The NHP Foundation (NHPF) had one of its busiest years, celebrating seven groundbreakings and ribbon-cuttings in 2023.
In addition, the nonprofit positioned several more projects to get off the ground this year.
“In late 2020, we realized we had to start focusing on new opportunities,” says Stephen Green, executive vice president and chief investment officer.
Like many other developers, NHPF was slowed by the COVID-19 pandemic and didn’t originate as many deals as it normally had. As a result, it wanted to get additional developments into its pipeline and refocus on new projects, according to Green. That spurred NHPF to a strong 2023.
The seven developments that recently started construction or opened its doors will bring a combined 546 units to Baltimore; Chicago; Hagerstown, Maryland; Houston; and Washington, D.C. The organization used to focus on preservation projects but in recent years has added new construction development to its repertoire. The 2023 highlights show NHPF’s versatility.
As an example, NHPF started construction on RoseMary’s Place, a 149-unit development for people who have experienced homelessness in Houston. Financing for the approximately $45 million project includes $18.7 million from the city’s Housing and Community Development Department, $10.2 million from the Harris County Community Services Department, $13.6 million from the sale of low-income housing tax credits (LIHTCs) to Hudson Housing Capital, and $2.4 million from Magnificat Houses as a sponsor loan. The new construction will include offices for nonprofit Magnificat Houses, the development’s service partner.
RoseMary’s Place is notable because it is the organization’s largest project with a high level of intensive services planned.
Also in Houston, NHPF opened The Citadel at Elgin, a 74-unit affordable housing community for seniors last year. The approximately $28 million development is funded in part by $10.25 million in federal disaster relief funds administered by the city’s Department of Housing and Community Development as well as 4% LIHTCs and tax-exempt bonds.
The property is managed by local nonprofit Change Happens Community Development Corp. Unlike some other national housing nonprofits, NHPF has not delved into property management.
On the acquisition-rehab side, NHPF reopened the Covent Apartments, a 30-unit development, in the Lincoln Park neighborhood of Chicago. The $21.6 million project is the organization’s second turnaround of an old SRO hotel into permanent supportive housing for residents who have experienced homelessness and an example of some of the tough projects that it takes on.
“The rooms were so small you could extend your arms and touch both walls,” Green says. “We converted two units into one and came up with 30 units. It’s also a historic preservation project. It was a long time coming.”
During the past few years, projects became significantly harder for NHPF and other developers as construction costs and interest rates spiked.
“By the time you aggregated the additional resources, rates would go up again,” Green says. “Construction prices would change. It was a bit of chasing your tail. Rates went up for everybody. Construction pricing went up everywhere.”
Fortunately, most of the public partners were understanding about the market changes. In a few places, NHPF was able to get sales tax exemptions to help with project costs. Typically, this allows nonprofits to get an exemption on sales tax for materials. For new construction projects, materials are a sizable portion of the project costs. “If you’re talking about a 6% sales tax, it can be hundreds of thousands of dollars,” says Green.
Another way NHPF reduces its development costs is by issuing corporate social bonds. The bond proceeds allow the organization to self-finance predevelopment activities and acquisitions at interest rates that are lower than market rates, according to Green.
The organization also expects to have a busy 2024. Its latest projects include a $52 million development that will bring 100 affordable homes to seniors in Baltimore. The firm broke ground on Park Heights Senior Apartments in December. The project continues the revitalization of the neighborhood that includes the redevelopment of Pimlico Race Course.
Financing partners include the city, Maryland Department of Housing and Community Development, R4 Capital, Aetna, and the Department of Housing and Urban Development.
NHPF also began this year by breaking ground on Seabrook Square, a 204-unit affordable housing development that is the organization’s first in Austin, Texas. Working with the Austin Housing Finance Corp. and local developer Capital A Housing, NHPF closed on $74.5 million in construction financing.
The development is supported by $40 million in tax-exempt bonds issued by the city of Austin, $3.4 million in construction bridge debt with Citi Community Capital, $32.3 million in 4% low-income housing tax credit equity from Boston Financial, and $13.5 million in Austin Housing Finance Corp. subordinate debt financing.
The development will include 10 live-work units that will be made available to income-qualified artists and approximately 3,000 square feet of commercial space for Raasin in the Sun, an artist incubator.Headquartered in New York City, with offices in Chicago and Washington, D.C., NHFP is expanding its footprint with developments in two different mountain resort areas of Colorado.
NHPF has committed resources to three affordable housing endeavors in pre-development to bring a potential 350-plus apartments, townhouses, and duplexes to Frisco and Granby.
“In a challenging development environment, NHPF continues to be successful by thinking creatively to solve seemingly intransigent problems,” Green says. “The organization prides itself on successfully structuring deals plagued by previous failures, whether they be capital, design, or construction struggles.”
