NEW YORK CITY-With affordable housing tax credits allocated in the early 1990s now approaching their expiration date, a group of public, private and nonprofit officials in New York City have taken action to preserve 447 residential units in Harlem. Developer L+M Development Partners Inc., in a single joint venture with the Harlem Congregations for Community Improvement Inc. (HCCI), collaborated with the city's Department of Housing Preservation and Development, the New York City Housing Development Corporation, the Goldman Sachs Urban Investment Group, and the state’s Department of Homes and Community Renewal on the closing of a $75 million tax credit restructuring that will ensure 14 residential buildings in the Bradhurst section of Harlem remain affordable.
The buildings--part of HCCI’s portfolio that was gut renovated in the 1990s--have reached the end of their 15-year Low Income Housing Tax Credit (LIHTC) compliance period, according to L+M. The portfolio will now be repositioned with a new round of LIHTCs, as well as financing provided by HPD, HDC and HCR, says Rick Gropper, project manager for L+M, who tells GlobeSt.com the transaction is one of the first tax credit restructurings of its kind, and hopes the deal will serve as a national model for other developers and city and state agencies. “There are a couple hundred thousand units in the US that are in the same situation where you have expiring tax credit buildings in need of major capital improvements,” Gropper says. “My hope is that this restructuring will be a catalyst for the thousands of units in the similar situations around the country.”
The 14 buildings in the portfolio are scattered between West 145th Street and West 153rd Streets between Seventh and Eighth Avenues in Upper Manhattan. Over time, the transaction will allow the apartments to remain affordable for low-income families for the next 30 years, while providing the capital needed to complete a comprehensive physical rehabilitation of the portfolio. Gropper says HCCI was “integral” in the rejuvenation of the neighborhood, and L+M came into the picture because the local nonprofit needed a “strong partner to help them maintain these buildings and assure that the buildings could withstand another 15 years,” he added.
On the financial side, the buildings were originally part of six separate ownership and financial structures, which were renovated under the city’s original affordable housing plan created under former Mayor Edward I. Koch. Of the six initial tax credit partnerships, HPD was initially involved in five, while the state’s HCR was both the tax credit allocating agency and lender for the sixth project, according to L+M.
In creating the new transaction, HCR worked with L+M and HCCI to restructure their existing debt and subordinate financing, while Goldman Sachs Urban Investment Group purchased the tax credits that will generate equity to undertake the construction work for rehabilitation.
In total, the HDC permanent blanket mortgage--approximately $40 million--will have a full 30-year term and a low interest rate. In addition, Gropper says the city’s HPD allocated a $6 million subsidy and will be working with HCCI and local officials to help restructure the properties. “Preservation deals are unique because they don’t require as much subsidy as new construction deals, so government agencies can do more with themoney they have,” he added. The project falls under Mayor Michael R. Bloomberg’s New Housing Marketplace Plan (NHMP), an $8.5 billion initiative to finance 165,000 units of affordable housing for 500,000 New Yorkers by the close of 2014.
And as the demand for affordable housing remains strong, Rev. Patricia A. Reeberg, founding board member and interim president of HCCI, says the community-based organization “has always been at the cutting edge” in designing new ways to preserve affordable units, in a statement. “It is only befitting to our history to be a part of this new dynamic partnership with L+M,” she says. “Through this partnership, HCCI has once again broken new ground in the affordable housing sector.”
On the investment end, Alicia Glen, managing director and head of the Urban Investment Group at Goldman Sachs says in a statement that the company is “pleased to work with public and private sector partners” to preserve the 14-building portfolio. “We remain committed to using innovative financial tools to ensure that low-income people have access to quality housing and other services in their communities,” she says.
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