2014 Journal of Tax Credits LIHTC Development that Best Demonstrates Financial Innovation

Winner

Charlesview Residences

Developer: The Community Builders Inc.
Owner: Charlesview Housing LP
Location: Brighton, Mass.

2014 Developments of Distinction Winner Financial Innovation Charlesview Residences

The winner of the 2014 LIHTC Development that Best Demonstrates Financial Innovation Award is The Community Builders Inc. for the development of Charlesview Residences in Brighton, Mass. The developers used low-income housing tax credits (LIHTCs) to transform and expand the former Charlesview Apartments building into a mixed-income and mixed-use facility. Charlesview Residences is a 22-building community that features 240 apartment units, retail space, a community center and a new parking structure.

James Madden, project manager of The Community Builders Inc., says the developers used innovative approaches to secure funding, including executing the first Housing Assistance Payments (HAP) contract “porting” transfer in the U.S. Department of Housing and Urban Development’s (HUD) New England region. The development team transferred the existing project-based rent subsidies from the old site, Charlesview Apartments, to the new complex to create homes for the original residents. This use of the HAP contract transfer led to a land swap with Harvard University. The Community Builders leveraged the HAP contract financing model by combining it with multiple public and private sources of funding. These funding sources included $28.5 million in LIHTC equity with Aegon USA Realty Advisors (who were acting on behalf of Google), $3.8 million in tax-exempt bond financing, equity from Massachusetts Brownfield tax credits and $2 million in public funds to cover gap financing, which will be repaid within 10 years. Madden says the debt closing on Charlesview Residences is the largest MassHousing has completed.

In addition to demonstrating financial innovation, this development will also benefit the community. Madden says that because affordable housing and land are in shorty supply in Boston, the new units will help meet the housing demands of the local community. Currently, 199 units, which are LIHTC eligible and HAP supported, are leased to low-income households, and 41 units are leased to moderate-income households. Charlesview Residences also provides family-sized affordable units with three or four bedrooms, which Madden says are uncommon in Boston.

Charlesview Residences also provides services and amenities to its residents and the broader Allston-Brighton neighborhood of Boston. Hundreds of local residents visit the community and computer centers each week to attend educational sessions, which cover adult education, substance abuse recovery, homebuyer education, nutrition and fitness. Additionally, a full-time resident services coordinator provides case management support to Charlesview’s residents. Every resident has an in-unit washer and dryer, an underground parking space, storage and Energy Star appliances. The development is LEED Silver certifiable.

“[A] massive redevelopment with preservation of existing affordable units and significant infrastructure improvements.  High cost, even for Boston, but the results are impressive,” said James Tassos, a 2014 Community Development Awards judge.

Honorable Mention

Forest Park Apartments and Silver Springs Apartments

Developer: Delphi Affordable Housing Group and Strategic Housing Finance Corporation of Travis County
Owner: FP Affordable Housing LP and SS Affordable Housing LP
Location: Austin, Texas

2014 Developments of Distinction Honorable Mention Financial Innovation Forest Park and Silver Spring Apartments

The honorable mentions for the 2014 LIHTC Property that Best Demonstrates Financial Innovation Award are Delphi Affordable Housing Group and Strategic Housing Finance Corporation of Travis County for the redevelopment of two affordable housing properties in Austin, Texas: Forest Park and Silver Springs. Developers leveraged $17.7 million in low-income housing tax credits (LIHTCs) to rehabilitate Forest Park and Silver Springs, which collectively offer 588 affordable units.

The development team used several creative financing strategies to fund the property, including structuring a joint venture with Strategic Housing Finance to exempt the properties from real estate taxes. This creative structuring enabled the developers to eclipse conventional buyers looking to take the property through qualified contract.

“With Austin being the hottest multifamily market in the country, sales prices are getting above what affordable properties can support, and this purchase and rehab could not have happened without the sponsor partnering with the local housing finance corporation to create a real estate tax exemption ...  had this sale not occurred, these LIHTC units would have been converted to market rate housing,” said Ray Landry, a 2014 Community Development Awards judge.

Honorable Mention

Pana Towers

Developer: S.E. Clark and Associates Inc.
Owner: Hanon LP
Location: Pana, Ill.

2014 Developments of Distinction Honorable Mention Pana Towers

The second honorable mention for the 2014 LIHTC Development that Best Demonstrates Financial Innovation Award is S.E. Clark and Associates Inc., for the development of Pana Towers in Pana, Ill. S.E. Clark and Associates leveraged $589,000 in low-income housing tax credits (LIHTCs) to renovate 72 existing affordable housing units serving a largely senior population.

The reluctance of the investors to underwrite the rents achievable through HUD’s mixed-finance program left a substantial funding gap. To secure additional funding, the developer applied to HUD’s Rental Assistance Demonstration (RAD) Program. Steven Clark, president of S.E. Clark and Associates, says the property, which was converted from public housing to Section 8 project-based rental assistance (PBRA) under the RAD Program, is the first RAD conversion to combine PBRA with federal and state LIHTCs and Federal Housing Administration (FHA) Section 221 (d)(4) financing.

“The development shows a jigsaw puzzle of debt, equity and rental assistance payments to pull together the overall financing in reliance on the LIHTC, tax-exempt bond financing, a land swap, Brownsfields credits, HAP Contracts and sheer enormity. One cannot help but be in awe,” said Thomas Morton, a 2014 Community Development Awards judge.

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