Hubbard Place Apartments
Developer: Cavalier Apartments, Somerset Development Company LLC
Location: Washington, D.C.
Hubbard Place transformed severely troubled, publicly assisted housing into decent and safe homes through creative and innovative financing and the collaboration of many parties. The development team was led by Somerset Development Company LLP. Total development costs for Hubbard Place Apartments were $52.5 million; hard cost construction costs, $17.5 million. The LIHTC allocation was $1.48 million; federal historic tax credits were $4.97 million.
Tax-exempt bonds for acquisition and rehabilitation were structured with a “reverse” or “mirror” defeasance to overcome a lock-out provision of an existing FHA-insured first mortgage. HUD agreed to the subordination of $26 million in new bond proceeds as a second mortgage lien on the property. Approximately $10.5 million was put in escrow to pay off the HUD loan, and $57,000 was escrowed to pay the anticipated prepayment penalty. The $26 million bond was paid down with tax credit equity to approximately $16 million upon stabilization. The tax credit syndication was structured with an interim loan, which was disbursed to the property in lieu of the first and second capital contributions. Soft subordinate financing by the DC Housing Authority was exchanged for commitments on maintaining affordability for an extended period. The private developer provided up front a substantial fund of more than $350,000 and contributed and additional 15 percent of annual net cash flow for resident services.
Project Team: D.C. Department of Housing and Community Development; D.C. Housing Authority; Somerset Development Company LLC; 3500 14th Street, NW, Tenant Association; MMA Financial; Kann Partners; Hamel Commercial Inc.