Sign Up For Novogradac Industry Alert Emails

RAD Program Gives Staten Island Housing a Fresh Start

Published by Teresa Garcia on Monday, June 5, 2017

Journal cover June 2017   Download PDF

Arlington Terrace Apartments in Staten Island, N.Y., was falling apart–literally.

For decades, the 536-apartment affordable housing development was plagued by chronic mold problems, roach and rodent infestations, chipped lead paint, missing smoke detectors, broken pipes and leaky ceilings. The New York City Department of Housing Preservation & Development (HPD), which supervises the development, reported that the property had “thousands of violations for its poor living conditions.” Leveraging public and private investments in coordination with the U.S. Department of Housing and Urban Development (HUD) Rental Assistance Demonstration (RAD) program, Arlington Terrace Apartments completed a propertywide overhaul in late 2016 and is now called North Shore Plaza.

“RAD is what really helped transform this property, replacing the existing tenant-based rental subsidy with project-based subsidy,” said Paula Roy Carethers, executive vice president of real estate for New York City Housing Development Corporation (HDC). HDC partnered with HUD and HPD to implement the RAD program, which facilitated financing for the acquisition and redevelopment of the property.

The redevelopment was led by New York City-based Preservation Development Partners, a partnership formed by K&R Preservation and BFC Partners. “The previous owners had gone through a number of workouts and they didn’t have the money to fix anything at that point,” said Francine Kellman, co-principal of Preservation Development Partners. “The only way to save the property was to come in on a white horse and that’s what we did.” 

Image: Courtesy of Preservation Development Partners
The newly named North Shore Plaza was renovated under the U.S. Department of Housing and Urban Development (HUD) Rental Assistance Demonstration (RAD) program.

History and Redevelopment

Arlington Terrace was built in 1975 under the Mitchell-Lama program, a statewide initiative that offers low-interest mortgages and tax abatements to encourage development of affordable housing for moderate- and middle-income families. The property fell into disrepair over the years and there were insufficient funds to make the necessary capital improvements. In the early 2000s, the New York City Housing Development Corporation (HDC) twice provided repair loans to Arlington Terrace for basic improvements to the property, including boilers and heating system updates. Still, more substantial upgrades were needed.

“The building needed a lot of work,” said Brian Raddock, co-principal of Preservation Development Partners. “We pretty much did everything: All 536 units have new bathrooms and kitchens, new electrical and lighting.” Roofs were replaced, the buildings’ façade updated and advanced security measures added. Preservation Development Partners also repaved the parking lot and installed a new playground. 

In previous years, Arlington Terrace experienced significant issues with crime. To help increase safety, Preservation Development Partners installed new security cameras throughout the property.

In addition to its physical improvements, North Shore Plaza will also offer new social services, including free job training for about 850 local residents on how to gain and keep employment in retail.

Financing

“Affordable housing represents one of the strongest models of public-private partnership in our country,” said Eric Enderlin, president of HDC. “Numerous government agencies and private partners came together to provide the financing and repair work needed to bring this extremely distressed project back to life and improve its long-term sustainability.” 

Financing included $45 million in tax-exempt bonds, including a credit enhancement from Freddie Mac. Wells Fargo acted as the seller and servicer on behalf of Freddie Mac. Wells Fargo CLI also made an equity investment of more than $26 million in the 4 percent low-income housing tax credits (LIHTCs).

“This was one of the first RAD deals we did in New York, which adds a layer of complexity,” said Rachel Grossman, managing director for Wells Fargo. “Although the process takes a great deal of time and patience, ultimately tenants get an improved building with most keeping the same rent.” 

The property’s conversion through the RAD program secured project-based Section 8 subsidies, providing long-term stability and affordability for residents. Carethers said keeping the property viable and affordable is a benefit to the entire community. “This property is a great example of how preservation can stabilize neighborhoods,” said Carethers. “By providing a diversity of housing serving a wide range of incomes, we are building greater opportunities for our city’s residents.” 

 

Learn more about Novogradac's expertise and many services