WHEN HUNTER Johnson started working at affordable housing firm LINC Housing Corp. 15 years ago, the first project he worked on was City Gardens. The Long Beach, Calif.–based nonprofit purchased the Orange County, Calif., property in 1996 with tax-exempt bonds and 4 percent low-income housing tax credits, with Irvine, Calif.–based Edison Capital as the investor. At the time, a fair amount of rehab had been done, and the property has been wellmaintained over the years.
When City Gardens needed refinancing this year—the project had reached its 15th and final year of LIHTC compliance— Johnson wanted to bring the property upto- date and include some green retrofits. He found the capital for improving the old community in a brand-new place. LINC and Cleveland-based Bellwether Enterprise Real Estate Capital closed the first loan in the Green Refinance Plus program, a partnership between Fannie Mae and HUD. The program allows affordable housing owners to refiinto mortgages that include additional financing for energyefficient upgrades. It offers up to 85 percent loan to value and a debt-service coverage ratio as low as 1.15x, 10 basis points lower than the standard rate.
The $19.4 million refi- nance loan of the 274-unit City Gardens closed in April with a 10-year term and 30-year amortization. The total rehab cost is $2.8 million, including approximately $520,000 for the green retrofitting.
Jay Helfrich, a senior vice president at Bellwether Enterprise, says “Year 15” deals are prime targets for the program. “[They] can benefit greatly from higher loan proceeds that come out of this program,” he says. “Developers upgrading everything from lighting to appliances that are more energy efficient and water conserving makes a lot of sense.”
Improvements for City Gardens include replacing inefficient gas-fired furnaces; installing low-flow plumbing fixtures and a solar hot-water heating system; and upgrading to a more efficient irrigation system. The team hopes to have the rehab done by the end of the year or the first quarter of 2013.
As part of the program, energy costs must be monitored, so the team is working with residents to track the savings monthly through Energy Scorecard software. They're also educating community children about the rehab.
“We have an afterschool program,” says Johnson, now LINC's president and CEO. “They'll start learning about the green improvements and the effects they'll have on their homes and the environment. That's going to be a critical piece through construction.”
Christine Serlin is executive editor of APARTMENT FINANCE TODAY's sister magazine AFFORDABLE HOUSING FINANCE.