Pinnacle Housing Group has worked on a number of tough deals during its history but none more difficult than the massive Kings Terrace development.
After years of planning and construction, the Miami-based developer recently opened its doors to the $53 million, 300-unit project. Utilizing $17 million in Neighborhood Stabilization Program (NSP) funds, Kings Terrace is likely one of the single largest recipients of NSP1 funding in the country.
"On a 1-to-10 scale of difficulty, this was a 14," says David O. Deutch, a partner at Pinnacle.
The project began with the firm taking title to a troubled 421-unit property in unincorporated Miami-Dade County near Opa Locka. Conditions were so severe at the old Westview Terrace apartments that it was condemned by the court even though hundreds of families made it their home. The property was also in foreclosure and under receivership, adding another layer of complexity.
"A major challenge was the condemned nature of the development and the associated liability of operating it until the foreclosure and subsequent relocation of 275 families was completed," Deutch says. "We mitigated such risk by closing on the Miami-Dade County NSP proceeds ahead of all other financing and using the funds to finance the acquisition of the first mortgage note while in foreclosure."
Pinnacle then implemented a relocation plan pursuant to the Uniform Relocation Act through a court-appointed receiver. The relocation costs alone totaled about $2.5 million, and the demolition was another $1.5 million.
Realizing that the original density was way too high and the design and site plan, which was in the shape of an X, was obsolete, the team started over.
The new development features 15 buildings. Instead of the Mediterranean design that is common in the area, the apartments are in three-story walkups that have an industrial look with floor-to-ceiling windows and flat roofs.
"In this neighborhood, that's what is called for," Deutch says.
Miami-Dade County stepped up big, providing $17 million to the deal from its $62.2 million allocation of NSP1 funds. In the federal program's first round in 2008, the Department of Housing and Urban Development distributed $3.9 billion to all states and selected hard-hit communities struggling with foreclosure and abandonment. Miami-Dade received the most of any city or county.
"This project reflects the largest investment in NSP funds to one single development," says Gregg Fortner, executive director of Miami-Dade Public Housing and Community Development. "It is also one of five developments where rehabilitation, including demolition and reconstruction, has been the largest focus of our NSP efforts."
To build Kings Terrace, Pinnacle also relied on tax-exempt bonds and 4 percent low-income housing tax credits (LIHTCs). The bonds were enhanced by Freddie Mac, with a construction loan from Citi Community Capital. A permanent loan takeout by Freddie Mac was about $12 million. Wells Fargo purchased the LIHTCs to provided $17 million in equity, and Florida Housing Finance Corp. contributed a $5 million HOME loan.
The site went from having no amenities to a project loaded with extras. The development features a clubhouse, business center, a library, fitness center, and a communal kitchen and area for residents to gather. The property also boasts three playgrounds, a gazebo and covered picnic area, a football/soccer field, basketball courts, and a splash park.
Incorporating public art into its developments is a signature of Pinnacle Housing. At Kings Terrace, people enjoy an outdoor art walk anchored by sculptures.
The apartments are reserved for households earning between 50 percent and 60 percent of the area median income. Rents range from $718 for a one-bedroom apartment to $1,031 for a four-bedroom unit.