The story and great lesson of the $192.2 million Hope Gardens portfolio acquisition and renovation can be summarized in seven words: Where there’s a will, there’s a way.
The ”way” involves the enabling Rental Assistance Demonstration (RAD) conversion of 1,321 New York City public housing units to clear the way for an ambitious and desperately needed renovation program. The immediate list of improvements includes everything from new boilers and wiring to updated kitchens and bathrooms. Longer term, the conversion ensures Hope Gardens residents in Brooklyn’s Bushwick neighborhood gain the permanent stability and peace of mind of housing affordability.
The federal RAD program seeks to improve and preserve at-risk public housing developments by allowing the properties to convert to long-term Section 8 rental assistance contracts. This is critical because it puts the housing authorities in better position to leverage additional financing to perform needed improvements.
Still, the road to closing was a challenge, requiring an impressive array of creative strategies and tools— tax-exempt loans, low-income housing tax credits and other funding sources; rent blending; and judicious risk taking by all players factored into the deal.
Tax-Exempt Loan Key
“It shows people are willing to go to the extra mile to make projects work,” says Joshua Reiss, vice president of Hunt Real Estate Capital. Hunt provided $192.2 million in financing in partnership with Freddie Mac Multifamily. Freddie Mac stepped forward with its Tax-Exempt Loan (TEL) program that is “… extremely efficient and allowed us to put those savings back into the project,” reports Reiss. Hope Gardens represents the first Freddie Mac Multifamily TEL offered in New York.
“TELs streamline the delivery of tax-exempt bond proceeds,” explains David Leopold, Freddie Mac’s vice president of targeted affordable sales and investments. “That efficiency drives down borrower costs and supports the creation of even more affordable housing.”
Creative Thinking
Another example of doing what it takes came from the state housing finance agency, NYS Homes and Community Renewal. The NYSHCR team pushed hard to support the financing structure by utilizing the state’s mortgage insurance fund and recycled bonds instead of new issues to help reduce loan costs. “We used the creative tools in our toolbox to improve transaction efficiency,” says Nicole Ferreira, NYSHCR senior vice president. “This is not a typical run-of-the-mill tax credit deal. By being creative, the residents benefit.”
Ferreira’s boss, NYSHCR commissioner RuthAnne Visnauskas, adds, “Securing the future of New York public housing demands more than simply putting the brakes on disinvestment … the key to nailing down the investment lies in innovative financing, careful planning, and having dedicated partners.”
A Way Forward for Public Housing
Crucial to the planning part was keeping residents informed. Reiss is quick to single out the New York City Housing Authority (NYCHA) for staging “… at least 30 resident meetings across two years” in the project’s ramp-up. “They worked tirelessly to help these residents,” says Reiss.
The rehab is a seven-phase project, now underway. The Hope Gardens portfolio makeover is expected to be substantially completed by late 2021. As significant as the Hope Gardens project is, it’s just the first steps in addressing a rehabilitation backlog. NYCHA oversees a portfolio of 174,000 apartments.
“Everyone bent over backward to get this deal done,” adds Reiss. “A lack of reinvestment in public housing is a nationwide problem. This kind of public-private partnership is a way to fix this going forward.”
Where there’s a will, there’s a way.
To learn more about TELs and other ways Freddie Mac supports affordable multifamily housing, visit Freddie Mac Multifamily.
Hope Gardens Rehabilitation Project Team
Acacia Network Housing
Bushwick United Housing Development Fund
Coalition for Hispanic Family Services
Freddie Mac Multifamily
Hunt Real Estate Capital
New York City Housing Authority
New York State Homes and Community Renewal
Pennrose
RiseBoro Community Partnership
