Bellwether Enterprise, a full-service mortgage banking firm and subsidiary of Enterprise Community Investment, Inc., has financed over $160 million in affordable housing investment loans over the past few months. This number includes a $5.2 million HUD 223 (f) refinancing loan for the Jefferson Davis Apartments in Montgomery, Ala.; a $31.5 million HUD 221 (d)(5) new-construction financing loan for the former site of the Village of Versailles in New Orleans; and a $133 million financing deal for the renovation of the five-property Harlem Affordable Portfolio in New York City.
Jefferson Davis Apartments
The Jefferson Davis Apartments’ refinancing loan will provide the 98-unit seniors property with a 35-year term and amortization, which will allow the property to remain affordable. The borrower, Gulf Coast Housing Partnership-Jefferson Davis, also plans to invest over $32,000 per unit on renovations.
“Jefferson Davis was unique because it was one of a very few transactions that had Alabama’s state house historic tax credits along with affordable tax credits,” said Phil Melton, executive vice president and national director of affordable housing and FHA lending at Bellwether. “So it was an opportunity once again for us to renovate and increase the quality of life for residents while being able to maintain a historic façade of an existing building.”
Village of Versailles
The upcoming Village of Versailles site was once home to a 200-unit, HUD-insured, 1970s-vintage apartment property, which was heavily damaged in 2005 when Hurricaine Katrina swept through New Orleans East. The Enterprise Foundation has had a long-standing relationship with the New Orleans area through its local office, and, so, looking back on Bellwether’s $31.5 million new-construction financing project, Melton views the project as an opportunity to work hand in hand with the parent nonprofit—and a chance to bring a high-quality affordable asset back to a community in need.
“We were able to deal with a sponsor that had a lot of expertise and experience and was very much committed to being in that New Orleans marketplace,” Melton said. “New Orleans is also a market where we have an Enterprise Partners office … [which was a] way for us also to continue to help, hand in hand with our mission-oriented partners at Enterprise, and to be able to do something in their backyard.”
With the help of Bellwether’s financing for the $31.5 million loan, work has begun on Village of Versailles’ 400-unit collection of 50 two-story residential buildings. The property, which is set to be finished in late 2017, will also include two one-story community buildings and a leasing office. The loan’s financing includes 4% low-income housing tax credits by City Real Estate Advisors and HOME Funds provided by the Louisiana Housing Corp.
Harlem Affordable Portfolio
The Harlem Portfolio was Bellwether’s largest recent financing project by far, with an investment of over $133 million in 550 low-income and Sec. 8–funded units across five properties in New York City’s Harlem neighborhood. Bellwether worked in cooperation with Tahl Propp Equities and Enterprise Community Investment, which also has a New York office, in order to finance the portfolio’s renovation and acquisition.
“The Harlem Portfolio [came from] a client of mine that we’ve been doing business with for about four years now,” Melton said. “It was very much, from our perspective, a tremendous opportunity to improve the quality of life for those particular residents and utilize the tax credit program in conjunction with our financing. … it was a great way for us to put into action not just the policies and the community involvement that we have through the nonprofit, but also find ways for us to help create new developments and new opportunities and increase the quality of housing in those particular areas."
In order to pull together the needed financing for these properties, Bellwether drew from a variety of sources, most notably a Fannie Mae bond credit enhancement for $38.1 million in long-term bonds and $24.2 million in short-term bonds issued by the New York City Housing Development Corporation. New York City Department of Housing Preservation and Development (HPD) provided another $15.2 million, Enterprise Community Investment syndicated the deal's tax credit equity, and Fannie Mae's Reduced Occupancy Affordable Rehabilitation program underwrote the deal's credit enhancement.
The properties will remain at full occupancy as they undergo renovation, which will allow for a more-efficient renovation process. The deal will allow all of the portfolio’s units to remain affordable for the next 40 years, on top of the properties’ current Sec. 8 subsidies. Bellwether’s goal across all of its financing projects is both to extend the useful life of the affordable asset and to improve the quality of live for residents. The company aims to finance “wholesale turnovers” of affordable apartment units, according to Melton, which will include new roofs, air conditioners, appliances, and windows.
“It’s important that we’re seeing that there’s a commitment to the property, to the long-term liability of the asset,” Melton said. “[We’re] trying to overcome any functional obsolescence that might have occurred because of the age or the vintage of the asset, increase the amenities to the residents, and then be sure that we’re creating enough renovation that the physical asset itself is able to withstand the next 15, 25, 30 years.”
