When LINC Housing Corp. acquired a Santa Ana property in 1996, some light renovations and maintenance work was done to help maintain the community, which was built in 1956.
By 2012, City Gardens was nearing the 15th year of low-income housing tax credit compliance and the Long Beach, Calif.-based nonprofit decided the property was in need of a full-fledged makeover, says Samara Larson, director of sustainability.
After doing an assessment of the property, the best option to get all the work done and to upgrade the community with green features was to go through a then-new program with Fannie Mae.
A $19.4 million refinance loan made City Gardens the first project to go through the Green Refinance Plus program. Being able to get money to do eco-friendly renovations was the most alluring part of this program, Larson says. The total rehab cost was about $2.8 million, including approximately $520,000 for the green retrofitting.
“We replaced boilers and put in energy-efficient lights in common areas and apartments,” she says. “We put in a solar domestic hot water system. We did low flow plumbing fixtures. We did weatherization and we did a project to change out the pilot lights to go to electronic lighters and some insulation work.”
Post-renovation, the property is seeing a 20 percent savings on energy costs and looking toward a 34 percent return on investment over six years.
However, Fannie Mae officials announced in Mayannounced a new version of the program, dubbed the Green Preservation Plus. The program, an extended version of Green Refinance Plus, offers financing to acquire affordable housing developments or refinance existing Fannie Mae multifamily affordable housing (MAH) loans.
Larson says the success of the City Gardens renovation has convinced her company to continue using the Fannie Mae execution where it makes sense. At press time, LINC Housing was in the process of securing a Green Preservation Plus loan for the renovation of a Fresno, Calif., property.
The new version of Fannie’s green program allows cash-out refinancing—when a property is refinanced for more than it owes, and the owner procures the difference—to pay for fees and renovations that weren’t included in the first version of the program, says Chrissa Pagitsas, director of Fannie Mae’s Green Initiative.
“The need to expand it really came because the original program was not flexible enough,” Pagitsas says. “What we had done with HUD was not allow affordable housing owners to do cash-outs allowing them to access the equity of their loan to pay for other things—fees and other costs.”
The program also provides additional loan proceeds through lower debt service and higher loan-to-value ratios. Eligible properties must be 10 years or older and meet MAH income and rent restrictions.
Since the program’s inception, Fannie Mae reports a volume of more than $56 million through the first quarter of this year, with deals for the expanded program already in the pipeline.
Lindsay Machak is an Associate Editor for Multifamily Executive. Connect with her on Twitter @LMachak.
