Using LIHTC for Mixed-Use Property: A Case Study Speaker: Peter T. - - PowerPoint PPT Presentation

Using LIHTC for Mixed-Use Property: A Case Study

Speaker: Peter T. Beck, Forsyth Street Advisors LLC

Using LIHTC for Mixed-Use Property: A Case Study

• 1. An Overview of Haven Plaza
• 2. Financing Structure
• 3. Grappling with Mixed-Use Components
• 4. Addressing Unexpected Challenges
• 5. Lessons Learned

An Overview of Haven Plaza

• 460,000 s.f., mixed-

use, mixed income complex:

– 371 units at various income levels – 9,000 s.f. retail & medical office – 185-car garage

• 501c3-owned
• Built in late 1960s

An Overview of Haven Plaza

Before: April 2009

An Overview of Haven Plaza

Before: April 2009

An Overview of Haven Plaza

• Rehabilitation was phased over three years
• Phase One:

– Façade/masonry repair – Elevator modernization – Roof replacements

• Phase Two

– Complete new kitchens & baths – Upgrades to interior common areas and mechanicals – Structural repairs to parking garage – Landscaping and plaza improvements – Asbestos abatement

An Overview of Haven Plaza

• A complex regulatory

structure created additional difficulty

• 136 units under Section 8

HAP Contract

• 191 units renovated with

HOME funds and restricted to lower income tenants

• Approximately 60% of

tenants met LIHTC income limits

An Overview of Haven Plaza

Development and Financing Team Developer: New York Institute for Human Development (Affiliate of the Archdiocese of New York) Contractor: MDG Design and Construction LLC Architect: Cutsogeorge Tooman & Allen Architects, PC Financial Advisor: Forsyth Street Advisors, LLC Management: Wavecrest Management Team Ltd. Counsel: Nixon Peabody / Comerford & Dougherty LLP Equity Syndicator: Richman Housing Resources Lender: Citibank

Financing Structure

• Phase One:

– $9.7mm subordinate loan from NYC Department

• f Housing Preservation and Development (HPD)
• Phase Two:

– $34.45mm in tax-exempt bonds issued by NYC Housing Development Corp. (HDC) – $12.6mm equity investment from Richman Housing Resources – $12.5mm seller note

Financing Structure

Development Costs Acquisition Cost $ 12,500,000 Construction Cost 38,312,890 Soft Cost 11,848,247 Reserves/Working Capital 746,513 Developer's Fee 8,768,000 Total Development Costs $ 72,175,650 Permanent Sources HDC Tax-Exempt Bonds/First Mortgage 30,000,000 HPD HOME Loan/Second Mortgage 9,712,890 Seller Note 12,500,000 Equity Investment 12,600,000 Construction Period Cash Flow 4,044,760 Deferred Developer's Fee 3,318,000 Total Permanent Sources $ 72,175,650 Construction/Rehab Sources HDC Tax-Exempt Bonds/First Mortgage 34,450,000 HPD HOME Loan/Second Mortgage 9,712,890 Seller Note 12,500,000 Equity Investment 4,000,000 Deferred Developer's Fee 8,268,000 Construction Period Cash Flow 3,244,760 Total Construction/Rehab Sources $ 72,175,650

Grappling with Mixed-Use Components

• Parking garage

– Charges to tenants – Contributed significant revenue to project underwriting

• Retail and medical
• ffice space

– Small physical area – Also important revenue generators

Grappling with Mixed-Use Components

• Parking garage

integrated as part of residential structure

Residential Rooftop Plaza Two-Level Parking Garage Attached Residential Buildings

Addressing Unexpected Challenges

• Superstorm Sandy struck
• ne day before completion
• Over $2 million in damages,

incurring additional renovation expense and time

• Substantial flooding in

ground floor areas, damaging electrical system, elevators, lobbies parking garage, commercial space

• Residents without power for

days

Lessons Learned

• Underwriting assumptions should be

conservative on mixed-use deals

• Use caution in underwriting commercial income

in LIHTC projects

• Don’t take shortcuts in financial modeling
• Coordinate with your accountant from day one
• Leave a cushion in case things go wrong

The Finished Product

Garage Roof Under Construction 2012 Completed Rooftop Plaza 2013

The Finished Product

After Rehab - 2013

Courtyard Typical Lobby