Los Angeles—New Directions Sepulveda, a San Fernando Valley, Calif., supportive housing community for veterans, recently celebrated its grand opening. The community received $34 million in financing from Bank of America Merrill Lynch, and was developed by non-profits New Directions Inc. and A Community of Friends. MHN talks to Maria Barry, community development banking executive at Bank of America Merrill Lynch, and Maria Joyce, a senior vice president in community development banking who has worked directly on the New Directions Sepulveda project, about this unique partnership and how financing supportive housing could benefit companies.
MHN: Describe the Community Development Bank and the types of products you have.
Barry: At Bank of America, we’ve been in the community development banking business for over 30 years, so we have a really deep commitment to the business and a lot of experience in different types of financing. We’ve been one of the top three banks in Affordable Housing Financing‘s ranking of top lenders every year for the last three years.
The types of financing we do are construction financing as well as permanent financing, for both tax exempt and taxable developments. We also invest in equity. We also have a CDC, which is a community development group within the space that develops four to six developments a year where we partner with for-profit or not-for-profit developers to be part of the development progress.
MHN: Is this unusual for a bank?
Barry: Actually it is. I believe we’re the only bank that has this capability, and it’s something we’ve been doing for a long time. Typically what we do is we help bring more capacity to projects that need more support to get done.
To give you a flavor of this year so far, we released our mid-year results in July. Through June, we provided more than $1.6 billion in community development lending and investing for the first half of the year. That was up significantly for us from the same period last year—it was almost double. That helped create more than 6,500 affordable housing units, and we are continuing to move forward with a lot of closings between now and year-end.
Some of the things that have driven the strong performance in our group have to do with our clients. We work closely with many clients across the country, and we’ve also added some new clients. We’ve increased some of our lending in states like New York, California and Florida. We also have a real focus on charter school lending, as well as supportive housing. On the supportive housing area, we work with housing the homeless. This is something that is very impactful and really has the ability to change people’s lives by [providing] housing that supports their needs—having on-site services, having capabilities to help people get their lives back on track. At the same time, this particular part of our business is also really impactful in that there are a lot of studies that show there are a lot of savings for cities and states when they have strong supportive housing in place. The cost of going to the emergency room or having someone in a psychiatric clinic is so expensive compared to when you have someone in a stable, permanent place to live with the services in place and with ongoing monitoring. This really has the ability to change people’s lives.
MHN: Describe New Directions Sepulveda.
Joyce: We recently celebrated the grand opening with our clients and some officials, and almost half of the residents have moved in. It’s a really exciting time for the project. So what really stands out about this project compared to other affordable of supportive housing projects? There are really three things that make it stand out from the pack. One is that it had a very innovative collaboration between our two non-profit clients that formed a joint venture and the Department of Veterans Affairs. It also has really great design, which is so important when you are creating homes for people, especially people coming out of homelessness. The project also addresses a significant unmet need in the market and a significant lack of options for homeless individuals and homeless veterans.
Regarding the collaboration, it was between a non-profit called A Community of Friends (ACOF), who’s an affordable developer that focuses on special-needs populations, and a non-profit called New Directions for Veterans, who is a non-profit in L.A. that specializes in providing a whole host of services to homeless veterans. These companies formed a joint venture to do this project and worked with the Department of Veterans Affairs (VA). The VA made the land and the building for this project, which is part of one of their campuses, available to them through a long-term ground lease, which is actually called an enhanced-use lease. That long-term lease allowed the two non-profits to go raise funding, raise financing and perform a major rehabilitation of the two buildings.
The second thing that makes these two buildings stand out is its design. These two buildings were former psychiatric facilities that were built in the 1950s on this VA campus, and they’ve been vacant for a very long time. Before the rehab, they felt very institutional. What ACOF and New Directions did is they worked closely with their architect and demolished their interiors and reconfigured them. They altered the layouts of the hallways; they created sitting areas for the tenants so they could really come together; and they really warmed up the space—they used very attractive veneer panels, color and brought in lots of light. This really changed the whole feel of the building. They did this while incorporating 147 apartments to these two large buildings. They also made the building LEED Silver.
The third thing that makes this project stand out is it addresses the major shortage of housing options for homeless veterans, and in particular in Los Angeles. In 2011, per our market study, there were over 8,000 homeless veterans in L.A. County. And that represents about 20 percent of the overall homeless population in L.A. County. Veterans also have a higher rate of being chronically homeless. This project is an opportunity to really focus on this population and really work to end the cycle of homelessness for them. The project not only offers affordable apartments for these men and women, but it also offers an array of services, for example, job training and placement, money management classes, legal financial assistance and substance abuse treatment. Its location, being on a VA campus, is a huge bonus too, because this campus already has a variety of healthcare services that tenants can access, a gym and other amenities. So people can come in and really rebuild their lives. This is a leasing opportunity that we’re excited to be part of.
MHN: Are your other projects similar to this? Do they all carry the same philosophy?
Barry: There definitely is a common theme with a lot of the supportive housing developments. They’re really focused on improving the quality of life for the residents. Most of them have built-in services right on site. Usually there’s 24/7 security. From all the developments I’ve visited, you really get a sense that people’s lives have changed because they have a permanent place to sleep, and they’re getting checked regularly, health wise. And there are definitely some cost savings for states and cities when this is put in place and done effectively.