Redevelopment of Expiring LIHTC Property Preserves 500+ Affordable Apartments
- Nov 17, 2008
By Keat Foong, Executive EditorBrooklyn, N.Y.—The Domain Companies and Arker Companies have announced completion of the $52 million redevelopment of Spring Creek Gardens. The property was coming to the end of its 15-year Low Income Housing Tax Credit (LIHTC) compliance period, and the prior owner had begun leasing the apartments at market rates. The redevelopment recapitalized the 582-unit project with new LIHTCs and will extend its affordability for another 30 years. The apartment community in Brooklyn’s East New York neighborhood is characterized as formerly severely distressed. Aaron Amitin, vice president at The Domain Cos., said the $25 million renovation, which took place with tenants in place, included the replacement of the entire façade system which had “failed completely”; repair of severe water infiltration in units and community areas; replacement of HVAC systems; and repairs of roofs. Windows were also upgraded, as well as kitchens and baths, lighting, plumbing and electrical systems. Additionally, numerous “security and management issues” were addressed in the redevelopment, he noted. The occupancy has been increased from 85 percent, when the property was first acquired, to 99 percent today. The New York City Housing Development Corporation (HDC) issued $24 million in tax-exempt bonds for the project’s construction through its Low-Income Affordable Marketplace Program (LAMP). The bonds enabled the project to receive $18 million in federal low-income housing tax credits through the New York City Department of Housing Preservation and Development (HPD). Centerline Capital Group, a New York-based real estate finance and investment company, provided $17.9 million in tax credit equity and arranged for permanent credit enhancement for the bonds from Freddie Mac. Freddie Mac also credit enhanced a swap contract that fixed the rate of the project’s permanent mortgage debt. Citibank provided the credit enhancement for the bonds during construction. Because the units will be preserved as affordable, Spring Creek qualified for 420c Tax Exemption through HPD, thereby exempting the entire residential portion of the project from property tax for 30 years.Amitin acknowledged that it will be more challenging to line up the tax-exempt bond financing today. The original tax-exempt bond financing closed in December 2006. “The means are available to make the same deal today, but it may require additional sources of financing,” he says. The transaction combined eight financing sources in coordination with several New York City and New York state agencies.