Hunt Real Estate Capital, a lender focused on affordable housing, provided over $192 million to finance the purchase and renovation of over 1,300 units of housing in Bushwick.
The currently NYCHA-owned apartments are spread across seven existing public housing properties that will undergo conversion through the RAD and Section 18 Disposition programs of the Department of Housing and Urban Development (HUD).
The sponsor is a joint venture between the Acacia Network, Hunt affiliate Pennrose, and NYCHA.
Redstone Equity Partners also provided LIHTC equity for the LIHTC partnership.
In total, the “Pennrose Bundle” consists of 60 scattered-site multifamily properties in close proximity, as well as one community center building.
The garden-style, mid-rise, and high-rise buildings range from three to 14 stories tall, and were built from 1980 to 1987. The unit mix includes studio, one-bedroom, two-bedroom, three-bedroom, and four-bedroom layouts.
The loans are tax exempt to help with the construction financing for the apartments.
Through a new program that hadn’t existed before in the state, Joshua Reiss, vice president at Hunt Real Estate Capital, said Hunt was able to get below market terms for the borrower. This, he added, allowed for even more rehabilitation work to benefit the residents.
This is the second large NYCHA portfolio that Hunt has financed. In November 2018, Reiss also arranged financing for a $120.6 million purchase and rehab of 1,088 units of scattered-site public housing in the Mott Haven section of the Bronx.
With the closing of the Pennrose Bundle, Hunt has arranged more than $310 million for NYCHA through RAD in the past nine months.
The portfolio was bifurcated into two transactions – one LIHTC (The Low-Income Housing Tax Credit) for five of the properties and for the two others non-LIHTC. The permanent mortgage loans are in the amounts of $118,500,000 (LIHTC) and $73,700,000 (non-LIHTC) with 30-year terms amortizing over 40 years.
“The Bushwick portfolio is being acquired and renovated under the Rental Assistance Demonstration (RAD) program in which public housing units are converted to project-based Section 8 housing,” explained Reiss.
The RAD program enables the use of public and private investments to revitalize and preserve affordable housing. With the new financing, the portfolio will undergo a significant rehabilitation over a 30-month period after closing with a total construction contract amount of $156 million.
Of the portfolio’s 1,321 units, 760 units will benefit from project-based vouchers under Section 18 of the U.S. Housing Act, while 557 units will benefit from project-based vouchers through the RAD program. Four units will be reserved for on-site staff.
“Freddie Mac and the New York State Housing Finance Agency (NYSHFA) created a new risk share program to reduce borrowing costs and promote increased proceeds to be used toward the essential rehabilitation of the portfolio,” explained Reiss. “This is the first Freddie Mac Tax-Exempt Loan offered in the state of New York. This highly efficient and competitive product will help create new pathways to financing affordable housing moving forward.”
