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 of 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 office 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 one 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