Marc Jahr, NYCHDC: A Program for Preservation

1. Source: Norman García, HDC Staff Marc Jahr, NYCHDC: A Program for Preservation NALHFA 2011 Educational Conference, San Francisco, CA May 20, 2011

2. The New Housing Marketplace Plan (2003 – 2014) • The most ambitious municipal housing plan ever undertaken • 11 years (2004 – 2014) • $8.5 Billion (not including bonds) • HDC’s ability to issue bonds is harnessed to the plan, and its balance sheet leveraged • Create and Preserve 165,000 units of affordable housing • Serving 500,000 low-income and middle-class New Yorkers

3. HDC Affordable Housing Programs • Issue tax-exempt or taxable bonds to finance multi-family senior mortgages. • Use unrestricted corporate reserves, created from net income and other issuance related activities, as low-interest subordinate mortgages. • Innovate and adapt development programs.

4. Reasons for Preservation • More economical to preserve than to build new • Less vacant land available for new construction • New capital needed to modernize • Funding for system upgrades • Capital resources needed for modernization • Services needed for tenancy • Address cases of poor management and neglect • Preserve asset value of affordable financing

5. Challenges Facing Preservation • Capital Needs • Restricted Income • Tight Budgets/Cash-Flows • Inadequate Reserves • Statutory & Regulatory Requirements • Loss/Expiration of Subsidies • Cancellation of Debt Issues • Expiring Tax Benefits • Syndicators/Investors (Limited Partners) want to Exit • Market Incentives to Leave Affordable Housing Programs

6. HDC Preservation Initiatives • LAMP Preservation Program (including HUD-distressed and/or Section 8 properties) • 202 Refinancing Program • Mitchell-Lama Preservation Program and Section 236 Decoupling • NYCHA Federalization • HUD foreclosed properties

7. LAMP Preservation Program • LAMP Developments: 168 • Units: 22,531 • Tax-exempt Volume Bond Cap: $2,526,505,000 • Taxable Bond/Other Financing: $0,056,295,000 • Senior Loan Debt: $2,582,800,000 • Subordinate Loan Debt: $0,496,840,000 • Key Program Principles: • Funds acquisition and moderate rehabilitation of existing occupied projects, many with Project Based Section 8 HAP contracts. • Uses tax-exempt bonds to leverage 4% LIHTC equity. • Project financing must support adequate rehabilitation budget in addition to proposed acquisition price   • Rehab scope reviewed by HDC to ensure adequacy • Permanent mortgage insurance provided by Sonyma, REMIC or enhancement from a financial institution or GSEs The Plaza Residences, Brooklyn NY

8. Section 202 Refinancing Program • LAMP Developments: 19 • Units: 3,184 • Tax-exempt Volume Bond Cap: $247,150,000 • Taxable Bond/Other Financing: $001,410,000 • Senior Loan Debt: $248,560,000 • Subordinate Loan Debt: $000,000,000 • Partners – HUD, HPD, Financial Institutions, • Syndicators/Investors, Developers • Key Program Principles • Existing Section 8 HAP Contracts extended.  Rent increases sought if necessary • Underwrite to full Section 8 Contract rents. • Acquisition by new LP to leverage 4% LIHTC equity to fund capital repairs and upgrades • Seller Note used to boost Acquisition basis • Offers lower tax exempt interest rate on 1st Mortgage to reduce monthly debt service and fund additional ongoing services for residents • Permanent mortgage insurance from SONYMA, REMIC, or long-term credit enhancement from financial institutions or GSEs. Linden Blvd Apts., Queens NY

9. Mitchell-Lama Preservation Program • Mitchell-Lama Developments: 41 • Units: 20,270 • Tax-exempt Volume Bond Cap: $154,400,000 • Taxable Bond/Other Financing: $568,949,468 • Senior Loan Debt: $592,807,241 • Subordinate Loan Debt: $281,188,502 • Partners – HUD, HPD, Financial Institutions, Syndicators/Investors, • Developers • Key Program Principles • Aimed at preserving the aging Mitchell Lama portfolio as an important affordable middle-income housing resource • Restructure existing HDC 1st and 2nd Mortgages to extend term, reduce rate and leverage additional loan proceeds • Owner must stay in the Mitchell Lama program for a minimum of 15 additional years to maintain affordability • Additional loan proceeds used to fund capital repairs and reserves • 2nd mortgages restructured from surplus cash notes to interest-only balloon payments after 1st mortgage is fully amortized Big Six Towers, Queens NY

10. Year-15 Preservation Program • Year-15 Developments: 12 • Units: 267 • Tax-exempt Volume Bond Cap: $N/A • Taxable Bond/Other Financing: $N/A • Senior Loan Debt: $02,095,511 • Subordinate Loan Debt: $ • Partners – HUD, HPD, Financial Institutions, Syndicators/Investors, Developers • Key Program Principles • The City has used LIHTC to develop approximately 30,000 units since the late 1980's. the Year-15 Program has repositioned 55 projects totaling over 2,800 units since fiscal year 2008. Approximately 10,000 units have reached or will reach year 16 by 2015. • Program purpose is to preserve the long-term affordability and viability of Year-15 projects. • Owners must agree to extend the original affordability restrictions by a minimum of 15 additional years. • HPD’s preservation strategies include full residential tax exemptions, up to $15,000 per unit in funding for capital work and project reserves, modifications of existing debt, rent restructuring, and management changes. • As a subcomponent of the existing Year-15 Program, HPD proposes to resyndicate Low Income Housing Tax Credits partnering city capital subsidy with 4% Tax Credit Equity to provide additional funding in situations where there is a substantial scope of work that might otherwise exceed the standard Year 15 subsidy maximum of $15,000 per unit

11. NYCHA Federalization • NYCHA Developments: 21 • Units: 20,139 • Tax-exempt Loan: $0,477,000,000 • Taxable Loan: $000,3,000,000 • Tax Credit Equity: $0,209,242,146 • NYCHA Loan (Non-ARRA Funds): $0,463,887,526 • NYCHA ARRA Loan: $0,100,000,000 • Total Sources: $1,253,129,672 • Partners – HUD, HPD, Financial Institutions, Syndicators/Investors, Developers • Key Program Principles • A Mixed Finance Transaction that enabled the NYC Housing Authority to qualify for $65M in annual federal public housing subsidies • Utilized a unique circular financing structure that maximized LIHTC without overleveraging the public housing developments with permanent debt • Used HDC’s strong AA-rated Open Indenture to issue bonds • Leveraged $200M in 4% LIHTC via Citi Community Capital • Funded physical repairs, upgrades and significant reserve escrows for more than 20,000 units of public housing Castle Hill, Bronx NY

12. HPD, HUD and HDC CollaborationNote Sale • Preserve 1,800 units of HUD-financed housing and extend the affordability period. • Program will ensure that the physical and financial needs of each property are addressed while maintaining the City’s housing preservation goals • HDC acquired a portfolio of discounted HUD notes on 10 properties in Manhattan, the Bronx and Brooklyn • Transaction enabled the funding of a Revolving Repair Fund (RRF) from a portion of the mortgage revenue • Immediate repair needs funded from the RRF • Longer-term repair needs funded via refinancing • 4 of 10 properties, with 683 units, have been refinanced to-date

13. Neighborhood Restore (NR) Privatizing Acquisition and Disposition • Neighborhood Restore HDFC • Structure • Incorporated in 1999 • A collaboration of HPD, LISC and Enterprise • LISC and Enterprise select the Board of Directors: • Harold Shultz (President), Citizen’s Housing and Planning Council • Ms. Bernell Grier (Vice President), Neighborhood Housing Services • Ms. Denise Scott (Secretary), Local Initiatives Support Corporation • Ms. Lydia Tom (Treasurer), Enterprise Community Partners • Ms. Diane Borradaile, The Low Income Investment Fund • Mr. Jack Greene, The Community Preservation Corporation • Ms. Holly Leicht , NYC Dept. of Housing Preservation and Development • Mr. Joseph F. Reilly, Community Development Trust • Mr. James Buckley, University Neighborhood Housing Program • Ms. Akiko Mitsui, The Vanguard Group • HPD Capitalizes Neighborhood Restore • Annual administrative budget - $700,000 • Annual program budget - $2,000,000 • Neighborhood Restore sells properties at $2,000/unit partially supporting its operating budget

14. Neighborhood Restore (NR) • Neighborhood Restore HDFC • Roles and Responsibilities (Bridging the Gap) • City takes title to distressed properties through • in rem proceedings and then instantly transfers • property to NR • Selects qualified developers through RFQ process • 2010 – 80 applications submitted; 50 qualified • Assigns qualified developers to properties • Work with tenants • Address all hazardous and emergency conditions with NR funding • Assemble take-out construction and permanent financing • Since 1999, over 440 properties, containing 5,141 units of housing have been transferred to Neighborhood Restore; in turn 367 properties, containing 4,600 units have been transferred to nonprofit and for-profit owners • Sources of financing have been divided among HPD PLP Program, Revised Tenant Interim Lease Program and NYS Affordable Housing Corporate Program • (Homeownership)

15. The New Housing MarketplaceThe Opportunities Within the Crisis – Proactive Preservation

16. HPD Proactive Preservation Initiative • Stabilize and create new affordable housing out of buildings in financial and physical distress • Goal is to restructure privately owned rent stabilized buildings in distress and gain affordable housing • This initiative marries HPD’s roles as code enforcer and affordable housing finance agency • 3 broad strategies: • aggressive outreach to lenders and owners • work with HDC and private sector partners to restructure debt • work with federal partners to find new resources

17. HPD Proactive Preservation Initiative • The Ocelot Portfolio • Overleveraged, Multi-family Rental Buildings • Collaborative effort between Fannie Mae, HPD and HDC • Transfer title of 19 distressed developments with 521 units to a responsible owner • HDC restructures debt of three Ocelot buildings in the Morris Heights section of the Bronx, preserving a total of 116 low-income units • Finance Note Sale – 1520 Sedgwick Avenue (“The Home of Hip Hop”) • Acquire Mezzanine Debt – Milbank Portfolio: 10 buildings, 548 Units, buy $3 million in mezzanine debt for $1 from Deutsche Bank • Borinquen Court: HPD exercises right of first refusal to acquire HUD foreclosed, 145-unit, Section 202; HDC acquires for $1 and instantly transfers title to qualified nonprofit

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