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As any real estate expert can tell you, the largest U.S. multifamily transaction ever financed by historic tax credits doesn’t happen without all the players at the negotiating table getting something out of the deal.
But if you’re Rick Gropper, principal at Camber Property Group (CPG), you can proudly discuss the successful $783 million in public and private financing that came together to renovate New York City Housing Authority’s (NYCHA) Edenwald Houses, a 2,035-unit multifamily public housing complex on 50 acres of land in the Bronx that is home to nearly 5,000 people.
“This is a very exciting transaction that we’ve been working on for two years,” Gropper told Commercial Observer. “It’s the largest public housing complex in the Bronx and one of the largest in the city.”
NYCHA closed the significant Permanent Affordability Together (PACT) financing June 27.
Resident leadership at Edenwald Houses had selected CPG and its development partners following the firm’s successful renovation of the nearby NYCHA Baychester Houses between 2018 and 2020. CPG’s other development partners in the deal include Stuart Alexander and Associates, a minority-owned business enterprise; Henge Development, a minority- and woman-owned business enterprise; and L+M Builders Group.
“NYCHA and the city have, smartly, brought in private developers in partnership with NYCHA to do what they do best: renovate, recapitalize and manage these really important assets to get it back to a place it was when it was built — and ensure that it runs for another 50 years,” Gropper explained. “It was really important for us to bring them into the deal and help build capacity and expand the base of developers that are doing this really important work.”
With more than $275 million in historic tax credit equity financed by JPMorgan Chase (JPM) and conventional equity from the new ownership-development syndicate, CPG’s deal is the largest-ever use of a tax credit that is used to rehabilitate aging U.S. buildings that hold historical value. The Edenwald Houses were built in 1953 and are listed on the National Register of Historic Places, which allowed the utilization of historic tax credits that were first purchased by Chase and sold as proceeds into the transaction.
“We wouldn’t have been able to execute the transition without the historic tax credit equity,” Gropper said. “This was a critical resource in getting this deal done and giving Edenwald the renovation it deserves.”
Camber Group and its development partners must spend money to rehabilitate or restore the dilapidated Bronx complex to generate the tax credit, which had included a submission to the State Historic Office and the National Park Service on what makes Edenwald Houses worthy of preservation. The plan to rehabilitate the property will center around fixing the facades and windows of the buildings, the tower in the park, and the lobbies, grounds and pathways between buildings, Gropper said. Other improvements will include new kitchens and bathrooms inside the units, new flooring and painting, free broadband internet, heating system upgrades, air conditioner unit upgrades, and improved common areas and outdoor spaces for tenants.
The capital stack also includes $450 million in debt-recycled tax-exempt bonds from the New York City Housing Development Corporation — backed by the Federal Home Loan Mortgage Corporation, better known as “Freddie Mac (FMCC)”) — and a $100 million subsidy from the City of New York.
“NYCHA is a 50 percent owner as well,” Gropper said. “So NYC
HA will continue to own the complex and it has an oversight role, primarily to protect the residents and the affordability for the long term of the property.”
Merchants Capital, an affiliate of Merchants Bank, financed the transaction by serving as the intermediary between Freddie Mac and HDC on a $320 million loan that was ultimately backstopped by the federal government and used to fill a majority of the senior debt behind the rehabilitation financing.
“Freddie provided the credit enhancement,” said Jessica Cherepski, senior vice president of originations at Merchants Capital. “It makes the debt, [and] the bonds, so much more attractive when Freddie’s standing behind the debt.”
Brian Pascus can be reached at bpascus@commercialobserver.com
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