NeighborWorks Capital’s Flexibility Helps ACOF Provide Affordable Homes for Families and Individuals with Special Needs
NC recently helped ACOF, one of the largest nonprofit affordable housing developers in Los Angeles County, by extending its $2 million acquisition loan and funding $500,000 in new predevelopment financing.
Policy and regulatory changes can be a serious obstacle for tax credit-funded projects. When A Community of Friends (ACOF) had its progress on a new development threatened, NC helped by extending our $2 million land acquisition loan (closed 2015) by 18 months and providing an additional $400,000 of predevelopment funds. This extension allows ACOF to move forward with helping meet the extreme demand for affordable homes in the Southland.
"Tamar and the NC closing team were responsive and turned things around quickly," said Mee Heh Risdon, Director of Housing for ACOF.
ACOF’s Huntington Square, in Huntington Park, five miles south of LA, will be a three-story, 60,000 SF building with one- to three-bedroom apartments for very low-income families earning $35,000, and homeless youth recently exiting the foster care system. ACOF will provide optional onsite services to help residents address issues that led to homelessness, and provide achievement plans for individual needs. The building will feature a community room with teaching kitchen, computer room, onsite laundry, fitness area, and private offices for case management. Special needs units will have furnished bedroom and dining rooms. The mixed-use project will also include 10,000 of commercial space for ground-floor retail and office.
The development will funded through a mix of local, city, state and federal sources. Since starting on this project in 2015, local and state affordable housing policies and regulations have changed and the projects requirements have been revised, so ACOF has had to return to the drawing board a few times. The loan extension will help ACOF modify the project to fulfill the latest project requirements.
"Complex government and non-governmental soft funding sources often change or get cut over time, making it difficult for most lenders to take on such projects. NC is willing to take these challenges on and to be flexible and work with our customers as conditions change. We understand and support these types of much-needed affordable developments," said Senior Loan Officer Tamar Sarkisian.
NC’s extended financing was also highly leveraged (100% LTV), so providing an unsecured predevelopment loan allowed us to reduce our LTV exposure to 95% LTV while still providing new predevelopment funds. Part ($100,000) of the new predevelopment loan will pay down the acquisition loan. The rest will be used to fund the project through its tax credit equity application, award, and closing process.
ACOF is one of the largest nonprofit affordable housing nonprofit developers in Los Angeles with extensive experience with permanent supportive housing. They have a solid and long-standing reputation, and have been a NeighborWorks America member since 2013. NC has worked with them on one previous project, a $400,000 predevelopment loan for Silver Star Apartments (repaid in December 2015), and the project opened in late 2017.
Despite a recent construction boom, nearly 600,000 new homes and apartments are needed to satisfy the demand of low-income renters. High single-family home prices in LA County, combined with consistent job growth is pushing the apartment vacancy rates below 4%, with average monthly rents increased by $200 during 2018.
Huntington Square will replace a vacant office structure in a mixed-use neighborhood. Investment has been slow and home choices are limited in the area. According to the City of Huntington Park, 75% of the homes and apartments in the city are more than 30 years old, and overcrowding is a serious concern. Huntington Square will help address some of these concerns.
Founded in 1988, ACOF currently provides homes for more than 2,600 people in over 1,700 apartments. Its mission is to end homelessness through the provision of quality permanent supportive affordable homes for extremely and very low-income families and people with mental illness, as well as providing onsite supportive services to help their residents remain stably housed. They are one of only a handful of agencies that offers supportive and service-enriched affordable homes for homeless individuals and families living with mental illness in Los Angeles County. They have been a NeighborWorks America member since 2013, one of 21 in California. Their current pipeline includes seven new construction projects, totaling 500 new apartments.