We reconnected with customer Rocky Mountain Communities (RMC) to finance a unique, two-part $3.25 million acquisition and predevelopment loan for two widely separate projects:
- $2.1 million plus closing costs to acquire Gateway Village Apartments, 96 affordable multifamily apartment homes in Fort Morgan, CO and
- $1.15 million in predevelopment funds for the unrelated Arroyo Village, a planned 130 apartments in Denver, CO.
One in every four Colorado renters spends more than 50 percent of their income just on rent, according to Live Affordably Colorado.
“We’d received other LOIs on the project, but NC was more favorable for the size we were looking at. The predevelopment funds, the rate, and the alignment of the mission were a big draw as well,” said Kara Washburn, Executive Assistant at Rocky Mountain Communities.
RMC has been quiet in the development arena for over a decade, though we’ve discussed various projects throughout the years.
“It was an unusual project and we were uniquely positioned to help them by wrapping everything into one loan. It is definitely unusual to have it split, especially two large amounts to two separate projects; one existing, one new construction. We were able to offer twice as much for the predevelopment loan, against the value of Gateway,” our Chief Lending Officer Stephen Peelor said.
Other lenders may shy away from predevelopment loans, especially when unsecured.
Our loan funded RMC’s preservation of 96 affordable multifamily homes at Gateway Village in rural Fort Morgan, CO, a community of largely Somali refugees and manufacturing workers. There are few affordable housing options in the area. If a market-rate developer were to buy Gateway, many of these families could be displaced.
The loan will be refinanced with non-competitive 4% LIHTC and tax-exempt bonds, significantly reducing our repayment risk.
RMC has managed Gateway Village for 15 years. When the property owner’s board decided to step away, they offered RMC the opportunity to purchase it. A Section 8 contract that will be transferred under the new ownership restricts 44 of the homes at 30% AMI ($14,850 for a family of four.) The remaining 52 homes are restricted at 80% AMI ($39,600 for a family of four.) RMC will completely rehab the property in the next five years.
RMC is also in predevelopment to redevelop an underutilized 27-bed women’s shelter in Denver, CO, into Arroyo Village, a 130-apartment affordable housing development, permanently supportive housing, and an 11,000-square foot shelter for women and transgender people.
The existing structures will be demolished and replaced with 95 affordable multifamily apartments up to 50% AMI ($45,000 for a family of four), and 35 units of permanently supportive housing for chronically or formerly homeless individuals. It is located in a rapidly gentrifying area, right by the new light rail, a true transit-oriented development.
Our predevelopment loan became the primary catalyst for this very specialized project. The funds helped pay consultants, the architect, lawyers, and more, and allowed them to apply for the different funds and assemble the financing. In the end, RMC will have very little long-term debt to pay back.
The 11,000-square foot shelter for women and transgender people is unique to Denver. It’s the first PSH that has a true continuum of homes all in one campus: the shelter for overnight and weekend, PSH to get people from the streets into safe homes, and then they can move right down the hall to the affordable units for families.
The shelter will be run by the Delores Project, who will also provide services to permanently supportive housing residents. Arroyo Village will also feature a supportive community with access to case workers and social services and counseling such as ESL and GED classes, fitness programs, after-school and early childhood, support groups and more.
The building will open May 2019 and already has a waiting list.
About Rocky Mountain Communities
RMC is a 27-year-old nonprofit with the mission of developing, owning and managing affordable housing and developing support services to help individuals succeed in life. They go well beyond building buildings, and offer residents services they can build on throughout their lives, free of charge, from ESL/GED classes, to after school tutoring and wellness classes.