When real estate entrepreneur Maria Rosado decided to retire, she wanted to make sure her housing assets wound up in good hands. In February 2017, Ms. Rosado achieved this goal, selling her 43 building portfolio to a new owner that was fully committed to long term affordability: a joint venture between the nonprofit St. Nicks Alliance and a newly formed nonprofit collaborative entity called the Joint Ownership Entity (JOE NYC).
The $7.5 million acquisition was financed through a $5.3 million loan from LISC NYC, and a $965,382 equity investment from St. Nicks Alliance as well as a $1.2 million equity investment from JOE NYC, which was sourced by LISC’s New York Housing Stabilization Fund. Together, the Jefferson and Watson clusters offer 248 units of housing which will be maintained as affordable over the long term. In a hot real estate market, this transaction is a rare example of the transfer of ownership from a for profit developer to a nonprofit organization.
Ms. Rosado became the owner of the buildings over a decade ago through the Neighborhood Entrepreneurs Program (NEP), an initiative by the NYC Department of Housing Preservation & Development (HPD) to accelerate the renovation and sale of abandoned, city-owned buildings while also fostering the growth of neighborhood-based, small-scale housing owner-managers. Through NEP, these neighborhood entrepreneurs accessed financing through federal Low Income Housing Tax Credits, which come with a 15 year compliance period, and City subsidies through HPD that extended affordability for an additional 15 years.
When NEP was launched in 1994, no one could have predicted today’s rapid rise of real estate prices and rents, particularly in New York City neighborhoods that, at the time, were abandoned and disinvested. As a result, affordable housing owners approaching the end of their tax credit compliance period (“Year 15”) had the option to forgo city programs that would further extend affordability. This option would enable them to eventually take the properties market rate.
Not Ms. Rosado. As she prepared for retirement, she was determined to see that the tenants in her buildings remained in their homes, and not face any fear of rising rents or displacement pressure. “St. Nicks Alliance was the right choice to continue affordability and provide quality housing,” said Ms. Rosado.
Enter longtime LISC NYC partner St. Nicks Alliance, a 41-year-old community development corporation (CDC) serving north Brooklyn that manages over 1,100 units of affordable housing. “We were very excited when Ms. Rosado began talking to St. Nicks Alliance about her portfolio,” said Michael Rochford, Executive Director of St. Nicks Alliance. “Ms. Rosado is an impressive entrepreneur who has remained focused on maintaining high quality affordable housing for residents. We shared Ms. Rosado’s mission and purpose, and thought we would be the right partner to sustain her legacy.”
Mr. Rochford saw an opportunity for St. Nicks Alliance not just to acquire the properties, but to add them to the growing portfolio of JOE NYC, a membership organization of nonprofit Community Development Corporations that will own and asset manage affordable multifamily properties on behalf of its members. The CDCs that comprise JOE NYC’s board are assembling ownership of affordable housing projects across their various portfolios into one entity of substantially greater scale.
“This transaction represents a big step for JOE,” said Peter Madden, Executive Director of JOE NYC. “It’s our first acquisition of a for-profit-owned portfolio into our nonprofit collective ownership model, hopefully the first of many. Achieving scale is the whole premise of JOE NYC, and taking ownership of these buildings moves us toward our goal of owning 3,000 units over the next year.”
There were a number of technical complexities in this transaction for which LISC NYC was uniquely suited. In addition to providing the acquisition loan, LISC NYC Director of Housing Arturo Suarez worked with St. Nicks, JOE NYC, and their development consultant Forsyth Street Advisors to consider financing options and how to structure the transfer. In addition to receiving approval from HPD, the transaction required the approval of the New York Equity Fund. This process was shepherded through the process by Lisa Deller, Vice President of Asset Management for National Equity Fund (NEF), an affiliate of LISC.
“There were a lot of players that had to align around the value of long term affordability,” said Sam Marks, Executive Director of LISC NYC, “from Ms. Rosado, to the City, to the new nonprofit owners. In today’s supercharged real estate market, we need to bring as many housing assets as we can into long-term affordable stewardship, and JOE NYC and its members like St. Nicks are critical players in making this happen.”