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RAD-Fueled Renovation of Housing Complex a Hit in Baltimore

Brad Stanhope, Senior Editor, Novogradac & Company LLP

A $10 million renovation of the 130-apartment Hollins House affordable apartment complex in West Baltimore was a good fit for the city and a great match for developer Community Preservation Development Corp. (CPDC).

CPDC completed a renovation in April for the property–which is for low-income seniors and people with disabilities in the Hollins Market neighborhood of Baltimore–by using low-income housing tax credit (LIHTC) equity. The development helped CPDC operate in its sweet spot and expand geographically.

The multiyear trek began when the Housing Authority of Baltimore City (HABC) sought developers to participate in a major U.S. Department of Housing and Urban Development (HUD) Rental Assistance Demonstration (RAD) conversion of public housing stock to project-based Section 8 housing.

CPDC was intrigued.

“We responded partly because CPDC’s strategic decision was to expand geographically,” said Stacie Birenbach, senior real estate development officer for CPDC. “We’ve been primarily in the middle Atlantic, with a focus on the [Washington,] D.C., metro area. We had two areas where we wanted to expand: to Baltimore and to the Richmond-Norfolk-Tidewater, [Va.,] area. We wanted to go north and south. We also wanted to partner with housing authorities.”

This hit the target.

“It was the perfect project for us. The size worked–it was 130 units in Baltimore, so it was in the sweet spot of not being too large and not too small,” Birenbach said. She said the presence of multiple community partners made it an even better fit.

“The location was extremely attractive for us,” Birenbach said. “Hollins House is on a troubled commercial corridor and there is a stark physical separation between downtown and West Baltimore. The University of Maryland has a presence on West Baltimore Street–literally a block away. We know they have a huge stake in the neighborhood and they’re a good partner for us. There also is a group of local, active neighborhood associations that are working to look at the future of southwest Baltimore. They have a vision, plan and voice to attract resources.”

The location was good for tax credit syndicator and investor Enterprise, too.

“It’s in the same neighborhood as our development offices,” said Philip Porter, vice president of syndication at Enterprise Community Investment Inc. “We’ve made other investments from programmatic work to financial services in the area–showing our commitment to West Baltimore. We’re also absolutely committed to the goals of RAD, so it’s a good fit.”

Updating an Aging Property

CPDC carried out renovations while residents remained in the 34-year-old building.

“Everything was old,” Birenbach said. “It’s not the oldest building we’ve worked with–we’ve renovated buildings from the 1960s and 1970s and this is from 1983, butut the systems were old and suffered from deferred maintenance.”

Apartments received a facelift, including kitchen and bathroom upgrades, new doors, walk-in closets, new HVAC, energy-efficient appliances and fixtures and other amenities.

Birenbach said the windows were one of the biggest issues, particularly windows (and doors) that led to the balconies in each unit. “There was water penetration from the balcony doors into the units,” Birenbach said. “We knew we had to tackle it.”

Birenbach said CPDC’s approach to the problem was counterintuitive.

“We noticed that the balconies were neither functional nor attractive,” she said. “For someone with a wheelchair, they were only accessible by a metal switchback ramp in the living room. So we enclosed the balconies and added space for the bedrooms. We put in a new energyefficient window system and there is no more water penetration through the windows.” Birenbach said some apartments now have floor-to-ceiling windows.

Porter agreed that water was an issue.

“Basically, the building was undermaintained,” he said. “One tenant told a story of getting so much water in her apartment when it rained that she kept a mop handy. Now it’s a fresh, clean, secure residential experience.”

The renovations weren’t limited to the apartments.

“Another big focus was to reconfigure the way the common areas functioned,” Birenbach said. “The management office was behind a closed door. The social worker offices space was hidden. There was a very narrow lobby. We blew that out and expanded it three times the size. People love to sit in the lobby–they love to gather and the lobby is where they do it.”

Working around Residents

The redevelopment was complicated by the fact that residents stayed on-site during construction and further mucked up by the fact that the only way to shut off the plumbing without disrupting the whole building was to shut down vertical stacks.

“So, we phased renovation in vertically, instead of floor by floor,” Birenbach said. “We asked the housing authority to hold some apartments vacant so when somebody’s unit was being renovated, we could temporarily move them to within the building rather than finding offsite housing. Typically, we had about 16 units under construction.”

Birenbach said the residents stayed upbeat.

“We’ve had a very positive reaction from the residents,” Birenbach said. “This was an extremely disruptive time. There was demolition going on, it was noisy and hectic. The residents and the construction workers shared the same hallways. But the residents’ feedback is amazing. A group of residents got together and cooked a lunch for the contractors, which is something we’d never seen before. We were able to engage the residents ahead of time to make them comfortable with us and understand that the benefit was for them.”

Birenbach said that the switch from being operated by the housing agency to private ownership came with some opportunities, including a CPDC staff member who works to coordinate services for the residents.

Financing

Enterprise Community Partners contributed $7.6 million in 4 percent low-income housing tax credit (LIHTC) equity, to go along with an $11.4 million HUD 221(d)(4) mortgage and a $6.1 million seller note.

Positive Reaction to Upgrade

With a new look, the reaction has been positive.

“CPDC was thoughtful in the selection of the finishes used throughout the Hollins House. For example, the community bathrooms have tile from the floor to the wall that looks great and will last a long time,” said Tania Baker, HABC director of communications. “Whenever we have given a tour of Hollins House, people always comment that the lobby looks like a hotel and feels like a home when you transition from area to area, due to the attention to design and quality of finishes.”

“Somebody told me that they thought Hollins House was new construction,” Birenbach said. “We’ve gotten positive feedback from the community as well. We’ve really built new neighborhood partners.”

Birenbach said HABC was a particularly good partner. “There are just a few tools to address their portfolio’s capital needs and HABC recognized RAD as an effective path forward. They are in this for the long term,” Birenbach said. “The road to RAD was not simple, but the reward for residents is paying off.”

The compliment was returned by HABC’s Baker.

“CPDC deserves credit for setting up strong lines of communication with the residents and following through with what they told residents they were going to do,” she said. “Relocating and living in the middle of construction noise and dust are never easy for anyone. However, the residents were rewarded for their patience during construction by receiving a new state-of-the art building that they can be proud to call home and can live in comfortably for years to come. “

 


Hollins House

FINANCING

  • $11.4 million HUD 221(d)(4) mortgage from Red Mortgage Capital
  • $7.6 million in 4 percent low-income housing tax credit equity from Enterprise Community Investment on behalf of Enterprise Housing Partners XXVI ŠŠ
  • $6.1 million seller note
  • $900,000 bridge loan from Enterprise Community Loan Fund
  • $500,000 deferred developer fee

 

This article first appeared in the August 2017 issue of the Novogradac Journal of Tax Credits.

© Novogradac & Company LLP 2017 – All Rights Reserved

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This editorial material is for informational purposes only and should not be construed otherwise. Advice and interpretation regarding property compliance or any other material covered in this article can only be obtained from your tax advisor. For further information visit www.novoco.com.

 


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