Capitol Heights,
Maryland
Prior to redevelopment by CPDC, Central Gardens II was a
deteriorated, drug infested slum with an owner disinterested
in operating and maintaining it. The property was redeveloped in a
joint venture between Mid-City Financial and CPDC (with CPDC
as the managing general partner). Today it is operated in
conjunction with its neighbor, Central Gardens I, with
shared management and community service
programs.
Property and Community
Profile
Central Gardens II is a 106-unit garden apartment complex
with one-, two-, and three-bedroom units, a pool, and
several spaces converted into community service areas. The
property serves very low-income families with Section 8
assistance. The majority of the residents are single head
of household families with children between four and
fourteen years of age.
Financing Structure
The price and fundamental structure of the purchase money
note to the seller were agreed to prior to CPDC's
involvement in the project. When the project budget was
developed, it was clear that additional funds would be
required. CPDC was able to take the terms of the seller's
note and turn them into an advantage for the property. The
seller's note is a surplus cash flow note payable in fourth
position after the payment of interest on a set amount of
equity investment. With this structure CPDC was able to
incorporate the use of the Low-Income Housing Tax Credit,
utilizing the preferred return on equity as payment of the
interest on an equity bridge loan. With a ten-year equity
bridge loan and annual contributions from the limited
partners, the yield from the tax credits was enormously
enhanced.
The first mortgage loan was funded
with tax exempt bonds, a soft second mortgage from the State
of Maryland was added ahead of the seller's note, and equity
was raised through the sale of the tax credits. CPDC's
wholly owned subsidiary, CPDC, Inc. is a one percent
managing general partner. This project was the first in
Maryland to utilize tax-exempt bonds to create Low-Income
Housing Tax Credits. All of the units have project-based
Section 8 subsidies.
Construction Management
This project was complex in
that it entailed: 1)
rehabilitation of a fully occupied property, and
2) construction conditions that were unique to
each unit because the project was not a full renovation.
There were also insufficient resources, so some physical
needs were delayed to be paid from operations during the
first five years. Residents were not relocated during
construction, requiring precise scheduling and coordination
of construction in the apartments with the general
contractor. CPDC was responsible for this process and the
in-depth work with the residents.
Resident Association Participation
The residents have a mature
and fully operating resident association. Multiple
community services are ongoing, including tutoring,
mentoring, leadership, entrepreneurship, educational and
recreational programs. CPDC was awarded an Americorp
volunteer trainer to assist in teaching residents how to
participate in the childrens' programs. In November of 1996
CPDC opened a new computer learning center which will be
used initially for adult computer literacy and some job
training. As CPDC raises funds, the program will be
expanded to encompass a full employment readiness and job
training program.
