News - 2006
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2006-026
RED Provides $16 Million in Bond Financing and $5.9 Million LIHTC Equity For Redevelopment of Downtown San Francisco Section 202 Project
Seniors Units Near Yerba Buena Center To Undergo Rehabilitation
Ceatrice Polite
San Francisco, California
Columbus, OH, June 12, 2006 – Red Mortgage Capital, Inc. and Red Capital Markets, Inc. (MEMBER FINRA/SIPC), respectively the mortgage banking and investment banking arms of comprehensive capital provider RED CAPITAL GROUP, recently arranged capital that provided for the rehabilitation of a seniors housing apartment complex in San Francisco’s downtown South of Market Area, just a few blocks from the financial district. The financing involved the prepayment of a Section 202 loan pursuant to recent HUD notices and was the first such transaction completed by the San Francisco HUD Office that included tax credits and bonds.
The property, Ceatrice Polite Apartments ("CPA"), is a 91-unit seniors residential property originally developed and still owned by the TODCO Group. The property is occupied by low income and very low income residents. Previously financed as a HUD Section 202 loan, the owners sought a way to finance project repairs and overall project revitalization. The property is one of eight affordable housing developments totaling 1,000 units built by the TODCO Group since 1978 in San Francisco ’s booming South of Market Neighborhood (SOMA). Founded by residential hotel tenants displaced from redevelopment projects over 30 years ago, TODCO is a community-based nonprofit institution whose mission as "South of Market Neighborhood Builders" is to maintain SOMA’s longtime working class, immigrant, and elderly communities as an integral part of their neighborhood’s future. In addition to developing housing utilizing city, state, and federal programs, TODCO directs the management of its properties and provides supportive services for their residents.
The Ceatrice Polite Renovation/Refinance Project implements three crucial goals of the TODCO Group’s long-term Strategic Plan:
- To extend the low-income affordability of the CPA project to a minimum of 75 years, and to ensure always-needed senior housing for the elderly residents of SOMA as envisioned by TODCO’s founders.
- To fully renovate and modernize the CPA building and address its 20-year rehabilitation needs by upgrading life/safety systems and building technology to current standards, implementing functional improvements, and significantly improving energy efficiency to enhance the quality of life of its residents.
- To ensure that the full ownership and asset management costs to TODCO itself are dependably funded from CPA operating revenues and cash flow and that resident support services are increased, to contribute substantially to the long-term financial self-sufficiency of the TODCO Group.
To accomplish the goal and obtain the necessary proceeds, a highly experienced group of RED CAPITAL banking professionals, having expertise ranging from tax credit syndication to bond financing and mortgage lending to credit enhancement, was brought in to structure the multi-faceted and highly complex financing. Red Mortgage Capital, Inc. underwrote and processed a $7,875,000 FHA Section 221(d)(4) insured loan commitment in conjunction with the HUD San Francisco Office and also arranged for a $2,250,000 letter of credit from Red’s parent, National City Bank. On the investment banking side, Red Capital Markets, Inc. bankers worked closely with all parties involved, including the issuer of the bonds, the Redevelopment Agency of the City and County of San Francisco, to structure $10,125,000 of fixed and variable rate tax-exempt bond financing and $5,913,184 of unenhanced, privately-placed, taxable bond financing. Red Capital Markets, Inc.’s LIHTC specialists provided $5,696,249 in low income housing tax credit equity. As a result of the financing, more than $3,800,000 (or $42,000 per unit) will be available for rehab projects including roof replacement, insulating to improve energy efficiency, elevator and electrical upgrades, and unit specific improvements such as new appliances and flooring.
Evan E. Becker, Managing Director of Red Capital Markets, Inc. noted, "This is such a perfect progression of the work TODCO started years ago in this community, advocating and providing housing for those affected by redevelopment. Recapitalizing the property was a complex undertaking that required tremendous determination from TODCO and its entire development team. TODCO provided us a special opportunity to do what we thrive on at Red - bringing all the financing pieces together. This will be a model for housing preservation."
Nicholas A. Hamilton, Managing Director of Red Capital Markets, Inc. added, " The expertise of the various bankers, attorneys, Redevelopment Agency staff and other professionals was essential to structuring this multi-faceted transaction and meeting myriad debt and equity requirements in order to preserve this essential affordable housing stock."
John Elberling , President of GP/TODCO-B, INC. said, "The Red Capital Group teams’ across-the-board experience with HUD 202 refinancing was central to the project’s success. Taking advantage of their know-how saved us at least a year in closing the deal. And Red’s ability to be a one-stop-shop for predevelopment, bond, mortgage, and equity financing greatly simplified our project analysis and decision-making so as to best achieve the TODCO Group’s goals."
