Gone Down in History: Multifamily and Mixed-Use Historic Tax Credit Case Studies

Malden Mills – Loft 550 Ph1 & 2Adam Stein, Senior Vice President, Winn Development

Mary Thompson, Senior Vice President, Bank of America

Loft Five50

Phase 1

• Completed in 2012

• 75 Units

• TDC = $34.5M

Phase 2

• Completed in 2015

• 62 Units

• TDC = $24M

Loft Five50

Arlington Mill District | Lawrence, MA | 1M SQFT

Loft Five50

Phase 12 Buildings; 29 + 30160,000 GSF

Phase 24 Buildings; 24, 27, 28 + 29R130,000 GSF

The Ideal Mill Building• Building width of 60 to 70 ft

• Column grid spacing of 8 to 11 ft

• Large windows, typically 42”W x 84”H

• Well maintained, Structurally sound

• Intact masonry/brick façade

• Building NOT in a flood zone

• Original architectural details (that work)

• Historic relevance; preferably within an existing District

• Close to Public Transit

• Opportunity to revitalize Neighborhoods /connect to the past

• Well situated site/buildings (not on top on each other)

• Accumulated State HTCs (MA)

But They’re Never Ideal…

MM had extremely wide and narrow buildings: 101 ft to 49 ft

Second Phase | First Floor Plan

But They’re Never Ideal…

Solution: Embedded Bedrooms

LIVING ROOM13’-5”X 16’-10”

BEDROOM10’-9”X 10’-10”

BEDROOM11’-5”X 14’-11”

But They’re Never Ideal…

Structural Issues

But They’re Never Ideal…Buildings located in the 100 yr Flood Plain

Solution: Raise Floor, flood gates, non-residential 1st Fl

But They’re Never Ideal…Environmental Items (not Issues…)

Solution: Vapor Mitigation Systems (sealing, SSDS & AUL)

Marketable Features

• High ceilings, large windows & common space

• Exposed brick and wood beams & decking

• Unique character and history

• Proximity to transit and neighborhood amenities

• Connectivity to riverwalk and public amenities (park)

Typical Adaptive Reuse Challenges

• Creating habitable space in a structure that was not intended for residential use

• Building code compliance vs. preservation

• Lack of windows

• Column grid spacing

• Site plan spacing

• No seismic or uplift ties on structure (Insurance Requirements)

• Deteriorated masonry (soft bricks)

• Eroded mortar joints

• Rotted wood + weakened steel

• Archaic construction methods + materials

• Existing space configurations required to be preserved

• Large window openings (non-standard sizes)

• Replicating historic construction + window brick mold profiles

• Mechanical equipment additions + retrofitting

• Flood plain

The Numbers | Phase 1

Sources:

FLIHTC Private Equity ($1,296,000 x 10yrs) $9,848,000

SLIHTC Private Equity ($3,500,000 x 10yrs) $11,375,000

Historic Tax Credit Equity $8,611,000

Permanent First Mortgage $1,450,000

State Loans (DHCR AHT, HTF, HOME) $2,300,000

City Support (HOME/CDBG) $500,000

Developer Equity/Deferred Fees $737,879

TOTAL $34,821,879

Uses:

Acquisition $3,193,800

Construction Costs $22,667,408

Architecture & Engineering $1,469,084

Legal $509,497

Financing Fees $2,481,710

Reserves $361,823

Other Softs Costs & Fees $4,138,557

TOTAL $34,821,789

≈$30MM Generated from Tax Credit Equity or approximately 86% of Project Sources (25% from HTC Equity)

$1.45MM Supportable Debt Resulting from Project NOI (3-4% vs. 70-80%)

$3.5MM State and Local Financing and DDF

Loft Five50

Loft Five50

Loft Five50

Loft Five50 -- amenities

Phase 2 Construction Financing

• BofA $18,400,000 Construction/ Tax Credit Bridge Loan

• $13,000,000 FLIHTC and FHTC

• $3,800,000 SLIHTC

• $2,900,000 SHTC

• $3,600,000 Public Sector Funds

• $1,400,000 MHP Permanent Loan

BofA Considerations

Deal Team:– Developer

– General Contractor

– Architect

– Preservation Consultant

– Accountant

– Tax Counsel

– 3rd Party Tax Credit Syndicator/Investor

– Permanent Lender

BofA Considerations

•Combined LIHTC/HTC investment structure.

•Equity Pay-in –governed by LIHTC policy

•Environmental Conditions

– Engage parties early

• Flood Plain

– New flood insurance regulations in place

• Construction/Bridge repayment

1. Get Registered asap (18mo+, investor impact)2. Be aware of functionally-related issues in larger

complexes3. Understand competing Programs (LEED, etc)4. Crack the codes5. Describe the work and save historic details6. Say what you’ll do, and do what you say7. Act locally8. Use insulation wisely (too much doesn’t = good)9. Use an experienced team10. Stick to a five-year plan

10 Things to Keep in Mind When Considering a Historic Project

Loft Five50 TeamDeveloper/Owner: Winn Development

Architect: The Architectural Team, Inc.

Historic Consultant: Epsilon Associates

General Contractor: Keith Construction

Transaction Attny: Murtha Cullina

Lender: Bank of America

Lender: TD Bank

Lender: Massachusetts Housing Partnership

Lender: Dept of Housing & Community Development

Lender: MassHousing

Lender: City of Lawrence

Syndicator: WNC & Associates