MassDevelopment, MHP, BNY Mellon team up to offer low-cost financing to nonprofit
Posted on September 30, 2011
BOSTON, Sept. 30, 2011--- For the fourth time ineight years, the Massachusetts Housing Partnership (MHP) has put its private bank financing to work to help preserve and improve affordable housing in thecity's popular Fenway neighborhood.
This time, MHP has collaborated with MassDevelopment and BNY Mellon to provide $7 million in tax-exempt bond financing to help preserve West Fenway Apartments, a 48-unit affordable rental complex for the elderly and handicapped,with some apartments set aside for people with AIDS and HIV.
The tax-exempt financing will enable the borrower, the Fenway Community Development Corp., to keep West Fenway affordable for years to come and make much-needed repairs to the 23-year old, seven-story building. The work scope will include replacement of elevator, boiler, water and ventilation systems as well as kitchen, bath and accessibility upgrades, window replacements and installation of sprinklers in all units.
The Fenway CDC loan marks the 11th time that MHP has teamed with MassDevelopment to provide low-cost tax-exempt financing to non-profit borrowers and the second time this type of financing has been used in the Fenway.
For the West Fenway loan, MassDevelopment issued the $7 million bond and MHP arranged for direct placement of the bonds with BNY Mellon, one of MHP's funding banks. This enabled the Fenway CDC to save money by avoiding the cost of finding investors through a public offering.
Back in 2003, MassDevelopment and MHP teamed up to provide $14 million in bond financing to support the renovation of 145 existing units at Morville House, and the addition of 33 new units. This time, MassDevelopment issued the bonds and MHP arranged for one of its funding banks to provide triple-A credit enhancement, resulting in a lower interest rate for the borrower, the Episcopal City Mission.
In 2006, MHP used its fixed-rate permanent financing loan product to support the preservationof 22 units of affordable rental housing at Kilmarnock Street Apartments. More recently, MHP committed long-term financing to preservethe 34-unit Burbank Street Apartments.
Tax-exempt financing options
Since its first bond closing in 2002, MHP has financed 11 developments involving tax-exempt bonds, totaling over 1,200 units, 90 percent of them affordable to households earning less than 60 percent of area median income.
Because the interest rates on these bonds is tax deductible, MHP can offer lower rates to borrowers. In most cases, project sponsors can also receive an automatic allocation of 4 percent tax credits, which for many projects provides an adequate level of financing and eliminates the needs for borrowers to compete for 9 percent tax credits.
Typically, bonds are issued by MassDevelopment and MHP arranges for one of the following:
Direct placement of the bonds with one of its funding banks without any credit enhancement
Credit enhancement of the bonds so they can be sold as a public offering to investors who demand a AAA credit rating for their best pricing
Credit enhancement of the bonds for a private placement of the bonds with an investor.
For more information about these efforts and MHP financing, contact Senior Loan Officer Amanda Roe.