The Erie County Industrial Development Agency is considering whether to issue $13.3 million in tax-exempt bonds to help a New York City-based housing developer that wants to purchase and renovate a 195-unit affordable housing complex in Black Rock.
Manhattan-based Related Cos. plans to buy and upgrade the Marina Vista Apartments at 32 Hertel Ave., consisting of two 13-story brick towers with 188,000 square feet of space, located on 5.36 acres.
The low-income multifamily complex - formerly known as Watergate II Apartments - features 97 one-bedroom units, 97 two-bedroom units and a single apartment for property management. It's currently assessed at $5.7 million, including the land.
Related called the project an opportunity "to preserve and improve an important affordable housing resource."
Related will manage the property through an affiliate but also plans to obtain and sell state low-income housing tax credits and majority ownership in the complex to a limited partner that is still to be determined. But in order to be eligible for the special 4 percent tax credits, the project requires tax-exempt bond financing, "and we are not currently aware of any other source," Related said in its application.
If the ECIDA approves the transaction, the proceeds of the bonds would be used to finance the project, with rental income from the apartments paying the debt to bondholders. Related also asked ECIDA to authorize sales and mortgage recording tax breaks of $380,835 and $93,757, respectively.
"It is unclear that other resources will be available for the project," Related wrote. "If other resources are not available, the applicant will not be able to acquire and rehabilitate the property. The owner will continue to work to maintain the property given available resources, but the property will likely experience increasing physical needs and declining condition."
Founded in 1972 by Stephen Ross, Related now owns and operates a $30 billion real estate portfolio of luxury residential, affordable and workforce apartments, and commercial, retail and mixed-use properties.
Built in 1973 on the site of a one-time lumber yard, the Marina Vista apartment complex was operated under an agreement that required that all apartments be occupied by residents earning no more than 80 percent of the area median income, with restricted rents, but that agreement expired Jan. 1.
The complex's debt was refinanced in 2004 with state Housing Finance Agency bonds, and also underwent a renovation financed with low-income housing tax credits. That triggered a separate "regulatory agreement" that requires that 131 units - 77 one-bedroom apartments and 54 two-bedroom apartments - be set aside for residents earning at or below 60 percent of the area median income. It also received a 15-year property tax break through a payment-in-lieu-of-taxes agreement with Buffalo and Erie County, as part of the tax credit rehab. The PILOT expires July 1, but the 40-year "regulatory agreement" extends through 2044.
While the apartment complex "has been well-maintained," Related notes, it now has some "physical needs" and requires "significant capital investment." Plans call for completing the purchase and starting renovation early this year, with work finishing by early 2020. The building will remain livable during the renovation.
Specifically, Related said it intends to spend an average of $45,000 per unit in total, for a "comprehensive rehabilitation that will improve the property functionally and aesthetically." That's $8.7 million in construction and renovation.
Work includes repairing and insulating roofs, replacing windows, repairing balconies and building facades, and completing updated lighting, repaving and concrete tasks, as well as modernizing elevators, making the building more accessible and performing other common space upgrades. Additionally, the apartments themselves will be updated with new counters, cabinets, energy-efficient appliances, sinks, faucets, toilets, lighting, outlets, smoke detectors, fan coils and window treatments.
Those costs come on top of a $10 million acquisition, plus $3.8 million in professional and soft costs and $1.1 million in additional expenses - or $23.6 million in total. Besides $12.5 million in bonds, Related is seeking $2.14 million in bank loans, with $575,400 in equity and $8.39 million in tax credits.
As part of the ECIDA and state financing, Related said it expects to sign new agreements that require all units remain affordable at 60 percent of area median income, for at least another 30 years, protecting 63 affordable housing units that would lose their affordable status this year.
"The proposed project will preserve and improve affordable housing in the City of Buffalo for current and future residents," Related said.