Nuns Sustain Order By Partnering on Joint Venture Real Estate Deal
By Caitlin Jones & A. J. Johnson
5 min read
Tax Credit Advisor, March 2009: A Roman Catholic order of nuns in Missouri is partnering in the historic rehabilitation of buildings on its campus into affordable apartments to generate needed housing and income, in an innovative multi-phase deal that could serve as a model for other religious orders.
The Sisters of the Most Precious Blood, an order founded in 1875, occupies a 42-acre campus in O’Fallon, a community about 35-40 miles from downtown St. Louis. Based in O’Fallon, the order is involved in educational, social work, and health care services activities.
Sister Mary Whited, the order’s congregational leader, or president, says the order has about 177 sisters, 88 of which live in the motherhouse on campus, and the rest spread across the U.S. and in five other countries.
Like other religious orders, the Sisters of the Most Precious Blood has seen the size of its community shrink – as existing sisters age, and few young women join the order – and its expenses grow.
Multi-Phase Development
Whited said the new joint venture development will unfold in several phases. First will be 60 affordable apartments created from the rehabilitation of seven or so of nine existing historic buildings dating back to 1874, plus some new construction. Of these apartments, 40 will be low-income housing tax credit units restricted to tenants earning 60% or less of the area median income, according to John Wuest and Matt Nordman of the St. Louis Equity Fund, which syndicated tax credits for the deal.
Next will come the renovation of the skilled nursing care center into a larger, licensed facility. Another piece, Whited said, will include development of 72 market-rate apartments and construction of some small “patio” homes for seniors.
The St. Louis Equity Fund and a consultant crafted a request for proposals for development of the affordable housing component, to be called Villa Theresa at the Villages of St. Mary’s. Selected was a local real estate developer, McEagle Properties. The order entered into a partnership agreement with the developer, and the affordable housing transaction closed last December 31st. Abatement and renovation work began in February. Construction is projected to take 21 months.
Wuest, President and CEO of the St. Louis Equity Fund, said the attractive campus consists of “a series of magnificently maintained beautiful old buildings, plus about 30-odd some acres of ground that’s never been built on.” He noted O’Fallon is in St. Charles County, Missouri’s fastest-growing county.
Whited anticipated that some of the sisters will live in the affordable apartments after they are completed. The apartments will be marketed to the general public, as will the residential units and facilities in the later phases.
Multiple Tax Credits
Tax credits were key to funding the affordable housing component. Close to 80% of the permanent funding dollars for the $16.3 project have been generated by equity from the sale of the federal low-income housing and historic rehabilitation tax credits and the Missouri housing and historic tax credits. The project will also receive a Missouri brownfield tax credit to help pay for environmental abatement work.
Other permanent funding sources include a permanent first mortgage from Bank of America (7.37%, 18-year term, 30-year amortization), a loan from the state’s Affordable Housing Assistance Program, developer equity, and a deferred developer fee.
The St. Louis Equity Fund (SLEF) is providing about $2.9 million in tax credit equity, placing the project in one of its funds. US Bancorp Community Development Corporation is providing nearly $7.5 million in tax credit equity, through a separate direct investment. Bank of America is also an investor in SLEF’s tax credit fund, and the construction lender.
Nordman, SLEF Vice President for Acquisitions, said a master lease structure was used for the transaction to maximize the historic tax credits generated.
Nordman said the Fund paid 89 cents per credit dollar for the federal housing credits and 44 cents for the state housing credits. An allocation of 9% federal housing credits was received for the project.
Whited said the order provided the buildings and land for the first phase, and will receive cash for these assets down the road. Wuest indicated the order will also reap additional future benefits from its joint-venture participation.
Model Project
Wuest said the affordable housing development “could well serve as a model for other [religious] organizations around the country.” Whited, in fact, noted, “We’ve had a lot of inquiries from other orders who are looking to do the same kind of things.”
Whited said the joint venture development will achieve several goals for the order. “By going in this direction, our expenses will be less,” she noted, explaining that now the 88 sisters living on campus split the expenses for the motherhouse and upkeep of the land. “Once we have more people on this property contributing in a lot of other ways, our expenses will decrease,” she said.
She added the venture will also enable the order to better care for its sisters, help fund its charitable outreach activities, and open up the campus to the public.
“We would like to be able to bring some new life into the campus, as well as to be able to share it with other people,” Whited said. “The time is right to do that.”
