The Groves: New Louisiana Development Will Feature Mix of Resident Incomes and Building Types
By Caitlin Jones
6 min read
Tax Credit Advisor, August 2010: “When you look at it, it’s almost like three different transactions in one,” says Amber Seely, of Renaissance Neighborhood Development Corporation (RNDC), the New Orleans-based developer of The Groves at Mile Branch Creek, a mixed-income planned unit development rising from the ground in Covington, La.
“There’s one project that’s just the infrastructure,” says Seely. “The second project is developing the multifamily rental housing. And then there’s the third project, doing single-family.”
Recently closed and now under construction, The Groves is creating a vibrant new community where none existed while balancing local architectural tastes and scale with modern financing techniques. Covington, a city of about 9,700 in St. Tammany Parish, is a rapidly growing bedroom community about 45 miles north of New Orleans on the north shore of Lake Pontchartrain.
RNDC, created by the Greater New Orleans affiliate and the national office of Volunteers of America, is developing the infrastructure (e.g., roads, sewers) for the entire 15-acre site; 35 lots for construction of single-family homes intended for low- and moderate-income families; and a 94-unit rental housing component funded in part by the federal low-income housing tax credit (LIHTC).
It’s not your standard apartment building. Rather, the rental component will consist of 24 separate buildings – duplexes, fourplexes, sixplexes, and eightplexes, none over two stories tall. In all there will be 14 different building types, including six different kinds of duplexes differing in appearance mostly on the outside.
“We wanted the development to feel like a community, a neighborhood,” says Seely. “So we felt like part of encouraging that kind of sense of togetherness could be communicated through the designÉMost neighborhoods develop over time, and not every building looks the same – there’s variety. We wanted to make sure that The Groves didn’t look cookie cutter.”
The low scale and lower density of the overall project, together with a mix of affordable and market-rate ownership and rental units, helped RNDC to win local acceptance for The Groves and local approvals, including the re-zoning of the 15-acre site from agricultural. “This is the kind of affordable housing that is right for this community,” says Seely.
The vacant site, located near downtown and one of the few undeveloped pieces of land in the area, abuts the West 30s Neighborhood, which Seely describes as a “pretty distressed community.” With The Groves, RNDC is building on work done in the neighborhood by a local nonprofit, Habitat for Humanity St. Tammany West. This Habitat affiliate has already constructed a number of houses in the neighborhood for low-income families, financed with new markets tax credits, and helped to secure the purchase of the 15-acre site for The Groves for $900,000 from a local family.
Home Lots, Rent Levels
The local Habitat chapter plans to acquire at least 20 of the 35 home lots at The Groves to build modest single-family homes for sale to low- and moderate-income families. Lots not purchased by Habitat will be sold to other developers for the same purpose.
Of the 94 rental units, five will be supportive housing units (one-bedrooms) leased to households making 20% or less of the area median income (AMI) for $130 per month. Another set of one-, two-, and three-bedroom units will be leased to households up to 40% of AMI at monthly rents ranging from $355 to $406. A third set of units of similar size will leased to households up to 60% of AMI at monthly rents ranging from $523 to $739. Finally, a fourth set of market-rate units of similar size will be leased at monthly rents ranging from $700 to $900.
The multifamily buildings and the single-family homes will face a two-acre park located at the center of the property.
There’s a significant need for additional affordable housing in Covington, which has a significant number of both high-income and low-income residents as well as rising home prices. While spared from damage by Hurricane Katrina in 2005, the city experienced a huge influx of evacuees from New Orleans, many of whom have remained. Parish leaders commissioned a study on local housing needs. “Some of the results of this study were that not only do we need more housing, but we need more affordable housing,” says Seely, who adds, “There aren’t a lot of rental options in this area.”
Multiple Funding Sources
RNDC had to assemble two separate funding packages: one for the infrastructure and single-family lots, and a second for the multifamily rental housing component.
Funding sources for the roughly $20 million rental component include nearly $5.7 million in housing credit equity; a combined $4.3 million in federal Tax Credit Assistance Program (TCAP) and Section 1602 exchange dollars; an $8.7 million loan capitalized by a federal disaster recovery Community Development Block Grant (CDBG) received from the state Office of Community Development; a permanent mortgage from New Orleans-based First NBC Bank of about $1 million; and a deferred developer’s fee of $515,000.
RNDC had to zig and zag before nailing down the tax credit equity. It received an allocation of $1.6 million per year in 9% housing credits from the Louisiana Housing Finance Authority (LHFA) in February 2009, in the midst of the turndown in the LIHTC equity market. “Trying to find an investor in that market was really hard,” recalls Seely. “We approached many different investors, and it ended up being either too big for some of the funds, or too small for some of the other funds. So we started talking to a consortium of regional banks.”
First NBC Bank, which had done LIHTC investments before, was interested in purchasing half the housing credits. RNDC found two other banks willing to buy the rest – but they later backed out. First NBC Bank was still interested, but only for half, which it later bought for 72 cents per dollar of credit. At the same time, the bank didn’t want the deal placed in a tax credit fund with other LIHTC properties, which might have provided the rest of the equity.
Stymied and confronted with a funding gap, RNDC approached LHFA to request additional funds. It eventually returned part of the original housing credit allocation, and receiving separate awards from LHFA of $1 million in TCAP funds – as a 15-year, third-position soft loan – and $3.3 million in exchange funds, as a grant. In first position is the permanent mortgage from First NBC Bank, which is also the construction lender. In second position is the $8.7 million CDBG loan.
To reduce the construction risk to First NBC Bank, the TCAP and exchange funds will be drawn down first to pay construction costs until they are exhausted. Subsequent construction draws will be funded 60% from the CDBG loan and 40% from First NBC’s construction loan.
The total development cost for the infrastructure for the 15-acre site is $3,850,000. Funding sources include a separate CDBG grant of $1.4 million from St. Tammany Parish; $1,350,000 from the multifamily lot sales; $850,000 from the single-family lot sales; and $250,000 in foundation support from the Major League Baseball Players Trust.
