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August 21, 2008

Ratner announces financing for 80 DeKalb

80DeKalb-2.JPG MarketWatch.com, Forest City Closes $167 Million Financing for Downtown Brooklyn Residential Building

The full press release from Forest City Ratner announces that the company "has closed on $167 million in construction financing for 80 DeKalb, a 335,000-square-foot residential building on DeKalb Avenue in downtown Brooklyn."

The Real Estate Observer, New Glassy Tower to Join Fort Greene Mini-City

The glass building will join the Forte Condo (at Ashland Place and Fulton Street), and the soon-to-be-built Danspace project across the street to form a small mini-city on the edge of Fort Greene, bordering Downtown Brooklyn -- but a taste of the 16-skyscraper-and-arena Atlantic Yards complex to come.
[A]ccording to the release.

"The New York State Housing Finance Agency selected 80 DeKalb to receive $109.5 million in tax-exempt bonds and $27.5 million in taxable bonds. The lending institutions involved in the transaction were Wachovia Bank, N.A., and Helaba (both co-agents providing the credit enhancement to the $137 million in bonds issued by HFA), as well as the National Electrical Benefit Fund, which provided a $10 million mezzanine loan and $20 million of credit enhancement."

Boring as that might seem, it's an achievement to get that sort of financing in this market, in which many of the Wall Street shops have stopped lending, and borrowers are forced to approach more traditional, and more conservative, balance sheet lenders.

NoLandGrab: It's less of an achievement when the state housing authority is backing most of the bonds. Also, the word on the street is that Ratner had to get the bonds from the State because the City of New York is more inclined to provide tax-exempt bond-financing for projects with a higher component of affordable units (50/30/20).

Brooklyn Daily Eagle, Funding Set For Ratner’s First Brooklyn Apt. Building

Unlike most 80/20 developments, 80 DeKalb will remain affordable for 99 years, according to Ratner. For the initial 35 years, 62 affordable units will be made available for households earning up to 50 percent of the area median income (AMI) and 11 units for households with incomes up to 40 percent of AMI. For the remaining years, all of the affordable units will be made available for households earning up to 90 percent of AMI.

NoLandGrab: For those trying to wrap your head around all of the fanfare, this means that after 35 years the income-ceiling for applicants for the "affordable units" will be raised for the remainder of the program. Bottom line, it's less affordability for the long term.

The Brooklyn Paper, Ratner’s first tenants

This head-scratching explanation is probably our favorite bit of spin of day:

Some critics have argued that state affordable housing bonds are too generous. Indeed, the state’s $109.5-million tax-free financing will create just 73 afforable units — a cost of $1.5 million per apartment.

But a spokesman for the Housing Finance Agency said such back-of-the-envelope calculations miss the larger point.

“We don’t finance only the affordable units in a building; we finance the entire building because the developer has committed to having affordable units in it,” said the spokesman, Phil Lentz. “So our contribution is actually $300,000 per unit. We don’t finance buildings that are exclusively market rate.”

NoLandGrab: So NY State justifies its generosity by reminding taxpayers that we are not only helping to finance the affordable units but the market-rate units too!?!

One other note: Chuck Ratner got it right in the press release where he stated, "It's also a tribute to our New York team and the relationships they have built in both the public-sector and private-sector financing community." Though this deal closed in a shaky lending environment, the backbone of the deal, the state-backed tax-exempt financing, couldn't have happened without the Ratners' deep political ties.

Posted by lumi at August 21, 2008 5:09 AM