A new mixed-use development adjacent to Manhattan will provide up to 5,000 new housing units for New York City, with tax-exempt bonds helping to finance the first phase of the project.
Construction for road, sewer, water, and power upgrades began last month on the 30-acre development, called Hunters Point South, and officials anticipate the initial phase of the project will be finished in 2014.
The Hunters Point development, the largest new affordable housing complex for the city since the 1970s, is located in Long Island City in Queens along the waterfront of the East River and across from the United Nations building. The location is just one subway stop away from midtown Manhattan, offers multiple public transportation options for future residents, workers and visitors, and has first-row views of Manhattan’s skyline.
Since the 1980s, various administrations have looked at the area as a prime location for development and Mayor Michael Bloomberg identified the site for temporary housing as part of the city’s unsuccessful bid for the 2012 Olympic Games.
“The administration has said that what we’re going to build here is a brand-new community where there will be million-dollar views but you won’t have to earn a million dollars to live there,” said Josh Wallack, chief operating officer at the New York City Economic Development Corp.
“I think the opportunity to turn such a stunning location and one that’s so close to the center of the city into a place where middle-class families are going to be able to live and raise their families is a once-in-a-generation opportunity for the city.”
The first phase of development includes 908 rental units, retail development, initial construction of an 11-acre waterfront park, and a new public school that will begin serving more than 1,000 intermediary and high school students in Fall 2013.
The New York City Housing Development Corp. will sell $200 million to $220 million of tax-exempt housing bonds on behalf of the development in June 2012 to help finance the residential component.
Rental payments will help pay down the bonds. Phipps Houses Group, the Related Cos., and Monadnock Construction Inc. are the site’s development team.
The HDC plans to issue variable-rate debt with maturities out to 30 years. The transaction will be a stand-alone borrowing that is not a part of the agency’s open resolution borrowing program, which carries HDC’s double-A ratings.
“The bonds would not be using HDC’s double-A rating,” said Joan Tally, agency’s senior vice president for development. “The bonds would be rated independently with the backing of a credit enhancement and that would be bringing the rating to the bond transaction.”
Marvin Markus, managing director of public-sector and infrastructure banking at Goldman, Sachs & Co., said the tax-exempt financing will allow for lower rental costs for residents.
He noted that the market has seen other stand-alone HDC housing bonds that rely on a liquidity facility or another type of enhancement for its credit rating.
“HDC has numerous bond issues outstanding that are not open resolution that have been enhanced in different fashions and the market will react consistent with the type of enhancement,” Markus said. “So there’s no reason to believe that the market will not react favorably.”
Construction on the 908 units will begin June 2012 and at least 75% of the apartments — a minimum of 685 units — are designated as affordable housing.
Incorporating low-income housing into the development allows HDC to issue the debt as tax-exempt.
At least 20% of the units are pegged for families earning between $31,680 and $63,360, which is 40% to 80% of the area’s median income of $79,200 for a family of four.
Another 20% of qualified families must earn no more than $102,960 per year and 35% of units will go to families making no more than $130,680.
Along with the bond proceeds, the $360 million residential development will gain $60 million to $85 million of subsidy payments from New York City, according to HDC.
The development will gain a subsidy of $90,000 from the city for each unit designated as affordable housing.
The city will spend around $250 million from its capital program to help finance the first phase of Hunters Point.
The $250 million includes the $60 million to $85 million of subsidy payments, another $64 million will go towards the infrastructure upgrades the EDC began last month, $18 million is for land costs, and $82.6 million will finance the new public school.
In addition, the city in 2009 purchased the land from the EDC and the Port Authority of New York and New Jersey for $100 million.
Officials anticipate the Hunters Point development to bring in $2 billion of private investment and create more than 4,600 construction jobs and permanent employment.
Wallack said Manhattan will benefit from having additional workforce housing in close proximity to the island’s busy midtown area. In addition, Hunters Point will help continue ongoing development in Queens.
“This is going to be a huge boost to Long Island City and the surrounding area by bringing in an influx of new residents there and that’s going to spur all kinds of ancillary activity — not only retail but by helping all kinds of local business development,” Wallack said. “We’ve really seen a lot of development in Long Island City over the last few years and I think this will be another boost to that growth.”
Officials will move forward with the second phase of the project once construction wraps up in 2014 on the first phase. The entire development and its 5,000 housing units will be finished by 2021.
Details of future residential construction, including any additional bond issuance and whether the site may include condominiums as well as rental units, will depend upon market conditions at that time, sources said.
Hunters Point is part of Bloomberg’s $8.4 billion New Housing Marketplace initiative to help build 165,000 units of affordable housing by 2014. The city has, so far, created or preserved 111,279 of such housing units throughout its five boroughs.
City Comptroller John Liu said the Hunter’s Point development is an important plan for Queens and the city to help address the area’s growing population.
“New York City’s population has been growing by half a million people every decade for the last three decades,” Liu said in an interview last week. “And we fully expect that to continue at least for the next two decades to the point where our population will be around 9.5 million by 2040.”
One key highlight of the area is its transportation options.
There are two Long Island Railroad stops close by and four different subway lines service the area. There will be ferry service between Hunters Point and Manhattan and drivers have close access to the Queens Midtown tunnel that connects the two sister boroughs.
Tally said the area’s accessibility is a huge draw for redevelopment.
“It’s not at all a derelict waterfront site that had manufacturing and is cut off from the city,” she said. “It feels very much a part of the city. So to have a spot like that in New York City that’s part of the city but is not developed yet — it is a huge opportunity.”