A bond issue from the New Jersey Housing and Mortgage Finance Agency will be helping the residents of a Newark housing complex live more comfortable, safe and productive lives, according to the agency.
Proceeds from the $40.64 million of multifamily conduit revenue bonds, priced by Wells Fargo Securities last week, will benefit the residents of the Georgia King Village Project. The housing project is a low-income unit located in the West Ward Fairmount section of the city.
The project covers a full block and consists of two 18-story high-rise towers and 25 townhouse buildings, which total 422 residential units in 371,574 square feet.
L&M Development Partners along with Prudential Impact Investments acquired general partner interest in the project in 2016.
"The complex had a somewhat negative history and stigma," said Joshua Weisstuch, senior project manager at L&M. "We bought it two years ago and were waiting for the old tax credits to expire. During that time we did some work on the boilers and cladded the towers with insulation that provided a new look and enhanced curb appeal."
He said the project now has a $28 million construction budget and plan to rehabilitate all the units, fixing kitchens, bathrooms and windows among other repairs. L&M also will landscape the property and create a playground as well as basketball court, playing field and resident courtyard. He said the construction is expected to be finished in 18 to 20 months.
“This is good for all the residents,” said John Murray, the N.J. Housing and Mortgage Finance Agency’s Chief Financial Officer. “We’ve been involved with the project for 25 years and I think we’ve turned the corner with the new owners and this financing enabled us to do it.”
The tax-exempt bond deal consists of short-term bonds with a three year final maturity date and an initial mandatory tender in two years, the expected completion date of construction and rehabilitation of the project.
The tax-exempt bonds were fully cash collateralized by a FHA 221(d)(4) loan provided by Merchants Capital Corp., which is the long-term permanent financing source.
The deal also included a low income housing tax credit investment, which was provided by Wells Fargo.
“While not a new financing structure, the current interest rate environment makes this financing quite favorable for the borrower due to the reinvestment earnings on the bond proceeds being sufficient to fully cover interest payments on the bonds,” said Rebecca Reape, a Director on Wells Fargo’s housing finance team. “Since the start of the year, borrowers have benefited from the uptick in short-term taxable interest rates resulting in increased reinvestment earnings and significant cost savings for the projects being financed.”
The transaction was the fourth financing where Wells Fargo has acted as sole underwriter for the NJHMFA’s multi-family conduit bond program, all of which had a similar financing structure, she said.
Nine investors participated in the financing of the Series 2018E bonds, which allowed a yield reduction of five basis points during the pricing with a final interest rate of 2.45%.
“This was a good solid transaction,” Murray said. “There was efficient execution and it was a good deal for all involved.”
