Niche Development Article

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Artist Live/Work UnitArtspace Hiawatha Lofts

Seattle, WashingtonDeveloped by Artspace, Inc.

Photo by William Wright Photography

East Harlem’s New Haven for ArtistsPAGE 4

LIHTC Equity Market on a RollPAGE 26

Liftoff for the New CDFI Bond GuaranteeProgramPAGE 36

November 2013 | Volume XXV No. 11

Building for Different Needs

Niche Development

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12 Tax Credit Advisor | November 2013 www.housingonline.com

In the low-income housing tax credit (LIHTC) world,there are plenty of opportunities to develop nichehousing projects.

These fill a niche either because of the type of resi-dents they target (e.g., veterans, persons with specialneeds) or because they are a specialized type of devel-opment (e.g., SROs, adaptive re-use of historic build-ings). In some states, these kinds of projects mayreceive extra points or other preferences in the competi-tion for 9% federal housing tax credits.

Just a few examples of niche affordable rental hous-ing developments are “aging in place” senior housing,developments targeted to artists, converted officebuildings, and supportive housing.

Aging-in-Place DevelopmentsA major niche today and for many years to come is

affordable senior rental housing designed and operated

Niche DevelopmentBuilding Specialized Housing for Market Segments

to accommodate “aging in place” – buildings and unitswith special features addressing the special needs andlimitations of older residents (social, physical, etc.) sothat they can live longer at a property.

“We’ve got changing demo-graphics,” says Potomac, Md. con-sultant Louis Tenenbaum, a nationalaging-in-place expert whose clientbase includes multifamily developers.“If owners want to keep tenants for along time, then paying attention, forexample, to the physical changes ofthe tenants and creating spaces that reduce the risk offalls, and allowing seniors to get care easily in theirhome, may mean you can have tenants much longer.”

According to the U.S. Administration on Aging, theU.S. population 65 and older is projected to grow by

Niche Development, continued on page 13

Brookland Artspace LoftsWashington, D.C.

Photo by Anice Hoachlander/Hoachlander Davis Photography

NICHEDEVELOPMENT

Louis Tenenbaum

36% between 2010 and 2020, from 40 million to 55 million, after an increase of 15% between 2000 and 2010. Moreover, the 85+ population is projected to increase from 5.5 million in 2010 to 6.6 million in 2020.

At National Church Residences, a nonprofit based on Columbus, Ohio whose portfolio includes numerous LIHTC senior properties that enable residents to age in place, designing and operating develop-ments to achieve this starts from a basic principle. “A lot of it is just common sense and putting yourself in the position of somebody’s who’s aging,” says NCR Senior VicePresident/Chief Development Officer Michelle Norris.

“We start with the building being as friendly as wecan make it for the seniors,” she says. “And then afterthat a lot is building layer upon layer of services or atten-

www.housingonline.com November 2013 | Tax Credit Advisor 13

tion to health and services as we can over time. Eachproject becomes unique; some may be more robustthan others, depending on where they are, who thepartners around us may be, and things like that…But we

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continue to build and make sure thatwe’re addressing the ongoing, ever-changing needs of seniors.”

Norris says a critical piece is having a resident service coordinator for a property.

According to Norris andTenenbaum, design and physical features that can makea property more senior-friendly include:

• Avoiding lengthy hallways in which apartments are far from the elevator. “You may have some residentswith mobility restrictions,” says Norris.

• Doors with lever handles instead of doorknobs – easier for residents with arthritis.

• Oven ranges with controls in the front instead of the back.

• Kitchens with enough space to allow someone with a walker to maneuver around.

• Bathrooms with plenty of grab bars – in different places – and enough space to allow a support per-son to work in easily. “I like to put five or six grabbars in the bathroom,” says Tenenbaum, “includingvertical grab bars at the entry to the tub, a long baragainst the long wall, and a vertical bar to hold asyou cross from the tub to the floor area.”

The pair suggested that a senior property shouldhave large amounts of common space to facilitate thedelivery of supportive services for the senior residents,as well as social activities. Among these services may bevisits by health care professionals, meal services, or avan to provide transportation.

Norris noted that the particular design elementsand services at each senior property will be different,and can change over time.

NCR also experiments with different models.According to Norris and others, one of the niches

sorely needed among low-income seniors, but in shortsupply, is affordable assisted living.

NCR is in the process of converting one of its HUDSection 202 developments – supportive rental housingfor seniors – into a building that will be one-half inde-pendent affordable apartments and one-half an afford-able assisted living facility. “We believe it’s the first onein the country,” says Norris.

To create the new Chimes Terrace, located inColumbus, NCR paid off the existing Section 202 mort-gage and divided the property for legal and ownershippurposes into two separate condominiums – one for thehousing and one for the assisted living. The acquisitionand renovation of the independent affordable apart-ments is being financed in part by equity generated by9% federal housing tax credits. The acquisition and con-version of the other half of the building into a wing thatis a licensed affordable assisted living facility is beingfinanced by a grant from HUD and a loan from a com-munity development institution. Medicaid waivers willbe used to help fund the services provided to assistedliving residents.

Artist HousingArtspace, a national nonprofit based in Minneapolis,

specializes in developing affordable housing and work-




NICHEDEVELOPMENT

Michelle Norris

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space for artists and their families.Many of its housing developmentsacross the U.S. utilize low-incomehousing tax credits. One example is a new LIHTC development inNew York City (see article on p. 4).

“We were started by the city of Minneapolis and their ArtsCommission to try to help find tem-porary locations for artists in a rap-idly gentrifying warehouse district of Minneapolis,” says ArtspaceSenior Vice President of PropertiesGreg Handberg. “But that workshifted from just trying to find temporary locations for artists tocreating permanent affordable locations for artists. That was because we were seeing

the same artists that we were assist-ing in finding space being displacedseveral years after they went intothat space.”

Artspace’s LIHTC buildings arecomprised of “live/work” residentialunits that have extra room for a stu-dio, and arts-oriented commonspaces, such as a gallery to display

residents’ artwork, meeting space, and low-rent officespace for arts or cultural organizations.

Artspace either acts as the sole general partner on its projects or partners with a local organization, typically a nonprofit, in a joint venture. The impetus for its developments is usually a request from a localcommunity.

In Artspaces’ housing developments preference inoccupancy is given to artists and their families. Prior toinitial lease-up, a newly formed selection committeeevaluates applicants to determine their eligibility. Afterthe building is leased up, artists are still given prefer-ence in filling vacant units.

Artspace defines artists very broadly, as individualscommitted to and participating in the arts, even if theydon’t earn their living this way. These include painters,sculptors, dancers, actors, musicians, writers, filmmakers,



photographers, and others.Artspace’s projects not only provide affordable

housing and work space for artists and their families but also achieve other goals that the community mighthave, such as revitalization of a particular neighborhoodor job creation. “The reason we do it is because of thearts,” says Handberg. “But the reason folks ask us has to do with a whole bunch of different positive publicsector impacts.”

Office Building ConversionsDominium, a for-profit developer based in

Minneapolis, has developed some LIHTC projects targeting artists while hitting another niche – the con-version of former office buildings into apartments.

Much of Dominium’s business is creating apartmentsthrough the acquisition, rehabilitation, and adaptive re-use of historic buildings originally used for commercialpurposes.

Metropolitan Artist Lofts, opened by Dominium inlate 2012, is a completed office building conversionproject in the arts and entertainment district in mid-town St. Louis that is targeted to artists. The develop-ment features 72 affordable one- and two-bedroomapartments, created from the historic rehabilitation of a vacant, eight-story, 100,000-square-foot building constructed in 1908 that once had medical offices.


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Artspace Everett Lofts, Everett, Washington

Greg Handberg

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Dominium financed the acquisition and rehabilitationlargely with equity generated by federal and state hous-ing and historic tax credits.

At present, Dominium is in the pre-developmentprocess for a project to convert the Arcade-WrightBuilding in downtown St. Louis into apartments. Thestructure is actually two conjoined, vacant historic officebuildings – one including a retail arcade – that wereconstructed in 1907 and 1913.

Dominium partner Jeff Huggett saidhistoric former office buildings can begood candidates for conversion to resi-dential rental use because they oftenhave traits that the company’s cus-tomers – renters – like. He said theyusually have large windows that let in

lots of light; are often in downtown or central locationsnear amenities, services, jobs, and public transportation;and their layout sometimes fosters some “funky unitdesigns” that make the apartments unique and special.Historic credits also generate extra equity.

In some cities, projects converting vacant or under-utilized downtown office buildings to apartments arehelping to not only provide additional housing and fos-ter an active round-the-block downtown but also soak-ing up excess office space. In some downtowns, officebuilding conversions are frequently to market-rate apart-ments or mixed-use developments.

Supportive, Special Needs HousingAnother niche is developing rental properties that

provide affordable housing and supportive services topersons with special needs, such as formerly homelessindividuals, persons with substance abuse issues, or per-sons with disabilities (e.g., disabled veterans).

Jonette Hahn, a partner at CohnReznick LLP in itsBaltimore office, sees two different models of specialneeds LIHTC projects. These include developments inwhich all of the units are for persons with special needs,such as for persons with disabilities, and properties inwhich only some of the apartments are for persons with special needs and the rest are for a general renterpopulation.

“When you do a 100% special needs project, you’vegot to have very specialized management and extensive


services programs and a provision for services and aservice plan,” says Hahn, noting these are frequentlybuilt and operated by nonprofits that are both develop-ers and service providers. But she indicated that mixed-tenure projects, in which only a portion of the units arefor special needs residents, are viable by for-profitdevelopers as well as nonprofit developers that are notservice providers. Such sponsors can always create alinkage with a local service provider, Hahn says.

Many states have set-asides, provide extra points, orhave other preferences in their 9% LIHTC programs forspecial needs or supportive housing projects. Hahn alsonoted that SSI II payments to severely disabled personscan provide funds for services as well as housing.

Other new variations on the theme are emerging as well.

For example, Don Bernards, a partner at Baker TillyVirchow Krause LLP in its Madison, Wisc. office,


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Metropolitan Artist Lofts, St. Louis, Missouri

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described a different kind of project his firm worked onrecently – one not using low-income housing tax credits.

In the village of Waunakee, near Madison, a for-profit developer and a nonprofit partner (Movin’ Out)are constructing a building that will include 63 market-rate apartments, 15 supportive housing units forextremely low-income persons with special needs, and4,000 square feet on the ground floor for a commercialtenant that could be a source of jobs for some of thespecial needs residents. Movin’ Out will coordinate serv-ices for these residents.

According to Bernards, fundingsources for the $7.5 million projectinclude a first mortgage from the statehousing finance agency, a second mort-gage from a community developmentfinancial institution, federal HOME funds,and private equity. The village sold theland for the project to the developers for one dollar.

Bernards said the state agency mortgage programallows up to 20% of the space in a funded project to befor commercial use.


NICHEDEVELOPMENT

In BriefFirst RAD Transaction Closes

The U.S. Department of Housing and UrbanDevelopment recently announced the first transactionclosing, on September 20, under the Rental AssistanceDemonstration (RAD) program. The transaction will generate funds to renovate multiple existing publichousing properties owned and operated by theHousing Authority of Green County, Ill. and to financeconstruction of some additional affordable rental units.Three-two units in the old buildings will be converted to project-based Section 8 rental assistance. The newproperty, called Walnut Estates, will have three scatteredsites, all with single-family rental homes.

TCAM Announces New AffiliationBoston-based TCAM recently announced that its

parent company (QuietStream Financial) has invested inRadian Generation LLC (RadianGEN), a solar energyasset manager that provides services for owners of solarenergy projects. RadianGEN focuses on the growingmarket of commercial, residential and utility-scale solarpower plants, many of which were financed with taxcredit equity.

RBS Citizens Announces $1 Billion CommitmentOn September 30, RBS Citizens Financial Group

announced a new commitment to provide $1 billion infunding over the next five years for affordable housingand community development located within its servicearea. More than $85 million in loans and equity invest-ments has already been committed in 2013 to fundaffordable housing projects that will contain more than600 units. The bank holding company, headquartered inProvidence, R.I., has two bank subsidiaries (RBS Citizens,Citizens Bank of Pennsylvania) with 1,400 branches in 12states (Conn., Del., Ill., Mass., Mich., N.H., N.J., N.Y.,Ohio, Pa., R.I., Vt.).

New Housing Publication IssuedThe National Housing Conference’s Center for

Housing Policy has issued a new publication, entitled,Building Support for Affordable Homeownership andRental Choices: A Summary of Research Findings onPublic Opinion and Messaging on Affordable Housing.The publication summarizes research on housing afford-ability and offers housing advocates and practitionersthe latest polling data and concepts on how to effec-tively communicate about housing affordability issueswith the public and policymakers.

(http://tinyurl.com/q4xddwx) TCA

AGING-IN-PLACE RESOURCE

A rich source of information on aging in

place and on professionals, organizations, and

service providers in the field is the Web site of

the National Aging in Place Council.

The organization’s Web site is at

http://www.ageinplace.org.

TCA

Don Bernards

TCA

Niche Development Article

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