CDT Buys Ocean Towers in Coney Island, Area Hit Hard by Sandy
- May 30, 2013
Community Development Trust and Proto Property Services have teamed up on a $52 million project to buy and rehabilitate a 19-story, 380,000-square-foot apartment building in Coney Island, an area in Brooklyn, N.Y., hit hard by Hurricane Sandy.
Ocean Towers is a 360-unit property located one block from the beach at West 24th Street between Mermaid and Surf avenues. The property was built in 1973 under the New York state Mitchell-Lama affordable housing program. The seller was not identified but Brian Dowling, vice president of Community Investments for CDT, told Commercial Property Executive that the previous owner had tried unsuccessfully to move the apartments to market rate.
CDT, a private REIT that provides capital for the preservation of affordable housing across the United States, is committed to keeping the Ocean Towers units affordable for at least the next 30 years, Dowling said. Over 14 years, the New York City-based REIT has invested more than $850 million in debt and equity capital and created and preserved more than 32,500 units of affordable housing in 42 states. The REIT also owns nearly 5,000 units of affordable housing. This will be CDT’s first New York City project.
“We saw an excellent opportunity to preserve those units long term and at the same time enter our home market in a pretty big way,” Dowling told CPE. “We are also working with a partner that has experience doing similar redevelopment in other parts of New York City, including Brooklyn, on a similar scale.”
Proto, also based in New York City, has rehabilitated more than 1,200 occupied units in the city, including two large-scale properties in Brooklyn. The firm will be the managing member, general contractor and property manager at Ocean Towers. Work there will include converting electric heat to natural gas heat with high-efficiency boilers that will be installed above Sandy flood levels; installing individual electric meters, replacing all the elevators; upgrading common areas and the parking lot and improving security.
The residents will remain in place during the renovations, Dowling said. Work will start in 25 vacant apartments, he added. The entire rehabilitation is expected to last 18 months. Once the work is completed, the property’s rents will be regulated under New York City’s Rent Stabilization guidelines. Most of the current residents already have rent subsidies, Dowling said.
“Our rehabilitation of Ocean Towers will make the building more energy-efficient and provide for resiliency again future storms,” CDP president & CEO Joseph Reilly said in a news release. “The fact that Hurricane Sandy impacted so many areas of New York where affordable housing was already scarce makes this acquisition all the more important.”
The purchase and renovations are being funded with $10 million of equity from CDT and Proto and a $35 million acquisition loan originated by Enterprise Community Loan Fund Inc., a subsidiary of Enterprise Community Partners, Inc., through the New York City Acquisition Fund. Managed by Forsyth Street Advisors, the $150 million NYAF is collaboration among Enterprise, the City of New York, major foundations and New York’s public and private community investment groups to provide flexible capital for acquisition and pre-development costs to developers of affordable housing in the city’s five boroughs. The $35 million Ocean Towers loan is the largest transaction originated through NYAF.
The project is also expected to receive $4.5 million from the New York City Department of Housing Preservation and Development through its Article 8A Loan Program that provides loans for multi-family rehabilitations. Other funding will include a $1 million loan from Enterprise’s Bank of America Energy Efficiency Loan Program and the possibility of another $400,000 from the New York State Energy Research and Development Authority. Long-term financing will be provided by The Community Preservation Corporation, which has issued a commitment for a $35 million, 30-year mortgage insured by the State of New York Mortgage Agency and funded by the New York City Employees Retirement System.
“Not only will this project allow for much needed improvements and bring this former Mitchell-Lama property under rent stabilization allowing for long-term affordability, it will also set a precedent for the future development of resilient, environmentally responsible housing in storm-prone regions,” Shola Olatoye, Enterprise’s vice president &New York market leader, said in the news release.
The state’s Mitchell-Lama Housing Program was signed into law in 1955 and was designed to create affordable rental and cooperative housing. Nearly 270 housing developments with 105,000 units were constructed under the program, which allowed developers to get tax abatements and low-interest mortgages subsidized by the city, state and federal governments.