Questions affordable housing developers should consider when beginning an adaptive reuse project:
- Will the project help meet the local market’s affordable housing needs?
- Is the project in an area that includes predominantly vacant class B, C, and D properties?
- Does the property offer easy access to parking, transportation, and tenant amenities like grocery shopping?
- Does the municipality have a defined redevelopment strategy?
- Can you expect local, state, and federal tax credits and other financing assistance?
A “yes” answer to all goes a long way toward clearing the path to a successful project outcome.
The Community Development Banking group delivers debt and equity financing solutions to developers of multifamily affordable housing throughout the United States. Between 2013 and 2015, Bank of America Merrill Lynch provided $165.4MM in debt financing and $100.6MM in equity investments to support adaptive reuse projects in the Northeast alone. Projects include the conversion of unoccupied schools, mills, office buildings, and factories into a variety of mixed-use and affordable housing communities.
Why the growing interest in adaptive reuse projects FROM DEVELOPERS?
The adaptive reuse of vacant or underused real estate can have a transformative effect on cities across the U.S. Preservation of iconic, often historic, properties helps to maintain the fabric of many communities and can be an important catalyst for cities that have suffered from economic stagnation. City and state officials understand this important economic development aspect and have supported adaptive reuse with grants, tax credits, and other assistance. In addition, our clients have found that there is often less competition for adaptive reuse projects as compared to new construction of affordable and mixed income housing. It’s our job to facilitate the financial process and make it a win-win situation.
What Kind of Projects are Typical?
In August 2015, Bank of America Merrill Lynch financed the conversion of a former shoe mill built in 1896 in Middleborough, Mass. into 25 multifamily housing units that will be restricted to residents earning less than 60% of the Area Median Income (AMI). In a town like Middleborough, this is an important addition to the stock of affordable units. The project demonstrates the kind of mill conversions happening in gateway cities around Boston. It’s supported in part by almost $1 million in subsidy funding from the state in addition to federal low-income housing tax credits that Bank of America Merrill Lynch purchased. The project is set to welcome its first residents in mid-August 2016.
The second phase of a textile complex conversion in Lawrence, Mass., is complete. There we helped to create 62 new affordable housing units with $18 million in construction financing. In Augusta, Maine we provided $7 million in construction financing and $7 million in low-income housing and historic tax credit investments to help turn an abandoned high school into 48 affordable senior housing units. And we completed a $17 million direct placement of tax exempt bonds that will finance the conversion of a vacant office building in downtown Hartford, Conn. into 112 mixed-income units. It’s our second adaptive reuse financing project in the Hartford central business district, and we are delighted to support the city’s revitalization effort.
We are gratified by the many opportunities we’ve had to assist developers, communities, and, most importantly, deserving residents. Please contact your Bank of America Merrill Lynch relationship manager to discuss your project needs.