NeighborWorks Capital is participating in a $1.9 million acquisition loan and a $325,000 predevelopment loan with National Council on Agricultural Life and Labor Research Fund, Inc. (NCALL) to Connections CSP for the Quaker Arts development in Wilmington, DE.
NeighborWorks is participating 74 percent in the acquisition loan with 85 percent LTV, and 50 percent (unsecured) in the predevelopment loan. This is NeighborWorks Capital’s first loan with Connections and its second loan participation with NCALL.
NCALL first became involved with the project when they helped Connections unwind previous tax-exempt bond financing that covered 17 properties. Connections has been NCALL’s largest customer for nearly a decade, and often has been its lender, arranging financing and bringing in other participants.
Connections considered selling the properties that now make up Quaker Arts, and NCALL temporarily financed them while they marketed them for sale. The main site was Connections’ main office, and a health clinic with a drug rehab.
Connections reconsidered and began looking at redeveloping the properties. NCALL still had the mortgage on the properties while Connections applied for LIHTC. After nearly two years of pre-application, they were awarded the LIHTC in 2019, providing the bulk of the financing for the project, which closed at the end of July 2020.
Working with NeighborWorks Capital
As NCALL begun to finance the acquisition and unwind the previous financing, they’d enlisted a different loan participant. When that loan came up for maturity, the loan participant was not interested in staying on as NCALL extended the loan so Connections could apply for the LIHTC. NCALL approached NeighborWorks Capital as the LIHTC sponsor to participate in the new financing. NeighborWorks was willing to share the predevelopment loan to get the project to closing as well.
“It was very important to find someone who would come in and play that role. We had a great experience with NeighborWorks, and were able to work out the structure and loan terms they were comfortable with. Both funding and closing worked well,” said Paul Marcus, Lender with NCALL.
NeighborWorks Capital has worked with NCALL on previous loans, including construction and permanent loans for The Gaudenzia Foundation’s new addiction rehab center in Claymont, DE.
NCALL also received a New Markets Tax Credit that will help reinforce these projects, and a JP Morgan-funded Pro Neighborhoods Grant, a three-year CDFI collaboration.
Neighborhood and Project Highlights
This section of Wilmington just west of Center City, is one of the city’s poorest sections, even though it is right by the downtown professional district. The city of Wilmington is the largest city in the state of Delaware, it is often referred to as the Corporate Capitol of the World with over half the Fortune 500 companies taking advantage of Delaware’s favorable corporate tax climate and calling Wilmington their corporate home. Quaker Arts’ neighborhood is also part of a creative arts district and redevelopment.
They development features 15 percent of its apartments geared for special needs residents, the core of who Connections serves, and half for artists. The 53 apartments range from studios to three bedrooms, with an AMI mix of 30-80 percent ($29,000-$77,000 for a family of four).
Currently, the project is comprised of four separate buildings. Three are three-story, walk-up style rental apartment buildings constructed around 1899, and amenities will include a community room with kitchen, reception area, washrooms, and central laundry room. The fourth will feature 23 apartments, four artist studio spaces, a computer lab, fitness/multipurpose room for dance artists, and four music rooms. The common area will also include a community room, meeting room, kitchenette, office space, and laundry area.
Adapting to COVID Restrictions
As much of Connections’ work is in health care, special needs, and drug rehab clinics, COVID impacted their ability to see patients. It was a challenge in the beginning, but they have adapted and adjusted well, Marcus said.
On NCALL’s side, nearly two-thirds of their borrowers took advantage of their offer of loan payment deferrals. “A lot of our borrowers feel more stable now, in part because of the federal support and funds distributed. We’re cautiously optimistic for many of our customers and borrowers at this point,” Marcus said.
NCALL has served the Delmarva Peninsula since 1976, specializing in affordable housing development, education and lending. They also offer public pre-purchase counseling, financial education and default and foreclosure prevention programs. NCALL helps locally based nonprofits develop multi-family housing projects, mostly apartments, through a variety of services such as financial packaging, asset management, and organizational development. NCALL’s Loan Fund provides various financial products to aid housing development and to enhance the capacity of nonprofit housing organizations.
Connections is the largest social service provider in Delaware, with 70 locations. They support 7,000 inmates and over 30,000 clients annually. The management of the organization is extensive and provides depth in professional fields to address short-term issues that may arise. Connections CSP provides services and facilities to a wide range of low-income people, (mostly with no income or receiving State support) in Delaware. The target populations are people with mental health issues and those suffering with alcohol and drug addictions.