NeighborWorks Capital provided a $1.5 million mezzanine loan to Community Housing Partners (CHP) to acquire the Kensington Village property in Winston-Salem, NC, which included CHP’s assumption of an existing $4.6M Freddie Mac mortgage.
Kensington Village features 142 affordable 1, 2, and 3-bedroom apartments. This property is an example of affordable housing preservation without the use of Low Income Housing Tax Credits. All rents are affordable to families earning around $49,000 (80% AMI) because of a HUD deed restriction as well as subordinate loan from the City of Winston-Salem.
“As the project financing changed, NeighborWorks Capital was able to remain flexible to enable us to get the financing to acquire this property,” said Kirsten Anderson, Vice President of Asset Management for CHP. “NeighborWorks Capital understands the mission of what we’re doing. Affordable housing isn’t always as understood in the commercial banking world. NC is very supportive of the mission and very easy to work with.”
Employing a model similar to enterprise financing, NeighborWorks Capital provided debt to CHP for the unsecured predevelopment loan. This approach exemplifies our newly released 5-year strategic plan, which includes offering new financing solutions and services.
“This opportunity came from several months of discussion of CHP’s acquisition strategy and their financings needs to acquire property within their target market—which now stretches from Maryland to Florida,” said Emily Dorfman, NeighborWorks Capital Senior Loan Officer. “Over the last 2 years, NeighborWorks Capital’s lending team has been working with NeighborWorks members to understand their needs for financing affordable housing preservation. This transaction is our first mezzanine loan.”
Kensington Village’s 142 apartments are spread in 17 buildings over 12.5 acres. The property received $5.8 million in renovations in 2005, is in excellent condition and currently at 98% occupancy, with double the demand for the number of apartments available.
The economy of Winston-Salem is booming, and housing is in high demand. The area between Highway 311 and I-40 is being called the “Heart of the Triad” and is slated for significant economic development over the next 25 years. This recent development spike is creating intense competition among a wide range of for-profit developers.
The main local industries include health care/social assistance, manufacturing, and retail trade. Kensington Village is five miles from downtown Winston-Salem, on the way to Greensboro, in a largely residential neighborhood developed in the 1980s and 90s. It has limited retail and commercial amenities, though several churches, an elementary school, community center and YWCA are nearby.
“This property provides the workforce homes, enabling people that work within the communities and cities to live there. Sometimes housing prices are rising so much that people who work within the community can’t always afford to live in it,” Anderson said.
Founded in 1975, the 501 (c)(3) nonprofit Community Housing Partners (CHP) provides quality-built, responsibly-managed, service-enriched homes for low-income individuals and families across the Southeast and Mid-Atlantic. CHP has 107 properties in their multi-state portfolio, and continues to grow. In the last five years, they have completed 20 projects including new construction, acquisition/rehab and renovations of projects in its existing portfolio.