July 21, 2011 — Related California celebrated the grand re-opening of Martin Luther King – Marcus Garvey Square Cooperative Apartments in San Francisco’s Fillmore District. The extensive three-year renovation project marks the completion of an extraordinary partnership between Related California, San Francisco Redevelopment Agency (SFRA), U.S. Department of Housing and Urban Development (HUD), Citi Community Capital, Freddie Mac and the development’s Co-op Board.
“Related is deeply committed to working with Bay Area communities on a wide range of housing projects,” said Bill Witte, Related California’s president and CEO. “We are especially proud to have helped the resident owners of Martin Luther King – Marcus Garvey Cooperative Square Apartments to improve and retain ownership of their homes.”
Originally built in the late 1960s, the Martin Luther King – Marcus Garvey Square Cooperative Apartments was one of the first developments of its kind — providing low-income residents the opportunity to have an ownership stake in their community by building equity over time. By late 2008, however, the physical property had declined to the extent that HUD nearly rescinded its Section 8 status and threatened to foreclose on the property. Then-Mayor Gavin Newsom and U.S. Representative Nancy Pelosi stepped in as strong advocates for the community and worked closely with HUD to allow the Co-op Board to find a solution. A search was conducted and Related California was selected to develop a plan, secure funding and manage a major renovation and upgrade of the development.
“There are few developers with the set of skills and experience needed to negotiate and facilitate the wide range of partners and interests brought together on this project,” said Steven Fayne, managing director, Citi Community Capital. “Related California knew who to work with within the community and industry and how to bring them together. The company’s involvement instilled a high level of confidence among the other parties.”
According to Witte, one of the most outstanding aspects of this project was the unconventional approach to financing. Since the development is owned by the Co-op Board and the goal is to build equity over time, the typical approach of accessing low income housing tax credits was discarded early in the planning process. Related California therefore had to be creative in structuring financing that provided adequate capital to renovate the property but allow for long-term equity growth. Boosted by an initial $5 million loan from the SFRA, Witte worked with Fayne at Citi, who in turn worked with Freddie Mac, to secure a $36 million loan.
“We knew that in order to make this undertaking work, our agency, as well as our partners, needed to show good faith both in action and dollars,” said Fred Blackwell, the San Francisco Redevelopment Agency’s executive director. “We provided the initial $5 million loan, which acted as equity that was leveraged to eventually secure full funding for the project.”
Blackwell added that the Agency also promised to stay closely involved with the venture to help provide long-term oversight. Related California also stepped up by guaranteeing $6 million of the overall loan during construction, in addition to its commitment to complete the project. “This undertaking presented unusual risks and challenges,” said Witte. “They were all well worth it to save this remarkable neighborhood community residence.”
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