Authority has eye on Ninth Square
CHFA looking for buyer of large city project
By Mary E. O'Leary
NEW HAVEN — The Housing Authority of New Haven is looking for a partner to bid on The Residences at Ninth Square, the large housing and commercial development that is credited with setting downtown on a positive growth trajectory.
It is one of some 20 companies that are considering submitting proposals by the Nov. 20 deadline.
The mix of affordable and market-rate housing, plus restaurants, galleries and other groundfloor businesses have been a success for the public-private partnership that came together in 1993 to stabilize an important part of downtown.
The Residences at Ninth Square is in debt, however, to the Connecticut Housing Finance Authority for more than $60 million on the principle alone, according to Erik Johnson, a member of the administrative team at the Housing Authority.
New Haven is owed some $24.3 million, which includes interest for more than 20 years, New Haven Economic Development Administrator Matthew Nemerson said.
A third investor, Yale University, has already been bought out. The last investor was the state Department of Housing.
New Haven is in fourth and fifth position in terms of being paid back, with CHFA first in line.
CHFA had no comment beyond stating it is working to assist the sale to new owners.
The Related Companies and McCormack Baran form the partnership that now runs it.
Karen DuBois-Walton, executive director of the Housing Authority, said her agency is running the numbers on a proposal and is proving to be a popular partner given its experience with affordable housing programs.
Johnson said there are 335 one- and two-bedroom apartments in the multibuilding development, 55 percent of which are deemed affordable housing under state guidelines and 45 percent are market rate. Two garages and 55,000 square feet of commercial space are also part of the project that extends along South Orange, Crown and George streets.
An upgrade of the property and a discount on the debt with CHFA and with New Haven has long been under consideration as the current partners continue to struggle with their finances.
Nemerson said the city has put together a list of its requirements to help the bidders.
The requirements include: $680,000 in a yearly PILOT, or payment in lieu of taxes, for 20 years; keeping 55 percent of the units affordable for 20 years using the current income guidelines; a payment of $2 million in return for forgiving all of the city’s subordinated loans’ principal and accrued interest.
Also, renovations should be done where needed, including upgraded kitchens, bathrooms, energy efficient windows and improved heating and airconditioning systems; a commitment to maintain the current property management and maintenance staff who have not been offered a position by the existing owners
Nemerson said laying out the city’s position will save developers from negotiating with CHFA and then being surprised of the need to negotiate with New Haven.
“We thought the best strategy to protect the city was for us to have all 20 people, competing to purchase it, know what our minimum requirements are,” Nemerson said.
“You bid, you know what the sellers want, you know what CHFA wants and you know what we want so everyone can value those things in their own discount rates,” Nemerson said.
The administrator said the city’s debt is not as important as the need for a PILOT and maintaining affordability, something that was required in the original bonds.
“We want to make sure that that isn’t somehow abrogated,” he said. “We just want to put together a package that we think is fair and that doesn’t reduce the value of the property.”
Johnson said The Residences at Ninth Square were built in two phases in 1993 and 1994. Two of the buildings were new construction and the others are rehabbed century-old structures.
The original investment was $10 million in taxable bonds bought by Yale; $31.8 million in tax exempt bonds frrom CHFA; $4.6 million in special obligation bonds from New Haven; $7 million by the state Department of Housing; $8.9 million in an Urban Development Action Grant; and equity generated through sale of federal low-income housing tax credits and historic investment tax credits.
The total cost in the mid-1990s was $86,600,000 or $258,000 per unit not incluing the parking and retail space, according to an analysis done by Christopher Miller in 2011 at the Yale Law School.
New Haven in recent years has been getting tax payments from the project and assesses it at $42 million, but for years it waived tax payments.
Nemerson said this re-refinancing of the project demonstrates the large cost of providing affordable housing, but “it is the right thing to do.”
He said this will continue to be more difficult given proposed tax credit cuts at the federal level and budget cuts at the state.
Part of the Residences at Ninth Square where there is retail on the first floor on Orange Street. The large project is for sale.