HUD Announces $621M Deal to Refinance Mortgage Loan for NYC Co-op
Backed by a federal mortgage guaranty program that was extended to a co-operative development for the first time, RiverBay Corp. and Wells Fargo Bank have closed on a $621 million deal to refinance the mortgage at Co-op City in the Bronx.
By Gail Kalinoski, Contributing Editor
Courtesy of RiverBay Corp.
Backed by a federal mortgage guaranty program that was extended to a cooperative development for the first time, RiverBay Corp. and Wells Fargo Bank, N.A., have closed on a $621 million deal to refinance the mortgage at Co-op City in the Bronx.
The deal, the largest ever insured under HUD’s 223 (f) program, will keep the complex with more than 57,000 residents affordable for the next 35 years. The Mortgage Insurance Fund of the State of New York Mortgage Agency and the New York City Housing Development Corporation also helped make the deal happen with the state agency providing $55 million in credit support and HDC covering $15 million of the loan.
“This is about preserving affordable housing for the next generation of families living and working in one of the nation’s highest cost rental markets,” said HUD Secretary Shaun Donovan.
“Working closely with the State of New York and New York City, we’re making certain that working families have a decent and affordable place to call home while saving private owners of affordable housing significant money that they can reinvest back into their properties.”
By locking into today’s low interest rates, refinancing the original debt will save Co-op City and its residents more than $150 million on the 14-year remaining term of the current loan and eliminate refinancing risk should the interest rates rise again, said Alan Wiener, managing director of Wells Fargo Multifamily Capital.
The new mortgage is backed by the Federal Housing Administration’s General Insurance and Special Risk Fund. The FHA’s Section 223 (f) program allows the 35-year loan to be financed with Government National Mortgage Securities, (Ginnie Mae). The 223(f) program protects lenders against loss on mortgage defaults at multi-family rental properties. Riverbay Corp. is expected to save about $400 million in interest payments over the life of the mortgage because it has the guarantee of FHA and GNMA.
Loan proceeds will be used to pay off the current mortgage and capital improvements under way and provide additional reserves for future capital needs and ongoing maintenance. More than $310 million in renovations have been done since 2004 at Co-op City, which has more than 15,000 units spread across 35 residential buildings. The complex is located on 330 acres in the Baychester section of the Bronx. It has three shopping centers, a 25-acre park, eight parking garages, three elementary schools, two middle schools, a high school and a power plant.
“If it were an actual incorporated city, Co-op City would be the 12th largest in our state – and so it is hard to exaggerate the critical role it has played for over 40 years in keeping housing in New York State and New York City affordable,” said Gov. Andrew Cuomo.
Co-op City opened in 1968 and is the largest Mitchell-Lama co-op in New York City. The state’s Mitchell-Lama Housing Program was signed into law in 1955 and is designed to create affordable rental and cooperative housing. Nearly 270 housing developments with 105,000 units were constructed under the program, which allowed developers to get tax abatements and low-interest mortgages subsidized by the city, state or federal governments.
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