The firms specialize in community development and mixed-incomeprojects. "Opportunities to preserve affordable housing in New YorkCity are very few and far between. Market pressures have beencausing a lot of owners or developers to opt their projects out ofthe affordable housing programs," explains Matt Schwartz, principalof the Domain Cos. Spring Creek was attractive, he says, because itwas "in an area where we saw a lot of long-term potential given theamount of development taking place and investment going into thearea."

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When Domain and Arker bought the nearly 20-year-old community inlate 2006, the affordable programs used to develop the property hadreached the end of their regulatory period. The asset was also inneed of significant upgrades due to deferred maintenance issues."We saw this as an opportunity to take this complex and present itto the state and city agencies that provide funding for affordablehousing and try to come up with a plan to preserve the complexwhile addressing all of the serious issues it faced," saysSchwartz.

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The JV was able to put together a creative mix of financing fromeight sources and several local and state agencies to help it inits endeavor. Through its Low-Income Affordable MarketplaceProgram, the New York City Housing Development Corp. issued $24million in tax-exempt bonds for the redevelopment. Those bondsallowed the project to receive $18 million in federal low-incomehousing tax credits through the New York City Department of HousingPreservation and Development. Further, Centerline Capital Groupshelled out $17.9 million in tax credit equity and arranged forpermanent credit enhancement for the bonds from Freddie Mac, whichalso credit-enhanced a swap contract that fixed the rate of thepermanent debt on the asset. Citibank provided the creditenhancement for the bonds during reconstruction. The community alsoqualified for 420c Tax Exemption through HPD, making itsresidential portion exempt from property tax for 30 years.

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The entire redevelopment effort for the property, which includes8,000 sf of commercial space and two garages, cost nearly $26million, says Schwartz. "When we arrived at Spring Creek, among theprimary challenges were the physical issues," he relates. "Forinstance, the original developers had used a panelized façadesystem that had completely failed by the time we took over. Thebuilding had substantial water infiltration issues that werecreating quality of life and life safety issues for its residents.In addition to that, the development had gone through 20 years ofwear-and-tear because it didn't have the capital to deal with thedeferred maintenance issues. It also suffered from a reduction inservices to tenants and a reduction in the quality of management,the quality of security--generally, the quality of life. We wereable to address all of those issues."

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Among the improvements are the replacement of the building'sentire façade, the addition of new roofs, windows, exterior doors,balconies, HVAC systems, elevators and kitchens and baths in theunits. Common areas also received upgrades, as did the exteriorlandscaping and parking facilities. The property's two communitycenters--one for youths and one for seniors--were revamped, withnew furnishings, supplies, pool tables, computers and flat-screentelevisions, as well as also implementing programs for both seniorand youth activities in both centers. Interestingly, all of theseimprovements were done with all of the tenants in place.

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In addition to the physical changes, Domain and Arker upgradedthe community's security systems, property management and residentservices. Tenants at Spring Creek now have a new on-site managementoffice, a resident website with an online community, online rentpayment and online maintenance requests and a communitynewsletter.

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The JV employed green practices in the redevelopment andinjected environmentally friendly features into the project, thanksto nearly $2 million in additional funding from the New York StateEnergy Research and Development Authority and the New York StateDivision of Housing and Community Renewal's WeatherizationAssistance Program. The energy-saving features of the property willresult in increased savings on energy costs for the residents.

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"What's unique about this development, and almost all the oneswe do, is that we did everything we could to maximize green andsustainable design features and energy efficiency enhancements,"says Schwartz. "That's one of the core missions of bothcompanies."

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And as for those units that were leased prior to the property'ssale to Domain and Arker, Schwartz says fewer than 10% of the unitshave market-rate tenants living in them. Those residents cancontinue to live in those apartments, but the rate will remain thesame until they move out. Should one of those units becomeavailable, the executive says, it would revert to affordablestatus.

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