Project Objectives:
Bethel Gardens Apartments was put in service in 1975 and formerly owned by a local, Hagerstown-based not-for-profit organization, The Bethel Corporation (Bethel Corp). The property is self-managed by Bethel Corp staff. Bethel Gardens is a 94-unit garden style apartment complex that previously received subsidy through a Rental Assistance Payment (RAP) contract that was originally issued in conjunction with a Section 236 mortgage.
The expiration of the RAP contract was fast approaching in early 2016, and Bethel Gardens’ affordability was at-risk if it was not re-capitalized through the RAD (Rental Assistance Demonstration) program prior to the RAP contract expiration. Bethel Corp did not have experience with Low Income Housing Tax Credits, and wanted to work with an experienced developer team that had the financial expertise to ensure that the RAD conversion was properly executed. Bethel Corp expressed interest in partnering with Hudson Valley Property Group to complete the re-capitalization and renovation of the property while retaining long-term involvement and management.
HVPG Solution:
HVPG formed a partnership entity with Bethel Corp that acquired the building and provided an innovative solution that has: enabled the essential renovation at no out-of-pocket cost to the organization, generated proceeds that the organization can use to further its mission, and preserved affordability for hundreds of tenants without any increase in tenant paid rents through a RAD PBRA Component 2 conversion. Bethel Corp and Hudson Valley worked hand-in-hand to create a thorough scope of work tailored to the property’s needs, while also improving operations through increased subsidy, PILOT extension, and investment in building systems.
Results:
- Substantial $8M renovation at no out-of-pocket cost to the organization that will improve resident quality of life and reduce future operating costs at the property
- Long-term affordability preserved utilizing the Rental Assistance Demonstration II (RAD II) program, which included the issuance of a new 20-year, Section 8 Project-Based Rental Assistance (PBRA) contract
- Generated proceeds that Bethel Corp can use to further its mission.
- No increase in tenant paid rents and no residents were displaced
- Bethel Corp was heavily involved in the development of the scope of work, and continues to provide excellent management for the building and its residents
Financing and subsidy:
Total development costs for this preservation endeavor were $18.5M. The project secured $6.2M in FHA insured debt and Maryland CDA provided additional support through its Rental Housing Works Program. The development team also decoupled the Section 236 interest reduction payment to procure additional funding for the project. Residents at Bethel Gardens now receive rental subsidy through a new 20-year, Section 8 Project-Based Rental Assistance (PBRA) contract.
Scope of Work:
Environmental: New water-saving plumbing system, weather stripping of doors and windows, new LED lighting, upgraded heating system and split air conditioning, programmable thermostats, high-efficiency boilers, low-flow faucets, and new energy-star appliances and exhaust fans
Safety: New and repaired accessible ramps, ADA compliant bathrooms and improved ADA compliance on site, additional site lighting and upgraded security system throughout the property
Building exterior and grounds: Brick repair and replacement, drainage improvements, repaired unit terraces and railings, repaired pedestrian walkways throughout the site
Building interior: Redesigned lobby at community center and management office, renovated restrooms in community center, staircase repairs throughout the buildings
Resident units: New kitchen cabinets, sinks and counter tops, new bathroom vanity cabinets, sinks and counter tops, new flooring, interior doors and painting
