11/14/2011

Unity Homes Substantial Rehabilitation Loan Closes

After a four-year process, Unity Homes Cooperative closed escrow on a $14,000,000 loan to rehab the Hunters Point development on September 12, 2011. The loan, written and insured under Section 221(d)(4) of the U. S. Housing Code, is designed to completely renovate both the interior and exterior 40-year old property, as well as bring the site's leasing office into ADA compliance. Eugene Burger Management Corporation (EBMC)'s Property Supervisor, Bill Johnston, CPM, has orchestrated the loan process from beginning to end.

The development, opened as one in a number of federally subsidized cooperative developments in the Bayview-Hunters Point area of San Francisco, is the lone survivor of the San Francisco Redevelopment Agency's "experiment" into shared ownership. While other developments in the area have either ceased operation, or changed from their original cooperative form into apartments, Unity Homes exists as the only such entity to have remained solvent and physically sound since its construction in 1973.

The process to gain HUD approval and financing through PNC Multifamily Capital began in fall 2006, as the development approached the end of its original HUD-insured loan, and structural functional obsolescence of its physical structures. A meeting of cooperative members (shareholders) was needed to approve a move forward. Once approved, EBMC contacted PNC Multifamily Capital to determine if it would consider acting as the financing arm of the comprehensive plan, and approached the San Francisco Redevelopment Agency (SFRA) to fund the considerable pre-development work required. PNC agreed in principle to act as the primary financial arm; however, due to changes in the budget allocations for redevelopment agencies statewide, the SFRA backed out of its pre-development commitment just before signing. LISC (Local Initiatives Support Corporation) was then approached to fill the pre-development funding void, and accepted.

Because HUD was already involved in other similar rehabilitation programs in the Hunters Point area, some of which were over budget or experiencing problems with contractors, HUD decided to put a moratorium on funding more such programs, until the ones currently under contract were successfully completed. This created an unexpected 2-year wait for Unity Homes, and risked losing both PNC's and LISC's funding.

LISC ultimately agreed to move forward with the pre-development funding, which allowed Unity Homes to contract with an architect for preparation of required drawings, and initiate discussions with the City of San Francisco concerning the necessary permits that were going to be required. While the delay caused by HUD's moratorium almost caused the loss of the primary funding agent, it provided extra time to deal with the predictable delays with the City's Planning Commission and Public Works Department. In the process, because of the delay, no less than three extensions to the LISC loan were needed to keep things moving forward.

In the meantime, due to its age since inception, it was determined that Unity Homes' bylaws and articles of incorporation needed to be completely rewritten to conform to changes in California and corporation laws. Once prepared, another shareholders' meeting was necessary to approve the changes.

Finally, after four years, HUD gave the go-ahead to Unity Homes and PNC to proceed with submittal of the loan package, and despite numerous last-second changes, the loan package was submitted, and the Firm Commitment was received in June 2011. However, as anyone who has worked to meet an escrow deadline knows, the journey was far from over. Prepayment instructions were provided to the existing mortgagor (Berkadia Commercial Mortgage) at two different times, before HUD and PNC were ready for the September 12, 2011 closing.

Exterior rehabilitation will include complete replacement of all roofs and siding, and upgrades of garages to conform to earthquake standards and painting. Interiors changes will include new double-pane windows, carpets & vinyl floor coverings, kitchen cabinets, refrigerators, wall heaters, and painting.

Work is expected begin later in November, and last for 12-14 months, with the main exterior work being delayed until after the rainy season.

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