Bed-Stuy Affordable Complex Recapitalized at 2.3x Its 2012 Basis

Willoughby Court, a 267 unit affordable complex spanning Willoughby Avenue, Vernon Avenue and Marcus Garvey Boulevard in Bedford-Stuyvesant, was recapitalized on August 31 with a $42,648,000 mortgage from Berkeley Point Capital, the Fannie Mae lending arm of Newmark. The sponsor paid $18,850,000 for the property in 2012. No sale accompanied the new debt.

Why it matters

Fifteen year old tax credit deals are coming due across Brooklyn, and how they are handled decides whether the units stay affordable. The structure here is the one a developer should recognize: original equity is retired, a new limited partner comes in, the property is refinanced at current value, and the affordability period restarts. It is the alternative to a sale into the market, and it is why a 267 unit Bed-Stuy complex can carry a number 2.3 times its 2012 price without a single unit changing hands.

For anyone shopping Brooklyn workforce housing, the practical read is that this asset is now off the table for another compliance period. The acquisition channel for stock like this is the resyndication, not the listing, and it is negotiated years before it records.

The numbers

The mortgage recorded at $42,648,000 against Block 1588, Lot 1, with Willoughby Court Apartments, L.P., care of Phoenix Realty Group, and HP Willoughby Housing Corporation as borrowers. HP Willoughby is the housing development fund corporation affiliated with the Housing Partnership, at 253 West 35th Street.

The complex is 290,715 sq ft across four floors on a 130,000 sq ft lot, 285,000 sq ft of it residential and 5,715 sq ft retail, built in 1976 and zoned R7A. It holds 272 total units, 267 of them residential. Assessed value is $17,301,600, which is roughly 41 percent of the new loan amount, the usual New York gap between assessment and financeable value.

The recording batch runs to 22 instruments, among them five satisfactions of mortgage clearing the prior debt stack and a deed recorded at $1 transferring an adjacent lot to another Phoenix Realty entity. A $150,000 kitchen exhaust job covering all 267 units was filed in May, with Shinda Management Corporation as owner of record on the application.

What’s next

Watch for the scope of the rehabilitation that the resyndication funds, which usually follows the closing by a quarter. See our coverage of DeMatteis exiting 1,527-unit Linden Plaza and the New York market.