PS109 Affordable Live/Work Housing
East Harlem, New York City

PROJECT NARRATIVE

  1. Introduction

    Established in 1979, Artspace Projectrs, Inc. (Artspace) is the nation's leading nonprofit real estate developer for the arts. Artspace has completed and currently operates 18 properties created to meet the needs of individual artists, small to midsize arts organizations, and arts-related businesses. The "prototype" Artspace project contains affordable "live/work" housing for artist occupancy and non-residential space occupied by community arts organizations and/or arts-related businesses.

    In 2004, the Andy Warhol Foundation for the Arts awarded Artspace a grant to underwrite Artspace's effortto identify a potential live/work development in New York City. This grant was renewed in 2005, and in 2006, the PS109 site having been identified, the Warhol Foundation made an additional grant to support Artspace's predevelopment work on the PS109 project.

    In 2005, Artspace established a partnership with El Barrio's Operation Fightback (EBOF), a local community development corporation long active in East Harlem. Artspace and EBOF have orked together to build community suppolrt and secure site control for a live/work development in the vacant PS109 building and will continue to work together to accomplish the rehabilitation of the structure.

    The attached materials describe our goals for the project.

  2. Development Team

    1. Project Sponsor/Developer/Owner

      1. Project Sponsor(s) The project sponsors are Artspace and EBOF. Both sponsors are 501(c)(3) nonprofit organizations. Artspace is a nationally active real estate developer with specific expertise in the area of live/work affordable housing development for artists. EBOF is a community-based real estate developer (CHDO) with a long history of successful real estate development in East Harlem.

      2. Developer The project will be developed jointly by Artspace and EBOF.

      3. Owner The project will be owned by a limited partnership. Artspace and EBOF will act as General Partners in the limited partnership and Artspace will act as Managing General Partner and have a 60% General Partner role. EBOF will act as Co-General Partner with a 40% role. Collectively Artspace and EBOF will hold a .01% interest in the Limited Partnership. The remaining 99.99% limited partnership interest will be held by a tax credit investor that has not yet been identified. It is expected that Artspace andEBOF, as qualified nonprifit entities, will assume ownership of the project at the expiration of the tax credit period in 15 years.

    2. Management Company EBOF will act as property manageer for the PS109 project when it is put into operation. EBOF has well-established property management expertise.

    3. Architect The project architects are Victor Morales, a Brooklyn architect with significant experience working on New York City affordable housing developments, and Raymond Plumey, an East Harlem architect with significant historic preservation experience and an excellent knowledge of the PS109 structure.

    4. General Contractor A general contractor will be selected through a Request for Qualifications/Interview process upon completion of schematic design work. The selected general contractor will provide pre-construction services throughout the architectural design process. We intend to use a negotiated bid process with the general contractor, and we expect that all sub-contracts will be awarded by the general contractor through competitive bidding.

  3. Artist Market

    The PS109 project is intended to meet the needs of the local (Community Board 11) artist market. The project will contain 64 units of affordable housing and approximately 7,500 square feet of community arts space. Artspace and EBOF have initiated a formal market survey of local artist live/work space needs and expect that this survey work will be completed in spring 2006. All preliminary information indicates extraordinarily strong need for artist live/work space, particularly affordable live/work space.

    The project will utilize an Artist Preference tenant selection process. This process will be a preference process and not a "set aside" or occupancy "restriction". Artspace has a strong track record of successful marketing and lease-up of affordable housing using a preference process. Artspace and EBOF ahve initiated conversation with HDC marketing/lease-up staff and are confident that a tenant selection process can be established that meets the requirements of New York City. The tenant selection process will be fully compliant with Federal Fair Housing law.

  4. Physical Space Plan

    1. Residential The project will provide 64 units of affordable live/work housing. As curently planned, the unit mix includes 18 one-bedroom units, 36 two-bedroom units, and 10 three-bedroom units.

    2. Non-Residential The project will provide approximately 7,500 square feet of community arts space on the south side of the first level of the building. Goals for this space include the creation of an art gallery, arts and community education space, and space for local nonprofit organizations.

      Additional non-residential space may be available in the basement of the structure after rehabilitation is complete. No rehabilitation budget or operating revenue opr operating expenses for such space have been included within our project budget.


  5. Proposed Sources and Uses of Funds

    Complete capital and operating budget pro forma analyses are provided as Attachment 3 within this submittal. A narrative summary of project sources and uses is provided below. Project financial structure is based on a Tax Exempt Bond/4% Low Income Housing Tax Credit development model.


    1. Tax Exempt Bonds Approximately $13 million in tax exempt bond allocation will be requested for the project. Bonds will be underwritten in an A/B series with the "A" bonds sold as permanent first mortgage debt in the amount of $3.55 million and the "B" bonds used for construction financing in the amount of $9.45 million. We propose a priveate bank letter of credit as the credit enhancement mechanism for both construction and permanent bonds.

    2. LAMP/PLP Subordinated (second mortgage) debt financing through HDC's LAMP program or HPD's Participating Loan Program (PLP) is requested in the amount of $6.9 million. Interest only payments of 1% are proposed for this debt. A debt coverage ratio of 1.10 is provided for the second mortgage debt.

    3. Philanthropic Grants Private (corporate and foundation) grant dollars totaling $1.63 million will be raised by Artspace and EBOF to support the propsed development. These funds will be loaned by Artspace/EBOF to a partnership in a last (fourth) lien position as a residual casy receipt loan.

    4. Deferred Developer Fee Artspace and EBOF intend to lend a portion of the developere fee for a term not to exceed 15 years. The loan would be a residual cash receipt loan at a rate to be negotiated. This loan would be in third lien position, payable out of cash flow remaining after interest only payments on the LAMP/PLP loan.

    5. Housing and Historic Tax Credit Proceeds Limited Partner equity investment will be generated through the sale of (1) 4% "As Right" automatic federal housing tax credits accompanying the tax exempt bonds and (2) federal historic tax credits. Both Artspace and EBOC have strong relationships with tax credit investors. While a tax credit investor has not yet been selected, the credit price of $0.92 reflects our expectation of an achievable price for the propsed project. We are projecting total equity in the amount of $11.2 million $4 million in historic tax credits and $7.2 million in low income housing tax credits.

    Operating Budget and Management Plan

    As previously stated, EBOF will act as management agent for the project. Artspace will perform asset management duties on behalf of the Limited Partnership, ensuring that long-term capital needs are planned for and working to establish an artist tenant organization.

    The operating proforma included within this submission has been developed by Artspace based on the operating history of other affordable artist live/work properties in Artspace's portfolio. As project plans are refined, Artspace and EBOF will work together to refine the operating budget.

  6. Project Timeline

    1. Commuinity Support and Site Control Obtained in Fourth Quarter 2004.

    2. Architectural Design and Engineering Work First, Second, and Third Quarter 2006.
      Completion of 50% CONSTRUCTION DRAWINGS BY 9/30/06.

    3. Contractor Selection (pre-construction) 6/30/06.

    4. Land Use Approval Applications Completed by 6/30/06.

    5. City Financing Structure Established Completed by 6/30/06. Tax Exempt Bond/Tax Credit Applications submitted shortly thereafter.

    6. Construction/Permanent Lender Identification Completed by 9/30/06. Loan commitment by 11/30/06.

    7. Equity Investor Identification Selection by 9/30/06. Binding Letter of Intent by 12/31/06.

    8. Construction Bid 3/31/07.

    9. Initial (Construction) Closing Second Quarter 2007.

    10. Construction Completion 6/30/08.

    11. Stabilized Occupancy 9/30/08.

  7. Next Steps

    Immediuate next steps are as follows:


    1. Architectural design and engineering is commencing and will lead to refined project plans and cost estimates.

    2. Artist Market study will be launched.

    3. Further discussions wuith HDC/HPD staff regarding financing structure and financing application submission and timing issues.