Building a New Life

5 min read

Muller Job Training Center provides housing and training

At an old U.S. Army site in the Bronx, the Doe Fund Inc. is using millions of dollars from New Markets Tax Credits in a unique attempt to create new lives for New York City’s indigents.

The facility will include enough beds to provide housing to 200 people who are homeless or at risk of homelessness. But the residents at the Muller will get much more than a place to stay. The Doe Fund also provides a huge range to supportive services, starting with basics, such as case management and substance abuse counseling. In addition, they offer access to unique resources from job training that leads to actual jobs, interview workshops, physical fitness and even dental care.

“I think this will be our new model,” says Larry Gordon, director of housing development for the Doe Fund, which plans to open the Muller Job Training Center in September 2016.

A difficult mission
The Doe Fund mission is to: “break the cycles of homelessness, addiction, and criminal recidivism… to help homeless and formerly incarcerated individuals achieve permanent self-sufficiency.”

The nonprofit has long-term commitment from the City of New York to operate a 200-bed facility at Muller for 20 years. Its $91 million contract with the NYC Department of Homeless Services includes a $16.5 million allowance to pay for the construction of a homeless shelter.

The nonprofit had bigger plans for Muller.

The Doe Fund plans to spend a total of about $22 million to redevelop the building, with the help of NMTCs. “If we hadn’t had New Markets Tax Credits, we would have still built it – though we couldn’t have built it the way that we did,” says Gordon.

The Doe Fund specializes in helping its residents find transitional work that pays better than New York State’s minimum wage. The Muller Center itself will be one of these opportunities. Once it’s open, the center will employ the equivalent of 75 people full-time – including case managers, administrative support, security and others needed to operate the facility and programs. Of those jobs, 72 will be filled by low-income people and more than half will be filled by formerly homeless graduates of the Doe Fund’s program.

The finished, 50,000-square-foot Muller Center will include two floors of residential space and another two floors of social services. That will include a gymnasium, a “corporate-style cafeteria,” a commercial kitchen and even an auditorium. “Maybe we can rent out the auditorium,” says Gordon. “We are always looking for income-producing ventures.”

Old army base
For decades, the building operated as the Sgt. Joseph E. Muller Army Reserve Center, an Army Reserve site. The site had been vacant for several years and had begun to crumble.

Before that, the Army used the building for military storage. As part of its Base Realignment and Closure process, the U.S. Dept. of Defense decided to work with local officials to give the building away to a local nonprofit to provide housing. New York City officials held a competition and chose the Doe Fund.

“Our deed is from the United States of America,” says Gordon. In return for possession of the building, the Doe Fund promised to operate the building to provide housing for homeless people, including veterans.

The Doe Fund expects to serve more than 8,000 homeless people at the Muller Center over the next 20 years, with half of them expected to be veterans.

Complicated financing
A big piece of the financing for Muller came from NMTCs. Citibank brought an allocation of $9.5 million in NMTCs to the transaction, provided by the U.S. Treasury’s Community Development Financial Institution Fund. Dudley Ventures Community Investment (DVCI), based in Phoenix, joined the transaction with another allocation of $6 million in NMTCs from the U.S. Treasury. These allocations give the Muller redevelopment project the ability to generate tax credits equal to 39 percent of its total of allocation of $15.5 million in NMTC, or $6.045 million in tax credits.

“DVCI’s mission to utilize New Markets Tax Credits to create employment opportunities for the hard to employ and underemployed dovetails perfectly into The Doe Fund’s primary objective to change the lives of the homeless through employment opportunities and job training,” says Jim Howard, CEO of DVCI.

To generate the tax credits, according to the program’s rules, the Muller redevelopment needed $15.5 million in qualified equity investments. Citibank paid $4.8 million in equity for the $6.045 million in NMTC. Citibank also provided a $10.7 million leveraged loan to the property – that adds up to the needed $15.5 million in qualified equity investments. For the seven-year NMTC compliance period, this $10.7 million loan will stay invested in Muller, so that the loan behaves like equity. The property will only make small loan payments that cover the loan’s one percent interest rate, but it will pay none of the principal balance. After Muller’s seven- year NMTC compliance period is finished, the loan is written to begin to amortize like a traditional loan with an interest rate similar to market-rate permanent loans. However, at other NMTC projects, similar loans have been forgiven at the end of seven years.

Citibank also made a second, $4.9 million direct loan to Muller, with an initial, low, one percent interest rate for seven years. The Doe Fund also brought $2 million of its own equity to the redevelopment of Muller, finishing off the financing. If the property had access to more NMTC authority, then these other investments in the redevelopment could also have generated more NMTCs. That shows the power of NMTC authority.

The redevelopment shows the flexibility of the NMTC program, which is not usually used to finance housing for homeless people. “It’s a type of asset that we don’t see a lot of,” says Gina.

The Doe Fund is already planning to develop another second facility with NMTC – and is now investigating a potential site, located not far from New York City in Upstate New York. “We would do it again,” says Gordon.