Case Study

A Lot of Everything

5 min read

Residential, Commercial and Academic All in Former Sibley Department Store 

Most tax credit deals are complicated. Between the allocation, syndication and gap financing, Low Income Housing Tax Credit developments are never easy to finance and build. Even so, it is safe to say that the Sibley Lofts are part of an unusually complex project structured to fit residential, commercial and academic components into a refit of one old and big department store.

“Winn tends to do large, complicated deals,” said Adam Stein, senior vice president of development for WinnDevelopment, Boston.

The Liberty Lofts are the fifth phase of the redevelopment of the Sibley Building in Rochester, NY, a 1.1 million square foot, 12-story department store being transformed into both mixed-income and mixed-use units. The lofts comprise 53 affordable units using four percent LIHTCs and 51 workforce apartments at up to 110 percent of area median income. Nine percent LIHTC and Historic Tax Credits are also in the mix for other parts of the historic redevelopment.

The overall project the Lofts are a part of is so complicated it takes seven colors to code all the various components on a section view of the building. There are three residential components (senior, market, affordable/workforce), 40,000 square feet of first-floor retail, 17,000 square feet of retail/condos, a 10,000 square foot food hall, a University of Rochester tech incubator and two schools, among others.

The Layer Cake
Stein calls that section view of the building “a layer cake.” The Lofts are on floors three to five, while Landmark is on the seventh and eighth floors and Spectra occupies the top four floors. The individual Lofts units are equitably dispersed, with both LIHTC and workforce units on the same floor.

Construction continues on the project, especially the commercial aspects. The yet-to-be-completed food hall is patterned after Faneuil Hall, a Boston marketplace that dates back to 1742. Winn did not have to look far for inspiration, as the famous colonial gathering place is adjacent to its headquarters.

Commercial is a big part of the development at the Sibley Building. The nearly 300 residential units in the three residential developments, in fact, make up just 35 percent of the total space.

Finishing touches are still being put on the Lofts, as well. “The project is 80 percent complete with units expected to be delivered at the end of March. Marketing and pre-leasing efforts have commenced. Early market response has been tremendous and we expect a very short absorption schedule,” said Stein.

Rents range between $777 for a studio and $999 for a two bedroom for the affordable units, and between $1,295 and $1,695 for the workforce units. Each apartment comes with a small utility allowance.

Winn acquired the building about ten years ago in a tax foreclosure, and has structured the various commercial and residential components into their own condominiums. The state Attorney General’s approval was required on the complicated structure, Stein told the summer meeting of the National Housing & Rehabilitation Association.

“We’ve done ten components, and each component is structured within its own condominium,” said Stein.

Multiple Condominiums
The Lofts development (the other residential ones are Spectra, 104 market-rate units, and Landmark, a nine percent LIHTC project, which has 72 units of affordable senior apartments) has a $30.4 million total development price tag, and was split into two condominiums to accommodate the LIHTC units ($15.8 million) and the 110 percent of area median income workforce part ($14.6 million).

The split also allowed the recycling of workforce bonds to save $7 million in volume capital resources for the New York State Housing Finance Agency, something the developer looks to do on a regular basis for projects in “sophisticated” states like New York and Massachusetts.

“Our goal,” said Stein, “is to minimize volume cap, either through a condominium or master lease structure.” He sees this as part of a trend. “Developers are getting creative if they want to continue to deliver mixed-income housing,” he said.

“The Sibley Lofts structure limits tax-exempt bonds, and the associated volume cap, to the affordable units only and basically reduced volume cap by 50 percent. This was achieved by creating separate condo units of ownership for the LIHTC units in the project and the workforce units, then in turn using TE bonds to meet the 50 percent test only on the LIHTC condo unit instead of the whole project.”

According to Stein, “In this deal only the affordable condo requires the volume cap. Therefore, we have reduced volume cap by about half. Typically, a deal this size requires about $14 million of tax-exempt bond financing. This one requires only seven. The remainder was used for the workforce component.”

The Lofts were financed with four percent LIHTC equity, Historic Tax Credits, City of Rochester funds, money from Restore NY (an effort to provide municipalities with financial assistance for revitalization of commercial and residential properties), and NYHFA subordinate financing.

One Investor
New York’s HFA was the issuer, and Bank of America was the single investor for both LIHTC and Historic Tax Credits, Stein said. “The State of New York Mortgage Agency (SONMYMA) provided the enhancement for the permanent loan.”

The building itself dates back to 1905 and at one time its seven commercial floors made it the largest department store between New York and Chicago. Part of the land it sits on at one time belonged to abolitionist Frederick Douglass. The tower section, the top floors, originally held offices.

In the last five years, Winn said it has invested over $100 million in renovations on the building.

The company specializes in adaptive renovation of historic buildings. It has transformed 28 historic properties into more than 3,100 units of mixed-income housing in mixed-use communities valued at $500 million.

Can deals like this become templates for other, complicated developments?

Maybe, Stein said. “This can be replicated with the right bond issuer, syndicator and lots of patience,” he said.

Story Contact:
Adam Stein
Senior Vice President, Development, WinnDevelopment, Boston
(617) 742-4500

Mark Fogarty has covered housing and mortgages for more than 30 years. A former editor at National Mortgage News, he has written extensively about tax credits.