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September 07, 2007
17th and Jackson: Community Development in Action, Turning a Vacant Lot into Affordable Housing and More
    by Anne Moore Odell

Non-traditional financing, including an investment by Enterprise Community Investment, funds a green multi-use building in Seattle's Central Area Neighborhood.


Where once stood a vacant lot and brownfield site at the corner of 17th and Jackson in Seattle's Central Area Neighborhood will, in the near future, stand a six-story mixed-use building with apartments, offices and a parking garage. Developed by Central Area Development Association (CADA), a local non-profit, the project was financed by a number of sources including Enterprise Community Investment, NeighborWorks Pre-Development Funds, and the Washington Mutual Community Development Corporation.

The development was started approximately three years ago when the City of Seattle was able to re-acquire the land as an urban renewal parcel that had been sold to a major manufacture 30 years ago.

"The model was not without difficulties or challenges for everyone and required Enterprise, Washington Mutual, the City of Seattle and the Central Area Development Association to think outside the normal financial model box to make this project meet numerous under-writing, regulatory, and policy standards," said George M Staggers, Chief Executive Officer of CADA. "Washington Mutual provided the construction loan and is an equity investor in this leveraged transaction."

The 17th and Jackson project was financed as a $15.5 million New Markets Tax Credit (NMTC) transaction allocated by Enterprise. Enterprise, with headquarters in Columbia MD, and a local office in Seattle, is a national investor in affordable housing development. It is also the largest dispenser of NMTC transactions in the US.

The NMTC program encourages investment in low-income communities by allowing certified Community Development Entities (CDEs) like Enterprise to raise capital for deployment to qualified businesses in qualified census tracts. Investors receive a 39% federal tax credit, recognized over a seven-year period, based on the capital raised. CDEs compete for NMTC allocation through a competitive process managed by the Community Development Financial Institutions (CDFI) Fund.

"Enterprise works with investors, developers, government, and grass roots organizations across the country to marshal the will and the resources to achieve the ambitious goal of a decent home and opportunity for every American," said John Ducey, Director of Originations and Structured Finance at Enterprise.

The total development costs for 17th and Jackson are $22.4 million. Sources for the deal included a $4.8 million equity investment from the NMTC investor Washington Mutual, a 20-year term loan from the City of Seattle's Office of Economic Development, as well as other City of Seattle grants. Combined with the NMTC program, features of the financing include longer than standard interest-only payments and a longer than standard amortization term.

The Seattle project is part of Enterprise's Green Communities initiative. Launched in 2004, Green Communities is a five-year, $555 million commitment by Enterprise to build more than 8,500 healthy, efficient homes for low-income people and make environmentally sustainable development the mainstream in the affordable housing industry.

"Green Communities provides funds and expertise to enable developers to build and rehabilitate homes that are healthier, more energy efficient, and better for the environment -- without compromising affordability," said Ducey. "Green Communities also assists state and local governments to ensure their housing and economic development policies are smart and sustainable."

The 17th and Jackson project will integrate environmentally sustainable design features and materials. It will also use energy and water-use efficient appliances and offer residents improved indoor air quality.

One of the goals of CADA is to create housing for working families. Housing will be subsidized to make it affordable to families that earn 70-80% of the area median income. The retail space and offices allow for economic growth and development in Seattle's Central Area. This is the first significant infusion of capital in several decades into this area of Seattle.

"Constantly focusing on our mission while listening and responding to community concerns leads to this collaboration or joint-venture that will remove urban blight and reinvest in an area of the community which has been avoided for decades," said Staggers. "Housing, businesses, and employment of the workforce will reflect the greater community, and 40% participation of women- and minority-owned trade businesses are the hallmarks of this effort."

The project was developed as a multi-use structure with 59 apartment units, 11,000 square feet of retail space and offices, and a 62-stall parking garage. Mixed-use development is important to CADA because it allows the organization to remove blight, improve the perception/image, generate economic recovery as it provides housing and strengthen the organizations' development and financial capacity.

Investors interested in community development opportunities can invest with Enterprise. Returns vary depending on the specific risks and financial structure of the specific deals. Enterprise, in aggregate, currently invests almost $1 billion a year in communities.

 

 
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