Development to Bring Affordable Housing to Brooklyn| Housing Finance Magazine

Developers have taken a major step toward creating 135 affordable and supportive homes in Brooklyn, New York.

Lantern Organization and Mega Contracting Group have secured $11.5 million in permanent financing from Barings for the development of Euclid Glenmore Apartments, which will include 81 units set aside for formerly homeless families and individuals and 14 units for seniors. The property will also feature a dedicated supportive services office and a community center that will provide child care and medical services.

“We are in the midst of an affordable housing crisis and a homelessness crisis in New York City,” says Dan Kent, president and CEO of Lantern Organization. “A lot of people who witness the crisis every day don’t know if there’s a solution. There’s been a solution for multiple decades now, and that solution is permanent supportive housing. It provides an apartment. It provides rent for the person. It also provides a range of support. We have staff on site that builds relationships with tenants and assists them with whatever they need help with.

“What’s incredible about permanent supportive housing is it saves lives. It protects people from the dangerous reality of living on the streets in New York City. It also gives people a more secure, dignified, healthy, and happy life. It does so at a cost that’s a lot of cheaper than the alternative, which is putting people in shelters and emergency rooms and jail cells. We have the solution.”

Euclid Glenmore builds on the work that Kent’s organization has been doing since 1997. “For us, we’ve seen the impact that this type of housing has on the lives of people live in our buildings,” he tells Affordable Housing Finance.

Assembling the Financing

The approximately $61 million project, which replaces a vacant site that was used mainly for parking, came with its share of challenges. It was not awarded low-income housing tax credits (LIHTCs) on its first attempt, so the team had to secure a bridge loan from Corporation for Supportive Housing and was then successful in obtaining the competitive 9% LIHTCs in its second attempt.

The team also had to work through the challenges of developing in a dense city and getting a project off the ground amid the COVID-19 pandemic, adds Daron Tubian, managing director and head of affordable housing investments at Barings.

“At the time we were working with the sponsor on structuring the transaction, interest rates had moved substantially,” he says. “These projects are complicated to put together and demanding to underwrite. We committed to a certain pricing and deal structure and held to it for over two years in order to lessen the unfavorable impact that market conditions had created for them due to COVID and higher lumber costs.”

Barings is providing an $11.5 million permanent loan commitment to take out the construction lender after the project is built.

“Our forward commitment goes out about 3.5 years, and, once the property is built and stabilized, the sponsor will have the benefit of a pre-committed rate lock for their long-term loan,” Tubian says.

Along with Barings’ permanent loan, there is also an $18 million subordinate loan from the New York City Department of Housing Preservation and Development (HPD), a $30 million construction loan from Bank of America, and $25 million of tax credit equity from Richman Housing Resources.

Over the years, Lantern has developed 18 buildings with 1,400 units on its own.

Euclid Glenmore is the organization’s first development under a joint-venture partnership with a for-profit co-developer, according to Kent. The relationship will continue with Lantern and Mega Contracting Group teaming on another project in East Harlem.

“In an environment of financial instability and volatile interest rates, we were very fortunate to have been able to close and commence construction on the Euclid Glenmore project,” says Emanuel Kokinakis, development principal at Mega Contracting Group. “This would not have been possible without our strong development partnership with the Lantern Organization and the commitment from our financial partners at HPD, Bank of America, and Barings. We are now in a position to deliver these critically needed 135 units of affordable and supportive housing to the East New York community.”