Participating Lender marathon ends with 10 loans closed.

After a marathon session, National Cooperative Bank's NCB, FSB announced it has closed its first ten loans with New York City's Participating Lender Program.

The closing is the culmination of a two-year effort by NCB Development Corporation (NCBDC) working with Department of Housing Preservation and Development (HPD) to obtain approval as a Participating Lender, educate them on the underwriting requirements for cooperatives, and drive the transactions forward.

NCB, FSB provided $5 million of a total $16 million in loans to the Urban Homesteading Assistance Board (UHAB). The loans, which are made jointly with HPD, will finance the repair and cooperative conversion of 10 properties in Manhattan, Brooklyn, and the Bronx. The 10 buildings, containing 158 residential units, requires extensive rehabilitation with construction costs averaging $80,000 per unit.

"The project exemplifies the effect of leveraging public funds and private capital to foster successful co-op conversions," explained Joe Diggs, Vice President of NCB, FSB.

The properties were transferred to UHAB as part of a NY City program to preserve affordable housing, the Third Party Transfer Program (TPT). Through this program, the city transfers title to properties acquired through tax delinquency or abandonment to qualified third party developers who will make repairs and maintain the buildings as affordable housing.

Upon completion of construction, each building will be converted to a limited equity cooperative, at which point the NCB/HPD financing will "split" into separate loans. NCB will offer long term fixed rate permanent financing to the new cooperatives. The city funds, at 1% interest-only, will be subordinated to NCB's. Rents will be stabilized at levels adequate to support the operations and debt service on the properties, and HPD offers Section 8 vouchers to eligible tenants to prevent displacement.

Current residents will buy shares in the coop for $2,500 per apartment. Maintenance charges are expected to range from $405 per month for a studio apartment to $1070 per month for a 4-bedroom unit. They will be affordable to households earning below 60% of New York City's Area Median Income.

UHAB will remain involved with the new coops by providing ongoing training for the board and members and by providing continuing oversight of operations.

The Third Party Transfer program incorporates all the components that make affordable housing possible: minimal acquisition price reduces total development cost; subordinate debt from the city at a 1% interest rate, for a blended rate well below market; and rent subsidies for the lowest income tenants to prevent displacement when rents are restructured after completion of repairs.

Closings, originally scheduled to take place before year-end 2003, were delayed by changes in the federal funding formula for Section 8 rental assistance, a key component of the TPT Program to prevent displacement of current residents. Once this issue was resolved, HPD required the loans to close by June 30, the end of its fiscal year. NCB, FSB's execution of the closings in record time met the city's deadline.

UHAB is pioneering the use of the TPT program for cooperative ownership. There are nearly 60 non-profit developers qualified for the TPT program but UHAB is the only one converting the properties to cooperative ownership. UHAB's choice of properties is based on express resident interest in cooperative ownership. Their success will serve as a replicable cooperative model for other developers.

NCBDC's new initiative called Together We Can, to foster the development of affordable coops by building the capacity of experienced non-profit developers will draw on their experience with UHAB in the TPT program.

UHAB supports self-help housing and community building in low-income neighborhoods. In New York City UHAB has developed the nation's largest community of limited-equity low-income cooperatives, with over 1,200 buildings housing approximately 26,000 households. Their expertise is helping residents take control of distressed, neglected, or abandoned buildings to become homeowners.

The partnership between the UHAB and NCBDC goes back to 1999, with 5 loans totaling $5.6 million to UHAB-sponsored coops, preserving 476 units of affordable housing prior to the current round of transactions.