MHFA Closes Record Transaction to Preserve Affordable Rental Units

January 31, 2011
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Massachusetts Housing Finance Agency (MHFA) has closed a package of 10 loans that is likely the largest private housing preservation transaction in state history. Rhode Island Homes, LLC, a subsidiary of Providence Realty Investment, has borrowed $125 million from MHFA to purchase 10 existing affordable apartment communities from their former owner, Equity Residential.

Nearly one-third of the 931 apartments involved were at risk of converting to market rents and being lost from the state’s inventory of affordable housing. A number of the properties are in high-cost Boston suburbs including Wellesley, Needham, Winchester, and Sudbury.

“It is unusual that we have the opportunity to preserve a whole portfolio of affordable housing in one transaction,” said MHFA executive director Thomas R. Gleason. “This is one of the most complex transactions in our 45-year history.”

Equity Residential put the portfolio of the 10 apartment communities up for sale last year. While all of the privately owned, publicly subsidized properties were already serving low- and moderate-income renters, at least 360 units were eligible to opt out of their affordable restrictions and convert to market rents. However, conditions of the agency’s loan, along with Rhode Island Homes’ commitment to affordable housing, will ensure that rents at the 10 properties remain affordable for lower-income renters for at least the next 60 years.

All 10 of the properties were originally financed by MHFA between 1979 and 1984. They are private owned and managed, but are subsidized by federal Section 8 Housing Assistance Program contracts.

The $125 million in MHFA financing is the largest in the agency’s history for a private transaction to preserve affordable housing and is believed to be one of the largest—if not the largest—in state history, although several public housing renovation projects have received larger loans.

Rachelle Dominique, director of investor relations for Rhode Island Homes, anticipates her firm “will be making moderate capital improvements to these housing communities totaling more than $15 million in the first year of ownership.”