Where: Aptos, California
Problem: The financial crisis left an experienced housing developer struggling to find a development partner, a construction loan guarantor and funding
Solution: RCAC became the development partner, construction loan funder and guarantor
The worst financial crisis since the Great Depression created huge challenges for South County Housing (SCH), a large, experienced nonprofit housing developer. Lenders were nervous about making a loan for Canterbury Park, a 19-unit townhome development in Aptos, California. The project had entitlements, full architectural plans and all subsidy commitments in 2011, but most lenders considered a homebuyer development too risky.
SCH contacted a Community Development Financial Institution lender but it required bringing in a development partner. After unsuccessful negotiations with potential development partners, SCH asked RCAC and RCAC’s affiliate, Aptos Housing, LLC joined with SCH in Canterbury Park, LLC as a back-up developer.
However, that was not the end of the challenges. California eliminated redevelopment agencies as a budget saving measure, and while the Canterbury Park gap financing was preserved, Santa Cruz County lost its redevelopment agency and was no longer able to guarantee the construction loan. RCAC stepped in as the construction loan guarantor.
The challenges continued when the construction lender required loan participants to make the construction loan. RCAC stepped in again to provide $3 million of the $5 million construction loan. RCAC also provided a $200,000 line of credit for possible cost overruns.
Once the project closed in May 2012, construction went smoothly. The SCH-affiliated construction company built the project, and finished on time and under budget. And, the 19 low- and moderate-income homebuyers closed on their affordably priced new homes within 60 days of completion.
“RCAC is finding new ways to support housing organizations – by using our balance sheet,” explained Michael Carroll, Loan Fund director. “By offering new tools such as loan guarantees and partnerships, RCAC is expanding resources to develop affordable housing in the rural West.”
