It has been a long-held belief that economic prosperity is a direct result of educational attainment with many overlooking the converse relationship between the two. A recent article in the July edition of The Atlantic titled “Education Isn’t Enough” stated that “multiple studies have found that only about 20 percent of student outcomes can be attributed to schooling, whereas about 60 percent is explained by family circumstances—most significantly, income.” Studies also show that a surrounding community of poverty and crime can adversely impact students’ scholastic success.
A thriving community produces thriving students. Students with a stable home environment and supportive community are more engaged and focused on academic achievement. Parents unburdened with the stress of providing quality housing for their families are better equipped to be more involved in their children’s education. Translating these theories into reality for Memphis communities is the driving force behind some of ComCap Partners’ work.
In 2015, the firm embarked on an effort to improve the community around neighborhood schools in Frayser. ComCap Partners teamed up with The Works, Inc. and Neighborhood Preservation Inc. (NPI) to rehabilitate a blighted apartment complex in the heart of Frayser. ComCap serves as co-developer along with The Works who will also own and operate the development. NPI provided funding and staff support to the project.
In taking on this project, the team had two primary goals: (1) decrease blight and create a quality affordable housing option, and (2) provide housing and programming that will have a positive impact on the community’s youngest residents. The project site was strategically chosen for its proximity to MLK College Prep and Frayser Elementary Achievement School.
Nearly four years later, after overcoming several obstacles, the development team closed the deal securing financing for the project in September and renovations began in October. Formerly Pleasant View Apartments, the site will be transformed into Renaissance at Steele, a development with 146 quality affordable units and a variety of amenities and services for residents and the surrounding community. Rents will range from $500-$690. The tenancy is restricted to potential residents at 60% and below of area median income. The complex will also have 3,100 square-feet of designated community space for onsite amenities and community programs. Renovations are expected to be completed by October 2020.
Providing a high-quality development with amenities at affordable rents requires diverse funding sources and significant subsidy. The $17.6 million project is funded with equity from the sale of 9% Low-Income Housing Tax Credits (LIHTC), conventional debt, local public funds, and philanthropic funding. Additionally, in collaboration with the Memphis Housing Authority, the development team secured an allocation of Project-Based Vouchers (25% of the total units) providing additional subsidy to the project.
Obtaining capital for a project in an economically depressed community was a difficult task, encumbered with several challenges.
- The project leveraged 9% LIHTCs to attract the equity investment that subsidizes the development, allowing for below-market-rate rents. Over the years, the 9% LIHTC application process has become increasingly competitive. As a result, the team was not successful in securing tax credits with the first application in 2017. This delayed the project by a year. The team successfully applied for the credits in 2018.
- Securing investment from financial institutions was an exhaustive process that further delayed the project. Due to a variety of factors, such as the uncertainty of the Frayser market, the team was unable to secure funding from any of the large, local financial institutions. Ultimately, an expanded search led to CREA, a LIHTC syndicator based in Indianapolis, and BlueHub Capital, a CDFI based in Boston. Memphis-based Tri-State Bank is participating with BlueHub as the local lending partner.
- Even with the subsidy provided through the tax credit investment, the project still had a significant gap in funding due to the economics of the Frayser market. The project required additional philanthropic and public funding to bridge the funding gap. Eventually, the team acquired loans (soft debt) for the needed funds from NPI and the City of Memphis.
The issues the team encountered are not unique to this project and highlight the difficulties in providing quality housing options in the neighborhoods that need them most. Although the financial challenges have been resolved, the work is far from complete. With an $11.2 million construction budget, the development will require significant improvement and repairs to the infrastructure, site, and exterior, as well as a complete interior renovation.
Once completed, the development will feature a management office and amenities to include a computer lab, fitness center, meeting space, green space, and community programs. The Works will offer cooking classes, financial literacy counseling, and exercise programs. Girls Inc. of Memphis, the Neighborhood Christian Center and Agape will also provide onsite programming and services.
Until recently, Frayser has experienced little investment. Soon the renovated apartment complex will be one of several exciting projects in the Frayser community. Girls Inc. of Memphis is developing a new facility on its 8-acre property which is already home to their urban Youth Farm. In addition to the girl-powered farm, the Patricia C. Howard Campus will operate as an additional programming site and the organization’s headquarters. Not too far away at 3060 Baskin Street, Porter-Leath will be breaking ground on a Frayser area Early Childhood Academy. The $10 million project will serve low-income children up to the age of five.
Hopefully, continued investment in Frayser will build on this momentum and lead to a more healthy and stable community for all residents.
ComCap Partners Newsletter – November 2019
Ainsley Willis