Ruggles

Affordable

Assisted

Living

Boston,       Massachusetts

Introduction

The Developers New Communities Services New Atlantic Development Committee to End Elder Homelessness

The Resident

The Member

Audio Tour

The Numbers

New Atlantic Development Corporation

Peter Roth is president of New Atlantic Development Corporation.

The project started with a meeting between myself and Pam Shea of New Community Services, which was the original nonprofit sponsor, and the then-program director of the Uphams Corner PACE program. PACE is the program of all-inclusive care for the elderly. It's a Medicaid- and Medicare-funded care program for eligible seniors. The program aims to keep people who are pretty frail and nursing-home eligible in the community as long as possible.

View of Dudley Square.

This was about 1997. There was a connection between the PACE people and New Community Services. They had identified a real problem with many of their clients, who were poorly housed and consequently were very difficult to serve in their program. These were people who were living on the third floor of a triple-decker walkup and needed to be carried downstairs to go to medical appointments or to get out into the community. These were people who had housing that was not suitable for their level of need.

And they said, "Wouldn't it be great to have some housing that really met the needs of our clientele." Those folks were all very poor. To be Medicaid eligible means you have less than $1,000 in income per month and have a significant disability and need assistance with activities of daily living.

Finding a Site
We set about looking for a site for this housing. We looked at a number of sites in the Uphams Corner area, Dorchester. We worked on one for a while but really couldn't put it together. Then we started looking more broadly in the community, in Boston neighborhoods to the south. We came upon the 25 Ruggles site, which was a very interesting site. It was a half block away from a pretty vital neighborhood business district (Dudley Square) but was also a little bit out of the way, tucked inside the residential community — inside the Madison Park redevelopment area to the north and west of Washington Street and Dudley Square.

We really liked the building and its situation. It was a little small, but it had some land area around it. We started doing some research and discovered that it was tied up in a very complicated bankruptcy. We were ultimately able to acquire it by purchasing a perfected lien that one of the creditors had on the property.

The Lafayette School was a city elementary school built in the 1910s and sold to a private company in the 1960s. It had been used as part office space, part warehouse space. The Bay State Banner had its office there at one time. About 10 years prior to the time when we started looking into the building, it had been owned by a mechanical-contracting company that went bankrupt at the end of the last building boom.

We really kind of designed what I think is the first fully affordable assisted-living facility in the city, the second in the Commonwealth. A lot of assisted-living facilities have been developed with tax-exempt-bond financing, but only a portion of their units are affordable.

Financing the Development
It takes a great deal of capital subsidy to make a project like Ruggles Assisted Living work because the operating expenses and the cost of supportive services in an assisted-living facility equal or exceed the operating cost.

So you have to come up with a way to fully capitalize the building if you have a significantly greater percentage of affordable units. But in a community like Roxbury, the market side isn't strong enough to offset and support with internal operating subisidies the low-income side.

So to get an assisted-living facility that really worked in this community, we had to use a formula that was different from those used in the past by other assisted-living facilities. We needed to go to a model that was fully capitalized with public debt and equity. That way, we would have no debt that had to be serviced in the operating phase of the project. Every dollar of income we got in rent and services and programs could go into providing services and paying the operating expenses of the facility.

To do this, we used mainstream affordable-housing programs and tax credits. I think we waded through three rounds with the state to get the tax credits; there was a significant amount of Community Development Block Grant money from the city (almost $800,000). We have HOME funds, HIF funds from the state, and we have a very creative syndication in the building's financing package that involves a seven-year bridge loan at relatively low interest rates — at least relative to when the project closed and went into construction.

A bridge loan provides funds that are needed in the construction and early operating phase. It will eventually be paid back by equity contributions from the syndication limited partner.

In a tax-credit deal, you take the tax credits that you are awarded by the state, and you sell them to an investor who has a significant tax bill and can reduce it with the credits; they pay you based on a pricing formula that has a lot to do with what their tax situation looks like; typically it's between 85 and 90 cents per dollar of tax credit.

Those investors have a yield expectation of somewhere between 9 and 12 percent, depending on who they are. You can maximize the proceeds if you can delay their payments and bridge their payments with low-cost, borrowed money on a temporary basis.

In Ruggles, the syndication pays in over a period of five or seven years. We went and borrowed money from a consortium of lenders, including Boston Community Loan Fund, the Property Casualty Initiative, and a faith-based lender in Pennsylvania called the McCauley Foundation, which offered us bridge financing with an overall blended rate of about 5 1/2 to 6 percent.

Because of the difference between the investors expected yield (about 9 1/4 percent), and the cost of bridging (roughly 6 percent), we were able to generate several hundred thousand dollars more in net syndication proceeds after paying the interest cost on the loan. I think we ended up getting over 1.05 or 1.10 net-tax-credit equity into the project.

It was basically a little creative financial engineering on the syndication side and all the other public sources of funds that enabled us to fully pay for the cost of developing the facility, including furnishing it and putting the capitalized reserves in place with public equity. We can now go into the operating phase with no debt.

The physical result is 43 studio apartments. Each has its own bathroom and kitchenette in a fully rehabbed and expanded building with an elevator. In addition to the 43 apartments, we have a whole complement of common areas and facilities; there is a main sitting room, a dining room, a sunroom with an enclosed garden, a fully equipped commercial kitchen, an activity room, and a second lounge on the third floor. There are also laundry facilities on the site.

The program is identical to a market-rate assisted-living facility where residents might be paying between $3,500 and $4,000 a month. The apartments are all studio apartments; they're relatively modest in size, but they're fully equipped; many are also fully furnished.

We set aside 18 of the 43 units for homeless elders based on the percentage of homeless people we have currently occupying the building. But I would say we have more than that, more like 55 or 60 percent.

We try to keep people there as long as we can; but we really don't have the resources and the staff to maintain folks with dementia. Typically, someone with dementia will have to go into a nursing home; there aren't currently any alternatives to nursing homes for very low-income people with no resources who have dementia.

The residents are all elderly folks who have a range of needs for daily assistance. Many of them get along pretty well, but may have trouble bathing or dressing. Almost all of them need medication reminders. They're pretty frail, but they're still able to ambulate on their own for the most part. About a third of the residents are in wheelchairs most or all of the time.

New Atlantic's Role
My company is not an owner. The owner is a limited partnership controlled by a general partner owned by two nonprofit organizations. One is New Communities Services — Pam Shea's organization, which started Ruggles Assisted Living with us, and the Committee to End Elder Homelessness, which is operating the facility on a daily basis.

Our role really was in the early development of the facility — pulling the whole project together, getting the financing, hiring the architect, assembling the team, getting it built. Then we, in essence, turn it over to the nonprofit organizations that will own it and operate it through its operating life.

We actually have an ongoing role as an asset manager; we make sure that the tax-credit structure remains solid and that the investors get all the reporting. We receive a very modest fee for this. From an affordable-housing developer's perspective and a business perspective, it is a development-fee-based activity.

The AHP Grant
The AHP program fills the gap. It takes a tremendous amount of resources to do these projects the right way, and the AHP program oftentimes is the last piece that fills the gap to make a project work. It enabled us to do the quality project we wanted to do.

The two challenges were getting all the money together, which was significant, and convincing everybody that this was something that would work, because it hadn't been done before.

It takes a lot of people and a lot of support from a lot of different places to do these projects. It's really a process of bringing folks together to meet a need and sticking with it until you've got what you need to make it work.

There are hundreds of people who were involved in making this project a reality, each of whom is as important as we are in the process. We couldn't have done it without all of them.

The project is also a piece of the huge revitalization of Dudley Square and has to be looked at in that light as well. When we started trying to convince people that the Ruggles site was a good one, there were vacant lots behind it and across the street from it and abandoned buildings that were waiting to be fixed up. But by the time we started construction, the vacant lot across the street held 16 brand new town homes developed by Madison Park, which was also renovating a building across the street.

There's just so much great revitalization underway over there and this project is part of it. It was a bit of a hard sell when we started because much of that development hadn't got underway yet.