HUD No. 05-047
April 15, 2005
HUD APPROVES $600 MILLION BOND DEAL FOR NEW YORK CITY PUBLIC HOUSING
Innovative financing to rehabilitate aging buildings across city,
pushes investment in public housing nationally over $2 billion
NEW YORK - The U.S. Department of Housing and Urban Development has approved the New York City Housing Authority (NYCHA) to issue up to $600 million in bonds that will be used to modernize public housing throughout the city. This marks the second largest housing bond issuance in history - just under the Puerto Rico Public Housing Administration's $663 million bond issuance in 2003.
"This is a win for everyone - NYCHA, the city and most importantly - the residents who live in buildings that are 40 to 50 years old, " said HUD Assistant Secretary Michael Liu at a signing ceremony at M.R. Beal & Company, one of the investment firms that advised NYCHA on the transaction. "With today's transaction, in the financial capital of the world, we are seeing Wall Street confirm with its pocketbook that investing in public housing makes sense."
NYCHA joins other city housing authorities, including Chicago, Philadelphia and New Orleans, that have utilized HUD's Capital Fund Financing Program (CFFP) to raise funds to address major modernization needs in two years that would normally take five to 10 years.
Although the Quality Housing and Work Responsibility Act of 1998 included an amendment that allowed PHAs to borrow funds on the private market to raise capital for major repairs to its housing stock, it was not until 2001 that this innovative financing tool was utilized. Public housing authorities (PHAs) pledge a percentage of their future Capital Fund, subject to annual appropriations, under CFFP to repay debt.
To date, 95 housing authorities throughout the U.S., including NYCHA, have HUD-approved CFFP transactions - bonds or loans - to generate financing that total $2.3 billion. There are 26 similar deals, involving about 39 housing authorities, under HUD review worth approximately $210 million.
Joining Liu today were NYCHA Board Chairman Tino Hernandez, NYCHA General Manager Douglas Apple and HDC President Emily Youssouf. The bonds will be issued in two $300 million series, with the New York City Housing Development Corporation (HDC) issuing the first series. HDC will also play an oversight and monitoring role. The second series is expected to close in 2006.
"Today marks another significant milestone towards preserving public housing for needy New Yorkers," said Hernandez. "I want to thank all of the people in this room, especially HUD Assistant Secretary Michael Liu and HDC President Emily Yousseff, who continue to play major roles in achieving Mayor Bloomberg's commitment of preserving thousands of apartments," emphasized Hernandez.
"HDC is the nation's number one issuer of bonds for affordable housing," stated Youssouf. Leveraging this expertise is a cost effective way for NYCHA to join other PHAs that have accelerated their preservation plan through similar transactions. Now, with HUD providing its approval, we will be able to assist the nation's number one housing authority make history with its most comprehensive capital improvement plan."
The co-senior managers for the transaction were Ramirez and Co., Inc, and UBS Financial Services, Inc. The co-managers were Goldman, Sachs and Co. and Merrill Lynch & Co. JP Morgan Chase Bank, N.A. provided a letter of credit for the transaction.
This bond issuance is part of a larger effort by NYCHA to accelerate repairs to roofs and building facades at 129 developments to make these properties safe and waterproof for many years to come. NYCHA has already expended more than $160 million to replace roofs and repair bricks over the past five years. The proceeds from the first issuance will expedite this work throughout the city. The poor condition of the roofs and the deterioration of the exterior bricks are damaging heat and electrical systems. Rehabilitation of this scale within a short timeframe cannot be done relying solely on annual HUD Capital Fund distribution.
The second series proceeds will address other critical physical plant projects, which NYCHA will identify after contracting a needs assessment of NYCHA's entire public housing portfolio.
NYCHA will repay the $600 million bond by using a portion of its annual federal Capital Fund grants over a 20-year period. By only using a portion of its Capital Funds to pay the debt, NYCHA still has the bulk of its federal funding to address other modernization needs.
HUD is the nation's housing agency committed to increasing homeownership, particularly among minorities; creating affordable housing opportunities for low-income Americans; and supporting the homeless, elderly, people with disabilities and people living with AIDS. The Department also promotes economic and community development as well as enforces the nation's fair housing laws. More information about HUD and its programs is available on the Internet and espanol.hud.gov.