Posted on August 16, 2002
BOSTON, August 16, 2002 --- MassDevelopment and the Massachusetts Housing Partnership Fund today announced that they will be providing Caritas Communities Inc. with a $5.4 million loan through its new Massachusetts Tax-exempt Credit for Housing Program (MATCH). The program, made possible through collaboration with Fleet National Bank and the Federal Home Loan Bank, provides non-profit owners of affordable housing with long-term permanent financing through the sale of tax-exempt bonds, which yield the lowest possible interest rates.
“Typically, this type of financing has only been available for larger-scale developments,” said Clark Ziegler, executive director of the Massachusetts Housing Partnership (MHP), which specializes in the financing of rental housing. “We’ve figured out a way to make lower-cost financing available for housing developed on a smaller, neighborhood scale.”
The financing is available to non-profits organizations classified under the tax code as 501 (c)(3) borrowers. Unlike other bonds issued by the state, 501 (c)(3) bonds are not capped, meaning that non-profit borrowers now have access to a previously underutilized and large source of financing. MassDevelopment is Massachusetts’ economic development authority.
"MassDevelopment has a long history of assisting non-profit institutions in Massachusetts gain access to the tax-exempt bond market, “ said Michael P. Hogan, CEO and President of MassDevelopment. “Non-profit sponsored affordable housing development fits well with MassDevelopment's mission, and the MATCH program is a very cost-efficient way for these non-profits to benefit from tax-exempt debt."
Caritas, an experienced non-profit provider of affordable housing for single-member households, is based in Braintree and owns 425 rooms in 18 properties around Greater Boston. Rooms rent typically for $105 per week, including utilities. The typical resident is a service-sector worker making $14,000 a year. The MATCH program enabled Caritas to refinance a substantial part of its portfolio (13 properties, 260 rooms) with a long-term permanent loan for 20 years at 6.20 percent interest, replacing its previous aggregate financing rate of 8.74 percent.
“This kind of financing better enables us to weather the uncertainties of rising property expenses and keep rents low,” said Mark Winkeller, executive director of Caritas.
The impetus to create this financing came from a comment made by Winkeller to MHP during a community meeting with housing advocates in Chelsea two years ago.
“I told (MHP) they should come up with a program that would allow smaller non-profit developers to get access to tax-exempt bond financing,” recalled Winkeller.
MHP, MassDevelopment and Fleet’s Community Investment Group figured out a way to deliver tax-exempt bond financing to non-profit borrowers like Caritas. MassDevelopment issued the bonds, and then lent the money generated by the bonds to MHP, which in turn lent it to Caritas. Fleet and the Federal Home Loan Bank of Boston guaranteed the bonds by issuing letters of credit. Fleet is the first bank in the Commonwealth to have participated with MHP in the MATCH program as a letter-of-credit provider.
The banks’ letters of credit were key for it enabled the bonds to yield the lowest possible interest rate for the borrower, according to Toby Yarmolinsky, a managing director for RBC Dain Rauscher, the investment bank that sold the bonds.
“The fact that we were able to get the letters of credit gave the bonds a triple AAA rating, which in turn allowed us to get the lowest possible rate and also created a tremendous demand for these bonds by individual investors,” said Yarmolinsky. “This is going to be a good program for non-profits like Caritas and it’s going to be a good program for investors.”
The MATCH program is designed to provide long-term financing for small affordable housing developments between $3 and $10 million.
For more information about the MATCH program, call MHP at 877-MHP-FUND or MassDevelopment at 800-445-8030.