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along river downtown for $34 million

Wilmorite sells apartment towers
along river downtown for $34 million

Wilmorite Inc. has closed what could be the area’s biggest real estate deal this year.
The developer sold the Plaza at Genesee Crossroads apartment complex to Rural Opportunities Inc. for $34 million.
Despite the complex’s hefty price tag and the fact that Wilmorite’s equity in the property was substantial, the company made virtually no money on the deal, said Karen Noble Hanson, Wilmorite vice president.
In the world of big, bond-financed projects, fees to bonding agencies, bond raters, attorneys and trustees often consume much of what otherwise might be profit, say industry experts familiar with financing of low-income housing.
“I’ve seen a number of deals, and usually the equity holder is the last one to see any money,” said Jay Golden, deputy director for housing development at Rural Opportunities.
Wilmorite built the riverfront Plaza apartments in 1978, taking advantage of an incentive the state offered private developers to spur creation of low-income housing.
Developers were able to use below-market-rate bonding to finance projects, if they promised to rent mostly to low-income tenants for the 20-year life of the bonds.
Once the bonds mature, developers are free to sell the projects or to raise rents to market rate.
The Plaza is a twin-towered, 520-unit complex at 91 St. Paul St. that includes two 100-space underground parking garages.
Handicapped and elderly tenants, with rent subsidies under the federal Section 8 program, occupy 496 units.
Low-income tenants eligible for Section 8 assistance pay low monthly rents, while landlords get additional payments from the federal Housing and Urban Development agency.
Rural Opportunities is a private, non-profit corporation specializing in low-income housing. Based in Rochester, it develops and owns projects ranging from single-family, affordable homes to multiunit complexes in New York, New Jersey, Ohio and Pennsylvania.
It financed the Plaza purchase with bonds obtained through the Rochester Housing Authority, Golden said.
Some real estate experts rated the roughly $70,000-a-unit price Rural Opportunities paid for the Plaza on the steep side, but Golden said his agency is pleased with the deal, which closed in January.
The property, he noted, sits on prime downtown real estate overlooking the Genesee River. The brick structures are sound and well-maintained, and the parking garages produce extra income.
Its chief value to Rural Opportunities, however, lies in the scarcity of good, low-income housing stock, Golden said.
The Plaza purchase by far is the biggest deal Rural Opportunities has done, but the agency hopes to do others approaching that range in the future, he said.
The St. Paul Street project is one of a number of privately built projects that could be lost to the low-income market, he said. Virtually no such housing is being built, yet the number of Section 8 certificate holders far exceeds eligible rental units, Golden said.
In 1989, Wilmorite refinanced the Plaza with a privately backed mortgage, thus bringing it to early maturity, Hanson said.
Golden believes Wilmorite or another developer could have converted the project to condominiums and easily realized the same $70,000 a unit Rural Opportunities paid.
Even though it made no money directly from the sale, Hanson said Wilmorite too is pleased with the transaction.
The Plaza is the third subsidized-housing complex the firm has sold to Rural Opportunities in as many years.
Last year, the Stonewood Village Apartments in Henrietta changed hands for $8.5 million. And in 1993, Wilmorite sold a Jamestown apartment complex to Rural Opportunities for $5 million.
Wilmorite’s payoff in all three deals comes with contracts from Rural Opportunities to have Wilmorite subsidiary Genesee Management Inc. continue to operate the properties, Hanson said.
HUD is happy, too, since it likes to see such projects go into the hands of non-profit agencies, she added.
All three projects have positive cash flow, so Rural Opportunities gets to keep self-sustaining, low-income housing on the market, making it and a number of needy tenants happy, Golden said.
The only ones who could possibly be happier, he said, are the bond raters, bonding firms and attorneys who found themselves in the middle of the deals.

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