The lender financing an affordable senior housing development in the village of Schoharie took control of the project from the developer on May 12, according to the agency that oversees affordable housing development in the state.
New York state Division of Homes and Community Renewal spokeswoman Stephanie Davis said Bank of America, the project’s construction lender, “has taken control of the property and project.”
The project is known as Birches at Schoharie, a 72-unit senior housing development that was undertaken to fill a need for housing after the village and county were devastated by flooding in 2011.
DHCR awarded the project in 2013 to Kingston-based developer Birchez Associates LLC under the agency’s low-income housing tax credit program. Birchez specializes in building affordable housing, and company president Steven Aaron has teamed up with the state on projects in the past.
The tax credits associated with the Birches at Schoharie development are not dispersed until the project is fully completed, according to DHCR. This funding mechanism necessitates a lender to work with the developer on building the housing units.
Bank of America makes money on the deal from interest earned on the construction loan and tax credits that can be used to offset corporate earnings, while Birchez Associates LLC gains a developer’s fee upon completion of the project and a percentage of monthly rents once they assume management of the development.
DHCR said last December that the project was 95 percent completed. The original plan called for a completion date of January 2016, but significant delays have pushed its opening back over 15 months.
Aaron told The Daily Gazette on Thursday that the delayed delivery has led to concerns on behalf of the bank. He denied, however, that the bank has taken the project over.
“We’re still working and we have no intentions of leaving,” said Aaron. “We intend to resolve all the issues that led to the bank being concerned about the late delivery.”
He added that no legal action has been taken by the bank to date, and that this latest news amounts to legal correspondence between his company and the bank.
“The bank has told [DHCR] they’re taking over but we’re still there,” said Aaron. “Our lawyers are in the process of working it out.”
Bank of America spokesman Anu Ahluwalia said the bank is declining to comment on the matter.
DHCR’s Davis said the project is critical for Schoharie and will be completed.
“[DHCR] – along with Bank of America and the community – is committed to seeing this development finished and occupied as quickly as possible,” said Davis.
In order to legally transfer ownership and tax credit eligibility, Bank of America sought and received DHCR’s consent to the change in ownership. The transfer gives the bank control over the management of the project, including day-to-day operations and any outstanding construction work, according to the state agency.
Aaron said it’s not in Bank of America’s best interest to kick his company off the project, and that ultimately he believes his company will stay on and complete the work. A subsidiary of Birchez Associates LLC is also slated to manage the project upon completion.
“Once we’re finished they’re not going to want to kick us off the project; Bank of America isn’t in the business of managing properties,” said Aaron.
He also alluded to a personality conflict he has with an individual at the bank as contributing to their stance on the project, but declined to get specific on the nature of the issue.
Aaron said Bank of America has so far paid out a $10 million-plus construction loan on the project. The original project was slated to cost $11 million. Aaron said when completed its final cost will be between $16 million and $17 million, which includes Bank of America’s construction loan and several million that Aaron said his company has tied up in the project. He claimed his company has already paid out nearly $1 million in interest to Bank of America on the construction loan.
Aaron contends there are many reasons for the delay in the project’s completion.
“It’s taken longer than it should for a variety of reasons,” he said. “Not all of them are our fault, there's plenty of blame to go around.”
He attributed some of the delays to upgrades he included in the project beyond DHCR’s minimum requirements. Most of those upgrades center around winterizing the development for eventual use by seniors.
“The original approved design would have caused a lot of concerns given the severity of Schoharie winters,” said Aaron. “I wouldn’t want any of my relatives to walk out of the front door during a Schoharie winter.”
Aaron installed heated sidewalks to melt snow and ice during the winter months, and added a fire alarm upgrade that allows emergency medical calls to be easily made by residents.
“I did it because we’re in it for the long haul and I wanted it to be done right,” he said of the upgrades.
He added that a request from the village to increase the project’s elevation -- which was already required by DHCR to be built above the 100-year floodplain -- cost the project a six-month delay. He said his company is also waiting on rent rate approvals from DHCR.
Monthly rent for the one-bedroom units, which are 725-790 square feet, will be between $768 and $922. The two-bedroom units, which are 925-980 square feet, will go for between $922 and $1,107 per month. The 72 units, split between one main building and two smaller buildings at 192 Main St. (State Route 30) in Schoharie, are available to low- and moderate-income seniors age 62 years and older.
Aaron said he’s received close to a hundred applications for the 72 units.
Aaron has also faced liens on the project from no fewer than 10 subcontractors who worked on Birches at Schoharie and claim Aaron has not paid them for services rendered. Aaron said the liens, which total tens of thousands of dollars, are resolved or are in the process of being resolved.
Aaron claims the companies that have filed liens against the project have variously done shoddy work, over billed or billed for work that was never completed, or have breached their contract with his company in some way.
Aaron provided a document to The Daily Gazette titled “Response To Liens.” In it, he claims that three of the liens are awaiting judicial rulings, one is being actively fought, one has expired, three are in the process of being removed, and two are being negotiated with the respective companies involved.
Aaron has faced similar accusations from subcontractors on other affordable housing projects he’s worked on in the state.
DHCR said last July that all liens must be resolved and omitted from Birches at Schoharie’s property title report before any public funds associated with the project are released.
Assemblyman Peter Lopez, who lives in Schoharie and was an early supporter of Birches at Schoharie, said any control Bank of America has over the project “means the project moves forward successfully, in my opinion.”
“If Mr. Aaron is able to do it God bless him,” said Lopez. “If he’s not able to do it, I’m confident Bank of America can complete it successfully.”
Lopez said his office has not been provided with an updated completion date.
Aaron declined to give an updated completion date, saying that he gets in trouble every time he commits to a new date. “We’re anticipating being able to bring in people very shortly,” he said.