Refinancing Secures Penn South’s Affordable Status for ‘Decades to Come’

New developments Hudson Yards, left, and Manhattan West, right, with Penn South in the foreground. Photo by Wyatt Frank
New developments Hudson Yards, left, and Manhattan West, right, with Penn South in the foreground. Photo by Wyatt Frank.

BY SEAN EGAN | After months of working under the unpredictable and potentially disruptive cloud of a new presidential administration, Penn South has officially closed on a deal with the Department of Housing and Urban Development (HUD), granting them a significant federal loan refinance. The new arrangement will help the housing cooperative (located btw. Eighth & Ninth Aves., and W. 23rd & 29th Sts.) remain an affordable haven in Chelsea for years to come, and save the 6,000 residents of the 10-building complex significant funds annually.

Approved officially at a signing on Wed., April 26 at HUD’s 26 Federal Plaza NYC office, the refinancing measure provides Penn South with a federally-insured $187.5 million loan with a fixed interest rate until 2052. This number is slightly lower than the $190 million that was originally sought after, but the figure nonetheless marks a major victory for Penn South residents.

Chelsea Now spoke with Penn South General Manager Brendan Keany on the afternoon of Tues., April 25, shortly before he left the iconic co-op to attend a loan pre-signing of the “voluminous” but momentous paperwork. While on the phone with us, Keany was still busy finalizing details, even fielding a call from the bank between explaining the details of, and sharing his thoughts on, the imminently-confirmed deal.

“It will do a number of things for us,” explained Keany, who spearheaded the efforts to secure the loan, going back as far as 2015. “It will reduce our annual debt service by approximately 3 million dollars, and it will ensure that when our regular mortgage would have ballooned in 2021 — we were very concerned that we would have much higher interest rates at that point — [it] will safeguard us against future interest rate hikes, because the term of this loan is 35 years, and the interest rate is 3.23 [percent].”

When last Chelsea Now reported on the situation in early February, the City Council had just passed a measure ensuring that the “shelter rent” tax abatements Penn South currently enjoys (which helps to keep it as affordable as it is) would be in place for the co-op through to 2052, rather than the 2030 date they’d previously expire. The official approval of the loan deal by HUD was contingent on these crucial abatements being approved, in order for them to be in place for the duration of the loan. In the intervening weeks, efforts were spent finalizing all the paperwork related to the deal.

“HUD would feel very uncomfortable if in 2030, the city, for any reason, weren’t to renew our tax abatement status, and we had to pay full real estate tax. The financial burden would be very substantial for fixed income people, and would… potentially put the loan into jeopardy,” Keany explained.

A further beneficial wrinkle of the renegotiated City Council terms would be that the money that Penn South collects every year in the form of a surcharge to its high-income tenants (determined by an annual assessment), would be fully retained by Penn South — rather than split with the city, as is the current arrangement.

“It also provides a means for the housing development to keep up with its infrastructure needs without having to be overly concerned about going to middle income shareholders to foot the bill,” said Keany, noting this arrangement would add about $4 million to the housing development’s treasury and savings per diem, which “would be used for re-roofing our buildings, re-piping our underground utilities systems, and all kinds of major capital projects that we will have to do.”

Prior to the loan’s commitment, significant worry had spread amongst Penn South residents earlier this year surrounding the deal. The process had not come to fruition as the last days of the Obama administration ticked by — and the threat that the Trump administration, and his HUD Secretary, Ben Carson, would be less receptive to the deal that had been brewing, was very real.

“It was teetering,” Keany recalled. “It was at a very difficult period in time because the outgoing administration was leaving office, and the incoming administration was getting ready to take over — and we were very, very scared, frankly, because we hadn’t yet received a commitment.”

Thankfully, local electeds helped expedite the process, including when, in early January, US Senator Chuck Schumer penned a letter openly supporting the deal, pressing the relevant agencies (including the presidential Office of Management and Budget, which also needed to sign off) to approve the deal posthaste. In that letter, Schumer wrote, “The opportunity to guarantee another two decades of affordable housing in this neighborhood is one that we cannot let pass without serious and diligent consideration. We simply cannot run the risk of failing to guarantee that the 2,820 units of affordable housing in this development will continue into the future.”

“Chuck Schumer and Congressman [Jerrold] Nadler, the combination of both, worked miracles and got this commitment done before the new HUD secretary took over, and we were very thankful for that,” Keany noted.

“Now that HUD has signed, sealed and delivered the HUD loan we pushed for — and needed to keep Penn South affordable for thousands of New Yorkers for years to come — we can all breathe a sigh of relief. Penn South is one of the last remaining middle-class havens in New York City and, with this news, we know this oasis of affordability will remain the wonderful place to live as it has been for decades,” wrote Sen. Schumer in a statement following the April 26 signing. “Places like Penn South — that provide a safe and affordable place to live for middle-class New Yorkers are increasingly rare and precious.”

“Affordable housing like Penn South is what makes New York’s neighborhoods the vibrant, inclusive, and dynamic places they are,” concurred Mirza Orriols, HUD Deputy Regional Administrator for New York and New Jersey, in the same press release. “Preserving this kind of housing and the opportunity it creates is at the core of HUD’s mission, and today we celebrate a victory that will keep Penn South affordable for decades to come.”

In all, because of these efforts and foresight, Keany and the residents of Penn South can look forward to years of reaping the benefits of this new deal.

“All around it’s what I call win-win-win. It allows us to continue the mission, and this is a mission that John F. Kennedy spoke brilliantly on back in 1962 at the opening of the housing development, and he talked about providing middle income housing to New Yorkers for generations to come. And many housing developments have not been able to do that; they’ve gone private, they’ve reconstituted, and they’ve done other things,” commented Keany. “Penn South has stayed true to its original mission, and this financial win-win continues that, and it allows us to continue that goal. And it’s a laudable goal in a time when, unfortunately, most of the middle-income housing is lost. So we’re very proud of the accomplishment, and we’re very happy that we can provide this kind of housing for the next several generations.”