Andrew Galdys

I saw this one in a Commercial Observer email and tried to add up the $167 million. It didn't work, so I started digging. Turns out the headline is probably the least interesting part of the deal.

The project is the Gallery at Lummus Parc, 257 units on the Miami River just west of I-95, a couple miles from downtown. It's the first phase of a 439-unit, two-tower plan from Related Urban Development Group, part of the Related Group. It's already under construction with delivery expected in late 2028, and Greystone put the financing together.

Adding it up

According to the press release, there are three pieces: an $80 million construction loan from Greystone Housing Impact Investors (with the BlackRock Impact Opportunities Fund), $27.1 million of 4% tax credit equity from Greystone Real Estate Capital, and a $60.1 million fixed-rate, tax-exempt Freddie Mac loan lined up as the permanent financing.

That's $167.2 million, so the math works. But the Freddie Mac loan is there to pay off the construction loan, along with the tax credit equity. So the headline is basically counting the bridge and the thing that pays off the bridge.

A filing with the Miami River Commission back in March put the total cost of the project at around $130.5 million. If that's still close, you're looking at about $508K a unit, and the $167 million headline is roughly 28% bigger than the actual project. It's a pre-closing estimate, so take it with a grain of salt.

So who's paying for the rest? My own rough math says the Freddie loan covers about 46% of that cost and the tax credits about 21%. That leaves around $43 million, or a third, coming from somewhere else. The filing lists the usual soft money suspects with no dollar amounts: a City of Miami ARPA loan, a Florida Housing SAIL loan, county surtax dollars, a Qualified Opportunity Zone investor, and deferred developer fees.

The land

I think this is what makes the whole thing work. The site belongs to Miami-Dade County, and according to a 2022 county resolution, Related got a 75-year ground lease on it. It's a one-time payment of about $1.5 million, then annual rent of 16.5% of net cash flow. The county appraiser put both parcels at around $4.2 million. I haven't seen the final lease, and that approval covered all 439 units, but land that cheap this close to downtown changes the math completely.

What “83% affordable” actually means

This comes from that same March filing. The press release says the range is 20% to 100% of area median income, so the mix may have shifted a bit since. Of the 257 units, 57 are at 30% AMI or below, 110 are at 80%, 47 are at 120%, and 43 are straight market rate.

So “affordable” covers a lot of ground here. The 51 units at 20% AMI match the 51 project-based voucher units in the press release, and my guess is the vouchers are what make those units work. About a third of the building is at 120% AMI or market rate, and I'd guess that's carrying a lot of the cash flow.

The takeout

If you're the construction lender, the nightmare is the building finishing and the borrower being unable to refinance. Greystone's Jeff Englund said the Freddie Mac commitment gives “a clear path to long-term permanent financing,” and I think that's fair, though I wouldn't call it a guarantee. Forward commitments usually come with conditions around completion and performance. One firm also supplied all three layers, which Related's Tony Del Pozzo basically pointed out himself.

What I couldn't find

I couldn't find the rate and term on either loan, or whether the construction money is a loan or tax-exempt bonds. I also don't know who's buying the credits, whether the cost has moved since March, or how Phase 2 gets financed.

My take

It's a really well-built stack: nearly free land, a pile of soft money, and a fixed-rate takeout locked in while the building is still going up. If I were the construction lender, I'd dig hardest into that $43 million of soft money, because nothing public tells me it's all closed and funded.