Peekskill IDA approves Stewart Gardens bond redemption to allow Fannie Mae refinancing

The Peekskill Industrial Development Agency voted to authorize documents needed to redeem the original Stewart Gardens bonds and to facilitate new permanent financing with Fannie Mae. Justin, presenting the owner’s transaction summary, told the board the IDA originally issued roughly $7.2 million in affordable-housing bonds for Stewart Gardens in May 2007 and that the lender issued a notice of redemption effective Sept. 1.

"The IDA, issued, I think, dollars 7,200,000 in affordable housing bonds for Stewart Gardens in May of, 2007," Justin said, summarizing the history of the financing. He told members the owner has a commitment from Fannie Mae for new permanent financing and is seeking to convert the project from the IDA's bond/leaseback structure to a Fannie mortgage.

Board members asked whether subordination or the bond redemption would weaken the IDA’s protections; Justin said the IDA’s position will remain protected because the IDA recorded a pilot mortgage in 2007 that functions similarly to a tax lien and that lenders commonly agree to cure unpaid pilot payments where needed. The owner will also request a mortgage-recording-tax exemption tied to the new financing, with an application for up to $100,000 in exemptions noted during the presentation.

Owner representative Joel Monte described capital work planned under the new financing, including paving, roofing, boiler improvements and appliance replacement, and said an existing replacement reserve of $467,000 will carry into the new loan to fund those capital needs. "There's an existing replacement reserve in the building of $467,000 that will go forward with the new financing," he said.

The board then considered a resolution authorizing the execution of bond-redemption and lease documents, retention of the IDA lease to preserve tax-exempt status, and approval of specified financial assistance including the mortgage-recording-tax exemption. After a motion and second, members answered "Aye" with no recorded opposition and the chair declared the motion carried.

Next steps: staff and the owner indicated a closing is scheduled in the coming days to complete the redemption and refinancing documents and to finalize the mortgage-recording-tax-exemption paperwork.