Swept up in the housing boom, affordable housing group struggles financially

The Community Preservation Corporation, which this week began exploring a sale of its Domino Sugar Factor project, is struggling financially because it got swept up in speculative lending for large-scale condominium projects during the boom, the New York Times reported.

Established in 1974 by banker David Rockerfeller to use capital raised from commercial banks to finance construction and rehabilitation of affordable multi-family rental apartments throughout the city, CPC has recently veered far off that course. In the 1990s CPC established a for-profit arm to invest directly in projects, with the intention of redirecting the proceeds to the pool of money it lent. During the boom the for-profit division took a larger role and in 2007 and 2008, more than half of the $1.5 billion in loans originated by both divisions were for condos.

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The highest profile of those investments was the Domino Sugar factory project on the Brooklyn waterfront. Last month, CPC defaulted on a $125 million loan for the project. Another spectacular failure came from a luxury condo project in Rockaway, called MetroPlex, where not a single unit sold after the project opened.

Now, nearly two-thirds of its condo loans are delinquent, and it narrowly avoided being shut down by reworking its debt with some 72 lenders.

But recently the CPC hired a new chief executive and it has returned to a more conservative approach for low-income New Yorkers, starting with providing $2.8 million to four buildings in the Bronx. [NYT]