Community Preservation Corporation, a major New York affordable housing lender, has whittled down its debt after almost drowning in $900 million of bad loans made before the real estate crash, and will return to it original mission.
“We went through a period, driven by the boom in the real estate market, where we got away from our core mission,” said CEO Rafael Cestero, who was hired in 2012 by the organization’s board to turn it around.
Established in 1974, CPC used capital raised from commercial banks to finance affordable multifamily rental apartments throughout the city, but veered off course during the boom when it began lending to riskier market-rate projects.
Its for-profit arm, CPC Resources, bought the Domino Sugar factory project in 2004 and ended up defaulting on a $125 million loan for it. By early 2009, the organization was on the brink of financial collapse with $900 million in troubled loans, Crain’s reported.
At one time, CPC borrowed money from 72 institutions, which it in turn lent to developers building market-rate projects. When borrowers defaulted after the downtown, CPC was still on the hook for the loans and spent years repaying investors.
CPC now has about $3 million of those trouble loans on its books, and, in addition to rebranding itself, will go back to issuing loans to small or unconventional affordable-housing projects. It is expected to issue $420 million in loans by the end of its fiscal year, according to Crain’s.
While that figure represents a triple increase from what CPC was doing in 2013, Cestero wants to do more, shooting to fund 175 projects across the state annually for a total of up to $600 million. CPC has raised $350 million from 16 investors and will likely continue to raise money to achieve these targets. [Crain’s] — Dusica Sue Malesevic