Council Member Dinowitz on Tracy Towers debt structure and loan history

Councilmember Dinowitz.

Well, I had similar questions about the debt.

But first...

I'm also excited for the roundtable.

I will be relying on Council Members Epstein and Brewer for snacks.

I would just also say that limited equity co-ops like the Amalgamated Cooperative should be included.

not Michelama, but in the same sphere, right?

So that it functions similarly and they have some of the similar issues.

So I would say that they should be part of this roundtable as well.

I need you to help explain how the debt works, because as I was starting in my first round,

Tracy had a $40 million loan.

The interest was $106 million.

It was refinanced to about $147 million.

I'm hearing you testify, well, we can't forgive the loan, but we just roll the loan over and it's no interest and it keeps growing.

That's what I'm hearing.

It keeps growing.

And at no point ever in the future do those payments ever have to be made.

Is that accurate?

So we use the, if principal and interest payments aren't being made on any portion of our existing debt, there's a balloon at the end of the loan term.

So after 30 years, our balloon is there.

And as Councilmember Sanchez so eloquently put, it's our hook, right?

So by us having existing debt, and if it's a large balloon, then we're able to ensure that the project will stay within an affordable program for the longer term.

So none of the rent increases or maintenance increases are due to the need to pay off any of these loans, any of this debt?

For Tracy Towers, the HPD debt that is in the project, none of the increase is going to pay towards the new capital that HPD put into the project.

Okay, so I'm not talking about the new capital.

I'm talking about the new capital.

About like the old capital, right?

The, all of that interest that accrued over the years, they don't, I'm hearing different things.

They don't have to pay it back.

I'm just trying to understand if any of that does have to do with the rent increases for Tracy.

So different lenders, right?

HPD has its own city capital that's contributed to the project.

And then there's an existing, there's a, sorry, I don't fully have the debt breakdown with me.

But HTC has...

Has a first mortgage and that one gets paid off.

So typically when we structure our loans, there's usually a private lender and that private lender will require principal and interest payments and then HPD comes in with subsidy and those subsidy payments

or that subsidy doesn't require principal and interest payments and the loan defers and accrues and there's a balloon at the end of the 30 years.

So the debt that's in first position, that requires debt service payments.

The city capital we put in does not require debt service payments.

All right.