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“DEALS THAT HAVE WORKED” RD-11

“DEALS THAT HAVE WORKED” RD-11. What it takes to make it work?. Thinking Outside of the Box Utilize All Agencies Recruit the Best Team Flexibility Patience Cooperation Experience. Common Denominators (11 Properties). 10 year holding period intact RD 515 financing

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“DEALS THAT HAVE WORKED” RD-11

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  1. “DEALS THAT HAVE WORKED”RD-11

  2. What it takes to make it work? • Thinking Outside of the Box • Utilize All Agencies • Recruit the Best Team • Flexibility • Patience • Cooperation • Experience

  3. Common Denominators(11 Properties) • 10 year holding period intact • RD 515 financing • HUD Section 8 HAP contracts • Same Owner/Management Agent

  4. Participating Agencies • Rural Development • Debt write-down (3 of 11 properties) • Restructured RD debt at new rates and terms • Subordinated RD debt to MHDC • Missouri Housing Development Commission • AHAP credits, Bonds, LIHTC, HOME Grant • Housing and Urban Development • HUD Project Based Rental Assistance • MHDC/HUD Risk-Sharing Agreement

  5. AHAP Tax Credits • AHAP Credits • One-time state tax credit allocated to eligible Donor (additional information and application located at www.mhdc.com) • Benefits to Previous Owner • Tax Credits equal to 55% of appraised value in excess of outstanding RD loans • Fully transferrable and may be carried forward for a period of 10 years • Sale/Use of AHAP credits • Receive charitable contribution deduction • Offset negative capital accounts/depreciation • Benefits to Buyer • Only assume existing debt leaving room for more rehab funding

  6. Non-Profit Participation • AHAP credits requires 501(c)3 non-profit • Need experienced non-profit or need experienced developer/co-general partner/management agent as a counterpart • Does not affect the 10 year holding requirement to receive LIHTC for acquisition

  7. Planning Involved • Develop Strategy • Review commonalities • Utilize all funding sources/agencies • Overcome hurdles • Smaller projects (12 to 48 units) • Debt service 2 mortgages • Funding/Approval of all 11 properties • Initial Planning Meeting • Attendees: • Transferor • Rural Development • MHDC • Non-Profit Intermediary • Transferee (newly created entity) • Attorney • Consultant • Accountant

  8. Planning Involved • Coordination • Appraisals • Current owner must obtain on each property • Subordination • Coordination between agencies • Document Preparation • Various application processes and closing documents required • Title Work and Recording • 11 properties; 9 counties • Application Process • 11 separate Transfer of Physical Assets Application submitted to MHDC • 11 separate Transfer Applications submitted to RD • HUD 2530 Approval • Non-profit entity • Management Agent • Developer • Newly created entity and its partners

  9. 2-Step Transfer • Step 1 - Transferor to Non-Profit Intermediary • All 11 properties had to be transferred from previous owner to non-profit • RD debt was transferred (assigned and assumed) to non-profit • AHAP Tax Credits transferred to Transferor (previous owner) • Step 2 - Non-Profit Intermediary to Transferee • All 11 properties transferred from Non-Profit to Transferee (newly created single asset entity) • Prior to actual transfer: • Financing in place • Federal and State investors admitted into newly created entity • RD Debt transferred and subordinated

  10. Funding Sources • Existing RD Debt • $6,532,594 • $6,268,589 transferred & subordinated • Tax Exempt Bonds • $8,450,000 (construction) • $3,485,000 (permanent) • Low Income Housing Tax Credits (federal & state) • $5,045,000 • HOME Grant • $393,595

  11. Closings • Transferor to Non-Profit and Non-Profit to Transferee Closing • Refer to Closing Attorney (Deed, Assignments, Affidavits, etc.) • RD Closing • Refer to local/state RD for Transfer Checklist • MHDC and Bond Closing • Refer to Transfer of Physical Assets Checklist • Syndication/Investor Closing • Due diligence requirements

  12. Accomplishments • 328 Units Improved • Substantial Rehabilitation • $26,006 Construction Costs per Unit • $33,841 as improved value • Innovative Use of Resources • Preservation of Affordable Housing

  13. Holden Law Office, P.C.Natalie D. Riley 718 W. Business Highway 60 P.O. Box 633 Dexter, Missouri 63841 (573) 624-8901 (573) 624-8188 facsimile natalie@holdenlawoffices.com

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