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NALHFA 2012 Annual Conference Case Examples of Affordable Housing Preservation

NALHFA 2012 Annual Conference Case Examples of Affordable Housing Preservation. By Aseem Nigam Director Real Estate Finance and Grants Management Fairfax County, Department of Housing and Community Development. Creekside Village. Project Description

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NALHFA 2012 Annual Conference Case Examples of Affordable Housing Preservation

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  1. NALHFA 2012 Annual Conference Case Examples of Affordable Housing Preservation By Aseem Nigam Director Real Estate Finance and Grants Management Fairfax County, Department of Housing and Community Development

  2. Creekside Village Project Description • 319-units located in Alexandria, Fairfax County – Built 1976 • Original configuration: • 2 phases- both phases purchased by developer • Phase 1: 110 units; HUD Section 236 financing; additionally, 50 of 110 units receive Rental Assistance Payment (RAP) contract- both expire 2018 • Phase 2: 209 units; “market” rate not subject to HUD restrictions but rents affordable to 50% AMI • Project needed renovation in order to provide upgrades in appearance, security, energy efficiency and long term durability (preservation)

  3. Creekside Village Summary of Sources and Uses • For both phases: • Construction costs/unit: $38,131 • Acquisition cost/unit: $126,066 (buildings only) • Land Cost/unit: $15,000 (ground lease Uses

  4. Creekside Village Sources

  5. Creekside VillageUnit & Income Targeting- Phase 1Reconfigured

  6. Creekside VillageUnit & Income Targeting- Phase 2Reconfigured

  7. Creekside Village • Roadblocks • Section 236 financing limited rent increases over time and rents/revenues from Phase 1 were very low • Financially infeasible without cash flow from Phase II to carry it • As a result, the project was limited to how much debt it could carry • Non-displacement of tenants • Solutions • In order to make Phase 1 financially feasible, changed distribution of units between Phase 1 and Phase 2 • Phase 1- 220 units with the following levels of affordability: 110 units @ 50% AMI, 93 units @ 60% AMI, and 17 units @ 80% AMI • Phase 2- 99 units with the following affordability- 55 units @ 60% AMI and 44 units @ 80% AMI • Created condominium regime to maximize LIHTC for the property • Needed to preserve some units as market rate so as not to displace tenants

  8. Creekside Village • Purchase of Land Using Penny Funds • Helps to reduce the overall cost the developer needs to finance • Unsubordinated ground lease • 99-year lease to borrower, 75-year to lender; at end of term, land and improvements revert back to the FCRHA and therefore, the FCRHA can maintain perpetual affordability • Long term preservation is achieved • Preservation and the AHPP • Requirements such as the ROFR, affordability covenants and in cases where we have a ground lease, the FCRHA is able to maintain and preserve units as affordable for the long term • With the ROFR, the FCRHA can purchase the property • Affordability covenants may extend affordable restrictions beyond the credit compliance period • Ground leases also revert land/buildings back to the FCRHA’s ownership

  9. Crescent Apartments • 181 units in Reston Va. – Built 1967 • Redevelopment / revitalization opportunity • Adjacent to Lake Anne – oldest planned community • Acquisition cost per unit $276,316 • Affordability • 20% units at 50% AMI • 80% units at 60% AMI • Unusual Aspects • Part of a larger portfolio sale (Mark Winkler) • Purchased to redevelop the site

  10. Crescent Apartments • Property is owned by Fairfax County • Ground Lease to the Fairfax County Redevelopment and Housing Authority (FCRHA) for property management • Payment agreement for the County to make the bond payments • Property contributes some revenues to the bond payments.

  11. Crescent Apartments • Purchased in 2006 for $49,500,000 • Sources of financing: • BANs - $40,600,000 • Penny for Affordable Housing - $9,136,826 • 2007 the original BANS were rolled over for another year at 4% interest rate • 2008 County issued 5 year BANS to allow time for the redevelopment plans to be completed. • Note had a 3 year call provision • Interest rate of 3.308% • County paid interest payment • Property contributed to principal pay down. • Bond ratings: Moody’s Aa2 and S&P AA+

  12. Crescent Apartments • 5 year note refinanced in 2011 • Same maturity • Lowered the interest rate to 0.75% • Net present value of Interest savings $1,642,152 • Responses to the RFP for redevelopment are due April 30, 2012

  13. Crescent Apartments • Recommendations from the RFP • Preservation of the 181 units as follows • 10% affordable to households earning up to 30% of AMI • 20% affordable to households earning up to 50% of AMI • 70% affordable to households earning up to 60% of AMI • Non-replacement Units 20% affordable pursuant to the ADU and WDU ordinance • Land Unit consolidation options • Unit A - 3.6 acres • Unit B - 4.2 acres • Unit C – 3.8 acres • Unit D – 17.3 acres (Crescent Apartments) • Unit E – 6.0 acres • Unit F – 5.75 acres (Current Shopping Area)

  14. Crescent Apartments

  15. Crescent Apartments

  16. Questions? Contact Information: Aseem Nigam 703.246.5167 aseem.nigam@fairfaxcounty.gov

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