280 likes | 592 Views
MFH Transfers. Deals That Have Worked By: Lela Gruebel LRG Consulting and Development Inc. 1405 NW Cedar Ct. Grain Valley, MO 64029 816-847-0988 lgruebel@comcast.net. NECAC Transfers. 19 Properties in various counties
E N D
MFH Transfers Deals That Have Worked By: Lela Gruebel LRG Consulting and Development Inc. 1405 NW Cedar Ct. Grain Valley, MO 64029 816-847-0988 lgruebel@comcast.net
NECAC Transfers • 19 Properties in various counties • Took 3 years to complete all transfers due to limited AHAP funding from MHDC to assist seller. • Not all properties transferred-some were taken out of the system, some foreclosed.
Benefits of Transfers • Phased Properties such as Hannibal Apartments (3 phases) were combined into one property. • Uniform Rents in all phases • Reduced operating expenses by combining properties. • Sharing of Rental Vouchers across properties since they are now 1. • Streamlining reporting and recordkeeping requirements.
Benefits continued • Needed affordable housing has been preserved. • No new rental assistance needed. • No additional rent burden created for tenants. • Loan servicing, property management and asset management more efficient and cost effective as result. • Deferred Debt will not be due until loan maturity.
Hannibal MPR Transfer • NECAC became the Not for Profit Owner. • Rural Development utilized many authorities. • Transfers and assumption of existing debt at new rates and terms. • Consolidation of 3 properties into 1. • Continuing rental assistance on 39 of 72 units. • MPR including debt deferral and additional loans • (first in nation) Transfer completed 9/30/2005. • Increased reserve funding to address capital needs.
Hannibal MPR Transfer • MHDC Provided: • AHAP tax credits to facilitate the 1st transfer. • Supplemental management fees during transition of ownership. • MHDC awarded LIHTC to the property in 2008 to complete rehab. It took 3 years to receive an Allocation of Housing Tax Credits. • Consultant • LRG assisted NECAC in the MHDC AHAP Tax Credit Application and the RD Transfer package in 2005. • LRG is assisting in the LIHTC application, co-developer, assisting in 2nd transfer with RD for Tax Credits.
Hannibal LIHTC Application • Received $363,000 in Tax Credits in 2008 • Will generate $4,481,000 in equity • Will still need Debt Deferral to keep rents low. RD will evaluate new C.N.A. and operating budget. --Rents in 2005 were $280 for 1br and $325 for 2 br. Post rehab rents will be $300 for 1 br and $350 for 2 br in 2009.
Hannibal LIHTC Application • Will have 39 of 72 units with Rental Assistance • Will have new washer/dryer hookups in each unit. • Will allow for construction of New Community Building and Office. • Approximately $43,750 per unit rehab.
MFH Transfer Checklist • Stage 1-Initial Transfer Request • Up to 22 items required, 19 from Applicant • Stage 2-Complete Transfer Application • Up to 83 items required, 45 from Applicant • Stage 3-Construction • Up to 17 items required, 12 from Applicant • Stage 4-Loan Closing • Up to 34 items required, 16 from Applicant
Anderson Estates-Palmyra(Prior to Revitalization) • 2 separate complexes built side by side • Different limited partnerships with same general partners. • 72 units (22-1 br, 48-2 br, 2-3br) • 75% occupancy • Approximately $1.6 million in total debt. • 59.7% Rental Assistance. • Basic rents for 1 br $287 and $297, 2 br $342 and $347, 3 br $407.
Anderson Estates-Palmyra(Prior to Revitalization) • Properties in need of substantial rehab. • Failure to address the capital needs causing vacancy issues. • Definite need in the community but needed different bedroom configuration.
Anderson Estates-Palmyra(Post Revitalization) • Transferred to NECAC as non profit purchaser using AHAP Donation Credit. • Capital Needs Assessment obtained • RD reviewed operating expenses and quantified financial needs for next 20 years. • RD reviewed efficiencies and cost savings of consolidating the 2 complexes into one complex.
Anderson Estates-Palmyra (Post Revitalization) • Process consisted of 2 transfers • 1st transfer to NECAC as non profit at new rates and terms • 2nd transfer was to a Limited Partnership in which NECAC Affordable Housing LLC is the Managing General partner in order to sell the LIHTC to investors (terms of this transfer were same rates and terms) • New C.N.A. obtained which factored in planned rehab work. • Debt of 2 properties were consolidated streamlining reporting and recordkeeping requirements. • RA available to both complexes since they are now 1.
Anderson Estates-Palmyra(Post Revitalization) • What rehab items have been completed: • New roofs • New siding • New windows and doors • New cabinets • New appliances including dishwashers and microwaves • Central heating and air • Washer/dryer hookups in each unit • Ceiling fans • Flooring • Exterior stairways • Landscaping • New playground area and pavilion • Reconfigured units and have more 3 bedroom units
ANDERSON APARTMENTS THE OLD THE NEW
ANDERSON APARTMENTS OLD KITCHEN NEW KITCHEN
Lewis County Affordable Housing (Revitalization) • Was part of the portfolio transfer with NECAC as non profit purchaser • Four (4) RD properties in 3 different cities within county combined into one property. • Process consisted of 2 transfers • 1st transfer was to NECAC as non profit at new rates and terms (11/16/06) • 2nd transfer was to a Limited Partnership in which NECAC Affordable Housing LLC is the Managing General Partner in order to sell LIHTC to investors (terms of this transfer were same rates and terms) (10/31/07)
Lewis County Affordable Housing (Revitalization) • Debt for 4 properties combined • RA available at all 4 complexes since they are now 1 ownership. • Reconfigured some 1 bedrooms to 3 bedrooms. • Currently under rehab
WESTPORT APARTMENTS THE OLD THE NEW
WESTPORT APARTMENTS OLD KITCHEN NEW KITCHEN
WESTPORT APARTMENTS OLD FLOORING NEW FLOORING
Low Income Housing Tax Credit Rehabilitation • If applying and receiving LIHTC’s this will require a second transfer to a Limited Partnership to allow the syndicator into the deal with the funding sources. • The Limited Partner must be admitted to the Partnership prior to the second transfer so that the Not For Profit does not have more than a 10% interest in the deal. • LIHTC’s are a good source of creating additional equity, however funding is very competitive and may take awhile to get approval.
AHAP Donation Credits • These AHAP Donation Credits can be used to entice the seller to transfer property to a Not For Profit. • The AHAP Tax Credit is issued to business firms that engage in providing affordable housing activities (contributions) to not-for-profit neighborhood organizations involved in the construction or rehabilitation of a specific development that will contain affordable housing units.
AHAP Donation Credits Continued • In order for a business firm to be eligible for the Affordable Housing Assistance Tax Credit, the neighborhood organization must agree to use 100% of the donation to house families with a household income of less than 50% of the area median income adjusted for family size. This is restricted through a LURA for 10 years. • This usually meets with RD’s goal to serve lower income tenants. • Must be applied for carefully to combine with Tax Credits at 60% of the area median income.
Packaging the Deals Lessons Learned • Requires coordination between different parties, Surveyors, appraisers, title companies, lawyers, RD and other state agencies. • Timing can be crucial-for example you may have transfer approval, but cannot get AHAP credits or LIHTC funding this year. • Surveys are now required to prevent ownership issues later. • Title legal descriptions must match surveys, easements, encroachment issues. • Communication is crucial between parties
Issues to getting Approval • Occupancy trends, vacancies can hurt a developments chances for approval, when vacancies usually indicate a desperate need for rehab. • Reason for vacancies should be studied more closely before rejecting a property. Is vacancy due to uninhabitable units, wrong unit configuration that can be changed-example excessive number of 1 bedroom units which could be converted to 2 or 3 bedroom units.
Issues to Getting Approval -continued • Capital Needs Assessments can require reserves to be so high the property cannot pay debt service. • C.N.A.’s typically require all items of a type such as flooring to be replaced at the same time estimated useful life of 7 years, this is not realistic, as flooring is usually done with move outs via regular operating budgets, not all at once in a given year. • Post 1991 RD properties are not eligible for debt deferral.
Questions How do I ????