housing assistance council building rural communities since 1971 multifamily housing preservation...
TRANSCRIPT
Housing Assistance Council
Building Rural Communities Since 1971
Multifamily Housing Preservation Resources
Presented toThe USDA Rural Development
Buyers and Sellers Conference
Albany, New YorkJune 30, 2010
Presentation Contents
• Background of Housing Assistance Council
• Our Mission• Housing Assistance Council
Services• Loan Products• Project Feasibility• Sucessful PRLF Financed
Properties
Housing Assistance Council
Building Rural Communities since 1971
• Established in 1971• National nonprofit organization• Created to increase the availability
of decent and affordable housing for low-income people in rural areas throughout the U.S.
• Provide services to local, state, and national organizations
Our Mission
“To improve housing conditions for the rural poor, with an emphasis on the poorest of the poor in the most rural places.”
HAC Services
Research and Information (R&I Division)
Technical Assistance and Training(TA&T Division)
–Regional Offices• Albuquerque, NM• Atlanta, GA• Kansas City, MO
Loans (Loan Fund Division)
Technical Assistance
• Assistance to those involved in the improvement of housing conditions for low-income residents in the rural United States.
• Most of this help goes to local governments, private developers, and nonprofit organizations.
Types of Technical Assistance
• analysis of project feasibility;• acquisition, housing construction or
repair, and environmental regulation;• assistance in the preparation and
review of loan and grant applications; • assistance with eligibility and
processing requirements for federal, state and other housing programs;
• information and publications on topics that affect rural housing; and
• special initiatives focused on particular areas or events
Eligible Recipients
• Located in a rural area
• Already obtained some general information about the rural housing problems you wish to address, and ways to address them
• Specific questions about finding funding sources, using government housing programs, or overcoming obstacles to housing development
Training
Research & Information
• Biweekly newsletter
• Quarterly magazine
• Reports
• Manuals
• Information sheets
Loan Fund’s Objectives
• Serve the underserved• Target the highest need
communities• Empower low-income people• Facilitate access to credit• Leverage resources• Provide technical assistance• Exercise sound business practices• Promote flexible partnerships
Eligible Projects
Financing is available for single- and multi-family housing, with various forms of ownership and using traditional and alternative models of land tenure.
Affordable and mixed-income housing projects in rural communities nationwide.
Eligible Borrowers
• Community-based nonprofit organizations• Housing development corporations• Self-help housing sponsors• Farm worker organizations• Housing cooperatives and condo
associations• Native American tribes• Public agencies and units of local
government• Public utility districts• Small businesses and minority contractors
Funding Sources
• Grants• HUD• Rural Development (RD)• HOME• FHLB• AHP• LIHTC• Bonds• Housing Trust Funds• State Housing Finance Agencies• Private lenders (HAC)
Loan Uses & Structure
Uses• predevelopment• land acquisition• site development• construction• preservation• gap/interim
Structure• loans• guarantees• compensating
deposits• letters of credit• lines of credit
Loan Terms & Rates
• Loans up to five years in duration• Below-market interest (currently
5.0%)
• Interest due quarterly• 1% service fee (borrower also pays
HAC's legal and other reasonable costs)
Loan Process
1. Inquiry.2. Submission of loan application.3. Comprehensive underwriting process.4. Internal management review.5. Loan committee review (approval, rejection or deferral).
6. If accepted, loan commitment issued.7. Pre-closing conditions satisfied before
disbursement of funds.8. Loan closing and disbursement.9. Servicing/monitoring loan throughout the term of
the loan.10. Full repayment of loan.
LOAN PRODUCTS
Pre-Development
• Standard 5 year term• 5% interest rate and 1% HAC service fee• No maximum loan amount• Maximum 100% LTV• Security of lien position on real property
and/or assignments and UCC-1 filings on unrestricted net assets of borrower.
• Repayment typically upon sale of developed lots or closing of construction/permanent financing
Site Acquisition
• Standard 5 year term• 5% interest rate and 1% HAC service fee• Maximum 100% LTV as supported by
current appraisal• Security of lien position on the project
property • Repayment upon sale of developed lots or
closing of construction/permanent financing
Site Development
• Standard 5 year term• 5% interest rate and 1% HAC service fee• Maximum 100% LTV as supported by
current appraisal• Security of lien position on the project
property • Repayment upon sale of developed lots or
closing of construction/permanent financing• Take-out financing must be identified or
committed at time of application
Construction Loans
• $750,000 cap per loan and borrower• Standard 2 year term with option to extend
for 1 year. A 1% extension fee applies.• 5% interest rate and 1% HAC service fee• Maximum 100% LTV as supported by current
appraisal• Security of lien position on the project
property • Repayment upon sale of developed lots or
closing permanent financing• Permanent, take-out financing committed
prior to disbursement.
• The SHOP program is authorized under Section 11 of the Housing Opportunity Program Extension Act of 1996
• Funded through the U.S. Department of Housing & Urban Development (HUD)
• Provides loans that can be turned into grant monies for land acquisition and infrastructure improvement costs associated with the development of self-help units
Self-Help Homeownership
Opportunity Program (SHOP)
Multi-Family Funding Programs
HUD Section 202, Housing for the Elderly
Provides capital grants for construction Provides tenant rental assistance Non-profits only, create new subsidiary NP Long term, non-interest loan Part of the HUD Super NOFA Now using leverage of other funds, last 2 years
Multi-Family Funding Programs
HUD Section 811, Housing for Persons with Disabilities
Provides capital grants for construction Provides tenant rental assistance Non-profits only, create new subsidiary NP Long term, non-interest loan Part of the HUD Super NOFA
Multi-Family Funding Programs
Rural Development 515 Multi-family Housing
Provides long term, low interest loans, often 1%, 50 year amortization; Limited Partnerships Provides tenant rental assistance, for all or part Involves leveraging of other resources, LIHTC, HOME, AHP, etc.
RD 538 Loan Guarantee uses local lenders
RD 514/516 Farm Worker Housing uses same basic structure for eligible farm worker projects
Filling the gaps
How do we make deals work? Reduce costs Reduce debt service Identify other funding sources; HOME, FHLB AHP, LIHTC, Bonds, Housing Trust Funds, private funds Identify financing subsidies; HUD, RD, State Housing Finance Agencies to reduce cost of debt and/or provide rental assistance
Filling the gapsHOME
HOME is funding program of HUD Funds are applied for through state for rural housing needs Priorities established through state comprehensive/consolidated plan Has extensive regulations, obtain copy. Plan to meet both use, and reporting requirements
Filling the gapsFederal Home Loan Bank
AHP AHP is administered through 12 district Federal Home Loan Banks Funds are awarded from usually two competitive application rounds Priorities established by Bank and Advisory Council annually Applications made through member bank; usually drafted/prepared by non-profit
Tax-Exempt Bonds
Why are developers using tax-exempt bonds?
• 4% or 9% Bonds• Because of demand for 9% credits• Automatic allocation of tax credits• Availability of bonds• Low interest rate on borrowing
Low-Income Housing Tax Credits (LIHTC)
Background
• Tax Reform act of 1986• Section 42 of IRC of 1986
– Housing program in the tax code– Statute amended several times, including
2000
• Objective to provide investor equity• Credit is a dollar-for dollar tax
reduction
Low Income Housing Tax
Credits Where do I find more information?
Your State Housing Agency HFA[Links from ncsha.org/main.cfm]
“Annual Allocation Plan” – establishes how credits will be allocated; populations served, geography allocations, non-profit set-asides
Trainings conducted by or sponsored by your state HFA
Project Feasibility
Basic Factors Critical To Basic Factors Critical To Determining The Determining The
Financial Feasibility of A Financial Feasibility of A ProjectProject
• Planning • Determination of the appropriate financing. • The availability of funding resources in the
community to develop the project.• Identification of take-out financing• Project Type • Know your local needs and market• Take a conservative approach to costs; do
not underestimate to make project “work”• Identify needed partners• Project the best, prepare for “worst”
Eligibility and Feasibility
• Basic Feasibility Thresholds– CNA to determine needs, timing and
funding– Underwriting to determine feasibility
and tools– Additional funding is available
(Agency or 3rd Party)– Basic Eligibility Thresholds
• Project is needed in market• Post transaction Owner is eligible
Participating Lenders With HAC PRLF Financing
– HUD Section 8 assisted state funded housing
– USDA/Rural Housing Services– Section 515 (MPR)– Section 521 Rental Assistance
– Low Income Housing Tax Credits
– Commercial Lending Institutions
PROFILE OF PRLF FUNDED PROPERTIES
• Aging properties and owners
– All over 20 years old
– Irreplaceable affordable rural rental housing option in the respective communities
Preservation Challenges
• Portfolio risks: small projects, rural not full RA.
• Aging physical asset with varying physical needs.
• Federal Budget constraints that limit funds for incentives, RA, and equity & rehab loans.
• Shortage or surplus of affordable rental housing/escalating or falling market values
• Contractually at-risk.
• Aging owners & ownership structures
• Lack of experience in the preparation of Section 515 transactions on the part of sellers, buyers and lenders.
PUTTING THE DEAL TOGETHER
What Did Not Work or Needs Improvement…Timing or Coordination is a
challengeDifferent funding cycles, different
programs, different AgenciesDifferent closing deadlines due to
different funding cyclesCan’t complete underwriting without
certain items:Capital Needs AssessmentAppraisalMarket Study
Putting the Deal Together
What Did Not Work or Needs Improvement… Making the Deal Work Without New Funding
while still Complying with RegulationsAddressing immediate capital needs at
propertyReplacement Reserve account has to be
resized to meet long term capital needs identified in CNA
Must keep rents affordable New Owner needs to understand that if
reserve is not sufficient for capital improvements or deferred maintenance, they will be ultimately responsible
PUTTING THE DEAL TOGETHER
What Did Not Work or Needs Improvement…Paperwork, Paperwork, Paperwork
Different Agencies require different applications
Different Agencies require different Legal Documents
Recognize that requirements may vary from state to state
PUTTING THE DEAL TOGETHER
What Did Not Work or Needs Improvement…Replacement of Management during the
interimCommunication was a struggle between seller/buyer
and interim managementHard for interim management to remain committed
when they know it’s temporaryHard for New Owner to let Management do their jobNeed Training Program for new Owner’s
management company in order for them to be qualified to manage RD financed properties
RD wants New Owner and New Management to be successful, so go slowly and don’t take on too much, too fast!
PUTTING THE DEAL TOGETHER
What Works….USDA Rural Development’s MPR
Program.This works well with transfers especially
if there are no other funding sourcesDebt deferral provides resources for making
capital improvements as identified in CNAHold meetings with Management and Owner
to discuss MPR program and responsibilitiesHelps them understand the CNA reportReview legal documents and requirements
Successful Property in Iowa
• Nonprofit entity requested a PRLF loan of $400,000 to pay acquisition and rehabilitation costs for a 90-unit multifamily complex.
• The transaction involved the consolidation of three existing USDA RD Section 515 financed properties located on an 8.25-acre site in a small community consisted of a population less than 5,000.
• Construction involved the rehabilitation of a 90-unit complex that serves residents with incomes at 30% -60% of AMI.
• All 90 units have either USDA RD or HUD Section 8 Rental Assistance.
Transaction Facts
• USDA RD holds a first lien on the property for $495,584 with a 20-year debt service deferral through the MPR Program.
• Applicant obtained a $900,000 Section 515 loan (MPR) using the proceeds to fund the rehabilitation debt service deferment.
• HAC’s PRLF loan is secured with a third lien against the real estate.
• The HAC $400,000 PRLF Loan is the only remaining debt service with a 5% interest rate and a 28 year repayment period.
• The property is receiving 100% Rental Assistance.
• Total development cost of the project was $1,300,000.
• No Low Income Housing Tax Credit Equity involved.
• Loan to value not to exceed 100%.
Project Status
• All loans have been closed for over a year.
• LTV 17.21%• USDA Rural Development and
PRLF accounts are current.
• Replacement Reserve requirements are being met.
Successful Washington State Property
• Applicant organization requested a HAC PRLF loan in the amount of $400,000 to acquire a 42-unit multi family property in Washington State.
• The project will serve very low and low income tenants with 30% to 80% of area medium income.
Transaction Facts
• Washington Department Housing Trust Fund provided no-debt-service funding in the amount of$515,000.
• Local County Government provided $750,000 in grant funding.
• USDA Rural Development approved an $800,000 transfer and assumption of a the existing Section 515 Loan secured by a first lien.
• A new Section 515 Loan in the amount of $800,000 secured by a second lien.
• HAC’s $400,000 PRLF loan is secured with a third lien against the real estate.
• An equity contribution was made in the amount of $2,411,198 from the syndication of Low Income Housing Tax Credits.
• The total funding from all sources amounted to $4,876,198 which is the total development cost.
• The total rehabilitation cost per unit was $116,195.
• Loan to value not to exceed 100%.
Project Status
• All loans have been closed for over a year.
• USDA Rural Development and PRLF accounts are current.
• LTV 35.01%• Replacement Reserve
requirements are being met.• Property is 100% occupied.
Successful Property in Kansas
• Non Profit applicant entity requested a $300,000 PRLF loan for the rehabilitation of three multifamily properties located on three separate sites.
• Properties at each site received $100,000 of loan proceeds.
• The transaction involved the consolidation of three existing USDA RD Section 515 financed properties
• All three sites were at-risk properties.
• Construction involved the rehabilitation of a total of 32-units serving residents with incomes at 30% -80% of AMI.
• All 32 units have either USDA RD or HUD Section 8
rental assistance.
Transaction Facts
• HAC as a first lien position on each site.
• The applicant received 9% LIHTC for each of these sites: $327,905, $388,635 and $375,010 for a total of $1,091,550.
• Loan to value not to exceed 100%.
Project Status
• All loans have been closed for over a year.
• LTV 23.48%• USDA Rural Development and
PRLF accounts are current.• Replacement Reserve
requirements are being met.• Rehabilitation complete.• Occupancy is 100%.
Office LocationsHousing Assistance Council1025 Vermont Avenue, N.W., Suite 606Washington, DC 20005202-842-8600, fax: [email protected]
HAC Southwest Office3939 C San Pedro, N. E.Suite 7Albuquerque, NM 87110505-883-1003, fax: [email protected]
HAC Midwest Office10920 Ambassador DriveSuite 220Kansas City, MO 64153816-880-0400, fax: [email protected]
HAC Southeast Office600 West Peachtree Street, N. W.Suite 1500Atlanta, GA 30309404-892-4824, fax: [email protected]
Contact Information
Karin KlusmannLoan Fund Director
[email protected]. 118
Jann YankauskasSenior Loan Underwriter
[email protected]. 149
Dierdra PressleyLoan Officer
[email protected] Ext. 154
Housing Assistance Council
(202) 842-8600
(202) 347-3447 Fax