hud office of multifamily housing programs preservation ......the 5 step preservation process. •...
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The Preservation Process
HUD Office of Multifamily Housing Programs Preservation Clinics
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Session Objectives In this workshop, you will learn about:
The 5 Step Preservation Process.
• What you need to know about your property in order to start the planning process.
• The importance of setting preservation goals.
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Mary Star of the Sea Senior Apartments Brooklyn, NY
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Preservation Process Steps
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KNOW YOUR PROPERTY 1
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Audience Question What financing do you have on your property? (Both first mortgage and other debt) • HUD Financing:o Section 202 Direct Loano Section 236 Loan with Interest Reduction Paymentso Flexible Subsidy Loano ELIHPA or LIHPRHA
Federal Housing Administration (FHA) Loan o• Other debt and grants (conventional loan, HOME, CDBG,
grants)• Low-Income Housing Tax Credits• Owner advances
Do you have other types of financing?
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Know Your Financing
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Gather Documents Regulatory AgreementsUse Agreements Loan AgreementsMortgages (or Deed of Trust) Section 236 IRP Schedule Recent statement from first
mortgage lender Audits and 3 years of
financial statements
• When does your loanmature?
• What is theremaining balance?
• What is the interestrate?
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Know Your Financing Prepayment Requirements • You may want to prepay your existing first mortgage to
enable refinancing of the property.• Some properties will need HUD PERMISSION to prepay:
o HUD permission is usually required for nonprofitsand for properties with Flexible Subsidy Loans.
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Find out the prepayment requirements for your loan.
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Know Your Rental Assistance Gather Documents: Project-based Section 8
contract Project-based Voucher
contract Rent Supplement (Rent
Supp) and/or RentalAssistance Payment (RAP)contract
Rent roll
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• When do your rentalassistance contractsexpire?
• What are your rents?• Are your rents above,
at, or below market?• What are the incomes
of your unassistedresidents?
• What is your vacancyrate?
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Know Your Capital Needs Gather Documents: Capital Needs Assessment
(CNA) REAC Report Preservation Property
Summary Form - Checklist ofkey capital needsconsiderations
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• What are yourproperty’s capitalreplacement needs?
• What is your REACscore? What issues areraised?
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Audience Question What does your property need? • Immediate and upcoming major repairs• Modernize older units and common areas• Upgrade and add common space• Convert efficiencies to 1-bedroom apartments• Energy and water efficient upgrades that will save
operating costs• Accessibility improvements
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More Questions to Ask • Aged payables and receivables: Are you having trouble
paying bills or collecting money?• Cash flow: Positive or negative cash flow? Potential to
increase revenue or decrease expenses?• What are your Reserves Balances?
o Reserves for Replacementso Residual Receipts Account
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SET PRESERVATION 2GOALS
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Preservation Goals
• Safeguard long-term rental assistance forcurrent and future generations.
• Improve and modernize properties throughcapital repairs.
• Stabilize properties by placing them on solidfinancial footing.
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A goal without a plan is just a wish. ~Antoine de Saint-Exupery
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Importance of Goals Goal Setting: • Establishes priorities for
decisions alongpreservation path.
• Keeps team on track.• Establishes consensus.
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Riverdale Park Residences Bronx, NY
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Process for Setting Goals 1.Conduct stakeholder discussion and focus
groups to develop a list of goals.2.Gather missing data, bring in outside help.3.Reconvene to refine and finalize prioritized
goals.4.Document formal approval of goals.
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Finding a Consultant What to look for: Experience with similar
clients (NP, FP, small/large)Experience with similar
properties (Sec. 8, 236,202, etc.)
Comfortable with yourPreservation Goals
Recent experience withsimilar transactions
How do you find a Consultant? HUD Representative Trade associations Peers that have
gone through
similar process
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Road Map to Preservation 1. Key Documents Checklist2. Preservation Property Summary Form3. Checklist of Potential Preservation Goals4. Checklist of Potential Next Steps toward Preservation
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CHOOSE YOUR PRESERVATIONOPTIONS
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Do you need a recapitalization? Explore financing options. Explore rental assistance options.
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APPLY FOR FINANCING AND HUD APPROVALS 4
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Design improvements. Secure contractor. Apply for new financing and conduct due diligence. Apply for rental assistance. Secure HUD approvals.
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Secure HUD Approvals Prepayment approval or
permission request Section 236 IRP
decoupling Flexible Subsidy Loan
deferral requests Increase in post-
transaction rents
Issuance of TPVs LIHPRHA-ELIHPA
amendments RAD 2 conversion
requests Combining
efficiencies into 1-BRunits
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SECURE LONG-TERM STABILITY 5Close on your new financing. Secure your rental assistance. Renovate your property. Stabilize your property by placing it on solid financial footing.
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QUESTIONS & ANSWERS
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Riverdale Park Residences Bronx, NY