what’s old is new: preservation projects
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What’s Old Is New: Preservation Projects
Yorkshire Manor & Canterbury Village
Mike Bouchee, Rocky Mountain Development Group
Joint Venture Partners
Canterbury Village
Canterbury Village2513 Willow St, South Sioux CityMultifamily96 Units / 4 Buildings88 Units - Section 8Constructed 1971Developed by Sheldon HarrisManaged by Jim Harris & Pete GodwinOriginal 221(d)(3) Mortgage1994 refinance - subordinate 241(f) LIHPRHA loan
Yorkshire Manor
Yorkshire Manor2600 North Laverna St, FremontMultifamily84 Units / 4 Buildings84 Units - Section 8Constructed 1971Developed by Sheldon HarrisManaged by Jim Harris & Pete GodwinOriginal 236 Mortgage1994 refinance - subordinate 241(f) LIHPRHA loan
The “Twins”Same owner / same management company
Strong seller desire for simultaneous closingsFamily legacy propertiesSame subordinate 241(f) LIHPRHA financing2010 LIHTC ApplicantsContractor – Barry Larson & SonArchitect – Alley Poyner Macchietto ArchitectureSimilar substantial rehabilitation projects
Substantial RehabiliationsNew RoofsNew HVAC SystemsNew Doors and WindowsFoundation WaterproofingNew Kitchens and BathroomsNew Flooring and PaintSite and Safety ImprovementsNew Community BuildingsACM and LBP Abatement
Rent Increase & LIHPRHARehab construction budgets ~ $40,000/unitTotal development budgets ~ $9MMNecessitated rent increase of ~ 15%HAP Contracts: OCAF or BBRILIHPRHA Use Agreements: OCAF or BBRIRecent HUD guidance – new debt service includable
BBRI factor in LIHPRHA projects.Preserving LIHPRHA became project imperative
Original Financing StrategyAssume existing subordinate 241(f) LIHPRHA loans with
Midland BankLIHPRHA loans can only be subordinate to HUD financingPay off existing primary mortgagesCombine with new 221(d)(4) financing from Wells Fargo
BankLIHTC Equity from Midwest Housing Equity Group
Omaha HUD - Production Office: TPA, 221(d)(4), BBRI, HAP Assignment and Extension
Round One ApplicationsJanuary 2010Assumption of 241(f) subordinate loans – Midland BankNew 221(d)(4) loans – Wells Fargo BankSyndicator – Midwest Housing Equity Group
March 2010Both properties failed to pass threshold reviewBack to the drawing board for Round Two
Round Two ApplicationsMarch 2010Assumption of 241(f) subordinate loans – Midland BankNew 221(d)(4) loans – Wells Fargo BankSyndicator – Raymond James Tax Credit Funds
May 2010Canterbury Village awarded tax credits!Yorkshire Manor not awarded tax creditsProjects are now decoupled
Key LIHPRHA DiscoveryMay 2010Previously understood BBRI tied to continued existence
of 241(f) loans.Instead, BBRI is tied to existence of LIHRPHA Use
Agreements; existence of 241(f) loan immaterial.Ability to pay off 241(f) loans opened up new financing
strategies.
Revised Financing StrategyPay off 241(f) LIHPRHA loansOriginal thought - larger 221(d)(4) loans
Too slow and cumbersomeFreddie Mac Mod-Rehab Loans
PNC Multifamily CapitalFreddie Mac Waiver (~$18K/unit vs. ~$40K/unit)
LIHTC EquityBoston Financial Investment Management
Des Moines HUD – Asset Management OfficePreservation, BBRI, HAP Assignment and Extension
Round Three ApplicationYorkshire Manor onlyOpen to all Round 2 unsuccessful applicants
July 2010Pay off 241(f) subordinate loansNew Mod-Rehab loans – PNC Multifamily CapitalSyndicator – Boston Financial Investment Management
September 2010Yorkshire Manor awarded tax credits!
Decoupled TwinsCanterbury Village – May awardAlert NIFA to new Canterbury Village financing and
equity partners/structureSubmit revised Yorkshire Manor application with new
financing and equity partners/structureYorkshire Manor – September awardExtend site control (both)Financing and equity due diligence (both)LIHTC reservation extension (both)
The Closing TableFinalize due diligence and underwritingNegotiate reserves and guaranteesNegotiate partnership and closing documentsReady to close both properties in early December
Fannie Mae decides properties are now de-stabilized!
Both transactions close simultaneously:
December 29, 2010
Rehab is UnderwayNotices to Proceed – December 2912-month construction schedulesProjects will be complete and placed in service in 2011
Canterbury Rehab
Yorkshire Rehab
Preservation “Best Practices”Minimize Subsidy/UnitWork with LIHTC-experienced partnersDevelop sufficient and consistent specificationsGive due diligence highest level of scrutinyFully understand QAP; ensure partners do as well
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