Preservation: HUD’s Re-Development Program Can be Part of Your Preservation Plan

July 28-30, 2014Hilton HotelAustin, TX

Presenters

Michael Backman, Amerisphere Multifamily Finance, L.L.C.Ray Landry, Davis-Penn Mortgage Company

Gretchen Marchand, HUDJoyce Moskovitz, Bank of America Merrill Lynch

Monica Sussman, Nixon Peabody LLP

Key HUD Goal Among HUD’s core strategic goals is the goal to

meet the need for quality affordable rental homes. The focus of this section is aligned with this specific

Key HUD Goal: Preserve the affordability and improve the quality

of federally assisted and private unassisted affordable rental homes.

Preservation of Section 8EXAMPLE OF PRESERVATION IN OUR FIELD OFFICE:To preserve Section 8 apartments in Austin, TX, an affordable housing property assisted by a project-based Section 8 Housing Assistance Payments Contract, a long term rental assistance contract to replace the expiring contract was needed.

The owner intended to demolish and reconstruct a 43-year old Project in order to address its deteriorating physical condition while maintaining affordability for the residents for 35 years.

The owner has requested the termination of the existing HAP Contract and renewal of the HAP Contract for an additional twenty years under Option 1-B.

Financing

• Conventional loan $26,000,000 • Subordinate Rental Housing Redevelopment

Assistance Funds (Assistance Funds) $2,000,000 loan from the City of Austin, 0% interest;

• 9% federal LIHTCs awarded by the TDHCA. A $18,798,120, the syndication of the LIHTCs to an investor.

Benefits to Residents• Residents will benefit from landscaped green space that

includes a splash pad, tot lot, covered pavilion, and barbeque grills. A landscaped courtyard will offer relaxation space and the preservation of mature native oak trees providing shade and social spaces. New amenities will include a community room, fitness center, business center, and theatre/classroom. The units in the new buildings will be larger and the 2-, 3-, and 4-bedroom units will include additional bathrooms. In addition, while the current project does not have any fully accessible units, ten percent of units in the redeveloped property will be accessible.

Section 15 Waivers Required

Tax Credit Rents would not support the costs of the transaction.

The guide requires the project manager or contract administrator to lower the comparable market rents in the rent comparability study to reflect any use restriction on the rents that can be charged; for example, tax credit restricted rents. The waiver was necessary to enable this transaction. The parties to this transaction need to be certain of the post-rehabilitation rents.

The prohibition against for-profit owners who wish to comply with the requirements of Chapter 15 from obtaining the benefits available under the chapter and the post completion market rents to be effective when the construction was complete was waived to secure the loan commitment and attendant credit enhancement and LIHTC equity investment . Sufficient income would be generated to cover operating expenses and the additional debt from the rehab of the property.

Requirements for Approval

• High priority for the local community1. Redevelopment partly financed with Assistance Funds

from the City of Austin;2. 9% LIHTC awarded by TDHCA • Finding no evidence of a use restriction that would

prohibit.• All residents will have the right to return to the

redeveloped property. The Purchaser will pay all fees and moving costs associated with relocation, including the cost to initiate utilities.

Relocation Requirements:

• Section 8 payments continue while the residents are temporarily relocated off-site utilizing the Section 8 pass through process described in Housing Handbook 4350.1.

• Relocated tenants will not be required to submit an application to the newly developed project and will not be placed on a waiting list.

• The purchaser will negotiate a Master Lease with the owners of the temporary units.

• The residents will not be relocated off-site for longer than 12 months- (because construction is phased).

FY14 CLOSINGS FOR SAN ANTONIO PROGRAM CENTER

Total Number of Closings - 21• Total Number of Units - 4088• Total FHA Loan Dollar Amount - $227,161,200

Affordable Number of Closings- 14• Affordable Number of Units – 2992• Total FHA Loan Dollar Amount - $162,893,000