Presentation on theme: "NCSHA –FINANCIAL STRUCTURING FORUM. Cottages and Gardens at Chesapeake Rehabilitation of 90 existing apartments originally financed by USDA, RHS Section."— Presentation transcript:
Cottages and Gardens at Chesapeake Rehabilitation of 90 existing apartments originally financed by USDA, RHS Section 515 in 3 contiguous properties built between 1980 and 1990 Construction of 8 new apartments and a community building with management offices, multi-purpose room, computer lab, workout room and children’s reading room. The existing housing included: a community owned by HFA for 10 years, restricted to seniors and persons with disabilities, consisting of 32 one bedroom apartments in one story townhomes and community building A vacant parcel owned by HFA between the properties with a preliminarily approved site plan for 8 new one story apartments two general occupancy communities of two story walk-up buildings with one and two bedroom apartments, and no community facilities
The Development Plan Acquire the two general occupancy sites Revise the preliminary site plan to construct a new one story building with offices and community spaces and a two story walk-up building with 8 general occupancy one bedroom apartments Combine the three existing properties and the new construction under one ownership entity and financing plan Gain operating efficiencies through the consolidation and by making significant energy efficiency improvements
Sources and Uses Sources Loan Assumptions: 3 USDA Loans $3,437,380 Maryland Loans 410,000 FHLB – AHP 250,000 LIHTC Equity 4,712,808 MD HOME Funds 2,741,567 Energy Loan/Grant 314,575 Interim Income 209,242 Transfer RFR Accts 144,891 Total $12,220,464 Uses Rehabilitation $ 5,212,281 Land & Buildings 4,362,686 Architect & Engineer 346,239 Government Fees 145,048 Financing Fees, legal, and accounting 1,696,209 Reserves 458,000 Total $12,220,464
Challenge Number 1 The State Agency rejected the project as violating Fair Housing because of the senior / disabled designated buildings within a community that going forward would have general occupancy buildings in the same project RHS document restriction of senior occupancy including persons with disabilities could not be changed, but RHS did not object to the overall concept as long as occupancy restrictions were specific to buildings as governed by existing RHS docs Developer’s counsel obtained guidance from HUD clarifying ways to ensure fairness and minimize likelihood of Fair Housing complaints – two separate waiting lists, marketing plans, project names, entrances, signs, service plans, resident associations, lease forms, selection policies, applications, tenant rules and regulations, etc.
Challenge Number 1 State had continued concern that if a Court found the project to be in violation of Fair Housing the State as a subordinate lender to USDA could be in a vulnerable position, if USDA continued to require the senior designation in its documents
Solution to Challenge Number 1 Reason and common sense prevailed! USDA counsel advised that “if a court should compel the senior community to admit families, it is RD’s policy to comply with court orders. RD would not be compelled to hold the project in default of its Section 515 loan terms.” The expectation that RD would not declare a default and initiate foreclosure satisfied the State’s concern.
Challenge Number 2 RHS rules permit incomes up to 80 percent of AMI Three residents had income above 60% of AMI and were not LIHTC eligible. Solution Number 2 The units were excluded from LIHTC basis but on turnover were to be rented to households with LIHTC eligible incomes. If the turnover occurred before completion of rehabilitation the basis would be LIHTC eligible, if not the unit’s basis and proportion of common areas would be excluded from basis.
Challenge Number 3 USDA rules would not permit assumption of the existing mortgages if the unit mix was changed in any way. This prevented the 8 new apartments and community building. Solution Number 3 All the lenders agreed to permit three separate legal parcels one with the original 32 unit senior community, one with the 2 general occupancy properties, and one where the 8 new apartments and community building would be constructed. RD mortgages were secured by parcels one and two. The State took security in parcels 2 and 3.
Gardens and Cottages at Chesapeake Gardens after rehabilitation Senior cottages after rehabilitation