The RAD Program Experience with Preservation Using Section III CHAPA Forum November 12, 2013 Thacher Tiffany, Director of Acquisitions Mary Corthell, VP of Compliance
Beacon experience to date TypePropertiesUnits Section III retroRent supp, Section III, completeRent supp, Section III, in processRent supp, Section I, in processHOPE VI2655 Total81,526
Case study using Section III of RAD Notice Expiring Rent Supplement Contract Expiring Section 236 Units Project Based Voucher (PBV) Contract
Prepay Section 236 Mortgage RAD Conversion Apply for RAD Recapitalization with 4% LIHTC and tax exempt bonds Plan preservation transaction Case study using Section III of RAD Notice
Project info -Built in units -Rent supplement contract for 72 units expired February Section 236 mortgage maturing July Investors with large negative capital accounts -Potential for market conversion in improving market area
Case study using Section III of RAD Notice Objectives -Address extensive capital needs at the property -Make investors equal or better off than “going market” -Ensure long-term stability of property
Case study using Section III of RAD Notice
Resident Services (required for PBV contract to exceed 50%) -Resident service coordinator staff -Programing space (community room etc.) -Contract with third parties both on and off site -Lease rider -Typical program categories -Youth Enrichment -Workforce Training -Self-sufficiency -Health and wellness
Revenue not sufficient to address needs using RAD alone Sources: $8 million max in new debt Uses: $12 million in capital needs -40 year old property $10 million in debt Transaction costs… Coupled with 4% LIHTC, re- subordination, soft debt etc. Sources: $8 million max in new debt $11 million in tax credit equity $4 million in subsidy Uses: $12 million in capital needs $2.5 million in exit taxes $8.5 million in trans. costs Subordination of most of existing debt
1.What are the capital needs? 2.What are the market rents? FMRs, rent reasonableness? 3.Can you provide resident services? 4.What is the local PHA? 5.What are the maturities? Is there a Rent Supp and Sec 236 mis-match? Is there other debt? 6.What share of resident will be eligible for PBVs? LIHTCs? 7.What’s the timing, can you meet the deadlines? 8.How do you work with uncertainty of program? Issues to consider when evaluating a RAD conversion
-Advanced Planning and Coordination with PHA -Preliminary Meetings with PHA -Interview Schedule for Income Certifications -Resident Consent to Release Information -Vital documents - Solidify the process between Agent and PHA -Designated Project Manager - Corporate -Initial resident meeting -HUD explains the RAD and EV Program -PHA is introduced to residents Implementation of RAD Conversion
-Process started shortly after initial resident meeting -Management circulated PIH paperwork to all households -Worked with PIH to arrange HQS Inspections -All residents returned PIH paperwork to management to review for completion -Management delivered completed paperwork to PHA for processing. -Tracking sheet – PHA and Management -Constant communication with PHA – weekly meetings Implementation of RAD Conversion
Update TSP to include PBV program Leases need to be created/signed by all eligible household members PIH provided management with PBV Addendum to be signed with lease HAP Contract – 15 year term – 110% of FMR (subject to rent reasonableness) Implementation of RAD Conversion
Up to a 5 year phase in for household experiencing more than a 5% increase to 30% of adjusted income for rent. PHA provided residents with TR and HAP Management sent follow up letters to residents if 5% phase in was required. Management tracks the phase-in for the 5 year period.
Thacher Tiffany, Director of Acquisitions (617) Mary Corthell, VP of Compliance (617)