# Presentation: 293268

## MFH Transfers

- Deals That Have Worked
- By:
- Lela Gruebel
- LRG Consulting and Development Inc.
- 1405 NW Cedar Ct.
- Grain Valley, MO  64029
- 816-847-0988
- lgruebel@comcast.net

## NECAC Transfers

- 19 Properties in various counties
- Took 3 years to complete all transfers due to limited AHAP funding from MHDC to assist seller.
- Not all properties transferred-some were taken out of the system, some foreclosed.

## Benefits of Transfers

- Phased Properties such as Hannibal Apartments (3 phases) were combined into one property.
- Uniform Rents in all phases
- Reduced operating expenses by combining properties.
- Sharing of Rental Vouchers across properties since they are now 1.
- Streamlining reporting and recordkeeping requirements.

## Benefits continued

- Needed affordable housing has been preserved.
- No new rental assistance needed.
- No additional rent burden created for tenants.
- Loan servicing, property management and asset management more efficient and cost effective as result.
- Deferred Debt will not be due until loan maturity.

## Hannibal MPR Transfer

- NECAC became the Not for Profit Owner.
- Rural Development utilized many authorities.
- Transfers and assumption of existing debt at new rates and terms.
- Consolidation of 3 properties into 1.
- Continuing rental assistance on 39 of 72 units.
- MPR including debt deferral and additional loans
- (first in nation) Transfer completed 9/30/2005.
- Increased reserve funding to address capital needs.

## Hannibal MPR Transfer

- MHDC Provided:
- AHAP tax credits to facilitate the 1st transfer.
- Supplemental management fees during transition of ownership.
- MHDC awarded LIHTC to the property in 2008 to complete rehab.  It took 3 years to receive an Allocation of Housing Tax Credits.
- Consultant
- LRG assisted NECAC in the MHDC AHAP Tax Credit Application and the RD Transfer package in 2005.
- LRG is assisting in the LIHTC application, co-developer, assisting in 2nd transfer with RD for Tax Credits.

## Hannibal LIHTC Application

- Received $363,000 in Tax Credits in 2008
- Will generate $4,481,000 in equity
- Will still need Debt Deferral to keep rents low.  RD will evaluate new C.N.A. and operating budget.
- --Rents in 2005 were $280 for 1br and $325 for 2 br. Post rehab rents will be $300 for 1 br and $350 for 2 br in 2009.

## Hannibal LIHTC Application

- Will have 39 of 72 units with Rental Assistance
- Will have new washer/dryer hookups in each unit.
- Will allow for construction of New Community Building and Office.
- Approximately $43,750 per unit rehab.

## MFH Transfer Checklist

- Stage 1-Initial Transfer Request
- Up to 22 items required, 19 from Applicant
- Stage 2-Complete Transfer Application
- Up to 83 items required, 45 from Applicant
- Stage 3-Construction
- Up to 17 items required, 12 from Applicant
- Stage 4-Loan Closing
- Up to 34 items required, 16 from Applicant

## Anderson Estates-Palmyra(Prior to Revitalization)

- 2 separate complexes built side by side
- Different limited partnerships with same general partners.
- 72 units (22-1 br, 48-2 br, 2-3br)
- 75% occupancy
- Approximately $1.6 million in total debt.
- 59.7% Rental Assistance.
- Basic rents for 1 br $287 and $297, 2 br $342 and $347, 3 br $407.

## Anderson Estates-Palmyra(Prior to Revitalization)

- Properties in need of substantial rehab.
- Failure to address the capital needs causing vacancy issues.
- Definite need in the community but needed different bedroom configuration.

## Anderson Estates-Palmyra(Post Revitalization)

- Transferred to NECAC as non profit purchaser using AHAP Donation Credit.
- Capital Needs Assessment obtained
- RD reviewed operating expenses and quantified financial needs for next 20 years.
- RD reviewed efficiencies and cost savings of consolidating the 2 complexes into one complex.

## Anderson Estates-Palmyra (Post Revitalization)

- Process consisted of 2 transfers
- 1st transfer to NECAC as non profit at new rates and terms
- 2nd transfer was to a Limited Partnership in which NECAC Affordable Housing LLC is the Managing General partner in order to sell the LIHTC to investors (terms of this transfer were same rates and terms)
- New C.N.A. obtained which factored in planned rehab work.
- Debt of 2 properties were consolidated streamlining reporting and recordkeeping requirements.
- RA available to both complexes since they are now 1.

## Anderson Estates-Palmyra(Post Revitalization)

- What rehab items have been completed:
- New roofs
- New siding
- New windows and doors
- New cabinets
- New appliances including dishwashers and microwaves
- Central heating and air
- Washer/dryer hookups in each unit
- Ceiling fans
- Flooring
- Exterior stairways
- Landscaping
- New playground area and pavilion
- Reconfigured units and have more 3 bedroom units

## ANDERSON APARTMENTS

_**ANDERSON APARTMENTS**_

**THE OLD**

**THE NEW**

## ANDERSON APARTMENTS

_**ANDERSON APARTMENTS**_

**OLD KITCHEN**

**NEW KITCHEN**

## Lewis County Affordable Housing (Revitalization)

- Was part of the portfolio transfer with NECAC as non profit purchaser
- Four (4) RD properties in 3 different cities within county combined into one property.
- Process consisted of 2 transfers
- 1st transfer was to NECAC as non profit at new rates and terms (11/16/06)
- 2nd transfer was to a Limited Partnership in which NECAC Affordable Housing LLC is the Managing General Partner in order to sell LIHTC to investors (terms of this transfer were same rates and terms) (10/31/07)

## Lewis County Affordable Housing (Revitalization)

- Debt for 4 properties combined
- RA available at all 4 complexes since they are now 1 ownership.
- Reconfigured some 1 bedrooms to 3 bedrooms.
- Currently under rehab

## WESTPORT APARTMENTS

_**WESTPORT APARTMENTS**_

**THE OLD**

**THE NEW**

## WESTPORT APARTMENTS

_**WESTPORT APARTMENTS**_

**OLD KITCHEN**

**NEW KITCHEN**

## WESTPORT APARTMENTS

_**WESTPORT APARTMENTS**_

**OLD FLOORING**

**NEW FLOORING**

## Low Income Housing Tax Credit Rehabilitation

- If applying and receiving LIHTC’s this will require a second transfer to a Limited Partnership to allow the syndicator into the deal with the funding sources.
- The Limited Partner must be admitted to the Partnership prior to the second transfer so that the Not For Profit does not have more than a 10% interest in the deal.
- LIHTC’s are a good source of creating additional equity, however funding is very competitive and may take awhile to get approval.

## AHAP Donation Credits

- These AHAP Donation Credits can be used to entice the seller to transfer property to a Not For Profit.
- The AHAP Tax Credit is issued to business firms that engage in providing affordable housing activities (contributions) to not-for-profit neighborhood organizations involved in the construction or rehabilitation of a specific development that will contain affordable housing units.

## AHAP Donation Credits Continued

- In order for a business firm to be eligible for the Affordable Housing Assistance Tax Credit, the neighborhood organization must agree to use 100% of the donation to house families with a household income of less than 50% of the area median income adjusted for family size.  This is restricted through a LURA for 10 years.
- This usually meets with RD’s goal to serve lower income tenants.
- Must be applied for carefully to combine with Tax Credits at 60% of the area median income.

## Packaging the Deals Lessons Learned

- Requires coordination between different parties, Surveyors, appraisers, title companies, lawyers, RD and other state agencies.
- Timing can be crucial-for example you may have transfer approval, but cannot get AHAP credits or LIHTC funding this year.
- Surveys are now required to prevent ownership issues later.
- Title legal descriptions must match surveys, easements, encroachment issues.
- Communication is crucial between parties

## Issues to getting Approval

- Occupancy trends, vacancies can hurt a developments chances for approval, when vacancies usually indicate a desperate need for rehab.
- Reason for vacancies should be studied more closely before rejecting a property.  Is vacancy due to uninhabitable units, wrong unit configuration that can be changed-example excessive number of 1 bedroom units which could be converted to 2 or 3 bedroom units.

## Issues to Getting Approval -continued

- Capital Needs Assessments can require reserves to be so high the property cannot pay debt service.
- C.N.A.’s typically require all items of a type such as flooring to be replaced at the same time estimated useful life of 7 years, this is not realistic, as flooring is usually done with move outs via regular operating budgets, not all at once in a given year.
- Post 1991 RD properties are not eligible for debt deferral.

## Questions

- How do I ????