# Presentation: 520004

## “DEALS THAT HAVE WORKED”RD-11

## What it takes to make it work?

- Thinking Outside of the Box
- Utilize All Agencies
- Recruit the Best Team
- Flexibility
- Patience
- Cooperation
- Experience

## Common Denominators(11 Properties)

- 10 year holding period intact
- RD 515 financing
- HUD Section 8 HAP contracts
- Same Owner/Management Agent

## Participating Agencies

- Rural Development
- Debt write-down (3 of 11 properties)
- Restructured RD debt at new rates and terms
- Subordinated RD debt to MHDC
- Missouri Housing Development Commission
- AHAP credits, Bonds, LIHTC, HOME Grant
- Housing and Urban Development
-  HUD Project Based Rental Assistance
-  MHDC/HUD Risk-Sharing Agreement

## AHAP Tax Credits

- AHAP Credits
- One-time state tax credit allocated to eligible Donor (additional information and application located at www.mhdc.com)
- Benefits to Previous Owner
- Tax Credits equal to 55% of appraised value in excess of outstanding RD loans
- Fully transferrable and may be carried forward for a period of 10 years
- Sale/Use of AHAP credits
- Receive charitable contribution deduction
- Offset negative capital accounts/depreciation
- Benefits to Buyer
- Only assume existing debt leaving room for more rehab funding

## Non-Profit Participation

- AHAP credits requires 501(c)3 non-profit
- Need experienced non-profit or need experienced developer/co-general partner/management agent as a counterpart
- Does not affect the 10 year holding requirement to receive LIHTC for acquisition

## Planning Involved

- Develop Strategy
- Review commonalities
- Utilize all funding sources/agencies
- Overcome hurdles
- Smaller projects (12 to 48 units)
- Debt service 2 mortgages
- Funding/Approval of all 11 properties
- Initial Planning Meeting
- Attendees:
- Transferor
- Rural Development
- MHDC
- Non-Profit Intermediary
- Transferee (newly created entity)
- Attorney
- Consultant
- Accountant

## Planning Involved

- Coordination
- Appraisals
- Current owner must obtain on each property
- Subordination
- Coordination between agencies
- Document Preparation
- Various application processes and closing documents required
- Title Work and Recording
- 11 properties; 9 counties
- Application Process
- 11 separate Transfer of Physical Assets Application submitted to MHDC
- 11 separate Transfer Applications submitted to RD
- HUD 2530 Approval
- Non-profit entity
- Management Agent
- Developer
- Newly created entity and its partners

## 2-Step Transfer

- Step 1 - Transferor to Non-Profit Intermediary
- All 11 properties had to be transferred from previous owner to non-profit
- RD debt was transferred (assigned and assumed) to non-profit
- AHAP Tax Credits transferred to Transferor (previous owner)
- Step 2 - Non-Profit Intermediary to Transferee
- All 11 properties transferred from Non-Profit to Transferee (newly created single asset entity)
- Prior to actual transfer:
- Financing in place
- Federal and State investors admitted into newly created entity
- RD Debt transferred and subordinated

## Funding Sources

- Existing RD Debt
- $6,532,594
- $6,268,589 transferred & subordinated
- Tax Exempt Bonds
- $8,450,000 (construction)
- $3,485,000 (permanent)
- Low Income Housing Tax Credits (federal & state)
- $5,045,000
- HOME Grant
- $393,595

## Closings

- Transferor to Non-Profit and Non-Profit to Transferee Closing
- Refer to Closing Attorney (Deed, Assignments, Affidavits, etc.)
- RD Closing
- Refer to local/state RD for Transfer Checklist
- MHDC and Bond Closing
- Refer to Transfer of Physical Assets Checklist
- Syndication/Investor Closing
- Due diligence requirements

## Accomplishments

- 328 Units Improved
- Substantial Rehabilitation
- $26,006 Construction Costs per Unit
- $33,841 as improved value
- Innovative Use of Resources
- Preservation of Affordable Housing

## Holden Law Office, P.C.Natalie D. Riley

- 718 W. Business Highway 60
- P.O. Box 633
- Dexter, Missouri  63841
- (573) 624-8901
- (573) 624-8188 facsimile
- natalie@holdenlawoffices.com