Transcript What’s Old Is New: Preservation Projects

Yorkshire Manor &
Canterbury Village
Mike Bouchee, Rocky Mountain Development Group
Joint Venture Partners
Canterbury Village
Canterbury Village
2513 Willow St, South Sioux City
 Multifamily
 96 Units / 4 Buildings
 88 Units - Section 8
 Constructed 1971
 Developed by Sheldon Harris
 Managed by Jim Harris & Pete Godwin
 Original 221(d)(3) Mortgage
 1994 refinance - subordinate 241(f) LIHPRHA loan
Yorkshire Manor
Yorkshire Manor
2600 North Laverna St, Fremont
 Multifamily
 84 Units / 4 Buildings
 84 Units - Section 8
 Constructed 1971
 Developed by Sheldon Harris
 Managed by Jim Harris & Pete Godwin
 Original 236 Mortgage
 1994 refinance - subordinate 241(f) LIHPRHA loan
The “Twins”
 Same owner / same management company
 Strong seller desire for simultaneous closings
 Family legacy properties
 Same subordinate 241(f) LIHPRHA financing
 2010 LIHTC Applicants
 Contractor – Barry Larson & Son
 Architect – Alley Poyner Macchietto Architecture
 Similar substantial rehabilitation projects
Substantial Rehabiliations
 New Roofs
 New HVAC Systems
 New Doors and Windows
 Foundation Waterproofing
 New Kitchens and Bathrooms
 New Flooring and Paint
 Site and Safety Improvements
 New Community Buildings
 ACM and LBP Abatement
Rent Increase & LIHPRHA
 Rehab construction budgets ~ $40,000/unit
 Total development budgets ~ $9MM
 Necessitated rent increase of ~ 15%
 HAP Contracts: OCAF or BBRI
 LIHPRHA Use Agreements: OCAF or BBRI
 Recent HUD guidance – new debt service includable
BBRI factor in LIHPRHA projects.
 Preserving LIHPRHA became project imperative
Original Financing Strategy
 Assume existing subordinate 241(f) LIHPRHA loans with




Midland Bank
LIHPRHA loans can only be subordinate to HUD financing
Pay off existing primary mortgages
Combine with new 221(d)(4) financing from Wells Fargo Bank
LIHTC Equity from Midwest Housing Equity Group
 Omaha HUD - Production Office:
 TPA, 221(d)(4), BBRI, HAP Assignment and Extension
Round One Applications
January 2010
 Assumption of 241(f) subordinate loans – Midland Bank
 New 221(d)(4) loans – Wells Fargo Bank
 Syndicator – Midwest Housing Equity Group
March 2010
 Both properties failed to pass threshold review
 Back to the drawing board for Round Two
Round Two Applications
March 2010
 Assumption of 241(f) subordinate loans – Midland Bank
 New 221(d)(4) loans – Wells Fargo Bank
 Syndicator – Raymond James Tax Credit Funds
May 2010
 Canterbury Village awarded tax credits!
 Yorkshire Manor not awarded tax credits
 Projects are now decoupled
Key LIHPRHA Discovery
May 2010
 Previously understood BBRI tied to continued existence
of 241(f) loans.
 Instead, BBRI is tied to existence of LIHRPHA Use
Agreements; existence of 241(f) loan immaterial.
 Ability to pay off 241(f) loans opened up new financing
strategies.
Revised Financing Strategy
 Pay off 241(f) LIHPRHA loans
 Original thought - larger 221(d)(4) loans
 Too slow and cumbersome
 Freddie Mac Mod-Rehab Loans
 PNC Multifamily Capital
 Freddie Mac Waiver (~$18K/unit vs. ~$40K/unit)
 LIHTC Equity
 Boston Financial Investment Management
 Des Moines HUD – Asset Management Office
 Preservation, BBRI, HAP Assignment and Extension
Round Three Application
 Yorkshire Manor only
 Open to all Round 2 unsuccessful applicants
July 2010
 Pay off 241(f) subordinate loans
 New Mod-Rehab loans – PNC Multifamily Capital
 Syndicator – Boston Financial Investment Management
September 2010
 Yorkshire Manor awarded tax credits!
Decoupled Twins
 Canterbury Village – May award
 Alert NIFA to new Canterbury Village financing and





equity partners/structure
Submit revised Yorkshire Manor application with new
financing and equity partners/structure
Yorkshire Manor – September award
Extend site control (both)
Financing and equity due diligence (both)
LIHTC reservation extension (both)
The Closing Table




Finalize due diligence and underwriting
Negotiate reserves and guarantees
Negotiate partnership and closing documents
Ready to close both properties in early December
 Fannie Mae decides properties are now de-stabilized!
 Both transactions close simultaneously:
December 29, 2010
Rehab is Underway
 Notices to Proceed – December 29
 12-month construction schedules
 Projects will be complete and placed in service in 2011
Canterbury Rehab
Yorkshire Rehab
Preservation “Best Practices”
 Minimize Subsidy/Unit
 Work with LIHTC-experienced partners
 Develop sufficient and consistent specifications
 Give due diligence highest level of scrutiny
 Fully understand QAP; ensure partners do as well