slide1
Download
Skip this Video
Download Presentation
Revitalizing Rural Development’s Multi-Family Housing (MFH) Portfolio “Saving and creating decent, safe, and sanitary affordable homes for rural renters ”

Loading in 2 Seconds...

play fullscreen
1 / 24

Revitalizing Rural Development s Multi-Family Housing MFH Portfolio Saving and creating decent, safe, and sanitary aff - PowerPoint PPT Presentation


  • 235 Views
  • Uploaded on

Revitalizing Rural Development’s Multi-Family Housing (MFH) Portfolio “Saving and creating decent, safe, and sanitary affordable homes for rural renters ”. * FY 2010 Presentation by: Larry Anderson, Director, MFH Preservation and Direct Loans (MPDL)

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'Revitalizing Rural Development s Multi-Family Housing MFH Portfolio Saving and creating decent, safe, and sanitary aff' - deon


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
slide1

Revitalizing Rural Development’s Multi-Family Housing (MFH) Portfolio“Saving and creating decent, safe, and sanitary affordable homes for rural renters”

* FY 2010 Presentation by: Larry Anderson,

Director, MFH Preservation and Direct Loans (MPDL)

Housing and Community Facilities Programs - laurence.anderson@usda.gov

basic facts 515 514 portfolio 1 1 09
Basic Facts: 515/514 Portfolio (1-1-09)
  • 16,000 Properties with 452,610 Units (28 units avg. size)
  • $11.6 Billion Outstanding Principal (3.0% delinquent)
  • The tenants who we serve:
    • $11.2K Annual Average Income ($9.2K for RA)
    • 64 % receive RA
    • 15 % receive HUD project or tenant based subsidy or other
    • 21% receive no deep tenant subsidy
  • Tenant Households headed by:
    • 59% Elderly
    • 71% Female
    • 30% Minority
    • 24% Handicapped or disabled
    • 30% Tenant turnover
  • 30% Properties in Counties with Declining Income
multi family housing delinquency
Multi-Family Housing Delinquency
  • Delinquency is under control
direct loan and grant program direction for fy 2010
Direct Loan and Grant Program Direction for FY 2010
  • Preserve and revitalize the direct portfolio
    • Fully identify capital needs
    • Market based sustainable underwriting
  • Build “super green” new where most needed
    • Goal of “zero net” energy consumption
    • Goal for property is long term sustainability of rents
  • Use third party resources – ARRA and other
    • Simplify, clarify and support the process
    • Better working relationships with 3rd party funders
super green what does that mean
SUPER GREEN – What does that mean?
  • Energy conservation plus generation
  • Build “super green” new where most needed
    • Goal of “zero net” energy consumption
    • Goal for property is long term sustainability of rents
  • NOFA Scoring Criteria
key revitalization challenges
Key Revitalization challenges:
  • Nature of the portfolio
    • Aging – earliest projects from the 60’s
    • Small properties
    • Rural Markets
    • Not enough RA
    • Aging of physical structure is project specific
  • Nature of ownership entities
    • Aging owners and entities
    • Conflicting interests within ownership
    • Tax consequences for selling or not selling
  • Cloud of Prepayment statute litigation now lifting
    • Franconia – Damages to owners possible
    • Tucker Act Settlement – 731 projects going thru process
    • Goldhammer – APA violation to not follow regulation
  • Limited pool of purchasers and funding resources
  • Tightening Federal budget for traditional subsidized housing
key revitalization study findings
Key Revitalization Study findings
  • Comprehensive Property Assessment (CPA) found:
    • Irreplaceable rural rental housing option
    • Portfolio in good shape, but aging and reserves under funded
    • Addressing now is more cost effective
  • Study also said:
    • Portfolio breaks into 3 segments
      • 10% in great markets – expensive to preserve
      • 10% in bad markets – not feasible to preserve
      • 80% in the middle – feasible to preserve
    • Old way - Just using rent increases and “more” RA is too expensive
    • New way – Use new cost effective revitalization tools
    • Reinvent program delivery for smarter & faster decisions
the working revitalization strategy
The Working Revitalization Strategy
  • Components of all deals
    • Project is needed in market
    • Post transaction Owner is eligible
  • Basic Feasibility Thresholds
    • CNA to determine capital needs, timing and funding
    • Underwriting to determine feasibility and tools
      • SUSTAINABLE RENTS = SUSTAINABLE PROPERTIES!
      • CNA needs - O&M - operating cushion – vacancy - accounts current
    • Seller payments and increased RTO is market based
      • Market value for equity loan
      • CRCU limit for equity payment and increased RTO
      • CRCU test before any MPR tools
    • Consider impact on tenants
  • Long Term Commitment – RD’s funding/Owner’s RUP
access to revitalization resources
Access to revitalization resources
  • MPR (MFH Preservation and Revitalization Demo)
    • NOFA rules – Access RD rehab funds – key tool: deferrals (pre-92 only)
    • Simple (stay in owners)
    • Complex (transfers)
    • Portfolio (now includes transfers and stay in owners)
  • Transfer
    • Low rents = tight deals
    • “Pie split” issues common
    • Limited RD funding – rehab through MPR
    • 3rd party funding – only source of seller payment outside prepayment process
  • Prepayment process
    • Incentives (stay in owners or transfers)
    • Sales to Non-profits (transfers)
  • Substitution of GP’s or "no funds” transfers - “white knights” beware
  • 3rd Party – ARRA funds
    • DOE – HUD Green Retro Fit
    • LIHTC – TCAP or Exchange
revitalization activity
Revitalization Activity
  • MPR (2006 – 76, 2007 – 87, 2008 - 135, 2009 – 94; SC top State)
  • Transfers (top State 2009 – SC)
    • 60% use third party funding
    • 2006 – 159 closed
    • 2007 – 194 closed
    • 2008 – 235 closed
    • 2009 – 165 closed
  • Prepayment process (top State 2009 – NC)
    • Incentive Loans, RA or Sales to Non-Profits obligated:
    • 2006 - 35
    • 2007 - 48
    • 2008 - 47
    • 2009 - 57
mpr demo overview 06 07 08 09 results
MPR Demo Overview - 06/ 07/08/09 results
  • Borrower applies per NOFA (4,100/2,400/1,700/1,250)
  • RD conducts competition and selects candidates (150/170/286/360)
  • Selected properties get:
    • Borrower, market eligibility review and CNA
    • Underwriting to develop a Financial Feasibility Plan (FFP)
    • Review Committee Approval
    • Documents prepared to reflect deal and new RUPs
  • USDA presents and owner approves the deal and mix of MPR tools
  • USDA obligates financing and arranges closing
  • Borrower and USDA close the deal
mpr deals obligated by state 06 07 08
MPR Deals obligated by State 06/ 07/08

65 SC 4 GA, IL, KY, PA, VT

  • ME 3 VI, MI, AZ, CT, IN, MA, NY

22 MO 2 WA, NV, OH, OR, MS, CA

  • NC, OK 1 VA, NH, NM, RI, MN
  • LA 0 AL, AK, CO, DE, MD, HI, NJ, PR
  • IA UT, WV

10 WI

  • ID, MT, SD
  • NE, ND
  • AR, KS, TX

5 FL, TN

mpr tools 06 07 08 demo results
MPR “Tools” - 06/07/08 Demo results
  • Partial or full 515 Deferral ($48M/$56M/$100M)
  • “Bullet” aka “Soft-second” loans ($4.5M/$2.8M/$13M)
  • Grants ($.2M/$.5M/$.4M)
  • 515 Loan @ zero percent interest ($.3M/$2.6M/$12.6M)
  • Payment to owner of some costs (CNA from reserve)
  • Forgiveness of 515 Debt ($0/$0/$0)
  • Re-amortization of 515 Debt (yes/yes/yes)
  • Subordination of 515 Debt (yes/yes/yes)
  • Consolidation of 515 projects (yes/yes/yes)
  • Other RD funds (Section 538/515) ($8.8M/$25M/$58M)
  • Third party funds ($1.8M LIHTC/$45M/$65M)
operational goals for fy 2010 mpr
Operational Goals for FY 2010 MPR
  • Gear up to handle more transactions
    • Encourage portfolio transactions/multiple property financing
    • Find ways to use more third party funding
  • Build capacity in all States
  • Improve key decision making points and reduce bottlenecks
    • CNA, CNA reviews Agreed to “scope of work”
    • Underwriting review and analysis
  • Develop routine supervising and servicing
    • budget integrity and reserve use per CNA
    • Establish long term internal controls
  • Continue to build funding pipeline of approved transactions
  • Expand LH participation
other demo related improvements
Other Demo Related Improvements
  • Transfer handbook updated
    • One - simplified application process
    • Processing deadlines per HR 3873
    • Better handling of third party funding
    • Working with portfolio transfers
  • Additional guidance
    • CNA and CNA review unnumbered letter (August 2008)
    • Underwriting unnumbered letter (October 23, 2008)
    • Construction unnumbered letter (under construction)
  • Improve outreach to buyers, sellers, and funders
    • Clarify program benefits and rules
    • Reduce barriers to participation
    • Website access at: http://www.rurdev.usda.gov/rhs/mfh/MPR/MPRHome.htm
  • Continue to seek permanent legislation
revitalization battleground sizing the split rehab seller and soft costs
Revitalization Battleground – Sizing the split: rehab, seller and soft costs
  • Sustainable rents –
    • What does CRCU support?
  • Rehab
    • upfront/spread out
  • Seller payment
    • loan or cash?
  • Soft costs
    • loan/cash
    • upfront/deferred
key concepts with the pie split and the mpr
Key concepts with the “pie split” and the MPR
  • Stay in owners – No split - It’s all about rehab
    • Underwritten once
    • Full use of MPR tools to fund rehab
    • Some soft costs may be included.
  • Transfer – It’s a three way split
    • Underwritten twice
    • First to fit the CRCU test
      • seller payment and soft costs must make economic sense
      • RD funds can be included if “in hand”
      • If not in hand - use 538 at AFR to size the transaction
    • Second to fit MPR underwriting
      • Deferral used to keep rents affordable
      • MPR tools not used for seller payment
why is the mpr a good idea for the program
Why is the MPR a good idea for the Program?
  • Cheapest way to revitalize a project
    • Deferral, soft money, grants and zero percent loans are cost effective tools
    • 08 average MPR rents went down by 2% or $17 PUPM
  • May be the only feasible way to address existing capital needs
    • Last year – rehab plus 20-years CNA needs over $29K per unit
    • Typical project could not afford rehab or higher reserves within CRCU without MPR
    • Without MPR tools the cost is carried by RA
    • Without MPR tool rehab is limited and may leave the job half done
  • Many owners have no ability to sell or pay off
    • The gap between current rents and CRCU is a pivotal feasibility measure
    • Many projects don’t have the market position to satisfy all expectations
    • Bringing in third party funds through a transfer not an option – project starts a death spiral
  • Mechanism for stay in owner to recapitalize
    • Over 50% of MPR transactions with stay in owners last year
    • Government funds not used for equity payout or huge developer fees
  • Magnet for third party funding
    • Last year $100 Million leveraged by $30 Million in MPR BA
    • Provides additional funds to get the transaction to work
portfolio management direction for fy 2010
Portfolio Management Direction for FY 2010
  • Reduced portfolio energy consumption
    • Improved operations at the property
    • Promote energy generation at the property
  • Seek better operations by Industry Collaboration
    • Role model - IPIA improvement
    • Continue to reduce duplicate monitoring
  • Major update to automation systems
    • Increase flexibility to new programs and relationships
    • Improve Servicing – focus on major challenges and reduce the burden of routine tasks
ad