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MFH Transfers

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

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MFH Transfers

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  1. 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

  2. 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.

  3. 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.

  4. 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.

  5. 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.

  6. 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.

  7. 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.

  8. 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.

  9. 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

  10. 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.

  11. 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.

  12. 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.

  13. 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.

  14. 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

  15. ANDERSON APARTMENTS THE OLD THE NEW

  16. ANDERSON APARTMENTS OLD KITCHEN NEW KITCHEN

  17. 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)

  18. 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

  19. WESTPORT APARTMENTS THE OLD THE NEW

  20. WESTPORT APARTMENTS OLD KITCHEN NEW KITCHEN

  21. WESTPORT APARTMENTS OLD FLOORING NEW FLOORING

  22. 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.

  23. 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.

  24. 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.

  25. 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

  26. 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.

  27. 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.

  28. Questions How do I ????

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