What’s Old is New: Preservation Projects

Amy Rowland, VP of Real Estate Development – Mercy Housing Mountain Plains Region

Housing Innovation MarketplaceJanuary 25, 2011

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• Founded in 1981 by the Sisters of Mercy of Omaha as a response to the need for affordable housing

• Currently active nonprofit developer/owner in 16 states • Works from 5 Geographic Business Centers across US• More than 38,000 homes developed nationwide, serving

over 130,000 people• Emphasis on provision of resident services• Denver-based national corporate office• Mercy Housing Mountain Plains covers CO, AZ, UT, SD

and NE

Mercy Housing - LIHTC Properties

3Crestview VillageCrestview Village

Western ManorWestern Manor

NorthglenNorthglen

Crestview VillageLaVista, NE

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• 154 units (2 sites)• 23 units are Section 8• HUD 236• Family rental• Acquired in

1996/Built in 1971• Minor rehab in 1996• One story 1

bedrooms units• Two story 2,3 & 4

bedroom townhomes• Upgrades: $35k/unit

New Community Building (3,900 SF)

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• 82 units• 78 units w/ Section 8• HUD 236• Family rental• Acquired in 1995/Built

in 1973• Has never undergone a

major rehab• Upgrades: $37k/unit

New Community Building (2,500 SF)

New Entry Porches

Western Manor Lincoln, NE

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• 60 units• 12 units are Section 8• HUD 236• Family rental• Acquired in 1995/Built in

1970• Has never undergone a

major rehab• Upgrades: $40k/unit

New Community Building (2,500 SF)

4 fully-accessible units new siding & decks

NorthglenLincoln, NE

7Resident Services currently take place in a 1,000 SF end unit at Crestview

The Community Buildings will house management and leasing activities, restrooms, a business center and a community room for activities such as crafts, after school programs, and life building classes.

At Western Manor, 50 out of 115 residents participated in an onsite activity or class in July 2009.

New Community Buildings

Western Manor

Crestview Community Building

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Western Manor - Built 1972• 7% HUD 236 Mortgage

maturing August 1, 2013• Mercy Housing acquired in

1995 w/ $1.4M LIHPHRA Grant

Crestview – Built 1970 &’71• 8.5% HUD 236 Mortgage

maturing February 1, 2012• Mercy Housing acquired in

1996 w/ $4.7M LIHPHRA Grant

Northglen – Built 1970• 7.5% HUD 236 Mortgage

maturing August 1, 2011• Mercy Housing acquired in

1995 w/ $1.07M LIHPHRA Grant

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Existing Financing

• Critical Rehabilitation Needs• Depleted Reserves• Negative Cash Flow • Tax Credit Availability

– 2008 – 2010 Disaster Credits– Tax Credit Assistance Program (TCAP)

• Prepaying HUD loan prior to loan maturity qualified non-subsidized residents to access enhanced vouchers.

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Refinancing Urgency

Sources:ANB First $2,147,000LP Equity $6,736,000Seller’s Note $4,910,000MHMP Loan $585,000Existing Reserves $246,000Deferred Fee $121,000Total Sources $14,745,000

Uses:Acquisition $5,200,000Rehab Costs $5,936,000Design/Eng $293,000Financing Fees $521,000Other Costs $615,000Developer Fee $972,000Relocation $393,000Reserves $815,000Total Uses $14,745,000

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Sources & UsesCrestview Village

Collective Financing Sources

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Major Issues

– Owner Distribution limitation of LIHPHRA makes repayment of Seller Notes, Investor Fees and Deferred Developer Fees impossible

– HUD decision-making process vs. critical LIHTC and TCAP deadlines

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• Conflicts between HUD Programs and Tax Credit Structure

• Enhanced Voucher Saga

TCAP Deadlines

Enhanced Vouchers

• Covers tenants without PB Vouchers• Complicated, not like Section 8 Vouchers• No local experience at HA’s• Timing problems with local receipt of vouchers

vs. our HUD approvals• Result – minority of tenants will be able to use

vouchers to stay in our projects, which was a major intent of our restructuring

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Lessons Learned• Perseverance & tenacity are

required - patience will not be rewarded

• Hire a lawyer with HUD-experience early (DC-based)

• 1+1+1 = 3!• Beware assumptions re:

qualified tenants• Asset Mgmt. tip - Keep on

top of allowable rent increases for HUD deals

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