The RAD Program
Experience with Preservation Using Section III
CHAPA Forum
November 12, 2013
Thacher Tiffany, Director of Acquisitions
Mary Corthell, VP of Compliance
Beacon experience to date
Type
Properties
Units
Section III retro
Rent supp, 236
1
100
Section III, complete
Rent supp, 236
4
699
Section III, in process
Rent supp, 236
1
72
Section I, in process
HOPE VI
2
655
8
1,526
Total
Case study using Section III of RAD Notice
Expiring
Rent Supplement
Contract
Expiring
Section 236 Units
Project Based
Voucher (PBV)
Contract
Case study using Section III of RAD Notice
Apply for RAD
Prepay Section
236 Mortgage
Plan preservation
transaction
RAD
Conversion
Recapitalization
with 4% LIHTC
and tax exempt
bonds
Case study using Section III of RAD Notice
Project info
-
Built in 1973
190 units
Rent supplement contract for 72 units expired February 2013
Section 236 mortgage maturing July 2014
- Investors with large negative capital accounts
- Potential for market conversion in improving market area
Case study using Section III of RAD Notice
Objectives
- Address extensive capital needs at the property
- Make investors equal or better off than “going market”
- Ensure long-term stability of property
Case study using Section III of RAD Notice
Rents
Type
Current
2013
60% AMI
2013
Rent Reasnbl
Apr-13
110% FMR
2013
Underwritten
Avg Size
Count
400
500
700
26
74
49
775
980
1,180
1,095
1,173
1,407
983
1,225
1,490
1,078
1,311
1,615
983
1,225
1,490
Housing Choice Vouchers
Efficiency
400
1 Bed
500
2 Bed
700
1
12
9
775
980
1,180
1,095
1,173
1,407
983
1,225
1,490
1,078
1,311
1,615
983
1,173
1,407
5
8
6
775
980
1,180
1,095
1,173
1,407
983
1,225
1,490
1,078
1,311
1,615
983
1,173
1,407
192,440
2,309,280
235,350
2,824,200
514,920
241,974
2,903,691
594,411
261,096
3,133,152
823,872
239,689
2,876,271
566,991
PBV Contract
Efficiency
1 Bed
2 Bed
Over Income
Efficiency
1 Bed
2 Bed
Monthly Gross Rent
Annual Gross Rent
Change from Current
Total Units
400
500
700
190
Case study using Section III of RAD Notice
Resident Services (required for PBV contract to exceed 50%)
-
Resident service coordinator staff
Programing space (community room etc.)
Contract with third parties both on and off site
Lease rider
- Typical program categories
- Youth Enrichment
- Workforce Training
- Self-sufficiency
- Health and wellness
Revenue not sufficient
to address needs using RAD
alone
Coupled with 4% LIHTC, resubordination, soft debt etc.
Sources:
$8 million max in new debt
Sources:
$8 million max in new debt
$11 million in tax credit equity
$4 million in subsidy
Uses:
$12 million in capital needs
- 40 year old property
$10 million in debt
Transaction costs…
Uses:
$12 million in capital needs
$2.5 million in exit taxes
$8.5 million in trans. costs
Subordination of most of
existing debt
Issues to consider when evaluating a RAD conversion
1.
2.
3.
4.
5.
What are the capital needs?
What are the market rents? FMRs, rent reasonableness?
Can you provide resident services?
What is the local PHA?
What are the maturities? Is there a Rent Supp and Sec 236
mis-match? Is there other debt?
6. What share of resident will be eligible for PBVs? LIHTCs?
7. What’s the timing, can you meet the deadlines?
8. How do you work with uncertainty of program?
Implementation of RAD Conversion
- Advanced Planning and Coordination with PHA
-
Preliminary Meetings with PHA
Interview Schedule for Income Certifications
Resident Consent to Release Information
Vital documents
Solidify the process between Agent and PHA
Designated Project Manager - Corporate
- Initial resident meeting
- HUD explains the RAD and EV Program
- PHA is introduced to residents
Implementation of RAD Conversion
-
Process started shortly after initial resident meeting
Management circulated PIH paperwork to all households
Worked with PIH to arrange HQS Inspections
All residents returned PIH paperwork to management to
review for completion
- Management delivered completed paperwork to PHA for
processing.
- Tracking sheet – PHA and Management
- Constant communication with PHA – weekly meetings
Implementation of RAD Conversion
• Update TSP to include PBV program
• Leases need to be created/signed by all eligible household
members
• PIH provided management with PBV Addendum to be signed
with lease
• HAP Contract
– 15 year term
– 110% of FMR (subject to rent reasonableness)
Implementation of RAD Conversion
• Up to a 5 year phase in for household experiencing more than
a 5% increase to 30% of adjusted income for rent.
• PHA provided residents with TR and HAP
• Management sent follow up letters to residents if 5% phase in
was required.
• Management tracks the phase-in for the 5 year period.
Thacher Tiffany, Director of Acquisitions
(617) 574-1105
ttiffany@beaconcommunitiesllc.com
Mary Corthell, VP of Compliance
(617) 574-1153
MCorthell@BeaconCommunitiesLLC.com