RD’s Revitalization Strategy
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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/3 year data/O&M 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 and mitigate impact on tenants
Long Term Commitment – RD’s RA funding/Owner’s RUP
Rural Housing Preservation Associates, LLC
- contact Larry Anderson at
landerson@rhpallc.com
Access to Preservation Resources
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MPR (MFH Preservation and Revitalization Demo)
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Transfer
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Access RA, RTO increase and equity loan incentives (stay in owners or transfers)
Apply thru RD Office – Incentives and S2NP process strictly regulated by Statute
Substitution of GP’s or "no funds” transfers
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Access 3rd party funding – only source of seller payment outside prepayment process
Apply thru RD Office, Low rents = tight deals and “Pie split” issues common
Prepayment process
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Apply thru NOFA – only access RD rehab funds – key tool: deferrals (pre-92 only)
Simple (stay in owners)/Complex (transfers)Portfolio (transfers and stay in owners)
Access to project control - no RD resources available
Apply thru RD Office, beware of internal and RD related “pottery barn” affect
Internal Rehab
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Access to existing RA and rent proceeds
Work with RD Office – get a CNA and prepare a plan
Rural Housing Preservation Associates, LLC
- contact Larry Anderson at
landerson@rhpallc.com
Preservation Strategies – Lost Resources
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MPR (MFH Preservation and Revitalization Demo)
– Last MPR NOFA FY 2013 – Annual funding for about a 100 projects
Transfer
– FY 12 started to retire RA and FY 13 stopped States from re-using RA
– Tighter appraisals - new debt rarely works, esp. if RUPs in place
– New underwriting UNL discourages rent increases and 3rd party funders
Prepayment process
– No USDA NP advance request since FY 2010 budget
– No USDA Incentive RA request since FY 2010 budget
– Current arbitrary freeze on new incentive offers or funding of sale to
nonprofits since July 30, 2012. Cloud on all prepayments.
Sales of Inventory Projects – No credit sale funding requested since FY 12
and selling fixed up program properties as “non-program.”
Ended all New Construction in FY 2012 – Avg. of 2,000 units lost each year
Rural Housing Preservation Associates, LLC
- contact Larry Anderson at
landerson@rhpallc.com
Some advice on a preservation strategy:
• Look for deals that work – the four “R” analysis
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RENTS - What’s the gap between current basic rents and market rents?
RA - How many RA units and what is the percentage?
RUPS – Find out about RUPs and prepayment restrictions (pre or post 89)
REHAB – How much (CNA & SOW)? Rehab or Transfer/Rehab?
• Line up third party money
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Lots of competition for 9% LIHTC
4% LIHTC with tax exempt bonds are less utilized, but need more units
Combine with MPR – usually only deferral is needed (only pre-92 loans)
538 may be an option
Consider partnership with NP to score well for AHP or LIHTC
– Line up green money
• Long term operational savings
• Look at energy generation
• Work with all to keep process simple and open – Meet early and often!
Rural Housing Preservation Associates, LLC
- contact Larry Anderson at
landerson@rhpallc.com
Successful strategies to coordinate and cooperate
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Agree to a Scope of Work
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First CNA – full review of needs. Walk the property together!
Add third party requirements – to get tax credits what must you do
Agree to a Scope of Work
Revised CNA to reflect post rehab per Scope of Work
Expect and schedule a series of meetings with all parties
– Issues will rise throughout the process
– Establish a positive effective working relationship
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Establish realistic underwriting expectations
– Equity and RTO increase must fit within CRCU
– The gap between current rents and CRCU is a pivotal feasibility measure
– Some projects may not have the market position to satisfy all expectations
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Is the MPR Team Leader available for fast tracked help advice and
solutions?
Big Deals need big time team work
– Coordinate developer, financial and RD resources (loan/servicing and technical)
– Focus on critical times – application, underwriting, obligation, closing, and
construction
Rural Housing Preservation Associates, LLC
- contact Larry Anderson at
landerson@rhpallc.com