NCSHA – Preservation Strategies

Homes for America (HFA)

Is a regional nonprofit working in 4 mid-Atlantic States

Create and preserve housing enhanced with services for low-income households and special needs populations

Portfolio of 5,500 homes in 71 communities

Preservation Activities

Portfolio Additions: Buy properties and rehabilitate using Tax

Exempt Bonds and LIHTC Buy and operate workforce housing with

no major rehabilitation

Portfolio Maintenance: Over the next 10 years HFA will have 3-5

properties reach year 15 annually

Preservation Ahead of the Curve Negotiated partner buy

out in year 12 of initial LIHTC compliance period

120 apartments in strong suburban market

Investor capital account balance over $1 million positive

Market presented good refinance opportunity - 9% to 5.5% interest

Cooperative and helpful local government lenders

Why use the buy-out approach?

Did not have a Right of First Refusal Had negotiated buying out a Co-GP on

a six property portfolio and this was one of the properties

Investor willing to exit before year 15 No major rehabilitation needed Local government partners motivated

to preserve affordability

Why it worked Public lenders did not require any pay down

of their debt Existing mortgage interest at 9%, current

interest at 5.5%, the refinance created $2.4 million of excess proceeds to buy out partners and pay transaction costs and future debt service payments did not increase.

Investor and syndicator willing to negotiate a reasonable sharing of the property’s value

One More Deal-At the opposite end of the spectrum

20 apartments with no economic value; 2 soft loans with balances in year 15 higher than year 1

ILP capital account $80K, balance fast approaching $0

Negotiated a buy-out of ILP for $100 plus payment of legal fees

Syndicator wanted 15 years of accrued asset management fees at about $38,000.

Limited Options

No refinance potential No resyndication potential under

current QAP No large cash reserves - $20K

operating reserve and $66K RFR Only viable option – negotiate walk

away of ILP and operate as a high public purpose, no return property

Typical Issues in Year 15 Transactions

Investors often want cash and the only cash in tied up in reserves

Many properties have limited refinance or resyndication potential

Exercising ROFR in nonprofit / for-profit joint ventures

Trying to buy year 15 properties on the market

Structuring to avoid related party issues