NALHFA 2012 ANNUAL CONFERENCE

CASE EXAMPLES OF AFFORDABLE HOUSING PRESERVATION

By Aseem NigamDirector Real Estate Finance and

Grants ManagementFairfax County, Department of Housing

and Community Development

Project Description•319-units located in Alexandria, Fairfax County – Built 1976•Original configuration:

– 2 phases- both phases purchased by developer

– Phase 1: 110 units; HUD Section 236 financing; additionally, 50 of 110 units receive Rental Assistance Payment (RAP) contract- both expire 2018

– Phase 2: 209 units; “market” rate not subject to HUD restrictions but rents affordable to 50% AMI

•Project needed renovation in order to provide upgrades in appearance, security, energy efficiency and long term durability (preservation)

Creekside Village

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Creekside VillageSummary of Sources and Uses

• For both phases: Construction costs/unit: $38,131 Acquisition cost/unit: $126,066 (buildings only) Land Cost/unit: $15,000 (ground lease

Uses

Phase 1 Phase 2 TotalAcquisition $27,734,500 $12,480,500 $40,215,000Hard Costs $7,874,955 $3,440,093 $11,315,048Soft Costs $4,789,996 $2,370,715 $7,160,711Developer’s Fee $5,070,000 $2,685,450 $7,755,450TOTAL $45,469,45

1$20,976,758 $66,446,209

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Creekside VillageSources

Phase 1 Phase 2 Total

VHDA Existing Mortgage

$1,450,033 $1,450,033

New VHDA Tax-Exempt Bonds

$4,100,000 $4,100,000

VHDA Taxable $4,575,000 $4,575,000VHDA- SPARC $3,000,000 $5,000,000 $8,000,000VHDA- REACH $2,000,000 $1,000,000 $3,000,000SPARC Deferred $1,000,000 $1,000,000LIHTC Equity $21,247,875 $4,080,542 $25,328,417AHPP $9,700,000 $4,515,000 $14,215,000Deferred Dev Fee

$2,496,543 $2,281,216 $4,777,759

TOTAL $45,469,451 $20,976,758 $66,446,209

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Creekside VillageUnit & Income Targeting- Phase 1

ReconfiguredBedroom Size No. of Units Maximum AMI

(%)1br, 1ba 25 50%1br, 1ba 26 60%1br, 1ba 4 80%

2br, 1.5ba 25 50%2br, 1.5ba 15 60%2br, 1.5ba 5 80%2br, 2ba 30 50%2br, 2ba 32 60%2br, 2ba 4 80%3br, 2ba 30 50%3br, 2ba 20 60%3br, 2ba 4 80%

Total Units 220

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Creekside VillageUnit & Income Targeting- Phase 2

Reconfigured

Bedroom Size No. of Units Maximum AMI (%)

2br, 1.5ba 25 60%2br, 1.5ba 20 80%3br, 2ba 30 60%3br, 2ba 24 80%

Total Units 99

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Creekside Village

Roadblocks • Section 236 financing limited rent increases over time and rents/revenues

from Phase 1 were very low Financially infeasible without cash flow from Phase II to carry it As a result, the project was limited to how much debt it could carry

• Non-displacement of tenants

Solutions • In order to make Phase 1 financially feasible, changed distribution of units

between Phase 1 and Phase 2 Phase 1- 220 units with the following levels of affordability: 110 units @

50% AMI, 93 units @ 60% AMI, and 17 units @ 80% AMI Phase 2- 99 units with the following affordability- 55 units @ 60% AMI

and 44 units @ 80% AMI• Created condominium regime to maximize LIHTC for the property• Needed to preserve some units as market rate so as not to displace tenants

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Creekside Village Purchase of Land Using Penny Funds

• Helps to reduce the overall cost the developer needs to finance• Unsubordinated ground lease • 99-year lease to borrower, 75-year to lender; at end of term, land

and improvements revert back to the FCRHA and therefore, the FCRHA can maintain perpetual affordability

• Long term preservation is achieved

Preservation and the AHPP• Requirements such as the ROFR, affordability covenants and in

cases where we have a ground lease, the FCRHA is able to maintain and preserve units as affordable for the long term

With the ROFR, the FCRHA can purchase the property Affordability covenants may extend affordable restrictions beyond the

credit compliance period Ground leases also revert land/buildings back to the FCRHA’s

ownership

Crescent Apartments• 181 units in Reston Va. –

Built 1967• Redevelopment /

revitalization opportunity • Adjacent to Lake Anne –

oldest planned community• Acquisition cost per unit

$276,316• Affordability

– 20% units at 50% AMI– 80% units at 60% AMI

• Unusual Aspects– Part of a larger portfolio

sale (Mark Winkler)– Purchased to redevelop

the site 9

Crescent Apartments

• Property is owned by Fairfax County• Ground Lease to the Fairfax County

Redevelopment and Housing Authority (FCRHA) for property management

• Payment agreement for the County to make the bond payments

• Property contributes some revenues to the bond payments.

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Crescent Apartments• Purchased in 2006 for $49,500,000• Sources of financing:

– BANs - $40,600,000– Penny for Affordable Housing - $9,136,826

• 2007 the original BANS were rolled over for another year at 4% interest rate

• 2008 County issued 5 year BANS to allow time for the redevelopment

plans to be completed.– Note had a 3 year call provision– Interest rate of 3.308%– County paid interest payment– Property contributed to principal pay down.– Bond ratings: Moody’s Aa2 and S&P AA+

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Crescent Apartments

• 5 year note refinanced in 2011– Same maturity – Lowered the interest rate to 0.75%– Net present value of Interest savings $1,642,152

• Responses to the RFP for redevelopment are due April 30, 2012

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Crescent Apartments• Recommendations from the RFP

– Preservation of the 181 units as follows• 10% affordable to households earning up to 30% of AMI• 20% affordable to households earning up to 50% of AMI• 70% affordable to households earning up to 60% of AMI

– Non-replacement Units 20% affordable pursuant to the ADU and WDU ordinance

– Land Unit consolidation options• Unit A - 3.6 acres• Unit B - 4.2 acres• Unit C – 3.8 acres• Unit D – 17.3 acres (Crescent Apartments)• Unit E – 6.0 acres• Unit F – 5.75 acres (Current Shopping Area)

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Crescent ApartmentsLand Unit Full Consolidation Option Redevelopment Option

A Residential 175 UnitsCommercial 105,000 SF

Residential 125 unitsCommercial 85,000 SF

B Residential 120 Units Commercial 130,000 SF

Residential 120 Units Commercial 130,000 SF

C Residential 100 Units Residential 100 Units

D Residential 935 Units Commercial 8,000 SF

Residential 750 Units Commercial 4,000 SF

E Residential 425 Units Commercial 4,000 SF

Residential 320 Units Commercial 2,000 SF

F Current Shopping Area

Total Residential 1,755 Units Commercial 247,000 SF

Residential 1,415 Units Commercial 210,000 SF

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Crescent Apartments

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QUESTIONS?

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Contact Information:Aseem Nigam703.246.5167aseem.nigam@fairfaxcounty.gov