CASE STUDY: USDA SECTION 515 RENTAL PRESERVATION:

CYPRESS VILLAGE, RICHLAND IA

Mel Maeder – Maeder Enterprises

Richland, IA

Entrance to Cypress Village

View of the handicapped parking

View of buildings B and C

Building A

Building B

DESCRIPTION OF PROJECT

• USDA Section 515 Rural Rental Housing Complex

• Owned by Richland Community – operating under non-profit corporation, Richland Betterment Council, Inc., formed in 1979

• Community shareholders elect Board of Directors, made up of 9 members, one of which is here today, Mr. Byron Kimble

DESCRIPTION OF PROJECT cont.

• Facility was built and first occupied in 1981• Originally designated as Senior Housing, but

currently designated as family housing• Facility is composed of 4 buildings, with 4 one

bedroom apartments in each building, with the exception being that the community room takes the place of one apartment, therefore there are only 15 rental units

DESCRIPTION OF PROJECT cont.

• Tenant population:– 8 tenants that are either seniors, handicapped or

disabled individuals – one of which is a veteran of the Korean War

– 5 tenants that are under age 62 and not handicapped or disabled

– All tenants fall under very low income criteria defined by Department of Housing and Urban Development.

– Currently have 2 vacancies, one of which is the handicapped unit under construction as part of current rehabilitation project

FUNDING

• Project is funded through original loan from Farmers Home Administration, now USDA Rural Development, rental assistance from USDA Rural Development, and tenant rent payments

• IRS designated 501-C4 Non-Profit entity

FUNDING cont.

• Rent income and rental assistance are expected to cash flow operating and maintenance expenses and repay the USDA RD loan, plus any other loans we may have

THE ROLE OF USDA AND HAC

• Determined in early 2012 by Board of Directors that the overall condition of the complex, due to age, was in need of repair that would exceed the amount of reserve funds available.

• Mr. Tony Putz, now since retired from State Office of USDA RD, suggested to apply for a loan with Housing Assistance Council

THE ROLE OF USDA AND HAC cont.

• The Housing Assistance Council (HAC) is an organization which cooperates with USDA RD in funding the rehabilitation of USDA 515 projects

• USDA RD re-amortized existing loan for another 30 years

• USDA RD also helped establish a budget to enable us to make payments on an additional loan of $200,000 from HAC; with an amortization based on 10 years

THE ROLE OF USDA AND HAC cont.

• A $200,000 loan was applied for with HAC• Mr. Obediah Baker, HAC representative, came

to the project, met with the Board of Directors and determined the loan was feasible.

• The loan was approved and closed in late April of 2013

• The construction began June 22, 2013

CHALLENGES

• A new Comprehensive Needs Assessment (CNA) was required

• A property appraisal was required• An Architect was needed to set the standards.

CHALLENGES cont.

• A new budget was needed to be able to repay USDA and HAC loans. New budget would establish a very substantial rent increase, which would not affect our tenants that are receiving rental assistance from USDA RD. However, it might affect ability to fill apartments with individuals that did not qualify for rental assistance.

CHALLENGES cont.

• Required to use USDA RD approved government contracts, advertise for certified and bonded contractors and accept the low bid contractor for each phase of the rehabilitation project.

• A large commitment of time and paperwork is required by management and the Board of Directors to complete the project, but guidance is provided by USDA RD and HAC

IS IT ALL WORTH THE EFFORT??

YES!!