The RAD ProgramExperience with Preservation Using Section III

CHAPA ForumNovember 12, 2013

Thacher Tiffany, Director of AcquisitionsMary Corthell, VP of Compliance

Beacon experience to dateType 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

Total 8 1,526

Case study using Section III of RAD Notice

ExpiringRent Supplement

Contract

ExpiringSection 236 Units

Project Based Voucher (PBV)

Contract

Prepay Section 236 Mortgage

RAD Conversion

Apply for RAD

Recapitalization with 4% LIHTC

and tax exempt bonds Plan preservation

transaction

Case study using Section III of RAD Notice

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

RentsCurrent 60% AMI Rent Reasnbl 110% FMR Underwritten

2013 2013 Apr-13 2013

PBV ContractEfficiency 400 26 775 1,095 983 1,078 983 1 Bed 500 74 980 1,173 1,225 1,311 1,225 2 Bed 700 49 1,180 1,407 1,490 1,615 1,490

Housing Choice VouchersEfficiency 400 1 775 1,095 983 1,078 983 1 Bed 500 12 980 1,173 1,225 1,311 1,173 2 Bed 700 9 1,180 1,407 1,490 1,615 1,407

Over IncomeEfficiency 400 5 775 1,095 983 1,078 983 1 Bed 500 8 980 1,173 1,225 1,311 1,173 2 Bed 700 6 1,180 1,407 1,490 1,615 1,407

Monthly Gross Rent 192,440 235,350 241,974 261,096 239,689 Annual Gross Rent 2,309,280 2,824,200 2,903,691 3,133,152 2,876,271 Change from Current 514,920 594,411 823,872 566,991 Total Units 190

Avg SizeType Count

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

Sources:$8 million max in new debt

Uses:$12 million in capital needs

- 40 year old property$10 million in debtTransaction costs…

Coupled with 4% LIHTC, re-subordination, soft debt etc.

Sources:$8 million max in new debt$11 million in tax credit equity$4 million in subsidy

Uses:$12 million in capital needs$2.5 million in exit taxes$8.5 million in trans. costsSubordination of most of existing debt

1. What are the capital needs?2. What are the market rents? FMRs, rent reasonableness?3. Can you provide resident services?4. What is the local PHA? 5. 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?

Issues to consider when evaluating a 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

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