Lancaster Pollard assisted Evangelical Lutheran Good Samaritan Society (Society) in financing an acquisition rehab on a Section 202 affordable seniors housings property using the FHA Sec. 223(f) Pilot Program.
The property, Village Tower, consists of 60 units in a five-story building in Prescott, AZ. Constructed in 1982, Village Tower has been providing high quality affordable housing to seniors in the Prescott area since its inception and operates with Sec. 8 Housing Assistance Payment (HAP) contracts on 100% of its units. The Evangelical Lutheran Good Samaritan Society (Society) was looking to renovate the facility. It had obtained 4% low-income housing tax credits (LIHTCs) from the Arizona Department of Housing and a tax-exempt private activity bond allocation from the Arizona Housing Finance Authority and was seeking a permanent financing solution.
Lancaster Pollard recommended the FHA Sec. 223(f) LIHTC Pilot program because the proposed repairs were less than $40,000 per unit, there would be limited tenant relocation and the property had already obtained 4% LIHTCs. In addition, the streamlined application process was ideal for the Society as it sought an expedited process due to an impending LIHTC deadline.
Because this project was using 4% LIHTCs, at least 50% of the aggregate deal amount had to be financed with tax-exempt bonds in order to meet the 50% test. Due to the fact that pricing of tax-exempt bonds is significantly higher than a taxable Ginnie Mae (GNMA) execution, Lancaster Pollard used its investment banking platform to underwrite short-term, tax-exempt bonds that were 100% cash-collateralized. This resulted in compliance with the 50% test and allowed Lancaster Pollard to base pricing and loan proceeds on the execution level of the FHA Sec. 223(f) LIHTC Pilot program taxable insured loan.
Adhering to a tight timeframe, the successful $4.1 million transaction closed prior to the impending LIHTC deadline at the end of 2014, enabling the Society to use its tax credits and negating the need to reapply under the 2015 qualified allocation plan (QAP). The closing will fund the acquisition of the project as well as approximately $2.1 million in renovations. Improvements include a new roof, new windows, unit refurbishment, new appliances, replacing the fire alarm system and other upgrades. The new permanent financing structure carries an interest rate below 4%, generates approximately $56,000 in annual debt service savings and greatly improves the fiscal outlook of Village Tower.
