Katie Alitz NHRA 2...Strategies)andConsiderations) Restructuring)Soft)Debt Southern CA 115 Units •...

Strategies and Considerations Restructuring Soft Debt

Katherine M. AlitzSr. Vice President, DirectorDispositions and Special Assets

Boston CapitalOne Boston PlaceBoston, MA 02108(617) 624-‐[email protected]


Southern CA115 Units

• Third party sale.• First mortgage prohibited pre-‐payment.• Soft debt:

City $1,160,000Seller Note $1,300,000Seller Note $3,100,000Accrued Interest $1,800,000

• 70% of Surplus Cash payable to City under soft loan terms.

• Compliance expiration 12/31/2014 and restrictions extended through 12/31/2055.



• Buyer assumed first mortgage and second soft mortgage to City.

• City deferred required payment of 70% of Surplus Cash for 7 years.

• Seller Notes:ü $1.3M cash payment ü $3.1M forgiveness of debt

• LP Return $883,000 and GP Return $883,000.



Takeaways:

• Property part of a Fund that included 13 properties.• At Fund level → small capital loss on disposition.• COD Income → positive adjusted basis which remained

positive after deduction of net sales proceeds.• If gain from sale and COD income occur in the same

year, there likely will not be a significant change in investor yield.


FL58 Units

• 2015 GP Transfer. • Property valued at $1.8M.• First mortgage balance $442,000.• Soft debt:

HFA $600,000Community RDA $600,000County $160,000Accrued Interest $872,000

• HFA loan matured January 2013 and Community RDA loan matured April 2012.



FL58 Units

• GP loaned partnership $840,000 (6.5% interest only).• First mortgage paid in full.• HFA loan:

ü Accrued interest = $765,000 waivedü GP to reduce principal by $174,000 over 5 yearsü Remaining principal re-‐amortized 30 years at 1%

• Community RDA loan:ü Converted to 2% interest only ü GP to reduce principal by $60,000ü Outstanding accrued interest of $ 210,000

converted to non-‐amortizing, 0% interest loan with a balloon payment due in 2026.


FL58 Units

• County loan:ü Principal = $162,000 paid in full ü Accrued interest = $84,000 waived

Results:

• Total outstanding debt before restructure approximately $2.875M

• Total outstanding debt after restructure approximately $2.02M, inclusive of GP Loan.

• LP Return $50,000.


FL49 Units

• 2015 GP Transfer. • Property valued at $2M.• First mortgage balance $277,000.• Soft debt:

HFA $460,000Community RDA $290,000Accrued Interest $744,000

• HFA loan and Community RDA loan matured January 2015.



FL49 Units

• GP loaned partnership $768,000 (6.5% interest only).• First mortgage paid in full.• HFA loan:

ü Accrued interest = $453,000 waivedü GP to repay principal over 4 years

• Community RDA loan:ü Converted to 2% interest only ü GP to reduce principal by $29,000ü Outstanding accrued interest of $ 291,000

converted to non-‐amortizing, 0% interest loan with a balloon payment due in 2030.


FL49 Units

Results:

• Total outstanding debt before restructure approximately $1.775M

• Total outstanding debt after restructure approximately $1.32M, inclusive of GP Loan.

• LP Return $50,000.


FLBoth Deals

Takeaways:

• Properties located in same town.• Lenders are the same entities for each property.• Expect a long process.

• At fund level → small capital gain on disposition.• If the gain from sale and COD income occur in the same

year, there likely will not be a significant change in investor yield.


Southern CA61 Units

• 2014 GP transfer as part of a resyndication.• Soft loans:

City $505,000City $199,000City, CDC $800,000State DDS $367,000County $100,000Accrued Interest $930,000

• Compliance expiration 12/31/2012, and restrictions extended through 12/31/2027.


Southern CA61 Units

• Appraised value and sale price = $5.2M.• First loan paid in full ($1.1M).• All soft loans and accrued interest rolled into new

transaction ($2.9M).• City did not anticipate being paid back on this deal and

GP had paid them back in full earlier in the year on an unrelated transaction.

• LP Return $600,000 and GP Return $600,000


Southern CA41 Units

• Third party sale.• Soft loans:

City, HOME $832,000City RDA $690,000Accrued Interest $678,000

• Compliance expiration 12/31/2013, and restrictions extended through 12/31/2028.


Southern CA41 Units

• GP approached City to forgive or recast soft debt.• City refused to consider.• Property marketed for sale.• Soft debt paid off at closing• LP Return $557,000 and GP Return $313,000


Southern CABoth Deals

Takeaways:

• Same General Partner.• Different Cities about 33 miles apart• Outcomes will differ on a case-‐by-‐case and City-‐by-‐City

(agency) basis.• Some cities in CA especially are financially stressed and

need the money.• More flexibility with equity.

Katie Alitz NHRA 2...Strategies)andConsiderations) Restructuring)Soft)Debt Southern CA 115 Units •...

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