U.S. Dept. of Agriculture
Rural Development538 Program
Offering Financial Advice and Solutions to Health Care, Senior Living, and Housing Providers.
Brian W. CoateVice PresidentLancaster Pollard & Co.Lancaster Pollard Mortgage Company
Rural Rental Housing Association o f Illinois
Table of Contents
Program Purpose
Program Outreach
Program Features
LIHTC
Qualifying Borrowers & Properties
Roles & Responsibilities
Application Process
Updates
Case Study
Reference Information
GRRHP Flow Chart
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• Non-profit corps. or partnerships
• Public entities• Indian Tribes• For-profit comps.• Individuals• Trusts
• New construction• Substantial rehab. of at least
$6,500 per unit for acquisition or to create new units.
• Can be used with acquisition and rehab. or a rehab. with no change of ownership.
Qualified Borrowers and Properties
Qualified Borrowers Qualified Properties
Roles and Responsibilities
Government’s• Approval and issuance of
loan guarantee and interest assistance
• Oversight of lender and program
• Process and reimburse losses
Lender’s• Originate, service, close and
monitor loans• Oversight of borrower for
compliance with program regulations
• Liquidation of property for collection
Program Purposes
• To encourage economic development in rural areas • To increase and preserve the supply of affordable
multifamily housing in rural areas
• To ensure the availability of housing for rural residents whose incomes are 115% of area median income or less
Program Purposes, cont.
• Foster risk-sharing partnerships with public and private lenders
• Increase moderately-priced housing in rural America
• Facilitate affordability for low and moderate income rural residents
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Program Features
• Covers 90% of outstanding principal and interest
• Offered for construction and permanent loans or permanent only loans
• Use with 9% tax credits, 4% tax credits & other gap financing
Program Fees
• Initial guarantee fee equal to 1% of the total loan guarantee due when guarantee is issued
• Annual guarantee fee equal to 0.5% of the total outstanding principal and interest of the loan.
• Lender Fees• Third Party Reports• Other Funding Source Fees
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LIHTC
• What you get• Sophisticated partner• ~6% Return Equity• Devoted partner for 15 yrs• Ongoing cash flows• Substantial repairs• Replacement reserves• Developer’s fee• Like new asset
• What you give up• Ownership, not control• The property… in default
The Players, Process, and Money Flow
Developer Lender
USDA
Tax C
redi
tsApplication
Equity
Debt
Loan Guarantee
State Allocating Agency
Tax Credits
TC Syndicator
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Updates
• Loan to cost limit increased to 70% from 50%• New 515 transfer template• 2010 census, what?• Refocus on preserving the portfolio
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Case Study
• 515 Transfer• Rental Assistance• Rehab Loan on existing property• HUD Section 8 HAP contract
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Keys to the Financing
• Mark up to post rehab market rent levels• Rents below market rate• Savings from existing high interest rates
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Updates:
• kitchen cabinets and countertops• sinks & faucets• range hoods • bathroom fixtures and accessories• remove the bath tub and install shower pan• shower surround with bench• valves and trim• install exhaust fans• lighting throughout apartment (LED)• HVAC systems
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Updates continued
• New flooring• paint the units• Accessibility modifications to current standards• Common area improvements include
• corridor and stair lighting (LED)• redesign of the public toilets• laundry facility for ADA access, paint walls, paint doors and frames,
• remove and replace the mailbox• Site improvements include redesign of the dumpster pad
and enclosure to provide ADA access.
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Partridge
Tree
www.lancasterpollard.com
QUESTIONS?Brian W. Coate, Vice PresidentLancaster Pollard65 East State Street, 16th FloorColumbus, OH 43215Phone (614) 224-8800Fax (614) 224-8805
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