Presenting a live 90-minute webinar with interactive Q&A Leveraging Affordable Housing HUD Financing: RAD and Other Mixed-Finance Development Programs Converting and Preserving Public Housing Through Public-Private Partnerships THURSDAY, JUNE 4, 2015 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Delphine G. Carnes, Partner, Crenshaw Ware & Martin , Norfolk, Va. Antoinette M. Jackson, Partner, Jones Walker , Houston Julie S. McGovern, Member, Reno & Cavanaugh , Washington, D.C. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Rental Assistance Demonstration “RAD” Program LEVERAGING AFFORDABLE HOUSING HUD FINANCING: RAD AND OTHER MIXED-FINANCE DEVELOPMENT PROGRAMS Converting and Preserving Public Housing Through Public-Private Partnerships
Presenters & Contact Information Julie McGovern Reno & Cavanaugh, PLLC jmcgovern@renocavanaugh.com 6
Agenda RAD Basics Conversion Mechanics RAD In Action Key RAD Provisions Affecting Residents Deal Structure Options Sample Deals 7
RAD Basics 8
RAD Overview GOAL Preserve vulnerable federally-assisted projects by converting existing subsidies to long-term Section 8 to leverage debt/equity PREMISE Converting from public housing assistance allows PHAs to finance properties at higher rents than Mixed Finance AUTHORITY FY 2012 HUD Appropriations Act Notice PIH 2012-32, REV-1 (July 2, 2013) 1 ST COMPONENT Public Housing & Mod Rehab Unit cap at 1850,000 – all units have been assigned 2 ND COMPONENT Mod Rehab, Rent Supp & RAP; no unit cap Subject to availability of Tenant Protection Vouchers (TPVs) 9
Conversion Mechanics 10
Overview of Closing Process for RAD Transactions Initial commitment made via Commitment to enter into a Housing Assistance Payment (“ CHAP ”) that sets out project milestones PHA submits Financing Plan (or FHA firm commitment application for projects with FHA financing) HUD issues RAD Conversion Commitment (“ RCC ”) that outlines closing requirements Closing occurs 11
RAD Milestones Within 30 days - Lender commitment and developer team capacity Within 60 days Significant amendment to Annual/Five Year plan Election to convert to PBV or PBRA Within 90 days - Submit Physical Condition Assessment (PCA) Within 150 days All funding applications have been submitted For FHA-insured deals, this is the Firm Commitment Application Within 180 days – Submit Financing Plan Within 320 days - Submit firm commitments for all financing Within 360 days - Financial closing Within 12-18 months after issuance of HAP - Completion of work . 12
Comparison to Other Programs Program FHA Mixed Finance RAD Initial Application Application for Firm Mixed Finance RAD Commitment Proposal Application/CHAP Presentation of Submission for Rental Term Sheet Financing Plan Transaction Details Invitation for Firm Commitment HUD Preliminary Firm Commitment Mixed Finance ACC RCC Approval (with Amendment Conditions) Closing Requirements Special Conditions in Owner’s Consolidated Firm Commitment Certifications HUD Final Approval HUB Closing Approval Letter Issued Execution of Use by HQ Agreement by HQ 13
CHAP Effectively the HUD RAD award letter If selected and awarded a CHAP, PHA must move quickly to secure lender and investor to satisfy required milestones In addition to milestones, CHAP sets forth information about transaction, including units to be converted, size, and contract rents For LIHTC deals, milestones begin at award of LIHTC funding 14
Financing Plan Key Elements : Type of conversion (PBV or PBRA) Physical Condition Assessment Scope of Work (for rehab or new construction) Completed Environmental Review Relocation Plan Development Budget Development Team (including 2530 clearance of PBRA conversion) Proposed Financing Operating Pro Forma HUD’s Approval of Financial Plan : Triggers closing process 15
RCC Follows approval of Financing Plan Triggers invitation to submit documents and assignment of field counsel Sets forth legal requirements related to conversion/rehab, including: Effective Date of HAP (executed by HUD, but held in escrow) Scope of Work Timeline for Work Key terms of financing, replacement reserve funding, and other special conditions 16
Closing Closing checklists available on HUD website www.radresource.net/closing.cfm Documents submitted to HUD HQ closing manager reviews documents for consistency with RCC Field counsel reviews title/survey, opinions and new owner’s organizational documents No approval letter; execution of Use Agreement is HUD’s final step 17
RAD Form Documents Financing Plan Conversion Commitment Use Agreement and Lender Rider PBV HAP+ RAD, Lender & Investor Riders No AHAP in 1 st Component HAP Executed Before Construction PBRA HAP – Lender &Investor Riders RAD Checklists – periodically updated 18
RAD Issues 19
Portfolio Awards PHA may reserve RAD conversion authority for a set of projects and lock in the current year’s contract rent Requires: A list of all projects proposed for a Portfolio Award, including units to be converted, total estimated capital needs, and the major anticipated financing sources, where applicable, for each project; and RAD Applications for at least 50% of the projects identified in the portfolio (PHA has 1 year to submit application for other projects) Upon Approval - HUD issues a Portfolio Award Letter covering the remaining projects within the proposed portfolio HUD may revoke RAD conversion authority for all projects that have not yet received CHAPs if HUD determines the PHA is not making sufficient progress. 20
Rent Bundling Under RAD PHAs may “bundle” or adjust current allocations of Capital and Operating funds in setting initial contract rents across multiple projects Must submit applications for at least 2 projects No limit on number of projects PHA may bundle The combined subsidy for “bundled” projects may not exceed the aggregate funding for all of the projects the PHA is proposing to bundle 21
Long-Term Affordability Initial Contract Terms: 20 (PBRA) and 15 (PBV) years Contract Renewal: Secretary must offer, and PHA must accept Use Agreement: Long-term use agreement extended with each contract renewal 22
PHA Requirements I Significant Amendment to PHA Plan Must be done within 60 days after the CHAP is issued. Requires 45-day notice, broad public outreach, and tenant consultation Use of Public Housing Funds PHA may use current public housing funds, including reserves, for predevelopment costs and construction. Future Public Housing Funding RAD units not eligible for Asset Repositioning Fee (ARF) or Replacement Housing Factor (RHF) funds. Public Housing Cap A PHA’s “Faircloth cap” reduced by number of RAD units. 23
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