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PRESERVATION QUESTIONS:But forownersready to go– no MM tenant obligation is a good thing.
Key preservation challengeHow close to maturity is the loan?Is the owner market or mission based?Is the market poor, good or great?Is the property in poor, good or great condition?How do rents relate to the market?What are the restrictions?How long to process a transfer?What is the availability of State funding?What is the availability of RD funding?Will RD use available servicing options?Do tenant protections encourage or discourage leaving the program?Does RA encourage or discourage exit?
* For tenants, mission based owners, purchasers, rural communities and advocates– No MM tenant subsidy or protections is a big worry.* Key question:What does it take to keep it or get it into the hands of an owner who is mission based?
Access to Preservation Resources
MPR (MFH Preservation and Revitalization Demo)Access RD rehab funds – key tool: deferrals (pre-92 only)Apply thru NOFASimple (stay in owners)/Complex (transfers)Portfolio (transfers and stay in owners)TransferAccess 3rd party funding – only source of seller payment outside prepayment processApply thru RD OfficeLow rents = tight deals and“Pie split”issues commonPrepayment processAccess RA and equity loan incentives (stay in owners or transfers)Apply thru RD Office – Process strictly regulated by StatuteWaiting list and no more access to Sales to Non-profits resourcesSubstitution of GP’s or "no funds”transfersAccess to project control - no new resources available (existing RA helps)Notify RD Office and white knights beware“pottery barn” affect – if you break it you take it!
Rural Housing Preservation Associates, LLC - contact Larry Anderson at [email protected]
Why is the MPR a good idea for the Program?
Cheapest way to revitalize a projectDeferral, soft money, grants and zero percent loans are cost effective toolsEarly MPR rents went down by 2% or $17 PUPMMay be the only feasible way to address existing capital needsEarly results – rehab plus 20-years CNA needs over $29K per unitTypical project could not afford rehab or higher reserves within CRCU without MPRWithout MPR tools the cost is carried by RAWithout MPR tool rehab is limited and may leave the job half doneMany owners have no ability to sell or pay offThe gap between current rents and CRCU is a pivotal feasibility measureMany projects don’t have the market position to satisfy all expectationsBringing in third party funds through a transfer not an option–project starts a death spiralMechanism for stay in owner to recapitalizeOver 50% of MPR transactions with stay in owners last yearGovernment funds not used for equity payout or huge developer feesMagnet for third party fundingEarly results $100 Million leveraged by $30 Million in MPR BAProvides additional funds to get the transaction to work
Prepayment prevention Resources
Incentives available per the statute and regulations:Equity LoansRAIncreased Return on Investment (ROI)Interest CreditRelease of Excess ReservesSale to Nonprofit or Public Body3rd Party Equity Loan Agency will subordinateTransfer w/equityAll Incentives Requires National Office Review and Concurrence
Preservation Strategies – Lost Resources
MPR (MFH Preservation and Revitalization Demo)Repurposing MPR rehab funds for voucher shortages – maybe $25 Million in FY 2018TransferFY 12 started to retire RA and FY 13 until FY 16 stopped States from re-using RATighter appraisals - new debt rarely works, esp. if RUPs in placeNew underwriting UNL’s discourages rent increases and 3rdparty fundersPrepayment processNo USDA NP advance request since FY 2010 budgetNo USDA Incentive RA request since FY 2010 budgetArbitrary freeze on new incentive offers or funding of sale to nonprofits since July 30, 2012 until FY 2017. Sloppy issuances and policy places a cloud on all incentives and prepayments.Sales of Inventory Projects –No credit sale funding requested since FY 12 and selling fixed up program properties as “non-program.”Ended all New 515 Construction in FY 2012– Avg. of 2,000 units lost each year
Rural Housing Preservation Associates, LLC - contact Larry Anderson at [email protected]





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