Louisville Housing Authority Agenda and Packet 2011 09 27

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We analyzed their operating costs, their debt requirements and summarized it as the basis of our analysis. The goal was to identify properties that could be better utilized and make specific recommendations. Steve went over the conclusions, beginning on page 3 in the report. Not one of your properties has more than 30 units. You have a relatively small operation. The larger the number of properties, number of units in a property, the more operating efficiency you can get. Anything you can do to achieve operating efficiency by expanding your operation or combining and being able to leverage your operations is a good thing. Regal Square is the cash cow with housing assistance payments. It has a very low debt amount. It has is $623,000 due to other funds. Money gets invested into other properties from that property. Lilac Place and Regal Court are small and debt burdened; $38,000 at Lilac and $36,000 Regal Court. The debt service left about $4,000 $5,000 per units, for operating and upgrading the units. Last year the per -unit expenditure was greater. They barely break even or are expensive to operate. The Wells Fargo loan is due at the end of May 2014. It has a 5.5% interest rate, at a 20 year amortization level. Acme has no debt. Lilac has $456,000 at the end of 2012; part of the overall loan. Regal Court has $416,000 and Regal Square has $177,000. The only other two debts are East Street, Sunnyside. At 8.11% that is the high interest rate. We recommend going to US Bank and ask for a reduction in the loan rate. Lydia Morgan has a debt that needs to be refinanced in January 2, 2013. 6.5% interest on $800,000. This property is right on the edge, about a year away, from winding up that tax credit partnership. Hillside is an interesting opportunity. We recommend a plan with HUD to leverage that property. There might be an opportunity to use that in a recapitalization plan Low income tax credits are earned over a 10 year period. In 1.5 years, those credits will have been earned on Sunnyside. Then there is a 5 year compliance period, at which the investor has to make sure the property stays available affordable housing, operating within all the requirements for the tax credit program. That will happen on this property by the end of next year. Steve Clark and Associates Recommendations: Consider operating efficiency and economy of scale where you can. Hillside is a leverageable asset. Consider combining it and get the relocation vouchers and go into HUD with a consolidated plan. A small version of that would be to refinance the debt on Lilac and Regal II and use the non- public housing Hillside to spread that debt, so that they are all on a better operating basis. As Lydia Morgan comes out of it's tax credit partnership, that property, along with Hillside, Lilac, Regal II or Regal One (with BCHA) could be combined and put together in a partnership in a 4% tax credit partnership to leverage money to acquire a new property. Instruct Staff to go forward to take Lydia Morgan out of the Tax Credit Partnership and have the 2013 debt refinanced. You should direct staff to study these options and come back with specific recommendations. Beyond 2014, Sunnyside will come out of the 9% tax credit units and it will be operated as affordable housing. There may well be a new opportunity to develop new properties. Efficiencies should be discussed at a retreat or set aside some time to discuss. You don't have huge capital needs. All of the properties need some improvement. Generally, there is not even a half million dollars in "have to" repairs on those properties. The ability to leverage or borrow money or manipulate the properties could be focused on additional units.