Louisville Housing Authority Agenda and Packet 2012 03 13

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Agency -wide Conclusion — Needed Capital investments Are Modest. Of the four affordable housing properties (i,e. non - public housing and non -tax credit properties), the total estimated rehabilitation requirements are estimated by staff at $295,000 or an average of $5,628 per unit. Similarly, Hillside Square, the public housing property, has only $2,077 per unit capital needs. The tax credit properties have required replacement reserves that have annually required deposits that are expensed and then the capital improvements are drawn upon with approval of the tax credit partner and lender. Regal Square is LHA's largest and strongest property and is supported by HUD HAP subsidies to income - qualified tenants. Regal Square is typically LHA's most profitable property. Regal Square's annual net operating income (net income plus depreciation less non - routine maintenance costs) covers its debt service by more than three tunes. Moreover, Regal Square shows a significant $623,114 "due from other funds" current asset that indicates this property is a cash source for covering costs in other areas of the Authority's operations. Regal Square has a $6,667 per unit capital need estimate and with its very modest debt of $177,480, the property's leverage could be increased. Much of this capital need per unit accounts for major rehabilitation needed in two units that are degrading quickly due to ground water level changes and building settling damage. If at any time LHA was considering acquisition of a significant property or wanted to develop additional affordable housing, the "equity" in Regal Square could be capitalized by including it in a LIHTC partnership with the new acquisition or development. Such combination would need to be approved by HUD for change of ownership from the Authority to a tax credit partnership controlled by LHA. Lilac Place and Regal Court 11 are small properties each with significant debt. Neither property has a formal subsidy source but some of their tenants appear to use Section 8 housing choice vouchers. Both properties are burdened with debt, $456,286 and $466,776, respectively, as of year -end 2010. This debt burden equates to $38,024 per unit for Lilac Place and $46,677 per unit for Regal Court IL Annual debt service for each property is $4,022 and $3,550 per unit, respectively, Lilac Place's 2010 operating income was $8,653 and Regal Court II's was $8,760. After scheduled debt service each property generated $4,631 and $5,210, respectively, to cover operating costs and extraordinary maintenance /repairs. One reason the annual debt service appears high is that the existing Wells Fargo loan for each property is a 20 -year amortization. Typically, housing authorities use 30 -year amortization debt if available to provide lower rents to needy tenants, and to have more cash flow for repairs and investments in the property. It is, of course, important to match the useful life of the property with its debt amortization rate. Acme Place is a small 4 -unit property with no debt. It generates reasonably adequate revenue to cover its costs. Its capital needs of $6,250 per unit appear manageable from cash flow in future years. A small amount of debt (approximately $140,000) could be supported by the property's operations if necessary. Louisville Housing Authority Page 4 Portfolio Analysis Summary Report 19