Louisville Housing Authority Agenda and Packet 2012 03 13

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Hillside Square Disposition Opportunity. As noted above, LHA could apply to HUD to "dispose" of this property or convert it from "public housing" to an affordable property owned and operated by the Authority or another qualified owner. This removes the typically onerous administrative burden of public housing regulations and reporting. It may also allow the Authority to leverage the property by recapitalizing in a tax credit partnership with other currently owned properties, or to be acquired or developed properties, Typically with disposition, public housing authorities also apply for relocation vouchers for the existing tenants. Such vouchers, depending on the total voucher pool may be able to be project based or tied to the specific Hillside Square property, The decision of whether to dispose of Hillside or not is likely best made in context of a larger decision process of additional property acquisition or development. S.B. Clark Companies did calculate a proforma operating example of Hillside with project based vouchers at comparable fair market rents. Given such, such potentially more than $800,000 could be borrowed against the property for use in its renovation and possibly applied to other property acquisition or development. Tax Credit Properties. LHA is managing partner or controls the managing partner of two LIHTC properties, East Street or Sunnyside, and Lincoln Street Elderly or Lydia Morgan. These properties are operating well, although they do not generate significant cash flow to pay interest on subordinated loans made to the partnerships for their development. LHA's highest priority relative to these tax credit properties is planning for the conclusion of the Lydia Morgan property partnership at the end of 2012. The final tax credit allocation was dated December 31, 1997 and the investor had earned all its "tax credits" by the end of 2007. At the end of 2012, the additional five years of "compliance" will conclude, The Authority should have the legal documents examined to determine the most effective means of having the tax credit investor exit the partnership and the Authority become the sole owner /operator of the property. Typically, this can be accomplished by the assumption of all debt and tax liabilities owed by the partnership but there may be complications depending on the status of "capital account" of the partnership. The East Street or Sunnyside partnership does not end until mid 2016, but there may be some opportunity for the investor to exit early if such is beneficial to both parties. An examination of the legal documentation, the partnership accounting reports and tax returns can reveal any such opportunity, In the interim, the East Street first mortgage debt owed to U.S. Bank carries a high interest rate relative to current market conditions. An examination of the prepayment options under the loan should be made to determine if refinancing is beneficial relative to its costs for the remaining term of the loan, which is due in May 2017. Louisville Housing Authority Page 5 Portfolio Analysis Summary Report 20