Louisville Housing Authority Agenda and Packet 2012 04 09

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Steve presented the high points of the last report. The LHA portfolio is made up of 3 categories; 4 affordable housing properties that do not have specific requirements on them the way public housing does where. HUD provides a monthly subsidy. One property within that has the section 8 new construction subsidy. Regal Square is a Section 8 new construction. The residents there qualify to get the subsidy, a benefit relative to the market rent that HUD feels is the difference between what they can pay. Fair market rents are calculated by HUD. Of those 4 properties, Regal Square is the largest, and has Section 8. Lilac Place and Regal Court 2 are smaller and have debt on them. In the past, it has barely covered the debt service. Acme has four units and no debt. On a whole they are operating fairly well. Regal Square carries them. The two low income housing tax credit projects, including Lydia Morgan (just coming up on the 15 year compliance period) has to be managed so that the tax credit investor can recapture and pay back the treasury for their tax credits. That is now ending and the investors want to exit the properties. The investors and JP Morgan own 99% of partnership. Louisville Housing Authority owns 1%. In order to get out of thatFartnership, you transfer that interest to LHA or the BCHA, and refinance the debt. January 3` , 2013, there is a note that has to be refinanced. The other tax credit property is Sunnyside; the East Street Partnership, has just about come up to its 10 years. It may be that you can get the tax credit investors to exit early. Those two tax credit properties need to be resituated and any rehabilitation should be done at that time. The Hillside property has 13 units of public housing. On the whole the 116 units are operating reasonably well. It's a very small portfolio. There is not a tremendous amount of value that could be leveraged to do other development. There is not a lot of room within the balance sheet to grow the portfolio. BCHA is trying to build their portfolio to compete more effectively and to delivery services for their residents. They are doing this on your behalf with a contract that they could walk away from, if they wanted to, within 60 days. We work for BCHA and we also work for LHA. Our business is to tell you the facts. For your city and your organization, there are advantages to potential synergies that BCHA has as a result of the portfolio analysis coming up. They are doing the second round of financing for the Josephine Commons property and you can include properties in that tax credit partnership that could potentially include LHA properties in that cost. Another opportunity is that BCHA has two bond issues with higher rates outstanding; that are now in the position to be refinanced. The refinancing that you are looking at relative to Regal Square and Regal Court II and Lilac, needs to be refinanced and could be rolled into that cost at the same time. The one piece of debt you do have is amortizing in 20 years, a good thing as you want to get out of debt as soon as possible, a bad thing because it raises the debt service requirement. 3