Leading the Way

AFFORDABLE HOUSING FINANCE • August 2008

BY DANA ENFINGER

AUSTIN, TEXAS - If you can’t join ’em, beat ’em. That’s basically become a motto of sorts for Foundation Communities, a nonprofit located here. It’s very fitting for its latest project, Skyline Terrace, a 100-unit single-room occupancy development.

“We are competing with for-profit developers in the hot real estate market in Austin. It’s tough for us to build new projects,” said Walter Moreau, executive director of F o u n d a t i o n Communities. “As a result, we have focused on acquiring other buildings to convert into supportive housing for individuals.”

“Other buildings” recently have consisted of two former hotels and a nursing home. Skyline Terrace was formerly a Ramada Inn. It could have been a target for condo conversion thanks to its solid construction and views of the Austin skyline. Foundation Communities was able to hold the project under contract for the seven-month low-income housing tax credit (LIHTC) application and review process through grants and its capital reserve fund. Moreau said the only way the development was financially feasible was with LIHTCs.

The property serves individuals who earn less than 50 percent of the area median income, or less than $24,900. Most of the residents will earn less than $14,900 annually. Sixty percent of residents have some sort of disability. Only about 30 percent of the tenants are working.

The 100-unit building includes a front desk staffed around the clock and video surveillance in community areas. All apartments are furnished and have kitchenettes. Common areas include a computer lounge with wireless Internet access, meeting and recreation rooms, and a community kitchen and dining area (which was the former hotel restaurant). Supportive services include case management for those who have been chronically homeless, support groups, a food pantry, bus passes, and more. Residents are offered a variety of classes in money management, computer skills, fitness, and other life skills. For some residents, especially those with chronic health problems, Skyline Terrace may be a permanent home.

Moreau said that Foundation’s proven track record (it operates 11 properties in Austin and three in the Dallas- Fort Worth area) made it relatively easy to combat NIMBYism. The real enemy was mold.

“In spite of the extensive due diligence we conducted, we discovered mold in the walls under the vinyl wallpaper,” said Moreau. The seller did not disclose the mold problem. Moreau said that the remediation cost about $300,000. Another $300,000 was spent weatherizing the building and rebuilding what had to be demolished. All told, the construction cost increased 25 percent. Foundation is employing a pro bono attorney to pursue compensation from the former owner. Despite all this, the project was delayed by only two months.

“Even when you have a lot of experience, rehab projects can always have surprises,” said Moreau.

Financing includes HOME funds and LIHTC equity that totaled $5.5 million. Enterprise Community Investment, Inc., syndicated the tax credits. Funds from the Austin Housing Finance Corp. amounted to $3.5 million, which includes $1.5 million in general obligation bonds and $881,000 in local housing trust funds. The project, which incorporated many green building elements, also received about a dozen grants from various national and local organizations.

Corde