ADA, OKLA.—The renovation of a 56-unit development here nearly came to a halt as the economy tanked, but Red-Wood Development was able to complete the work this year with the help of federal stimulus dollars.
The $4 million rehabilitation of Ada Square Apartments is the first project to be completed in Oklahoma using Tax Credit Assistance Program (TCAP) or credit exchange funds.
“Without the exchange funds, we would not have been able to complete this,” says Rick Schroeder, president of the Joplin, Mo.-based development company.
Red-Wood purchased the 29-yearold complex about two years ago and received a reservation of low-income housing tax credits (LIHTCs) from the Oklahoma Housing Finance Agency (OHFA) to transform the aging property, including removing mold and asbestos.
Work was under way when officials found out that their tax credit investor wasn't going to come through. Schroeder and others in his office worked for two months calling every tax credit syndicator they could think of but were unable to sell their LIHTCs.
Investors were cutting back on their investment volume and being more selective about their deals. As a result, small rural projects like Ada Square were having a hard time.
The situation in Oklahoma was similar to other states that saw developers not finding an investor or pricing dropping significantly, says OHFA Executive Director Dennis Shockley.
To help stalled LIHTC projects, Congress created TCAP and the exchange program as part of the American Recovery and Reinvestment Act of 2009. Red-Wood then exchanged its unused credits for about $2.2 million in exchange funds.
Developers were able to finish the renovation of the apartments, including adding new appliances, carpet, and flooring.
The complex also has a new community building and a playground. The property is managed by Bell Management, a Red-Wood affiliate.
In Oklahoma, a dozen projects received TCAP funds, 23 received exchange funds, and three are utilizing a combination of the two, representing about $90 million in total funds, says Shockley.
OHFA was able to meet the demand and finance the projects requesting assistance.
Demand down for OHFA's latest LIHTC allocation round
The agency has now turned its attention to its latest round of LIHTC allocations.
OHFA usually receives 24 to 28 applications, with demand outstripping the agency's $9 million in annual LIHTC authority.
Two allocation rounds have been the norm in Oklahoma, but this year a single round was scheduled, with applications due in May. OHFA received just 11 applications.
Shockley, who has been with the agency 13 years, says it is the first time he can remember that the program has been undersubscribed. One possible reason is that developers remain uncertain about the tax credit market, he says.
In any case, OHFA plans to go back to two allocation rounds in 2011. This year's reservations are scheduled to be made in September.
Missouri ARRA update
The Missouri Housing Development Commission (MHDC) provided about $38 million in TCAP funds to 24 developments. All but one had closed as of mid-July, with the final project scheduled to close by the end of July.
MHDC officials also approved tax credit exchange funds to 23 properties.
Eleven deals representing about $41.1 million in exchange funds had closed as of mid-July, with four others expected to close on their funding over the following four weeks.
“It has allowed us to help properties move forward that were struggling with finding investors or getting suffi- cient pricings,” says Bill Ulm, director of rental production.
MHDC held a supplemental funding round to reserve the stimulus funds. Like other states, the commission tried to focus on properties that had a good chance of closing, says Ulm.