More than $64 million in financing will help to preserve 18 aged U.S. Department of Agriculture (USDA) Rural Development Sec. 515 properties across 14 counties in Kentucky. The properties, which are owned and operated by Lexington-based Winterwood, include 563 units for low-income households.
Greystone Affordable Housing Initiatives’ preservation group worked with the national and Kentucky offices of the USDA Rural Housing Service (RHS) and the Kentucky Housing Corp. (KHC) to secure the financing for the recapitalization and rehab of the at-risk housing.
All the properties leveraged the Multifamily Preservation and Revitalization Program, a loan restructuring tool that provides debt with favorable financing, through the USDA. This will help decrease overall rents by $22 per unit across the portfolio. Also, 68% of the units will continue to receive Sec. 521 rental assistance provided by RHS or Sec. 8 rental subsidy pursuant to a Housing Assistance Payments contract through the Department of Housing and Urban Development.
The $64.4 million statewide pooled transaction is comprised of a combination of public and private funding, including:
- Single issuance of $21.2 million in private-activity tax-exempt bonds by KHC;
- 4% low-income housing tax credits purchased by CAHEC that will generate $11.9 million in capital contributions;
- Assumption and resubordination of $13 million of original Sec. 515 debt;
- Long-term debt that includes $775,000 in USDA-guaranteed Sec. 538 loans provided by Greystone Servicing Corp. and $15.9 million in newly issued Sec. 515 loans; and
- $500,000 in HOME funds provided by HUD to KHC.
“This transaction provided a rare opportunity in the movement to preserve and improve affordable housing. By aggregating smaller properties into a single statewide portfolio, economies of scale were created and a deal with this level of complexity became possible,” said Tanya Eastwood, president of Greystone Affordable Housing Initiatives, in a statement. “Winterwood recognized the importance of repositioning its assets and collaborated with Greystone to accomplish its goals. Substantial renovations for the properties, which range from 12 to 60 units and were built between 1978 and 1999, will include interior and exterior improvements to bring them up to modern standards and will average $31,700 per unit. The renovations are estimated to be complete within 12 months.
Greystone also arranged for energy incentives and rebates with the Home Energy Analysis and Home Energy Rebates programs through the Louisville Gas and Electric Co. and Kentucky Utilities Co. to make almost half of the units more energy efficient. The goal is for 253 units to be 30% more energy efficient by the end of construction.