The Hallmark Cos. has closed a $168.6 million transaction to recapitalize and rehabilitate 1,310 affordable homes in Georgia.
The portfolio of affordable housing properties includes 26 aged U.S. Department of Agriculture (USDA) Rural Development Sec. 515 properties, which were then consolidated into 23, in 17 counties across the state.
The deal is the Atlanta-based developer and owner’s third collaboration with Greystone Affordable Development.
In the statewide-pooled transaction, Greystone worked closely with USDA’s Rural Housing Service’s state and national offices and the Georgia Department of Community Affairs (DCA) to coordinate and secure the financing needed to recapitalize and rehabilitate this at-risk and much-needed housing.
“With only 38 affordable rental homes available for every 100 extremely low income households in Georgia, a large percentage of the state’s income-restricted households are severely rent overburdened,” said Tanya Eastwood, president of Greystone Affordable Development, a provider of affordable housing recapitalization and rehabilitation advisory services. “New affordable housing stock just isn’t being created fast enough to meet the demands, thus preservation of the aging stock is absolutely essential. We are able to not only preserve, but also modernize this vital housing stock. It is important to note that this unique and complex process would simply not be possible without housing credits and private-activity bonds.”
The financing plan combined both public and private funding, and included:
· Tax-exempt bonds: Single issuance of $54.3 million in publically offered multifamily private-activity tax-exempt bonds from the Housing Authority of Macon-Bibb County;
· Low-income housing tax credits (LIHTCs): Purchase of 4% federal and state LIHTCs by Boston Financial Investment Management, generating $54 million in capital contributions;
· Sec. 515 debt: Assumption and subordination of $27.6 million of original USDA Sec. 515 debt, as well as $368,000 in new USDA Sec. 515 debt awarded to two of the properties through Rural Development’s Multifamily Preservation and Revitalization program. The Sec. 515 program is a direct loan program designed to provide subsidized loans to developers of affordable housing in rural markets;
· Senior debt: $27.3 million in USDA Sec. 538 loans provided by Greystone Servicing Corp.; and
· Excess reserves, project operations, investment income, and deferred developer fees: $5 million.
The rehabilitation plan includes a fast-paced construction phase, estimated to be complete within 24 months, during which no residents are expected to be permanently displaced.
Substantial renovations, averaging $37,000 per unit, will include both interior and exterior improvements. Particular emphasis will be placed on bringing the properties, built between the late 1970s and the mid-1990s, up to modern standards, addressing accessibility, functional obsolescence, and deterioration. This transaction includes the goal to achieve an overall energy savings of at least 20% at each property via installation of energy-efficient measures such as Energy Star–certified windows, doors, and appliances, high-efficiency water heaters, and insulation upgrades.
“With the critical need for affordable housing in Georgia, we are inspired by Hallmark’s proactive efforts in preserving this critical housing stock,” said Laurel Hart, director of the housing finance and development division at the Georgia Department of Community Affairs. “We would love to see other owners in Georgia embrace this process, which is clearly something of a ‘secret sauce’ that Greystone has developed for the benefit of thousands of affordable housing residents.”