Greystone Affordable Development Spearheads Preservation of 1,310 Low-Income Rental Units with $168.6 Million Transaction in Georgia
April 11, 2018
Category: Affordable Housing
Intended to Address Growing Affordable Housing Crisis, The Hallmark Companies, Inc. Completes Third Innovative Recapitalization with Substantial Rehab Process to Follow
Greystone Affordable Development, a leading provider of affordable housing recapitalization and rehabilitation advisory services, announces the closing of a $168.6 million multifamily housing transaction in Georgia, marking the third collaboration with Atlanta, GA-based The Hallmark Companies, Inc., an owner and manager of approximately 11,000 affordable housing rental units in the U.S.
The portfolio of affordable housing properties included 26 aged USDA Rural Development Section 515 properties (which were then consolidated into 23) comprised of 1,310 rental apartments serving low-income households in 17 counties across the state. In the statewide-pooled transaction, Greystone worked closely with USDA’s Rural Housing Service (RHS) 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. New affordable housing stock just isn’t being created fast enough to meet the demands, thus preservation of the aging stock is absolutely essential,” said Tanya Eastwood, President, Greystone Affordable Development. “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 rural areas of the U.S. are often overlooked for real estate investment, so we appreciate how valuable the portfolio preservation strategy is for owners committed to serving rural residents,” said Joyce White, State Director of Georgia, USDA Rural Development.
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 Credit Equity – Purchase of 4% Federal and State LIHTCs by Boston Financial Investment Management, generating $54 million in capital contributions.
- RHS 515 Debt – Assumption and subordination of $27.6 million of original USDA Section 515 debt, as well as $368,000 in new USDA Section 515 debt awarded to two of the properties through Rural Development’s Multifamily Preservation and Revitalization (MPR) Program. The Section 515 program is a direct loan program designed to provide subsidized loans to developers of affordable housing in rural markets.
- Senior Debt of $27.3 million in USDA Section 538 loans provided by Greystone Servicing Corporation, Inc.
- Excess Reserves, Project Operations, Investment Income, and Deferred Developer Fees totaling $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, Housing Finance & Development Division, 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.”
“Greystone has been an incredibly valuable partner in our role as stewards of affordable housing in the southeast,” said Pete Petersen, President, The Hallmark Companies, Inc. “Their sincere commitment to our residents is what drives such a complex transaction to the finish line, and we look forward to working on future transactions together.”
“We strive to create a blueprint for preservation that can be replicated across the country as we continue to seek opportunities to recapitalize and rehabilitate multiple properties in a single transaction, said Will Eckstein, Senior Vice President, Greystone Affordable Development. “These public / private partnerships not only preserve and improve much-needed affordable housing in rural communities, it drives economic investment and is a win-win for all. We especially thank Hallmark for their continued confidence in Greystone to guide them through this process for the third time and their commitment to affordable housing across the state of Georgia and the Southeast.”