High-Speed Preservation: Portfolio Transaction Hastens the Renovation of Multiple Rural Apartment Properties in Georgia

By
3 min read

If you’re not from Georgia or don’t live there, chances are you haven’t heard the name of the following rural communities: Pine Mountain, Midville, Preston, Talbotton, Cusseta, or Willachoochee.

The common thread among these and numerous other small rural Georgia towns is that they are the location of older USDA Rural Housing Service (RHS) Section 515 rental housing properties being renovated and recapitalized with the proceeds of a $117 million transaction closed in September.

The transaction is said to be the first involving the acquisition and rehabilitation of a portfolio of multiple Section 515 properties in which the newly originated mortgages are Fannie Mae loans. Similar previous Section 515 portfolio transactions have utilized new RHS Section 538 loans or new mortgages insured by the U.S. Department of Housing and Urban Development.

 

Forty-Four Properties

Structured by Greystone, which also originated the new Fannie Mae DUS loans, the latest transaction generated funding for the acquisition and rehabilitation of 44 older Section 515 properties in 30 counties by WWJ, LLC, an affiliate of Boyd Management, Inc., based in Columbia, S.C. Once work on these properties is complete, Boyd Management will be over halfway through the renovation and recapitalization of its entire portfolio of more than 200 Section 515 properties – all located in Georgia, North Carolina, and South Carolina. Roughly 125 properties were renovated and recapitalized in three previous portfolio transactions also structured by Greystone.

Barbara Jaco, Vice President of Boyd Management, said the use of portfolio transactions has enabled the company to renovate and recapitalize its Section 515 properties much more rapidly. She said the company initially was renovating only one to three properties a year as part of an ongoing process to preserve the housing, but came to realize that it would need to come up with a creative way to accelerate the pace. “We met the Greystone folks, they had some skills and we had some skills, we came together, created a partnership, and here we are,” she says.

Jaco said some of the current 44 properties have already been renovated, and all should be completed by sometime in 2014. “We started construction on July 29th and we’re on project No. 12,” she says. “We finish 8 to 10 units a day.” Residents leave their apartment for the day and all work is completed during this period. Jaco said the 44 properties are about 20 years old and range from 10 to 52 units.

Interior renovations to apartments include new flooring, energy-efficient appliances, hot water heaters, upgraded HVAC, kitchen cabinets and countertops, fixture upgrades, and other improvements. Exterior improvements include new insulated double-pane windows, doors, gutters, siding, new roofs, and landscaping.

 

Multiple Funding Sources

Funding sources for the transaction included $26.9 million in new Fannie Mae loans; more than $31.7 million in equity generated by federal (4%) and state housing tax credits syndicated by an affiliate of CAHEC; proceeds from more than $47.2 million in tax-exempt bonds issued by the Athens (Ga.) Housing Authority; the assumption and subordination of more than $35.9 million in existing Section 515 debt on the properties; and $2.2 million from other sources. About 98% of the total 1,362 units continue to receive RHS Section 521 rental assistance.

To enable the Athens Housing Authority to issue the bonds, Boyd Management had to obtain the permission of the housing authority in each county in which the properties are located.

“This was a major undertaking and the first of its kind in Georgia,” said Tanya Eastwood, Managing Director for Greystone’s Affordable Housing Initiatives group. “These properties risk being removed from the affordable housing stock unless there are collaborative efforts from all agencies and partners involved.”