MEYERS GREENE

A Rural Development 515 Rehab

Why Preserve RD 515 Properties

• Integral to the housing stock in many rural communities

• Preservation of Rental Assistance • Rehabs are expensive, but not as expensive as

building new • Community cooperation and support • Opportunity to have a major impact on residents’

lives • Many old 515’s lack modern amenities, accessible

units, energy efficiency, etc.

The Project

• Before—76 units consisting of 16 one bedrooms and 60 two bedrooms

• Numerous units were not habitable • Site problems, including accessibility problems • We reduced the unit count to 52, and ended up with

13 one bedrooms, 16 two bedrooms, 15 three bedrooms, and 8 four bedrooms

• Drastically improved all units, accessibility, energy efficiency

• All units now have Rental Assistance

BEFORE

Site Problems

Asphalt is expensive

Typical of the condition of the site

Drainage problems throughout

Units were totally gutted

Exteriors were upgraded

Added various architectural elements

Repaired all walks and asphalt

After

Another After

Drake Crossing Before

Drake Crossing After

Sources

• Investor equity $6,216,549 • Assumed 515 loan $1,738,210 • Reserves from Seller $15,012 • GP Equity $100 • Deferred Developer Fee $196,049 Total $8,165,920

Uses

• Land $190,000 • Building Acquisition $1,744,245 • Construction $3,596,803 • Soft Costs $1,208,47 • Developer Fee $846,629 • Reserves $579,396 Total $8,165,920

Challenges Inherent with a 515 Rehab

• The 515 program still operates under the legislative framework signed into law by Richard Nixon in 1972. The legal framework was established for a new production loan program. Many elements of the legal framework do not contemplate or work well with the tax credit program.

• No way to decouple RA from the loan. • 47 states, 47 ways of doing things. • Limited return to owner. • Relatively low rents. • Appraisal issues. • CNA problems. • Timing.

More Challenges

• In some states, we have waited over 2 years for closing instructions from the Office of General Counsel.

• Many transfers take up to a year to process. • RD has lost many experienced staff members. • RD budget underwriting frequently does not

match SHA underwriting.

The Good News

Pennsylvania has an excellent RD staff, and the RD staff and PHFA work together better than in any other state (13 in total) where we work.