HDC MidAtlantic completes $26M bond transaction for 7 properties in 3 counties

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Groundbreaking deal consolidates properties into a portfolio under one partnership,
provides financing for renovations

LANCASTER – Housing Development Corporation MidAtlantic President Michael R. Carper announced today that the company completed a groundbreaking $26 million tax-exempt bond transaction this month that will allow the nonprofit company to keep rents affordable for seven of its properties, in three counties, for an additional 30 years.

The deal, a first of its kind in Pennsylvania, consolidates the properties under one limited partnership and provides roughly $8.4 million for HDC MidAtlantic to perform renovations intended to improve energy efficiencies and provide many upgrades at each of the properties.

“Outside of major metropolitan areas, it is extremely rare for affordable housing providers to cobble together a transaction like this,” Carper said. “For a nonprofit company like ours, legal fees and other fees kill the idea of issuing a bond for a single property with a few dozen apartments.

“But by combining these seven properties into one portfolio, with a total of 376 apartments, we found a unique way for small affordable housing developers to take on a big-time transaction,” Carper said.

The properties that comprise this portfolio are:  

Berks County
Penn’s Common Court, Reading

Dauphin County
 Highspire School Apartments, Highspire

Lancaster County
Aster Place Apartments, Manheim Township 
Franklin Street Apartments, Ephrata
King Theatre Apartments, Lancaster
Oak Bottom Village II, Quarryville
Umbrella Works Apartments, Lancaster

All of these properties were originally financed and built or renovated at least 15 years ago using federal Low-Income Housing Tax Credits (LIHTC). Under LIHTC rules, landlords can opt of the program, and start charging market rate rents after 30 years.

“The problem with this,” Carper said, “is it takes away affordable housing from people who need it most. That’s not what HDC MidAtlantic is about. We are here to provide affordable housing because there’s still a need for it.”

The transaction called for an innovative and complex financing structure, which was reached in partnership with the Lancaster Housing and Redevelopment Authority. In April 2011, the Board of Directors of the Authority unanimously approved the issuance of private activity, tax-exempt bonds to pay down debt it held in some of the properties.

Working with attorneys at Nikolaus & Hohenadel and bond counsel at Stevens & Lee, both of Lancaster, HDC MidAtlantic requested an allocation of the state’s annual allotment of federal Volume Cap proceeds, administered by the Pennsylvania Housing Finance Agency. Volume Cap is another tool the government provides for financing affordable housing.  After securing the bonds, HDC reached out to Fulton Bank in Lancaster, a long-time partner, which agreed to the purchase the bonds.

Upon receiving approval for the tax-exempt bonds, HDC MidAtlantic by law then was eligible for 4 percent Low-Income Housing Tax Credits. HDC was able to generate additional equity capital through the sale of the credits to Enterprise Community Investment Inc., a nationally recognized syndicator of tax credits for affordable housing.  

“I am grateful for the tenacity of our staff here at HDC who worked tirelessly for months to make this deal a reality,” Carper said.

In the end, the complicated refinance provided HDC MidAtlantic a more competitive interest rate that saves money for the company and each of the properties.

In total, the transaction will include roughly $8.4 million that HDC will use to install green technologies at each of the properties. This includes solar panels, high efficiency boilers for heating systems, and energy efficient windows. HDC will be able to keep rents affordable because the properties will realize significant savings thanks to the installation of the green technology. By simply installing the energy efficient technologies, the properties will realize savings of 18 percent to 20 percent in utility costs. HDC and residents alike will realize these savings.

In addition, all handicapped apartments at the properties will be renovated to ensure that they meet current requirements of the Americans with Disabilities Act.

CH&E Construction of Lancaster is serving as the general contractor.

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Founded in 1971, Housing Development Corporation is a not-for-profit company dedicated to providing quality affordable rental housing for low-income people and senior citizens throughout Pennsylvania. HDC is the largest provider of affordable rental housing in south-central Pennsylvania and has developed and currently manages more than 3,100 rental housing units in 11 counties.

 

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