September 13, 2022
Housing Authority
Economic Development
DATE: September 13, 2022
TO: Housing Authority Board of Commissioners
FROM:
Shasa Curl, City Manager
Nannette Beacham, Executive Director of the Richmond
Housing Authority
Gabino Arredondo, Project Manager
Subject:
Richmond Village Memorandum of Understanding (MOU)
FINANCIAL IMPACT: The financial conversion will require no additional subsidy from RHA and is projected to result in repayment of over $14.7M in RHA debt over the next 12 years. Richmond
Housing Authority (RHA) and McCormack Baron Salazar
(MBS) will assume a “non-debt” Rental Assistance
Demonstration (RAD)/Section 18 Small Public Housing
Agency (PHA) Blend conversion for Richmond Village I,
II, and III. This is a change from the plan reflected in the PHARS agreement. This change is advantageous to
RHA and HUD and became possible with the publication
of the Office of Public and Indian Housing (PIH) Notice 2021-07 on January 19, 2021.
PREVIOUS COUNCIL
ACTION:
7/27/2021; 12/22/2020
STATEMENT OF THE
ISSUE:
The MOU facilitates the repositioning of the Richmond
Village properties (I, II, and III) by making clear the future operations, partnerships, collaboration, and initial
timeframe to apply for Rental Assistance Demonstration
(RAD) conversion to the United States Department of
Housing and Urban Development (HUD). The MOU
execution supports the completion of tasks 5.1 to 5.3 and
6.1 to 6.3 of the Public Housing Agency Recovery and
Sustainability (PHARS) Agreement with HUD.
AGENDA
REPORT
September 13, 2022
RECOMMENDED ACTION:
ADOPT a resolution approving a Memorandum of
Understanding (MOU) by and among the Richmond
Housing Authority (RHA), MBA Urban Development Co.,
a Missouri corporation, Community Housing
Development Corporation of North Richmond (CHDC),
and MBS Easter Hill Acquisition Partner, LLC, pertaining to the operation of the Easter Hill development phases I and II, and cooperation regarding potential Rental
Assistance Demonstration (RAD) Conversions for the
developments with a term ending December 31, 2023;
and AUTHORIZE the Executive Director to execute the
MOU – Richmond Housing Authority (Nannette J.
Beacham 621-1300).
DISCUSSION:
The MOU by and among RHA, MBA Urban Development Co., a Missouri corporation, Community Housing Development Corporation of North Richmond (CHDC), and MBS Easter Hill Acquisition Partner, LLC execution supports the completion of tasks 5.1 to
5.3 and 6.1 to 6.3 of the 2019 Public Housing Agency Recovery and Sustainability (PHARS) Agreement with HUD (Attachments 2 & 3).
Repositioning Richmond Village (converting to Rental Assistance Demonstration (RAD)) involves three distinct and related tasks: 1) exit the investor limited partner (so called “year 15”); 2) negotiate new terms with MBS for the future ownership and operations of Richmond Village; and 3) submit a RAD application.
Regarding #1: MBS was able to secure a commitment from the investor limited partner to exit the partnership for $1.00. This is the best possible outcome under the Right of First Refusal and Option Agreement. Work to finalize the exit is on- going. Timeliness of this task has been frustrated by the fact the investor was in the process of selling their Low-Income Housing Tax Credit (LIHTC) investment portfolio.
Regarding #2: RHA and MBS have finalized the terms of a memorandum of understanding (MOU). This MOU protects RHA, current public investments, and future use as affordable rental housing (Attachment 3). Regarding #3: The elements of a RAD application are in place (resident meetings, Mixed Finance Affidavits, and plan). Changes in subsidy type by unit over time at Richmond Village has required confirmation of unit information necessary for the RAD application. This work is nearly complete. We anticipate a RAD application submittal by the end of September 2022.
Richmond Village MOU Summary of Terms
September 13, 2022
The MOU facilitates the repositioning of the Richmond Village properties (I, II, and III) by making clear the future operations, partnerships, collaboration, and initial timeframe to apply for Rental Assistance Demonstration (RAD) conversion to the United States Department of Housing and Urban Development (HUD).
The MOU addresses the following:
Replacement of the investor limited partners of the partnerships that own and operate Phases 1 and 2 of the Easter Hill development (known as Richmond Village 1 and 2), with an MBS affiliate
Admission of CHDC as the managing general partner, replacing RHA, and increasing the partnership management fee payable to CHDC to $25,000 per year
Confirms agreement of the parties to cooperate to pursue RAD Conversions Confirms agreement of the parties to seek resyndication at a future date to be determined based on factors including project needs and availability and competitiveness for funding sources
Existing RHA and RDA loans will be repaid according to the original LPA cash flow waterfall and no fees or expenses will be placed ahead of RHA debt repayment.
RHA and MBS assume a “non-debt” RAD/Section 18 Small PHA Blend conversion for Richmond Village I, II, and III. This is a change from the plan reflected in the 2019 PHARS agreement. This change is advantageous to RHA and HUD and became possible with the publication of the PIH Notice 2021-07 on January 19, 2021. At the time the 2019 PHARS Agreement was executed, this option was not available. “No debt” conversions are the most streamline of all RAD conversions. The Financing Plan will be submitted as soon as possible following receipt of the RAD Commitment to Enter into a Housing Assistance Payments Contract (CHAP).
Under the new approach mentioned above, closing for Richmond Village I, II and III will occur simultaneously. Closing should occur within 120 to 180 days on submittal of the Financing Plan. Processing by HUD’s Recapitalization office and RHA will determine the schedule for closing. Additionally, we expect Richmond Village I and II (Asset Management Projects (AMP 007 and 008) will proceed as a RAD “many-to-one” transaction since both AMPs are currently and will continue to be owned by a single ownership entity.
ATTACHMENTS:
Attachment 1 - Resolution
Attachment 2 - MOU
Attachment 3 - 2019 PHARS