Love Funding, one of the nation’s leading providers of FHA multifamily, affordable and healthcare financing, announced the closing of a $5.3 million loan to substantially rehabilitate a 96-unit apartment community in Deerfield Beach, Florida, and preserve its affordable status through a unique FHA program.
Stanley Terrace was built in 1969 as a traditional public housing development, but in 2014, the Deerfield Beach Housing Authority applied for and received acceptance to the U.S. Department of Housing and Urban Development’s Rental Assistance Demonstration (RAD) program.
The RAD program was created by HUD in 2014 to convert public housing units to long-term Section 8 contracts, allowing the units to remain affordable to low-income households. Rather than having to apply annually for operation and management subsidies through the federal public housing budget, the Deerfield Beach Housing Authority was able to convert those funds into Section 8 rental subsidies. This allows them to offer market rents, since the rental assistance makes the units affordable. Consequently, the Authority can operate and renovate the property with debt that is supported by net income, like any other property owner.
Love Funding Midwest Regional Director Bruce Gerhart secured the loan through HUD’s 221(d)(4) Substantial Rehabilitation Program in combination with short-term tax exempt bonds from the state of Florida and 4% low-income housing tax credits (LIHTCs). This was the first RAD conversion in Florida to utilize 4% credits and bonds.
Additionally, Love Funding worked with its parent, Midland States Bank, to make a “one day” loan to facilitate the release of the short-term bonds and to recognize the contributed value of the property from the Housing Authority to the new partnership. The technique, which was necessary for the transaction to be completed, will soon be replicated on a similar transaction in New York.
“Since its introduction, the RAD program has proven to be a highly effective financing mechanism to modernize public housing and place it on a market-based economic operation like all other rental housing.” Gerhart said. “To its credit, Deerfield Beach Housing Authority recognized this and helped push the number of housing units preserved through the program to more than 30,000 nationwide since the RAD program’s inception.”
Darren Smith of Smith & Henzy Advisory Group, Inc., and C. Ray Baker & Associates were instrumental in helping guide the Deerfield Beach Housing Authority through this complicated transaction. The financing will help the Authority implement a wide range of repairs and renovations to the property’s units, including remodeled kitchens and bathrooms, window and roof replacements, and the repair of all existing mechanical and electrical systems. A special ribbon-cutting ceremony was held at the property on October 11 to showcase the improvements. Speakers at the event included Deerfield Beach Mayor Jean Robb, District 2 Commissioner Gloria Battle, State Representative Gwendolyn Clarke-Reed, Former DBHA Chairman Keith Emery, and County Commissioner Chip LaMarca.
For more information, contact Bruce Gerhart at (216) 583-0812.