By Barbra Murray, Contributing Writer
Memphis–Acquiring financing for affordable housing projects is no simple feat in the current economic climate, but Memphis-based ALCO Management Inc. has managed to obtain funding packages totaling over $8 million for the upgrading of four apartment communities in Tennessee. And with money in hand, the multifamily owner and operator has commenced work on the first of the four renovation endeavors.
ALCO has a portfolio of 7,000 conventional and affordable multifamily properties across eight Southeastern states, and while the 30-year-old company engages in development of both types of assets, its activity in affordable housing has focused solely on renovation projects over the last 10 years. “It’s awfully expensive to build, so renovation makes more sense to us,” Robert D. Hyde, senior vice president and chief operating officer with ALCO, tells MHN. “Also, renovating is an inherently green process because you’re using an existing property and a lot of existing building materials.”
ALCO relied on numerous sources to cull the necessary financing for each of the four properties. For the $4 million renovation of the 244-unit Dellway Villa Apartments in Nashville, the company facilitated a multi-faceted package consisting of bonds issued by The Health and Educational Facilities Board of the Metropolitan Government of Nashville and Davidson County, and Low Income Housing Tax Credits (LIHTCs) and Tax Credit Assistance Program funds via the Tennessee Housing Development Agency (THDA). The financing package also includes a federally insured mortgage through Wells Fargo and the U.S. Department of Housing and Urban Development, and equity from Regions Bank.
In Memphis, ALCO will spend $2 million to bring new life to the 128-unit Saints Court Apartments. Part of the financing was made available through bonds, and the remaining was collected from a long list of entities. The Health, Educational and Housing Facility Board of the City of Memphis issued a PILOT tax abatement; Wells Fargo and the Nashville HUD office came through with a federally insured mortgage; THDA provided funds via LIHTCs and the Tax Credit Assistance Program; the City’s Division of Housing and Community Development supplied HOME funds; and Independent Bank made an equity investment.
Two rural multifamily communities are part of ALCO’s four-property affordable housing rehabilitation project. “Development in rural areas is particularly challenging because there is less opportunity for rent growth and equal opportunity for expense growth,” Hyde notes. The 44-unit Tranquility Apartments in Camden will be submitted to a $900,000 renovation, courtesy off a new first mortgage from Regions Bank and LIHTC replacement funds that THDA provided by means of the American Reinvestment and Recovery Act, or the federal stimulus package. In Parsons, Gunn Garden Apartments, which offers 50 residences for seniors, will undergo a $1 million renovation that will be paid for via existing financing arrangements and LIHTC replacement funds that THDA provided through the federal stimulus package.
“A lot of these properties were developed about 30 years ago under some type of government affordable housing program, so we’re renovating them and extending the life of the property and the life of the subsidy,” Hyde says.
GSB Contractors Inc. has been tapped to serve as general contractor for all four rehabilitation projects. Construction and upgrading activity will take place over the next 9 to 12 months, and upon completion 466 affordable housing residences will have been revitalized in Tennessee.