DEAL OF THE DAY: E&G Group Awarded LIHTC Project by Washington, D.C. Housing Department
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Washington, D.C.--E&G Group, LLC and its principals have completed the purchase of five properties in Washington, D.C. from five limited equity cooperatives.
Washington, D.C.–E&G Group, LLC and its principals, Tom Gallagher and Jim Edmondson, have completed the purchase of five properties in Washington, D.C. from five limited equity cooperatives. The properties will be renovated.
The buildings will be financed as a single Low income Housing Tax Credit (LIHTC) project, and will use grants under the Section 1602 program for each separate property. The Washington, D.C. Department of Housing and Community Development (DHCD) had sought out developers to gain control of the properties and to seek an allocation of 9 percent LIHTCs. E&G succeeded in the 2009 round.
The properties comprise 129 units in their current configurations. After rehab the unit count will reach 134 units. At least 90 units must be rented to LIHTC-eligible households, but E&G intends to keep at least 103 units under the LIHTC program.
The idea for the financing mechanism arose when DHCD staff realized that it would not have sufficient local funds to permit the redevelopment of the properties. The department had already spent about $9 million to permit three of the co-ops to acquire the buildings, all in need of substantial rehabilitation. The other two coops had private debt financing.
Co-op members/current residents will be temporarily relocated for the rehabilitation by Harkins Builders, the general contractor. Work will begin in November under a GMP contract. Each co-op will have a right to buy its property back from the owner at the end of the compliance period or earlier if compliance rules can be satisfied. The sales price to the co-ops is contractually constrained under certain circumstances.
The sources of funding include $8.5 million of Section 1602 grants in lieu of equity, with the entire amount of the annual $1 million of LIHTCs converted to grant funds. Other funding includes: a PNC Bank first deed of trust loan; assumption of the existing DHCD financing by the owner entity; some additional local funding from DHCD; a capital grant through three of the co-ops from the DC Housing Authority; a subordinate loan from Enterprise Community Partners for one of the co-ops; a subordinate loan from a private party for a second co-op; and deferred developer fees. Enterprise has also agreed to provide a working capital loan to the owner to assure that draw requests can be funded timely.
DHCD intends to use this E&G model to facilitate the near-term redevelopment of additional limited equity co-ops, even though not all of its terms can be repeated. The pre-development process consumed 15 months.