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2005-014
RED Provides Tax Credit Equity, Bond Enhancement & Underwriting for Kentucky Property
Innovative Sponsorship Structure enables the Acquisition and Renovation of Section 8-Assisted HUD 202 Facilities for the Elderly
Columbus, OH, June 6, 2005 – Red Capital Markets, Inc. and Red Mortgage Capital, Inc., the investment banking and mortgage banking arms of integrated capital provider RED CAPITAL GROUP, structured acquisition and renovation financing for a three-phase, age-restricted seniors property in Florence, Kentucky, which is located approximately fifteen miles south of Cincinnati.
The property, Arcadia Park Apartments (formerly Florence Christian Homes), consists of 215 one-bedroom and studio units in three mid-rise buildings. The new owner will use the RED financing package to acquire, renovate and update the assets to ensure the long-term quality and preservation of low-income housing. The renovations will include new kitchens and bathrooms in all apartment units. Common area amenities such as a library, beauty salon, and several community rooms will continue to serve the social and recreational needs of this independent elderly population.
All three phases were constructed in the early to mid 1980s under the HUD Section 202 program that provided capital to not-for-profit, entities to build low-income housing. Urban Innovations, Ltd., a sophisticated, for-profit, Chicago-based developer with prior 202 acquisition experience, independently sponsored the acquisition of Phase I and II, and teamed with Florence Christian Church to arrange not-for-profit participation in Phase III. Under the new sponsorship, all phases of Arcadia Park Apartments will continue to benefit from Section 8 project-based rental assistance, preserving this much-needed affordable housing for Northern Kentucky senior citizens.
Red Capital Markets, Inc. (MEMBER FINRA/SIPC) syndicated $5 million of 4% low income housing tax credits and underwrote the accompanying tax-exempt bonds, which were issued through Kentucky Housing Corporation. This was the first transaction by the newly-formed Kentucky Housing Corporation involving both tax-exempt bonds and 4% low income housing tax credits.
Red Mortgage Capital, Inc. provided Fannie Mae bond credit enhancement to support the two fixed-rate tax-exempt bond issues. Phases I & II were financed with Series A bonds in the amount of $7,140,000 and Phase III was financed with Series B bonds in the amount of $2,675,000. Due to the Fannie Mae bond credit enhancement, each series of bonds received an "AAA" rating from Standard & Poor’s.
Andrew Delman, Arcadia Park General Partner and Urban Innovations Principal said, "This is the fifth 202 transaction we have completed and as in the past, the Red Capital team provided valuable sources and advice that allowed the consummation of this extremely complex transaction. Not many full source capital providers have the experience or understanding to combine the complexities of LIHTC, tax exempt bonds, mortgage credit enhancement and the 202 program restrictions. All the components of the transaction were coordinated by various Red Capital Team leaders. Red’s expertise has allowed our business to expand and remain one of the leaders in the Senior Section 8 housing program".
Nicholas A. Hamilton, Director of Red Mortgage Capital, Inc. said, "In addition to the rent restrictions and rehabilitation required by the bond financing and tax credits, the properties also benefit from HUD Section 8 HAP contracts. It was a pleasure to once again work with this experienced sponsor to meet the myriad requirements of the transaction. Red Capital Group’s team approach to underwriting the bonds, mortgage, and tax credits allowed us to deliver creative and integrated solutions to get the deal done."
