A beautiful renovation completed at Tysons Towers


Last Saturday we celebrated the completion of the renovation at Tysons Towers in Vienna, Virginia, The Owner, Fairfax Education Association Retirement Housing Corporation (“FEARHC”), worked with a team that included The Gates Dunaway Group, Miner Feinstein Architects, Polinger Company, and Hamel Builders to complete a $16MM renovation, bringing new life to the 274 units of affordable senior housing in this booming part of Northern Virginia, just a few blocks from the DC Metro Silver Line. VHDA provided the 30-year construction/permanent financing.

The key to the financial success of this project was the conversion and expansion of the rental subsidy. At the beginning of the transaction, the Property had an expiring HUD RAP contract for 244 units. We were able to convert the RAP subsidy to a long term 20 year Section 8 Project Based Rental Assistance contract through HUD’s Rental Assistance Demonstration (RAD) program. The conversion doubled the income by increasing the old RAP rents to market, and by expanding the subsidy to cover all 274 units. This huge increase in income allowed the non-profit owner to use debt-only to fund the large renovation of the Property.

RAD for PRAC Updates...

I was in meetings in Washington, DC earlier this week and heard that HUD is expected to release Revision 4 of the RAD Notice by the end of May. This Revision will include the new RAD for PRAC option. Once the updated Notice is issued, PRAC owners should be immediately able to submit letters of interest, followed by applications to HUD.

I’m excited to announce that I will be teaming up with Recap Advisors to plan and conduct trainings around this new program, starting with a series of trainings in Georgia in August. If you are interested in being on the direct email mailing list to receive information about future trainings, please email us radforprac@recapadvisors.com.

RAD for PRAC Draft ready for comments!

The long awaited draft “RAD for PRAC” update of the RAD Notice has been posted on the HUD Drafting Table for comments. You can find the draft here, ready for download on the right side of the page, entitled Draft RAD Notice Rev 4. Comments are due by March 12, 2019. Email your comments to rad2@hud.gov.

Some highlights …

  • RAD 1 vs. RAD 2. RAD for PRAC will be processed as a “RAD 2” conversion (as opposed to RAD 1, which is most associated with PHA conversions).

  • Use Agreement. Upon conversion, a PRAC property and owner will be released from all obligations under the original PRAC funding, and a new 20 year Use Agreement, presumably similar to a 202 Use Agreement, will be recorded to codify continuing restrictions on the property.

  • Contract Type. The PRAC subsidy can be converted into either a Project Based Voucher (PBV) contract, or a Project Based Rental Assistance (PBRA) contract (owner’s choice). The new contract term will be for 20 years in either case.

  • Service Coordinators. The cost of a Service Coordinator will continue to be an allowed project operating expense, a practice that carries forward from the PRAC program.

  • Rent Setting. How rents will be set on the new contracts is perhaps the most critical element of the draft provisions.

    • PBV Initial Rents will be the lesser of (1) approved PRAC rents, (2) “reasonable rent” as determined by the administering PHA, (3) an amount determined by the PHA, not to exceed 110% of FMR (less the UA), or (4) the rent requested by Owner. For rents that are under market, this would mean that they would not see a rent increase above their current PRAC rents. Conversely, PRAC rents over 110% of FMR would see a decrease. Rents can be increased by OCAF each year.

    • PBRA Initial Rents are the lesser of (1) approved PRAC rents, or (2) 120% of FMR. As with the PBV rent setting, current PRAC rents will prevail unless they are more than 120% of FMR, in which case they will be lowered.

An underlying goal of RAD for PRAC is stability and preservation of our PRAC inventory. In many cases, to preserve the owner will need to refinance. A refinancing needs “Net Operating Income” (NOI) to be able to pay debt service. And PRACs were initially set up to be break-even, with no appreciable NOI.

So how is this going to work?

When talking to folks around the country about how RAD for PRAC is going to work - in terms of allowing for a refinancing - if HUD does not allow for an increase in rent, the key will be in re-calibrating the operating budget through a conversion. Check back here as RAD for PRAC makes it way to being implemented to learn more about how we can use RAD for PRAC to refinance, even with no increase in rents…

A New Life for Morgnec Village in Chestertown, MD

Congratulations to Upper Shore Aging Housing Corporation! Last week they closed on a new FHA 223(f) loan for their 30-unit Morgnec Village, located in Chestertown, MD. This is a senior property originally financed with a HUD 202 Direct loan, with 100% Section 8 rental subsidy. Owners and lenders sometimes think that a 30-unit property is too small to take advantage of preservation financing, but this project proves this wrong. We were able to help USAHC increase their Section 8 rents by 13%, which increased their new loan considerably. With a new FHA 223(f) loan, they are now going to be able to pay for the replacement of the property’s siding, roofs, windows, kitchens, baths, and they will also bring the property into full accessibility compliance. I look forward to sharing the “after” pictures with you in a year!

This preservation could not have happened without Centennial Mortgage, who did a superb job with the FHA loan, Miner Feinstein Architects who helped us envision and plan for this beautiful transformation, and Horst Construction, who specializes in working on rehabs of senior properties. We are already underway on refinancing the rest of USAHC’s portfolio, based on the success with Morgnec Village.

"Preserving Your Aging HUD Property" Available for Purchase!

LeadingAge has transitioned to a new learning platform that allows you to purchase their 1-hour webinars. They have just released a session I recorded this summer, Preserving Your Aging HUD Property, which is a three-part series that starts with how to decide to sale or keep your property. Assuming you decide to keep, part two addresses whether or not you need to refinance, and part three goes over the refinancing options and how to move forward.

The webinar is interactive, and promises to help you learn the basics on preservation. Enjoy!

October 9th Webinar for Pre-1974 Direct 202 Loan Properties

See below from an announcement from HUD about a webinar for owners of properties funded with 202 Direct Loans that closed before October 1974. We know these pre-1974 202 properties as the “old 202’s” (as opposed to those funded between 1974 and 1989). These properties often have a more difficult process to refinancing and recapitalize.


Register Today: Preservation of Pre-1974 Section 202 Direct Loan Properties Webinar – October 9, 2018 - 2:00 PM EDT

HUD is pleased to announce the Preservation of Pre-1974 Section 202 Direct Loan Properties webinar. This webinar is scheduled to take place on Tuesday, October 9, 2018 at 2:00 PM EDT.

This 90-minute webinar provides a detailed review of preservation options for pre-1974 Section 202 Direct Loan properties. The webinar will include guidance on recent HUD notices related to prepayment and refinance of Section 202 Direct Loans (Notice H 2013-17), and strategies to obtain and utilize tenant protection vouchers and Senior Preservation Rental Assistance Contracts (SPRACs) (Notices H 2018-01 and H 2018-02). Following the overview of these preservation options, participants will be able to participate in a Q&A session with the presenters.

Training Objectives

This webinar has the following objectives:

  • Participants will gain a better understanding of available options to preserve their pre-1974 Section 202 Direct Loan properties and affordability of their rental units.

  • Participants will gain clarity on the preservation steps and requirements of the notices.

Who Should Attend?

This training is intended for Pre-1974 Section 202 Direct Loan property owners, public housing agencies, and other stakeholders interested in learning strategies to preserve the affordability of these properties.

Registration Information

You must have a HUD Exchange account to register. Follow these instructions for registering.

Training Point of Contact

Helena Waziri | recap.training@cloudburstgroup.com | 240-582-3626