An Extra Boost: New Mixed-Income Development Near Atlanta Contains RAD Units

9 min read

Columbia Senior Residences at Forrest Hills, a new mixed-income apartment community for persons 62 and older, rising in suburban Atlanta, Ga., reflects the flexibility of the federal Rental Assistance Demonstration (RAD) program and the different approaches being taken under it by local public housing authorities (PHAs).

The $13.4 million development in Decatur, expected to be completed by November, was reportedly the second RAD transaction in the country to close, in October 2013. It is a joint venture of Columbia Residential, an Atlanta-based for-profit developer, and the Housing Authority of DeKalb County (HADC), a mid-sized PHA with just over 1,000 housing units that administers roughly 5,800 housing vouchers.

Under RAD, PHAs can apply to the U.S. Department of Housing and Urban Development (HUD) to convert the current federal funding for public housing properties (capital funds and operating subsidies) to Section 8 contracts of up to 20 years providing project-based vouchers or rental assistance for a specified number of units. Renovated or new units can, but don’t have to be, on the same public housing site.

RAD has become popular with PHAs as a way to raise new capital to revitalize old public housing properties.

Four Categories of Units

Columbia Senior Residences at Forrest Hills will contain 80 one- and two-bedroom apartments in three interconnected two-story buildings on a sloped site in a neighborhood containing older single-family homes.

Seventy apartments will be low-income housing tax credit (LIHTC) units restricted to seniors making 60% or less of the area median income (AMI), while 10 will be market-rate. Of the 70 LIHTC apartments, six will be RAD units reserved for public housing-eligible residents with rents subsidized by RAD project-based vouchers; 48 will be assisted units with rents subsidized by standard project-based vouchers; and 16 will be LIHTC-only units. Voucher unit residents will pay only 30% of their income for rent.

The current annual income cap at 60% of AMI is $27,060 for an individual and $30,960 for two persons.

HADC will provide RAD and standard project-based vouchers under two separate Section 8 contracts with initial 15-year terms.

Initial gross monthly rents will range from $608 to $709 for the LIHTC units and from $800 to $950 for the market-rate apartments.

The development will contain a library, computer center, theater, a large living room-like area, and an outside community garden open to neighborhood residents. A resident services coordinator will develop programming and arrange on-site and off-site services.

Located on a bus line with quick access to MARTA rail, nearby stores, and banks, the project is designed to meet EarthCraft Communities standards, a regional green building standard.

Site Occupied by Rundown Buildings

The development is on a site previously occupied by a conventional apartment complex of 12 two-story buildings, constructed in 1951, which had fallen into disrepair and been vacant for several years.

“I’m from DeKalb County,” says HADC President/CEO Pete Walker, “and I saw the apartments that were there before. I saw them when they were livable, and then I saw them go down and get boarded up.”

Jim Grauley, President and Chief Operating Officer of Columbia Residential, said neighborhood residents were “very concerned” about the vacant, rundown buildings. He noted the site is at a “prominent corner” of the Forrest Hills neighborhood.

“We worked with the county, state housing finance agency, and the existing owner, a nonprofit, to acquire the property and put together a plan to redevelop it.”

Twists and Turns in Plans

Columbia Residential reached out to partner with the housing authority and provide new senior housing units for persons on HADC’s waiting list for elderly apartments. Plans were revised as HADC’s needs changed.

The firm acquired the property in late 2011 with a soft loan from the Georgia Department of Community Affairs (DCA), capitalized by federal Neighborhood Stabilization Program (NSP) dollars. The loan also helped pay for demolition of the buildings, which occurred in early fall 2013.

In 2012, Columbia Residential applied to Georgia DCA for federal 9% housing tax credits, and HADC committed to make a loan to fund six public housing units within the new development. At the time, HADC was studying the RAD program and considering an application to HUD to convert all 266 of its remaining public housing units. After applying for and receiving a RAD commitment from HUD for 266 units in December 2012, HADC decided it didn’t make sense to potentially have only six public housing units in its portfolio going forward, and worked with Columbia Residential to re-designate the six public housing units in the new project as assisted RAD units. HADC committed to provide 54 project-based vouchers for the new development.

A Columbia Residential affiliate will manage the new property after completion. HADC isn’t currently a qualified tax credit property manager but aims to be one eventually, says Walker, who was already familiar with tax-exempt financing, housing tax credits, and affordable housing development when he joined HADC 3½ years ago from stints at Mercy Housing Southeast and Invest Atlanta.

Multiple Funding Sources

Georgia DCA awarded the project $776,841 in annual federal 9% housing credits and a like amount of state housing credits in December 2012. Equity generated by the tax credits is funding more than three-fourths of the project’s total development cost.

Other funding sources are a construction loan and permanent first mortgage from local Community & Southern Bank; Georgia DCA’s NSP loan; a third mortgage from HADC capitalized by federal Replacement Housing Factor funds; and a deferred developer fee. Columbia Residential and HADC’s development subsidiary, the co-general partners in the project partnership, are splitting the developer’s fee.

RBC Capital Markets’ Tax Credit Equity Group syndicated the federal housing credits at a price of 93 cents per dollar of tax credit on behalf of several bank investors. Executive Brian Flanagan said the firm was attracted to the deal because of its existing relationships with Columbia Residential and HADC on prior projects; the high quality and solid performance of Columbia Residential’s past LIHTC deals; and the transaction’s conservative finance structure, which had significant subordinate debt allowing for a small permanent mortgage.

Sugar Creek Capital syndicated the state housing credits at a price of 39 cents per dollar of tax credit.

Different Uses of RAD

HADC is using RAD in different ways to convert all of its public housing units to assisted units, either on the same site as demolished projects or at other locations. Displaced public housing residents, who have been given tenant-based vouchers to defray the cost of apartments elsewhere, may return to the new mixed-income communities if they wish.

The RAD units at Columbia Senior Residences at Forrest Hills are a conversion and transfer of six public housing units for seniors from Tobie Grant Manor, a 55-acre, 1960s-era public housing complex of 200 units in 105 buildings that will be demolished and replaced in stages with new mixed-income apartments for families and seniors and some single-family homes. Of the remaining 194 RAD units for the redevelopment of the complex, 110 will be on the same site and 84 located off-site at two new developments – Mountain View Residences (25 RAD units) and Hills at Fairington (59 RAD units).

HADC has already used RAD to convert 66 public housing units in two existing mixed-income, mixed-finance properties (Ashford Parkside, Ashford Landing) without any new renovations. These developments were built during 2007-2009 as the first two phases in the redevelopment of Johnson Ferry East, a former 498-unit public housing complex on 55 acres that has been demolished and is being replaced in six phases with new apartments, houses, and retail. HADC developed Ashford Parkside and Ashford Landing in partnership with Atlanta-based NorSouth Companies.

HADC’s Pete Walker calls the RAD program “the best thing since sliced bread. I do believe that RAD is the future for housing authorities and we need to embrace it.” He said housing authorities nationwide can’t possibly address their more than $20 billion backlog of needed public housing repairs and maintenance with the less than $2 billion in federal public housing capital funds they receive annually.

“The problem with public housing as the program is now is that there’s just not enough money to maintain the units. In RAD we see a way for us to be able to bring in outside money, in the form of tax credits and loans, to maintain affordable housing. It’s going to be different; it’s not going to be the old public housing the way it used to be.”

Walker adds: “RAD speaks in a language that banks, investors, and other types of institutions that can provide funding understand.”

Past the Challenges

Columbia Senior Residences at Forrest Hills hasn’t been without challenges. One was getting to closing in the midst of the federal government shutdown in the fall of 2013. But come late this fall, the first residents will be moving in.

“We tried to figure out a way to get it done for years, and finally things came together,” says Walker.

“We have tremendous demand from seniors for this property already,” says Grauley. “We are also committed to ensuring that the Forrest Hills transaction is beneficial to the surrounding community as well as to the new residents. It shows how we were able to figure out how to structure something that allows for RAD units to be portable to off-site housing. As part of the Tobie Grant redevelopment, some of those units will be replaced at Forrest Hills in an extraordinary senior residential community.”

Permanent Sources and Uses Summary
Permanent Sources  
Federal 9% Low-Income Housing Tax Credit Equity (RBC Capital Markets’ Tax Credit Equity Group $7,151,653
State Low-Income Housing Tax Credit Equity (Sugar Creek Capital) $3,102,026
Permanent First Mortgage (Community & Southern Bank) $1,000,000
Second Mortgage (Georgia DCA – NSP Funds) $1,500,000
Third Mortgage (Housing Authority of DeKalb County – RHF Funds) $500,000
Deferred Development Fee $191,404
Total Sources $13,445,083
Acquisition/Abatement/Demolition/Carrying Costs $881,716
Construction Hard Costs $8,407,249
Architecture/Engineering Fees $513,502
Project Soft Costs $1,925,647
Development/Construction Management Fee $1,190,000
Project Reserves $526,969
Total Uses $13,445,083