Case Study: Hillcrest Arms Philadelphia PA

1
Case Study Hillcrest ArmsPhiladelphia PA
2
The Facts

• 60 units new construction
• family housing with one, two, three bedroom
  apartments
• Constructed in 1990
• NEF investment of 2,483,000 (.43)
• Other funding included hard and soft debt of
  2.5 million
• total development cost of 5.3 million
  (88,000/unit)

3
Hillcrest Arms
4
The Neighborhood

• North Philadelphia
• very low income census tract
• high poverty rate, high vacancies, abandonment
• near Temple University Medical School, Broad
  Street, subway, shopping

5
Ownership

• 99 limited partner interest owned by NEF 90
  Limited Partnership
• .01 general partner interest owned by Hillcrest
  Arms Association, which is owned by two
  organizations one non-profit and one for-profit

6
Today

• capital needs of about 400,000
• Current vacancy of about 4
• annual NOI of 68,000
• 38 of revenue from Section 8 vouchers
• Revenue, NOI trending downward
• balance of PHFA first mortgage of 372,000
  (interest rate of 5.9, annual payments of
  48,000, 11 years remaining)
• balance of PHFA 2nd mortgage of 839,000,
  deferred until 2008, then converts to must-pay
  loan with 10-yr amortization
• 3rd mortgage from City of Philadelphia of 1.1
  million, deferred until 2008, then converts to
  must-pay loan with 10-yr amortization
• Operating Reserve balance of 0
• Replacement Reserve balance of 211,000
• Positive capital account

7
Option 1 Resyndication

• Plusses preservation of affordability, infusion
  of new capital, recapitalize reserves, extensive
  renovation, extended affordability, earn
  developer fee
• Minuses PHFA will only provide 4 credits,
  generating only 550,000 in new equity, high
  transaction costs

8
Option 2 Conventional Refinance

• Plusses preservation of affordability, moderate
  rehabilitation, out from under some restrictions
• Minuses need to negotiate forgiveness or
  assumption of secondary debt, no new funds to
  recapitalize reserves

9
Option 3 sell or convert to condo

• Plusses quick exit from partnership
• Minuses potential displacement, lenders and
  investors will look for return of capital,
  potential financial loss to general partner

10
NEF Contacts

• Tony Lyons Vice President, NE Regional Manager
• 212-455-9323
• tlyons_at_nefinc.org
• Meghann Rowley Disposition Manager
• 312-697-6168
• mrowley_at_nefinc.org
• www.nefinc.org