HomeMy WebLinkAboutAgenda - 06-29-2000-9bORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: June 29, 2000
Action Agenda
Item No. q= J~
SUBJECT: EmPOWERment, Inc. Request for Funds for Acquisition of Eleven Homes
DEPARTMENT: Housing/Community Dev. PUBLIC HEARING: (Y/N) No
ATTACHMENT(S):
06/17/00 EmPOWERment Proposal
INFORMATION CONTACT:
Tara l_. Fikes, ext. 2490
TELEPHONE NUMBERS:
Hillsborough 732-8181
Chapel Hill 9fi8-4501
Durham fi88-7331
Mebane 33fi-227-2031
PURPOSE: To review a request for funds from EmPOWERment, Inc. for the acquisition of
eleven homes in Carrboro for the purpose of repairing and reselling these homes to low income
families.
BACKGROUND: At the June 6, 2000 BOCC meeting, Myles Presler of EmPOWERment, Inc.
asked the Board to consider a request for funding to purchase eleven homes in Carrboro for the
purpose of repairing and reselling these homes to low income families. The request was
referred to staff for a report at this BOCC meeting.
EmPOWERment, Inc. has provided the attached proposal outlining their funding request. The
request is presented in two scenarios. The first scenario requests $247,500 for property
acquisition. The second scenario requests $292,062 paid in installments of $136,962 and
$155,100. This scenario is presented as an alternative that will allow greater time for the
County to review the project in relation to affordable housing policies prior to committing the
total amount of funding. The first payment, $136,962, would be paid by October 1 when
EmPOWERment closes on the property. The second payment of $155,100 is the cost of
"holding" the project for approximately six (6) months.
This proposal has been reviewed by County staff with Myles Presler of EmPOWERment,
Incorporated. The following information is being provided as a result of staff review.
Feasibility
1. The project will comply with the Commissioner's long-term housing affordability policy by
requiring a 99 -year affordability period.
2. The project will benefit families at or below 80% of median income, the target population
for most affordable housing projects.
3. The project uses existing housing to provide additional home ownership opportunities.
EmPOWERment, Inc. has successfully implemented this activity in past projects.
Outstanding Issues
1. The properties in question have not been appraised to determine current market value
nor has a title search been conducted.
2. Rental tenants presently occupy the properties. The proposal indicates that
EmPOWERment plans to sell these properties to the existing tenants where possible,
However, the potential for displacement of these residents is still present since it is
unclear whether the families would be eligible or interested in purchasing the homes.
3. If bond money is used for this project, it raises a fairness question since other bond
projects have been placed on hold.
4. Staff does not support Scenario 2 of the proposal. This scenario divides the investment
into two payments with the County paying the operating subsidy required to hold the
properties as rental property until the County releases a second payment. This scenario
requires $44,562 more than Scenario 1.
Myles Presler of EmPOWERment, Inc. will be present to answer questions.
FINANCIAL IMPACT: This request is for funding in the amount of $247,500 or $292,052 for
Scenario I and 2 respectively.
RECOMMENDATION(S): The Manager recommends, based on the specific request in
EmPOWERment's June 17 letter, that the Board:
1) Indicate whether or not this is a project that the Board is interested in pursuing; and
2) If so, identify any questions, concerns, or additional information that EmPOWERment needs
to address to the Board's satisfaction in the coming weeks so the Board can consider
whether to make a final funding commitment to this project at the August 15, 2000 regular
BOCC meeting.
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Em ~ • meat
INC.
Reclaiming the POWER of our Communities
Vivian S. Foushee, President
Northsrde Community Association
Stepney Edwards, Vice President
Madway Barber Shop
Matthew Fearrington, Secretary
Lloyd Street Neighborhood Association
Jane Stein, Treasurer
Chair, Common Sense Foxndation
SAM Brooks
REALTOR
Barbara Brown
Carr Court Neighborhood Association
Alvater Barnette
Lloyd Street Neighborhood Associatio;
Rev. Roben Campbell
Roge>s Road Neighborhood Associatio
Hubie Mercado
Susan Mmirikwe
Lloyd Street Neighborhood Association
Robin Rankin
Norihside Community Association
STAFF
Myles Presler
Director
Mark Chilton
Associate Director
Maxecine Mitchell
Director of Community Bxilding
Terry Carver
Project Manager
jeff Caiola
Business Manager
ADDRESS
705-A West Rosemary Street
Carrboro, NC 27510
Phone: (919) 967-8779
Fax: (919) 967-0710
Mr. Jahn Link
County Manager
Orange County Offices
PO 8181
Hillsborough, NC 27278
Deaz Mr. Link:
June 17, 2000
I am writing to request County support for the acquisition of eleven houses in
Carrboro. The properties aze located on Dillazd Street and Hillsborough Road and
were constructed between 1952 and 1963 by the Wright family, which still owns
and rents the homes. There aze a total of 13 homes owned by several heirs; and our
contract is to purchase all thirteen homes and resell two to family members who
live in or adjacent to the properties. The properties aze located on Dillard Street
and Hillsborough Road between Main Street and Greensboro Street.
Background
The Wrights originally built these homes to provide affordable housing for local
families, and the heirs have maintained this commitment by renting out the homes
at faz below mazket value. All homes aze occupied and some tenants have lived in
the properties far up to ten years. Last spring the heirs decided to sell the
properties and began soliciting offers. We know of several competing offers, and
believe that our offer was accepted in part because of our commitment to
preserving the homes in the affordable housing stock and to helping current tenants
buy their homes, if possible. If the County is interested in supporting this project,
we must have a commitment of financing by August 30, 2000 and must close the
transaction by October 1, 2000.
Of the thirteen homes, two would be re-sold to family members and eleven would
be sold to first-time homebuyers that earn less than 80% of AMI, currently $45,200
for a family of three. The total acquisition cost for thirteen properties is
$1,232,000. The two homes would be sold back to family members for a total of
$260,000, leaving a balance of $972,000 for the purchase of eleven 2-bedroom
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houses at an Appraisals completed in 1995 show property values between $85,000 and
average cost of $102,000. The homes are generally in good condition, though some are in need of
$88,364 each. new roofing, upgraded central heat/air and
other cosmetic repairs. We have estimated an average cost of $10,000 per unit for renovations.
There are two scenarios for County support depending on the timing and amount of the County's
investment. Detailed financial projections aze attached describing both options.
Scenario 1
EmPOWERment, Inc. purchases the properties by October 1, 2000 for $1,232,000. Two homes aze re-
sold to family members for $260,000, leaving an effective acquisition cost of $972,000 for the eleven
homes. The County would make an investment of $247,500 towazd acquisition; the balance would be
financed through BB&T. Over the fall, EmPOWERment, Inc. performs renovations, subdivides the
properties and helps current tenants to prepare to purchase their home. Homes would be re-sold to first
time hamebuyers earning less than 80% AMI.
Tatal per unit development costs are projected at $109,015, including a contribution of $2,000 toward
buyers' closing costs. After renovations the eleven homes would be sold to eligible, first time buyers at
a cost of about $85,515, which would include the County subsidy of $22,500 each ($247,500/11). This
is the simplest and least costly alternative.
Scenario 2
EmPOWERment, Inc. purchases the properties by October 1, 2000 for $1,232,000. Two homes are re-
sold to family members for $260,000, leaving an effective acquisition cost of $972,000 for the eleven
homes. County investment would come in two stages to allow greater time to review current
affordable housing policies prior to committing all necessary funds to the project.
The first stage of investment would be in the amount of $136,962 by October 1 when
EmPOWERment, Inc. closes on the property: This funding would provide the equity required to
achieve 85% loan to value on our construction loan. We are assuming as-is appraisals in the amount of
$100,000, an actual per unit cost of $94,915 and a required equity investment of $9,915 per unit. The
goal here would be to secure site control and lease the properties to current tenants until additional
funding is available from the County to complete renovations and sell the homes to first-time buyers.
Because current rents aze only $465 per month, we would require an operating subsidy to cover debt
service, pay taxes and handle ongoing maintenance and repairs. Our projected monthly costs per unit
aze $855, including $655 for debt service, $150 for taxes and $50 for maintenance. We will require an
operating subsidy of $423 per month per unit to cover the gap in available funds. Assuming a 6-month
holding period, the total operating subsidy required for all eleven units would be $27,902. This
amount, plus the required equity for purchase, equals the sum of $136,962 mentioned above.
There will be additional costs deferred until homes are renovated and sold, totaling $14,100 per unit or
a total of $155,100. These casts are outlined on the attached development proforma. The total county
investment under scenario 2 would be $292,062, which reflects the costs of the operating subsidy
required to hold the units for six months until development.
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Next Steps
We are excited at this opportunity to preserve a significant portion of our affordable housing stock in
Orange County. The chance to purchase eleven homes in Chapel Hi1UCarrboro from a single seller
will probably not occur again in the near future. County support is essential to the success of this
venture.
Our initial analysis of project feasibility is positive, and we feel confident that this is a tremendous
opportunity to expand homeownership and preserve the stock of affordable housing. However, we are
under a fairly tight timeline to pull this project together. While a final commitment of funding will not
be required until August 30, 2000, we will need a clear indication from the Board on June 29, 2000 as
to whether or not this is a project that the Board is interested in pursuing. If not, we will cancel our
contract and the properties will be sold to other buyers. If this is a project that the Board is inclined to
support, then we will work with County staff over the summer to resolve any outstanding issues before
the sale is completed by October 1, 2000.
We are open to any solution that can make this project work. We look forward to working with your
staff as we pursue this project.
Sincerely,
Myles Presler
Director
Enclosures
Wright Property
Development Budget
Scenario 1: Purchase, Renovate and Re•sell*
Costs Per Unit Total
Purchase Price $ 1,232,000
Resale of 2 homes to family members $ (260,000)
Effective Acquisition Costs $ 88,364 $ 972,000
Broker's Fee $ 2,651 $ 29,160
Rehab $ 10,000 $ 110,000
Soft Costs $ 1,500 $ 16,500
Financing $ 1,500 $ 16,500
Contingencylbevelapmentfee $ 3,000 $ 33,000
Total $ 107,015 $ 1,177,160
Sales Price $ 107,015 $ 1,177,160
plus closing $ 2,000 $ 22,000
Total cost to Buyer $ 109,015 $ 1,199,160
less buyer contribution $ 1,000 $ 11,000
less 2nd mortgage $ 22,500 $ 247,500
First mortgage ; 85,515 940,660
Total County Investment $ 22,500 3 247,500
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*Assume after•rehab appraised value +l• $115,000
Wright Property
Development Budget
Scenario 2: Purchase and Lease Until Additional Funding Available*
Acquisition Costs Per Unit Total
Purchase Price $ 1,232,000
Resale of 2 homes to family members $ (260,000)
Effective Acquisition Costs $ 88,364 $ 972,000
Broker's Fee $ 2,651 $ 29,160
Rehab $ 1,500 $ 16,500
Soft Costs $ 900 $ 9,900
Contingency $ 1,500 $ 16,500
Total 94,915 ; 1,044,060
85% LTV "" $ 85,000 $ 935,000
15°~ Equity $ 9,915 $ 109,060
Monthly Carrying Gosts
Financing @ 9.25 $ 655 $ 7,207
Taxes $ 150 $ 1,650
Maintenance $ 50 $ 550
Total $ 855 S 9,407
Gross Rents $ 465 $ 5,115
Less Vacancy (796) $ 33 $ 358
Effective Gross Rents ; 432 ; 4,757
Monthly Operating Subsidy $ 423 $ 4,650
Total Operating Subsidy (6 mos) $ 2,537 $ 27,902
Interim County Investment $ 12,451 ; 136,962
Deferred Expenses
Rehab $ 8,500 $ 93,500
Soft Costs $ 600 $ 6,600
Financing $ 1,500 $ 16,500
Devek~pmentfee $ 1,500 $ 16,500
Closing Costs $ 2,000 $ 22,000
Total Defamed Costs $ 14,100 $ 155,100
Total County Investmerrt ; 26,551 $ 292,062
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* assume 6 month holding period
**assume avg. as-is appraised value of $100,000