WEBVTT 00:00:00.258 --> 00:00:08.220 - Good afternoon, everybody. My name is Nathan Ferreira. I'm the executive director of the Bloomington 00:00:08.220 --> 00:00:16.891 - Housing Authority and Summit Hill Community Development Corporation. We scheduled this additional opportunity 00:00:16.891 --> 00:00:23.198 - for public comment on a project that we've been contemplating for about a year. 00:00:23.330 --> 00:00:31.256 - pieces to this. I'll just say as an introduction, housing authorities are needing to get creative about 00:00:31.256 --> 00:00:39.107 - how to cover costs, how to generate revenue in an atmosphere where we are facing cuts from our primary 00:00:39.107 --> 00:00:46.957 - funder, which is HUD. For us, for Bloomington Housing Authority, that's about 90% of our funding comes 00:00:46.957 --> 00:00:53.054 - from HUD, federal. So that was one of the drivers of us exploring this project. 00:00:53.890 --> 00:01:01.606 - We started this endeavor, what, about a year ago. We were approached by a broker asset manager named 00:01:01.606 --> 00:01:09.704 - White House, who has done these kind of deals across the country. And essentially, they work with housing 00:01:09.704 --> 00:01:18.718 - authorities to sell municipal bonds, to purchase properties for renovation and for preservation of workforce housing. 00:01:19.330 --> 00:01:26.289 - So we were skeptical at first. We explored and we brought in our consultants, the people we knew that 00:01:26.289 --> 00:01:33.180 - we needed to make sure this was all legit and would cash flow and do everything it's supposed to do. 00:01:33.180 --> 00:01:40.140 - So we've got Ice Miller, who's been our bond counsel and our real estate counsel throughout this past 00:01:40.140 --> 00:01:47.099 - year. CFX is a financial advisor that works across the country, but referred by IHCDA to us, which is 00:01:47.099 --> 00:01:49.214 - the Indiana Housing Authority. 00:01:49.794 --> 00:01:58.489 - who works with CFX annually on their reporting. And then Colliers as the bond underwriter. So they don't 00:01:58.489 --> 00:02:07.102 - exactly work for us. They do the work of actually selling pricing and selling the bonds, which happened 00:02:07.102 --> 00:02:15.383 - today. So we're at the finish line. I'll get to that a little bit more. Hayes-Gibson, we were happy 00:02:15.383 --> 00:02:19.358 - to award the bid for managing these properties. 00:02:19.458 --> 00:02:26.505 - We recognized early on that the housing authority did not have the capacity to actually manage property, 00:02:26.505 --> 00:02:33.552 - manage these. We also recognize that this is out of our expertise. These are market units. We're experts 00:02:33.552 --> 00:02:40.667 - and affordable and working with HUD and working with vouchers, but market units and the kind of marketing 00:02:40.667 --> 00:02:47.580 - that is required for that is beyond our skill set. So we, we recognized early that we needed a partner 00:02:47.580 --> 00:02:48.318 - there. So, 00:02:48.610 --> 00:03:00.089 - Happy to partner with Hayes-Gibson. We've gone through a long public process that required by law, Indiana 00:03:00.089 --> 00:03:11.460 - law. So we had the bond limit approved by city council, which is our local municipal agency that approves 00:03:11.460 --> 00:03:15.966 - bond sales specifically in the state law. 00:03:16.994 --> 00:03:25.427 - Oh, I didn't update that. We received our S&P rating, which we worked with Collier's on. And we received 00:03:25.427 --> 00:03:33.940 - an A+, which is a very good rating. There's a number of other housing authorities that share that rating, 00:03:33.940 --> 00:03:42.293 - ranging from massive housing authorities like LA and to some that are smaller like us. So we're in good 00:03:42.293 --> 00:03:44.702 - company. It means we have our 00:03:44.898 --> 00:03:53.629 - ducks in a row financially. We have good policies in place. We have a good board oversight. These are 00:03:53.629 --> 00:04:02.789 - what's called general revenue bonds, which means what supports the project is not just the project itself. 00:04:02.789 --> 00:04:11.349 - It's actually from revenue from the BHA. So that does mean we have a high degree of responsibility, 00:04:11.349 --> 00:04:14.174 - meaning if things did go poorly, 00:04:14.370 --> 00:04:21.296 - we would be responsible for making those bond payments no matter what. We recognized that there was 00:04:21.296 --> 00:04:28.291 - additional risk there, but we also recognized that our need for preservation of workforce housing is 00:04:28.291 --> 00:04:35.217 - incredible in our area, and it was worth the risk to us. And plus the deal that we've put together, 00:04:35.217 --> 00:04:42.282 - I think, is very steady, and I think we're in good shape. Just a note, because this question has come 00:04:42.282 --> 00:04:43.390 - up quite a bit. 00:04:43.522 --> 00:04:51.001 - Bonds are not payable from taxes or any general obligation from the city. I understand there are bonds 00:04:51.001 --> 00:04:58.263 - like library bonds, school bonds, other bonds that may involve the city. Ours do not. We are solely 00:04:58.263 --> 00:05:05.742 - on the line for these. We've done our municipality approval. I mentioned that. And the interest on the 00:05:05.742 --> 00:05:12.350 - bonds are exempt from federal and state taxation. That's part of what makes the deal work. 00:05:14.466 --> 00:05:22.703 - So concurrently with going through a bond rating process, we were working with Lighthouse on identifying 00:05:22.703 --> 00:05:30.704 - a potential purchase. And that's where the hometown group properties came along. You can see the five 00:05:30.704 --> 00:05:39.020 - properties there around the city. Some details of where they stood closer to the beginning of our looking 00:05:39.020 --> 00:05:40.510 - into this project. 00:05:40.962 --> 00:05:48.940 - where the average rents were, where occupancy was. Occupancy at a couple of these is unfortunately lower 00:05:48.940 --> 00:05:56.842 - at this point. That's been part of the reason we want to purchase is to manage these properties better. 00:05:56.842 --> 00:06:04.743 - We see a lot of value in these properties despite what reputation some of them might have. And we think 00:06:04.743 --> 00:06:09.758 - that there's some renovations that can be done to greatly improve 00:06:10.434 --> 00:06:19.325 - the livability and people's enjoyment in living here in Bloomington. Current property status, there's 00:06:19.325 --> 00:06:28.304 - down units across all the properties. Two properties have more down units due to past fires, more than 00:06:28.304 --> 00:06:37.021 - the other properties. So those will be focused on in terms of the renovation and getting those back 00:06:37.021 --> 00:06:38.590 - into circulation. 00:06:39.266 --> 00:06:46.477 - Current property management ownership has led to low occupancy. I won't say any more than that, but 00:06:46.477 --> 00:06:53.687 - that's the situation these properties are in. Some of the rental permits we understand are at risk, 00:06:53.687 --> 00:07:01.115 - meaning those at the city that inspect some of these are or had been considering pulling some of these 00:07:01.115 --> 00:07:08.830 - permits kind of along the lines of Jeff Jones properties, if you've been tracking any of that in the news. 00:07:09.666 --> 00:07:17.943 - BHA vouchers, vouchers we issue at some of these properties at Woodland Springs were actually under 00:07:17.943 --> 00:07:26.385 - abatement due to some of the required repairs not being made in the amount of time that HUD requires. 00:07:26.385 --> 00:07:34.827 - There's some declining safety and housing instability there. We have completed due diligence with our 00:07:34.827 --> 00:07:37.310 - partners on these properties. 00:07:37.570 --> 00:07:46.442 - played a huge role in that. So we're, like I said, we're at the finish line. Let me check my notes. 00:07:46.442 --> 00:07:55.579 - Yeah. Yeah, I think everything is done at this point. In terms of comparables, we think that occupancy 00:07:55.579 --> 00:08:04.628 - rates should be higher at several of these properties. Part of the market studies that have been done 00:08:04.628 --> 00:08:06.846 - on these properties just 00:08:06.946 --> 00:08:15.358 - highlighting a couple of numbers there. So for two of these properties, I believe, are under 75% occupancy 00:08:15.358 --> 00:08:23.534 - now. Where really, if we're looking at other similar properties across the city, they should be higher. 00:08:23.534 --> 00:08:31.395 - So just more evidence that we believe it truly is a property management issue that can be resolved. 00:08:31.395 --> 00:08:35.326 - No pressure, Hayes-Gibson. We know you can do it. 00:08:36.738 --> 00:08:46.990 - The path to final numbers has been long and winding. Like I mentioned at the beginning, we actually 00:08:46.990 --> 00:08:57.550 - just finalized the bond sale. So our purchase price is $72,778,000. The immediate capital expenditures 00:08:57.550 --> 00:09:05.342 - going into these five properties is almost $10 million. We do expect a fire 00:09:05.474 --> 00:09:13.181 - related insurance claim to come in as well. And we're working with our asset manager, Lighthouse, to 00:09:13.181 --> 00:09:20.964 - identify some additional sources to expand those capital expenditures even further. Specifically, the 00:09:20.964 --> 00:09:28.670 - Indiana Energy Savings Program will allow us to put in new HVAC and some electrical work in at least 00:09:28.670 --> 00:09:34.622 - a couple of these properties. I think we're focused on Woodland and Kingston. 00:09:34.786 --> 00:09:43.105 - Yeah, so those will get a little extra energy efficiency help. And that'll be significant. Rehab, we're 00:09:43.105 --> 00:09:51.264 - allowing up to three years, but we expect 70% to be done in the first year. We're right in the middle 00:09:51.264 --> 00:09:59.503 - of marketing rebranding, working closely with Hayes-Gibson and Lighthouse to get information out about 00:09:59.503 --> 00:10:04.222 - these properties. Resident meetings will start right away. 00:10:04.514 --> 00:10:12.996 - bond pricing was today. I'll just mention without getting into a lot of detail, but if you follow the 00:10:12.996 --> 00:10:21.560 - news at all, you know that the market, the bond market has been quite volatile and the worst it's been 00:10:21.560 --> 00:10:22.558 - in decades. 00:10:22.754 --> 00:10:29.453 - The last two weeks, there's been a rally, and municipal bonds actually recovered, which is what we're 00:10:29.453 --> 00:10:36.414 - selling. So I feel incredibly lucky. I've been telling everybody I'm going to buy a lottery ticket today, 00:10:36.414 --> 00:10:43.179 - because it's amazing that we really thought things were getting much worse, and somehow what we needed 00:10:43.179 --> 00:10:48.958 - to recover actually recovered just in time. We're scheduled to close a week from today. 00:10:49.058 --> 00:10:56.183 - Interior rehab to begin immediately. I think exterior has been delayed until next spring. About 30% 00:10:56.183 --> 00:11:03.450 - of the units overall will have an interior rehab. We know that there's more work than that that needs 00:11:03.450 --> 00:11:11.074 - to be done. But we're focused on decreasing that vacancy first, doing as many as we can with the available 00:11:11.074 --> 00:11:18.270 - capex. And then as proceeds become available in the future, we'll invest more into these properties. 00:11:18.690 --> 00:11:26.115 - bring them all up to our standard. Just to be clear, there is a tax abatement. So there is no property 00:11:26.115 --> 00:11:33.468 - taxes on these properties. That's been a point of contention, I think, locally and understandably so. 00:11:33.468 --> 00:11:41.038 - We have researched this somewhat and we believe many of the student housing developments that are coming 00:11:41.038 --> 00:11:47.742 - online more than offset the property taxes that will be reduced as a result of our purchase. 00:11:50.018 --> 00:11:57.928 - We see a lot of benefits here. Preservation of existing workforce housing. The first two years, we don't 00:11:57.928 --> 00:12:05.763 - really see much of a rent increase on these units, which is part of the whole goal here is that we want 00:12:05.763 --> 00:12:13.523 - to preserve naturally occurring workforce rents. Long-term control for BHA over affordability on these 00:12:13.523 --> 00:12:19.550 - properties and a more significant share of trying to keep things affordable and 00:12:19.778 --> 00:12:27.206 - in Bloomington in the greater area. Trying to stabilize these properties, we will gain appreciation 00:12:27.206 --> 00:12:34.709 - that is beyond what the project requires. So there will be cash flow made available to our nonprofit 00:12:34.709 --> 00:12:42.138 - Summit Hill Community Development Corporation, which is our affordable housing development wing. So 00:12:42.138 --> 00:12:49.566 - this will support other future projects, some that we've been working on right now that need a cash 00:12:49.794 --> 00:12:58.073 - injection, we hope that this will produce some of those funds so that we can start building other properties 00:12:58.073 --> 00:13:05.821 - as well. Diversifies what we do. Many housing authorities are moving into workforce housing, not just 00:13:05.821 --> 00:13:13.569 - affordable. We see that as a big value for our community. And it creates a new repeatable development 00:13:13.569 --> 00:13:18.430 - tool. We don't have plans to sell more bonds. Sorry about that. 00:13:18.850 --> 00:13:24.444 - Assuming this works for a couple years in, there are housing authorities that use this as a regular 00:13:24.444 --> 00:13:30.207 - tool to purchase and rehab properties, sometimes selling them once they're rehabbed, sometimes keeping 00:13:30.207 --> 00:13:36.025 - them in their portfolio. There's also housing authorities that sell bonds to do short-term construction 00:13:36.025 --> 00:13:41.731 - gap funding on other projects. So let's say there was a low-income housing tax credit project here in 00:13:41.731 --> 00:13:46.654 - Bloomington that had a gap in their construction expenses, we could potentially step in 00:13:47.202 --> 00:13:56.791 - and loan short term through our bond sales for a couple of years, and then receive that money back with 00:13:56.791 --> 00:14:06.102 - some interest. This is a lot. We're not going into this blindly. We understand there's a lot of risk 00:14:06.102 --> 00:14:15.230 - that comes with what we're doing. Like I said, we feel that the risk is warranted, given the need. 00:14:15.746 --> 00:14:25.319 - This is how we're mitigating some of that risk. So real estate risk, due diligence, property condition 00:14:25.319 --> 00:14:34.799 - assessments, title survey, capital needs. We've been very thorough, in my opinion. Construction risk. 00:14:34.799 --> 00:14:42.142 - Oh, man. GMP. Help me remember what that acronym. It went right under my head. 00:14:42.370 --> 00:14:52.448 - I know what it means. The contractor's max costs cannot go above a certain amount. That's it. All right. 00:14:52.448 --> 00:15:02.719 - Thank you. We have reserves. We have contingency for the capital expenditures. Financial risk, our minimum 00:15:02.719 --> 00:15:07.710 - debt coverage is very good on these projects, hence 00:15:07.970 --> 00:15:15.362 - the additional cash flow that we see this project generating. So we're in very good shape there. We've 00:15:15.362 --> 00:15:22.683 - been working with CFX who's been running lots of different financial scenarios. If we had low rent or 00:15:22.683 --> 00:15:30.075 - if we had low occupancy and we didn't get a good bond rate, they've they've run every scenario you can 00:15:30.075 --> 00:15:36.606 - imagine. In terms of the bond rate, we ended up in a very good place. So now it's just the 00:15:36.962 --> 00:15:44.457 - The main focus will be increasing that occupancy. Operating risk. We are bringing in people that have 00:15:44.457 --> 00:15:51.953 - more experience of this than we do. That's the whole goal of working with these partners is they have 00:15:51.953 --> 00:15:59.742 - more experience, so we're relying on them. A little bit more about this project. These are 10-year bonds. 00:16:00.098 --> 00:16:05.938 - We'll be establishing a capital plan for the deferred maintenance. So just what I mentioned before, 00:16:05.938 --> 00:16:11.836 - not everything's going to get fixed in the first capital expenditure, that almost $10 million that I 00:16:11.836 --> 00:16:17.735 - mentioned. We will be identifying other issues, and we'll be deciding how to put money back into the 00:16:17.735 --> 00:16:23.166 - deal to make those additional repairs going forward, reinvesting proceeds in the properties. 00:16:24.514 --> 00:16:32.035 - We will need to refinance or sell between seven and 10 years. That is the nature of not just bond projects, 00:16:32.035 --> 00:16:39.278 - but also tax credit projects. There comes a point where you have to refinance. I will say our intention 00:16:39.278 --> 00:16:46.521 - is to hold onto these properties. There's a pretty narrow path to once the bond period has ended, being 00:16:46.521 --> 00:16:50.142 - able to do a low income housing tax credit project. 00:16:50.274 --> 00:16:56.925 - We intend to explore that, at least on one of these properties, which would increase affordability. 00:16:56.925 --> 00:17:03.576 - That would look more like the core community flats project where we're doing where incomes are less 00:17:03.576 --> 00:17:10.293 - than 50% area median income. So that's our intent. The others, we really would hope to refinance and 00:17:10.293 --> 00:17:15.614 - keep in our portfolio. We have to see what comes in the next seven to 10 years. 00:17:20.258 --> 00:17:26.753 - To kind of wrap up, and then I'm just hoping we can answer questions, the main opportunity is to use 00:17:26.753 --> 00:17:33.570 - BHA's financial capacity to acquire existing housing at a time when private owners may lack the incentive 00:17:33.570 --> 00:17:40.001 - or resources to make the necessary investments, and then to rehabilitate these properties, preserve 00:17:40.001 --> 00:17:46.110 - them long term. The trade-off is that BHA assumes the real estate risk, the construction risk, 00:17:46.210 --> 00:17:52.961 - operating financial risks that would otherwise be borne by a private owner. So in summary, that is what 00:17:52.961 --> 00:17:59.648 - we're doing. We've tried to make ourselves very available to answer as many questions as we can. We're 00:17:59.648 --> 00:18:06.205 - going to have a press release following very soon. So happy to answer questions. I think most of the 00:18:06.205 --> 00:18:13.086 - people that are here I've been talking with, so I don't know how many questions there will be, but we can 00:18:14.754 --> 00:18:43.326 - If anybody wants to throw a hard one and we'll see if we can answer it for the public. Is it live? No. Okay. 00:18:46.914 --> 00:18:55.721 - and they do not. This is solely on our backs. I will say another thing that comes up is just in terms 00:18:55.721 --> 00:19:04.442 - of your values, we get a question a lot about whether a public entity should own this much property. 00:19:04.442 --> 00:19:13.854 - I don't necessarily disagree with that. I don't have a comment about it. I think we're in a unique position. 00:19:14.146 --> 00:19:21.908 - that we have tools that a private developer might not have at a time where it's very hard to do what 00:19:21.908 --> 00:19:29.593 - we're trying to do. So these tools that are available to us, why wouldn't we use them? So that's my 00:19:29.593 --> 00:19:38.046 - response there. And we're not alone in that. There's housing authorities across the country that realize that 00:19:38.594 --> 00:19:46.150 - We have tools that other entities don't have, and we should be using them. But also seeing the writing 00:19:46.150 --> 00:19:53.485 - on the wall in terms of potential cuts in HUD funding and just being prepared for that. I get a lot 00:19:53.485 --> 00:20:01.041 - of people asking if this is going to turn into Section 8 housing or if it's going to have subsidy. And 00:20:01.041 --> 00:20:05.662 - I think it's more of a not in my backyard kind of questioning. 00:20:07.170 --> 00:20:14.305 - Yeah, and I sometimes use terms that make sense in our field. So when I say workforce housing, meaning 00:20:14.305 --> 00:20:21.301 - it is not going to look any different than, well, what will look different about these properties is 00:20:21.301 --> 00:20:28.436 - they're getting rehabbed. They're getting improved. But who lives there will not change. We don't have 00:20:28.436 --> 00:20:35.710 - the capacity to issue vouchers or bring subsidy to this that would create the kind of affordability that 00:20:36.130 --> 00:20:43.416 - section eight has. With that said, we do have some of our voucher holders in the community that already 00:20:43.416 --> 00:20:50.563 - live at these properties. So does SCAP. But that's like any property manager owner that works with us 00:20:50.563 --> 00:20:57.919 - with vouchers. Their rents are market rents. It's just a portion of it comes from the Housing Authority. 00:20:57.919 --> 00:21:04.995 - Four to the five of these properties already accept section eight vouchers. So there's not a massive 00:21:04.995 --> 00:21:06.046 - change coming. 00:21:06.178 --> 00:21:12.465 - Yeah, over the 18 months or so HUD, there's a moratorium on issuing new vouchers. So we couldn't add 00:21:12.465 --> 00:21:18.689 - more affordability to these properties if we wanted to. Pretty much the only path to do that at the 00:21:18.689 --> 00:21:24.976 - moment would be if we can do a LIHTC eventually. So a low income housing tax credit redevelopment of 00:21:24.976 --> 00:21:31.387 - one of these projects or one of these properties. But that would be after, that'd have to be after the 00:21:31.387 --> 00:21:33.566 - bond period. So seven to 10 years. 00:21:39.970 --> 00:21:48.903 - Any other? All right. Well, we'll stick around for questions for a time. Appreciate everybody coming 00:21:48.903 --> 00:21:57.747 - out. More news on this soon. Thanks. Oh, yeah. Yeah, please do. Yeah. Well, we're really excited to 00:21:57.747 --> 00:22:06.856 - be working with the Bloomington Housing Authority. And actually, believe it or not, Hayes Gibson, just 00:22:06.856 --> 00:22:09.598 - to kind of give you a history, 00:22:09.858 --> 00:22:17.017 - This firm started out by my dad, Lindsay Hayes, back in 1952. So we're going to be 75 years into it 00:22:17.017 --> 00:22:24.247 - in 2027. And we actually have a history with Bloomington Housing Authority going all the way back to 00:22:24.247 --> 00:22:31.549 - the mid-1960s. And of course, living here in Bloomington and graduating from Edgewood High School and 00:22:31.549 --> 00:22:36.990 - going to Indiana University, when we had the opportunity to do something in 00:22:37.122 --> 00:22:44.329 - our hometown, that was something that we really wanted to do. And we don't just say yes to every single 00:22:44.329 --> 00:22:51.397 - thing. We always try to make sure that we're entering into an assignment like this, because this will 00:22:51.397 --> 00:22:58.534 - be a lift, and this will be an assignment with people that share the same values and the same approach 00:22:58.534 --> 00:23:04.286 - to what we're doing. And hopefully, seeing by the five people that are here today, 00:23:04.962 --> 00:23:13.726 - This is a commitment to the strength of what we're about and what we're trying to do. And so we have 00:23:13.726 --> 00:23:22.577 - one of our vice presidents here, Emily Bedell. And we have the area manager for these projects that's 00:23:22.577 --> 00:23:28.478 - based in Bloomington, Tammy Schultz. We have Christie Davis, who is 00:23:28.738 --> 00:23:35.154 - kind of the jack of all trades, but certainly helping in the recruiting and making sure that we have 00:23:35.154 --> 00:23:41.823 - the best folks at the site level operating this property. And then really the architect of how we manage 00:23:41.823 --> 00:23:48.239 - things on a day-to-day basis is Cassandra Mike cell, which is our regional property manager based in 00:23:48.239 --> 00:23:50.462 - Indiana based in southern Indiana. 00:23:50.786 --> 00:23:58.801 - And we'll be here all the time. So again, we're just very thankful for this opportunity. And we really 00:23:58.801 --> 00:24:07.049 - look forward to great things for these properties in the future. Thank you, Carson. And thank you, Jerry, 00:24:07.049 --> 00:24:14.908 - for reminding, for prompting our board chair and vice chair here. So Sherry Clay, Jerry Cravens, and 00:24:14.908 --> 00:24:20.510 - then our director of real estate development, Ryan Still, is also here. 00:24:21.794 --> 00:24:35.386 - So we have one lone unaffiliated person that showed up. So we appreciate that. I know she's affiliated, 00:24:35.386 --> 00:24:41.790 - but yeah. All right. Well, thank you, everybody.