Good afternoon, everybody. My name is Nathan Ferreira. I'm the executive director of the Bloomington
Housing Authority and Summit Hill Community Development Corporation. We scheduled this additional opportunity
for public comment on a project that we've been contemplating for about a year.
pieces to this. I'll just say as an introduction, housing authorities are needing to get creative about
how to cover costs, how to generate revenue in an atmosphere where we are facing cuts from our primary
funder, which is HUD. For us, for Bloomington Housing Authority, that's about 90% of our funding comes
from HUD, federal. So that was one of the drivers of us exploring this project.
We started this endeavor, what, about a year ago. We were approached by a broker asset manager named
White House, who has done these kind of deals across the country. And essentially, they work with housing
authorities to sell municipal bonds, to purchase properties for renovation and for preservation of workforce housing.
So we were skeptical at first. We explored and we brought in our consultants, the people we knew that
we needed to make sure this was all legit and would cash flow and do everything it's supposed to do.
So we've got Ice Miller, who's been our bond counsel and our real estate counsel throughout this past
year. CFX is a financial advisor that works across the country, but referred by IHCDA to us, which is
the Indiana Housing Authority.
who works with CFX annually on their reporting. And then Colliers as the bond underwriter. So they don't
exactly work for us. They do the work of actually selling pricing and selling the bonds, which happened
today. So we're at the finish line. I'll get to that a little bit more. Hayes-Gibson, we were happy
to award the bid for managing these properties.
We recognized early on that the housing authority did not have the capacity to actually manage property,
manage these. We also recognize that this is out of our expertise. These are market units. We're experts
and affordable and working with HUD and working with vouchers, but market units and the kind of marketing
that is required for that is beyond our skill set. So we, we recognized early that we needed a partner
there. So,
Happy to partner with Hayes-Gibson. We've gone through a long public process that required by law, Indiana
law. So we had the bond limit approved by city council, which is our local municipal agency that approves
bond sales specifically in the state law.
Oh, I didn't update that. We received our S&P rating, which we worked with Collier's on. And we received
an A+, which is a very good rating. There's a number of other housing authorities that share that rating,
ranging from massive housing authorities like LA and to some that are smaller like us. So we're in good
company. It means we have our
ducks in a row financially. We have good policies in place. We have a good board oversight. These are
what's called general revenue bonds, which means what supports the project is not just the project itself.
It's actually from revenue from the BHA. So that does mean we have a high degree of responsibility,
meaning if things did go poorly,
we would be responsible for making those bond payments no matter what. We recognized that there was
additional risk there, but we also recognized that our need for preservation of workforce housing is
incredible in our area, and it was worth the risk to us. And plus the deal that we've put together,
I think, is very steady, and I think we're in good shape. Just a note, because this question has come
up quite a bit.
Bonds are not payable from taxes or any general obligation from the city. I understand there are bonds
like library bonds, school bonds, other bonds that may involve the city. Ours do not. We are solely
on the line for these. We've done our municipality approval. I mentioned that. And the interest on the
bonds are exempt from federal and state taxation. That's part of what makes the deal work.
So concurrently with going through a bond rating process, we were working with Lighthouse on identifying
a potential purchase. And that's where the hometown group properties came along. You can see the five
properties there around the city. Some details of where they stood closer to the beginning of our looking
into this project.
where the average rents were, where occupancy was. Occupancy at a couple of these is unfortunately lower
at this point. That's been part of the reason we want to purchase is to manage these properties better.
We see a lot of value in these properties despite what reputation some of them might have. And we think
that there's some renovations that can be done to greatly improve
the livability and people's enjoyment in living here in Bloomington. Current property status, there's
down units across all the properties. Two properties have more down units due to past fires, more than
the other properties. So those will be focused on in terms of the renovation and getting those back
into circulation.
Current property management ownership has led to low occupancy. I won't say any more than that, but
that's the situation these properties are in. Some of the rental permits we understand are at risk,
meaning those at the city that inspect some of these are or had been considering pulling some of these
permits kind of along the lines of Jeff Jones properties, if you've been tracking any of that in the news.
BHA vouchers, vouchers we issue at some of these properties at Woodland Springs were actually under
abatement due to some of the required repairs not being made in the amount of time that HUD requires.
There's some declining safety and housing instability there. We have completed due diligence with our
partners on these properties.
played a huge role in that. So we're, like I said, we're at the finish line. Let me check my notes.
Yeah. Yeah, I think everything is done at this point. In terms of comparables, we think that occupancy
rates should be higher at several of these properties. Part of the market studies that have been done
on these properties just
highlighting a couple of numbers there. So for two of these properties, I believe, are under 75% occupancy
now. Where really, if we're looking at other similar properties across the city, they should be higher.
So just more evidence that we believe it truly is a property management issue that can be resolved.
No pressure, Hayes-Gibson. We know you can do it.
The path to final numbers has been long and winding. Like I mentioned at the beginning, we actually
just finalized the bond sale. So our purchase price is $72,778,000. The immediate capital expenditures
going into these five properties is almost $10 million. We do expect a fire
related insurance claim to come in as well. And we're working with our asset manager, Lighthouse, to
identify some additional sources to expand those capital expenditures even further. Specifically, the
Indiana Energy Savings Program will allow us to put in new HVAC and some electrical work in at least
a couple of these properties. I think we're focused on Woodland and Kingston.
Yeah, so those will get a little extra energy efficiency help. And that'll be significant. Rehab, we're
allowing up to three years, but we expect 70% to be done in the first year. We're right in the middle
of marketing rebranding, working closely with Hayes-Gibson and Lighthouse to get information out about
these properties. Resident meetings will start right away.
bond pricing was today. I'll just mention without getting into a lot of detail, but if you follow the
news at all, you know that the market, the bond market has been quite volatile and the worst it's been
in decades.
The last two weeks, there's been a rally, and municipal bonds actually recovered, which is what we're
selling. So I feel incredibly lucky. I've been telling everybody I'm going to buy a lottery ticket today,
because it's amazing that we really thought things were getting much worse, and somehow what we needed
to recover actually recovered just in time. We're scheduled to close a week from today.
Interior rehab to begin immediately. I think exterior has been delayed until next spring. About 30%
of the units overall will have an interior rehab. We know that there's more work than that that needs
to be done. But we're focused on decreasing that vacancy first, doing as many as we can with the available
capex. And then as proceeds become available in the future, we'll invest more into these properties.
bring them all up to our standard. Just to be clear, there is a tax abatement. So there is no property
taxes on these properties. That's been a point of contention, I think, locally and understandably so.
We have researched this somewhat and we believe many of the student housing developments that are coming
online more than offset the property taxes that will be reduced as a result of our purchase.
We see a lot of benefits here. Preservation of existing workforce housing. The first two years, we don't
really see much of a rent increase on these units, which is part of the whole goal here is that we want
to preserve naturally occurring workforce rents. Long-term control for BHA over affordability on these
properties and a more significant share of trying to keep things affordable and
in Bloomington in the greater area. Trying to stabilize these properties, we will gain appreciation
that is beyond what the project requires. So there will be cash flow made available to our nonprofit
Summit Hill Community Development Corporation, which is our affordable housing development wing. So
this will support other future projects, some that we've been working on right now that need a cash
injection, we hope that this will produce some of those funds so that we can start building other properties
as well. Diversifies what we do. Many housing authorities are moving into workforce housing, not just
affordable. We see that as a big value for our community. And it creates a new repeatable development
tool. We don't have plans to sell more bonds. Sorry about that.
Assuming this works for a couple years in, there are housing authorities that use this as a regular
tool to purchase and rehab properties, sometimes selling them once they're rehabbed, sometimes keeping
them in their portfolio. There's also housing authorities that sell bonds to do short-term construction
gap funding on other projects. So let's say there was a low-income housing tax credit project here in
Bloomington that had a gap in their construction expenses, we could potentially step in
and loan short term through our bond sales for a couple of years, and then receive that money back with
some interest. This is a lot. We're not going into this blindly. We understand there's a lot of risk
that comes with what we're doing. Like I said, we feel that the risk is warranted, given the need.
This is how we're mitigating some of that risk. So real estate risk, due diligence, property condition
assessments, title survey, capital needs. We've been very thorough, in my opinion. Construction risk.
Oh, man. GMP. Help me remember what that acronym. It went right under my head.
I know what it means. The contractor's max costs cannot go above a certain amount. That's it. All right.
Thank you. We have reserves. We have contingency for the capital expenditures. Financial risk, our minimum
debt coverage is very good on these projects, hence
the additional cash flow that we see this project generating. So we're in very good shape there. We've
been working with CFX who's been running lots of different financial scenarios. If we had low rent or
if we had low occupancy and we didn't get a good bond rate, they've they've run every scenario you can
imagine. In terms of the bond rate, we ended up in a very good place. So now it's just the
The main focus will be increasing that occupancy. Operating risk. We are bringing in people that have
more experience of this than we do. That's the whole goal of working with these partners is they have
more experience, so we're relying on them. A little bit more about this project. These are 10-year bonds.
We'll be establishing a capital plan for the deferred maintenance. So just what I mentioned before,
not everything's going to get fixed in the first capital expenditure, that almost $10 million that I
mentioned. We will be identifying other issues, and we'll be deciding how to put money back into the
deal to make those additional repairs going forward, reinvesting proceeds in the properties.
We will need to refinance or sell between seven and 10 years. That is the nature of not just bond projects,
but also tax credit projects. There comes a point where you have to refinance. I will say our intention
is to hold onto these properties. There's a pretty narrow path to once the bond period has ended, being
able to do a low income housing tax credit project.
We intend to explore that, at least on one of these properties, which would increase affordability.
That would look more like the core community flats project where we're doing where incomes are less
than 50% area median income. So that's our intent. The others, we really would hope to refinance and
keep in our portfolio. We have to see what comes in the next seven to 10 years.
To kind of wrap up, and then I'm just hoping we can answer questions, the main opportunity is to use
BHA's financial capacity to acquire existing housing at a time when private owners may lack the incentive
or resources to make the necessary investments, and then to rehabilitate these properties, preserve
them long term. The trade-off is that BHA assumes the real estate risk, the construction risk,
operating financial risks that would otherwise be borne by a private owner. So in summary, that is what
we're doing. We've tried to make ourselves very available to answer as many questions as we can. We're
going to have a press release following very soon. So happy to answer questions. I think most of the
people that are here I've been talking with, so I don't know how many questions there will be, but we can
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.
and they do not. This is solely on our backs. I will say another thing that comes up is just in terms
of your values, we get a question a lot about whether a public entity should own this much property.
I don't necessarily disagree with that. I don't have a comment about it. I think we're in a unique position.
that we have tools that a private developer might not have at a time where it's very hard to do what
we're trying to do. So these tools that are available to us, why wouldn't we use them? So that's my
response there. And we're not alone in that. There's housing authorities across the country that realize that
We have tools that other entities don't have, and we should be using them. But also seeing the writing
on the wall in terms of potential cuts in HUD funding and just being prepared for that. I get a lot
of people asking if this is going to turn into Section 8 housing or if it's going to have subsidy. And
I think it's more of a not in my backyard kind of questioning.
Yeah, and I sometimes use terms that make sense in our field. So when I say workforce housing, meaning
it is not going to look any different than, well, what will look different about these properties is
they're getting rehabbed. They're getting improved. But who lives there will not change. We don't have
the capacity to issue vouchers or bring subsidy to this that would create the kind of affordability that
section eight has. With that said, we do have some of our voucher holders in the community that already
live at these properties. So does SCAP. But that's like any property manager owner that works with us
with vouchers. Their rents are market rents. It's just a portion of it comes from the Housing Authority.
Four to the five of these properties already accept section eight vouchers. So there's not a massive
change coming.
Yeah, over the 18 months or so HUD, there's a moratorium on issuing new vouchers. So we couldn't add
more affordability to these properties if we wanted to. Pretty much the only path to do that at the
moment would be if we can do a LIHTC eventually. So a low income housing tax credit redevelopment of
one of these projects or one of these properties. But that would be after, that'd have to be after the
bond period. So seven to 10 years.
Any other? All right. Well, we'll stick around for questions for a time. Appreciate everybody coming
out. More news on this soon. Thanks. Oh, yeah. Yeah, please do. Yeah. Well, we're really excited to
be working with the Bloomington Housing Authority. And actually, believe it or not, Hayes Gibson, just
to kind of give you a history,
This firm started out by my dad, Lindsay Hayes, back in 1952. So we're going to be 75 years into it
in 2027. And we actually have a history with Bloomington Housing Authority going all the way back to
the mid-1960s. And of course, living here in Bloomington and graduating from Edgewood High School and
going to Indiana University, when we had the opportunity to do something in
our hometown, that was something that we really wanted to do. And we don't just say yes to every single
thing. We always try to make sure that we're entering into an assignment like this, because this will
be a lift, and this will be an assignment with people that share the same values and the same approach
to what we're doing. And hopefully, seeing by the five people that are here today,
This is a commitment to the strength of what we're about and what we're trying to do. And so we have
one of our vice presidents here, Emily Bedell. And we have the area manager for these projects that's
based in Bloomington, Tammy Schultz. We have Christie Davis, who is
kind of the jack of all trades, but certainly helping in the recruiting and making sure that we have
the best folks at the site level operating this property. And then really the architect of how we manage
things on a day-to-day basis is Cassandra Mike cell, which is our regional property manager based in
Indiana based in southern Indiana.
And we'll be here all the time. So again, we're just very thankful for this opportunity. And we really
look forward to great things for these properties in the future. Thank you, Carson. And thank you, Jerry,
for reminding, for prompting our board chair and vice chair here. So Sherry Clay, Jerry Cravens, and
then our director of real estate development, Ryan Still, is also here.
So we have one lone unaffiliated person that showed up. So we appreciate that. I know she's affiliated,
but yeah. All right. Well, thank you, everybody.