202 Prepayments Allow for Recapitalization and Extension of Affordability
Federation Gardens and Federation Towers are two properties in Miami that together have 275 units and were originally financed with 202 direct loans from HUD and were subsidized under Project-Based Section 8 Housing Assistance Payments (HAP) contracts.
Neither project had undergone a comprehensive rehabilitation since their construction in the 1970s and 1980s. With 202 loans that were approaching their maturity dates, HAO worked with Fairstead to obtain the necessary HUD approvals so Fairstead and its partner, The Affordable Housing Institute, Inc., could acquire the properties, prepay the 202 loans, and extend the HAP contracts.
Fairstead’s financing plan allowed it to perform a large rehabilitation of the properties by investing over $80 million into the combined preservation plans and extending the properties’ affordable housing status for an additional 40 years. Fairstead also established robust social services programming for its elderly residents.
Applicable HUD Programs
- 202 Direct Loan
- Project-Based Section 8
- HAP Renewal
- HAP Combination
- Chapter 15/MUTM Post-Rehabilitation Rent Increase
Fairstead Obtains Approvals and Funding for Large-Scale Rehabilitation
HAO helped Fairstead and partner The Affordable Housing Institute, Inc. obtain the appropriate approvals and support for its rehabilitation plan.
Federation Gardens and Federation Towers were each financed with 202 loans with different prepayment requirements. HAO worked with Fairstead to determine the necessary HUD approvals to prepay the 202 loans and structure the transactions to meet the associated requirements.
20 Year HAP Renewal with Rent Increase
To support the rehabilitation, HAO obtained approvals to renew the HAP contracts for 20-year terms with Chapter 15, post-rehabilitation rent increases needed to support the new financing and make the rehabilitation of the projects possible.
Federation Gardens was originally two properties each subsidized under separate HAP contracts. To simplify management of the projects going forward, HAO obtained HUD approvals to combine the HAP contracts into a single contract.
The rehabilitation of each project was financed with a new loan and equity generated by the sale of 4% low income housing tax credits. HAO worked with Fairstead to obtain the associated approvals required in connection with the new financing.
Rehabilitation Leads to Preservation of Elderly Housing
From sweeping in-unit modernization, including the installation of energy-efficient appliances, to weather-resistant glass windows and extensive common area updates, the transformation of Federation Towers can be witnessed all across the building and property.
Federation Gardens also experienced a much-needed refresh through in-unit upgrades and common area restorations. By working with HUD, HAO helped Fairstead make this rehabilitation possible and lead to the preservation of 275 units of subsidized housing.
View Examples of Our Other Work
Our partnership with Wingate Companies shows how HAO guides clients through complex, multi-phase projects. See other examples of our work by viewing our project portfolio.