Background

Egida de la Concepcion is an affordable, 69-unit senior housing project located in San German, Puerto Rico.  The project was developed in 1987 under HUD’s Section 202 direct loan program.  The Owner was saddled with high interest debt (9.25%) and had minimal cash flow to address deferred maintenance and other capital repairs and improvements. 

Challenges

This project faced several substantial challenges:

• Terms of the Section 202 Mortgage Note prohibited prepayment prior to loan maturity without the prior written approval of HUD. 
• As constructed, the property was seriously non-compliant with regard to current fair housing standards and ADA accessibility requirements.
• While well maintained, the project is older and still has the original construction building system in place.  A number of capital repairs were needed.

Outcome

Rockhall leaned on its expertise in the Section 202 and Section 8 Housing programs to navigate the 202 prepayment process and obtain approval for a new 20-year Section 8 HAP contract. Rockhall utilized FHA insured financing to pay off all existing debt; fund $185,000 for repairs, improvements and accessibility modifications; and fund an enhanced $386,500 initial deposit to capital replacement reserves. The enhanced replacement reserve deposit, well above the recommended requirement, will enable the project to fund capital repairs over the term of the loan.  The 202 prepayment/refinance cut the fixed interest rate by more than half and renewed the Section 8 HAP contract for a 20-year term, ensuring the long-term economic viability of the project.