Greystone Closes $88.6 Million Affordable Housing Preservation Transaction in Tennessee

Collaborating with both Federal and State Agencies and The Hallmark Companies, Inc., Greystone advises, finances and preserves 793 Units in 20 Affordable Housing Communities across the State

Greystone announces the closing of an $88.6 million multifamily housing transaction in Tennessee. The 20 aged USDA Rural Development Section 515 properties, comprising 793 apartment homes serving low-income households in 16 counties across the state, are owned and operated by The Hallmark Companies, Inc.

In the statewide pooled transaction, Greystone’s affordable housing preservation group worked closely with the Tennessee Housing Development Agency (THDA), as well as both USDA’s Rural Housing Service (RHS) National Office and Tennessee State Office to coordinate and secure the financing needed to acquire and rehabilitate this at-risk and much-needed housing.

“The preservation of aging RD Section 515 properties is a challenging segment of the affordable housing industry. Thousands of properties face maturing mortgages in the next several years and are also at the end of their original restrictive-use periods,” said USDA Rural Development State Housing Program Director Don Harris. “The Hallmark-TN transaction represents a commitment to helping improve the economy and quality of life in rural Tennessee through the repositioning of these vulnerable assets. The ability to partner with experienced resources like the Tennessee Housing Development Agency and Greystone Affordable Housing Initiatives LLC was a significant factor in making this preservation transaction such a success.”

“While we have completed similar deals, closing the Tennessee transaction was particularly rewarding due to the level of careful orchestration. The effort will allow the transformation of a rural apartment portfolio in need of immediate attention,” said Tanya Eastwood, head of Greystone’s affordable housing preservation group. “Collaborating with government agencies and professional partners on this scale required innovation and perseverance. The result is a replicable preservation model that addresses the complex challenges faced by affordable housing property owners across the nation.”

The financing plan combined both public and private funding and included:

  • Tax-Exempt Bonds – Single issuance of $28 million in multifamily private activity tax-exempt bonds by The Health, Educational and Housing Facilities Board of Sevier County, Tennessee. The short-term bonds were issued as a public offering facilitated by Stifel, Nicolaus & Company, Inc. and received an A-1 rating from Standard & Poor’s.
  • Low-Income Housing Tax Credits – Purchase of 4% Federal LIHTCs by Boston Financial Investment Management, generating over $16 million in capital contributions.
  • RHS 515 Debt – Assumption and subordination of $21.8 million of original USDA Section 515 debt. The Section 515 program is a direct loan program designed to provide subsidized loans to developers of affordable housing in rural markets. In addition, 84% of the 793 apartment units continue to receive Section 521 Rental Assistance provided by the USDA Rural Housing Service.
  • Senior Debt of $21.9 million – Long-term debt comprised of a combination of $19.3 million in USDA guaranteed 538 loans, provided by Greystone Servicing Corporation, Inc., and $2.6 million in newly-issued USDA 515 loans.
  • Other – Other funding sources included additional financial support in excess of $830,000.

“This closing marks a noteworthy collaboration between the public and private sectors to create and protect safe, sound, affordable housing opportunities. Preserving 20 communities in small towns across rural Tennessee is a significant achievement as deals of this nature are typically harder to finance. The project will provide quality rental units for low and moderate income individuals and families,” said Ralph Perrey, Executive Director of THDA. “The multifamily tax-exempt bond program proved to be a critical tool in the success of this deal and THDA is proud to have worked closely with Greystone on this first-of-its-kind transaction in Tennessee.”

“Although none of the properties in the Hallmark-TN portfolio were located in Sevier County, The Health, Educational and Housing Facilities Board enthusiastically participated in this transaction. The project exemplifies the mission of the Board to advance public benefit and good by finding solutions to address the health, educational and affordable housing needs of the community,” said Issuer’s Counsel Ron Sharp of Sharp & Ripley, PLLC. “It was a privilege to offer our services and resources in the issuance of revenue bonds to benefit preservation efforts in the greater State of Tennessee.”

The rehabilitation plan includes a fast-paced construction process, estimated to be complete within 12 months, during which no residents will be permanently displaced. Substantial renovations will include both interior and exterior improvements, with particular emphasis on promoting energy efficiency, thermal comfort and overall health of the residents. Formula Construction Group of Roswell, GA will serve as General Contractor and estimates an average of 45 workers, including local laborers, will spend three months contributing financially to the local economies in the various counties as they refurbish each property.

“The decision to partner with Greystone and its experienced team was based on the clear strategy that was presented. Issues were met head-on with practical, creative solutions,” said Pete Petersen, President of the Hallmark Companies, Inc. “In addition to preserving the value and intended use of our portfolio, this accomplishment will benefit the local economy as there will be a need for labor and physical goods during the construction process. We are thrilled to offer our residents an improved quality of life and are grateful for this opportunity.”

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