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A place you can
invite folks for the holidays
by
Paula C. Squires
Virginia
Business
March 2003
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Village
South Town Homes
$5.7 million renovation/affordable housing
Hunt Investments
Richmond
A gleaming white sink atop a new vanity in Cookie Booth's
bathroom is all the proof she needs that Village South
Town Homes is giving her a better life. Booth, a hospital
food services worker, used to wash her face in a sink
caked with rust. A hot water heater stood in her tiny
kitchen, and the walls of her home looked like bare
sheet rock.
Then
a $5.7 million makeover transformed the 56-year-old
complex. These days Booth enjoys a new dishwasher in
her kitchen. Fresh paint covers her walls. Best of all,
her house stays warm thanks to a new efficient central
gas heating system. The improvements raised her rent
by $60 to $435. But the amenities at her 912-square-foot,
two-bedroom town home are worth it. "I have nicer
neighbors. And it looks good," she says.
The
pleasant result came after years of work. Ron Hunt,
president of Hunt Investments of Richmond, had plenty
of doubts as the firm struggled to rehabilitate the
former Holly Springs Apartments, a rundown complex about
10 minutes from downtown. Its location, however, on
a bus line and proximity to several major employers
was one of the property's strengths. But its overflowing
trash dumpsters and broken windows scared away potential
investors. "The hardest part was getting people
to believe in the viability of the deal," recalls
Hunt. "They'd come and look at this place and it
looked terrible. They didn't want to risk the financing."
While
Hunt sensed the project's potential, he didn't anticipate
the complexities of putting together a deal that would
require low-income tax credits, a federal grant, bank
financing and the relocation of tenants. "There
were times when he came to me, and he thought it was
going under," says Hunt's son, Michael who runs
the family's property management company, Genesis Properties
Inc.
Hunt's
company bought the 122-unit Holly Springs property in
1999 for $1.4 million. Over the next 18 months, there
was a murder, police drug raids and numerous property
crimes at the complex. Hunt tried to line up financing
by applying for federal low-income tax credits - a crucial
step because they raise equity by attracting corporate
investors who purchase them as a means of obtaining
tax deductions. But the Virginia Housing Development
Authority rejected the application, because the project
appeared to be too costly.
Not
one to give up Hunt applied again, after lining up a
$400,000 development grant from the Federal Home Loan
Bank of Atlanta. This time, the project won conditional
approval. However, a mistake in the application threw
the project into jeopardy again. Hunt fixed the mistake,
won final approval and began courting investors. Even
with the credits, several major lenders turned him down.
Fortunately, Hunt found another partner — a real
estate investor from Florida — who put up $300,000.
The additional support helped convince BB&T to back
the renovation with a $3 million construction loan.
The
search for a tax-credit buyer continued, and a white
knight stepped forward. Community Affordable Housing
Equity Corp. based in Raleigh, N.C. — one of the
biggest regional nonprofits active in affordable housing
— bought the credits. Regional manager Barry Lubman
says the company serves as a middleman, forming partnerships
with for profit equity providers, such as BB&T,
and selling them the credits. CAHEC's involvement raised
another $2 million for Hunt's project. And as a limited
partner, it helps tenants by providing programs such
as technology learning and assistance with first-time
home buying.
With
the financing finally in hand, construction began on
Village South in June 2001. Workers installed new front
doors and thermal windows and added four playgrounds,
security fencing and gates. The project was finished
by September 2002 and opened under its new name.
Today, all but 7 units are leased. To qualify, applicants
must meet federal guidelines on income and survive a
criminal background check, a procedure that property
manager Dwayne Henry says has reduced crime. The property's
appraised value has increased from $1.4 million to $3.5
million, but Hunt will be taxed only on the former assessment
for the next 10 years through a city tax -abatement
program that encourages rehabilitation. All in all,
it's a happy ending. "Now they have a place where
they can bring family for the holidays," says Henry.
What most impressed the judges about Village South was
the number of obstacles Hunt overcame, and the positive
impact it's having on the neighborhood and the lives
of its tenants.
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