CASE STUDY

Low Income Housing Tax Credit Assisted Living Facility in Atlanta, GA

Low Income Housing Tax Credit Assisted Living Facility in Atlanta, Georgia

Environment: Affordable assisted living services in Georgia are sorely lacking. This is due in part to the restrictions that exist in Georgia to access Medicaid waivers to pay for services. Yet the large and growing number of low income seniors needs an affordable option. The health care environment that exists today makes it impossible for seniors to find the services that would allow them to age in place thus forcing them into premature institutionalization at a higher cost to taxpayers. Faced with these challenges, the Atlanta Housing Authority, a LIHTC developer, and Mia Senior Living worked closely to apply for a 9% low income housing tax credit (LIHTC) set aside from the Georgia Department of Community Affairs. The project will cater on a priority basis to senior Veterans. The closing for the project occurred on December 31, 2013. The facility contains 60 rental units (all one bedrooms) in a three story building. The facility contains a commercial kitchen, dining/recreational area, offices, laundry room, doctor’s offices and staff stations. The building is UFAS compliant and contains many green and sustainable design features.

The funds to build and operate this new facility were as follows:
1. Construction Loan: $7,236,000 (1st Position)
a. Construction Lender (Bank)
2. Construction Loan: $1,500,000 (2nd Position)
a. Construction Lender Atlanta Housing Authority
3. Equity Investment: $9.1M equity from purchase of Low Income Housing Tax Credits (Affordable Housing Partners (AHP) / Berkshire Hathaway)
4. Project-Based Section 8 Rental Subsidies from Atlanta Housing Authority

The proforma included start-up costs of $381,893 for the first year of operation. The second stabilized year showed a NOI of $294,369 and a projected $270,862 net income on year 3.

Challenges

There was a delay of 7 months in completing the construction. A license cannot be submitted without a CO.
Although the pro forma and the management contract specified 14 – 18 month lease up the investors required a 6 month instead so they could use the credits during the fiscal year 2016
There were many eligibility requirements, criminal checks, income, assets that disqualified most of the clients that were recruited. Mia had 125 clients on a waiting list when the license was obtained and only 10 were eligible and able to move the 1st day.
Investors and developers were working on the assumption that this would mirror an independent senior building.
Many corners were cut including applying for a lower license that meant we had to hired licensed personnel
Clients’ assets meant we had to hired lawyers to do a irrevocable trust that added to the expense of the project
LIHTC eligibility process took over 3 weeks and created a bottle neck situation resulting in the loss of many residents
There were delays in obtaining the license mainly due to the poor physical plant. License obtained October 1
Service reimbursement from VA took 8 months to be approved. Developer misinterpreted this to the investor. Clients must approve once they are in the facility but processing the application took 7 months.

Solutions

Operator must have full control of physical plant, financials and eligibility requirements
Train investors and developers on how this model works so expectations are realistic
Set aside some market rate units so lease up can be achieved
Ensure sufficient start up funds
47 units were occupied by the end of March not meeting the expectations of the investor