August 4, 2021 Meeting
On August 4, 2021, the Administration met with MBCDC, their counsel, and OLCDC to obtain clarification on several items in the Business Plan and to provide technical assistance where needed.
Phase I involves capital improvements to decrease vacancy; debt modifications; a phased rental increase; renovation of the Shelbourne Apartments.
The following items were clarified:
- Financial Capacity- In the Plan, MBCDC describes two scenarios in connection to their long-term fiscal future. The first scenario does not include a rental subsidy from the City or County, which means that the portfolio would be in the same position in years 7-10 of the Bond issuance and the projected scope of work for repairs would not be completed.
The second scenario would entail an annual subsidy of $150,000 or project-based vouchers provided by the City or Miami-Dade County that would directly benefit the residents. This investment would maximize the agency’s ability to support a higher bond issuance and would address the projected scope of capital repairs for 187 units in the portfolio. MBCDC clarified that the properties chosen for repairs were the highest grossing in the portfolio.
In addition, the Plan addresses the repayment of the bonds and future debt service. The Bond’s proceeds would be used to pay the existing debt of almost $6 million for seven (7) properties in the portfolio. MBCDC plans to recapitalize via LIHTC after the bond and they project the bonds will be for a 10-year term with the ability to repay after the seventh year.
- Requests for City/County subsidies: In the Plan, MBCDC requests for the City to add their properties to the City’s Self-Insurance policy. If granted, this would alleviate the annual costs of property liability insurance of approximately $287,400.
The Administration has inquired about the feasibility of MBCDC’s request and Risk Management confirmed that the City does not have funds to support purchasing property insurance, nor can their properties be added to the insurance program.
Additionally, the administration clarified that the City does not oversee a housing voucher program and does not have the ability to subsidize rents through their Federal entitlement programs. MBCDC would have to make the request for housing vouchers with Miami-Dade County or the Housing Authority of the City of Miami Beach.
- Partnership with Opa-Locka Community Development Corporation- MBCDC clarified that there is a conceptual agreement with OLCDC to form a Nonprofit Partnership, but it has not been formally executed. The agreement would allow OLCDC to oversee their portfolio, provide financial support and to stabilize the organization’s position to qualify for the 501 c3 Bond. A Restrictive Covenant would be issued in connection with the OLCDC agreement, in order to give them ownership of the portfolio and they would receive a portion of operating cashflow.
In order to fulfill the strategies for financial support described in the Plan, OLCDC explained they would generate a $500k line of credit from the agency’s equity and the balance sheet would be secured by receivables. OLCDC also stated they will apply for a loan from the Community Fund of North Miami-Dade that will grant them access to a $2M line of credit with favorable terms. OLCDC identified another source of funding support by re-syndicating OLCDC projects, resulting in greater equity to invest in MBCDC.
- Partnership with La Raza Development, Inc.- MBCDC clarified there is a verbal agreement with La Raza for a $2 million loan to be utilized for the Shelbourne Apartments renovation project. The agreement will be executed after the OLCDC agreement is completed. The Raza loan will be repaid with the bond proceeds. As of this memo, MBCDC has not provided loan documents for the La Raza loan or the Partnership Agreement with OLCDC.
- Shelbourne Apartments renovation- MBCDC states that HUD would only issue their formal approval of a subordinate loan or grant once they review the loan commitment from another provider. MBCDC can provide the loan approval after the agreement is signed with La Raza Development, Inc.
- Capital Repair Needs- This plan would only address a portion of the MBCDC portfolio in need of repairs, leaving 136 units still in need of renovation. During the July 23, 2021, Commission meeting, MBCDC requested for FY 20/21 HOME funds in the amount $220,000 to be allocated to Villa Maria and FY 21/22 SHIP funds in the amount of $394,363 to be allocated to the Allen Apartments. Both requests were made to address urgent capital repairs associated with the properties’ 40-year certifications.
The Administration explained that the City cannot allocate HOME or SHIP funds into either property while they are still under affordability; the Allen Apartments’ affordability period expires in June 2041 and the Villa Maria expires on June 2060.
In addition, MBCDC has not presented any official documents regarding the structural conditions of the properties in need of repair, which is a hindrance to qualify the need and the cost for their funding requests. The Administration continues to offer technical assistance to ensure the viability of future proposals.
- Amending existing City loan documents- MBCDC requests the City’s subordination for the Bond to be in the first place. MBCDC met with the County to request subordination of their documents.
Secondly, MBCDC asked about prorating their remaining years of affordability for the Jefferson Apartments and reducing the loan by the amount.
Thirdly, MBCDC would like to obtain the Satisfaction of Mortgage for the Westchester Apartments prior to the property’s affordability expiration on March 2022.
Miami-Dade County Public Housing Community Development (PHCD) Response
MBCDC met with Miami Dade County Public Housing and Community Development on August 17, 2021 regarding their Business Plan. The County continues to express their concern with MBCDC’s financial capacity. Their responses address the following:
- 501c3 Bond application- MBCDC has not discussed their intention to apply for Bond financing with the Housing Finance Authority.
- MBCDC has not submitted professional assessments to support the estimates of needed repairs.
- The County does not have the funding mechanism to assist MBCDC with insurance costs.
- PHCD cannot provide project-based vouchers for MBCDC’s unsubsidized tenants, as the Voucher program is linked to availability and competitive process requirements.
Consolidated Financial Statements
On September 24, 2021, MBCDC provided Consolidated Financial Statements for FY 19 and FY 20. The report showed financial improvements from their FY 18 Consolidated Financial Statements, which delineated several material weaknesses in connection to the agency’s internal controls, accounting processes and tenant management. The sale of the Shelbourne Apartments provided a cash infusion of $2,034,950, which was used to payoff the existing loans on the Seymour building, the Raza Development loan for $733,394 and the Florida Department of Financial Services loan for $103,750. MBCDC recognized a profit of $1,134,282 during FY 19.
The audit delineates the changes to the lines of credit incurred by MBCDC in 2020, which included a loan forgiveness of $399,506 from HSBC Bank and a new loan with the Small Business Administration for $150,000.
The following loans payable listed in the audit report describe pending issues that need to be addressed:
The Allen: The Allen, LLC entered into a payable loan to Florida Community Bank in the amount of $750,000 paid in monthly installments of $1,905. The Principal and accrued interest are due on October 15, 2021. MBCDC requested a five-year extension for the payment of the accrued interest, but the request for the loan modification is not reflected in their Business Strategy Plan.
The Meridian Apartments: The Meridian, LLC entered into two payable loans with the National Housing Trust Community Development Fund in an aggregate amount of $635,012. The combined loans require monthly payments of approximately $5,600 that were due on June 29, 2020. The maturity date was extended to October 22, 2021, while MBCDC requests a 2-year extension from the lender. MBCDC requested the City’s subordination on September 9, 2021.
Villa Maria: Villa Maria, LLC and MBCDC entered into loan with International Finance Bank with a current balance of $792,175. The report indicates that Villa Maria is out of compliance with non-monetary financial reporting covenants set forth in the loan agreement and if the loan enters into default, the entire amount may become payable within 30 days. There is no mention of the violation in the Business Strategy or in any subsequent report submitted by MBCDC.
Villa Maria is also out of compliance with non-monetary financial reporting set forth in the loan agreement with Miami-Dade County HOME Loan funds in the amount of $747,222. If MBCDC receives notice of default from the lender, the loan may become payable within 30 days.
The audit also mentions MBCDC’s availability and liquidity, which consists of $329,425 in cash and $238,500 of accounts receivable to meet cash needs for general expenditures. The Business Strategy Plan lists MBCDC’s April 2021 Year-to Date Net Operating Income as $226,743.