Four Years After Katrina: Sims Mortgage Funding Helps to Finance New Orleans' Renewal Through Low Income Tax Credits and HUD-Insured Loans

It is almost four years to the day that Hurricane Katrina landed on the Gulf Coast, leaving a trail of destruction and devastation in its path. In the wake of that tragedy, Sims Mortgage Funding, Inc. has played a critical and ongoing role in assisting one of its not-for-profit clients to fulfill its mission of developing and restoring low-income seniors housing. Providence Community Housing, established in 2006, is a venture jointly sponsored by the Archdiocese of New Orleans, its social-services arm Catholic Charities and a number of locally-based community development organizations.

Providence agreed to acquire from the Archdiocese five former HUD Section 202 elderly housing projects in New Orleans. These properties totaled approximately 570 units and had been heavily damaged by Katrina. They would require significant rehabilitation before they could be made operational again. The plan of finance for the acquisition and rehabilitation involved short-term bank debt and low-income housing tax credits. The bank and tax-credit investor required Providence to have take-out financing in place as a condition of closing. That’s where Sims came in.

From November 2007 through June 2008, Sims obtained HUD Firm Commitments for Section 221 (d) (4) mortgage insurance for the five properties. Since the HUD-insured loans were designed to take out the bank loans, they could not be issued and closed until after Providence successfully rehabilitated the properties, completed its cost certifications and closed out the renovation phase in accordance with HUD’s requirements. We arranged for “forward deliveries” of the HUD-insured loans at specific interest rates to eliminate Providence’s exposure to market fluctuations.

With the HUD commitments in hand as their take-out collateral, Providence acquired Annunciation Inn, Nazareth Inn and Nazareth II in December 2007; Delille Inn and St. John Berchmans were acquired in May and June 2008 respectively. Renovations to the properties commenced shortly after acquisition.

Sims’ work did not stop after obtaining the HUD commitments. Despite the fact that the HUD closings would not occur for at least 15 to 18 months after the acquisitions took place, Sims has remained engaged with Providence throughout the renovation period. Sims continues to assist Providence by working closely with the local New Orleans HUD Office and the regional HUD Office in Ft. Worth on the close-out of construction, cost certifications, mortgage increase and loan closing protocols.

Sims is pleased to report that Providence has been successfully bringing these much-needed properties back on line, enabling many low-income seniors to return to their beloved New Orleans. Annunciation Inn completed construction in December 2008, closed on its HUD financing in June 2009 and is fully occupied. Nazareth II completed renovations in January 2009 and is close to 90% occupied; Nazareth I completed renovations in mid-May 2009 and has reached 50% occupancy. Both properties are scheduled to close on their HUD-insured loans in early September. The remaining properties, Delille and St. John Berchmans, have targeted construction completion dates in early September; Delille is almost 70% pre-leased and Berchmans has over 100 prospective elderly residents – representing 67% of total capacity – who are waiting to be screened for income-eligibility as required by the low-income housing tax credit program. The HUD-insured loans for these properties are expected to close early in the fourth quarter of 2009.

HUD has recognized Providence’s achievements in connection with the purchase and renovation of these properties by issuing the organization an award earlier this month and using the transaction in some form of “best practices” workshop. Sims congratulates Providence on their efforts and success, and are pleased to have them as a client.