Since RAD’s debut, only three such transactions have been executed in Texas so far besides HACEP’s. Walter and Palmer were at the forefront of the first three, which all took place in Fort Worth and closed in 2014. One of the projects converted Hunter Plaza, a vacant building in downtown Fort Worth, to a renovated housing facility via low-income housing tax credits and historic tax credits.
Coats Rose also represented the Housing Authority of New Orleans before and after Hurricane Katrina, closing a series of transactions from 2005 to 2013.
San Antonio partners Jane Macon, William Avila and Carey Troell served as the lead attorneys for Bracewell’s team. Also working on the deal were San Antonio partners Michael Bernard and Blakely Fernandez and associate Shelby Gutierrez, Austin partner Victoria Ozimek and Houston associate Brian Teaff.
“At Bracewell, we’re excited about having an opportunity to work on some cutting-edge projects that not only have legal significance, but also have an impact on the future of multi-family housing,”Macon said.
“As we know, dollars are short not only in Texas, but nationwide,”she added. “The private sector is participating in monetizing this project so [the apartments] can be rehabbed in a significant manner in which [without private investment] there would never be enough funds available to do the rehab and make an impact for the housing practice that we see in this country.”
Bracewell is not new to working on bond transactions for public improvement projects. Avila, a partner in Bracewell’s public finance practice group, has closed approximately 1,000 transactions in his career totaling more than $50 billion in municipal bonds. Some of his previous work includes securing bonds to finance an apartment complex designated to provide year-round housing for teachers in the school district of Presidio, Texas and refinancing the debt of various 501(c)(3) housing charities in Houston, Austin and San Antonio.
The biggest challenges of the deal were the obstacles that the structure of the transaction itself created, Palmer said. He said the biggest hurdle was to get the regulatory agencies to approve the financing plan because of its size.
“They had never done a transaction this big before and had never done financing with multiple properties, and there were 13,”Palmer said. “Getting them comfortable was probably the biggest challenge.”
There were also major time constraint issues. Because the financing involved tax-exempt bonds, Palmer explained that once developers receive an allocation for one, the bond is only good for 150 days.
“If you don’t close in that time frame, you lose the bond allocation and have to start all over again,” he said. “We got the allocation in November and the deadline to close the bonds was April 10. We closed on April 9.
“When you have a due diligence checklist with 300 items on it, you can [usually] think of a couple more to add,”Palmer added. “At some point, you have to stop adding items…and get the lender and investor to come to the closing table.”
Though the transaction has closed, Cichon, HACEP’s CEO, said time constraints will again be the ultimate challenge in getting the project done. Rehabbing thirteen properties is an undertaking that could take 10 years normally, he said, but the government said the housing authority must get it done in five at the latest.
Though the deadline is daunting, Cichon said he is confident his team will deliver.
“The team we have is the Google of public housing,”he said. “No one is better situated than the Housing Authority of El Paso.”
Relocating tenants during the renovations will be another concern, but Cichon said HACEP staff is working hard to make the process as seamless as possible. During the renovations, Cichon said families will be relocated to the same area of town to prevent transportation issues and other hardships. He added that the HACEP staff has met with tenants six or seven times face-to-face before their moves, and that every single tenant has the cell phone number of one of his staff members.
“For us, it’s all about customer service,”Cichon said. “Obviously there are a lot of special needs out there…this is that chance to really respond to [residents] and give [them] a safe, affordable and sustainable place to live.”
HUD initially announced the RAD program in 2011 with a bid or application competition for 60,000 units nationwide. El Paso, the 14th largest housing authority in the nation and largest in Texas, obtained 6,000 units, or 10 percent of the entire units offered at the time.
HACEP celebrated its 77th anniversary this February. Cichon said its prominence today as a housing authority is credited widely to HACEP’s early leaders and their efforts to make El Paso’s great need for affordable housing known. According to recent U.S. Census Bureau data, El Paso is among the top 11 poorest cities in America. Cichon said 75 percent of El Paso’s public housing families have an attrition rate of five years.