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Suffolk housing agency to issue first bonds in decade

SUFFOLK

The Suffolk Redevelopment and Housing Authority is poised to earn money to help with funding shortfalls as it reenters the bond business after a decadelong hiatus.

The agency plans to issue up to $5.5 million in bonds for the acquisition and rehabilitation of Wilson Pines Apartments, an affordable-housing community on East Washington Street, to be developed by a subsidiary of North Carolina-based Silver Street Development Corp.

The issuance, which still needs City Council approval, would be the first since 2003, when the housing authority allocated $10 million in bonds for an apartment complex in Henrico County.

State law allows a housing authority to leverage its tax-exempt status to issue tax-free bonds to spur construction or renovation of affordable housing throughout the state, and the agency isn't on the hook for repayment.

The state has allocated about $108.8 million for private activity bonds this year, and so far no housing authority has submitted an application for the program, said Shea Hollifield, deputy director of housing for the state's Housing and Community Development Department, which approves the bonds.

Suffolk's bond issue is the first step in a potentially big business buoyed by the current economy, in which typical construction loans are harder to acquire and carry higher interest fees.

Though bond prices have declined recently, long-term investments are expected to return higher yields, said Clarissa McAdoo, the agency's executive director.

"What that means over time is that we see developers approaching us again," she said.

Suffolk's proposed bond issue is small compared to amounts other authorities have issued in the past, but it adds to the organization's bottom line at a time when other agencies are trying to secure deals.

"It beats a blank," McAdoo said.

The Norfolk Redevelopment and Housing Authority last issued $56 million in bonds in 2008 for 258 student housing units at Old Dominion University. Authority spokesman Ed Ware said the agency would like to do more of the once-common deals, but the economy has limited them in the past few years.

The Chesapeake Redevelopment and Housing Authority last issued $22 million in 2007 for apartments in the Great Bridge area. Dewayne Alford, the agency's deputy executive director, said business tapered off when interest rates on traditional loans hovered near all-time lows.

Alford said the agency hopes to reenter the bond market as rates climb in the recovering economy, but the ability to issue bonds doesn't necessarily mean developers will come knocking. One reason is the bonds can be complex and costly for developers, Alford said.

Companies that apply for the bonds must complete a pile of paperwork and commit to maintaining properties as affordable housing, especially for communities funded through federal rental-assistance programs like Section 8.

Budget cuts to similar programs, though, is one reason the Suffolk agency is hoping to issue bonds to make money for its own affordable-housing initiatives throughout the city.

The Wilson Pines developer paid $7,500 to the authority to apply for the bonds, and the agency expects to earn half of one percent of the total amount of bonds issued, potentially $27,500.

The bonds will be used to purchase the property from the owners, who completed a similar deal when the property was built more than 30 years ago but who are no longer eligible for the tax break under current federal regulations.

The new developer plans a 16-month "rehab in place" where it will upgrade external and internal features in phases so residents won't have to leave their homes.

Those renovations include new stairwells, landscaping and siding as well as heating, cooling, plumbing and flooring upgrades in each of the 104 apartments.

As part of the project, the developer expects to get a renewed U.S. Department of Housing and Urban Development Section 8 contract for the next 20 years, and has agreed to operate the complex as subsidized and affordable housing for the next 30 years.

Cherise M. Newsome, 757-222-5563, cherise.newsome@pilotonline.com

Posted to: Local Government News Suffolk

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