Wednesday, April 30, 2008

Future of Fay Apartments in doubt

The future of the Fay Apartments is in doubt, and the City is exploring its options should the West Side complex close down.

A recent report issued by City Manager Milton Dohoney, Jr is the result of a March 5 motion by City Councilmember Jeff Berding, signed by councilmembers Chris Monzel and Chris Bortz, asking the City Solicitor to look into any possible recourse that the City has should owner Stern-Hendy Properties, Inc.default on the terms of a sales and operations contract, and what is the likelihood of the U.S. Department of Housing and Urban Development (HUD) closing the apartments for good.

Fay Apartments is an 893-unit complex of affordable rental units located off of Baltimore Avenue (BIRD'S EYE), just south of I-74 and west of the community of South Cumminsville that includes:

* 650 units of project-based Section 8 rentals
* 128 units under a Moderate Rehabilitation contract through the Cincinnati Metropolitan Housing Authority
* 112 market-rate units

In 1982, the City of Cincinnati acquired the property from HUD and sold it to Stern-Hendy for $1 per unit in 1986.

Since that time, the City has provided nearly $1.2 million in loans to rehabilitate and upgrade the units.

With interest, the balance of that loan now stands at $4.2 million.

In late 2005, Stern-Hendy had proposed to sell the development to the National Housing Trust, a not-for-profit organization whose goal is to preserve the nation's affordable housing stock.

The National Housing Trust requested a $7 million gap financing loan to assist with its $65 million acquisition and redevelopment cost, which included the $35 million renovation of the Fay Apartments and the assumption of some of Stern-Hendy's debt.

Following the sale to the National Housing Trust, the market-rate units would have been eliminated and the Moderate Rehabilitation contract would have been replaced with a project-based Housing Assistance Program contract.

The National Housing Trust had planned to re-create the complex as a series of smaller "urban villages", with new kitchens, bathrooms, and air conditioning to be installed in all of the units.

Stern-Hendy would continue to maintain the buildings and grounds.

Despite a reconfigured, two-phased housing plan that would have lowered the initial cost to only $20 million, the National Housing Trust couldn't make the numbers work.

On March 6, Stern-Hendy alerted the City that the National Housing Trust had dropped out of the project entirely.

Trouble in the mortgage market is blamed for killing the deal.

As a result of the financial shakeup, large banks, as well as the federally-backed lenders Fannie Mae and Freddie Mac, stopped buying low-income housing tax credits, making most affordable housing redevelopment projects impossible.

Although Stern-Hendy promised the City an updated proposal for the complex, there has been no contact between the two parties since.

Spokespersons for Stern-Hendy have said on several occasions that without renovations, they would have to shut their operations down.

"Now this same developer is seeking more - $10,000 a unit," Berding wrote in a statement accompanying his motion. "It's difficult to determine the proper course of action when the only other option that has been presented by the owner is to close down the complex, leaving hundreds of tenants without a home."

The original sale agreement between the City and Stern-Hendy states that the Fay Apartments must be operated as low- to moderate-income housing, under HUD regulations, until the year 2018.

The agreement also says that Stern-Hendy must maintain a minimum number of units on the site, and cannot demolish any units below that minimum without City permission.

If the complex does close, it will likely be by Stern-Hendy's choice.

The property has remained in compliance with HUD regulations and quality standards and is up to City code.

If Stern-Hendy opts to close the Fay Apartments, the City would declare all outstanding notes due and payable and would begin the process of relocating tenants.

"The City Solicitor should be prepared to exercise the City's legal rights to hold the owner accountable to the original agreement while the administration determines the necessary orders needed for improvements in the quality of life for tenants," Berding wrote.