FAYETTEVILLE – The nonprofit arm of the Housing Authority wants to cut its losses and sell or abandon ownership of five properties it intended to buy and renovate for low-income residents.
The FHA Development board, made up of Housing Authority board members, voted in favor of the move on Thursday.
The plan for the properties was to use bank loans, grants, and resident rents to make a profit. Purchases were underway, but when covid-19 hit bank funding failed and many residents couldn’t afford rent, President Melissa Terry said at a board meeting on Thursday.
The nonprofit authority had to come up with new plans, she said, and some properties were bought and some were leased to become owners.
FHA Development now has approximately $ 164,000 in unpaid rent and property renovation and maintenance costs. The nonprofit also earns about $ 12,000 in interest per month on restructured loans and $ 18,700 per month to the Housing Authority itself for administrative and support services, Terry said.
The aim is to recover the money invested in projects that no longer have a path to solvency, said Ezra Brashears, member of the board of directors.
“We had a wonderful trial. We kept people housed during the covid, and it cost us dearly. It cost us the ability to move forward comfortably,” he said. “So with the market as it is, let’s sell, relieve the staff and cut our losses. We will probably gain a little ahead.”
The nonprofit authority was set to purchase five properties totaling 133 units at a cost of $ 7.3 million in purchase price and renovations, according to a document that Terry presented to the board of administration.
Four of the properties were donated to the nonprofit authority by the same owner, John Cloyed. A real estate contract for the properties was signed in December 2019 with an expected closing date of April 2020. At the end of March 2020, the bank that had agreed to finance the purchases told the non-profit authority that it could not not complete the transaction due to the pandemic. , according to the document that Terry shared.
Two of those four properties did not close and were leased to the nonprofit with an option to purchase. It was an apartment complex on West End Avenue north of Wedington Drive and another on Dunn Avenue between 11th and 13th streets. These properties are expected to be handed over to the original owner on Tuesday.
The nonprofit authority recruited new banks and received funding for the other two properties. The deal for a complex on 12th Street and South Washington Avenue was signed on April 22 for $ 865,000. The bank funded 75% and the seller accepted a second mortgage for the remainder of the purchase price and closing costs, according to the document. The debt is still unpaid.
The deal for another complex south of Deane Street and Porter Road was closed on June 15 for just over $ 1.3 million. The bank financed 85% of the purchase price and the seller accepted a second mortgage of $ 200,000 to be repaid in October of this year, according to the document.
The first property purchased by FHA Development was the former Hi-Way Inn & Motel across from the Veterans Hospital on North College Avenue in 2019. The property also includes the Cafe Rue Orleans restaurant. The nonprofit authority closed the purchase of the property in April 2019 for $ 690,000.
Café Rue Orléans continued to function as a restaurant and the motel was transformed into apartments. Residents who live in public housing in downtown Hillcrest Towers, owned by the authority, moved into the motel while renovations took place in the towers. The plan was to support the veterans in the renovated motel. The renovations were completed at Hillcrest, and these residents have since moved. Council members discussed other plans to house the veterans at Thursday’s meeting.
The board has agreed to allow the West End and Dunn Avenue apartments to revert to the previous owner. He also agreed to market the properties at 12th and Deane Street, as well as the motel and restaurant property.
Board member Kristen Bensinger, who is the chair of the Housing Authority’s regular board, stepped down at the start of Thursday’s non-profit board meeting. She read a letter to the board outlining her concerns about the finances of the nonprofit authority and a lack of transparent communication.
Bensinger said during the meeting that the document Terry shared with the board of directors outlining the properties’ financial position was the first time members had received a clear explanation in a public setting. The authority’s nonprofit board now has three members with Terry, Brashears and Monique Jones. Former member Lucky McMahon resigned from both boards last month for personal reasons.
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FHA development properties
The Fayetteville Housing Authority development nonprofit planned to buy and renovate the following properties, but decided Thursday to sell or relinquish the property. Properties marked with an * have not closed and have been leased with an option to buy.
• White Sage Studios, West End Avenue north of Wedington Drive, 49 units *
Purchase price: $ 1,600,000
Renovation: $ 612,500
Total cost: $ 2,212,500
• Golden Elm Meadows, Dunn Avenue between 11th and 13th Streets, 14 units *
Purchase price: $ 850,000
Renovation: $ 175,000
Total cost: $ 1,025,000
• Red Bud Gardens, 12th Street and South Washington Avenue, 18 units
Purchase price: $ 865,000
Renovation: $ 225,000
Total cost: $ 1,090,000
• Magnolia Court, Deane Street and Porter Road, 27 units
Purchase price: $ 1,320,000
Renovation: $ 337,500
Total cost: $ 1,657,500
• North Gate, North College Avenue east of VA Hospital, 24 units