WASHINGTON -- A private nonprofit organization recently purchased two apartment complexes from the Resolution Trust Corp. using tax-exempt financing, in what apparently is the first deal of its kind, an RTC official said last week.
The organizatiion, Volunteers of America, acquired two multifamily housing complexes in New Orleans with financing from $13.25 million of 501(c)(3) bonds, said Sheldon Schreiberg, a partner with the law firm of Brownstein Zeidman and Schomer, which represents the group.
Some multifamily housing units in the RTC's portfolio already have been acquired with tax-exempt financing from 501(c)(3) issuers set up by public housing authorities, said Stephen S. Allen, director of the RTC's affordable housing disposition program. But, he added, Volunteers of America appears to be the first truly private organization to acquire such units from the RTC using tax-exempt bonds.
"For an organization like VOA, which is a nonprofit in the truest sense, this is a good example of developing the financing through their tax-exempt status to purchase RTC real estate," Mr. Allen said. "It's something that needs to be encouraged."
Volunteers of America will rent the units to low- and middle-income families and provide family and youth programs to the residents, the group said in a statement. The bonds were issued by the Louisiana Public Facilities Authority.
"Because of tax-exempt bonds and the resulting lower rates, we were able to make the deal work," Mr. Schreiberg said. "It would have been impossible otherwise."
Mr. Schreiberg said the organization plans to acquire more multi-family housing units from the RTC and may use up to $117 million more of tax-exempt bonds to make those purchases.
The organization is prevented from using more than that amount by the Tax Reform Act of 1986, which caps the amount of 501(c)(3) bonds any one private nonprofit group can have outstanding at $150 million. Before the $13.25 million issue, Volunteers of America already had $20 million outstanding for a project not related to RTC acquisitions.
"We're in negotiations with RTC and some private owners and hope to repeat the same technique," Mr. Schreiberg said.
Since 1968, Volunteers of American has undertaken several dozen housing projects with the assistance of the Department of Housing and Urban Development. The organization is a church-related group that also provides community services, such as homeless shelters, employment training, day care, and support services for the elderly.
Mr. Schreiberg said issue size is the only difficulty with using tax-exempt financing. Most properties in the RTC portfolio tend to cost less than $5 million, and a tax-exempt bond issue that small tends not to be cost-efficient. That is why the bond deal for the apartments in New Orleans covered two separate RTC properties, Mr. Schreiberg said.