News Talk 94.1/AM 1600 Where The Upper Cumberland Talks
Highlands Residential Services reapplying for a tax credit that would provide funding for the Magnolia Ridge development.
Project Advisor Alvin Nance said Highlands Residential applied for the competitive tax credit last year and lost to the Oak Ridge Housing Authority. Nance told Highland Residential’s board Monday that recent changes to the application process should allow this year’s application to get more priority.
“We have worked on the tax credit program with THDA this year,” Nance said. “So we’ve gotten things shifted around a little bit to where (the) housing authority can come in and do an acquisition rehab application this time, but it will be behind new construction.”
A financial summary from the development company showed the project is expected to cost some $21.61 million. Nance said the project will require some debt to be taken on because of rising costs, but Highlands Residential Executive Director Dow Harris said the organization’s finances are well-suited to handle the cost.
“Our debt coverage ratios are really, really good and I’m not sure if you’re going to get into that today but the project cash flows very, very well,” Harris said.
Nance said the project’s budget has included conservative per-unit prices that may be higher than necessary in order to provide some wiggle room for any economic changes. Nance said there is some space for adjustment, but if costs increase too much that cushion could still get eaten up.
“It was great when we did Hickory Valley ’cause equity pricing was high, construction cost was a little bit lower, and we were trying to figure out what are we going to spend money on at Hickory Valley,” Nance said. “We had plenty. Now we’re constrained somewhat, but we’ve still got a very strong deal.”
Nance said the deadline to apply for the tax credit is April 15, but LHP Capital Vice President of Development Talal Shakarchi said everything should ideally be buttoned up by the end of this week. Shakarchi said they are in great shape as the only other items they need are a market study and appraisal, which should be imminent.
“For all intents and purposes, if we get an allocation, an award in July we should be able to get some firm pricing from a contractor sometime in the fall,” Shakarchi said. “And ideally we’d be in a position to close probably sometime in early 2026 and begin construction around then.”
Shakarchi said low income housing tax credits used to bring in around $0.90 per dollar of credit awarded but market shifts have brought that number down to around $0.85. Shakarchi said the project would require almost $5 million in debt to supplement the investor equity from the tax credits.
“I’ve also been working with (A&H Development Managing Partner) Don Alexander to submit for (an) AHP application in the spring, in a month or so, to hopefully get $1.5 million in AHP funding as well,” Shekarchi said. “So this would effectively fill out entire gap to build Magnolia Ridge Apartments.”
Shakarchi said the project will pay some $787,000 to Highlands Residential upon closing and an average of some $126,000 per year for fifteen years totaling around $1.89 million. Shakarchi said Highlands Residential would also receive around $61,000 per year from its annual seven percent management fee for another total around $920,000.
