RAD for PRAC in practice: Guiding a first-time owner through tax credit financing
Faith-based nonprofit Illuminus Inc. partnered with Baker Tilly to complete a complex RAD for PRAC conversion and tax credit transaction, securing long-term Section 8 assistance and funding critical senior housing renovations.
Client background and need
Illuminus Inc. is a faith-based, not-for-profit senior living management company dedicated to providing operational expertise, financial strength and quality care to senior living providers.
The client, new to the industry but owning other multifamily properties, required Rental Assistance Demonstration (RAD) for Project Rental Assistance Contracts (PRAC) services for necessary repairs, including aging-in-place components and mechanical preservation.
The project consisted of a Section 202 PRAC transaction, to renovate an old, 42-units building. Of these, 41 units were supported by a new Section 8 HAP (Housing Assistance Payment) contract and one unit was unassisted. They needed RAD services to convert to the Section 8 platform and complete necessary repairs.
Solution
Baker Tilly’s team suggested tax credits transaction to the clients as it is the primary funding source for the most affordable housing projects nationally.
The client faced stringent due diligence and required higher levels of contribution due to their first-time participation in tax credit transactions.
Our team, acting as a liaison between the HUD office of multifamily, HUD office of recapitalization, and the client, ensuring compliance, guiding them through the tax credit process and advocated on their behalf to the equity provider and lender.
Results
With Baker Tilly’s consultation from application through closing, the client successfully underwent the RAD for PRAC conversion and tax credit transaction, securing long-term Section 8 assistance, leveraging tax credits to finance critical renovations and aging-in-place features.
Despite the complexities of first-time tax credit participation, the client gained valuable experience in HUD programs for future projects.
The project's uniqueness stemmed from the client's faith-based, not-for-profit status and their novice with tax credit transactions. Our consulting services were pivotal in building their capacity for future projects by providing extensive guidance, training and advocacy throughout the process.