Alert on NYC redevelopment company refinancings.This alert addresses recent New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of State legislation that enables redevelopment companies with properties in New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. to finance increased cash flow resulting from a "Mark-up-to-Market" Section 8 Housing Assistance Payments Contract. On Aug. 1, 2007, Governor Spitzer signed a bill (A8957A/S6023A) creating a new Section 111-b in Article 5 of the New York State Private Housing Finance Law (PHFL), which will permit equity "takeout" mortgages for redevelopment companies with properties in New York City Redevelopment companies are entities created (most often as limited partnerships) pursuant to PHFL Article 5. In the 1970s and early 1980s, they were used to develop and own low-income housing using project-based Section 8 subsidy contracts. These Section 8 contracts have expired and HUD Hud (h  d), a pre-Qur'anic prophet of Islam. Hud unsuccessfully exhorted his South Arabian people, the Ad, to worship the One God. has provided an
incentive for owners to continue to renew these contracts under the
Mark-upto- Market Program. This program, in effect, increases the
Section 8 rents to market rents and eliminates limitations on
distributions. In exchange, the owner must agree to renew the Section 8
contract for five years.
Owners in the Mark-up-to-Market Program who are not redevelopment companies have been able to use the additional income generated by these contracts to refinance their mortgage debt and take out some portion of their equity. PHFL Article 5 contains a limitation on redevelopment company debt that does not permit equity take out financing. This new section, 111-b, amends Article 5 to permit this type of financing for redevelopment companies in New York City (but not outside New York City) under the following circumstances: * The new financing must be approved by the "supervisory agency." This is almost always the NYC NYC abbr. New York City NYC New York City Department of Housing Preservation and Development but, in some instances, may be the NYS 1. Is not. See Nis. Division of Housing and Community Renewal; * The redevelopment company must enter into a "Restrictive Agreement" that shall provide that, for a period of five years from the date of the agreement, the redevelopment company: (a) will not dissolve or reconstitute re·con·sti·tute tr.v. re·con·sti·tut·ed, re·con·sti·tut·ing, re·con·sti·tutes 1. To provide with a new structure: The parks commission has been reconstituted. 2. pursuant to PHFL; (b) must renew its Section 8 contract; and (c) must preserve the existence of the Section 8 contract for the five-year period; and * The tenant portion of rents may not be increased to pay for increased indebtedness attributable to the takeout financing. The new Section 111-b provides an additional incentive for redevelopment companies to remain in the Section 8 program rather than opting out. BY JOHN L. KELLY, PARTNER, NIXON PEABODY Nixon Peabody LLP is one of the largest multipractice law firms in the United States, with offices in seventeen cities and more than seven hundred attorneys collaborating across twenty-five major practice areas. LLP LLP - Lower Layer Protocol |
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