Community Development

Upstairs Rental Rehab Program for Atlantic City

I.  Project Background

The Program will support the downtown revitalization effort the organization is seeking to restore apartment housing above stores in its 14-block Atlantic Avenue district. This will not only help to stabilize the district but it will provide workforce housing opportunities within walking distance of the eleven Casino Hotels, Atlantic City and Atlantic County’s largest employers. There are approximately 30 such above-store apartments in the district which runs from Michigan to Massachusetts avenues, all long vacant and in need of gutting and rebuilding.

The Atlantic County Improvement Authority will provide loans to qualified property owners to assist in financing the reconstruction/renovation of vacant apartment units located above commercial retail stores located on Atlantic Avenue between Michigan to Massachusetts Avenues.

II.  Financing Terms/Commitment

A.  Amount of Loan

To be requested by borrower based on a Construction Cost Estimate provided by a registered contractor in the case of simple renovation or by an architect for more complex projects involving extensive rehabilitation. Project Management staff of the Improvement Authority will determine the level of design required.

B. Term: 20 years

C. Interest Rate: 2%

D. Estimated Monthly Payment: $5.06/$1,000.00

E.  Security: The loan will be collateralized by a Mortgage on the property.

F. Conditions:

1. Approval is subject to an operating budget/pro-forma analysis demonstrating sufficient Net Operating Income (NOI) to provide a 1.2 Debt Service Coverage Ratio after all other priority obligations are satisfied.  The calculation shall include the following elements:

Gross Rental Income (# of units@ $_____.___/month
-   Vacancy @ 7%
= Effective Gross Income
-  Expenses including maintenance and other debt
=   Net Operating Income (NOI) before Taxes and Debt       Service  
-   Real Estate Taxes
                        =   Net Operating Income before Debt Service
/   Debt Service Ratio of 1.2
= Net Available for Debt Service  
 
2. Appraisal - demonstrating sufficient collateral to secure the loan.

3. Expenses - the pro forma shall demonstrate a sufficient amount of funds are included in the projections under expenses to maintain the units and provide for major system repair as required.

4. Real Estate Taxes: At loan closing sufficient funds shall be escrowed to pay the estimated amount of real estate taxes at the next billing date, less any amounts estimated to be escrowed for real estate tax payment from rental receipts for the period between the closing and the real estate tax billing date.

5. Insurance Escrow- An amount equal to one full year’s property and liability insurance premium meeting the Authority’s requirements must be paid or in place at the time of closing and maintained throughout the term of the loan. The Authority will be named as loss payee on all policies.

III.  Other Considerations

A. Marketability: The applicant will be required to demonstrate demand for the units to the satisfaction of the lender. A strong Marketing Plan, the utilization of a Management Company, a market study, and pre-leases will be considerations that should be addressed.

B.  Project costs and the leveraging of the funds: The lender will also evaluate and consider the overall cost of the project, how the funds are leveraged and the final product in an effort to maximize the impact of the investment.

IV.  For More Information:

Interested property owners who have questions or wish to pursue an eligible project should contact John Lamey at the Atlantic County Improvement Authority at 645-5838.

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