First National manages the administrative complexities to provide financing to a Social Housing Provider with one of the first Section 95 agreements to expire.
A provider with 270 units in Toronto had a Section 95 affordable housing agreement that expired on June 1. Free of Government obligations, the owner was anxious to pursue improvements to the building. Based on an engineering assessment, the owner was advised that the building would require $16 – 18 million worth of upgrades in the next four to five years including garage, boiler, elevators and roof.
As a result of the limitations of the Section 95 agreement, the owner lacked the necessary funds to do the upgrades. He turned to First National for help.
The First National team proposed a refinancing of the property to generate the needed funds, but there was significant administrative work required to manage the complicated nature of affordable housing.
When providers signed these agreements with the Federal Government, CMHC loaned the money. However, when the province assumed the agreements, the province provided an indemnity to CMHC in perpetuity -- to cover any potential losses on the existing loan as well as any future financing on the property.
With the expiration of the agreements introducing the alternative to refinance, it is necessary to complete a Section 9D waiver to cancel the indemnity. Without that waiver, CMHC is unable to do any more financing on the property and will not even consider an application. The waiver process includes three levels of government, and it’s a fairly new and complicated process to complete.
In this case, First National pioneered this new administrative frontier on behalf of its client, making sure that the 9D waiver was secured ahead of time. The First National team assumed responsibility for completing the CMHC application for the client so there would be no delay in receiving funds when the agreement expired.
In addition, the client required $18 million in financing to fund all of the outlined upgrades. Due to underwriting restrictions based on affordable housing rent levels, the application came up approximately $1 million short. However, the First National team proposed using the CMHC energy program to cover the $1 million differential.
In the end, the client received the financing within three weeks after the agreement’s expiration.
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