MT DOC Rescinds HOME Grant Earmarked for Nemont Manor
December 4, 2019
The Montana Department of Commerce (DOC) has officially rescinded a $492,000 HOME Investment Partnership Program grant awarded to the City of Glasgow and earmarked for the delayed Nemont Manor renovation.
In a letter sent to Glasgow Mayor Becky Erickson the DOC states, “On July 16, 2019, the City requested and Commerce granted an extension to meet start up conditions with an end date of November 11, 2019. However, the developer is not yet prepared to proceed with the project. Therefore, Commerce withdraws its $492,000 HOME commitment to the City of Glasgow for rehabilitation of the Nemont Manor.”
Despite the withdrawal, the DOC did add in the letter that the city could reapply for the grant when the project was ready to proceed. “We encourage the City of Glasgow to reapply for funds to complete this worthy project once the long-term financing is in place.”
According to the Executive Director of Affiliated Developers, who is developing the project, Kirk Bruce, that long-term financing is a Housing and Urban Development 221 (d)(4) long-term loan. The HUD website refers to it as a “non-recourse, ground-up development and substantial rehabilitation multifamily financing” loan.
Bruce referred to it as a HUD “Debt” loan, and said it was the ideal source of financing for a project of this size because it offered a 30 to 35 year term with a low interest rate and an ideal 40 year amortization, meaning the loan could be paid off over the next 40 year period.
“It’s the best way to get that [project] done,” explained Bruce. He added that the program’s construction loan offering would allow them to have a interest-only fixed rate for up to three years while they complete the construction project, ultimately saving the company money and time during the renovation.
The only hold up in receiving that financing right now, is the occupancy rate. As reported by The Courier back in September of this year (“Nemont Manor Struggles to Finance $4.6 million Reno,” Sept. 11, 2019), following the purchase of the manor by Affiliated Developers in 2018, a round of income verification led to a significant loss in occupancy that reduced the rate from 65 percent down to 42 percent. Due to the low occupancy levels, HUD was unable to offer financing until Nemont Manor reached an occupancy rate of 60 to 65 percent.
Bruce said that the building was, last he checked, at an occupancy level of 50 percent. “So we’re about 50 percent of the way home on resubmitting our application,” said Bruce referring to both the HUD financing and the Department of Commerce Home Grant. “My intent is that, hopefully, we’ll have a real nice lease up period in April and fill those remaining 10 to 15 units.”
He said that once Nemont Manor reaches that 65 percent occupancy rate, then the company will move forward with the HUD financing and, once they secure that loan, they will reapply for the DOC HOME grant. “I don’t think it’s going to be a problem,” stated Bruce. “It just takes time.”
Bruce reaffirmed, however, his commitment to the project and again touted the $4.6 million dollars the plan would put into the structure. He said each unit would be getting a $46,000 investment when it was all said and done. When complete, the project will update and modernize the living and common areas, repave the parking lot, add new landscaping and redo the membrane roof.
“If we can get it done,” said Bruce, “it should be pretty nice.”