Public Agency Drives $30M in Additional Revenue through Subordinate Loan Management from MRI Asset Management Services
A public housing authority (PHA) completed a Rental Assistance Demonstration (RAD) conversion of 28 properties. The PHA provided lender carry-back residual receipt loans to owners and developers to ensure project financing viability, which included Low-Income Housing Tax Credits (LIHTC).
Business Challenge
The PHA newly assumed the role of a subordinate lender but lacked the resources and infrastructure to undertake the responsibilities of subordinate loan management. The PHA recognized that without outside expertise and assistance to guide and institute a residual receipt process, it would not be able to adequately invoice the annual residual receipts it is owed.
Solutions
The PHA partnered with the City and engaged MRI Asset Management Services (formerly TCAM) to conduct annual reviews and prepare residual receipt invoices for both the PHA and City, This alleviated the agencies’ staffing shortages, while also ensuring calculations and invoices were correct. The partnership allowed the PHA to effectively manage their loans and establish a new funding source that would eventually factor into annual budget projections.
Business Impact
Immediate and Ongoing ROI
With approximately $30M invoiced by the PHA in the first six years, the additional revenue generated from residual receipts has more than covered the service cost. Going forward, now that the portfolio’s additional revenue has stabilized, the PHA budgets annual receipts based on previous year invoices and anticipated adjustments.
Efficient Loan Management
The PHA lacked the staffing—both in terms of time and experience required—to effectively manage annual residual receipt calculations and invoicing. MRI’s involvement streamlined the loan management process, enabling reliable and consistent results without increasing staff workload.
Enhanced Financial Resource
The unanticipated surplus in residual receipts provided the PHA with much-needed funds to support its core business and new program initiatives.