CASE STUDY – LIMITED EQUITY COOPERATIVE
Leisureville Community Association, Inc. (LCA), Woodland, CA.
Leisureville Mobilehome Park is a 150-site low-income senior park in California’s Central Valley.
In early 1993, the residents protested large rent increases and threatened
(along with the City) the owner with the imposition of rent control. After 8 months, the owner agreed to consider the sale of the park to the resident group. The group retained Gerald Rioux (currently with the San Luis Obispo County, California Housing Trust Fund) and David Thompson (Neighborhood Partners, LLC, Davis, CA) to act as the real estate broker and Technical Assistance Providers for the transaction.
In April 1995 (26 months after the initial protest), the park was purchased by LCA as a Limited Equity Housing Cooperative (LEHC) with members each paying $5,000 for a share in the LEHC, many using low-interest loans.
The LCA Saga illustrates many of the important points in purchasing your park as an LEHC, but also highlights many of the challenges:
• Opportunity combined with tenacity enabled to park to be purchased.
• The availability of qualified and experienced Technical Assistance Providers was critical to the success.
• Local, State and Regional financial support was required and was very complex (Much of the financing was only available because of the low-income levels of the park residents.):
• Initial funding was a $5,000 grant from the Presbyterian Church.
• A forgivable loan of $30,000 was obtained from a cooperative development foundation.
• The City provided $275,000 from Community Development Block Grant Funds.
• The State provided $1,000,000 from the HOME Program.
• $300,000 came from a local Community Development Fund.
• $500,000 came from a regional affordable housing non-profit.
• Key to the transaction was the assumption of the seller’s loan of $3,000,000. Such an assumption would be unlikely in today’s financing climate.
• The final funding shortfall was made up from share sales to individuals in the park and unsecured loans also from park residents.
• The secondary debt required refinancing in 5 years.
• Most of the debt secured by the real estate carried rates of 7%-8%, while loans to individuals were subsidized at 3% with interest deferred.
• The total funds sources of $5.4 million enabled the following:
• Park purchase – $5.05 million
• Reserve Funds – $150,000
• Legal & Professional Fees – $78,000
• Loan Fee & Points – $75,000
• Other costs & contingencies – $47,000
• The park seller paid a broker commission to the consultants resulting in lower fees to the LEHC.
For additional information, contact Deane Sargent (deane.f.sargent; 415-271-3919)