The Alexandria City Council voted Tuesday to bail out an affordable-housing firm to protect the city’s $14 million investment in three apartment buildings on the verge of foreclosure.
The three buildings are owned by Robert Pierre Johnson Housing Development Corp. of the National Capital, or RPJ Housing, which came under fire in 2010 when its executive director was accused of forging Fairfax County documents for loans. Now the organization cannot pay back $9.5 million in BB&T loans by July 5, putting the property in jeopardy, city officials said.
“The city’s investment is at risk, so the idea was if RPJ can’t do it, let’s give it to somebody who can,” said Alexandria Vice Mayor Kerry Donley (D). “Let’s work with them to develop a plan, consider alternatives and make a decision by the end of the year.”
The council voted to transfer the three buildings to Alexandria Housing Development Corp., an independent nonprofit group that is funded through the city. The corporation would take over management of the properties and the $23.5 million debt that comes with them. The city also authorized $574,000 for the corporation to cover transaction and start-up costs.
“We do not know what our long-range strategy is going to be at this time,” said AHDC President Daniel R. Abramson. “We have a bridge loan from BB&T that will give us a comfortable period of time at a low interest rate to decide what is best for these tenants and properties.”
Abramson said he hopes to settle with RPJ Housing before July 1.
RPJ Housing bought up several properties during the boom of the mid-2000s in an effort to preserve housing for low-income families in Northern Virginia.
In 2006, the organization bought Lacy Court Apartments, in the 1500 block of Commonwealth Avenue, and Arbelo Apartments, in the 830 block of Bashford Lane, using a combination of city, federal housing and BB&T loans. It bought Longview Terrace, in the 2900 block of Seay Street, in 2007 using city and BB&T loans. There are 119 units in all three buildings.
“The plan was, they would get tax credits to renovate the properties,” said Mildrilyn Stephens Davis, director of Alexandria’s Office of Housing. “That did not happen. With all the issues they faced recently, there was no way to get that done.”
RPJ Housing’s former director, Herbert J. Cooper-Levy, was accused in 2010 of forging a zoning document in Fairfax County to secure more than $700,000 in public loans. Cooper-Levy resigned, but the group’s finances took a toll.
The nonprofit organization, which owns 17 properties in Northern Virginia, spent more than $50,000 in legal fees, paid for two private investigations and had to convert the Fairfax property from apartments back to a single-family home.
RPJ Housing was unable to get tax credits to renovate Arbelo Apartments because the state’s funding pool was suspended, said Eric Bonetti, RPJ’s executive director. BB&T “was a little reluctant” to refinance the loans, he said.
RPJ never applied for tax credits for the other two properties, and the interest-only payments to BB&T stopped in May, Davis said.
“This past year has been a tight one for us,” said Bonetti, who said that the Alexandria properties were “a drain on our resources.”
The organization has spent $250,000 since acquisition to upgrade the properties, Bonetti said, although many of the renovations that RPJ promised the city it would do never happened.
RPJ’s portfolio is valued at about $34 million, but it has $37.9 million in outstanding debt. The majority of that debt is in low-interest or non-payable loans that are often forgiven over time. For example, Alexandria’s $14 million is based on residual receipts, meaning that when the nonprofit begins making a profit, repayment to the city begins.
If the Alexandria sale moves forward as planned, Bonetti said he anticipates that his organization will strengthen over time, especially without three foreclosures on its books.
AHDC will take over the $14 million loan with the same payback schedule. The city will attach the $574,000 to the property as a lien. The council expects a permanent financing plan from the corporation by the end of the year.
“I don’t want them coming back to the city to ask for additional money,” said council member Frank H. Fannon IV (R). “If they need to sell one of these buildings at market rate for us to get our money back, then that is what is going to need to be done.”
Staff writer Debbie Cenziper contributed to this report.