AHFA's latest development spotlight shines on Legacy Trail in Semmes. Currently under construction with an expected completion date of early 2023, Legacy Trail was awarded $1.5 million in HOME Investment Partnership Program funds and $834,216 in Housing Credits during the 2020 competitive cycle. When Legacy Trail was awarded AHFA funding in 2020, we were at the start of the COVID-19 pandemic with little knowledge of how much it was going to impact life in the long term. AHFA spoke with Phil Ellen, executive director of Paladin, Inc., to provide a developer's viewpoint on how they were able to move the project forward.
It was one of the most uncertain times I've experienced during my 20 years in affordable housing. Natural disasters and economic downturns have challenged the industry in the past, but in my opinion the rapid rise in costs as a result of the pandemic has been perhaps the most difficult. Supply chain issues and sub-contractor labor shortages due to COVID-19 created issues for each of our developments across every state we work in. All of these conditions of course were unknown at application and projects based on reasonable budget assumptions were unbuildable in a matter of months.
To close our 2020 deal and begin construction we had to aggressively restructure the deal. Our investors were willing to increase the credit pricing. The construction company worked extremely hard to find the best pricing and subs for the job. We asked existing lenders to restructure loans and provide more funding, in addition to pulling in new conventional debt to help deals move forward. While we are grateful to our partners, we remain very concerned as costs have continued to spike even beyond our revised projections at closing.
In August 2021, we requested and received relief from the Mobile County Commission regarding its HOME funds committed to the project. In addition to increasing its HOME award amount, it also agreed to modify the amortizing loan structure to a cash flow contingent repayment structure. Through this modification, the deal was able to support considerably more conventional debt. We also negotiated a credit price increase with our syndicator to generate additional equity and increased our deferred developer fee substantially. These combined modifications allowed the project to close and begin construction in extremely challenging circumstances. The risk profile for the project is significantly higher following the restructure, however, and unfortunately so is the rent burden for tenants in order to support the added debt.
The lesson we have learned is that to overcome the challenges of developing affordable housing in an uncertain environment takes a lot of hard work and good relationships with quality partners who are willing to make the adjustments needed to bring housing to the people who need it during these times.
When complete, Legacy Trail will provide 56 units of safe, decent, and affordable housing for elderly residents in Semmes.