May 12 2020

The Acquisitions, Asset Management, and Investor Relations teams at CAHEC collaborated on a list of Frequently Asked Questions that may be helpful to partners as we navigate the COVID-19 pandemic together. You can also visit our website to view a list of housing-related COVID-19 resources and webinars.

  1. Will CAHEC authorize the use of Operating Reserves to cover shortfalls? Yes. In general we would expect properties to utilize their resources in roughly the following priority to cover operating deficits, subject where appropriate to lender and agency approval: (1) cash on hand, (2) deferral of management fee in the case of affiliated management companies to the extent possible, (3) operating reserves, (4) suspended replacement reserve deposits, (5) replacement reserve balances, (6) loan forbearance. USDA-RD and HUD may grant up to 3 months of loan forbearance without requiring the utilization of other sources of cash, although HUD strongly suggests the borrower consider these sources first.

  2. Will CAHEC require operating reserves be replenished during this time? The requirement to replenish operating reserves will be evaluated after review of the 2020 audits, and subject to lender and agency requirements.

  3. Will CAHEC require replacement reserve deposits during this time? CAHEC is amenable to suspending replacement reserve deposits provided there are sufficient replacement reserves to meet immediate life safety needs, and subject to lender and agency requirements.

  4. Can replacement reserves be used to cover operating shortfalls? CAHEC would be amenable to using replacement reserves to cover debt service payments provided there are sufficient replacement reserves to meet immediate life safety needs, and subject to lender and agency approvals. HUD is allowing use of replacement reserves to meet debt service payments provided the account balance does not fall below $1,000/unit.

  5. How will CAHEC handle cash flow distributions at year-end if a property has been granted debt forbearance? This depends upon the forbearance terms negotiated with the property’s lender. If the property has been granted a temporary 3-month deferral from the lender and debt must be repaid immediately after that forbearance period, we will calculate net cash flow including debt service (as if debt has been paid during the year). If the property’s debt has been permanently modified or restructured, then we will incorporate the new, modified debt service payments into our calculation.

  6. Will CAHEC permit Paycheck Protection Program (“PPP”) loans to pay property management staff? We will consider the use of PPP funds that are contributed to the partnerships/operating companies to pay property management staff. Please consult with your legal and tax advisors to determine whether these loans are right for your situation and how to account for them at the partnership/operating company level. The PPP rules are still evolving and we ask that you watch those rules closely to ensure compliance with the latest SBA and Treasury guidelines.

  7. When and what should property managers and Owners report to CAHEC during this time? Please continue to meet your regular monthly or quarterly reporting requirements during this time. In addition, we will be requesting monthly rent collection reports, and would appreciate monthly updates on rent collection percentages to enable us to respond to investor inquiries. Finally, if you are requesting an operating or replacement reserve withdrawal, or any other concession to cover COVID-19 related shortfalls, please submit monthly financial statements with your request along with a GP certification of need.

  8. How will CAHEC calculate stabilization and break-even if a property obtains debt relief, and will it impact equity installment milestones? We will determine this on a case-by-case basis. Generally, if the loan is already in place and the lender has granted forbearance, we would calculate break-even without debt service payments. We will have to document for investors why we would advance equity without the disbursement benchmark having been met.

  9. How will CAHEC handle adjusters triggered by the virus? We cannot issue a blanket statement at this time. Adjuster determinations can only be made after the full impact is known by CAHEC and its investor partners. CAHEC will continue to monitor timing delays and seek ways to minimize the impact if possible.