Seattle-area authority plans $162.5M bond sale for affordable housing projects

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The King County Housing Authority plans to sell $162.5 million in tax-exempt revenue bonds Tuesday to support affordable housing projects in the Seattle metropolitan area.

The area has experienced 8% to 9% annual rent increases over the past several years – and has a less than 1% vacancy rate for apartments that provide housing to low-income residents, said Sam Adams, a vice president with KeyBanc Capital Markets.

“Part of the mission of the housing authority is to insure that an economically diverse workforce has a reasonably priced place to live,” Adams said.

The upcoming bond sale is part of what S&P Global Ratings called “very active” efforts by the Housing Authority to tackle that mission.

KeyBanc will price $90 million of revenue bonds and $72.5 million of revenue refunding bonds for the housing authority.

With interest rates expected to rise, the authority decided it would be a good time to convert short-term debt to long-term debt, Adams said.

S&P Global Ratings gave the $90 million tranche an AAA rating in an April 9 report, based on the triple-A rated King County’s credit enhancement pledge. The refunding received a AA rating from S&P without an enhancement. The housing authority only holds ratings from S&P, which gave the agency a stable outlook.

Both series of bonds are secured by the general revenues of the housing authority. The $90 million tranche also is backed by full faith and credit of the county.

King County previously provided a credit enhancement to lower debt costs and help the housing authority fulfill its mission, Adams said.

S&P cited the housing authority's management and the strategic plans' potential to boost growth and services diversification.

The bonds support the housing authority’s mission of developing and preserving affordable housing in the state. It owns or operates about 9,590 units in 129 properties and administers more than 11,000 rental vouchers, according to S&P.

The proceeds from the $90 million tranche will pay off a nonrevolving line of credit revenue note, while the $72.5 million of bonds will refund 2005 pooled housing variable rate refunding revenue bonds on a current basis and refund a portion of a 2017 revenue note for the Ballinger Commons Apartments.

The housing authority purchased the 485-unit Ballinger Commons apartments for $132.5 million in December from Essex Property Trust of San Mateo, Calif. Over the past two years, it has also acquired a 76-unit apartment community in Bellevue and a 146-unit apartment community in Sea-Tac and has $20 million in capital improvements planned on two other apartment communities, according to S&P Global.

Since 1992, the U.S. Department of Housing and Urban Development has named the housing authority “a high-performing agency in the areas of financial condition, resident services, management operations and physical condition of housing,” S&P analysts wrote.

Pacific Law Group is bond counsel on the deal.

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