DALLAS — A Hobbs, N.M., apartment complex that defaulted on revenue bonds issued by the Southeastern New Mexico Affordable Housing Corp. will go on the market for a second time after bondholders rejected a short sale last fall, officials said.
Chris Herbert, president of the New Mexico Eastern Regional Housing Authority, said his agency hopes to get a second request for proposals published before August. The authority needs approval of the U.S. Department of Housing and Urban Development to sell the 88-unit complex, known as Casa Hermosa Apartments.
The Southeastern New Mexico Affordable Housing Corp. is a nonprofit created as the owner of the complex and issuer of the debt. The Eastern Regional Housing Authority manages Casa Hermosa and other low-income projects in its service area.
The housing authority tried to sell the 30-year-old Casa Hermosa last year for more than $1.7 million in hopes of retiring the $1.6 million of revenue bonds that financed a remodeling project in 1997. But the highest offer of $650,000 was rejected by bondholders, Herbert said.
Wells Fargo Bank represents the bondholders.
“Since it’s under default and subject to litigation, our company policy is to make no comment,” said Wells Fargo spokeswoman Aynsley Wade.
The housing authority reported a monetary default June 1 when it failed to make an interest payment. But the complex has not produced enough revenue to service debt for several years, creating technical defaults since 1999, Herbert said.
“For several years, we were using funds from other programs to make the bond payment,” Herbert said.
Anthony S. Freedman, partner at the law firm Holland & Hart and an expert on low-income housing tax credits, said that using funds from other housing authority programs should not endanger the tax-exempt status of the bonds. Use of outside revenues from private sources would be another scenario, he said.
The fixed-rate bonds issued in 1997 with a coupon of 7.25% maturing in 2027 have an average yield to maturity of 15.723, according to Thomson Municipal Market Monitor. A June 28 trade of 20,000 yielded 18.687, a spread of 1,513.7 basis points against the triple-A MMD scale.
The bonds initially carried an A-rating from Standard & Poor’s.
With a better marketing effort, Herbert said the housing authority hopes for better results on the upcoming sale attempt. Southeastern New Mexico Affordable Housing Corp. bought the complex from HUD in 1994. Situated on 5.53 acres, the complex is 81% occupied currently, Freedman said.
Located in Lea County on the border of the Texas Panhandle, Hobbs has 29,000 residents, many of whom work in the oil and gas industry.
The Eastern Regional Housing Authority operates several low-income housing projects in several counties.
Though New Mexico did not really experience a housing bubble, the economy of the state is still weakened from the recession, adding pressure to property values, according to economists in the state.