Lease change aims to improve senior housing project’s tax-credit chances
The application lists an estimated total funding amount of $18.1 million, including $1 million in federal funding and $17.1 million from other sources.
GLASGOW, Ky. — The Barren County Fiscal Court has canceled its option to lease the former health department property to Wabuck Development and approved a new option to lease the property to the Glasgow Housing Authority’s nonprofit arm, clearing the way for a proposed 75-unit senior housing development.
The change is tied to the project’s application for low-income housing tax credits through the Kentucky Housing Corporation. Wabuck Development representative April Bowman told magistrates Tuesday the change is needed to give the project the best possible chance in the competitive tax-credit process.
Wabuck Development, a Leitchfield-based affordable housing developer, approached the county earlier this year about developing the property at 318 W. Washington St.
Bowman told magistrates the company has worked with Glasgow Housing Authority Director Sheri Lee for more than two years and identified the former health department property as a strong location for the project.
“We have been in conversation with Ms. Sheri Lee at the Housing Authority for probably over two years now,” Bowman said.
Wabuck’s primary source of funding for its affordable housing projects is low-income housing tax credits awarded annually through KHC’s competitive application process.
The scoring criteria changes each year. Bowman said location has been a major factor in recent years, with KHC considering data such as renter cost burden, area income, employment density and job opportunities.
“Glasgow, and it’s a relatively small area that we have to choose from. We have eyeballed it again for a couple of years now, trying to find something that would work in all aspects,” Bowman said. “This health department building on West Washington Street has kind of checked all of the boxes.”
Wabuck initially secured an option to lease the property from the fiscal court as part of its role as a consultant and co-developer. The option was written so it could be assigned to the nonprofit ultimately involved in the project.
That arrangement created a problem under KHC’s scoring criteria for this year’s tax-credit application.
The second part of the competitive scoring process considers what KHC calls “below-market sources.” Bowman said the criteria encourages developers to secure assistance from local governments, housing authorities, utilities and other entities.
“Every dollar that you can bring to the table to the deals that’s considered below-market is a scoring piece this time,” Bowman said.
Bowman said projects can be separated by fractions of a point because of the competitiveness of the program.
One factor that can qualify as a below-market source is donated property.
Bowman said the Hero Foundation, the nonprofit arm of the Glasgow Housing Authority, offered to contribute toward the property, allowing that contribution to help the project under the scoring criteria.
The problem was that Wabuck was originally the party holding the option with the county.
Bowman said KHC recently clarified that although Wabuck could legally assign the option to the Housing Authority, the project would not receive the same scoring benefit because Wabuck would remain in the middle of the transaction.
“Legally, you’re fine. You can proceed, but for scoring purposes, if there’s a middleman in that transaction, which, in this case, Wabuck Development will be the middleman because the lease was initially with us, even though that assignment works, we would not get the credit,” Bowman said.
Wabuck therefore asked the fiscal court to cancel its option and enter into a new option directly with the Hero Foundation.
“This was Sheri’s project all along. This was gonna be the Hero Foundation all along. We simply were securing that option as part of our job as consultant,” Bowman said.
The fiscal court approved canceling the option with Wabuck. The county will retain the $5,000 nonrefundable fee Wabuck previously paid as consideration for the option.
The fiscal court then approved a new option to lease the property to the Hero Foundation.
Brennan Crain
Bowman said the change does not alter Wabuck’s role in the project.
“None of the other terms have changed. The ownership structure hasn’t changed. What we’re building isn’t changing, what we’re gonna pay isn’t changing,” Bowman said. “It’s just a matter of, it’s now directly between the fiscal court and the Hero Foundation, and not Wabuck.”
The new option covers approximately 2.94 acres at the former Barren County Health Department, also known as the Howard Clinic.
The terms call for a 99-year ground lease at a total cost of $600,000. The original closing deadline is March 30, 2027.
The agreement allows the closing date to be extended through Dec. 31, 2027, if the lessee pays an additional $100,000 in nonrefundable earnest money by the original closing deadline. That money would be applied toward the $600,000 cost at closing.
The proposed development, known as Highland Heights, would replace the former health department building with 75 residential units primarily intended for elderly households.
According to a project application submitted by Wabuck, the development would include a three-story, elevator-served building with community gathering areas, management offices, resident amenities, landscaped outdoor spaces and parking.
The application lists an estimated total funding amount of $18.1 million, including $1 million in federal funding and $17.1 million from other sources.
It says the project is expected to use low-income housing tax credits, National Housing Trust Fund resources administered by KHC, permanent financing and other public and private funding.
The application also says the project is expected to receive Section 8 Project-Based Vouchers administered by the Glasgow Housing Authority for eligible residents.
