EXECUTIVE CORRESPONDENCE

WASHINGTON, D.C. 20410-8000

OFFICE OF THE ASSISTANT SECRETARY FOR
HOUSING-FEURAL HOUSING COMMISSIONER

Mr. Calvin W. Troup
Vice President

DRG Funding Corporation
1099 30th Street, NW
Washington, DC 20007

Dear Mr. Troup:

In conformity with our policy of monitoring and review of coinsurance processing, particularly in areas where many occupancy rates are below those desired, we request that DRG forward us, for review, a copy, of the processing in the following Section 223(f) coinsurance cases:

Your cooperation in this matter will be appreciated. Please send these files for post endorsement review to my Office within 15 days from the date

of this letter.

Sincerely yours,

Thomas T. Demery

Assistant Secretary

DO NOT WRITE ON THIS COVER AS IT IS INTENDED FOR RE-USE
DETLIÐNI IT WITH THE FILE COPIES TO ORIGINATING OFFICE

FROM: Thomas T. Demery, Assistant Secretary for Housing, H

SUBJECT: Section 223(f) Multifamily Coinsurance Projects
Project No. 112-10511

Georgetown Apartments
Dallas, TX

Project No. 133-10503

Woodscape Apartments
Lubbock, TX

Project No. 133-10507
Foxfire Apartments
-Amarillo, TX

This is in response to the memorandum of January 26, 1987 concerning subject coinsurance processing. I am requesting the coinsurer to submit processing on these cases to us for our review.

Thank you for bringing these cases to our attention.

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RETURN IT WITH THE FILE COPIES TO ORIGINATING OFFICE

U.S. Department of Housing and Urban Development

Fort Worth Regional Office, Region VI

1600 Throckmorton

Fort Worth, Texas 76113-2905

January 26, 1987

MEMORANDUM FOR: Thomas T. Demery, Assistant Secretary for Housing-
Federal Housing Commissioner, H

FROM: Walter G. Sevier, Deputy Regional Administrator
Fort Worth Regional Office, 6SD

SUBJECT:

Section 223 (f) Multifamily Coinsurance Projects

Attached are memoranda concerning the appraisal and underwriting of three 223 (f) coinsurance projects by DRG Funding Corporation -- Georgetown Apartments, Dallas, Texas; Woodscape Apartments, Lubbock, Texas; and Foxfire Apartments, Amarillo, Texas.

As the attached memoranda indicate, the value estimate by DRG for Georgetown Apartments is $15,500,000, woodscape Apartments $2,460,930, and Foxfire Apartments $3,235,252. More realistic values are 'Georgetown Apartments $10,700,000, Woodscape Apartments $1,854,263, and Foxfire Apartments $2,713,366.

Attachments

U.S. Department of Housing and Urban Development

Fort Worth Regional Office, Region VI

1600 Throckmorton

Fort Worth, Texas 76113-2905

October 30, 1986

MEI-DRANDUM FOR: THE FILE

FROM: Walter G. Sevier, Deputy Regional Administrator, 6SD

SUBJECT: Georgetown II Apartments, Dallas, Texas

After reviewing Bob Creech's nemorandum of October 2, 1986, subject as above, and the appraisal used in the coinsurance processing, it appears that the following is a more realistic estimate of value:

$1,018,080 9:58 rate (from appraisal) = $10,716,631

$10,700,000

Per the request of Joe Glenn, Director, Housing Development Division, Regional Housing Staff has reviewed the appraisal used in the coinsurance processing for the subject project. Our comments are as follows!

1.

WHIRT SHDUCI

MEFT. PONTS BF E

ENDERES FAENT?

2.

3.

Review of the rent roll shows a wide variance in
the rents that are being collected for each unit
type, yet the appraiser took the high rent for each
in developing the income analysis. For example,
the appraiser uses $340 per month for the two
bedroom units when approximately 283 of 617 units
pay $320 per month. This $20 difference, when
capitalized, using his assumptions, results in a
reduction in value of about $700,000. In addition,
the leases for most of the units have expired, so
reat increases should be relatively easy to effect
if the $340 is actually the market rent. Further,
the appraiser includes rent for two four-bedroom
units which are used by the project manager; this
-18 inappropriate unless they are expensed also.
This was not done.

The rent comps are much newer than the subject,
but no adjustments were made for either age or
visual appeal. It appears that these comps were
included merely to provide a range for support of
predetermined rents.

Actual expenses for the subject for 1985, which do
not include a replacement reserve, are $2.46 per
square foot (PSF) or $1779 per unit per annum
(PUPA). The appraiser analyzed data from several
sources, including the Institute of Real Estate
Management (IREM) for 1984. His adjustments to the
IREM data to extract tenant paid utilities were