The Handbook of Municipal Bonds

CASE STUDY 2

9/11, Subprime Loans, and the Magnolia Park Apartments Bond Default

Michael J. Ross, CFA Senior-Vice President Morgan Keegan & Company, Inc.

 

 

 

This is a case study of a multifamily mortgage revenue bond issue of the Housing Authority of Clayton County, Georgia. The bonds were issued in 1999 for the Magnolia Park Apartments and secured by payments from the apartment project. They were issued in June 1999 as the Series 1999 bonds and consisted of:

1. $10,310,000 Series A (tax-exempt)

2. $300,000 Series B (taxable)

3. $2,300,000 Subordinate Series C (tax-exempt)

OVERVIEW OF THE PROJECT AND THE OWNER

The bond proceeds were used for the acquisition and rehabilitation of the 328-rental unit, Magnolia Park Apartments, located in Jonesboro, Georgia, This is outside the city of Atlanta within proximity of the Hartsfield International Airport. The project was constructed in the 1970s and situated on a rectangular shape tract of approximately 28.6 acres.

The owner of the complex was an RHA/Housing, Inc., a Georgia not-for-profit corporation that was established on August 19, 1994. RHA received its 501 (c)-3 determination from the Internal Review Service on March 15, 1995. Prior to the acquisition of Magnolia Park in 1999, RHA had acquired a 768-unit complex in Orlando and another 151-unit low-income housing project also located in Orlando, Florida. In addition to these two complexes, RHA had acted as codeveloper of a new construction 230-unit low-income housing project in Jonesboro, ...