Aristocrat receives almost $60K per month in HUD subsidies

The Aristocrat Manor Apartments, 240 Central Ave., are exempt from fair-market rent standards as a result of the property’s participation in a now-defunct federal program, the U.S. Department of Housing and Urban Development said Friday.

Rent and subsidies the property’s parent company receives exceed HUD’s fair-market standard by almost 70 percent, netting $900 and $870 a month for the 440-square-foot units, according to December rent roll records The Sentinel-Record obtained through an Arkansas Freedom of Information Act request submitted to the Arkansas Fair Housing Commission.

The Aristocrat is a project-based Section 8 property where residents pay

30 percent of the rent and HUD pays the balance. According to rent data, residents of the 101-unit complex pay

$127 to $437 a month.

A letter Coffman Investment Co., part of Coffman Holdings LLC, the general and limited partner of Aristocrat Manor LTD, sent the fair housing commission in March 2017 said tenant eligibility is limited to applicants 62 or older or disabled.

Patricia Campbell, HUD’s Region 6 public affairs officer, said the property’s 2000 enrollment in the Demonstration Restructure Program exempts it from fair-market standards, which, according to HUD’s website, in Garland County are $531 a month for an efficiency apartment and $580 for a one bedroom.

She said not all Section 8 properties receiving Housing Assistance Payments from HUD are subject to

fair-market standards, including the Aristocrat. The demonstration program governs its rent structure, including any subsequent increases since 2000, she said.

“The program was only around for about four years, and HUD has a very limited number of these throughout the nation, as compared to the HAP portfolio as a whole,” Campbell said. “This was a program developed to preserve affordable housing for properties through debt restructuring.

“So in 2000, rents were determined by headquarters using appraisals and rent comparability reports at the time to determine the base rent. These numbers may have differed from any HUD determined ‘fair-market rents’ for the area.”

Coffman is using the subsidies, which, according to December rent roll records, total $58,490 a month, to amortize the $2,754,617 mortgage granted to Arvest Bank in December, according to Garland County property records. The loan matures in December 2022, more than two years after the Housing Assistance Payment agreement the property entered into with HUD in 2000 expires.

Campbell said HAP proceeds can be used to pay down debt secured by Section 8 properties.

She said the HUD-held, HUD-insured debt Coffman took out in 2000 was paid off in December. According to property records, HUD was given a security interest in the property to guarantee a $1,874,600 principal.

It’s unclear if the latest debt issue is financing improvements to the property, which last year was added to the National Register of Historic Places, as Coffman representatives have not responded to the newspaper’s requests for comment.

Copies of recent building permits the newspaper requested from the city of Hot Springs showed one was issued for electrical work in April, when the building’s chiller stopped working. A portable unit set up at 222 Central Ave. has been cooling the building ever since, but residents were without air conditioning for several days in late April and early May as Coffman and the city were at loggerheads as to where to locate the unit.

Unsafe, unsanitary conditions

The property’s HAP agreement with HUD requires it to provide “decent, safe and sanitary housing,” but, according to a Feb. 6 letter from HUD to Aristocrat Manor LTD the newspaper received through a records request, an inspection in December revealed deficiencies for mold and/or mildew.

The finding resulted in a score of 79.5, putting the Aristocrat just above the threshold for a Standard

2 Performing Property subject to HUD inspections every two years. The federal code of regulations stipulates properties receiving scores of 80 or higher are Standard 2 Properties.

The 79.5 score was rounded up, elevating the Aristocrat to a Standard 2. Properties scoring less than 80 are Standard 3s subject to annual inspections. The Aristocrat scored a 95 on its 2014 inspection, making it a Standard

1 Property subject to inspection every three years.

Bedbugs have also been an issue, with the city receiving numerous complaints about infestations. The problem led to a code violation in November 2016, according to a violation report the newspaper received through a records request to the city. An inspection the Aristocrat contracted a pest-control service for in December of that year found beg bugs in seven apartment units.

The property paid $4,230 for a bedbug treatment in February, according to an invoice, but the city’s neighborhood services division received a complaint later that month stating “all the apartments” were infested. The complaint noted the violation was corrected the following day.

In November, the city’s transportation services department submitted a complaint to neighborhood services about Aristocrat residents bringing bedbugs onto city buses. The complaint said the violation was corrected later that month.