Boardwalk is a 284-unit property is a vital source of affordable housing for seniors in our community. The project came via the Low Income Housing Tax Credit program (LIHTC) funded by the federal government and allocated to states. The owner of Boardwalk is Capital Way Associates Limited Partnership. SHAG (now standing for “Sustainable Housing for Ageless Generation”) is the General Partner and therefore manager of the property. The limited partner—the investors who receive the tax credits — is AMTAX Holdings out of Ohio.
When a 15-year compliance period ended in December 31, 2014 the tax credits were exhausted. Then came a 2-year period ending in December 31, 2016 in which it was possible to change ownership. For at least two years, SHAG and AMTAX have engaged in a legal dispute over whether SHAG can gain ownership of the property and maintain it as affordable housing for seniors; or whether the investors can take over the property and sell it.
On March 4, 2019 (Western) District Judge Ricardo Martinez ruled against SHAG in a bench trial. SHAG lost because, according to Judge Martinez, it had “unclean hands”—defined as having “engaged in unjust, inequitable, bad faith or unconscionable conduct in connection with the transaction at issue.” The judge had found that SHAG had inappropriately attempted to exercise their Right of First Refusal to purchase the building.
What the exact implications of this legal loss are is uncertain. SHAG, as a non-profit organization, was unable to exercise its Right of First Refusal to purchase the property. The case is now headed for the 9th Circuit Court of Appeals. One possible outcome would be that AMTAX, a profit-oriented group of investors, could “privatize” the apartments and eliminate the affordability standard.