CNA for a 60-unit apartments (C)

Date:	June 26, 1998
Report of:	Edgewood Heights Apartments
Location:	Federal Street, Asheville, NC
Prepared for:	John Southby and Alan Henson
Prepared by:	William A. Stanton, P.E.

This Comprehensive Needs Assessment (CNA) is mandated by statute §402 of the Housing and Community Development Act of 1992 as amended by the Multifamily Housing Property Disposition Reform Act of 1994. The purpose is to assure the future viability of HUD-assisted housing projects like Edgewood Heights Apartments.

The assessment documents the current and future needs of Edgewood Heights Apartments and the resources that are available to meet these needs. The needs that are addressed include financial needs, building modernization and maintenance needs, tenant social needs, and management staffing needs. The available resources that are assessed include the financial resources generated by Edgewood Heights Apartments, HUD resources, assistance from State and local government resources, and private resources.

The Edgewood Heights Apartment facility is located in a medium-size city in the western part of North Carolina. Income levels are generally low in comparison with other regions of the country. Employment in the region has improved in recent years from the influx of several large manufacturing plants to Asheville.

The housing project was constructed in 1974 with a HUD Section 236 loan. The complex consists of five identical apartment buildings and a community building on a six-acre site. The apartment buildings are two-story structures (photo 1), each containing eight two-bedroom apartments and four one-bedroom apartments for a total of 60 apartment units. Approximately 1/3 of the apartments are occupied by low-income families, 1/3 are occupied by mentally-handicapped residents, and 1/3 are occupied by elderly residents.

The basic rent for the two-bedroom units is $275.00, and the basic rent for the one-bedroom units is $249.00. Edgewood Heights Apartments pays the sewer and water costs, and the tenants pay the electric costs. The local electric utility, Duke Power Company, gives the tenants a rate reduction of 50 percent on their electric utility bills. Some tenants receive rent subsidies from the North Carolina Housing Authority.

The project is jointly owned by local businessmen, John Southby and Alan Henson. John Southby is an original owner. Alan Henson inherited ownership from his father. Both are long-term residents of the area, and they own other rental properties in the community. We have only met Mr. Southby and were impressed favorably with his personal interest in the well-being of the residents and the condition of the facilities.

The management staff consists of Joyce Meaders, the part-time Accountant who has kept the books for the apartment complex since its inception; Virginia Brace, the Manager who has held the position for three years; and Mike Stafford, the Maintenance Supervisor, who lives on the premises and has held the position for three years also. We were impressed with the competence, honesty, and dedication of each of these staff members.

At the outset of the assessment, we conducted interviews with the Owner, Manager, Accountant, and Maintenance Supervisor. The interview process included an initial walk-through of the project where we were escorted by John Southby. From the interviews and the walk-through, we obtained information about the following:

With the assistance of the manager, we gathered information from the tenants about the maintenance and modernization needs for their apartments and other social needs they have. This information was obtained by furnishing each apartment with a Unit Survey Form (HUD Form 96001). We received 43 responses from 58 apartments.

HUD’s Office of Community Planning and Development (CPD) was contacted to review the assistance available through their CPD programs. State and local government agencies were contacted about other potential assistance.

We spent approximately 1-1/2 days at the site performing a physical inspection of the facilities. During that time, we went up on the roofs of all the buildings except the community building. We viewed that roof from the roof of a nearby apartment building. We walked around the perimeters of all the buildings and observed the condition of the exteriors, the outside air-conditioning coils, and the electrical services. We also observed the condition of the exterior stairs and landings, sidewalks, and landscaping.

Accompanied by the manager, we entered eleven apartments to assess the condition of the interiors. We deliberately chose apartments that were in various states of modernization to get an impression of the condition of an average apartment. There were two vacant apartments at the time of our inspection, so we were able to make detailed inspections of the interiors, appliances, and mechanical equipment in these apartments. The detailed inspections included uncovering the air-conditioning coils and electric service panels. It also included making holes in the ceilings, so that we could observe whether there was any rotting of the roof rafters and roof sheathing, due to inadequate ventilation or roof leaks.

In the final part of our field inspection, we observed the condition of the community building, the playground, storm drains, pavements, and grounds. We made notes and took photographs of the defects that we observed (see photos in Appendix A).

The physical inspection is based on an examination of the major systems in the buildings; specifically the heating, air conditioning, plumbing, electrical, and structural systems. It is not an exhaustive technical evaluation. The report contains opinions about the condition of these systems. The opinions are based on visual evidence available during a diligent inspection of all reasonably accessible areas. Other than where specifically noted, no surface materials were removed, no destructive testing undertaken, nor furnishings moved. As Professional Engineers, it is our responsibility to evaluate available evidence relevant to the condition of mechanical systems and structural components. We are not, however, responsible for conditions that could not be seen or were not within the scope of our services.

For your reference while reading the report, the following definitions may be helpful:

All ratings are determined by comparison to other buildings of similar age and construction.

The property generated $172,619 in income in 1996. Total maintenance and operating costs were $120,155, depreciation was $34,248, and profit was $18,216. As of May this year, the reserve fund balance was $21,272, and the operating account balance was $5855. The contribution to the reserve fund is currently $650 per month or $7800 per year (4.5 percent of the 1996 income). The unpaid mortgage balance is $447,958. It is due to be paid off in year 2015.

While the project is in sound financial condition, we do not think it is generating sufficient income to create the reserves that will be needed to cover maintenance and replacement costs in the future. Due to the age of the facility, we anticipate that maintenance, replacement, and modernization costs will soon begin to exceed available funds.

According to our cost estimates, $90,000 is needed to take care of immediate replacement and repair needs, $347,000 will be needed in years 2 through 8, $367,000 in years 9 through 15, and $197,000 in years 16 through 20, for a total of $1,001,000. The money is needed for the replacement of building components and equipment that have limited life spans and for the modernization of the apartments. The cost estimates for years 2 through 8 and 9 through 15 include $86,000 for the installation of energy-efficient windows. Due to cost restraints, it may not be realistic to make this improvement. If $86,000 is subtracted, the total cost through year 20 becomes $915,000, instead of $1,001,000.

According to the Edgewood Heights Statement of Profit and Loss for 1996 (HUD Form 92410), approximately $38,000 was spent on maintenance and repairs in 1996. At that yearly expenditure rate, $760,000 will be spent on maintenance and modernization over the next 20 years versus the $915,000 that we think will be needed. The shortfall will be $155,000 ($7,750 per year). The owners need to find a source for the additional funds that will be needed. They also need to find a way to finance the near-term repair and replacement needs.

The current rate of replenishing the reserve fund is insufficient for future needs. One solution is for HUD to allow the project to increase the percentage it contributes to the replacement reserve account. Because the project is not receiving any Section 8 rental assistance, the owners are in a good position to obtain financial assistance from HUD. Potential sources of funds include:

If assistance under the above programs is not available, Edgewood Heights may be able to increase the rents and use Section 8 rental subsidies as a way of making up the difference between what tenants are now paying and increased costs.

Tenants are currently receiving a rate reduction of about 50 percent on their electric utility bills from the local power company. Hopefully, this program will continue. Some tenants are receiving rental assistance under a State rental assistance program. Other tenants may qualify for this assistance. Increased rental assistance from the State is a way that Edgewood Heights may be able to increase income without further burdening the tenants.

The supportive services available to the residents through existing social service agencies is sufficient to meet their needs.

Most of the apartments are in need of modernization. A systematic program for upgrading all the apartments should be instituted. Renovations should include the following:

While the present aluminum sliding window units are mostly in good condition, they are not energy efficient. For this reason, we are recommending that they be replaced with insulated units as part of a modernization program.

The manager reported to us that the project has experienced some problems with drugs and crime. She told us that she has made a concerted effort, since taking over the job three years ago, to rid the project of tenants who were causing the problems and replace them with elderly and mentally-handicapped tenants. Her efforts have paid off as they now are experiencing very few security problems. The close working relationship that she has developed with the local police department has also helped.

The project is managed and maintained by a full-time manager and a part-time maintenance person who lives on-site. The bookkeeping is handled by a part-time accountant who has been doing the job since the inception of the project. We met all these persons and were favorably impressed by their skills and dedication to the project. There is sufficient staff for the present needs.

Many building products used prior to 1978 contained asbestos. The products included asbestos floor tile, asbestos pipe and furnace insulation, asbestos ceiling spray-on treatments, asbestos siding, asbestos roof covering, asbestos-cement water pipes, and other products. The only asbestos material that we observed was asbestos floor tile that was present in some of the apartments. There may be other asbestos materials in the buildings that we could not observe because they are hidden from view. Because asbestos may be present, care should be used when making repairs to materials that look like they may contain asbestos.

Chloroflorocarbon (CFC) is a refrigerant that is used in some air-conditioning systems. It was banned in 1995. Since much of the air-conditioning equipment in this project is 23 years old, it is possible that CFC is used as a refrigerant. The company that services the heat pumps should he able to confirm whether CFC’s are present in any of the HVAC equipment.

Lead-based paint was widely used until 1977, when Federal regulations governing the amount of lead in paint went into effect. It is possible that lead-based paint has been used on this project, especially on the exterior. The presence of lead can only be confirmed through testing.

Polychlorinated biphenyls (PCB’s) were widely used in electrical equipment such as transformers and capacitors up to 1976. In 1976, it was banned from further manufacture. The only place where PCB’s are likely to be present on this project is in the electrical transformers. The local utility should be consulted in this regard.

Since the facility is electrically heated, it is unlikely that any underground storage tanks (UST’s), such as buried oil tanks, are present.

There are two types of roofs on the buildings. The first type are the low-slope roofs that are the principal roof coverings. The second type are the mansard roofs that cover the upper half of the buildings (the lower half is brick).

The low-slope roofs are covered with modified bitumen roof membranes that have been placed over the original built-up roofs. New bitumen roof membranes were applied to all buildings three years ago. Since that time, the roofs on three of the buildings have had to be redone because the they were not installed correctly.

The modified bitumen roof coverings are a good choice for the buildings, and they should provide several years of service if they are properly maintained. Modified bitumen roofs should be coated periodically to increase their life span. To insure that the modified bitumen roofs are properly cared for, we recommend that a Registered Roof Consultant (RRC) be hired to inspect the roofs and prepare a maintenance plan.

We noted ponding on several of the roofs (photo 30). The ponding is caused by sags in the roof and water not getting to the roof drains. Drains should be added at the low points to insure that water drains completely off the roof. We observed that some roof drains are not functioning because they are either plugged or have been roofed over. Also, some of the downspouts are rusted through and need to be replaced. Steps should be taken to return the roof drain system to good working order.

The mansard roofs are covered with asphalt/fiberglass shingles. The roof shingles are worn out and need to be replaced (photo 21). According to the owners, they plan to have the mansard roofs resurfaced within the next few months.

The foundations for the buildings consist of concrete slab-on-grade floors and shallow concrete perimeter footings and walls. There are very few signs that any structural movement has occurred in the buildings. We did not observe any cracking in the brick veneer. We did observe minor cracking in one building foundation, caused by slight settlement of the footing.

Spalling has occurred in several places on the brick veneer (photo13), and some repointing is required. To insure that the brickwork remains weather-tight, the owners should consider having the brick treated with a water-repellent agent.

The exterior doors and hardware are in fair condition. The manager reported to us that they are constantly replacing door hardware. Since the doors are approaching their 25-year life span, it is likely that they too will begin to need to be replaced.

The exterior windows are aluminum sliding units. They are generally in good condition, although we noted that several screens are in need of repair. The window units are single-pane glass and fit loosely in the frames. We performed heating and cooling loss calculations and determined that half of the heating and cooling losses occur through the windows. For this reason, we recommend that the window be gradually replaced with insulated units as part of the modernization program. It will be expensive to replace the windows (we estimate $86,000), but savings in energy costs probably justifies doing it.

There are large plywood panels beneath the windows. Many of the panels, especially the ones on the lower level, are rotted and in need of repair or replacement. We also observed that almost all the window and panel frames need to be caulked. The wood panels and frames also need to be painted.

The steel stairs and landings to the second floor apartments are generally in good condition. There is one stairway, however, that has several badly rusted steps (photo 18). It is a safety hazard and it should be repaired without delay.

The parking areas, drives, and entrance road are original pavements. Alligator cracking is starting to occur in the pavement surface (photo 3). This is an indication that the pavement is nearing the end of its life, and it needs to be resurfaced in order to preserve the integrity of the asphalt base. Once the pavement is resurfaced, it should be sealed at five-year intervals to keep water out of any cracks that develop in the surface.

There is a flat area in one of the parking lots that does not drain well. The condition can be improved by cleaning out the debris that has accumulated in the gutter line. However, positive drainage can only be achieved by cutting out and regrading a section of the pavement along the gutter.

Several sidewalk sections that are raised up relative to adjoining sections (photos 6, 7). Also, there are a few areas where the sidewalk surface has spalled. These areas present tripping hazards that should be repaired immediately. Some sidewalk areas have longitudinal cracks (photo 7). Since the walking surface is not impaired, there is no urgency about performing repairs on these sidewalk areas. Eventually, however, all damaged sidewalk sections should be replaced or repaired.

About 150 wood landscape timbers have been used around landscaped areas. The timbers are badly deteriorated and need to be replaced. We recommend that they be replaced with wood members that have been pressure-treated with preservatives. Some of the tenants expressed a desire for more flowers and plantings. A program for beautifying the project should be considered as a way of making it a more desirable place in which to live.

In the unit surveys, several residents asked that more lighting be installed in the breezeways, in the rear of the apartments, and in the parking areas. One resident suggested that smoke alarms and fire extinguishers be placed in the kitchens. Another resident was concerned about people driving too fast through the project. Another resident wanted a 24-hour telephone number to call management in case of trouble or for maintenance needs. Finally, one resident was concerned about controlling pets. We believe these suggestions are good suggestions that the owners should take action on.

The living rooms, bedrooms, and hallways in many of the apartments are in need of new carpets and a fresh coat of paint. Many kitchens need new cabinets, counter tops, sinks, appliances, vinyl floor tile and paint. Many bathrooms need new toilet fixtures and accessories, and the ceramic tile around the bathtubs should be either glazed or the tubs replaced with fiberglass units. According to the owner, apartments are modernized as tenants move out. We recommend that a more aggressive program with the goal of modernizing all the apartments within the next six years be considered. Such a program will go a long way toward upgrading the facility and keeping the residents happy.

The apartments are individually heated and cooled with 1.5 ton heat pumps. Approximately 2/3 of the outside coils are original equipment. Since the average life span of outdoor coils is 15 years, it can be expected that the remaining original coils will probably have to be replaced within the next 1-3 years. This works out to one coil per month for the next three years.

The inside coils seem to be holding up well, except that some of the condensate pans are rusting and beginning to leak (photo 40). Several condensate pans have had to be replaced in the last two years. Since the leaks damage the apartments and upset the tenants, a proactive program for replacing all the pans should be initiated. Most of the inside coils should also be cleaned at the same time to increase their heating and cooling efficiency.

The apartments are equipped with individual 38-gallon hot water heaters. The heaters are presently being replaced at an average rate of about four per year. Since many water heaters are old, the rate of replacement will probably increase.

Many kitchen sinks and bathroom lavatories have original chrome-plated drains and traps. The chrome-plated drains and traps are being replaced with PVC materials as they rust out. It can be expected that this will remain a constant maintenance problem until all the chrome piping is replaced.

The project is serviced with town water and sewer, and there were no reported problems with the services. Edgewood Heights pays the cost of the utilities.

The apartments are equipped with 100-amp electrical services. The capacity seems adequate, and there were no reported problems with overloaded circuits. Many of the main panels and circuit breakers in them are rusted and should be replaced. We were told that the local utility is responsible for maintaining them. If this is the case, the local utility should be asked to check all the panels and replace them where necessary.

We observed several exterior outlets in the rear of buildings that are not safe. The unsafe outlets should be identified and repaired. We did not observe any ground fault circuit interrupters (GFCIs) in the apartments. We recommend that these safety devices be installed in the kitchens and bathrooms and on exterior outlets.

The office, maintenance shop, and laundry area are combined in a single-story building. The building type is the same as the apartment buildings. The building has a new modified bitumen roof. The rest of the building is in about the same condition as the apartment buildings, and it needs similar repairs. The washers and dryers are leased and are six months old. Some repairs to the folding table are needed.

Some of the playground equipment is old and should be replaced. One of the wooden benches is badly deteriorated and needs to be replaced. In the unit surveys, one resident made the suggestion that the playground area be enclosed with a fence. Another resident suggested that more basketball hoops be provided. These seem like good suggestions that the owners should consider.

Appendices B, C, D, and F contain HUD Forms 96002, 96003, a summary of HUD Form 96001, and an explanation of the line items in the forms. Appendices A, E, and G contain supplementary information that the authors thought would be useful information for Edgewood Heights, but not information that HUD needs. These appendices are omitted from the HUD copies.

The cost estimates for replacements, maintenance, and modernization needs are based on R.S. Means Company Building and Residential Construction Cost Data, 1997 Edition, cost information that we obtained from Edgewood Heights, and cost data from our company files. The estimates are in terms of present dollar values without any adjustment for inflation.

Overall, the we feel that the facility is being managed well, considering the tight budgetary constraints imposed by low rents. The staff is responsive to the needs of the tenants, who for the most part, seem content. Due to the age of the facility, many building components and mechanical systems are wearing out. Our study indicates that more funds will be needed to maintain the facility in the future than were required in the past. Increased costs will also result from the need to modernize apartments. To a greater extent than in the past, the owners will be challenged to successfully deal with the following problems:

We are pleased to have had the opportunity to work on this project. We could not have accomplished the study without the excellent cooperation we received from the owners and management staff, and we want to thank all who gave their time and assisted us.

If you have any questions about any parts of the report, please feel free to call us.

Excellent -	Component or system is in "as new" condition requiring no rehabilitation and should perform in accordance with expected performance.
Good -	Component or system is sound and performing its function, although it may show signs of normal wear and tear. Some minor rehabilitation work may be required.
Fair -	Component or system falls into one or more of the following categories: a) Evidence of previous repairs not in compliance with commonly accepted practice, b) Workmanship not in compliance with commonly accepted standards, c) Component or system is obsolete, d) Component or system approaching end of expected performance. Repair or replacement is required to prevent further deterioration or to prolong expected life.
Poor -	Component or system has either failed or cannot be relied upon to continue performing its original function as a result of having exceeded its expected life, excessive deferred maintenance, or state of disrepair. Present condition could contribute to or cause the deterioration of other adjoining elements or systems. Repair or replacement is required.