2019 tah workshop - non-lihtc forwardswhat are non-lihtc forwards provides unfunded forward...
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Non-LIHTC Forwards2019 Optigo Targeted Affordable Housing Workshop
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Steven Winslow
Manager
Underwriting & Credit
McLean, VA
Senior Producer
Affordable Investments & Sales
McLean, VA
Ryan Sherriff
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Key Takeaways
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1 4
3
Reasons for Non-LIHTC Forward
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6
Product Overview
Affordability Requirements
Property Eligibility
Loan Terms
Success Stories
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What is in it for the Sponsor?
2▪ A unique execution with
the ability to hedge
interest rate risk
▪ Can be combined with
multiple financial
investment resources
▪ Affordability requirements
geared towards workforce
housing
The Non-LIHTC Forward combines the use of state and local programs other than LIHTC to promote construction of new affordable and workforce housing and the
substantial rehabilitation of existing properties.
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Construction Costs are on the Rise
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▪ Forward locking the interest rate gives construction lenders greater certainty of being refinanced
▪ Greater certainty means construction lenders can be more aggressive with their financing
▪ Greater synergies can be achieved if the construction and permanent lender are the same bank
Larger Construction Loans
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What are Non-LIHTC Forwards▪ Provides unfunded forward commitments for:
» Rent and income-restricted affordable housing with a workforce housing component
» Available to for-profit and 501(c)(3) nonprofit sponsors
▪ The Forward Commitments will take out new construction and substantial rehabilitation loans up
to $100 millions
» Substantial rehabilitation must be no less than $35,000 per unit
▪ Conversion requirements same as for LIHTC Forwards
» Except for LIHTC specific requirements (8609s, etc.)
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Properties must exhibit: » Public/mission-driven financial
investment
» Affordability requirements
Investment must be from a public or mission-driven
nonprofit source:
» Must be quantified as at least 10% of the first mortgage UPB
» At minimum, must be in place for the term of the mortgage
Public/Mission-Driven Financial Investment – For-Profit Borrowers
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Affordability Requirements – For-Profit Borrowers
Additional 80% of units at workforce
rent levels
10% of units at market10% of units restricted
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Affordability Requirements – For-Profit Borrowers
▪ The property must have both rent AND income restrictions on at least
10% of the units AND
▪ Those rent AND income restrictions must be part of a state or local
program, according to their affordability requirements (there must be
some level of governmental involvement), AND
▪ Those restrictions must be
» Through a state or local regulatory agreement or recoded use
restriction AND
» Be enforced by a governmental entity AND
» Stick with the property for the loan term or longer
1st Requirement
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Affordability Requirements – For-Profit Borrowers
▪ 80% of the units at the property must have rents at or below the following
thresholds:
» Very high-cost or extremely high-cost markets
– At or below 150% of AMI – i.e., NYC, LA, SF
» High-cost markets
– At or below 125% of AMI – i.e., Chicago, San Diego
» Standard-markets
– At or below 100% of AMI – i.e., everywhere else
▪ Detailed list of markets available at:
2nd Requirement
https://mf.freddiemac.com/docs/mf_scorecard_volume_cap_exclusions.pdf
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Affordability Requirements – For-Profit Borrowers
*****Workforce housing requirements do not apply if 50% of the units at the property have rent and income restrictions that
meet FHFA rules for TAH uncapped volume.*****
▪ 10% of the units at the property may be at market rents
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Nonprofit Borrower Requirements
▪ Nonprofit borrower must be a 501(c)(3) whose public purpose is owning, developing and operating
affordable multifamily housing
▪ The general partner or managing member of the borrower must be a nonprofit
» Being the co-general partner for the purposes of qualifying for a real estate tax abatement (e.g.,
CA Welfare TA) is not sufficient
▪ We expect rents for all units to be at uncapped and workforce housing levels
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Loan Terms▪ Credit Parameters
» 1.25x DCR and 80% LTV based on “as-stabilized” value
▪ Borrower Equity
» Minimum 15% cash or policy-compliant subordinate debt from a governmental or nonprofit lender
▪ Prepayment
» Subject to standard cash loan provisions (yield maintenance or defeasance)
▪ Net Worth and Liquidity
» Standard guarantor requirements
▪ 30-year amortization
▪ Up to 36-month forward terms
▪ Standby Fee with “make whole provision” versus Delivery Assurance Fee/Note
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Success Stories: Flats on 21
▪ $7.76 million
▪ 82 units
▪ Austin, MN
▪ Tax abatement granted by local municipality
▪ 10% of the units restricted at 60% of AMI
» Documented in local government LURA
▪ 80% of the units affordable at 100% of AMI
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Success Stories: Lake Vue at Red Berry Estates Apartments▪ $29.5 million
▪ 330 units
▪ San Antonio
▪ 75-year below-market ground lease provided by the
City of San Antonio
▪ 50% of the units restricted at 80% of AMI
» Documented in Ground Lease Memorandum
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Which For-Profit transaction is eligible for a Freddie Non-LIHTC Forward?
The Winds of Winslow (A)
▪ Chicago, IL (Very High-Cost Market)
» 100% AMI Uncapped threshold
» 150% AMI Workforce threshold
▪ 10% of units rent restricted @ 100% AMI
▪ 80% of units with rents affordable @ 150% AMI
▪ 10% of units unrestricted with rents @ 180% AMI
(market rent level)
▪ 10-year loan
▪ 20-year tax abatement (PV of tax savings = 15% UPB)
from county housing agency
▪ Cash equity from borrower = 20% appraised value
The Shoals of Sherriff (B)
▪ Birmingham, AL (Standard Market)
» 60% AMI Uncapped threshold
» 100% AMI Workforce threshold
▪ 20% of units restricted @ 50% AMI
▪ 20% of units restricted @ 60% AMI
▪ 40% of units with rents affordable @ 90% of AMI
▪ 20% of units unrestricted with rents at 120% AMI
(market rent levels)
▪ 15-year loan
▪ 30-year soft sub loan from city housing agency =
30% of appraised value / 40% of UPB
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Poll: What is the Best New Name for the NLF?
1) No LIHTC, NO PROBLEM! Forward
2) The Sherriff-Winslow Forward
3) The Winslow-Sherriff Forward
4) The Mixed-Income/Workforce Housing Perm Product (MIWHPP – “My Whip!”)
5) Fear Of Missing Out on Mixed-Income Housing (FOMO MIH)
6) NONE OF THE ABOVE – JUST STOP AND CALL ON MY TABLE AND I’LL GIVE YOU THE NEW
NAME
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