council for affordable and rural housing · 2015-01-25 · bonneville mortgage company in...

1112 King Street Alexandria, Virginia 22314 (703) 837-9001 (703) 837-8467 Fax [email protected] www.carh.org

Serving the Affordable Housing Needs of Rural America

Section 538 (RHS 538 GRRHP) – Advanced Deal Structures and Strategies

Presentation Agenda Introductions: Bob Morton, Moderator and Presenter. Senior Vice President &

Director of RHS Programs, Bellwether Enterprise Real Estate Capital, LLC.

Rob Hall – Presenter. Director, Bonneville Multifamily Capital.

Craig Hackett – Presenter. Senior Loan Officer, Bonneville

Multifamily Capital. Presentation Outlines: General RHS 538 GRRHP Overviews and Updates: Rob Hall – RHS 538 GRRHP Overview

Bob Morton – Fiscal Year 2014 and Year to Date 2015 Loan

Statistics

Bob Morton – Current Funding Availability Bob Morton – 2014/2015 Published NOFA. New Electronic NOFA

Submission Form and Process

Bob Morton – Program Initiatives and GNMA 70% Loan-to-Total Development Cost update

Council for Affordable and Rural Housing

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Advanced Deal Structures and Strategies: Craig Hackett and Rob Hall

Questions and Discussions:

Thank you and Conclusion of the Presentation!

Bob MortonSenior Vice President &Senior Vice President & Director RHS Programs

Direct: 219.879.3118Cell: 216.870.9935

Email: [email protected]

Company Overview

Bob Morton -- Senior Vice President & Director RHS Programs• Bob has 17 years of experience in the commercial lending andBob has 17 years of experience in the commercial lending and

banking industry and serves as the Director of Rural Housing Services for Bellwether Enterprise. He has concentrated specifically on Rural Housing Service (RHS) and Federal Home Administration (FHA) multifamily and healthcare guaranteed loan programs since 2004programs since 2004.

• Since joining Bellwether Enterprise in 2009, Bob has greatly expanded his knowledge and expertise in the Freddie Mac, Fannie Mae and Life Company loan products. Prior to Bellwether Enterprise, Bob was the chief underwriter and department head ofEnterprise, Bob was the chief underwriter and department head of RHS loans and an FHA originator at Centennial Mortgage, Inc. He earned his Bachelor of Arts in finance and economics from Indiana State University, and his Graduate School of Commercial Lending/MBA degree from Michigan State University.Bob is a member of the Council for Affordable Rural Housing and• Bob is a member of the Council for Affordable Rural Housing and was a key member of the CARH subcommittee that spearheaded the effort and success of reactivating the RHS 538 GRRHP loan program with the Federal Government in 2012.

Company Overview

• Bellwether Enterprise is a full-service, commercial and multifamily mortgage banking company that puts people first. Large enough to provide anbanking company that puts people first. Large enough to provide an impressive variety of lender options, we’re just the right size to offer the type of one-on-one attention that our clients deserve.

• Bellwether Enterprise provides loans for a range of institutional investorsBellwether Enterprise provides loans for a range of institutional investors including life insurance companies, pension funds, commercial banks and CMBS lenders and is a direct FHA, Fannie Mae, Freddie Mac and USDA RHS lender.

• In November 2013, Bellwether Enterprise was named a National Best and Brightest Companies to Work For™ Winner.

Historical Loan Originations

Bellwether/Enterprise Production History

$2,000

$2,500

$1 779

$2,086

$1,197

$1,514 $1,500

$2,000

Total Loan Volume (Millions)

$1,779

$214

$725

$500

$1,000 ( )

$0 2009 2010 2011 2012 2013 2014

# of Loans 25 121 161 217 210 272

Average Loan Size(Thousands)

$8,560 $5,991 $7,435 $6,979 $8,475 $7,669

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Company Overview

• Servicing Portfolio Statistics - Investor Type Summary as of October 31 2014:October 31, 2014:

INVESTOR TYPE # OF LOANS % OF TOTAL PRINCIPAL BALANCE % OF TOTALInsurance Companies 1119 63.58% 4,755,190,817 59.91%FHA 138 7.84% 876,755,554 11.05%, ,Fannie Mae 222 12.61% 679,438,437 8.56%Freddie Mac‐Securitized 68 1.48% 587,961,960 7.41%Equity 90 3.86% 389,028,218 4.90%CMBS 26 0 06% 261 356 341 1 85%CMBS 26 0.06% 261,356,341 1.85%Freddie Mac 40 5.11% 175,853,692 3.29%Insurance Company‐Securitized 14 2.27% 147,033,626 2.22%RHS 42 2.39% 41,163,911 0.52%

• Fitch Ratings assigned Bellwether Enterprise a CMBS primary

RHS 42 2.39% 41,163,911 0.52%Private Institution 1 0.80% 23,600,000 0.30%Total 1,760 100% 7,937,382,557 100%

g g p p yservicer rating of ‘CPS3+’.

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Bonneville MultiFamily Capital

111 East Broadway, Suite 200 Salt Lake City, Utah 84111 Telephone (801) 323-1000 Fax (801) 323-1001

Equal Housing Lender Bonneville Mortgage Company in cooperation with banking corporation, Lewiston State Bank, an approved USDA lender

Robert A. Hall

Affordable Housing Finance Team

Mr. Hall works on the production team of Bonneville MultiFamily Capital, directing project analysis, underwriting and deal sourcing. As a founding member, he has been with team since its inception in late 2003. Over the past 11 years, Bonneville MultiFamily Capital has provided either construction/perm financing or permanent-only financing for more than 270 affordable housing properties across the nation. The majority of these loans have been guaranteed under the USDA Section 538 loan program. The group has also financed affordable housing properties through correspondent relationships with Fannie Mae DUS and Freddie Mac lenders. Bonneville focuses its financing efforts on properties that are income and rent-restricted under the Section 42 Low Income Housing Tax Credit (LIHTC) program, the HOME Investment Partnership Program, the Federal Home Loan Bank AHP Program and the USDA 515 program. Prior to joining Bonneville, Mr. Hall worked in Key Bank’s commercial real estate group, providing construction and permanent financing for all classes of commercial properties. During his time at Key, Mr. Hall became involved with Key’s tax credit business, which purchased tax credits awarded to affordable housing projects and also provided debt financing for these projects. Before joining Key, Mr. Hall worked for a retail REIT, New Plan Excel Realty Trust, in its acquisition department, acquiring grocery-anchored shopping centers across the country. Mr. Hall received a bachelor’s degree in business management and minor in Spanish (1997) from Brigham Young University and, later, an MBA in finance also from BYU (2003).

Bonneville MultiFamily

111 East Broadway, Suite 310 Salt Lake City, Utah 84111

Telephone (801) 323-1000 Fax (801) 323-1071

Equal Housing Lender Bonneville Mortgage Company in cooperation with banking corporation, Lewiston State Bank, an approved USDA lender

Craig Hackett Resume’

Mr. Hackett graduated from University of Utah with a BS in Finance followed by a Masters of Business Administration in 1973 In 1992 he was Senior VP over Real Estate lending at Key Bank of Utah which soon merged with Society Bank of Cleveland to become the new National KeyCorp. With the expansion of the bank through mergers came the ability to place larger construction and permanent real estate debt and a national scope large bank “discipline”. Permanent debt investors included – FHA, Fannie Mae, Freddie and conduit (MBS) loans. The construction loans ranged from $1,000,000 to $65,000,000 in size with the average loan size around $15,000,000 In 2002, the newest product for financing LIHTC apartment deals in rural areas was the emerging USDA 538 program. Mr. Hackett implemented the 538 financing at Key and then established and continued the program as a partner at Bonneville Multifamily as the underwriter/production co-coordinator. Now under a new organizational structure the group has recently closed its 260th USDA 538 “construction/permanent” or “permanent only” loan. The team has closed apartment loans in 35 different states and is currently processing in 37 states. Because Ginnie Mae will only accept USDA 538 apartment loans that are 50% or less “loan to cost”, all of the USDA 538 apartment loans that have been processed and closed are either 4 or 9% tax credit projects to meet Ginnie Mae standards for delivery. Mr. Hackett is a board member of the Council for Affordable Rural Housing (“CARH”), until recently he was a board member on the Olene Walker Housing Trust Fund over DCED State of Utah multifamily and single family project fundings. Prior to Olene Walker/State of Utah he was vice-chair of the Utah Community Reinvestment Corporation (“UCRC”) loan committee.

538 Program at a Glance538 Program at a Glance538 Program at a Glance538 Program at a Glance

USDA guarantees loans made by private, USDA approved USDA guarantees loans made by private, USDA approved g y p ppg y p pplenders, in eligible rural areas (90% of the loan is guaranteed) lenders, in eligible rural areas (90% of the loan is guaranteed) Population < 20,000 is generally eligiblePopulation < 20,000 is generally eligible http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.dohttp://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do

No loan size restriction or capNo loan size restriction or cap Program allows for permanent only loans, Program allows for permanent only loans, constrconstr/perm loans /perm loans

and rehab/perm loans ($6 500/unit minimum rehab)and rehab/perm loans ($6 500/unit minimum rehab)and rehab/perm loans ($6,500/unit minimum rehab)and rehab/perm loans ($6,500/unit minimum rehab) 538 Guarantee can be used to enhance tax538 Guarantee can be used to enhance tax--exempt bondsexempt bonds USDA Fees: 0.9% at closing; 0.5% annually (MIP)USDA Fees: 0.9% at closing; 0.5% annually (MIP) Lender Origination Fee: varies by lenderLender Origination Fee: varies by lender

Reasons for Developers to use the 538Reasons for Developers to use the 538Reasons for Developers to use the 538Reasons for Developers to use the 538

538 loans can be used to rehab 515 properties538 loans can be used to rehab 515 properties Maximize Loan DollarsMaximize Loan Dollars

Maximum Maximum 90%90% LTV (97% for nonLTV (97% for non--profits)profits) Maximum LTC 50% Maximum LTC 50% -- EXCEPT 515 Rehabs 90%EXCEPT 515 Rehabs 90% (more on this later)(more on this later) MinimumMinimum 1 151 15 times DSCR on all serviceable debttimes DSCR on all serviceable debt Minimum Minimum 1.151.15 times DSCR on all serviceable debttimes DSCR on all serviceable debt 25 25 –– 40 year term & 40 year term & amortamort or any combination thereof (25/40, 30/30, 30/40, 40/40, or any combination thereof (25/40, 30/30, 30/40, 40/40, etcetc))

Some states have a rural set aside or give points on the tax Some states have a rural set aside or give points on the tax credit application for the 538credit application for the 538pppp

Program allows for conversion to perm at C of O with Program allows for conversion to perm at C of O with funding of a reserve (2% of Total Development Cost) that is funding of a reserve (2% of Total Development Cost) that is used to cover operating expenses and debt service during used to cover operating expenses and debt service during p g p gp g p glease uplease up

Credit enhancement allows for very competitive rateCredit enhancement allows for very competitive rate Immediate funding rate lock and forward rate locksImmediate funding rate lock and forward rate locks Immediate funding rate lock and forward rate locks Immediate funding rate lock and forward rate locks

available available (more on this later)(more on this later)

Construction and Permanent Loan Guarantees Permanent Only Loan Guarantees Permanent Only Loan Guarantees

-Immediate funding of 515/538 occupied in place rehab/repair

-Unfunded forward-Unfunded forward-Unfunded Forward Rate Lock

New Construction Substantial Rehab/Repair Substantial Rehab/Repair

-w/RD-515-w/o RD-515Portfolio of RD 515-Portfolio of RD-515

Primarily 9% or 4% LIHTC Projects or other heavily subsidized projects (HOME, CDBG, State, Local)

FY 2014: $136,162,031 Obligated, 98-Projects, 4,928-Units 22-Projects Construction/Perm Loans & 76-

Projects Perm Only LoansProjects Perm Only Loans 20-States 37-New Construction & 61-Rehab/RepairpFY 2015: $150 Mil. Available to be Obligated

$ $18,386,442 Obligated to date 9-States

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Fiscal Year 2014 NOFA Response Form for Section 538 Guaranteed Rural Rental Housing Program (GRRHP)

Instructions

Applicants may submit this NOFA Response Form electronically by accessing the website: http://www.rurdev.usda.gov/HAD-Guaranteed_Rental_Loans.html and clicking on the link for the “Fiscal Year 2014 NOFA Response Form.” Please note: electronic submittals are not on a secured web site. If you do not wish to submit the form electronically by clicking on the Send Form button, you may still fill out the form, print it and submit it with your application package to the State Office. All 2014 NOFA responses will be scored using the priority scoring criteria on this form. Supporting documentation required with your application may be sent via email to a special address that you will receive upon receipt of your electronic form. If using this option, please enter the Submission Email Address on the form below (I.g). Under item XVII. Documents Submitted, check all supporting documents that you are submitting and indicate whether you are submitting each item to the State Office or via email.

I. Lender/Applicant Information a. Lender’s Name: b. Lender’s Mailing Address:

Address, Line 1: Address, Line 2: City: State: Zip:

c. Name of Lender’s Contact Person: d. Contact Person’s Telephone Number: e. Contact Person’s Fax Number: f. Contact Person’s Email Address: g. Submission Email Address:

Specify the Sender’s email address that will be used to email all supporting documents. When you submit this form electronically, you will receive an email address for submitting all documents checked under item XVII. Documents Submitted.

II. Borrower Information a. Borrower’s Name: b. Tax Classification: For Profit Not for Profit c. Borrower’s DUNs Number:

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d. Organization Type: General or Limited Partnership Public Agency For Profit Corporation Indian Tribe Non-Profit Corporation Trust Limited Liability Corporation Individual Other Specify:

e. Borrower’s Address: Address, Line 1: Address, Line 2: City: State: Zip: County:

f. Name of Borrower’s Contact Person: g. Contact Person’s Telephone Number: h. Contact Person’s Fax Number: i. Contact Person’s Email Address:

The following supporting documents are required for submission, unless otherwise noted. Check the documents you are submitting under item XVII. Documents Submitted:

j. Equal Opportunity Survey (optional) k. Principal or Key Members of Borrower Organization l. Borrower Information and Statement of Housing Development Experience

III. Project Information a. Project Name: b. Project Type: Family Senior (all residents 55 years or older) Mixed

c. Project Address: Address, Line 1: Address, Line 2: City: State: Zip: County: Congressional District:

d. Construction Type: New Construction Acquisition with Rehabilitation

e. Supporting documents required: Property Description and Proposed Development Schedule

IV. Project Cost and Rent a. Total Project Development Cost: b. Total Number of Units: c. Total Number of 3-5 bedroom units: d. Ratio of 3-5 bedroom units to total units: e. Cost per Unit (Total Development Cost ÷ Total Units): f. Proposed Rent Structure

Unit Type Monthly Rent

g. Median Income for Community (from the most recent census data published by the United States

Department of Housing and Urban Development (HUD)):

V. Project Site Information Supporting documents required:

a. Evidence of Site Control b. Description of any Environmental Issues:

VI. Project Funding a. Loan Amount: b. Borrower’s Proposed Equity

Source Amount Total Equity:

c. Tax Credits Have tax credits been awarded? Yes No If not, when do you anticipate an award will be made (announced) (mm/dd/yyyy)? What is the [estimated] value of the tax credits? Include one of the following supporting documents:

• If awarded, a copy of the award or evidence of award • If not awarded, letters of application and commitment, if available

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d. Other Sources of Funds

List all Loan funding sources other than tax credits: Source Amount Rate Term Total: List all Grant funding sources other than tax credits: Source Amount Total:

e. Loan to Total Development Cost (Guaranteed Loan ÷ Total Project Development Cost):

f. Debt Coverage Ratio (Net operating income divided by debt service payments):

Note: Debt Coverage Ratio must be at least 1.15 or greater to qualify for this program. g. Percentage of Guarantee requested: h. Provide Collateral for Guarantee as a supporting document i. Type of Guarantee being requested?

Permanent Only (Option 1) Construction and Permanent (Option 2) Continuous (Option 3)

j. Loan Term (minimum 25-year term; maximum 40-year term including construction period; may amortize up to 40 years; balloon mortgages permitted after the 25th year):

VII. Other Background Information a. The project is located in one of the following areas:

In a Colonia On Tribal Lands In a place identified in the State’s Consolidated Plan In a high-need community for multi-family housing based on the State’s Needs

Assessment None of the above

b. Is the property located in a Federally Declared Disaster Area? Yes No If “Yes,” provide the Presidential Declaration as a supporting document.

c. What is the population of the county, city or town where the project is or will be located? Name of County, City or Town: Population:

VIII. Priority 1 Projects located in eligible rural communities with the lowest population will receive the highest points.

What is the population of the county, city or town where the project is located or will be located upon construction? 0 to 5,000 people (30 points) 5,001 to 10,000 people (15 points) 10,001 to 15,000 people (10 points) 15,001 to 20,000 people (5 points) 20,001 to 35,000 people (0 points) Points:

IX. Priority 2

The neediest communities, as determined by the median income from the most recent census data published by the United States Department of Housing and Urban Development (HUD) will receive points. The Agency will allocate points to projects located in communities having the lowest median income. What is the median income of the community where the project is located? Less than $45,000 (20 points) $45,000 to less than $55,000 (15 points) $55,000 to less than $65,000 (10 points) $65,000 to less than $75,000 (5 points) $75,000 or more (0 points) Points:

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X. Priority 3

Points will be awarded to projects that demonstrate partnering and leveraging in order to develop the maximum number of units and promote partnerships with State and local communities.

What is the loan to total development cost ratio (percentage %)? Check one: Less than 25% (60 points) 25% to less than 50% (30 points) 50% to less than 70% (10 points) 70% or more (0 points) Points:

XI. Priority 4 Responses that include equity from low income housing tax credits will receive an additional 50 points. You must have a commitment in place in order to receive points.

This project will include equity from low income housing tax credits. (50 points) Yes (50 points) No (0 points) Points:

XII. Priority 5

Points will be awarded to projects with the highest ratio of 3-5 bedroom units to total units. What is the ratio of 3-5 bedroom units to total units? More than 50% (10 points) 21% to 50% (5 points) Less than 21%, but more than 0% (1 point) Not applicable (0 points) Points:

XIII. Priority 6 Responses for the revitalization, repair, and transfer (as stipulated in 7 CFR 3560.406) of existing direct section 515 and Section 514/516 FLH and properties involved in the Agency’s MPR program (transfer costs, including equity payments, are subject to Agency approval and must be an eligible use of loan proceeds listed in 7 CFR 3565.205) will receive an additional 10 points. No points will be awarded for transfers that include equity payments. This project includes the revitalization, repair and transfer of existing direct Section 515

or Section 514/516 FLH properties AND did not receive any equity payments as part of a transfer (10 points)

This project is part of the Agency’s MPR program AND did not receive any equity payments as part of a transfer (10 points)

Not applicable (0 points) Points:

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XIV. Priority 7A Projects that are energy-efficient and registered for participation in any of the following programs will receive points, up to a maximum of 25 points. Each program has an initial checklist indicating prerequisites for participation. Applicants must provide a checklist establishing that the prerequisites for each program, that the project will be participating in, will be met. All checklists must be accompanied by a signed affidavit by the project architect stating that the goals are achievable. Additional points will be awarded to checklists that achieve higher levels of energy efficiency certification as stated below. Check all the energy-efficient programs that you will be participating in. NOTE: You can receive a maximum of 25 points for participation in one or more programs.

Energy Star for Homes (5 points): Yes No Points:

Green Communities by the Enterprise Community Partners, www.enterprisefoundation.org (10 points): Yes No Points:

LEED for Homes program by the U.S. Green Building Council (USGBC), www.usgbc.org Check one of the five levels of certification: LEED Certified (10 points) LEED Silver (12 points) LEED Gold (15 points) LEED Platinum (25 points) No LEED certification (0 points) Points:

Home Innovation’s National Green Building StandardTM (NGBS) certification program, www.homeinnovation.com/green Check one of the five levels of certification: NGBS Bronze (10 points) NGBS Silver (12 points) NGBS Gold (15 points) NGBS Emerald (25 points) No NGBS certification (0 points) Points:

This project will participate in a State or local building program (2 points): Yes No Points: Total Points for 7A Energy-efficiency: (Points earned for 7A cannot exceed 25)

Page 7 of 11

XV. Priority 7B Projects that will be managed by a certified green property management company will receive 5 points. Applicants must provide proof of certification in one of the programs listed below. This project will be managed by a green property management company that is certified by one of the following programs: National Apartment Association, Credential for Green Property Management (CGPM)

http://www.naahq.org/Education/DesignationPrograms/Other/Pages/default.aspx (5 points) OR

National Affordable Housing Management Association (NAHMA), Credential for Green Property Management (CGPM), www.nahma.org/content/greencred.html (5 points) OR

U.S. Green Building Council (USGBC), Green Building Certificate Institute (GBCI) LEED AP (any discipline) or LEED Green Associate, www.gbci.org (5 points) OR

None of the above (0 points) Points:

XVI. Documents Submitted Below, please check all documents that you will be submitting to substantiate your responses on this Form. Hard copy submissions should be mailed to the State Office with your application package. If you check the email option, you will be notified of the email address to use upon electronic receipt of this form. Points will be assigned for the items that you checked based on a review of the supporting documents. Below are some ground rules for documents submitted via email, so that they may be correctly identified upon receipt:

1. In the Email Subject line include the Project Name and State 2. For each document submitted, include the Project Name, Project State, Form

Reference and Item name shown below, as in “II j. Equal Opportunity Survey for Hopewell Apartments, WI.”

3. You may submit each document listed below as a separate file or combine several documents into one large file – so long as all documents in the file pertain to the same project. Remember to identify each document with its Form Reference.

4. When sending attachments via email, you may bump up against the limit on the size of an attachment or the total number of attachments that you can include in one email. If the submission is not successful, you may need to limit the size or number of files sent in one email. You may use multiple emails to submit all of your documents.

Page 8 of 11

Reference in Form

Item

Submission Mode

II. Borrower Information Via Email State Office N/A j. Equal Opportunity Survey (optional)

k. Principal or Key Members of Borrower Organization

l. Borrower Information and Statement of Housing Development Experience

III. Project Information Via Email State Office N/A e. Property Description and Proposed

Development Schedule

V. Project Site Information Via Email State Office N/A a. Evidence of Site Control

b. Description of any Environmental Issues

VI. Project Funding Via Email State Office N/A c. If Tax Credits have been awarded, a copy of the

award or evidence of award, OR

c. If Tax Credits have not yet been awarded, letters of application and commitment

h. Collateral for Guarantee requested

VII. Other Background Information Via Email State Office N/A b. Presidential Declaration document if property

is located in a Federally declared disaster area

VIII. to XIV. Priority 1 through 6 Via Email State Office N/A VIII. Priority 1: Population Size

IX. Priority 2: Median Income

X. Priority 3: Loan to Total Development Cost Ratio

XI. Priority 4: Equity from low income housing tax credits

XII. Priority 5: Ratio of 3-5 bedroom units to total units

XIII. Priority 6: Revitalization, repair and transfer of existing 515 properties or MPR properties -- with no equity payments

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Reference in Form

Item

Submission Mode

XIV. Priority 7A: Energy-Efficient Program Via Email State Office N/A

Energy Star for Homes checklist and signed affidavit

Green Communities by the Enterprise Community Partners checklist and signed affidavit

LEED for Homes Program checklist and signed affidavit

Home Innovation’s National Green Building Standard checklist and signed affidavit

State or local green building program checklist and signed affidavit

XV. Priority 7B: Credentials for Green Property Management

Via Email

State Office

N/A

National Apartment Association, Credential for Green Property Management

OR

National Affordable Housing Management Association, Credential for Green Property Management

OR

U.S. Green Building Council, Green Building Certification Institute LEED AP (any discipline) or LEED Green Associate

XVII. 2014 Scoring

PLEASE NOTE: The scoring below is based on the responses that you have provided on this form and may not accord with the final score that the Agency assigns upon evaluating the supporting documentation that you submit. Your score may change from what you see here if the supporting documentation is incomplete or missing.

Priority Description Points Earned 1. Population Size (30, 15, 10, 5)

2. Median Income (20, 15, 10, 5)

3. Loan to Total Development Cost ratio (60, 30, 10)

4. Equity from Low Income Housing Tax Credits (50)

5. Ratio of 3-5 bedroom units to total units (10, 5, 1)

6. Revitalization, repair and transfer of existing Section 515 properties, Section 514/516 FLH properties or MPR properties -- with no equity payments for transfers (10)

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Priority Description Points Earned 7A. Participation in energy-efficient programs (25 or less)

7B. Credential for Green Property Management (5)

Total Score:

Page 11 of 11

Working with RD and GNMA to increase the Loan-to-Total Development Cost from 50% to 70%

Removing the requirement of publishing a NOFA Allowing for “No Year Money” and a continuous

funding process (similar to HUD) Increase the Rural Definition of population to Increase the Rural Definition of population to

50,000 Reenactment of Interest Credit Subsidy Reenactment of Interest Credit Subsidy

Bonneville MultiFamily Capitaly p

USDA Section 538 Guaranteed Loan USDA Section 538 Guaranteed Loan ProgramProgramProgramProgram

R b t H llR b t H llRobert HallRobert Hall801801--323323--10781078

[email protected]@bmcslc.comCraig HackettCraig HackettCraig HackettCraig Hackett801801--323323--10771077

[email protected]@bmcslc.com

Bonneville MultiFamily LLCy

Closed 259 USDA 538 loans over past 11 yearsClosed 259 USDA 538 loans over past 11 years Closed 259 USDA 538 loans over past 11 years Closed 259 USDA 538 loans over past 11 years

Nearly all 538 loans closed have been in conjunction with Nearly all 538 loans closed have been in conjunction with tax credit (either 9% or 4% w/tax exempt bonds)tax credit (either 9% or 4% w/tax exempt bonds)

Well over half have included secondary debt financing Well over half have included secondary debt financing such as 515, HOME, FHLB, such as 515, HOME, FHLB, etcetc

The past two years only five loans closed as a The past two years only five loans closed as a construction/perm all of the rest were permanent only.construction/perm all of the rest were permanent only.

N t d t i f d t l kN t d t i f d t l k l ki thl ki th Newest product is a forward rate lock Newest product is a forward rate lock –– locking the locking the permanent loan interest rate 18 permanent loan interest rate 18 –– 24 months in advance of 24 months in advance of closingclosinggg

538 CONSTR/PERM vs 538 PERM ONLY538 CONSTR/PERM vs 538 PERM ONLY538 CONSTR/PERM vs 538 PERM ONLY538 CONSTR/PERM vs 538 PERM ONLY

Construction/Perm 538 loanConstruction/Perm 538 loan Funds drawn down as construction/rehab is completedFunds drawn down as construction/rehab is completed

Interest only debt service during construction (max 24 months)Interest only debt service during construction (max 24 months)

LoanLoan typicallytypically converts to amortizing perm loan at COconverts to amortizing perm loan at CO Loan Loan typicallytypically converts to amortizing perm loan at COconverts to amortizing perm loan at CO•• Large “Conversion” Reserve needed to pay op Large “Conversion” Reserve needed to pay op expexp & debt service during lease up& debt service during lease up

•• EEquity installments accelerated to pay off construction loan at COquity installments accelerated to pay off construction loan at CO

Rate locks at start of constructionRate locks at start of construction (rate 50(rate 50 100 bps > perm only rate)100 bps > perm only rate) Rate locks at start of construction Rate locks at start of construction (rate 50 (rate 50 –– 100 bps > perm only rate)100 bps > perm only rate)

NO MECHANISM TO BRIDGE EQUITY INSTALLMENTSNO MECHANISM TO BRIDGE EQUITY INSTALLMENTS•• Loan amount during construction = Loan amount after perm conversionLoan amount during construction = Loan amount after perm conversion

P l 538 lP l 538 l Perm only 538 loanPerm only 538 loan Loan closes and is fully disbursed at 90/90Loan closes and is fully disbursed at 90/90

Monthly P&I debt serviceMonthly P&I debt serviceyy

Rate locks at conversion to perm Rate locks at conversion to perm (rate 50 (rate 50 –– 100 bps < 100 bps < constrconstr/perm rate)/perm rate)

INTEREST RATE RISK DURING CONSTRUCTIONINTEREST RATE RISK DURING CONSTRUCTION

538 Forward Rate Lock538 Forward Rate Lock538 Forward Rate Lock538 Forward Rate Lock

Largely eliminates the need for the 538 construction/permLargely eliminates the need for the 538 construction/permg y pg y p Conventional lender provides larger construction loan bridging equity Conventional lender provides larger construction loan bridging equity

installmentsinstallments

Perm loan closing occurs at 90/90 rather than at COPerm loan closing occurs at 90/90 rather than at CO Perm loan closing occurs at 90/90 rather than at COPerm loan closing occurs at 90/90 rather than at CO•• Eliminates need for the big “Conversion” ReserveEliminates need for the big “Conversion” Reserve

•• EEquity installment for construction loan payoff not needed until stabilizationquity installment for construction loan payoff not needed until stabilization

Eliminates interest rate risk during constructionEliminates interest rate risk during construction Eliminates interest rate risk during constructionEliminates interest rate risk during construction Permanent Note Rate is locked at start of construction Permanent Note Rate is locked at start of construction

•• Typically 18 Typically 18 –– 24 months prior to perm loan closing24 months prior to perm loan closing

R t ll i t th 538 t ti / tR t ll i t th 538 t ti / t Rate generally approximates the 538 construction/perm rate Rate generally approximates the 538 construction/perm rate

ConsiderationsConsiderations Rate lock costs/fees, Rate lock deposits, margin calls, builtRate lock costs/fees, Rate lock deposits, margin calls, built--in in , p , g ,, p , g ,

extensions, breakage feesextensions, breakage fees

Bonneville MultiFamily LLC

4% B d d l4% B d d l

y

4% Bond deals4% Bond deals

Pitfalls and ProblemsPitfalls and Problems(Things you might just want to (Things you might just want to

know before you do bonds)know before you do bonds)know before you do bonds) know before you do bonds)

Early Years of the 538 ProgramEarly Years of the 538 Program

Were like early experiments in transportation – we were there!


Diff t W tDiff t W tDifferent Ways to use Different Ways to use 4% LIHTC B d4% LIHTC B d4% LIHTC Bonds4% LIHTC Bonds

N iN iNew constructionNew construction1 B d l1 B d l 221d4 FHA221d4 FHA ( ld( ld1. Bonds alone 1. Bonds alone -- 221d4 FHA 221d4 FHA (could (could

change if USDA increases LTCchange if USDA increases LTC))gg ))

2 Bonds with Additional soft financing2 Bonds with Additional soft financing2. Bonds with Additional soft financing 2. Bonds with Additional soft financing (HOME funds)(HOME funds)

Very unusual to use Bonds on new construction and the Very unusual to use Bonds on new construction and the USDA 538 program BECAUSE the USDA 538 program loan USDA 538 program BECAUSE the USDA 538 program loan p g p gp g p gcannot exceed the 50% loan to cost on cannot exceed the 50% loan to cost on newnew construction construction projects. The following 3 deals were done with 4% direct projects. The following 3 deals were done with 4% direct placed bonds secured or enhanced with the USDA 538placed bonds secured or enhanced with the USDA 538placed bonds secured or enhanced with the USDA 538 placed bonds secured or enhanced with the USDA 538

guarantee guarantee andand HOME funds to help meet the 50% loan to HOME funds to help meet the 50% loan to cost USDA requirement.cost USDA requirement.qq

Arcata IIArcata II –– Humboldt bondsHumboldt bondsArcata II Arcata II Humboldt bondsHumboldt bonds

WillowcreekWillowcreek –– Humboldt bondsHumboldt bondsWillowcreekWillowcreek Humboldt bondsHumboldt bonds

Fortuna Family Fortuna Family –– Humboldt Humboldt bondsbonds

P tiP tiPreservationPreservation (USDA (USDA will allow existing 515 loans to be subordinate to will allow existing 515 loans to be subordinate to

a 538 loan to accomplish rehab of a property; the USDA a 538 loan to accomplish rehab of a property; the USDA 538 loan can go up to 90% loan to value and 90% loan 538 loan can go up to 90% loan to value and 90% loan to cost in this instance when used to execute a 515 to cost in this instance when used to execute a 515 acquisitionacquisition rehabrehab))acquisition acquisition rehabrehab))

1) Construction lender buys tax 1) Construction lender buys tax exempt bondexempt bondexempt bond exempt bond

2) USDA 538 construction/perm with2) USDA 538 construction/perm with2) USDA 538 construction/perm with 2) USDA 538 construction/perm with gap financinggap financing

Most transactions that we see involve Most transactions that we see involve pooling of several 515 projects under a taxpooling of several 515 projects under a taxpooling of several 515 projects under a taxpooling of several 515 projects under a tax--exempt bond issueexempt bond issue

CreekwoodCreekwood –– constconst/perm bond 6 /perm bond 6 --515 project package 515 project package -- TNTN

Creekwood, Tennessee is the first of four acq/rehab projects done with bonds done as a package closingrehab projects done with bonds done as a package closing

BellemeadeBellemeade –– Syndicator covered Syndicator covered the gap financing.the gap financing.

3) 538 taxable permanent financing for 3) 538 taxable permanent financing for groups of 515 acquisition/rehabsgroups of 515 acquisition/rehabsgroups of 515 acquisition/rehabsgroups of 515 acquisition/rehabs

(Short term cash collateralized “Switcheroo” (Short term cash collateralized “Switcheroo” ––((hybrid hybrid -- bonds providing tax credit equity)bonds providing tax credit equity)

Tenants stay “in place” with minimum 90% occupancyTenants stay “in place” with minimum 90% occupancy Tenants stay in place with minimum 90% occupancyTenants stay in place with minimum 90% occupancy

Equity/loan Equity/loan funds for all construction and funds for all construction and acquisition cost in acquisition cost in escrow at closingescrow at closing

BondBond costs are high per unit unless 515costs are high per unit unless 515 packages arepackages are largelarge Bond Bond costs are high per unit unless 515 costs are high per unit unless 515 packages are packages are large large ––consider direct placement of consider direct placement of bond for smaller transactions.bond for smaller transactions.

1.15 DSC at closing1.15 DSC at closing

Package of 6 properties, 5 loans and Package of 6 properties, 5 loans and g p p ,g p p ,194 units 194 units –– permanent only permanent only –– mod rehabmod rehab

Pitfalls along the wayPitfalls along the wayPitfalls along the wayPitfalls along the way(stuff you’d like to know before you start on multi project packages)(stuff you’d like to know before you start on multi project packages)

(1) Sales Price(1) Sales Price –– appraisal “as is”appraisal “as is” (1) Sales Price (1) Sales Price appraisal as isappraisal as is

(2) 50% “bond test” to qualify for tax (2) 50% “bond test” to qualify for tax creditscreditscreditscredits

(3) “Preference proofing” funds as they (3) “Preference proofing” funds as they i t th h b/i t th h b/ tt h f thh f thcome in to the rehab/come in to the rehab/constconst phase of the phase of the

project i.e. bankruptcy project i.e. bankruptcy clawbackclawback

(4) Replacement reserves (4) Replacement reserves –– high per unit high per unit requirement with limited additional RArequirement with limited additional RA


Craig Hackett: 801Craig Hackett: 801--323323--10771077

h k tt@b lh k tt@b [email protected]@bmcslc.com

Robert Hall: 801Robert Hall: 801--323323--10781078

rhall@bmcslc comrhall@bmcslc [email protected]@bmcslc.com

217 Garden Trail | Michigan City, IN 46360 | 219.879.3118 | Fax 216.820.4501

www.BellwetherEnterprise.com

RHS 538 GRRHP – Permanent Loan Only, Immediate Delivery

Tucker Manor I Limited Partnership Tucker Manor Apartments

Parsons, West Virginia 30-Units

Acquisition and Rehabilitation of Senior Housing 9% Low Income Housing Tax Credits

HOME Funds HUD Section 8 HAP Contract Rental Assistance



ProjectDescription:The subject project known as TuckerManor Apartments is an existing age‐restrictedmultifamilyaffordableapartmentprojectlocatedat202SunnydaleSt.,approximately1blocknorthof1stStreet,inParsons,TuckerCounty,WestVirginia.SunnydaleStreetisamoderately‐traveled thoroughfarecarryingapproximately4,000vehiclesperday.FirstStreet is amoderately‐traveled east‐west road carrying approximately 6,000 vehiclesperday.Accessibility is considered to be goodby virtue of the location of the subjectpropertyrelativetoexistingstreetsandthoroughfares.The site is located in Census Tract 9654. The site size is approximately 1.54 acres.There is no zoning in Parsons, thereby making the project an approved, legal andconforminguse. It is located in floodplainZone Xwhich is areas outside the 100 and500yearfloodplanandnot locatedinspecial floodhazardareas.Tucker Manor Apartments was originally constructed 1984 and is currently in faircondition.Theprojectisimprovedwithone(1)two‐storybuildingona1.54acrelot. Itwill be renovated using Low Income Housing Tax Credits. At one time, the projectconsistedofatotalof32units.However,oneunithasbeenconverted into an office, andone unit is for the manager and is thus non‐revenue producing. For purposes offinancing, we have considered only the 30 revenue producing units. The unit mixconsists of thirty (30) 1‐bedroom/1‐bath units at 636 square feet each. The projectconsists of twenty four (24) off‐street parking spaces for the residents. The propertyfeaturesacentrallaundryandacommunityroom.Allmunicipalutilitiesareprovidedtothesubjectsiteandtheutilitystructureisasfollows:Water: ProjectPaidSewer: ProjectPaidTrash: ProjectPaidElectricity: TenantPaidTelephone: TenantPaidCable: TenantPaid

Renovation Description: The renovations focused on improving the major building systems including roofs,windows, doors,soffits and fascia. An elevatorwas added to the project. Additionally,the focus for theunit interiorswere replacing all appliances and adding a dishwashertoeachunit.Unit interior includsnewvanities,kitchencabinetsandhotwaterheaters,andtherenovationswerecompletedwithtenantsinplace.

Loan closed in December of 2012 and renovations were completed in November 2013.



Sources and Uses of Funds – Tucker Manor Apartments Uses: Acquisition Cost: $925,000 Cost of Construction: $924,900 Architect Design & Supervisory: $18,000 Total Carrying Charges & Financing: $158,300 Legal Expense: $45,000 Organizational Costs: $26,650 Other Financing Costs, Developer Fee, and Application Costs: $290,548 Total Development Cost: $2,388,398 Non-Mortgagable Costs & Reserves: RHS O&M Reserve: $15,000 Partnership Reserves-Operating Reserves: $128,330 Total Uses: $2,531,731 Sources: RHS 538 GRRHP Permanent Loan: $750,000 LIHTC Tax Credit Equity: $1,299,522 HOME Funds: $410,000 Other Developer and Partnership Equity Contribution: $72,209 Total Sources: $2,531,731

RHS 538 GRRHP – Bellwether Enterprise Proforma Underwriting Summary RHS 538 GRRHP Permanent Loan Amount: $750,000 Note Interest Rate: 4.25% Term & Amortization: 40- Years Debt Service Coverage (Inclusive of the RHS .50% Annual Fee): 153% Total Development Cost: $2,388,998 Average Cost per Living Unit (30-Units): $79,613 RHS 538 Loan-to-Total Development Cost: 31.40% Appraised Value(Restricted & “As Improved and Stabilized): $1,016,376 RHS 538 Loan-to-Value (Restricted & “As Improved and Stabilized): 73.79% Value (Restricted & “As Improved and Stabilized) per Unit: $33,879 RHS 538 Loan per Unit: $25,000



CARH Members and Tucker Manor

TM Associates, Developer – Bob Margolis & Ari Severe TM Associates Management, Inc., Property Management – Lester Severe MARG Rural LLC, General Partner – Bob Margolis Boston Capital, Investment Limited Partner - Katie Alitz Bellwether Enterprise Real Estate Capital, LLC, RHS 538 Lender – Bob Morton Coventry Capital Group, RHS 538 Investor – Liam McGuigan Canterbury Construction, Inc. – Larry Canterbury Clark Schaefer Hackett – Todd Fentress