nyc preservation bond transaction - nh&ra...tahl-propp nyc 4% bond transaction •new york city...

NYC Preservation Bond Transaction

PHIL MELTON

EVP, Director of Affordable Housing

P: 469.729.7677 | E: [email protected]

© 2016 Fannie Mae. Trademarks of Fannie Mae. 27/22/2016

Fannie Mae’s permanent financing solution for property renovations up to $120,000/unit where economic and physical occupancy may be reduced to as low as 50% during the renovation period.

• The permanent loan closes and funds before rehabilitation begins and includes funds for renovations, eliminating the need for a construction loan with a forward commitment on a permanent loan.

• LTV is based on the as-improved value.

What is ROAR?

Reduced Occupancy Affordable Rehab (ROAR)


ROAR Benefits & Competitive Advantage

Benefits

• Up to 90% of “as stabilized” LTV• Increased leverage opportunities

when underwritten to as-improved rents

• Interest-only available during the rehab period

• Proceeds are fully funded at closing, eliminating interest rate risk (rehab and “earn out” funds aren’t disbursed at closing)

• During rehab:• Minimum occupancy of 50%• Minimum DSCR of 1.0x (IO

basis)• Rehab costs up to $120,000

per unit

Competitive Advantage

• One loan solution for construction and permanent financing

• Initial cash execution and our single asset security allow for flexible loan terms

• Tailored prepayment structures• Competitive pricing and terms• Experienced, dedicated affordable

team partners with you to provide expert solutions



ROAR Eligible Lenders

• Eligible to deliver Multifamily Affordable Housing Mortgage Loans

• Demonstrated experience in origination, construction monitoring, and asset management of moderate rehabilitation transactions

• Prior approval by the Fannie Mae Multifamily Affordable Housing Deal Team



ROAR Sponsor Profile

• Demonstrated positive experience with at least two tenant-in-place rehab projects of similar size and scope and where at least 50% of the property’s units rehabilitated

• Full construction completion guaranties required

• Strong net worth and liquidity requirements to support the transaction size and risk profile



• Section 8 HAP Contract properties utilizing newly funded 4% or 9% LIHTC

• Properties utilizing newly funded 4% or 9% LIHTC, with rents 10-15% below market rents

• Properties utilizing newly funded 4% or 9% LIHTC with rents close to market rents

• Transactions with significant equity (e.g. existing low leveraged properties) where refinance proceeds will be used to fund the rehabilitation

• Modestly underperforming properties taken over by strong affordable operators, with a modest rehabilitation or repositioning strategy that will improve the property performance and may improve rent levels

ROAR Eligible Property Types



ROAR EXECUTION TYPES

• Side by Side Structure with Short Term Tax-Exempt Bonds

• Taxable Loan Execution• Fixed-rate with flexible

pre-payment structures

• Traditional Credit Enhancement of Tax-Exempt and Taxable Bonds

• Rate Options• Fixed-rate with flexible pre-

payment structures• Variable-rate



ROAR Valuation and Collateral

The Minimum DSCR Test during the Rehab Period is calculated based on:

• Projected residential rent collections for the calendar month estimated to have the lowest collections during the term of the rehabilitation

• Actual/normalized Operating Expenses per the Guide (modest reduction in Underwritten Expenses due to rehab could be considered)

• Allowable Other Income per the Guide• Interest Only Debt Service based on the proposed loan at

the actual fixed interest rate



• Required Guaranties:• Fannie Mae Standard Recourse Carve-outs guaranty• Construction completion guaranty*• Operating deficit guaranty*

• Additional Credit Support at Fannie Mae’s Discretion:• Debt Service Reserve Fund• Letter of Credit meeting Fannie Mae’s current

requirements (sized at 125% of difference between pre-and post-rehab loan sizes)

• Guaranty or loan proceeds holdback

If the property does not achieve the projected stabilized Net Cash Flow by the required date, the additional credit support may be used to resize the loan.

* Guaranties must burn off prior to securitization

ROAR Sponsor Guaranties & Credit Support



ROAR Rehab Timeline



ROAR Key Terms

Eligible Properties Stabilized MAH; rehab up to $120K/unit

Eligible Sponsors Strong sponsors with demonstrated tenant-in-place rehab track record

LTV Up to 90% “as stabilized”

Term 5-30 years

Amortization Up to 35 years

Rehab Period 12-18 months

Minimum Loan Size $5 million

Loan Disbursement Fully funded at closing; rehab and earn out funds escrowed by Lender


DEAL OVERVIEW

12

TAHL-PROPPNYC 4% Bond Transaction

• New York City• Bellwether Enterprise production

existing client• Enterprise referred in as the LIHTC

investor• 5 assets located in Harlem, NY

• 95% Section 8 contract residents• 549 units• $53K a door in renovations

(including contingency)

SOURCES & USES

13

Tax Credit Equity $39,908,211

HDC Tax Exempt Bonds (Long Term) $38,135,000

HDC Tax Exempt Bonds (Short-Term) $24,210,000

HPD Second Mortgage $15,274,497

Transfer of Existing Reserves -Allocated to Construction

$3,492,003

Net Income from Operations$6,091,145

Seller's Note $24,780,917

Deferred Developer Fee Note$5,506,786

SOURCES

Construction Costs $31,167,762

Interest Carry $6,167,517

Relocation Reserves $250,000

Replacement Reserves $549,000

Financing/Bond Fees $3,925,457

Insurance $701,680

Acquisition $73,100,000

Operating Reserve $4,327,143

Developer Fee $13,000,000

USES

TOTAL PROJECT: $133,188,559

CHALLENGES

14

• Multi-site in place rehab going on simultaneously

• Seller/Buyer commonality

• HPD subsidy amount and rent registration

• HDC volume cap availability

• Article XI tax abatement

• HAP Contract limitations (no mark up to market for 16 years)

• Short term bond credit enhancement

QUESTIONS & ANSWERS

15

Phil Melton, EVP, Director of Affordable Housing


Tabaré Borbón, Customer Account Manager III, Multifamily Affordable Lending


nyc preservation bond transaction - nh&ra...tahl-propp nyc 4% bond transaction •new york city...

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