Affordable Housing Finance

FINANCE

Tax Credit Equity

Syndicator Eyes Return to Market

AFFORDABLE HOUSING FINANCE • October 2009

BY DONNA KIMURA

BOSTON Boston Financial Investment Management is preparing its first low-income housing tax credit (LIHTC) fund since its change from MMA Financial. It’s one of several key moves that the firm is making as it returns to the market under new ownership.

“The biggest challenge will be reintroducing the company to the marketplace in a way that emphasizes the quality of the company’s people and systems, while conveying that we are free from the accounting problems that MuniMae has encountered,” says new CEO Ken Cutillo.

MMA Financial, a prominent LIHTC syndicator, was sold this year by MuniMae to an affiliate of JEN Partners, LLC, a New York-based private equity firm. The $30.7 million deal consisted of $18.7 million in cash and $12 million in liabilities to be assumed by the buyer.

The name was then changed, but it’s not totally new. The firm started out many years ago as Boston Financial, then became Lend Lease, and then MMA.

Company leaders describe Boston Financial as a “mature start-up,” meaning it has many of the people and structures from MMA Financial with a revamped business plan and new ownership.

In addition to syndicating tax credits, the firm holds third-party contracts with several institutional investors to asset-manage their holdings. Boston Financial wants to grow that third-party asset management business.

“Overall, I see us continuing our asset management business for existing investors, expanding it by securing thirdparty asset management work or acquiring additional portfolios, and getting back into the syndication market, but in a way that is consistent with the constrained equity market that currently exists,” says Cutillo, who worked for seven years as a senior vice president at Alliant Capital and supervised the firm’s acquisition program.

First LIHTC fund

In one key change, the firm does not have an affordable housing finance group as MMA did. Earlier this year, Oak Grove Capital acquired MMA Financial’s Fannie Mae, Freddie Mac, and Department of Housing and Urban Development lending platform for about $70 million.

Boston Financial is talking with a few lenders to establish a correspondent relationship, where it would have an exclusive alliance with a lender. That way it could offer debt and equity together to its affordable housing partners.

On the equity side, Boston Financial is working on its first LIHTC fund. It is hosting an investors’ conference at the end of October to re-introduce itself to the market, says COO Greg Judge, who has been with the company since 1989.

He expects that the fund will be launched in November and will likely be between $50 million and $100 million.

“We expect to have a modified structure to our funds going forward with the goal to further align ourselves with our investors while also creating self-sustaining funds,” says Judge. “We’d like to turn the tax credit investment business into more of an annuity business from an up-front transactional fee business as we feel that this better aligns interests and incentives.”