The first two projects to be financed under the Low Income Housing Tax Credit (LIHTC) Pilot Program have closed, according to CBRE HMF, Inc., one of the Federal Housing Administration (FHA) lenders participating in the program.
Both loans—in the amounts of $13.3 million for Villa Vasona Apartments in Los Gatos, Calif., and $4.2 million for Twin Oaks Apartments in Vacaville, Calif.—have low fixed-interest rates and 35-year terms, and are nonrecourse and fully amortizing. The sponsors secured 9 percent LIHTCs for the properties through the California Tax Credit Allocation Committee, qualifying them to take advantage of the higher rehabilitation limits and increased efficiency available under the pilot program. Ultimately, the loans closed in 120 days after the initial concept meeting.
The Department of Housing and Urban Development (HUD) program aims to speed the processing time for FHA-backed deals that use housing tax credits. In the past, affordable housing developers have had difficulty using the FHA because they faced tight deadlines under the tax credit program and couldn’t wait for the agency’s slow turnaround time.
“We are pleased to have worked with HUD FHA to break new ground in affordable multifamily financing,” says Jayne Hulbert, president of CBRE HMF. “The pilot program is a valuable tool in financing low-income housing, and it marks a new level of responsiveness from HUD. This experience shows that HUD is backing up their good intentions with action, by speeding up processing and creatively designing terms to meet affordable development realities.”
In the past, the loans could have taken 10 months to a year to close, according to Hulbert. “We were able to whittle a huge amount of time.”
The pilot program streamlines much of the process, including the multiple reviews that are done by the agency’s different technical disciplines such as valuation and engineering.
“This is the breakthrough we’ve been waiting for,” Hulbert says.
While the CBRE HMF loans look to be the first, a number of other transactions are on the way.
CBRE HMF worked with development sponsors Highland Cos. and Mission Housing Development Corp., who are experienced developers, owners, and operators of housing for low-income families, seniors, and the disabled.
RBC Capital Markets—Tax Credit Equity Group provided the equity capital through its purchase of the LIHTCs awarded to both projects.
Constructed in 1983, Villa Vasona Apartments is a seven-building, 107-unit property restricted to elderly and disabled tenants. The site is leased from the town of Los Gatos at a cost of $1 per year, with the provision that the project remain in its present use. Also built in 1983, Twin Oaks Apartments consists of 12 two-story walk-up structures and totals 46 one-, two-, and three-bedroom family units. Both properties will receive moderate improvements as part of participation in the pilot program, including new siding, appliances, and cabinetry, as well as general site upgrades and increased accessibility.