Columbus, Ohio — The Ohio Capital Corporation for Housing (OCCH) said that it has raised more than $1 billion in equity for affordable housing developments in the state of Ohio, a goal it reached after closing the $157 million Ohio Equity Fund for Housing XV in December.
It is not unheard of for large, for-profit tax credit syndicators, such as Charter-Mac Capital and MMA Financial, to raise more than $1 billion in a single year, said OCCH President Hal Keller. But OCCH, after 17 years in the business, became the first nonprofit local or regional syndicator to raise a cumulative $1 billion.
OCCH expects to raise $180 million or $200 million for its next fund in 2006. Keller attributes the increasing pace of his organization’s growth to its strong program of services in addition to its tax-credit syndication efforts, as well as its roster of satisfied investors.
More than just equity
OCCH was formed by the Ohio Housing Finance Agency in 1989 as an independent nonprofit dedicated to aiding the construction, rehabilitation and preservation of affordable housing in the state. “Clearly you can be given a start by an agency, but you have to prove yourself to a number of other constituencies to prove yourself a success,” said Beth Stohr, president of U.S. Bancorp Community Development Corp., the largest of OCCH’s bank investors. She added that the constituencies of general partners, developers and investors appreciate OCCH because “they do it right on a number of fronts.”
OCCH estimates its equity financing for more than 300 transactions has helped to create about 15,000 units of affordable housing in 70 different Ohio counties. It also owns and manages 868 units on 133 different sites.
In addition to providing equity, OCCH provides extensive technical help, including filling out tax credit applications on its clients’ behalf, project-development assistance, asset management, and community housing development organization training. Its financial tools include a revolving loan fund for providing below-market-rate acquisition financing and the Resident Development Fund (RDF), for funding services that directly benefit tenants. The RDF’s grants, capped at $30,000 each, have paid for such things as a van for a seniors housing project, computer learning centers, homeownership downpayment assistance, service coordinators, summer youth programs, and camps for children.
“They literally put together the tax credit application, the bond package, the tax credit syndication; all we had to do is prepare the HOPE VI papers,” said Steve Habens, director of business development for Columbus Metropolitan Housing Authority (CMHA). CMHA has developed or has under development four affordable housing projects with OCCH, including two HOPE VI projects.
In the 17 years since OCCH was founded, a lot of different types of investors have entered and exited the tax credit business, said Keller. But, “with very few exceptions, our investors in our Ohio Equity Fund (OEF) I are the same investors as in OEF XV.” One reason for that loyalty is undoubtedly the yields of about 9.2% OCCH delivered to its investors in 2005. According to a recent Affordable Housing Finance magazine survey of state and local equity funds, typical yields range from 4.2% to 7.6%.
Though Freddie Mac ranks as the largest investor in OCCH’s funds, having participated in all 15 OEFs for a total of more than $225 million, other major investors include a roster of household names. JPMorgan Chase has invested more than $120 million, Fannie Mae more than $113 million. Besides U.S. Bancorp, other large investors range from GE Capital and PNC Bank to the Campbell Soup Co. and Minnesota Mining and Manufacturing Co.
One reason OCCH attracts and retains such investment partners is that it understands their approach to underwriting affordable housing projects, said Stohr of U.S. Bancorp. “They’re out ahead of the curve in understanding the underwriting,” she said. “Hal hired a lot of ex-bankers. A number of years ago, [OCCH was] calling me and saying, ‘How do you underwrite a deal? What sorts of terms do you put in your term sheets?’ They were thinking about the process a lot like their investors did.”
That understanding has paid off for its developers, as well. “They’ve been very helpful to us in maximizing our terms … just from technical advice – [such as] how to arrange financing, what gets included and what doesn’t get included in basis,” said Habens of CMHA.
“One of the nice things about our model here is that all of our projects, even from our first fund, have very low hard debt,” said Keller. “As a result, we’ve had zero foreclosures, zero defaults, zero recapture. We don’t even have anything that’s close.”
In its early years, the organization typically funded “50-unit cornfield new-construction multifamily projects, generally for working people,” said Keller. OCCH still funds a lot of those, but it has financed an increasing number of projects serving very low income residents, special needs, public housing, supportive housing for formerly homeless people, and preservation projects.
Most of the equity OCCH has raised has been for low-income housing tax credits, but a lot of its projects have also involved historic tax credits. Keller said he has not paid the inflated coastal prices of more than $1 of equity per dollar of credit, but adds that even in Ohio the prices are climbing. CMHA, which received about 92 cents per dollar for its previous deal, expects to get 97 cents to the dollar on a development currently in the preparation stage.