Google has become the newest low-income housing tax credit (LIHTC) investor.
Union Bank announced an innovative arrangement with the well-known Web firm to finance affordable housing in California.
The bank’s Community Development Finance (CDF) division will syndicate and manage about $25 million in LIHTC investments. Two affordable seniors housing projects, including one that is about eight miles from Google’s Mountain View headquarters, will receive financing.
“Google recognizes the challenges associated with developing affordable housing in California and is proud to help meet this need by providing LIHTC financing for some of the region’s developers,” said Brent Callinicos, Google vice president and treasurer, in a statement. “Union Bank has a track record of identifying and securing strong affordable housing investments.”
A federal program, LIHTCs are the major source of funding for affordable housing in the nation. Developers who receive an allocation of LIHTCs can sell the credits to investors to raise equity for their affordable housing projects. The investors then use the credits to offset their tax liability.
“This announcement is exciting news for the industry, signifying the entrance of a major new investor into the LIHTC market coming from outside the pool of financial institutions that typically purchase these tax credits,” said Senior Vice President Annette Billingsley, who heads Union Bank’s CDF division.
Google’s entry comes at a time when the industry has been searching for new investors to help replace several companies that have dropped out of the market or reduced their investing levels in the past two years. That has meant that prices to developers have fallen, leaving projects with significant financing gaps.
In its role as a syndicator, Union Bank has originated and will manage two LIHTC investments in California in this first fund for Google: Fair Oaks Senior Housing and Regency Towers Apartments.
Google is investing $19 million in LIHTC equity in Fair Oaks Senior Housing, a development that will serve 123 low-income seniors in the San Francisco Bay Area community of Sunnyvale, near its headquarters. Union Bank also contributed $21.8 million in debt financing for the project, which is being developed by Mid-Peninsula Housing.
“Mid-Pen is proud to be the recipient of Google’s first investment in affordable housing,” said Matthew O. Franklin, president of Mid-Peninsula Housing. “We applaud Google’s vision to invest in their region by supporting the development of affordable, high-quality housing, and we hope that their leadership will pave the way for other nontraditional investors to enter the LIHTC market.”
A $6 million LIHTC investment in the Regency Towers Senior Housing will round out Google’s portfolio.
Using financing provided by Google, Thomas Safran & Associates has purchased and will rehabilitate this 104-unit property in the Los Angeles County community of Inglewood.
Preserving the property as affordable for low-income seniors, the rehabilitation of Regency Towers will include the renovation of building interiors, the expansion and upgrade of community areas, and the replacement of the property’s roofs, windows, elevators, and HVAC system.