Low-income housing tax credit syndicators admitted paying as high as $1.05 or $1.06 for some select deals on the West Coast this year. These high prices were influenced, in certain cases, by the pay-in structure or the need to fill a Community Reinvestment Act obligation.
No one reported paying less than 85 cents this year during AHF Live’s “Tax Credit Equity Outlook” session moderated by Todd Sears, vice president of finance at Herman & Kittle Properties, Inc.
Looking toward 2008, syndicators projected seeing lower prices. If the average price this year was 94 cents, the average price may be 90 cents or maybe in the 80s next year, estimated Greg Judge of MMA Financial.
Syndicators expressed concern that Fannie Mae, which has historically been the industry’s biggest tax credit investor, is significantly reducing its investment level because it has slipped into alternative minimum tax status.
“The depth is razor thin,” said Ryan Sfreddo, managing director of Centerline Capital Group. “There are very few investors.”
Overall, there are probably 20 to 30 core investors in the market, with the top six making up 50 percent of the volume in the market, estimated Judge.
Jeff Butcher of WNC & Associates, Inc., said he often receives calls from developers asking about pricing. “If someone tells you a price without first asking is it a 9 percent deal or a 4 percent deal, does it have some debt and how much, you are not going to have an accurate number at all,” he warned.
Sfreddo added that the other key questions are “who’s your sponsor and what’s your track record.”