Freddie Mac has closed a low-income housing tax credit (LIHTC) fund with RBC Capital Markets (RBCCM) Tax Credit Equity Group and initiated several investments within the fund.
The closing marks Freddie Mac’s fourth LIHTC fund since re-entering the market in 2018 and the first fund managed by RBCCM.
The fund will invest in the creation and preservation of affordable rental housing across the country, with a focus on transactions in areas that have been underserved over the past decade, such as rural communities, 4% LIHTC financings, and developments that provide intensive supportive services for their residents. It will also invest in supportive housing for special-needs populations and housing in disaster-affected areas.
The fund is set to provide more than $180 million in targeted affordable housing investments and has already closed 10 transactions, including two in Puerto Rico and eight more across New York, South Carolina, Tennessee, Texas, and West Virginia.
The Puerto Rico investments are notable as they will serve the Caguas community, which is one of many that were devastated in September 2017 by hurricanes Irma and Maria. Both investments will help build the José Gautier Benítez mixed-finance communities, which will stand on the site of a demolished public housing development.
A 238-unit family phase will receive a $37.5 million LIHTC equity investment, and a 200-unit senior phase will receive a $28.9 million investment. Together with $38.5 million in Community Development Block Grant–Disaster Recovery funds (the first of these to close in Puerto Rico following the hurricanes) and $23.2 million in other public funds, funding for these developments represents a substantial public-private partnership to assist Puerto Ricans most affected by natural disasters, according to the team.
The buildings will have separate community rooms, on-site management offices, and a common area and courtyard. More than 80% of the family units will be affordable to tenants earning 60% or less of area median income (AMI), and all the senior units will be affordable to seniors age 62 or older making 60% or less of AMI.
The buildings have been designed to withstand future hurricanes and tropical storms and include backup generators that are sufficient to power the entire development in the event of a prolonged outage.
“We are proud to partner with RBCCM as a LIHTC syndicator. Our fund will provide stability to underserved markets and deliver equity capital for affordable housing to communities across the United States,” said David Leopold, vice president of Targeted Affordable Sales & Investments at Freddie Mac. “The investments in Puerto Rico are particularly important to us. We all watched with horror as hurricanes ravaged the island and residents went without power for months. Among its many important investments, our fund with RBCCM is helping to build housing that is both affordable and resilient to future storms.”
RBCCM Tax Credit Equity Group provides equity capital by utilizing LIHTCs and other tax credits. Since its inception, it has raised over $9.9 billion of equity for affordable multifamily and senior housing, historic, and renewable energy tax credit programs, and has 954 assets located in 47 states, the District of Columbia, and Puerto Rico, representing 83,799 housing units.
“We are honored to partner with Freddie Mac in achieving its targeted affordable housing investment goals,” said Eric Moody, managing director at RBC Capital Markets. “Investors have been reluctant to return to Puerto Rico following the hurricanes of 2017, and Freddie Mac’s investment epitomizes its commitment to add liquidity to the LIHTC market to ensure much-needed housing is delivered in underserved areas.”
He added that the firm is pleased to have leveraged its longstanding partnership with McCormack Baron Salazar and its significant experience with local government partners in multi-phased, mixed-income developments on these new investments.