ROCKVILLE, MD.— There’s a new player in the lowincome housing tax credit (LIHTC) market—CAPREIT. The privately held real estate investment trust is known for investing in market-rate apartments, but the firm recently stepped into the affordable arena with the purchase of three LIHTC properties in Tennessee in 2006. The complexes have a total of 402 units.
The firm is also managing nine LIHTC properties for a national tax credit syndicator.
CAPREIT’s focus remains on owning and managing market-rate apartments. There are several reasons behind its interest in LIHTC properties, however. For one, the company was involved in condominium conversions recently and has sold some of its properties. It didn’t want to lose good, experienced management people, said Martin Bershtein, vice president and director of tax credits.
Getting into the affordable housing business provides a new opportunity to acquire and manage properties, he said.
It’s a move that other firms that have traditionally been market-rate apartment owners are looking at, according to Bershtein. “They’re examining alternatives,” he said.
Bershtein emphasized that CAPREIT does not plan to convert the LIHTC apartments into market-rate properties.
CAPREIT wants to acquire between five and 10 affordable projects a year, he said. Leading the company’s foray into affordable housing, Bershtein has 20 years of affordable housing experience, including serving as the director of tax credit services at the New Jersey Housing and Mortgage Finance Agency.
CAPREIT’s strategy is to buy LIHTC properties that are nearing the end of their 15-year compliance periods. The company would then apply for a new allocation of tax credits and use the equity to rehabilitate the properties.
Bershtein said the goal is to obtain 9 percent tax credits. If a project doesn’t receive an allocation, the company would then consider reapplying for credits in a following allocation round or possibly adjusting its plans to seek 4 percent credits and tax-exempt bonds.
Even if the firm doesn’t receive tax credits, the LIHTC developments are still good investments, according to Bershtein.
“We’re buying them at a price [at which] they sustain themselves,” he said.
The firm has applied for credits for one of its Tennessee developments. It will have to wait to seek credits for the other two properties until 2009 when their compliance periods end, according to Bershtein.
He estimated that LIHTC prices have been in the low-90 cents range for 9 percent credits and the mid-90s for 4 percent deals.
The pricing has stabilized, he said, noting that the recent days of LIHTCs selling for $1.04 for a dollar’s worth of credit are gone.
At the Housing California conference in late April, LIHTC syndicators reported that prices were about four or five cents lower than they had been six months earlier.
Fannie Mae Invests in Gulf Coast
Fannie Mae has been among the companies investing in the rebuilding of the hurricane-damaged Gulf Coast.
It established five low-income housing tax credit (LIHTC) funds totaling $375 million, which are dedicated to serving Louisiana, Alabama, and Mississippi, said Jay Ryan, Fannie Mae’s vice president for tax-advantaged equity. Its fund manager partners have been Raymond James Tax Credit Funds, Inc., The Richman Group Affordable Housing Corp., and Boston Capital.
Combined with LIHTC investments from other funds, Fannie Mae has invested about $424 million in the Gulf region, according to Ryan.
Fannie Mae would not specify how much it plans to invest overall in LIHTCs this year. Officials said the company will “continue to be a significant player in this market.”
