After breaking into the low-income housing tax credit (LIHTC) market last year, Google has started 2011 with a new affordable housing investment.

The Web search engine giant has invested in a new LIHTC fund, with the first tranche of $28 million closing Jan. 28. A second tranche is expected to close in the second quarter of this year.

Upon closing of the second tranche, the proprietary fund will involve three properties—new construction projects in Santa Fe, N.M., and Allston, Mass., and an acquisition/rehabilitation project in Minneapolis.

AEGON USA and its affiliates acted in multiple roles, including fund manager and guarantor.

The first tranche will help finance the construction of the Villa Alegre Senior Apartments, which will provide 50 affordable apartments for seniors in Santa Fe. The development will have geothermal heating and cooling and solar panels to generate electricity.

It will also fund the Riverside Plaza Apartments development in Minneapolis, which will include the rehabilitation of nine multi-story buildings with 1,303 family units, which are home to about 4,500 residents, according to Christoph Gabler, senior vice president for AEGON USA Realty Advisors, LLC.

The community includes one of the country’s largest on-site education facilities within a housing complex, including services for early child care and a charter school, according to officials.

“We are excited about our investment partnership with Google,” said Brian Herman, senior vice president for AEGON USA Realty Advisors, in a statement. “We take great pride in forming long-term relationships with companies, including Google, and we look forward to working with them on future projects.”

Carreden Group, Inc., an investment banking firm that specializes in advising guarantors in the tax credit market, represented AEGON in structuring the deal.

“The emergence of tax credit equity and liquidity from corporate investors is positive for the market,” said John Faulkner, managing director at Carreden.

Having raised more than $600 million in tax credit equity over the past 12 months, Carreden has been very active in market development, working to attract new LIHTC investors, including Google.

The tech company has invested in three funds in the past 12 months. The first was a $25 million investment with Union Bank's Community Development Finance division, involving two properties, including one in Sunnyvale, Calif., near Google’s headquarters.

The company followed up with an $86 million fund with U.S. Bancorp Community Development Corp. involving seven affordable properties in the Midwest and West.

Carreden also acted as exclusive financial adviser and placement agent with Union Bank and U.S. Bancorp on these transactions.

While banks and financial institutions have been the major LIHTC investors over the years, the market has seen several new investors, including Kroger Co. and Waste Management, emerge in the past year as yields increased from their early 2008 lows.

A key question is whether new corporate investors will remain in the market as yields decline.

“I expect these new investors to stay for the simple reason that there’s a lack of alternative investments that offer as attractive economics,” said Faulkner.

He pointed out that the 10-year Treasury is currently yielding about 3.4 percent. For illustration purposes, a LIHTC investment with a 6 percent guaranteed after-tax yield generates an approximate 9.2 percent pre-tax equivalent yield, which represents an approximate 600 basis point premium over like-term U.S. Treasuries, said Faulkner. Compared with historical spreads, that would be considered very attractive.