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Low-Income Housing Tax Credits News Briefs - August 2011

AFFORDABLE HOUSING INDUSTRY

RBC announced the $3.62 billion sale of its United States regional retail banking operations to PNC Financial Services Group. RBC said the transaction will refocus its growth strategy in the United States, reaffirming the policy to focus on wealth management and capital markets and maintaining RBC's cross-border banking platform. The sale consists of approximately $3.45 billion for the purchase of RBC Bank (USA) and $165 million for the purchase of related credit card assets. The sale is in no way related to RBC Capital Markets and its U.S. municipal finance platform, which includes its tax credit equity group. The transaction is subject to regulatory approval and is expected to close in March of 2012.

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Senators representing several states that suffered from spring tornado and flooding damage have introduced legislation to allow the affected states to receive additional LIHTC allocations and other relief. S. 1205, The Southeastern Disaster Tax Relief Act of 2011, would increase to $8 per person per year through 2013 the amount of LIHTCs allocated to Alabama, Arkansas, Georgia, Kentucky, Mississippi, Missouri, North Carolina, Oklahoma and Tennessee. S. 1205 would also increase the states' amount of tax-exempt bond authority available for affordable rental housing. A copy of the bill is available at www.taxcredithousing.com.

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The Internal Revenue Service (IRS) recently released a revised version of Form 8703, the annual certification of a residential rental property financed by tax-exempt bonds. Form 8703 is filed by an operator of a property to provide information to the IRS to show that the property continues to be a qualified residential rental property under section 142(d) and that the bonds maintain their tax-exempt status. Several questions were added to reflect a provision in the Housing Assistance Tax Act of 2008, Public Law 110-289 relating to the "next available unit" rule. This legislation conformed the "next available unit" rule for tax-exempt bonds to the LIHTC rule. In addition, a new section was added to gather information about the issuer and the tax-exempt financing used to finance the project under section 142(d).

DEALMAKERS

PNC announced the completion of PNC Real Estate Tax Credit Capital Institutional Fund 46, a $154 million investment limited partnership that closed in June. Ten institutional investors each invested between $8 million and $21 million to acquire limited partnership interests in the fund. They will derive returns based primarily on the receipt of low-income housing tax credits (LIHTC) and passive losses from real estate depreciation, PNC said. The fund comprises investments in 25 operating partnerships involving a portfolio of more than 2,000 housing units targeted to households earning 60 percent of less of the area median income.

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Boston Capital closed the $244 million Boston Capital Tax Credit Fund XXXIV, a portfolio of 39 affordable properties in 17 states. With this closing, Boston Capital said it has invested $291 million in equity since January. The properties acquired by the fund, including 11 senior developments and 28 family properties, will add an additional 3,238 apartment units to the firm's holdings. The firm expects the development and rehabilitation of the properties to create 2,680 jobs. Boston Capital also announced that it has launched another fund, Fund XXXV, a $305 million fund that is expected to close by the end of 2011.

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AEGON USA Realty Advisors LLC, with two new investments from Google totaling $74.6 million, added two properties to the Garnet LIHTC Fund XXV, which it manages on the tech firm's behalf. Charlesview Housing in Boston, Mass. features 240 units, a parking garage, commercial space and community space. The second property, Towers at Kuhio Park Terrace in Honolulu, Hawaii, is a public housing community composed of two 16-story high-rises. AEGON said the fund will provide a major funding source for the rehabilitation of that property's 555 units. The first tranche of the fund closed earlier this year and included a $28 million investment in LIHTC developments in Minneapolis, Minn. and Santa Fe, N.M.

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In a separate announcement, AEGON says it closed the Garnet LIHTC Fund XXVII, the company's first unguaranteed fund organized with other investors. The $66 million fund owns five properties in as many states. The properties will provide more than 1,900 housing units in Michigan, Minnesota, Illinois, Louisiana and Texas. AEGON said that it and its affiliates invested in the fund alongside a major bank and three insurance companies. The company manages a portfolio in excess of $2.5 billion in affordable housing assets.

STATE BRIEFS

New Jersey Gov. Chris Christie abolished the Council on Affordable Housing (COAH) and transferred its responsibilities to the Department of Community Affairs as part of a reorganization plan that he said will streamline state government. COAH's elimination was consistent with recommendations from the governor's Housing Opportunity Task Force and the Red Tape Review Group, which said the move would reduce costs and promote more efficient operations.

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The Wisconsin Housing and Economic Development Authority (WHEDA) created a special round of 2011 LIHTC allocations specifically designated for developing affordable housing in Marinette, Wis. WHEDA expects an influx of workers at the Marinette Marine Corporation, which was recently awarded a large U.S. Navy ship-building contract, to have an unprecedented housing impact on the area. The agency will accept electronic applications from August 26 to September 16. More details are available at www.wheda.com.

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The California Tax Credit Allocation Committee (TCAC) held forums throughout the state to discuss the issue of cost containment associated with developing affordable housing. TCAC said that some LIHTC developments have significantly higher per unit development costs than the statewide and/or local average, which prompted TCAC to study the reasons why these outlier projects are so costly. The agency said the study may lead to program changes to limit LIHTC development costs. In addition to meeting with stakeholders, TCAC also met with its sister agencies to develop a plan for addressing the cost containment issue. According to a statement from the agencies, TCAC's goal is to make LIHTC reservations only to cost-reasonable projects. More information is available on TCAC's web site at www.treasurer.ca.gov.

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New Hampshire's apartment vacancy rates have decreased while rental costs remain flat, according to New Hampshire Housing Finance Authority's (NHHFA's) annual Residential Rental Cost Survey. This year's rent for the state's median-priced two-bedroom apartment, including utilities, was $1,050, which the agency said is roughly the same as last year. However, vacancy rates for two-bedroom units decreased to 3.5 percent, as compared to 4.4 percent last year. The study showed demand for rental housing is increasing. In the southern part of the state, demand remains high, but there has been little increase in the rental housing supply. In fact, NHHFA said, the number of rental properties built in the state has decreased since 2003. A copy of the survey is available on the agency's web site at www.nhhfa.org.

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The Internal Revenue Service (IRS) issued Notice 2011-47 to grant certain LIHTC properties relief from specified Section 42 requirements in the wake of the devastation in Missouri caused by severe storms, tornadoes and flooding beginning on April 19. The IRS said it will temporarily suspend income limitation and non-transient requirements for those LIHTC properties that have received approval from the Missouri Housing Development Commission to rent vacant units to individuals displaced by natural disasters. Other rules and requirements of Section 42 will continue to apply during the temporary housing period. See Internal Revenue Bulletin 2011-27 for more details.

PEOPLE IN THE INDUSTRY

Susan McFarland has been appointed Fannie Mae's executive vice president and chief financial officer. McFarland will serve on Fannie Mae's executive committee and report to Michael J. Williams, president and CEO. McFarland joined Fannie Mae from Capital One Financial Corporation, where she served as executive vice president, finance and principal accounting officer and led a team of 500 professionals. She has a strong background in accounting, controls and operating finance. McFarland graduated from Texas A&M University and the Stanford University executive program.

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Hal Keller, president of Ohio Capital Corporation for Housing (OCCH), was elected a director of the Federal Reserve Bank of Cleveland. His responsibilities as a director include making recommendations to the Board of Governors regarding the bank's discount rate on primary credit; providing information about regional business conditions to the Reserve Bank president; and overseeing the bank's budget and finances. Keller serves on the boards of several organizations, including the Affordable Housing Trust for Columbus and Franklin County; YMCA of Central Ohio; Ohio Housing Council; Greater Ohio Policy Center; National Association of Affordable Housing Lenders; National Housing Conference; and the National Association of State and Local Equity Funds. He holds a master's degree from Ohio State University.

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Ryan Sfreddo joined Red Stone Equity Partners as director of investor relations. Sfreddo, based in Red Stone's New York office, is responsible for the origination and placement of tax credit investments for the syndicator's institutional clients. He will grow Red Stone's investor relationship network, including assisting with the launch of its first multi-investor fund. Prior to joining Red Stone, Sfreddo was a managing director at Centerline Capital Group, where he oversaw its tax credit fund management business.

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Centerline Capital Group has hired three specialists to expand its affordable housing debt products business. Philip A. Melton, based in the company's Dallas, Texas office, will lead the debt originations team, which is composed of Karen Dubrosky, in Minneapolis, Minn.; Cindy Hannon, in Atlanta, Ga.; and Suzie Cope, in Denver, Colo. Melton will focus on debt originations as well as expanding Centerline's Federal Housing Administration (FHA) lending volume. Melton, Dubrosky and Hannon previously worked together at Grandbridge Real Estate Capital.

Journal Category:

Low-Income Housing Tax Credits

Authors:

Novogradac

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