Low-Income Housing Tax Credits News Briefs - January 2012

Sunday, January 1, 2012

AFFORDABLE HOUSING INDUSTRY

The Internal Revenue Service (IRS) published the amounts of unused low-income housing tax credit (LIHTC) carryovers for calendar year 2011 that were allocated to 28 qualified states under Internal Revenue Code §42(h)(3)(D). Revenue Procedure 2011-57 details how nearly $3.66 million of unused LIHTCs were divided among the states in the national pool. California received the largest allocation, with $570,425 in LIHTCs. A copy of the notice is available at www.taxcredithousing.com.

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Enterprise Community Loan Fund (ECLF) received a $5.5 million low-cost loan and operating grant from Bank of America to expand its energy efficiency and retrofit financing program for affordable properties in several locations. ECLF is among the community development financial institutions (CDFIs) selected to participate in Bank of America's $55 million Energy Efficiency Finance Program, which enables CDFIs to finance green retrofits and environmental initiatives in low-income communities. ECLF will repay the loan with the long-term cost savings realized by the reduction in utility costs.

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The IRS ruled that the sale of certain Massachusetts state tax credits, including low-income housing and historic tax credits, to a third party by the original recipient is a taxable event, according to Chief Counsel Advice memorandum (CCA) 201147024. In addition, the agency said the original recipient has no tax cost basis in the tax credit and that the original recipient's gain on the sale of a nonrefundable credit is capital gain. The purchaser's basis for the tax credit is the cost of the tax credit. If the tax credit is purchased for less than its face value, the purchaser must recognize apportioned gain when the tax credit is used to satisfy state tax liability. Read the memo at www.taxcredithousing.com.

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Sen. Bob Corker, R-Tenn., introduced a bill to wind down government-sponsored entities (GSEs) Fannie Mae and Freddie Mac. S. 1834, the Residential Mortgage Market Privatization and Standardization Act, would reduce the GSEs' mortgage-related assets portfolio and take steps to replace the GSEs with private capital. The bill, according to Corker's office, provides for the creation of a new futures market with no government guarantee, monetization of business assets and uniform underwriting standards.

DEALMAKERS

AFL-CIO Housing Investment Trust (HIT) announced that it has invested $640 million during the past 10 years to create or preserve more than 24,000 housing or health-care units in New York City. HIT's most recent investment was $134 million to rehabilitate Manhattan's historic Penn South Cooperative, which encompasses 2,820 units in 10 buildings. The transaction will preserve the community's affordability, renovate the complex and generate more than 600 construction jobs. HIT's investment is part of its Construction Jobs Initiative, which has created nearly 12,000 construction jobs and invested more than $1 billion in 36 housing developments.

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Enterprise Community Investment closed an $8.3 million LIHTC syndication deal to help Community Corporation of Santa Monica build High Place West Apartments. The property will offer 47 affordable housing units to families earning 35 percent to 60 percent of the area median income (AMI). High Place West will feature Energy Star appliances, a community room and a parking garage. Other financing sources include the California Community Reinvestment Corporation, the California Department of Housing and Community Development, the city of Santa Monica, Citibank and the California Statewide Communities Development Authority.

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Boston Capital invested $5 million in tax credit equity in the construction of the $6.6 million Conway Pines Apartments, a 32-unit affordable multifamily development in Conway, N.H. The property will offer six one-bedroom, 23 two-bedroom and three three-bedroom units located in one three-story building. Units will be available to households earning 60 percent or less of the AMI and will include dishwashers, patios and energy-saving features. The development will also incorporate geothermal cooling, heating and hot water. Conway Pines' construction is expected to create 48 local jobs.

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Centerline Capital Group closed a $48.6 million transaction to acquire nine multifamily properties. The loan proceeds include $35.8 million in Fannie Mae loans for the acquisition of five properties in Tampa, Fla. and two in Orlando. The transaction also included $12.8 million in bridge financing for two multifamily facilities in Pasadena, Texas. Johnson Capital provided the equity for the transaction.

STATE BRIEFS

The Texas Department of Housing and Community Affairs (TDHCA) announced the availability of more than $22 million in HOME funds for affordable multifamily rental development. The agency has set aside $10 million of that amount for Community Housing Development Organizations and more than $1.5 million for units restricted to persons with disabilities. Funding will be available on a first-come, first-served basis. Applications are due before 5 p.m. on April 30. More information and application instructions are available at www.tdhca.state.tx.us.

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The California Tax Credit Allocation Committee (TCAC) has proposed several substantive low-income housing tax credit (LIHTC) regulation changes that include increasing the set-aside of state tax credits for 4 percent LIHTCs from 15 percent to 30 percent of the total state tax credits available for the year. Also included are establishing that the agency's market study guidelines will be changed only after public comment opportunities, and establishing a process by which high-cost projects would not be considered for funding unless approved by the committee. At the time of this writing, TCAC was collecting public comments on the changes and was expected to put them to a vote in January. More details on the proposed regulations are available at www.treasurer.ca.gov.

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The New York City Department of Housing Preservation and Development (HPD) awarded $14.4 million in LIHTCs to 13 affordable housing developments. The financing will support a total of 737 affordable units and is expected to generate approximately 1,400 jobs throughout the construction period. The properties receiving credits under this allocation round are Truxton Residence, 329 Lincoln Road, 2142 Amsterdam Avenue, Clinton Avenue House, Garden House, Promesa Court, Harlem 117, St. Nicholas Park Apartments, 1070 Washington Avenue, Cypress Village, El Barrio's ArtSpace, 552 Academy and Kelly Street Restoration.

PEOPLE IN THE INDUSTRY

The Federal Housing Finance Agency (FHFA) announced the appointments of Richard B. Hornsby as the agency's chief operating officer (COO) and Jon Greenlee as deputy director of the Division of Enterprise Regulation. Hornsby previously served at the Federal Reserve Bank of San Francisco for 26 years in a variety of senior level management and banking supervision positions. He was most recently the group vice president and division head for the bank's Financial Planning and Control and Corporate Administration divisions. As FHFA's COO, Hornsby will be responsible for the strategic management of the agency's operations and will oversee its administrative and support services. Greenlee joined FHFA from KPMG LLP, where he was the managing director in the financial services regulatory advisory practice. Before joining KPMG, he spent 21 years in significant positions at the Federal Reserve. As FHFA's deputy director of the Division of Enterprise Regulation, Greenlee will be responsible for overseeing the safety and soundness examinations of Fannie Mae and Freddie Mac.

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Local Initiatives Support Corporation (LISC) named Rhonda A. Lewis its new executive director to lead local efforts in Greater Newark, N.J. Lewis most recently served as president and CEO of Bridge Street Development Corporation in Brooklyn, N.Y. In prior work with LISC, Lewis played a critical management role in the development of more than $100 million of community development transactions, the delivery of technical assistance programming, and in building relationships with funders, officials and community stakeholders.

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Michael Lappin announced his intention to retire as president and CEO of the Community Preservation Corporation (CPC), a New York City-based affordable housing development company. To help ensure a smooth transition, Lappin will remain in his current role and continue to lead the New Domino development until CPC's board selects a successor.

BONDS

Gotham Organization Inc. began construction on a $520 million mixed-use housing development in Manhattan, N.Y. The property will span nearly an entire city block and contain more than 1,200 units in four buildings. Amenities will include a sky terrace, 10,000 square feet of indoor recreational space, an interior courtyard, onsite parking and bicycle storage. A total of 682 units will be reserved in three of the buildings for low- and moderate-income households. The development will be financed primarily by tax-exempt bonds issued by the New York State Housing Finance Agency and enhanced by a lending syndicate led by Wells Fargo Bank. As part of the deal's structure, Gotham will contribute $20 million to affordable housing needs elsewhere in Manhattan. The development is expected to create more than 2,900 construction-related jobs and 34 full-time permanent positions. It is slated to open in 2014.

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RED Capital Markets announced that it has created a proprietary tax-exempt bond financing structure and that it has employed the new structure to help finance The Reserve on South Martin, a 60-unit affordable property near Cincinnati, Ohio. Called the Bonds DirectSM structure, the financing mechanism involved a commitment by related entity RED Capital Partners to purchase the project's entire $6 million bond issue on a draw-down basis. The company says that as a result of using this structure, negative arbitrage expenses were significantly reduced for the project sponsor. In addition to bond proceeds, the development also benefitted from $1.2 million in low-income housing tax credit (LIHTC) equity and Neighborhood Stabilization Program funds. Construction is expected to be completed in the fall of 2012.

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The Iowa Finance Authority (IFA) and the Federal Home Loan Bank (FHLB) of Des Moines announced a partnership that has made as much as $50 million in bonds available to multifamily affordable housing property owners in Iowa. IFA says the bonds offered through this partnership provide the agency with a competitive, long-term funding source without the risks associated with traditional variable rate demand obligations. The agency has already used $11.5 million of the bonds to finance two affordable properties. More information is available at www.iowafinanceauthority.gov.