1. Tax credit transactions
Greystone Affordable Development

2. Topics 9% Tax Credits 4% Tax Credits / Tax Exempt Bonds
Selecting a Project and Determining Structure
Getting Started

3. 9% Low income housing tax credits
Tax Credit Transactions
9% Low income housing tax credits

4. 9% Low Income Housing Tax Credits
More beneficial to properties
More tax credits generated by rehab
75-90%
Less debt required, results in:
More net cash flow generated by properties
Lower rent levels needed to operate properties
Less risky for investors, meaning higher prices per credits
Less complicated*

5. 9% Low Income Housing Tax Credits Cont.
Limited amount of funding available
Must win credits
Max annual credits: state-by-state cap on the total award one property can receive. Can restrict the amount of equity that can be raised by some larger or scattered site properties.

6. 4% Low income housing tax credits & Tax Exempt bonds
Tax Credit Transactions
4% Low income housing tax credits & Tax Exempt bonds

7. 4% LIHTC & Tax-Exempt Bonds
Bonds are generally non-competitive
Minimum score thresholds are sometimes required
When properties receive bond allocations, tax credits come “as of right,” as long as Section 42 requirements are met:
50% of aggregate basis financed by bonds
95% of bonds pay for “good” costs
No more than 2% of bonds can pay for costs of issuance
No more than 25% of land can be paid by bonds
Rehab Expenditures must exceed 15% of acquisition

8. 4% LIHTC & Tax-Exempt Bonds Cont.
Bonds can be long or short term
Long term – issued by state housing finance agencies
Can potentially have low rates, long amortization terms (30-40 years)
Short term – issued by state housing finance agencies, local jurisdictions, or in some cases private conduits
Require long-term financing
Bonds are often “cash backed”
Results in high bond rating
Low interest rates

9. 4% LIHTC & Tax-Exempt Bonds Cont.
Difficulties of bond transactions:
High Costs of Issuance
Equity generally only covers 20-35% of total development costs
High debt required
Requires a large spread between income and expenses
Some properties can’t support debt to cover 65-80% of their budget, and require more equity than the market will provide based on their budget

10. SELECTING A PROJECT AND DETERMINING STRUCTURE
Tax Credit Transactions
SELECTING A PROJECT AND DETERMINING STRUCTURE

11. Selecting a Project Evaluate all potential properties
Are there any with unique characteristics?
What properties need the most rehab?
Income / Income potential
Existing Ownership Structures

12. Selecting a Project Useful Resources / Important Information:
Income limits
Market data (Rents, cap rates)
Census Tract information (QCTs / DDAs)
Historical data
Operating budgets – Fin1700
Physical Vacancy – PRJS4200
RUP Expiration Date – PRJ1100
QAP and other State Agency Documents

13. Determining Structure
Potential 9% Deals:
Scoring is Critical
Potential 4% Deals:
Opportunities for income growth
Qualify for basis boost
Moderate rehab needs*
Other Opportunities
Refinance / Recapitalization & Light rehab

14. Determining Structure
Increasing feasibility of bond transactions – “Bridging the Gap”
Soft debt
Grants
Energy Rebates
Excess Reserves
Seller Notes
Deferred Developer Fees

15. Determining Structure
Increasing feasibility of bond transactions – The Pooled Transaction
Multiple properties under one bond issuance
Fixed costs spread between properties
Equity is raised for all properties as one investment
Allows properties to balance out each other’s equity prices, allowing some properties that wouldn’t otherwise work as a bond deal to become feasible
Bulk discount on debt – more debt in the deal can result in lower interest rates

16. Getting Started Transfer Analysis – Preliminary Assessment Tool
Build your budget
Negotiate sales price (critical cost #1)
Estimate hard costs (critical cost #2)
Legal and professional fees
Financing costs
QAP / Agency fees & required costs
Build financing assumptions:
Debt
Equity

17. Contact Information
Greystone Affordable Development 4025 Lake Boone Trail, Suite 209 Raleigh, NC (919)