202 Refinancing Alterna0ves. Aileen Gribbin, Forsyth Street Advisors

Transcription

1 202 Refinancing Alterna0ves Aileen Gribbin, Forsyth Street Advisors

2 202 Refinancing Products Overview Option: 221(d)(4) FHA-insured Tax-Exempt Bonds with 4% LIHTC 9% Low Income Housing Tax Credits with 4% LIHTC Rehab Constraints: $17,500 per unit, may be increased to approx. $20,500 per unit by HUD waiver request. At least $17,550 per unit OR the substantial rehab of at least two building systems At least $6,000 per unit (or higher per state requirements) AND at least 20% or Acquisition Cost, up to maximum of 223(f) program limits Developer Fee: 15% of acceptable development costs Not-for-profit owners: 8% of the first $5,000,000 of amount plus 2% of amount above $5,000, % of Acquisition Cost plus 15% of hard and soft costs excluding reserves and developer fee. Uses of Cash Flow Deposit to project reserves or residual receipts Same as 223(f) First to pay deferred developer fee and seller note (if any); then distributable to partnership

3 Pros & Cons FHA- Insured Loans Option: 221(d)(4) FHA-insured Pros: Non-recourse; no guarantor required Able to earn a developer fee Term of up to 35 years Loan term of up to 40 years Able to do more rehab than a 223(f) if needed/ desired Proceeds in excess of development costs will be deposited into the Project s reserve account. Proceeds in excess of development costs will be deposited into the Project s reserve account (for not-for-profit owners) Does not trigger Davis-Bacon No architect or GC requirement Cons: Per-unit cap on the amount of rehab may not fund all needed repairs Does not trigger Davis-Bacon No architect or GC requirement Subject to Davis-Bacon wages and compliance (increases construction costs) At least 1 year to close

4 Pros & Cons Tax- Credit Structures Option: Tax-Exempt Bonds with 4% LIHTC 9% Low Income Housing Tax Credits Pros: Provides no-cost equity for the project Sponsor earns a developer fee Fund substantial operating and replacement reserves Potentially accomplish the most work for the lowest cost of funds (no letter of credit fees as in bond deals, plus no-cost taxcredit equity) Fund substantial operating and replacement reserves with 4% LIHTC Couples the lower interest rates and longer terms of an FHA- with the additional capital yielded by LIHTC investment Cons: Potentially have to wait for and allocation of volume cap bonds Complicated deal structures partner into a partnership structure Requires a guarantor or substantial liquidity reserves Complex LIHTC compliance may require expertise that inhouse Competitive application process adds to uncertainty of timing partner into a partnership structure Requires a guarantor or substantial liquidity reserves Complex LIHTC compliance may require expertise that inhouse Hybrid FHA- and tax-exempt bond structure is new and relatively untested in NYC Most complex structure. Requires a volume-cap allocation, a tax credit investor, an FHA lender, and possibly Letter of Credit bank. partner into a partnership structure Complex LIHTC compliance may require expertise that in-house

5 Program Details Option: 221(d)(4) FHAinsured Tax-Exempt Bonds with 4% LIHTC 9% Low Income Housing Tax Credits with 4% LIHTC Related-Party Sale Required: No No Yes Yes Yes Davis-Bacon Wages: No Yes No No No Loan Characteristics: Permanent from day one with repair escrow Permanent from day one with repair escrow Indicative Rates/ Terms: <5.0%, 35 years, 87% LTV, 1.15 DSC %, 40 years, 90% LTC, 1.11 DSC %, 30 years (typ.), 1.15 DSC %, 30 years, 1.15 DSC <5.0%, 35 years, 87% LTV, 1.15 DSC