Love Funding, Washington, D.C., closed its first transactions under a HUD program that expedites processing for acquisition or refinance of affordable apartments with Low Income Housing Tax Credits.
James Vanar, senior director of Love Funding’s Los Angeles office, used the new program to secure two loans totaling $21.7 million to fund acquisition of Coral Wood Court Apartments in Reseda, Calif. and Orangewood Court Apartments in Sherman Oaks, Calif. WNC & Assoc., Irvine, Calif., purchased both properties.
HUD introduced the LIHTC pilot program in select markets in 2012 to help preserve affordable apartment properties; it expanded the program nationwide this year. The program accelerates HUD application processing and increases the allowance for property renovation and repairs.
Both Coral Wood Court and Orangewood Court set aside 10 percent of units for households with incomes at or below 50 percent of area media income, with the rest of the units reserved for those at or below 60 percent of AMI. HUD’s pilot program also applies to projects with Section 8 Housing Assistance Plan contracts.
Vanar said HUD has dedicated significant energy and resources to this program, “and the market is responding in force,” he said, adding that the Los Angeles HUD office alone currently has 17 other LIHTC pilot program transactions pending.
“In this instance, HUD’s Los Angeles office took only 25 business days to process the applications and commit to insure,” Vanar said. “Added up, total application handling time between Love Funding and HUD came in just over four months, less than half the time of a typical HUD construction loan.”
The transactions also permitted WNC & Assoc. to re-syndicate 4 percent Low Income Housing Tax Credits on the two transactions through a relatively new financing structure that combines short-term, cash-collateralized bonds with the sale of taxable Ginnie Mae securities.
“We are seeing a lot of interest from the affordable multifamily community in this financial structure,” said Kent Neumann, a partner with Eichner Norris and Neumann PLLC, Washington, D.C., the law firm that pioneered the structure. “[It] allows the developer to benefit from the historically low taxable interest rates currently available in the capital markets while significantly reducing the amount of negative arbitrage typically associated with these transactions.”
Vanar said Denise Troeschel, chief underwriter with Love Funding, performed underwriting for both transactions.
Source: MBA NewsLink