LIHTC Gets Its Mojo Back – Will It Last? PAGE 14 NCSHA Updates Recommended Practices PAGE 4 Project Pioneers the Way for Disability Movement PAGE 33 Historic Credit Community Buoyed By Boardwalk Decision PAGE 31 TaxCredit Advisor February 2011 | Volume XXIII No. 2 50 West Broadway South Boston, Massachusetts Developed by John M. Corcoran & Co. LLC and The Brennan Group Photo by Rixon Photography PUBLISHED IN ASSOCIATION WITH THE NATIONAL HOUSING & REHABILITATION ASSOCIATION
Transcript
LIHTC Gets Its Mojo Back –Will It Last?PAGE 14 NCSHA Updates
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I S S U E T H E M E : Tax Credit Equity
14 LIHTC Market Gets Its Mojo Back: Industry Savors RecoveryBut Nervous About 2011
16 Corporate Tax Credit Fund Watch
32 Historic, New Markets Credit Equity Markets Improve
Low-Income Housing Tax Credit
4 NCSHA Revises Recommended Practices for LIHTC Underwriting, Allocations
12 Op-Ed, Will Cooper Jr.: Where Do We Go From Here?
28 For Bob Greer and The Michaels Organization, It Was a Very Good Year
Other6 Tax Act Draws Mixed Reactions; Advocates Mull ‘Asks’ for 2011
Green Building2 The Focus in Austin is Green
Historic Rehabilitation
Historic Boardwalk Case:Tax Court Rules Against IRS
New Markets Tax Credit33 A New Approach to Disability: Sparkling New Facility in
California Raises Visibility of Movement
Columns
Inside front coverThom Amdur: New DevelopmentsCold Outside But Heating Up In Washington
24 David Smith: The guru is InPredictions for 2011
Departments13 In Brief
26 NH&RA News
36 State Roundup
36 People
37 Capital Briefs
Foundation forInnovation:MacArthur Supports New Enhanced LIHTCPreservation Fund
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2 Tax Credit Advisor | February 2011 www.housingonline.com
The Focus in Austin Is Green
Rendering of M Station, Austin, TexasRendering by Sunshine Mathon
programs for children in the propertyand the surrounding neighborhood. Italso provides adult education classes –anything from ESL to financial literacy tohome buying classes.”
Green FeaturesM Station will meet the standards of Enterprise
Green Communities, LEED Platinum, and the AustinEnergy Green Building Program.
Green elements will include solar electric panels togenerate electricity for the development’s child carebuilding; solar hot water panels to supply 60% of theresidents’ hot water needs; Energy Star-rated appli-ances and light fixtures (compact fluorescent lights, of
the pin type that can’t be replaced withordinary light bulbs); variable refrigerantflow, super high-efficiency HVAC systemsthat each serve an entire building; hybridspray insulation in the exterior walls;extremely low-flow water fixtures; nativeplants; and high-efficiency landscape irriga-tion equipment.
“The modeling we’ve done has [elec-tric, gas, water] utility costs at M Stationbeing roughly 50% of what they would be
at a standard new construction code-built property,”says Mathon.
In addition to housing, Foundation Communitieswill also provide or arrange services for residents, suchas after-school programs for children and financial literacy classes. M Station will have an on-site child carecenter operated by a long-established local nonprofit.
Retrofit JobsBesides new construction, Foundation Communities
has retrofitted a number of its existing affordable multi-family rental properties to reduce energy and watercosts and to make them healthier for residents.
Common steps have included better insulation,replacing old air conditioning equipment, installingsolar screens, putting in Energy Star-rated appliances,and replacing all water fixtures with low-flow models.
In addition, Foundation Communities in retrofitstries to take out as much existing carpeting as possibleand to replace this with ceramic tiles, to improve airquality for residents, reduce respiratory problems, andcut maintenance costs.
In Austin, Texas, Foundation Communities is develop-ing a 150-unit low-income housing tax credit projectthat will have many green features, and is retrofitting
its existing apartment properties to make them moreenergy efficient.
The new LIHTC project, M Station, will be a quarter-mile from the Martin Luther King Station on the newcommuter rail line that opened last spring, and is locat-ed in a city-designated transit-oriented district.
“We’re a nonprofit affordable housing providerbased here in Austin,” says Sunshine Mathon, Design +Development Director with Foundation Communities.“The majority of our properties are here in Austin but, wedo have three properties in the Dallas-Fort Worth areaas well. All told, we own and operate in the ballpark of2,200, soon about 2,500, rental apartments.”
M Station, located in the central eastsection of Austin, will be the 16th property(the 5th LIHTC-funded project) developedby the Foundation Communities. It will con-sist of two, three-story buildings containing12 apartments each connected by walkwaysto two, four-story buildings. Site work hasbegun and an opening is expected this summer. Apartments will be one-bedroom(32 units), two-bedroom (60), and three-bed-room (58), ranging from 712 to 1,200 square feet. All but10 units will be rented to households at or below 60% ofthe area median income (AMI), with 10% of the unitsaffordable to tenants at 30% of AMI.
The site was once used by a concrete manufactur-ing plant.
Bank of America Merrill Lynch is providing construc-tion and permanent financing, and is also the equityinvestor, purchasing the federal housing and solar taxcredits. Other funding sources include multiple grantsplus local general obligation bond proceeds used tofund the acquisition of the site.
New Construction Project“It’s our first new construction project in about a
decade,” says Mathon. “The majority of our projects arerehabs. One of the bylines of our organization is ‘creatinghousing where families succeed.’ So we don’t simplyjust provide affordable housing. We typically embednumerous services in each of our multifamily properties.The most common manifestation is a learning centerwhich provides free after-school programs, free summer
Green Building
www.housingonline.com February 2011 | Tax Credit Advisor 3
Sunshine Mathon
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‘The modeling we’vedone has [electric,gas, water] utilitycosts at M Stationbeing roughly 50% of what they would
be at a standard new construction
code-built property.’
Low-Income Housing Tax Credit
4 Tax Credit Advisor | February 2011 www.housingonline.com
NCSHA Revises Recommended Practices for LIHTC Underwriting, Allocations
The National Council of State Housing Agencies(NCSHA) has issued revised recommended prac-tices for low-income housing tax credit (LIHTC)
underwriting and allocations by state housing creditagencies (HCAs).
NCSHA’s recommended practices were originallyissued in 1993 and revised in 1998 and 2003. The recom-mended practices are voluntary standards that stateHCAs are urged to incorporate in their LIHTC programstandards and procedures for underwriting proposedprojects seeking housing credits, and for deciding howmuch credit to allocate to projects. The latest set of so-called “best practices,” contained in a new report, wasadopted recently by NCSHA’s Board of Directors.
“This was a pretty broad review of all of the [2003]recommended practices,” said NCSHA official GarthRieman. "For some of them it really was a close look aftermore than 10 years.” He added, “We wanted to considermany of the suggestions that many people in the industryhave put forward, either formally or informally, over thelast few years, and to reflect recent legislation.”
The report contains recommendations in 23 areas ofLIHTC underwriting and allocating. Notable modificationswere made to existing recommended practices on:
• Per unit cost limits, to delete the reference to the HUD Section 221(d)(3) program’s limits as a bench-mark, and urging agencies to use their credit allocat-ing experience to judge the reasonableness of a project’s proposed development costs.
• Verification of expenditures, to encourage state agencies to issue IRS Form 8609 in a timely fashion,and to update the model 10% test and final cost cer-tification letters to follow an audit standard ratherthan examination standard.
• Operating expenses, to recommend use of a 7% vacancy rate projection in LIHTC underwriting.Agencies are encouraged to consider operatingexpense data from syndicators, investors, lenders,
and their own portfolios, and urged to establish andmaintain their own operating cost databases.
• Market analysis, to expand the minimum recom-mended components for a market study.
• Development and management experience, to define the members of the development team, urgeagencies to collect information on the past experi-ence of such teams, and to encourage inexperiencedsponsors to partner or joint venture with more experienced sponsors.
• Application procedures, to recommend that HCAs visit the site of proposed projects (or rely on third-party site visit reports) at the application stage wherever possible.
New PracticesNewly added recommended practices encourage
HCAs to:
• Set standards for use of the state-designated 30% boost in eligible basis allowed by 2008 legislation.
• Establish asset management procedures for projects assisted by the Tax Credit Assistance Program andSection 1602 exchange program.
• Analyze recent experience in developing rural housing and supportive housing with the housingcredit and consider policies to ensure that the needfor these types of housing is adequately addressed.
• Assess their housing credit policies encouraging green building and sustainable development, and tocontinue innovations in this area.
• Evaluate the impact of their policies on projects reaching the end of 15 years.
www.housingonline.com February 2011 | Tax Credit Advisor 5
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Tax Act Draws Mixed Reactions; Tax CreditAdvocates Mull Decisions on ‘Asks’ in 2011
6 Tax Credit Advisor | February 2011 www.housingonline.com
Tax credit industry participants had mixed reac-tions to provisions in the major tax bill (H.R. 4853)signed into law by President Obama on
December 17 (P.L. 111-312).Meanwhile, as January unfolded, advocates for the
federal low-income housing, historic rehabilitation, andnew markets tax credit programs were trying to decidewhich specific legislative changes – or “asks” – to seekfrom the new 112th Congress.
Tax Act ProvisionsTax credit program stakeholders were pleased with
tax act provisions extending:
• The new markets tax credit (NMTC) program for two years, through December 31, 2011, and providing$3.5 billion in additional annual allocation authorityfor 2010 and 2011. With the extension in hand, theCommunity Development Financial Institutions (CDFI)Fund can now announce NMTC allocation awardsfrom its 2010 funding round – an event expected soon.
• The placed in service deadline for rental housing projects receiving Gulf Opportunity (GO) Zone hous-ing tax credits, by one year, through 2011.
• The higher rehabilitation tax credit rates of 26% for historic buildings and 13% for old non-historic build-
ings, for rehabilitation expenditures paid or incurredin 2010 or 2011 for projects in the GO Zone.
• The Section 1603 program that allows taxpayers to opt for a federal cash grant in lieu of claiming feder-al renewable energy investment tax credits, by oneyear, through 2011.
The act also extended through 2011 bonus deprecia-tion for GO Zone property, expensing of remediationcosts for brownfields, tax incentives for empowermentzones, favorable tax treatment for charitable donationsof historic preservation easements, and the ability toissue special tax-exempt GO Zone bonds to finance resi-dential and non-residential property. It also continued100% expensing for property placed in service afterSeptember 2010 and before 2012.
The final bill, though, did not contain extensions ofthe popular Section 1602 LIHTC exchange and BuildAmerica Bond programs, nor provide any initial dollarsfor the National Affordable Housing Trust Fund.
Reaction Is Mixed“We’re very pleased that the [NMTC] program was
extended and it was extended for two years,” said DavidTrevisani of the National Development Council, a com-munity development entity (CDE) that had no more
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Tax Credit Advisor
8 Tax Credit Advisor | February 2011 www.housingonline.com
NMTC allocation authority left to commit to new proj-ects, and applied for $150 million in the 2010 fundinground. “[We’re] obviously not thrilled that the programwas reduced from the proposed $5 billion [in annualallocation authority] to $3.5 billion…There’s a need outthere and we’d like to see more authority, not less. Butwe’re pleased that the program was extended.”
Peter Lawrence of EnterpriseCommunity Partners, Inc., which operatesa CDE and has an affiliate that syndicatesnew markets and housing credits, wasalso disappointed that the final bill omit-ted a provision – in previous bills – toallow NMTC investments made during acertain time period to offset federal alternative mini-mum tax (AMT) liability.
Ira Weinstein, a principal with Reznick Group, sug-gested that the forthcoming release of additional 2010NMTC allocations will be heartily welcomed. “Folks thatwere trying to find allocation very recently just hit thewall – couldn’t find anything,” he said.
John Leith-Tetrault, of the National Trust CommunityInvestment Corporation, which has a CDE and syndi-cates new markets and historic credits, said the NMTCextension will also boost the historic credit market.“There’s so much twinning [in projects] of historic andnew markets credits that any failure to extend the newmarkets credit would definitely have had an [adverse]impact on demand for the historic credit.”
Leith-Tetrault also lauded the extension of theenhanced credit rate of 26% for historic rehab projectsnow under construction in the GO Zone, saying this willgive them “extra breathing room” and more financialcushion. He noted, for instance, that the 26% credit hasprompted an increase in historic rehab projects in NewOrleans. But he said that many projects here now under-way – before the latest extension – were planning on a
26% credit for expenses paid orincurred before the previous deadlineand the regular 20% rate for subse-quent expenditures. The extensionmeans some extra tax credit equity forthese jobs.
Milton Bailey, president of theLouisiana Housing Finance Agency (LHFA), reacted with“a mixture of appreciation and disappointment.”
Legislation, continued from page 6
Legislation, continued on page 10
He welcomed the one-year extension of the GOZone LIHTC placed in service deadline, but asserted thata full two-year extension is needed to give projects timeto get completed.
Sen. Mary Landrieu (D-La.), in a colloquy on the Senatefloor on December 14, secured a commitment from SenateFinance Committee Chairman Max Baucus (D-Mont.) andSen. Jon Kyl (R-Ariz.) to include an extension of the GOZone LIHTC placed-in-service deadline through 2012 innew tax legislation as soon as possible in 2011.
Bailey was also disappointed by the failure to extendthe Section 1602 exchange, highly valuable and needed inLouisiana. And he was bothered that Louisiana and otherGulf states, unfairly, haven’t been permitted to exchangeGO Zone housing credits for cash grants under the 1602program. He hoped that the new Congress or the ObamaAdministration will take action to allow this. Bailey alsowants Congress to further extend the GO Zone LIHTCplaced-in-service deadline, and renew the regular exchangeprogram. LIHTC has delayed the rollout of its 2011 LIHTCprogram and application cycle because of uncertaintiesabout whether any of these remedies will come about.
LHFA has awarded about $176 million in GO Zonehousing credits to 167 projects. Of this, Bailey said proj-ects earmarked $30 million of these credits are now “inlimbo,” their viability jeopardized, because of theirinability to exchange GO Zone credits and the lack of alonger placed-in-service deadline.
The National Council of State Housing Agencies(NCSHA), whose member agencies allocate housingcredits and issue tax-exempt housing bonds, had somedisappointments as well.
“We had a number of [legislative] priorities in the hous-ing bond and [housing] credit area that were not includedin the final bill,” said NCSHA official Garth Rieman. “Wewere hoping certainly that the extension of the exchangeprogram, as well as some additional provisions, wouldhave been included in the final bill. And they weren’t.”
As January unfolded, tax credit advocacy groups wereconferring with their members to try to decide which specific legislative changes they will seek from the 112thCongress, particularly the tax-writing committees. TheHouse Ways and Means Committee is now GOP-con-trolled with a new chairman, Rep. Dave Camp (R-Mich.).
Enterprise’s Peter Lawrence, a coordinator of theumbrella coalition organization Affordable RentalHousing A.C.T.I.O.N., which developed and lobbied for a
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Tax Credit Advisor
set to revert to a fluctuating monthly rate after 2013.NMTC advocates are expected to renew their push
for a multi-year or even permanent extension of the newmarkets program, and for the AMT relief proposal.
Leith-Tetrault said the Historic Tax Credit Coalitionhadn’t yet decided on the specific legislative amendmentsto the historic credit that it will seek this year, but expect-ed fewer proposed changes than what the Coalitionpushed for in the last Congress. “What I think the direc-tion we’re headed for is a more focused bill, fewer provi-sions, and provisions that have the most potential for jobcreation and targeted economic impact.”
With Republicans in control of the House, many newlawmakers, a deficit-cutting mindset, and possible taxreform, tax credit advocates could be facing some head-winds this year. Many advocates says the critical first taskwill be to educate the new members of Congress – andreiterate to veterans – the value, benefits, and success todate of the housing, new markets, and historic creditprograms, and to make them aware of the credit projectsin their districts and states.
“Our Priority No. 1 is to assist to educate this newCongress,” says Lawrence.
10 Tax Credit Advisor | February 2011 www.housingonline.com
few industry consensus LIHTC proposals in the lastCongress, said on January 6 that the group had not yetreached agreement on specific legislative requests forthis year, and that no proposals – including prior ones –had been ruled out. He anticipated consensus soon.
In the last Congress, Rental A.C.T.I.O.N. pushed forextension of the 1602 exchange program and a five-yearcarryback period for housing credits, and for modifyingthe passive loss rules to enable taxpayers in certain busi-ness entities, such as community banks organized as Scorporations, to utilize the housing credit.
NCSHA has determined its 2011 legislative priorities.Among these, Rieman said, are to pursue reinstatement– extension – of the Section 1602 exchange program andthe New Issue Bond Program.
In comments in interviews and on panels at anNCSHA housing credit conference in Washington, D.C. inearly January, several LIHTC industry participants said thatadvocates need to start early to lobby Congress toextend the current “floor” on the rate for the 9% housingcredit. The current floor of 9%, set by 2008 legislation, is
Legislation, continued from page 8
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Low-Income Housing Tax Credit
12 Tax Credit Advisor | February 2011 www.housingonline.com
As the low-income housing tax credit (LIHTC)program enters its 25th year, there are manyreasons to celebrate. The LIHTC program, the
nation’s largest and most successful federal affordablehousing program, has had a magical run since 1986. Yetthe winds of fiscal and political change are upon it, andboth the success and support that the LIHTC programhas long enjoyed could easily be eclipsed by this change.
The program was created by the bipartisan TaxReform Act of 1986 – enacted under a RepublicanPresident and Senate and a Democratic House ofRepresentatives. Unlike previous direct federally-fundedprograms, the LIHTC program was designed byCongress to bring the private and public sectors togeth-er in partnership to build and maintain quality affordablerental housing. Few can argue with the LIHTC program’ssuccesses to date: the construction and rehabilitation ofmore than two million homes for families and seniors ofmodest means; a national portfolio with a lower foreclo-sure rate than virtually every other real estate asset class;and, at least until now, the blessing of Congress.
The Challenges AheadYou don’t have to be a registered lobbyist to see
the fiscal and political challenges facing Congress andPresident Obama. According to the December reportreleased by the President’s bipartisan NationalCommission on Fiscal Responsibility and Reform, theUnited States is on an unsustainable fiscal path. Citing afederal debt that is too high, the Commission has rec-ommended reducing the federal deficit through a com-bination of aggressive cuts in federal spending and taxexpenditures and increases in tax revenues (manythrough tax reform). In pre-November polls, votersvoiced concerns about the nation’s financial woes. In aspring 2010 Gallup Poll, respondents ranked the federaldebt and terrorism as the most worrisome threats to thefuture well being of the U.S.
Since its bipartisan beginning, the LIHTC programhas enjoyed support from both sides of the aisle inCongress. But in this deficit-plagued environment, nogovernment funded program or tax incentive can beviewed as permanent. Everything may be subject to
careful scrutiny, and even programs andincentives that have had strong biparti-san support historically could becomevictims to today’s fiscal restraint and suf-fer severe reduction or even elimination.The LIHTC program is no exception.
The recent fate of the Section 1602tax credit exchange program – Congress decided not toextend it – should be a clear message to the LIHTCindustry: Don’t expect more Band-Aid fixes and, moreimportantly, don’t take political support for the housingcredit program as a given. After passage in Decemberof the bill temporarily extending the Bush-era tax cuts,Rep. Dave Camp (R-Mich.) issued a press releaseannouncing that the exchange program and three otherstimulus-born programs had been “TERMINATED.” Inthe release, Rep. Camp, now the Chairman of the Waysand Means Committee in the Republican-controlledHouse, described the exchange program as further sub-sidizing of “frequently excessive spending practices”.
Can Tax Reform Take Away What Tax Reform Gave?The federal deficit isn’t the only shadow looming
over the LIHTC program; tax reform is another. The TaxReform Act of 1986 was one of the most significantpieces of federal tax legislation ever passed. Fortunately,at that time, Congress chose not only to protect taxincentives for investments in affordable rental housing,but also enhanced them by creating the LIHTC pro-gram. The drumbeats of tax reform are upon us onceagain, and this time there is no assurance that Congresswill be as friendly to affordable housing as it was in 1986.
Both Chairman Camp and Senate FinanceCommittee Chairman Max Baucus (D-Mont.) have or willbe holding hearings on tax reform; both have publiclyexpressed the need for fundamental tax reform. ThePresident’s National Commission recommends eliminat-ing most federal income tax expenditures, including taxcredits, and lowering individual rates. The ObamaAdministration has been meeting with private industry toexplore the matter. Despite polarization in Washington,many Democratic and Republican lawmakers seem to
Where Do We Go From Here?By Will Cooper Jr., President and CEO, WNC & Associates, Inc.
Will Cooper Jr.
O P-E D
Op-Ed, continued on page 13
feel that the current tax code is unfair, complicated, andinefficient.
It is not clear if comprehensive tax reform will occurbefore the next general election in November 2012.What is clear, however, is the increasing momentum inWashington to simplify the tax code. Like it or not, itcould be something as fundamental as tax reform thatbrings an end to the LIHTC program.
So where do we go from here?We in the LIHTC industry must not assume a
continuation of the widespread and bipartisan politicalsupport that the LIHTC program has enjoyed since itscreation. Doing so in the current fiscal and political environment could likely result in the program’s demise.Where we need to go is go back to the basics: to edu-cate and re-educate Congress on the LIHTC programand its merits; and why this private-public partnershiphas been – and will continue to be – the most cost-effec-tive method for building and maintaining quality, afford-able housing for persons and families of modest means.
Yes, the LIHTC program has had many successesover the last 25 years. Yet we cannot celebrate beforewe educate.
Op-Ed, continued from page 12
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Low-Income Housing Tax Credit
www.housingonline.com February 2011 | Tax Credit Advisor 13
In BriefNew Tax Credit Syndication Firm Formed
The Churchill Companies and Stateside Capital,LLC, recently announced the formation of ChurchillStateside Group (CSG), which will serve the affordablehousing industry by sponsoring tax credit investmentfunds for institutional investors and offering financingto developers of multifamily housing and renewableenergy installations. Clearwater, Fla.-based CSG is ledby Keith Gloeckl, who will be president and CEO.Gloeckl is founder of The Churchill Companies andserved as president and COO of The MidlandCompanies during 1988-99. Christopher Martin willlead CSG’s new developer originations group as exec-utive vice president. TCA
14 Tax Credit Advisor | February 2011 www.housingonline.com
Equity, continued on page 15
LIHTC Market Gets Its Mojo Back
Industry Savors Recovery But Nervous About 2011
As 2011 begins, the rejuvenated low-incomehousing tax credit (LIHTC) equity market is inmuch better shape than the terrifying roller
coaster market downturn of 2008-2009, when someindustry players white-knuckled along just to survive.
Today, there is plenty of equity that is available inmore places; more investors and active syndicators; andhigher credit prices for developers, making more pro-posed projects pencil out.
But will this rosy environment continue?In interviews and in comments on panels at an early
January conference held by the National Council ofState Housing Agencies, LIHTC industry officials weregenerally optimistic. But a host of factors will shape themarket, including how far tax credit yields to investorscontinue to fall, actions by the new 112th Congress ondeficit reduction and tax reform, and other areas.
A Great Year CompletedThere’s no argument that 2010 was a
good one for the industry.“It started off slowly, and we had
concerns as everybody did, “said JeffGoldstein of syndicator Boston Capital.“But as the year went on things reallyimproved, and ultimately improved dra-matically.”
Industry sage Fred Copeman, of Reznick Group,estimated that $7.5 to $8 billion in total LIHTC equity
was raised in 2010, from multi-investor fund, proprietaryfund, guaranteed, and direct investments by investors,compared to about $4.5 billion in 2009 and a peak $9billion in 2006.
“In contrast to the two years before itwas a wonderful year,” said Copeman,“because we saw the return of the insur-ance company investors in fairly largenumbers, both in terms of the number ofcompanies and the amount of capitalthat they are authorized to invest.”
Many syndicators raised more LIHTC equity in 2010than in 2009. 2010 raises included The Richman Group,$922 million; Enterprise Community Investment, Inc.,just under $825 million; National Equity Fund, Inc., over$800 million (a record); Alliant Capital, $667 million; PNCReal Estate Tax Credit Capital, $652 million (a record);Boston Capital, about $560 million; RBC Capital Markets-Tax Credit Equity Group, about $525 million; RaymondJames Tax Credit Funds, $510 million; WNC & Associates,Inc., a bit above $200 million (for fiscal year ending August31, 2010); City Real Estate Advisors, Inc., just under $180million; and Stratford Capital Group, over $125 million.
As an example of investor demand, PNC Real EstateTax Credit Capital Group last November closed a record$256 million national multi-investor fund, yielding a bitover 10%, which was targeted at $150 million when itcame out. “It was oversubscribed within three business
Fred Copeman
Jeff Goldstein
www.housingonline.com February 2011 | Tax Credit Advisor 15
Equity, continued from page 14
Equity, continued on page 17
days,” said Todd Crow.Two long-time syndicators
returned to the market in 2010 aftergetting recapitalized. BostonFinancial Investment Managementraised $85 million last year, said GregJudge. Centerline Capital Grouprolled out its first multi-investor fund in a while in 2010,kept it open, expanded it as investor demand grewwhile keeping the yield at 9.5%, and expects to close it
at $120 million by early February, saidAndrew Weil. The fund has eightinvestors: one bank for $4 million andseven insurance companies providingthe rest.
Another sign of the LIHTC market’srevived health is the recent entry of
some new, smaller syndicators, such as ChurchillStateside Group (see p. 13).
Last year saw hefty investment activity by some majorcorporate investors. JPMorgan Capital Corporation, forexample, made more than $700 million in new non-guaranteed LIHTC investment commitments in 2010,more than $600 million of it proprietary and direct,reported Patrick Nash. Bank of America Merrill Lynch’snew LIHTC investment commitments exceeded $600million, said David Leopold. Mandy Kozminske said U.S.Bancorp Community Development Corporation closedmore than $1 billion in investments generating federalhousing, historic rehabilitation, new markets, and renew-able energy tax credits.
Executives cited 2011 LIHTC equity volume targetsat PNC, $700 million; Enterprise, Boston Capital, andNEF, around $650 million each; RBC, $500-$600 million;Centerline, $400-500 million; WNC, $300-325 million;and Boston Financial, around $200 million.
Last year saw growth in the number and size ofmulti-investor funds – popular with new investors – thatis continuing. Some syndicators with national multi-investor funds now on the street include:
• Boston Capital, with a $225-250 million fund expected to close in March with a projected yield toinvestors of 8%. This follows a record $305 millionfund yielding 9.75% that closed last October.
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16 Tax Credit Advisor | February 2011 www.housingonline.com
• City Real Estate Advisors (CREA), with a $100-110 million fund closing by early February. Tony Bertoldisaid early investors will receive a yield of 9.5%; laterinvestors, 10.25%.
• Boston Financial, which anticipates a closing shortly for additional investors in a fund that maywind up at or above $100 million. Four investorswere closed in during late 2010 for $85 million. Theyield varies depending on when investors wereadmitted; the fund’s latest piece is being marketedat 8.25%.
• WNC & Associates, with a $100-150 million national fund yielding 9%,after a record $153 million fund in2010 that yielded 11%. WNC is alsomarketing a $70 million multi-investor fund (California propertiesonly) that should close February 1,and may come out with a New York fund this spring,said Michael Gaber. WNC is also marketing a $15million “retail” fund aimed at individual investors – ararity these days – after resurrecting this productline in 2010 with a $6 million fund.
First Sterling Financial, Inc. soon hopes to close itsfirst multi-investor fund in years. “We’re trying to dothem in tranches, I would say, of about $50 million,” saidVictor Sostar. Stratford Capital Group is rolling out anew $75-100 million multi-investor fund in January, fol-
lowing its first national multi-investorfund in 2010 that yielded above 12%,said Benjamin Mottola. PNC expects toroll out a $125-150 million nationalmulti-investor fund in February. BostonFinancial expects to begin marketing aroughly $100 million national fund with
a yield probably around 8%, said Judge.Syndicators and sponsors reported strong current
investor demand, but noted that investors are still most-ly from the financial services field – CRA-motivatedbanks plus insurance companies. There are some excep-tions – non-financial “economic investors” such asGoogle, Berkshire Hathaway, Verizon, Kroger, and TheSherwin-Williams Company.
RBC Capital Markets’ Tax Credit Equity Group isclosing a fund in January with a grocery store chain, saidRobert Spangler. Last year RBC raised equity exclusivelyfrom banks and insurance companies. Mottola also notedthat Stratford had a grocery store chain in its 2010 multifund. Spangler said RBC had more than a dozen newinvestors in 2010 – some new to LIHTC plus veterans.
Investors continue to make LIHTC investmentsalmost entirely through multi-investor and proprietaryfunds and direct investments and little through newlyoriginated guaranteed investments, largely because of adearth of willing, top-rated guarantors.
Copeman suggested that the guaranteed LIHTCproduct market is a large unmet need, estimating atleast $2 billion in potential demand for such productfrom companies that will not invest in housing creditsother than through a guaranteed execution.
Bertoldi noted CREA is trying to structure a guaran-teed fund investing in California LIHTC properties thatwould have triple-A rated Rabobank International, head-quartered in New York, as the guarantor. “We have anincredible amount of demand for the guaranteed product,” he said. “But we need to get the product inplace first.”
Outlook for Yields, PricesSources generally said that housing credit yields to
investors are still falling, and credit prices to developersare still rising, in spite of a rapid and sharp change inboth since late last summer.
Yields on new multi-investor funds, well north of10% in 2010, have fallen below this threshold on manynew funds and have even undercut 8% in some cases.
“Yields are all over the board…It’s the widest rang-ing of yields for multi funds that I’ve ever seen in themarket,” said Boston Financial’s Judge.
In the latest edition of Corporate Tax Credit FundWatch, prepared for Tax Credit Advisor by Ernst &Young LLP, syndicators reported projected yields on 11current multi-investor funds ranging from 7.50% to10.25%. The average net tax credit price reported forspecified properties in the funds ranged from 73 to 82cents per credit dollar. (See p. 16 for Fund Watch chart.)
Sources said competition by syndicators and directinvestors for projects with new credit allocations is robustin most markets, with multiple bids common even in sec-ondary and “non-CRA” markets largely ignored by equity
Low-Income Housing Tax Credit
www.housingonline.com February 2011 | Tax Credit Advisor 17
Equity, continued from page 15
Equity, continued on page 18
Michael Gaber
Benjamin Mottola
Pho
to:D
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than a few investors, particularly recententrants, to scale back or stop theirLIHTC investing. “I think we’ve got tobe careful as an industry to not priceourselves out of the market,” said RBC’sSpangler. Several sources also frettedabout possible investor retreat if there issignificant erosion in deal terms to developers.
Leila Ahmadifar, of major LIHTC investor CitiCommunity Capital, and current president of theAffordable Housing Investors Council, expressed con-cern that the risk-adjusted credit pricing of deals thatoccurred in 2009 went away in 2010 as investor dollarsflooded into the market. “I would like to get back to riskadjustment in pricing,” she said.
Other factors that could influence the course andcondition of the LIHTC market in 2011 include:
• Interest Rates. Sources said a rise in interest rates would boost yields on alternative investments andnarrow the current yield advantage of LIHTC invest-ments, making the former more attractive toinvestors.
• Washington. The November election results, putting Republicans in control of the House ofRepresentatives and reducing the influence of someDemocratic LIHTC champions, combined with cur-rent jawboning about the need to slash the federalbudget deficit, throws ominous clouds on the hori-zon. Lawmakers, with President Obama on board atleast in principle, may well cut federal spending,including for housing, which would affect LIHTCprojects. In addition, Congress appears likely totake a stab at comprehensive tax reform legislation,which could put tax credit programs (includingLIHTCs) at risk, even as advocates try to secure legislative improvements. And then there’s likelyhousing finance reform legislation – deciding thefate of debt sources Fannie Mae and Freddie Macand other possible far-reaching changes.
• No TCAP, Exchange. State housing credit agencies won’t be making any new funding awards to proj-ects in 2011 from the Tax Credit Assistance Programand Section 1602 exchange program. Some expectthat one impact of no exchange program will bemore new deals with 9% credit allocations. Some
Low-Income Housing Tax Credit
18 Tax Credit Advisor | February 2011 www.housingonline.com
providers in the past. “Everything has multiple bids onit,” said WNC’s Gaber. Reasons include more investorcapital and fewer projects with new credit allocations –the latter caused by the Section 1602 exchange programin 2010, and currently by the seasonal drop-off in newcredit awards. “Credit allocations haven’t come out yet,”said Raoul Moore of Enterprise Community Investment,so new deals “won’t be seen for a few months.”
As for typical current credit pricing to developers fordeals going into multi-investor funds, Moore said, “If it’sa non-CRA market, high 70s, low 80s. If you’re in a highlycontested CRA market (e.g., New York City, Los Angeles,San Francisco), you’re going to see high 80s, low 90s.”Several others suggested prices are even higher in thehot CRA markets, with some deals even fetching abovea dollar. Judge said South Florida and Washington, D.C.
are also strong.“Pressure on pricing in the market
has been unprecedented,” saidBertoldi.
Developers are happy about higherpricing and more equity in the market.
“We’re seeing some really competi-tive numbers. We’re blessed to be in a geographywhere investors want to be,” says Lisa Gomez, of L+MDevelopment Partners, Inc., which develops LIHTC proj-ects (9%, 4%) mostly in the New York City metro area andhas a pipeline of 800-1,000 units for 2011. The companygets its equity now almost entirely from direct investors,while during pre-late 2008 it was 50/50 between syndica-tors and direct investors. The latter include major moneycity banks; Goldman Sachs has also partnered on someprojects on both the equity and debt side.
Mark Sween, of Plymouth, Minn.-based DominiumDevelopment & Acquisition, LLC, said his firm has seena dramatic increase in pricing for its Midwest deals froma year ago, and is getting multiple bids. It gets equityfrom both syndicators and direct investors.
What’s Ahead for 2011?But while happy about the LIHTC market today, a
number of industry participants are nervous about 2011.Some worry about possible “irrational exuberance” – ofcredit prices, fueled by lots of equity dollars chasingdeals, getting pushed up significantly higher, causing adramatic further decline in yields that prompts more
Equity, continued from page 17
Equity, continued on page 20
Tony Bertoldi
Robert Spangler
Pho
tob
yH
ow
ard
Tuck
er
www.housingonline.com February 2011 | Tax Credit Advisor 19
$10,382,0769% LIHTC EquityFamilyNew ConstructionSheboygan, WI
$8,650,000Bond PurchaseSection 8Acquisition/RehabBoston, MA
$5,085,000FHA Section 223(f) RefinanceSection 8Denver, CO
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Innovative thinking.Done deals.
Low-Income Housing Tax Credit
20 Tax Credit Advisor | February 2011 www.housingonline.com
might argue, though, that states may have to putmore credits into some deals to make them viable,especially if soft dollars are scarcer. Richard Floreani,of Carlisle Tax Credit Advisors, LLC, expects more4% bond-financed projects in 2011.
• Soft Dollars. Some sources expect even less gap andsoft dollars available this year. Federal housing dollarscould be cut by deficit-reduction legislation. Moststate and local governments have tighter budgets.
• Community Reinvestment Act Reform. Banking regulators last year held hearings and solicited rec-ommendations as they launched an initiative thatmay lead to changes to the regulations for CRA,which has prompted substantial LIHTC investmentby banks. Certain rule changes, if they occur, couldguide more LIHTC equity into underserved markets.
• Accounting Rules. LIHTC advocates hope to persuade the Financial Accounting Standards Board
to change its rules to let investors account for non-guaranteed LIHTC investments using the effective-yield method. This would make these investmentsmore attractive to publicly traded investors.
• Secondary Market. “There is sleeper element in our market this year – secondary market transac-tions,” said NEF’s Joe Hagan. Given that investordemand for LIHTC investments now exceeds supply,he suggested that the housing credit market wouldbe impacted if the Obama Administration, for somereason, reverses its prior position and lets FannieMae and Freddie Mac sell their existing LIHTCinvestments. These amount to billions, even thoughthe agencies have written them down to zero sincethey can’t use or dispose of them. Fannie andFreddie once accounted for 40% of annual LIHTCinvestment.
“It’s going to be an interesting [LIHTC] market foreverybody” in 2011, says Hagan. “And I don’t knowwhere it’s going to end up.”
Equity, continued from page 18
TCA
www.housingonline.com February 2011 | Tax Credit Advisor 21
Foundation for Innovation: MacArthur Supports New Enhanced LIHTC Preservation Fund
The John D. and Catherine T. MacArthurFoundation has seeded a new “enhanced” low-income housing tax credit (LIHTC) fund providing
added protection to investors against any cut-off ofHUD Section 8 rent subsidies to financed projects.
The fund has two classes of investors with differentyields and changing benefit ratios.
The Foundation is providing a $20 million guaranteein connection with the fund, which aims to provide $100million to nonprofit developers to help finance thepreservation and renovation of approximately 20 proj-ect-based Section 8 LIHTC properties nationwide serv-ing more than 2,000 low-income residents.
The tax credits are being syndicated and the fundco-managed by the National Affordable Housing Trust,a nonprofit syndicator based in Columbus, Ohio, andCornerstone Real Estate Advisors, LLC, a unit ofMassachusetts Mutual Life Insurance Company (MassMutual).
An initial fund of $50 million recently closed and hasbeen committed to finance eight preservation projectsin Massachusetts, Minnesota, Nebraska, Ohio, andOklahoma. Investors in the fund include JPMorganChase, Mass Mutual, MetLife, and United Bank. A secondfund of $50 million is expected to close later this year.
That fund will finance additional LIHTC Section 8 projectsdeveloped by sponsors approved by the Foundation.
Need for Housing Preservation“Our nation’s need for affordable rental housing has
never been greater and continues to grow,” said DebraSchwartz, MacArthur’s Director of Program-RelatedInvestments. “This innovative approach, which bringstogether major financial institutions, philanthropy, andthe federal government, shows that we can mobilize thecapital needed to save thousands of at-risk affordablerental homes, even in difficult economic times. Muchmore needs to be done but this model offers one cre-ative way forward.”
In an interview, Schwartz said that while the LIHTCequity market has recovered significantly, there continueto be certain geographic areas and types of projects –among them preservation deals – that still have a toughtime attracting equity. “Right now preservation doesn’thave a fair shot in the capital markets, in our view. Wewant to show that there is this challenge, but there aresolutions, too.”
In preservation deals, one concern of many investorsis Section 8 risk – the possibility, however, remote, that
Enhanced, continued on page 22
Southwoods Apartments,Oklahoma City, OklahomaPhoto by Rick Erickson.
Low-Income Housing Tax Credit
project-based Section 8 rent subsidiesnow flowing to properties might end,such as if HUD fails to renew the con-tract. One subset is “appropriations”risk – the possibility that Congress oneyear fails to appropriate annual fundingfor current Section 8 contracts.
Investors worry about Section 8 “overhang” – proj-ects with Section 8 contract rents significantly higherthan maximum tax credit rents. The fear is that if aSection 8 project ever had to adjust to charging thelower housing credit rents, rental income would tumbleand the project would no longer be self-sustaining.
The MacArthur Foundation’s guarantee providesextra protection to investors in three areas. First, it pro-vides added assurance of the completion of construc-tion of projects. If problems arise in a project and thesurety bond and sponsor guarantee are inadequate tofund completion, the guarantee may be tapped for thispurpose.
Second, the guarantee may be drawn upon to coverrental income shortfalls if a project’s Section 8 contractisn’t renewed by HUD in substantially the same form, orif Congress doesn’t appropriate funds for the contract.
Finally, the guarantee provides an additional backstopfor investors in the case of recapture of housing credits.
The guarantee’s protections are all for 15 years.Schwartz noted that MacArthur’s guarantee elimi-
nates the need for project sponsors to capitalize a largecash reserve to protect investors for Section 8 risk – acommon requirement of many syndicators and investors.
Different Investors, Different YieldsThe initial fund has two classes of investors. There is
one subordinate investor, Mass Mutual, putting in about20% of the equity, while the remainder are seniorinvestors, contributing about 80% of the equity.
According to Lori Little, of the National AffordableHousing Trust, during the first 7 to 8 years of the 10-yearhousing credit period, senior investors will receive nearlyall of the projected total tax benefits, while the subordi-nate investor receives a small amount. At the end of 7 or8 years the benefit ratio will flip, with the subordinateinvestor receiving the bulk of the benefits and the seniorinvestors a small amount. On the “flip” date, senior
investors may exercise a put option to sell their interest.The subordinate investor will be in for the full 15 years.
The senior investors will receive a lower yield thanthe subordinate investor, which is bearing more risk and,unlike the senior investors, will not be protected by theguarantee against Section 8 appropriations risk.
Little declined to disclose the projected yield levelsto investors or each investor group’s percentage shareof the tax benefits before and after the flip date.
Little said no letter ruling was obtained from theInternal Revenue Service regarding the transactionstructure. “We did lots of work with tax counsel.”
The enhanced fund doesn’t provide more favorablecredit pricing to sponsors because of its structure.
Welcome Funding SourceVolunteers of America (VOA), a national nonprofit
developer of LIHTC projects, has threeacquisition/rehab deals that will receive equity from theinitial $50 million fund. These are: Nicollet Towers,Minneapolis, a 300-unit development being financedwith 4% housing credits, tax-exempt bonds, and softstate dollars; Southwoods Apartments, Oklahoma City, arecapitalization of a 100-unit HUD Section 202 projectwith 9% tax credits and Federal Home Loan Bank funds;and Shaker Place, in Highland Hills, a Cleveland suburb,an 80-unit 9% credit deal.
The initial fund will also help finance RenaissanceSenior Apartments, a 100-year-old property in Toledo,Ohio being renovated by National Church Residences.
VOA official Patrick Sheridan praised the enhancedfund and said that because of it his organization won’thave to take money from each project’s funding sourcesto capitalize a transition reserve as is often required byequity sources due to the Section 8 risk and overhangconcern. “That cash reserve would deplete some of thefunds that we would have had available for either payingfor more renovation work, or paying developer fees, orthings like that,” he said. “So the fact that we don’thave to post a cash reserve of Section 8 transition reallymakes the deals work much better.”
Sheridan said VOA may well have been able to findequity from another source for Nicollet Towers, becauseit is large and in an attractive location. “But the othertwo were ones that we had a hard time finding equity atfirst. And who knows if they would have closed eventoday if we didn’t have these enhanced funds.”
22 Tax Credit Advisor | February 2011 www.housingonline.com
Enhanced, continued from page 21
Debra Schwartz
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www.housingonline.com February 2011 | Tax Credit Advisor 23
Business built on relationships—
For the last 25 years we have provided quality
service to our clients. As real estate markets
go up and down, our relationships with our
clients endure.
We are actively raising and investing equity.
We are actively originating loans.
Since 1986, we’ve raised $9.9 billion of tax credit
In last year's inaugural Guru column, I made a baker’sdozen predictions. Eight were clearly right (including"Risk curve widens, Dems lose House"); three incom-
plete or hard to assess; and two wrong ("Bernankeboosts rates" and "consolidation by survival"). Becausenothing in 2010 became it like the leaving of it, let's start2011 afresh – looking forward, with another baker'sdozen of predictions.
1. Low-Income Housing Tax Credit prices will rise and stay risen. During 2011, Fed ChairmanBernanke's money-printing will combine with globalanxiety in the capital markets to keep macro rateslow, making LIHTC spreads scrumptious. That willkeep prices solid.
2. LIHTC sells out coast to coast. With the Section 1602 Exchange Program thankfully gone, and withdemand for housing credit investments strongeroverall, all of 2011's LIHTCs will be placed withinvestors. Prices will vary widely between theCommunity Reinvestment Act’s geographic hotspots and its cold zones, but every Ask will have aBid – so in 2011, after two-plus years of disruption,we will finally have a newly “stabilized” LIHTC mar-ket, where price changes are gradual and continu-ous, not abrupt.
3. By year-end, inflation will be seen as the Next Big Problem. Weaknesses in housing and job cre-ation are depressing these two major componentsof overall inflation, but in the pocketbook expendi-tures – groceries, gas, cars – inflation is already here.Corporations finished with staff layoffs will recoverprofitability where they can, in retail prices.
4. Talk, not action, will dominate reform of the Government Sponsored Enterprises. Doubtlessthere will be bills introduced by one or more mem-bers of Congress; none will go anywhere. GSEreform is critical, but with the housing market still soweak, no one wants to be conducting open-heartsurgery in a struggling financial marketplace.
5. Even more talk will focus on CRA reform. CRA reform is long overdue, and with new GOP Houseleadership, this could advance further. Unlike GSEreform, CRA reform could be tackled now becauseit's not connected to the lifeblood of finance.However, as this will be highly contentious, andhence politicized, it will stall in the Senate. Watch formeaningful CRA reform in 2012, when electoral pres-sure will lead to a political alliance of convenience.
6. Much of the job growth will be in part-time and flexible workers. Between the health-care man-dates and the costs of staff layoffs, employers willsearch for contractor-type solutions. That means anincrease in home office and telecommuting workand a rethinking of apartment configurations.
7. State-level affordable housing programs will be cut right and left. From Chris Christie in NewJersey to Jerry Brown in California, governors realizethat Washington will not save them from the long-building tidal wave of unsupportable public pensionobligations. To slay this dragon, they will have tosacrifice other maidens beforehand – includingmany affordable housing programs such as state taxcredits, soft loans, inclusionary zoning, and so on.Watch also for gubernatorial raids of the equity bal-ances of state housing finance agencies, which lookto them like large pots of idle money.
24 Tax Credit Advisor | February 2011 www.housingonline.com
David A. Smith
Predictions for 2011
Guru, continued on page 25
8. Affordable-housing real estate tax abatements will come under increasing fire. This has alreadybroken out for a couple of years now in Texas. It willonly get worse.
9. Repurposing retail space into workforce housing will emerge as a business. Walk through anyAmerican downtown, and what do you see? Vacantretail space – much of it vacant for many monthsnow, and unlikely to reoccupy soon. This well-locatedproperty needs to be repurposed into affordable andworkforce housing, for the real estate's value andalso for the health of our nation's cities.
10. Half a dozen or more municipalities will actually file for bankruptcy. Vallejo, California is already inbankruptcy. Prichard, Alabama has literally run out ofmoney. Harrisburg, Pennsylvania and Hamtramck,Michigan are both asking their states for permissionto file. More cities will follow them. This will impacthousing because of the following three points.
11. Risk spreads will widen as markets start seriously pricing government-counterparty risk. An endlessstream of budget-woes stories will put furtherupward pressure on all bond rates, and risk spreadswill continue to widen. The U.S. may lose its AAAcredit rating and the dollar may at some point ceasebeing the world's reserve currency. In either case,inflation will rise faster.
12. Carbon-taxing will come to the U.S., not out of climatology or geopolitics but out of domesticbudget economics. Taxing carbon is too politicallyappealing and too useful as a revenue-raiser to beavoided for long – it's one of very few untaxed thingswhose taxation the public will support (except attheir local gas pump).
13. The merchant-building value chain model will grow in importance. Development of affordablehousing is high-complexity and place-specific; factorsthat dis-incentivize scale. Ownership and operations,by contrast, standardize and scale. In the REIT sector,development has been separated from ownershipthrough the emergence of capable merchant
www.housingonline.com February 2011 | Tax Credit Advisor 25
Guru, continued from page 24 builders. We can anticipate something similar inaffordable housing.
David A. Smith is Chairman of Recap Real Estate Advisors, aBoston-based real estate services firm that optimizes the valueof clients' financial assets in multifamily residential properties,particularly affordable housing. He also writes Recap's freemonthly essay State of the Market, available by [email protected].
TCA
WANTEDMidwestern, affordable housing
developer seeking Financial Analyst-Underwriter
Candidate is responsible for modeling developments at
inception, at tax credit application and inputting into
each state’s financial model. Candidate is also
responsible for adhering to state application financial
guidelines, reasonability of each amount and overall
accuracy of projections. After tax credit award, the
candidate is responsible for evolving financial projections
to meet lender, investor and state housing guidelines.
Candidate must have financial degree (finance,
accounting, etc.) and experience in this position.
RHS Issues Final Rule for Continuous LoanGuarantee Option
USDA’s Rural Housing Service has issued a final rule,effective February 2, offering developers the option toreceive a single, continuous loan guarantee under theSection 538 program that covers both the constructionand permanent financing phases of a rural rental housingproject. Before, separate guarantees were available forconstruction advances and the permanent loan. The finalrule makes some changes to the proposed rule.
NH&RA NewsInformation on NH&RA and its Councils is availableonline at http://www.housingonline.com
NCAHMA Plans Series of Webinars onMarket Study Issues
The National Council of Affordable Housing MarketAnalysts plans to hold a series of Webinars to focus onissues relating to the preparation and use of marketstudies for proposed affordable housing developmentsincluding those seeking low-income housing tax credits.The Webinars will be open to members ofNH&RA/NCAHMA as well as non-members. The initialWebinar is tentatively planned for March. Times anddetails will be announced shortly.
26 Tax Credit Advisor | February 2011 www.housingonline.com
Upcoming ConferencesTo register, and for more information, go to http://www.housingonline.com
National Housing & Rehabilitation Association2011 Annual MeetingFebruary 23-26, 2011Hyatt Regency Coconut Point, Bonita Springs, Fla.
National Housing & Rehabilitation Association2011 Winter New Markets Tax Credit SymposiumFebruary 23, 2011Hyatt Regency Coconut Point, Bonita Springs, Fla.
National Housing & Rehabilitation AssociationNational Council of Affordable Housing Market Analysts2011 Spring Affordable Housing Policy & Underwriting ForumApril 27-28, 2011Washington Court Hotel, Washington, D.C.
Information on NH&RA and its Councils is available online at http://www.housingonline.com
NH&RA, NCAHMA Announce Spring Conferences
The National Housing & Rehabilitation Associationand the National Council of Affordable Housing MarketAnalysts have announced the dates and location for the2011 Spring Affordable Housing Policy & UnderwritingForum. The conference will be held on April 27-28, 2011at the Washington Court Hotel in Washington, D.C. Toregister and for details go to http://www.housingonline.com/Events.aspx
NH&RA Councils to Convene at February Conference
NH&RA’s various councils will meet during NH&RA’s2011 Annual Meeting and 2011 Winter New Markets TaxCredit Symposium, set for February 23-26 in BonitaSprings, Fla., to discuss current issues affecting theirrespective areas. The groups meeting will be the:Council for Energy Friendly Affordable Housing;Developer’s Council (open to developers only); HistoricPreservation Development Council; LegislativeLeadership Committee; and New Markets Tax CreditSteering Committee. Details: http://www.housingonline.com/2011AnnualMeeting/CouncilInformation.aspx
NH&RA Executive Director Speaks at Conferences
NH&&RA Executive Director Thom Amdur participat-ed in two recent conferences. At the National Trust forHistoric Preservation’s Annual Historic Preservation con-ference in Austin, Texas, he spoke on a panel entitled,Mixed Income, Mixed Uses and Mills: Award-WinningHistoric Rehabilitation Projects. Amdur described varioushistoric rehabilitation projects around the nation thatrecently won NH&RA’s 2010 J. Timothy Anderson Awardfor Excellence in Historic Preservation. Sponsors of sever-al of the projects also appeared on the panel.
Amdur also spoke on a panel at Greenbuild 2010,held by the U.S. Green Building Council. He discussedthe activities, initiatives, and objectives of NH&RA’sCouncil for Energy Friendly Affordable Housing. TCA
Enterprise. It’s the clear answer.
For over 20 years, the Low-Income Housing Tax Credit
(LIHTC) has been instrumental in meeting the country’s
critical need for affordable housing. As one of the nation’s
leading syndicators of LIHTC equity, Enterprise has helped
create affordable housing across the country by raising
$7.4 billion through more than 100 investment funds. This
has helped finance over 1,600 properties totaling more than
94,000 affordable homes. We have consistently been a leader
in the market – in good times and bad. With that kind of solid
track record, why look to anyone else? The answer is clear.
LIHTC & New Markets Tax Credit EquityMultifamily Mortgage Finance | Predevelopment & Acquisition LoansPublic Policy | Technical Assistance | Asset ManagementHousing Development | Capital Markets | Green Initiatives
Michaels, continued on page 30
Low-Income Housing Tax Credit
28 Tax Credit Advisor | February 2011 www.housingonline.com
For developer Bob Greer and TheMichaels Organization, the pastyear has been a period of multiple
awards and positive recognition.The Marlton, N.J.-based firm has six
subsidiary companies, including an afford-able housing development arm (MichaelsDevelopment Company), a property management outfit(Interstate Realty Management), a military housing devel-opment concern (Michaels Military Housing), and a low-income housing tax credit (LIHTC) syndication arm(Prestige Affordable Housing Equity Partners).
Laurels in the past year include:
• Michaels Development Company being named as the 2010 Multifamily Housing Development Firm ofthe Year by the National Association of HomeBuilders. Michael J. Levitt, who founded the compa-ny in 1973, accepted the award in December 2010from NAHB Senior Staff Vice President SharonDworkin Bell. “Michaels Development has raisedthe bar for affordable and mixed-income housingdevelopments in this country,” Bell said, noting that“despite the economic downturn, Michaels securedfinancing when others couldn’t, and, as a result, suc-cessfully helped its housing agency partners acrossthe country meet their housing needs.” Said Levitt,"We are gratified every day that we are able to giveback to society by providing homes to thousands ofpeople who would not otherwise have adequatehousing, and we appreciate the industry’s recogni-tion of this important work by bestowing this presti-gious award on our organization.”
• The Michaels Organization heading Affordable Housing Finance magazine’s 2010 list of the topaffordable housing owners and developers in the U.S.
• The induction of Bob Greer, president of Michaels Development Company, into the AffordableHousing Hall of Fame in November 2010. The Hall issponsored by Affordable Housing Finance magazine.
• Awards honoring Michaels Development’s Spring Gardens Community Revitalization project inPhiladelphia, received from the National Housing &Rehabilitation Association and the PreservationAlliance of the City of Philadelphia.
• Additional honors to Interstate Realty Management(IRM); to Lona Black, a vice president of IRM; andto James Henderson, former president of IRM andcurrently an executive consultant to The MichaelsOrganization.
Michaels Development Company is a major nationalaffordable housing developer, with 54 communities cur-rently in development and a pipeline of 11,000 units.The Michaels Organization’s portfolio consists of 230properties – approximately 38,000 units – in 31 states,the District of Columbia, and the U.S. Virgin Islands.Michaels Military Housing is developing and managinghousing for the U.S. Department of Defense at four U.S.Army bases and two Air Force bases.
Michaels Development’s portfolio includes manylow-income housing tax credit (LIHTC) projects and anumber of mixed-income residential communities builtand funded under the federal HOPE VI public housingredevelopment program administered by the U.S.Department of Housing and Urban Development (HUD).
Reasons for SuccessIn an interview, Bob Greer gave the reason for the
success of Michaels Development and The MichaelsOrganization, particularly in affordable housing develop-ment.
“I think it’s probably our ability to make adjustmentsin our manner of doing business,” he says. “Certainlycreating our own syndication company has been a greatboon in allowing us to continue to move forward with allof our developments that we were scheduled for clos-ings. And we’ve been able to place all of our creditsdirectly from our own company to banks primarily, whoare buying our credits and making it possible for us toclose our deals.
For Bob Greer and The Michaels Organization, It Was a Very Good Year
Bob Greer
www.housingonline.com February 2011 | Tax Credit Advisor 29
“In addition to the tax credit work and the HOPE VIwork, we’ve also expanded our efforts to buy other portfo-lios from other developers who are experiencing difficultyand/or are just seeking an opportunity to get out of thebusiness. That has enabled us to take on many additionalproperties and expand our management presence inmany states that we weren’t previously involved in.
“That, and military housing, the privatization of mili-tary housing, has just allowed our company to experiencesignificant growth this year both in portfolio size and staffsize and in our overall participation in the affordablehousing industry.”
In 2010, The Michaels Organization expanded intoseveral new states and added 341 employees, bolsteringits total to around 2,000 – a far cry from when Bob Greersigned on. “When I joined the company 35 years ago,”he says, “there were only four of us: Mike Levitt and meand a secretary and one guy in the field.”
A Change in CourseMichaels Development has had to make some sig-
nificant adjustments to finance and build LIHTC proj-ects. A little over three years ago, it began to syndicatethe housing credits for its projects itself, placing themwith direct investors. This was a diversion from years oftraditionally getting its equity solely from tax credit syn-dicators. “The big economic change came and all of asudden we found that syndicators – who are normally inthe room with us – just weren’t there,” says Greer. “Weeither had to rely on the exchange program or TCAP orsome other vehicle or just start our own ability to placeour credits directly with investors. And we made a bigcommitment to do that.”
During 2010, Michaels made a slight change incourse, getting equity for some deals from syndicatorsagain. But Greer estimates that Michaels placed thecredits itself with investors for about 90% of its LIHTCprojects in 2010. Also, while Michaels started off sellingits credits almost entirely to local banks, that expandedlater to regional banks as well and now includes a num-ber of major national banks.
As a developer, Michaels Development Company isbenefiting from the recovery of the LIHTC market, withthe price in cents per credit dollar that it receives for itshousing credits from equity sources higher than duringthe trough of the LIHTC market downturn a few yearsback. “Credit pricing has really come back significantly…We’re back into the 80s, and if I’m on the East Coastor West Coast, we’re into the high 90s. It has come backsignificantly.”
The Road AheadLooking forward, Greer sees a couple of challenges to
the company – and the affordable housing industry – onthe horizon.
Among these are “trying to find the pulse” of thenew, 112th Congress where Republicans now control theHouse; the national focus on deficit reduction and thepossibility of tax reform – action on which could affectthe LIHTC program; and getting some additional defini-tion from HUD of the details of its new ChoiceNeighborhoods program – the successor to HOPE VI.
In the meantime, Greer is relishing the honors thathe and The Michaels Organization have received as theyprepare to move ahead in 2011.
“This has been such a big year for us,” he says.“There’s been a lot of effort made by many, many peoplewithin the organization.”
Michaels, continued from page 28
Low-Income Housing Tax Credit
30 Tax Credit Advisor | February 2011 www.housingonline.com
TCA
Historic Rehabilitation
www.housingonline.com February 2011 | Tax Credit Advisor 31
Historic Boardwalk Case: Tax Court Rules Against IRS
In a significant ruling hailed by practitioners, the U.S.Tax Court has ruled against the Internal RevenueService in its challenge of the structure of a transaction
involving the $99 million historic rehabilitation of the for-mer convention center in Atlantic City, N.J. The IRScould appeal the decision. (Historic Boardwalk Hall, LLC,New Jersey Sports and Exposition Authority v.Commissioner of Internal Revenue Service, Docket No.11273-07, Jan. 3, 2011.)
Washington, D.C. tax attorney Jerry Breed, a partnerwith Bryan Cave LLP, called the Court’s ruling “a verywelcome decision that should provide substantial com-fort and assurance to investors.” He noted, “If the casehad come out the other way and the government hadwon you would have needed a restructuring of how thesedeals are structured….I think what you see is an affirma-tion of the way these deals are structured currently.”
The Court affirmed that there was economic benefitto the investor from the transaction in addition to the taxbenefits, including a 3% preferred cash-on-cash return.
Rehabilitation ProjectThe renovation project utilized the federal historic
rehabilitation tax credit to transform the old conventioncenter (East Hall) into a modern venue for entertainmentand sports called Historic Boardwalk Hall. The originalstructure, built in 1929, was listed on the NationalRegister of Historic Places.
In 2000, a limited liability company called HistoricBoardwalk Hall LLC (HBH LLC) was formed to own, reno-vate, and operate the rehabilitated convention center.HBH LLC’s members were the New Jersey Sports andExposition Authority (NJSEA), a state entity, and PBHistoric Renovations, LLC (PBHR). During tax years 2000,2001, and 2002 – the years of the tax returns under chal-lenge – the sole member of PBHR was Pitney BowesCredit Corp., the tax credit investor.
NJSEA subleased Historic Boardwalk Hall to HBH LLCfor 87 years, and transferred and assigned to HBH LLCownership of all prior rehabilitation work and licensingand operating agreements. HBH LLC then became theowner of Historic Boardwalk Hall for federal tax purposesand assumed responsibility for completing the renovation
of it. HBH LLC placed the rehabilitatedproperty in service and claimed the his-toric tax credits and other tax benefits.These credits and benefits were allocat-ed to NJSEA and PBHR.
IRS Challenges TransactionIn February 2007, the IRS issued a Notice of Final
Partnership Administrative Adjustment to the partner-ship and to NJSEA, proposing adjustments to the taxbenefits claimed on the partnership’s federal tax returnsfor tax years 2000-2002, plus proposed penalties. NJEAand the partnership filed challenges in U.S. Tax Court inMay 2007. The Court then considered the petitioners’request to rule against the tax adjustments and penal-ties and to grant other relief.
The IRS had argued that all of the operating lossesand tax credits of HBH LLC should be reallocated toNJSEA, a tax-exempt entity, from PBHR. It argued thatthe formation of HBH LLC was a “sham transaction” cre-ated to improperly pass along tax benefits to PBHR, andthat HBH LLC therefore shouldn’t be recognized as apartnership for federal income tax purposes.
The IRS also contended that PBHR wasn’t a bonafide partner in the partnership because it had no mean-ingful stake in the success or failure of HBH LLC. TheService said PBHR should therefore be disqualified as amember of HBH LLC, leaving NJSEA as the sole member.
Finally, the IRS asserted that NJSEA’s sublease of itsleasehold interest in Historic Boardwalk Hall wasn’t asale for federal income tax purposes because the bur-dens and benefits of ownership didn’t pass from theseller (NJSEA) to the buyer (HBH LLC).
The IRS said that HBH LLC should pay accuracy-relatedtax penalties for tax years 2000-2002.
The Tax Court rejected the Service’s arguments,holding that the transaction was not a sham but insteadwas a legitimate transaction that had economic sub-stance and that Pitney Bowes was a true partner thatbore financial risk despite various guarantees and otherprotections.
32 Tax Credit Advisor | February 2011 www.housingonline.com
The historic rehabilitation tax credit equity marketis a bit improved from last fall in terms of theavailability of equity and credit pricing to devel-
opers, say sources. The new markets tax credit (NMTC)market, because of the recent reauthorization of theprogram through 2011, should see increased flow ofinvestor equity in the near future.
“We haven’t seen a lot of large [stand-alone historiccredit] deals closing. But I’ve seen more on the tablethan we’ve had before. We continue to see a lot ofsmaller deals,” said Eric Darling, of Boston-basedCarlisle Tax Credit Advisors LLC, which syndicates his-toric credit investments for investors including Chevron,the largest.
He added, “At the end of [2010], we started to see anumber of larger deals that were in active discussionswith lenders – they were getting back on the table.Some of those are moving forward, some of them aren’t.”
John Leith-Tetrault, of the National Trust CommunityInvestment Corporation, which syndicates historic andnew markets credits, including projects “twinning” bothof these credits, said there’s a good number of outletsfor small stand-alone historic transactions. These includeChevron, NTCIC, and small project funds run by suchentities as Carlisle Tax Credit Advisors, CityScapeCapital, Foss & Company, Tax Credit Capital, andClocktower Tax Credits.
“If you’ve got a small deal,” he noted, “you’re lookingat the same pricing as you got before the recession – maybetops 85 cents on the dollar. And they’re easy to place.”
While pricing for small deals – $2 million and underin equity – remains around 80 to 85 cents per credit dol-lar, he said, “on the larger transactions, pricing’s recov-ered a little bit. In the depth of the recession, 92 to 99cents was top of the market. We’re now seeing pricesmore in the 98 cent range…What you’re not seeingmore is the $1.10, $1.15 pricing we saw before therecession. But it definitely is settling back somewhereabove $1, say between $1 and $1.05.”
Noted Carlisle, “Most [stand-alone historic] projectsare still residential. There’s not been a big rebound inoffice, hotels, commercial buildings. But it’s starting.” Hesaid residential projects – say affordable and market-rate
apartment buildings – are more prevalentbecause they have an easier time gettingdebt financing, such as FHA-insuredloans. Also, many sectors and localeconomies are still soft and recovering,preventing many commercial projectsfrom penciling out or attracting investors.
Still, some large stand-alone historic deals are gettingdone by major direct investors. “We continue to be anactive investor on the historic front,” said Leigh Ann Smithof Bank of America Merrill Lynch, which invests in stand-alone historic and twinned new markets-historic deals. Onstand-alone historic deals, the bank typically focuses onprojects requiring more than $3 million in equity.
Smith added, “The good news on the historic frontis we’re actually seeing more investors come into themarket.” For instance, she said that other banks, insur-ance companies, and other types of companies havebeen co-investing with BofA in some stand-alone his-toric projects.
“Prices are going up and yields to investors arecoming down,” Smith said. “Part of that is due to theaddition of new investors in the market; part due to afree-up of capital.” She anticipated that the number ofhistoric credit deals will increase in 2011.
Leith-Tetrault felt that the recent extension of theNMTC program will help the historic credit market sincemany deals combine both new markets and historiccredits. The forthcoming announcement of additional,2010 NMTC allocation awards will also put more newmarkets credits out in the capital markets for investors.
Washington, DC tax attorney Jerry Breed, a partnerat Bryan Cave LLP, says there continues to be stronginvestor interest in the new markets program. “I thinkthat was the [tax credit program] hit least in the recentrecession.”
He said the primary NMTC investors today are U.S.Bank, Bank of America Merrill Lynch, JPMorgan Chase,and Goldman Sachs.
Breed indicated that the biggest issue for the newmarkets program going into 2011 is still being able toget debt for projects, particularly conventional lever-aged loan dollars.
Historic, New Markets CreditEquity Markets Improve
Leigh Ann Smith
TCA
www.housingonline.com February 2011 | Tax Credit Advisor 33
The disability movement has a sparkling, visiblenew national symbol in a two-story developmentin Berkeley, Calif., funded in part by the federal
new markets tax credit. The projects used the “targetedpopulations” criteria to qualify for this incentive.
The new Ed Roberts Campus (ERC), an 85,000-square-foot facility, is the nation’s first universal design,transit-oriented development serving persons with dis-abilities. Named after Ed V. Roberts, a Californian recog-nized as an early founder of the Independent LivingMovement, the Ed Roberts Campus offers an array ofon-site programs and services for clients with variousdisabilities. Most clients are low-income and use publictransportation to get to and from the center.
The facility was sponsored by seven nonprofit organi-zations that moved into the new building in late 2010:
• Bay Area Outreach & Recreation Program, which sponsors recreational programs and has a fitnesscenter at ERC for people with disabilities.
• Center for Accessible Technology, which provides access to computers for persons with disabilitiesand consults to businesses on Web accessibility andproduct testing for people with disabilities.
• Center for Independent Living, the first independ-ent living center in the U.S.
• Computer Technologies Program, a job training program for persons with disabilities.
• Disability Rights Education & Defense Fund, alegal advocacy organizations that helps parents ofchildren with disabilities advocate for their kids inthe schools.
• Through the Looking Glass, which works with children and parents with disabilities, and runs achild care center at national parent center at ERC.The latter center provides information to parentswith disabilities about pregnancy and child care.
• World Institute on Disability, a disability policy think tank.
Accessible, High Visibility FacilityDmitri Belser, executive director of the Center for
Accessible Technology, and president of the Ed RobertsCampus, said, “Six of the seven agencies were in rented
Ed Roberts, continued on page 34
A New Approach to Disability:Sparkling New Facility Raises Visibility of Movement
Ed Roberts Campus, Berkeley, California
Photo: Roy Manzanares/Manzanares Photography
New Markets Tax Credit
space; only one owned a building. And all of us were inspaces that – I think the best way to describe themwould be – dumps…None were in spaces that had anykind of visibility, and most of us were not anywhere real-ly close to public transit, which is important to personswith disabilities. And there was no real cohesionbetween the various organizations. If you wanted to goto one agency and then to another one, you often hadto cross town to get there. And for persons with disabili-ties that is a real burden. So being located right together,and being right at a major transit hub, was a real priorityfor all of the agencies.”
The campus is adjacent to a BART rapid transit linestation and convenient to other public transit. The build-ing was designed in accordance with Universal Designprinciples. Features include a helical ramp connectingthe first and second floors that permits easy access andevacuation by wheelchair users; accessible elevators,automatic doors, and wide corridors; specially designedsignage and way-finding devices to guide individualswho or blind or have low vision; restrooms accommodat-ing all ability levels; and hands-free seniors and timersthat control lighting, acoustical, and security systems.
The Ed Roberts Campus project was 15 years in themaking, says Belser. The nonprofits raised dollars overan extended period from fundraising, grants, federalfunds, city funds, private funds, and other sources.
The project had a total development cost of about$52 million. Construction was completed in late 2010.The new markets tax credit (NMTC), lined up after con-struction began in September 2008, generated funds tohelp pay for the tenant improvements to the building.Belser said the NMTC enabled the building to be com-pleted faster. “We thought it was probably going totake us a couple of year to raise the money to do thetenant improvements.”
Use of Target Populations Criteria“We first learned about the new market tax credits
when we hired a person who was helping with fundrais-ing,” says Belser.
But qualifying for the NMTC wasn’t easy. The site wasa parking lot in a census tract that wasn’t low-income,though surrounded by low-income census tracts.
In general, to qualify for a new markets credit alloca-
tion, a project or business must be in a low-incomecommunity (i.e. low-income census tract). In 2004, how-ever, the program’s rules were modified to permitNMTC investments in businesses in moderate-incomecensus tracts, if a business benefits a “targeted popula-tion.” To qualify, a business must: (1) be at least 50%owned by low-income persons; (2) have at least 40% ofits employees be low-income persons; or (3) derive atleast 50% of its annual gross income from sales, rentals,services, or transactions with low-income persons. Also,there must be a reasonable assumption that the busi-ness will satisfy the low-income test selected from the
preceding options forthe next seven years. Todate, there have beenonly a small number ofNMTC targeted popula-tions transactions.
The seven nonprofitsdecided to try to qualifyfor targeted populationsunder the employeeincome test. Procedures,forms, and systems wereestablished to verify theannual incomes of the
roughly 160 current employees of the Ed RobertsCampus and of the seven nonprofit agencies to deter-mine if they were low-income. The task was madetougher because the rules require an employee to below-income as of their date of hire – as well as currently.This was particularly difficult for long-time employees;some provided an affidavit in lieu of tax returns. “Wehave employees in some of the agencies that haveworked here since 1977,” says Belser.
The agencies, working with a local accountant andthe national accounting and consulting firm of ReznickGroup, developed a system, procedures, and forms tocollect the necessary information from employees (taxreturns, affidavits where necessary, etc.); review them;and determine whether each employee qualified as low-income. These regimes had to satisfy requirements ofthe two community development entities (CDEs) thatprovided new markets credit allocations for the project,and of the new markets investor, JPMorgan Chase. Thesystems provide for ongoing monitoring of eachemployee’s income and for checking the income of
34 Tax Credit Advisor | February 2011 www.housingonline.com
Ed Roberts, continued from page 33
Ed Roberts, continued on page 35
The campus is adjacent to a BART
rapid transit line station and
convenient to otherpublic transit. The
building was designedin accordance withUniversal Design
principles.
prospective new hires.According to Belser, the CDEs established that as a
minimum threshold, 60% of the employees be low-income, which was met from employees of six of theseven tenant agencies.
New Markets AllocationsThe National Development Council provided a new
markets tax credit allocation of $14.5 million; theNorthern California Community Loan Fund, an alloca-tion of $25.5 million.
NDC’s Scott Rodde said his group was attracted tothe Ed Roberts Campus project by “the mission of theorganizations and the communities that they serve.”NDC’s David Trevisani added, “That’s consistent with themission of [NDC’s] program. Most of the projects thatwe’ve been involved with in our new markets programare community facilities. And this fit well with our mis-sion and it fit well with the deals that we typically look
for within our program.”Dutch Haarsma of the Northern California Community
Loan Fund, said, “NCCLF has long been a supporter ofmulti-tenant profit centers. The economies of sharedspace and synergies among programmatic offerings arepowerful motivations for taking on these types of diffi-cult projects. Ed Roberts Campus will be home to non-profit organizations serving the independent livingmovement. I cannot think of a better use of the newmarkets tax credit.”
Ira Weinstein, a principal with Reznick Group,described the Ed Roberts Campus as an outstandingNMTC project but acknowledged that it was more chal-lenging to do than many new markets projects becauseof the added work and procedures necessary to satisfythe targeted population employee-income test. Hepraised the “persistence” of the collaborating nonprof-its and other participants.
Says Trevisani, “We’re extremely pleased to be partof this. We think it is going to be a model that can beused to do other targeted population deals.”
New Markets Tax Credit
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Ed Roberts, continued from page 34
TCA
Mississippi Releases Final Revisions to 2011 QAPThe Mississippi Home Corporation has published a
list of final approved revisions to its qualified allocationplan (QAP) for its 2011 low-income housing tax creditprogram. Key changes include: an increase in the preser-vation set-aside from $750,000 to $1 million; a new elder-ly housing set-aside of $500,000; a requirement that atleast 10% of a project’s total development costs be fund-ed by permanent financing from a federally regulatedfinancial institution; and modified point scores for ameni-ties, historic rehabilitation, and Federal Home Loan Bankfunding. In addition, MHC will fund only one develop-ment in each primary market area if one or more projectshave been funded within the prior two years; historicrehab projects are exempt.
(http://www.mshomecorp.com)
Maryland Announces Tax Credit AwardsMaryland recently announced the award of federal
low-income housing tax credits and state rental housingfunds from its fall 2010 competitive funding round. Thestate Department of Housing and Community Develop-ment has awarded the tax credits and funds to develop-ers of five projects with a total development cost of $54million that will contain 255 affordable rental housingunits.
Alabama Announces Application Window, WorkshopThe Alabama Housing Finance Authority has
announced that it will accept applications this year forlow-income housing tax credits and federal HOME fundsduring March 15-17, 2011. An application workshop isscheduled for February 14 in Montgomery.
The Delaware State Housing Authority has releaseda summary of public comments on its proposed 2011QAP for its 2011 low-income housing tax credit program,along with DSHA’s responses to the comments.
Boston Mayor Tom Menino’s PILOT Task Force hasreleased its final report recommending more consistentmonetary contributions from the city’s tax-exempt non-profit institutions to the city’s Payment in Lieu of Taxes(PILOT) Program. Boston’s is one of the oldest and well-funded PILOT programs in the U.S. The report's recom-mendations would impact hospitals, universities, cultural,and other tax-exempt institutions with facilities in thecity. A summary of the recommendations has been pre-pared by the law firm Goulston & Storrs.
People in the NewsWyman Winston is the new Executive Director of the
Wisconsin Housing Economic Development Authority,the state housing finance agency. He was previously withthe Atlanta Development Authority and before that spent14 years at WHEDA as a senior manager.
Dominium, a large Minneapolis-based owner, developer, and manager of apartment communitiesnationwide, has announced the promotions of: BrendtRusten, to senior vice president of asset management;Tom McAllister, to senior vice president and chief financial officer; Mark Moorhouse, to senior vice president and project partner; Mark Mahoney, to vicepresident of asset management; Chris Barnes, to vicepresident and project partner; and Jeff Huggett, to vicepresident and project partner.
Reznick Group, a national accounting and consultingfirm, has announced that Mary Beth Norwood, CPA andPrincipal, has been named as the new Baltimore officeCo-Managing Principal. She succeeds Joel Cohn, whoseterm as Office Co-Managing Principal expired. Norwoodwill partner with current Co-Office Managing PrincipalGary Perlow to continue overseeing the growth of theBaltimore office. TCA
President Obama Signs Supportive Housing BillsOn January 4, President Obama signed into law
bills revising two programs of the U.S. Department ofHousing and Urban Development (HUD) that funddevelopment of supportive housing projects for elderlypersons (Section 202) and persons with disabilities(Section 811). One measure (S. 1481, P.L. 111-374) mod-ernizes the Section 811 program in a variety of ways,including stipulating minimum initial 30-year terms andfive years’ funding for project rental assistance contractsfor Section 811 projects financed with low-income housing tax credits or tax-exempt bonds. The secondmeasure (S. 118, P.L. 111-372) streamlines and modern-izes the Section 202 program, including directing theuse of state and local housing finance agencies toprocess applications for mixed-finance Section 202 proj-ects, making it easier to pool other funds with Section202 dollars to build or renovate projects, revising rentalassistance rules, and allowing nonprofit sponsors toshare in refinancing proceeds.
(http://thomas.loc.gov)
Treasury Issues New Priority Guidance PlanThe U.S. Treasury has released its Priority Guidance
Plan for 2010-2011, identifying specific priority rulemak-ing projects of Treasury and IRS for the one-year periodending June 30, 2011. Projects for the low-income hous-ing tax credit program include a final rule for qualifiedcontracts, utility allowance rules for sub-metered build-ings, guidance on recapture, and guidance pertaining toan exception for federally or state assisted buildings.
VA Solicits Requests for Supportive Services GrantsThe U.S. Department of Veterans Affairs is soliciting
applications by March 11 for $50 million in grant fundsavailable under the Supportive Services for VeteransFamilies Program. The funds can be used by nonprofits
and consumer cooperatives to coordinate or providesupportive services to very low-income veteran familieswho: live in permanent housing; are homeless butscheduled to move to permanent housing; or have leftpermanent housing and are seeking other housingresponsive to their needs.
HUD Invites Applications for Rural Innovation GrantsHUD is soliciting applications by February 23 for
$25 million available under the Rural Innovation FundProgram. The funds can be used for projects thataddress the problems of concentrated rural housing dis-tress and community poverty.
IRS Issues New Tax GuidanceThe Internal Revenue Service recently issued the fol-
lowing private letter rulings:
• No. 201049018. A tax-exempt bond-financed project that met the 50% test will still be treated asfinanced more than 50% by tax-exempt bonds evenif all or some of such bonds are redeemed beforethe end of the first year of the low-income housingtax credit period.
• No. 201048019. A taxpayer that failed to file a Part 1 application for a federal historic rehabilitationtax credit project until after the property was placedin service will still be deemed to have satisfied thePart 1 filing requirement.
Also released was a Chief Counsel Advisory memo (No. 201046014),providing views on whether the proper tenant income limits were usedfor a low-income housing tax credit project, and regarding an IRSexaminer’s proposed disallowance of housing credits claimed in pastyears. (http://www.irs.gov/pub/irs-wd1049018.pdf , 1048019.pdf,1046014.pdf)
Capital Briefs
www.housingonline.com February 2011 | Tax Credit Advisor 37
TCA
PRSRT STDUS Postage
PA I DMerrifield, VA
Permit No. 1253
Dworbell, Inc.1400 16th Street, NW, Suite 420Washington, DC 20036
National Housing & Rehabilitation Association
2011 Annual Meeting:Securing Capital in 2011
February 23-26, 2011Hyatt Regency Coconut Point Hotel
Bonita Springs, Florida
R E G I S T E R N O W !R E G I S T E R N O W !
For more information about events or to register, please visit www.housingonline.com/Events.aspx
NH&RA 2011Winter New Markets Tax Credit Symposium
February 23, 2011Hyatt Regency Coconut Point Hotel
