All Forum Posts by: Kyle Jean

If you Google "WHAT HAPPENS TO LOW INCOME HOUSING TAX CREDIT PROPERTIES AT YEAR 15 AND BEYOND?" you'll find an excellent white paper on HUD's website which details typical assumption or purchase scenarios once a tax credit project enters the extended use period.

For smaller assets (loans under $500k) your local banks and credit unions are going to be more economical.

For anything over $1mm I would recommend reaching out to a Fannie Mae or Freddie Mac multifamily lender. They lend nationwide.

If over $2mm, reach out to a HUD multifamily lender. They lend nationwide.

Any of the above will also be able to help you size the loan or answer questions about the property.

Fannie and Freddie will offer 30 year am and the fixed term will be 5-15 years. Leverage will vary depending on market but all loans are non-recourse.

With a HUD multifamily loan (223f) you could acquire and it would be a 35 year fixed rate, 35 year am, non-recourse loan. HUD just requires a bit longer in underwriting, has higher soft costs and will require more property scrutiny.

Pros and cons to both.

Depending on how big the asset is I'd recommend Alpha Barnes. They're my go-to for management in Texas.  Hugh Cobb is a Principal there who I have had discussions with in the past. Very experienced.

You've got the big ones but sometimes I'll also adjust utilities or r&m if I think capital improvements completed as part of the transaction will impact those figures.

We have a lot of experience as the lender in tax credit transactions, actually just finalized a 4% tax-exempt bond deal with our own debt. I'd be happy to connect and discuss sometime if you have any questions.

HUD 223(f) can do 85% LTV (minimum), 35 year fixed rate, non-recourse, but there are more soft costs involved and timing is longer than Freddie SBL or a bank. If you have something in the 30 unit range or around ~$1.5mm+, it's worth running an analysis. Smaller than that it's probably not going to be cost effective.

Like Hadar said, if HUD or Freddie/Fannie are not feasible, leveraging local banks in your area can be surprisingly effective. Some aggressive banks around here are offering 10 year fixed.

I know locally Brady Sullivan has a large renovated mill portfolio throughout New England, they're headquartered just over the border in NH. Anagnost Investments would also be interested - we have financed a number of projects for them. We also looked at a number of projects in Lawrence. 

Are you looking to syndicate tax credits or would it be all private investment? There are opportunities out there, but a mill rehab is more difficult than it looks.

 I don't think an expense ratio of 30-35% is a bad starting point before securing real financials. On a per unit basis it seems light, but that varies by market.

Logic looks sound to me. I would get property tax returns from seller to accurately determine an expense trendline, and also make sure your ROI is including an adequate set-aside for reserves, especially for a property of that age. Seller could be trying to dump the property at the crazy prices we're seeing today before some major CapEx is required.