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Freddie Mac Bridge-to-TEL Resyndication Structure

The Property:

• 200 Units in San Jose, CA; existing LIHTC property for

family tenancy

• Constructed in 1972 / Moderately Rehabilitated in 2003

with 4% LIHTC and tax exempt bonds

• Generally well-maintained but in need of substantial

rehab to facilitate long term preservation

• ~ $50,000 in immediate repairs needed
• $325 pupy in ongoing replacement reserves
• Encumbered by CSCDA Bond Regulatory Agreement

and a TCAC LIHTC Regulatory Agreement

• Acquired by the Borrower in February 2017

Freddie Mac Bridge-to-TEL Resyndication Structure

Financing Challenges:

• Seller in need of quick close
• Property highly sought after by conventional (cash-on-

cash) buyers

• CSCDA and TCAC regulatory agreements all required

modification/subordination

• Resyndication transaction not possible until January

2019 when the current 15-year LIHTC compliance period ends, thus exposing buyer to interest rate risk

• In order to compete with conventional buyers the

Buyer had to value the Property assuming a successful resyndication

Freddie Mac Bridge-to-TEL Resyndication Structure

Financing Structure:

• Freddie Mac Bridge Loan
• High leverage (85% LTV)
• Low cost (2.60% spread over 30-day LIBOR)
• Full term interest only
• Quick close – 60 days from execution of PSA
• Freddie Mac Tax Exempt Loan
• 30-month forward rate lock on a permanent Tax

Exempt Loan (“TEL”)

• 5.00% interest rate
• 17-year term, 35-year amortization
• Two (2) years Interest Only

Freddie Mac Bridge-to-TEL Resyndication Structure

Financing Sources and Uses:

Freddie Mac Bridge-to-TEL Resyndication Structure

Unique Aspects of Financing:

• The Bridge Loan allowed a quick close (60 days) to

compete with conventional buyers while the forward rate lock TEL eliminated interest rate risk for the Buyer who could not resyndicate until January 2019

• Freddie Mac allowed reduction or expansion of the

permanent TEL based on final LIHTC rents TBD in 2019 (10% reduction and 5% expansion at locked interest rate)

• Expansion could eliminate Seller Note and lower

Deferred Dev Fee

• Reduction could increase Seller Note
• Freddie Mac approved any shortfall in resyndication

sources to be structured as a Seller Note