Presented by Sammy Ehtisham Midwest Housing Equity Group, Inc. - - PowerPoint PPT Presentation

Presented by Sammy Ehtisham Midwest Housing Equity Group, Inc.

About Me:

 Sammy Ehtisham

 Acqusitions Manager for MHEG’s Oklahoma

Operations

 Work only with Low Income Housing Tax

Credit financed developments

 6 years  Current territory includes Oklahoma,

Arkansas, and North Texas

Today’s Discussion

 We are going to talk about something

much more exciting than a way to combine a financing source with tax credits.

 So….let’s talk about:

S_X! I

Our Discussion Will Include

 General Overview of LIHTC  LIHTC with HOME  LIHTC with RD 515  LIHTC with RD 538  LIHTC with AHP  LIHTC with Tax Exempt Bonds

What is the LIHTC Program?

 The Federal Low Income Housing Tax

Credit program was created under the Tax Reform Act of 1986, as amended.

 This program creates affordable rental

housing through a partnership of public and private partners.

 The program is responsible for the creation

• f more than 2.5 million units of affordable

housing since inception.

How many credits are available?

 Each year population figures for each

state are estimated and each state receives their allocation of credits based

• n a predetermined formula.

 In 2012, the Oklahoma allocation of

credits was $8.3 million, as determined by population.

So what’s the benefit of LIHTCs?

 Owner Structure

 0.01% to the General Partner (or Managing

Member in an LLC)

 99.99% to the Limited Partner (or Investor

Member in an LLC)

 The resulting ownership structure is how

the benefits flow to the partners.

What we’ll look at for each financing combination

 General Program Information  Advantages  Disadvantages  Layering complexities

HOME – General Information

 Funds are administered by HUD,

through Participating Jurisdictions

 There are 6 PJs in Oklahoma  What is the HOME Program?

LIHTC w/ HOME Advantages

 Awards in the form of grants to Non

Profits

 Now available to for profits  38% of HOME funds set aside for LIHTC  Minimum 1% Debt Service

LIHTC w/ HOME Disadvantages

 Can only apply in 2nd Round of LIHTC  Separate lengthy application  Subject to federal appropriation  Cross cutting federal regulations

HOME Layering Issues

 Must have Low HOME and High HOME

rents

 New construction period of affordability

not equivalent to LIHTC compliance period.

RD 515 – General Information

 Loans available direct from USDA-RD.  Administered through each state office.  What is the 515 program?

LIHTC w/ RD 515 Advantages

 30 year term and 50 year amortization  1% effective interest rate  Units generally have some type of rental

assistance through RD

 Rents can be in excess of the LIHTC

limits

LIHTC w/ RD 515 Disadvantages

 Limited cash flow allowed – Return to

Owner

 Rural Areas  Must request rental increases through

RD.

LIHTC w/ RD 515 Layering Issues

 Restrictions on the terms of additional

debt, if needed.

 Generally require much higher per unit

per year replacement reserve deposits

RD 538 – General Information

 What is it?  Lender based loans

LIHTC w/ RD 538 Advantages

 No Return to Owner limitations like the

RD 515 program.

 Lender gets a 90% guaranteed loan  Terms – Minimum 25 years and a

maximum of 40 years. Amort. up to 40 years.

LIHTC w/ RD 538 Disadvantages

 Limited eligibility  Loan fees are expensive  Is the benefit of the loan really worth the

extra expenses?

RD 538 Layering Issues

 Additional Reserve Requirements  Annual fee adds to operation expenses.  Otherwise meshes very well with

LIHTCs.

AHP – General Information

 FHLB

 Topeka

 What is the AHP program?

LIHTC w/ AHP Advantages

 Grants  Works very well with LIHTC

LIHTC w/ AHP Disadvantages

 Limited funds  Very competitive  Max per project

AHP Layering Issues

 Grant funds into LIHTC deal  Keep to promises in Tax Application

The Greatest Advantage of All of These Financing Combinations?

 Leverage Points in the LIHTC

Application!

Tax Exempt Bonds – General Information

 How much is available?  OHFA

LIHTC w/ Tax Exempt Bonds Advantages

 Plenty of bond cap available.  Allows access to non-competitive 4%

LIHTCs

 Deep skewing of rents not required  Great for larger deals

LIHTC w/ Tax Exempt Bonds Disadvantages

 Significant additional fees  More debt risk  More parties involved, slower to get

through process

 No 9% credits

Tax Exempt Bonds Layering Issues

 50% of the basis for the project must be

financed with Tax Exempt Bond financing

 Use 4% rate….not fixed.  Works very well with LIHTC’s

Questions about LIHTC: Sammy Ehtisham Darcy Green Midwest Housing Equity Group Oklahoma Housing Finance Agency 405-278-7909 405-419-8145 sehtisham@mheginc.com darcy.green@ohfa.org Questions about HOME: Darcy Green Oklahoma Housing Finance Agency 405-419-8145 darcy.green@ohfa.org Questions about RD 515: Debora Phillips USDA RD 580-726-3347 Debora.phillips@ok.usda.gov

Questions about RD 538: Tammi Miller USDA RD 580-889-2554 ext 114 Tammi.miller@ok.usda.gov Questions about AHP: Jeff Ragsdale FHLB Topeka 785-438-6034 Jeff.ragsdale@FHLBTopeka.com Questions about Tax Exempt Bonds: Darrell Beavers Oklahoma Housing Finance Agency 405-419-8261 darrell.beavers@ohfa.org