Posts filed under ‘Financing’

FHA Initiative Intended to Boost Development of Affordable Housing

From Housing Wire (via NAA Industry Insider):

The Federal Housing Administration announced a new plan to reduce multifamily insurance rates in order to encourage capital financing of affordable and energy-efficient apartments…

The rate reductions will take effect on April 1, 2016, and will directly impact FHA’s Multifamily Housing Programs and properties housing low- and moderate-income families and/or developments installing energy-efficient systems or building within federal energy guidelines.

As a result, the FHA said it expects the multifamily insurance rate reductions to cause the rehabilitation of an additional 12,000 units of affordable housing per year nationally…

The FHA also announced that it is reducing upfront premiums to support its affordable housing and energy efficiency goals. Upfront insurance rates will be set at 25 basis points for Broadly Affordable and Energy-Efficient properties and 35 basis points for Mixed-Income properties. 

February 5, 2016 at 4:04 pm 1 comment

Miami Using EB-5 Visa Program to Finance Affordable Housing Development

The city of Miam, FL is taking a creative approach to addressing its shortage of affordable housing. They are tapping the EB-5 visa program to attract foreign development dollars:

The city will arrange for selected developments to be partially funded by a federal visa program known as EB-5, which grants green cards to foreigners who invest at least $500,000 in businesses or construction projects that create American jobs. The overwhelming majority of EB-5 investors are individuals from China eager to obtain U.S. residency…

Businesses seeking EB-5 funds typically contact middlemen—often lawyers—who run what are known as regional centers, which work with brokers in China and other countries to recruit investors, pool their investing dollars and funnel the money, often in the form of low-cost financing, to the businesses. The regional centers are paid a fee based on the amount of money they raise.

In the past year, Miami and a few other governments decided to create their own EB-5 regional centers, which allows them to select projects to help finance what would benefit the local community, charge a lower fee to the businesses and, in some cases, use the fees to supplement services such as police and firefighters…

Miami officials said they decided to start a regional center mainly to tackle its lack of affordable housing. According to an analysis prepared for The Wall Street Journal by the University of Florida’s Shimberg Center for Housing Studies, Miami-Dade County lost nearly 21,000 affordable apartments—or those that low- or medium-income people can rent without spending more than 40% of their income each month—from 2000 to 2012. In most cases, the buildings were torn down or converted to attract residents with higher incomes.

The city’s first development is actually an 83-story luxury tower, but they stated that it helped finance the creation of the regional center and that they expect many future projects to target affordable housing. In fact after getting wind of the program a veterans group and some members of the business community came out with a plan to build mixed use facility for veterans near the University of Miami hospital.

August 7, 2015 at 2:42 pm Leave a comment

Greystone Provides $30.5 Million in Loans for Varden’s 941-Unit Triad Portfolio Buy

From Greystone’s press release:

Greystone, a leading national provider of multifamily and healthcare mortgage loans, today announced it provided $30,500,000 in loans for the acquisition of four multifamily properties in the Piedmont Triad region of North Carolina. The four separate loans were originated by Vincent Langan of Greystone and delivered to Fannie Mae under its Delegated Underwriting and Servicing (DUS®) program.

The loan terms for all four properties include 10-year financing with 30-year amortization, one year interest-only and 80% LTV. Acquired by Varden Capital Properties (VCP), the apartment communities comprise a total 941 units and all offer a range of attractive amenities such as swimming pool, fitness center, clubhouse and tennis courts. The properties in this portfolio include:

  • Ashland Apartments in Greensboro, NC
  • The Lakes on Meadowood in Greensboro, NC
  • Ambercrest Apartments in Winston-Salem, NC
  • The Hunt Club Apartments in Winston-Salem, NC

 

February 3, 2015 at 5:05 pm Leave a comment

CMBS Back at the Party

At the height of the recession pretty much the only financing available to apartment developers were government-sponsored enterprises Fannie Mae and Freddie Mac. Since then commercial lending has made a comeback, but just recently commercial mortgage backed securities (CMBS) have started to really heat up. From the Wall Street Journal:

In all, lenders made $94 billion in loans bundled together and sold off as bonds to investors in 2014, the most since 2007 for the product known as commercial mortgage-backed securities, according to trade publication Commercial Mortgage Alert.

Real-estate executives and bankers are predicting that figure will rise in 2015.

That’s good news for some developers.

Growing demand from investors, in turn, has had a magnetic pull on lenders, causing them to pile into the sector. In 2014 there were about 35 active lenders that contributed to CMBS deals, according to Commercial Mortgage Alert. By contrast, there were just 18 in 2011.

As more companies have been jousting to lend, borrowers have been benefiting. Developer Eric Blumenfeld last month secured a $25 million loan for a 205-unit Philadelphia apartment building from an affiliate of Cantor Fitzgerald LP, which then sold it off in a package of commercial mortgage-backed securities. Mr. Blumenfeld said there was more competition among lenders for the loan than he expected and there “was a little bit of a bidding war” before he ultimately went with Cantor, which he had used before.

“Money is more readily available, and for performing assets that have cash flow, there’s a lot of different options,” he said.

January 15, 2015 at 10:06 pm Leave a comment

Why Mortgages Are Still Hard to Get

If you’re wondering why people are still renting instead of buying the Wall Street Journal has an item that helps explain what’s going on. In short, the banks are covering their butts and doing whatever they can to not repeat the mistakes they made during the housing bubble. After having to buy back toxic mortgages and pay billions of dollars in fines they’re playing things extremely close to the vest:

One way to reduce the risk of having to buy back mortgages is to make sure than any loans sold to Fannie or Freddie or submitted for a Federal Housing Administration guarantee not only meet official standards but surpass them. That way, if a loan falls short of the bank’s standards for some reason, it still will likely meet official ones.

Federal housing officials refer to the higher standards as “overlays” and want to eliminate them. To that end, officials have tried to clarify what triggers a buyback and strengthening procedures that allow banks to resist repurchase demands.

So far, however, these have had little effect. Banks have made it clear that it isn’t just repurchase risk that is triggering the overlays. They are the result of internal rules prohibiting banks from making loans their analysis predicts will have a high rate of default.

That is, banks are second-guessing Fannie, Freddie and the FHA. Even if the agencies approve a certain type of loan and promise not to ask the bank to repurchase it, the banks refuse to make the loan if they view it as too risky. Their aim: avoid a situation similar to the one that just cost them billions.

Those of us of a certain age can remember when bankers were seen as stodgy and boring, then deregulation happened and all the sudden they were running with the wolves on Wall Street. Looks like it’s time to say, “Welcome back, stodgy.”

August 26, 2014 at 1:28 pm Leave a comment

Home Sales Lagging, Tight Credit May Be the Culprit

An article in the Wall Street Journal that explores the (still) lagging home sales market has a nugget of data that won’t surprise many apartment managers:

But price hasn’t been the only thing holding back the housing market. The Federal Reserve’s senior loan officer survey shows that as the economy has recovered, banks have been far slower to relax lending standards for mortgages than for other types of loans. In recent quarters they have actually tightened a bit.

Applying hard lessons learned during the bust, households may also be engaging in some self regulation, demanding higher down payments of themselves and more assurances that they will have the wherewithal to make payments…

It is cheering that the price and supply problems that have been holding back housing are showing signs of improvement. True recovery, though, rests on employment improving to the point that banks are more willing to extend mortgages to households and households are more willing to take them. There is hope that with the recent pickup in the job market, that time is no longer over the horizon. But it hasn’t come yet.

Until that time comes apartment managers will continue to see strong demand for their products.

June 26, 2014 at 12:01 pm Leave a comment

Interesting Approach for Affordable Housing

According to this piece in the Wall Street Journal some non-profit affordable housing providers have formed a REIT to help acquire properties:

An apartment complex in suburban Chicago was saved from the clutches of gentrification by a private real-estate investment trust formed to buy and protect affordable housing…

Housing Partnership has raised over $100 million from investors, includingCitigroup Inc., C +0.80% Morgan Stanley MS +2.02% and Prudential Financial Inc., PRU +2.85% as well as the John D. and Catherine T. MacArthur Foundation. The money will be chasing additional acquisitions in the future, says Drew Ades, Housing Partnership’s chief executive…

To compete with the profit-making companies for properties, the housing advocates are combining the benefits of their nonprofit structure with the financial flexibility that comes from operating a REIT.

“We were only able to get this property because of this REIT structure,” says Ms. Holler, noting that Mercy closed on the property in three months instead of the two years it would typically take to raise financing strictly through the nonprofit channels. Yet, Mercy’s nonprofit status came in handy given it was able to use state tax credits to secure the property at a below-market rate.

May 3, 2013 at 7:18 pm Leave a comment

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