Financial Consulting and Syndication of Low Income Housing Tax Credits
The California Housing Partnership advises client partners on financial strategies to maximize equity and bond or loan proceeds raised, selection of equity investors, lenders, and underwriters, negotiation of deal points, preparation of financial projections, and assistance in obtaining funding from a large array of competitive programs. The Partnership has provided financial consulting services on hundreds of multifamily transactions totaling more than 75,000 apartments. Typical client projects range from new construction of family apartments with childcare to acquisition and rehabilitation of SRO buildings for extremely low-income residents with special needs. Depending on the development, the California Housing Partnership helps client partners obtain financing from the following programs:
- Tax-Exempt Bonds
- 9% and 4% Low Income Housing Tax Credits
- Multifamily Housing Program (MHP)
- Transit-Oriented Development (TOD)
- Infill Infrastructure Grant Program
- Joe Serna Farmworker Housing Grant Program
- Mental Health Services Act (MHSA)
- California Housing Finance Agency (CalHFA)
- State HOME
- McKinney Supportive Housing Program
- Rural Development programs
- Project-based Section 8 Vouchers and contract extensions
- Federal Home Loan Bank AHP Program
- HUD, including 202/811 Mixed-Finance and FHA mortgage insurance, and Preservation programs
- Local CDBG, HOME and Redevelopment Agency programs
- Other federal, state and local funding sources
Approach to Providing Financial Consulting Services
Unlike typical financial advisors, the California Housing Partnership does not see itself as a third-party consultant whose sole task is to run financial projections and advise on important financial decisions. The Partnership takes to heart the part of our mission that focuses on building the long-term capacity of our clients, who we see as long-term partners. The California Housing Partnership program managers all have many years of experience in the field enabling us to provide intensive coaching and mentoring to less experienced project managers and engage more experienced project managers and Directors of Housing Development in detailed conversations about the pros and cons of various approaches to financing their developments as well as tips on avoiding pitfalls in the development process. We like to be called in early in the development process before the first decisions affecting financing are made and we stay involved until well after the property is completed. We also provide inside information on the latest trends in pricing and likely changes to program regulations and funding sources before they change.
Fees for Services
Our fees are calculated on what it costs us to provide the services described above and are on average less than half of what for-profit consultants charge for syndication and consulting services. To reflect the level of investment we have in our work and our relationships with our clients, we typically bill only when major milestones are achieved. We also work on an hourly basis when the scope of our work is less defined or there is less certainty about whether the client wants to move forward with developing a site.
Sample Scope of Services
The California Housing Partnership typically provides the following services as part of its financial and preservation consulting:
- review of sponsor’s development budget and financial proforma;
- review of rental income assumptions;
- evaluation of TCAC regulatory compliance and competitiveness issues
- review of sources of funding and potential regulatory issues that may arise by combining sources;
- analysis of 4% (tax-exempt) versus 9% (taxable) tax credit structures; analysis of potential bridge loan financing;
- analysis of applicable State programs, including MHP, TOD, Infill
- evaluation of timing considerations;
- analysis of HUD regulatory issues, if applicable; and
- other related feasibility issues and potential sources.
Local Government Commitments
Assist Sponsor in creating financial models for submittal to local governments for such funding as CDBG, HOME, Redevelopment Agency or other locally administered funds. Assist in negotiations over loan amounts and terms.
Assist Sponsor to secure the most advantageous conventional and/or tax-exempt bond financing commitment. The California Housing Partnership will assist in developing financing models, lender bidding if requested, review and negotiation of pricing and all terms, including rates and rate options, fees and expenses, forward rate locks, hedges (if applicable), guarantees and covenants, valuation methodology, conversion terms, public vs. private placement structure, and other related issues.
Assist Sponsor in structuring a tax credit application, including project feasibility, syndication and financing projections, meeting California Tax Credit Allocation Committee (TCAC) thresholds, maximizing competitiveness, and other related issues. Sponsor will package the application; the California Housing Partnership will prepare financial sections and review other sections as needed.
CDLAC Application (if applicable)
Assist Sponsor in structuring a tax-exempt bond application, including project feasibility, preparing financial projections, obtaining credit enhancement or bank purchaser, selecting a bond lender, meeting California Debt Limit Allocation Committee (CDLAC) thresholds, maximizing competitiveness, assistance with bond closing and other related items. Sponsor will package the application; the California Housing Partnership will prepare financial sections and review other sections as needed.
MHP Application (if applicable)
Assist Sponsor in structuring an application to the California Department of Housing & Community Development’s Multifamily Housing Program (MHP), including project feasibility, preparing financial projections, meeting MHP program thresholds, maximizing competitiveness, MHP loan closing and other related items. Sponsor will package the application; the California Housing Partnership will prepare financial sections and review other sections as needed.
Mental Health Services Act (MHSA) Application (if applicable)
Assist Sponsor in structuring an application for funding from the Mental Health Services Act (MHSA), including feasibility analysis, structuring the capital loan and/or capitalized operating subsidy, assisting with financial sections of the application, maximizing competitiveness, closing, and other related items. Sponsor will package the application; the California Housing Partnership will prepare financial sections and review other sections as needed.
Upon the receipt of a preliminary tax credit reservation, or prior to as required, the California Housing Partnership typically performs the following services:
- Prepare financial projections and analysis of various equity investment scenarios, as well as preparation of financial projections (including complete tax consequences) for presentation to prospective investors. Assist Sponsor in identifying, evaluating and selecting an investor. Selection of an investor may include the preparation by the Partnership of a formal Request for Proposals.
- Assist Sponsor and legal counsel to negotiate a letter or intent and/or commitment letter from a prospective limited partner which frames the key terms of the investment and other related matters, including: maximizing the equity raise and fees to the general partner; equity adjusters; distribution of cash flow; allocation of proceeds upon sale or refinancing; developer fee timing; long-term control of the project by the general partner; option, right-of-first-refusal, and protection of the long-term affordability of the Project; GP guarantees and indemnity requirements; and timing and thresholds for limited partner pay-ins.
- Assist Sponsor in meeting due diligence requirements for final approval of Project by investor.
- Assist Sponsor in preparing and submitting required submittals to TCAC, including 10% Carryover Allocation, 270-day threshold, Final Reservation and Placed-in-Service request (if applicable). If required, assist Sponsor in selecting a bridge lender, applying for bridge financing, and meeting bridge lender closing requirements.
- Assist Sponsor and legal counsel to negotiate the required legal documents for the syndication, which may include: limited partnership agreement, ground lease, general partner promissory notes and security agreements, option and/or put agreement, development and service fee agreements, and any general partner guarantee agreements.
- Prepare preliminary and final financial projections as required for the investor during due diligence, syndication closing and capital contribution funding.
- In conjunction with the syndication work, assist Sponsor in coordinating the key aspects of the syndication as they relate to other development and finance issues and decisions as appropriate to insure coordination of resources and avoid conflicting policies, documents and schedules.
- Assist Sponsor in closing the syndication.
- Assist Sponsor in reviewing the TCAC cost certification prepared by the project accountant.
- Assist Sponsor in receipt of Form 8609.
- Assist Sponsor in calculation of equity adjusters and receipt of final equity pay-ins.