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From my limited knowledge, it depends what your experience within LIHTC is. If you are providing financing for LIHTC deals, then that is many times more complicated than with other commercial deals and can then be an easy transition to commercial lending. If you are working with a developer, then I would think there could be more of a likelihood of being pigeon holed.
I'd like to hear what others will say as well.
+1. I work for an affordable lender and agree with this. Same can be said for an owner/operator or AM. You will pick up additional skills but still be able to transition to the conventional side easily. Now if your working for a developer, you may gain too much specialized knowledge that it will keep you in the affordable industry
I'm currently working for a LIHTC syndicator. My boss told me when I started, "LIHTC is real estate.... sort of." On the Acquisitions side, you can get pigeon-holded very easily. The experience is great, but I wouldn't recommend staying for more than two years. I'm looking to move to Capital Markets IS teams at large brokerages. It's taken a ton of networking for me to get interviews. We don't use Argus DCF or AE. It's a proprietary excel model. Valuation is totally different than a typical CF analysis. Also, the industry is VERY rocky right now with the uncertainty of where the corporate tax rate will end up. Investors are very reluctant to jump back into the market. I'm not sure why ANY LIHTC developer/investor/syndicator would be hiring. Deal flow has been very slow since the election. Be careful when accepting a job in this industry because it can be difficult to get out of if you stay in for too long.
This sounds VERY similar to the position. Any questions during a call you recommend I ask?
If it's with a LIHTC syndicator, here are some questions I think you should ask:
What does your pipeline look like in terms of volume? They should at least give you a macro-level view on the company's recent performance.
Is the uncertainty in corporate tax rates scaring your investors? I wouldn't say it exactly like that, but it's a fair question.
Do you feel the company will be able to make it through this uncertainty and continue to be productive?
Is there a clear promotion ladder? My company has too many VP/producers. There isn't enough business to go around right now. I have no shot at progressing up the ladder. You should find out how they operate.
I've asked all of these questions to my VP and other VPs in the company. My company is trying to stay alive right now, but we are getting beat on deals by direct investors (ex: big banks) and other syndicators that are backed by big-banks.
CRE" is right in terms of the difference between LIHTC and community development. Those developers can make A LOT of $$$$. Unfortunately, I don't work for one of them. I needed to take a position after a few internships at IBs didn't turn into full-time opportunities. After two years, I'm looking to get out and into capital markets.
maineiac42" is also correct in that LIHTC shops will pay up for experienced analysts, associates, VPs, etc. There is a ton of tax law that you need to know and the modeling can be complex. People make money in this industry, but the election has thrown a wrench into the works.
It's smart to find out as much as possible before the call. Good luck with the interview.
Most people "pigeon-holed" into LIHTC work chose to be there, either out of a moral obligation to help people or because it is a very unique skillset that is growing in demand as housing affordability becomes more and more of a problem.
Don't confuse LIHTC with community development companies either. One of my best friends makes good money in the space and a mixed-income/workforce developer I know is absolutely loaded. You can definitely do very well for yourself.
"work force developer." are these created through tax programs, or are they market driven?
You could get "pigeon holed", but there are a lot of shops that do market rate and LIHTC. From an outsider's perspective I can see why it would seem like you would get trapped in the industry, but the main difference in LIHTC is that the industry is so esoteric and you really have to know your shit. The industry is also aging and as a result there seems to be demand for experienced talent in the industry.
I work in Asset Management for one of the largest direct LIHTC investors. I manage the deal cycle from closing to disposition. The level of complexity of a LIHTC deal is far greater than any traditional white bread real estate deal.
Because of this I think I have the opportunity to grow not only within the LIHTC group but also within the larger commercial real estate group as well. I could also move laterally to the front end. And I could also exit to private equity, where my real estate, tax accounting, legal document knowledge, and most of all, complex niche deal exposure, will make me a valuable asset in both LIHTC and non-LIHTC positions.
Although I am new to my current role, I assure you LIHTC is some of the most intellectually challenging work in the CRE space, and I'd encourage you to explore it a little more.
bump
Curious for an update on what people in the AH/LIHTC space are seeing in the market after the newest tax reform was introduced.
Also, any other input/success stories on exit opportunities to a different asset class after affordable housing?
We should be seeing a further adjustment of about 2-5 cents per credit. Corp rate settled at 21%, and the industry had already adjusted to an expected 25% rate after Trump's election, so the remaining adjustment will be very small. For example, in NYC, pricing in summer 2016 was as high as $1.25-1.30/credit, and by late December settled in around $1.00-1.05/credit, depending on the project/sponsor. I would expect that number to stabilize around $1.00 now (NY is an expensive market) and inch upwards as banks compete for business to fulfill CRA needs.
Why would someone pay more than $1 for a tax credit?
Does anyone work in acquisitions of existing properties in LIHTC? PM me if you want to connect on a possible conversion opp in my firm's portfolio.
Hi all I was wondering if modeling for LIHTC would be the same as a regular multi-family deal? If not does anyone have a model for what a LIHTC deal would look like?
I don't have a model for you but can give my 2 cents.
It depends on how tenants are paying rents and how long the Lura lasts. If there's a HAP contract you just model around that, if the tenants are paying with section 8 vouches then you minus the voucher overhang from max lihtc rents and underwrite to that. Determining whether the max lihtc rents are eligible/worth the effort to be marked up because of increased AMI is also factor. R&M is usually lower than market rate as well. Lastly, if the lura is expiring soon then you should model a conversion to market or lihtc resyndication.
Modeling LIHTC deals looks nothing like market rate multifamily because your return on equity is via tax benefits (credits, depreciation, losses) not cash flow. You only care about cash flow to the extent that the project will break even for a while as you take your benefits. The GP takes his developer fee, management fee, incentive management fee, and usually most of the CF if there is any. Any cash the ILP gets is just gravy, whereas in a traditional deal cashflow is the primary evaluation metric.
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