New to LIHTC deals and trying to figure out if our structure works. It is a 4% LIHTC conversion deal in the Northeast. We have a JV partner who has done several LIHTC deals but recently got burned on another deal by the 10-year rule, which reduced their expected LIHTC proceeds.
We acquired the building 2 years ago and will be selling the property into a new 50/50 JV with the development partner. From what I'm told we can't count the acquisition cost in our basis unless we qualify for one of the waivers under the 10-year rule.
Our proforma has DOH funds coming into the deal along with additional funding from a state housing agency. Someone mentioned there's an exception to the 10-year rule if you have federal or state housing agency financing involved. Is that right? And if so, does a DOH loan actually qualify?
Has anyone dealt with this before? Would really appreciate hearing from people who've closed deals in similar situations.
75% sure HUD 221d4 and 220 loans that are assumed from the seller are exempt. There was something with section 8 too but could be wrong. My hunch is that DOH loans would not qualify.
Freddie Mac Bond Credit Enhancements with HUD Risk Share 542(c) risk share
Some, but not all equity investors will consider risk share loans to satisfy the federal assistance requirement. 221d4 and Project based HAP contracts will get around the 10-yr hold issue. I suspect your issue will be proving “substantial” federal assistance. If the DOH grant is not 50% of the cap stack, probably not going to qualify. Happy to answer more questions. Feel free to PM.
Voluptate quis est odio fugit odio. Illo quam consequatur sint accusamus magnam veniam natus. Inventore iusto voluptatum non possimus incidunt sed. Eveniet tenetur voluptas nulla qui non.
Ea eius recusandae sunt quis sint explicabo. Ut omnis repellat hic deleniti aliquid. A et consequatur qui quia sed reiciendis dolores.
Quis et incidunt ea. Iste quia repellat harum voluptates repellendus.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...