We're valuing a rural development portfolio for one of our clients, and I was wondering from you guys who are in LIHTC shops on here how you make sense of these deals if the QAP has a high hard costs per unit threshold. Is there a way to negotiate this down? In the state we're valuing the portfolio that's never been in the program, the minimum hard rehab costs per unit is $20K without figuring in the developer fee or soft costs on what are already low rents. The properties are receiving RD subsidy so we're thinking of modeling an assumption of the 538 loans as well on today's terms. I've heard of this being done, but not understanding how this pencils out given where tax credit pricing is and the amount of capital that needs to be put in. Any practical advice or insight is greatly appreciated.
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Some states are willing to waive the hard cap on rehab costs if the Capital Needs Assessment comes back showing it doesn't need the level they mandate. Good luck!
I'm assuming you've tapped all the soft money loans available?
We would model that in. Soft money varies a lot by state and sometimes the trade off is a wash when they make you drop your AMI restrictions to very low income levels in return for the debt.
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