Recourse in Affordable Multi-Family Projects

mjray87's picture
Rank: Baboon | banana points 108

Has anyone seen any structures or could give some feedback on how to limit developer recourse for affordable development (think 4% LIHTC) from either a legal or economic position?

Private Equity Interview Course

  • 2,447 questions across 203 private equity funds. Crowdsourced from over 500,000 mem.
  • 9 Detailed LBO Modeling Tests and 15+ hours of video solutions.
  • Trusted by over 1,000 aspiring private equity professionals just like you.

Comments (4)

Oct 19, 2017

New construction or rehab? Also, what kind of recourse? Construction guarantee? Guaranteeing delivery of credits? From what I remember in a previous life, no real way to avoid the former, but developer shouldn't be on the hook for delivery of credits assuming factors out of their control (e.g. legislative risk).

Oct 19, 2017

Tax credit recapture guarantee, construction completion guarantee, and operating deficit guarantee.

Project is ground up new construction.

Best Response
Oct 20, 2017
mjray87:

Tax credit recapture guarantee, construction completion guarantee, and operating deficit guarantee.

Project is ground up new construction.

Tax credit recapture: known developers can get out of this, excepting for actions or negligence that cause the recapture.

Completion: kind of depends. There are GCs who will put up the completion guarantee for you, just costs more.

ODG: this was always a huge bone of contention, much more so than the other two, and sadly one I usually lost. I don't think it's always the case, but most of the time we ended up with it. Depends on the bank and the deal.

    • 2
Oct 20, 2017