Recourse in Affordable Multi-Family Projects

mjray87's picture
Rank: Baboon | banana points 103

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?

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).

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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

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