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MCCORMACK BARON SALAZAR

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Artesian well located in basement. Located in City's Central West End ... National City HTC equity. Missouri Housing Development Corp LIHTCs ... – PowerPoint PPT presentation

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Title: MCCORMACK BARON SALAZAR


1
MCCORMACK BARON SALAZAR Preservation Through
LIHTC and HTC Washington Apartments in St.
Louis
Jonathan Goldstein jonathan.goldstein_at_mccormackba
ron.com 314.621.3400
2
Washington Apartments
  • St. Louis, Missouri

3
Outline
  • Project Background
  • Structure
  • Financials
  • Key Lessons

4
Background History
  • George Washington Inn built in 1902
  • At 7 Stories, among highest in St. Louis
  • Artesian well located in basement
  • Located in Citys Central West End
  • Slipped into decline/disrepair
  • McCormack Baron first redeveloped in 1979

5
Background Tenants
  • Project originally developed as Section 8 Housing
  • 99 one bedroom units
  • Building was occupied
  • Physical structure showed age
  • Design issues
  • Energy conservation issues

6
Background Preservation
  • Central West End hotbed for condo activities
  • Losing many affordable units
  • Condo conversion considered
  • Combination State and Federal LIHTCs and HTCs,
    State Donation Credit permitted preservation

7
Background Physical Plan
  • Reoriented entrance to Kingshighway
  • New roof, tuckpointing/sealing
  • All new historic, energy-rated windows
  • New systems (fire, heat pump, etc.)
  • New unit and common area finishes and appliances
  • New fitness center, community room, laundry
  • Abatement of all lead, asbestos

8
Structure Permanent Sources
  • Tax Exempt Bonds
  • State HOME Funds
  • State Donation Credit
  • 4 Low Income Housing Tax Credit
  • State Low Income Housing Tax Credit
  • Federal Historic Tax Credit
  • State Historic Tax Credit (25)

9
Structure Finance Participants
  • U.S. Bank CDC LIHTC/HTC equity
  • National City HTC equity
  • Missouri Housing Development Corp LIHTCs
  • Enterprise Bank bond purchaser
  • A.G. Edwards underwriter
  • St. Louis Industrial Devp Board bond issuer
  • Urban Strategies donation credit lender

10
Structure Bonds, 4 LIHTCs
  • Bonds unlock 4 credits, act as inexpensive
    bridge for equity
  • In addition, project needed permanent first
    mortgage
  • Borrowed combination of short/long term bonds to
    clear 50 Test
  • Received 4 credits on 100 of units
  • Will redeem short-term series after completion
    with equity, retain long-term series as permanent
    first

11
Structure Donation Credits
  • Missouri has Affordable Housing Assistance
    Program (AHAP) donation credit
  • Credit permits a .55 tax credit for every 1.00
    donated to a nonprofit to support housing
  • Provides huge tax incentive for motivated donor
  • Even where motivated donor not available, equity
    investor can make donation, offset pricing by net
    expense of donation

12
Structure Historic Credits
  • Both Federal and State HTCs used
  • If LIHTC owner uses federal HTCs, must reduce
    basis for LIHTC
  • This would significantly reduce benefits of
    getting historic credits
  • To avoid, we structured Master Tenant for HTCs
  • Master Tenant can receive federal HTC equity,
    push benefit to project without loss of LIHTC
    basis
  • State credits not subject to same limitations

13
Structure Diagram
14
Financials Bond Details
  • Series A (permanent) - 2,875,000 Series B
    (short term) - 4,625,000
  • Total 7.5M is greater than 50 of aggregate cost
    basis
  • Presold to Enterprise Bank, which brought AG
    Edwards in as underwriter
  • During construction, bonds secured by LOC from US
    Bank (equity)
  • 5 interest-only during construction, 6.5
    amortizing thereafter

15
Financials HTC Details
  • 10.9M in Qualified Rehabilitation Expenditures
  • 20 Federal HTC (2.2M in credits) 25 State HTC
    (2.7M in credits)
  • If Federal HTC investor in ownership entity,
    700K lost in LIHTC equity for 2M gained in HTC
  • Instead, owner passes Federal HTCs to Master
    Tenant, Investors purchase from MT, which loans
    funds back to Owner (Master Landlord)
  • MT leases building from ML for lease payments
    that offset ML debt to MT MT then contracts with
    residents
  • Structure is collapsed after five year compliance
    period

16
Key Lessons
  • Helps to operate in progressive state
  • ML/MT HTC structure is complex, include time and
    structuring costs in determining value
  • Beware evolving tax interpretations
  • . . . Shouldve kept the bath houses

17
Questions Jonathan Goldstein jonathan.goldstei
n_at_mccormackbaron.com 314.621.3400
18
(No Transcript)
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