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A Big Deal in Cash Preservation

April 10, 2017

With better pricing, higher proceeds and lower DCR requirements, it’s a good time to consider a Cash Loan for Affordable Housing Preservation.

Here’s how a recent deal worked—The Hamptons at Town Center in Montgomery County, Maryland. For targeted affordable housing, Hamptons was the largest capital markets cash preservation deal we originated last year.

This complex, $93 million refinance transaction brought together Freddie Mac,
AHC Inc. (a leading not-for-profit affordable and mixed-income housing developer), our Seller/Servicer Capital One, and the Montgomery County Department of Housing and Community Affairs (DHCA).

Loan proceeds were used to pay off the existing first trust loan, buy out AHC’s preferred equity partner, and repay a substantial portion of the County’s initial loan made to AHC to help finance its 2012 acquisition of the property.

AHC

AHC acquired the 768-rental community to preserve rental housing affordability in the fast growing I-270 corridor in Montgomery County, in the Washington, DC/Baltimore area.

Thanks to this deal, residents enjoy a well-maintained and affordable place to live in a fast-growing bio-science corridor with excellent access to transportation, shopping and employment, as well as high quality public schools. The apartment community features a pool, 24-hour fitness center, tennis courts and clubhouse.

Thirty percent (230) of the apartments are rented by households earning no more than 60 percent of the Area Median Income (AMI)—or $64,500 for a family of four. The remaining 70 percent (538) apartments float at market rates and are currently affordable to workforce households earning about 61 to 70 percent AMI. The affordability restrictions will remain in place for 30 years, and all renewing tenants benefit from rent increases capped at the Voluntary Rent Guideline percentages issued annually by Montgomery County.

“Through this innovative public-private partnership, lower income residents are able to remain in a rapidly gentrifying area where rent growth has continually outpaced increases in AMI,” said AHC Multifamily Director Alan Goldstein.

Commenting on the success of the project, Goldstein said: “AHC worked closely with Capital One to structure a deal that met AHC’s financial objectives, preserved long-term affordability, and recycled jurisdictional subsidy funding without relying on tax exempt bonds or Low Income Housing Tax Credits.  We’ve closed a number of structured transactions with the Capital One team, but this was our first GSE execution with them. The lender worked closely with all of the parties to ensure a seamless closing on a very large loan!”

The project is the largest community ever acquired by AHC. The acquisition financing included the largest loan ever from Montgomery County’s Housing Initiative Fund to help preserve housing low- to moderate-income families can afford.

Meet the Residents

Tjsade Scott and her son Jonah were able to stay in their apartment at The Hamptons thanks to the affordable housing program AHC offers and our innovative partnership. Scott said the program “truly changed her life” and that without it, she would have to move in to her Mom’s house.

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A pre-K teacher at a school ten minutes away, Scott moved in to The Hamptons in 2015 but when her lease was up for renewal a year later, found she could not afford to live there anymore. With the help of AHC and her rent cap, she and her son were able to stay in the community they love. Jonah’s favorite thing about The Hamptons? The swimming pool.


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