In the April 2014 issue of the Tax Credit Advisor, Armand Tiberio of the Tax Credit Group of Marcus & Millichap Real Estate Investment Services (TCG) provides a summary of trends in LIHTC property sales in recent history.
According to Tiberio, there has not been much change in the last year in the characteristics of the buyers of LIHTC properties in brokered sales. Approximately 70% were market-rate multifamily owners that are expanding into owning and managing affordable housing. The remaining typical buyers were tax credit developers.
Other common characteristics of recent LIHTC property sales, as noted by Tiberio, included the following:
- The average sales year continued to be Year 13, which has not changed in the last 7-8 years;
- Typical sellers have been a variety of owner/developers seeking to invest in newer developments, leave the tax credit business or developers whose main line of business is not affordable housing;
- A small share of the properties (< 15%) have been sold for resyndications as many of these assets are only 15 years old and not eligible for new tax credits;
- The main source of equity used by buyers is private capital and Fannie Mae and Freddie Mac account for about 90% of the debt utilized;
- Very few buyers are seeking to convert the assets to conventional housing; and
- Cap rates have been constant over the last 12 months with the exception of the slight adjustment when interest rates went up in July 2013.
TCAM continues to follow trends in the Year 15 inventory, helping both owner/developers and limited partners plan for and manage Year 15 transactions.
To learn more about TCAM’s Year 15 services, please contact us at Allen Feliz (afeliz@tcamre.com) — (617) 542-1200.