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Real Estate Bisnow
January 16, 2013 
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6 Ways to Finance Affordable Housing

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This morning at Bisnow's Affordable Housing Summit at the Renaissance Harborplace, our panelists bemoaned the infamous gap—the span between public financing/tax credits and private money. (That gap has far fewer casual sweaters in it than the one we were thinking of.) Then they offered the latest creative solutions.
1) Remove Risk for Partners
Scott Nordeheimer and Jonette Hahn at the Renaissance Harborplace on Jan. 16, 2013
Urban Atlantic's Scott Nordheimer (with CohnReznick's Jonette Hahn) suggests easing the burden on housing authorities. For a 196-unit mixed-income project in DC that'll close in 60 days, Urban Atlantic made the participating housing authority a partner in the market-rate segment, too. Scott's firm subordinated its debt and gave up some cash flow, but the housing authority's cash flow keeps it from stressing over writing checks each month. It's a pilot project, Scott says, but one that gives him hope.
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2) Create Your Own Fund
Renaissance Harborplace on Jan. 16, 2013
Scott's firm also launched a national fund to acquire preservation properties. The fund can move quickly to acquire, essentially acting as mezz financing that gives Urban Atlantic time to seek tax-credits. Scott says his firm expected a variety of investors in the fund, but one swooped in and took it all, so his firm is launching a second one. (We took this picture to double check everyone was paying attention.)
3) Get the Government to Help
Ivy Dench-Carter and Lila Shapiro-Cyr at the Renaissance Harborplace on Jan. 16, 2013

Pennrose Properties' Ivy Dench-Carter (with Ballard Spahr's Lila Shapiro-Cyr and Enterprise's Corey Powell) says the state of Maryland's Rental Housing Works program, especially the $25M the governor included in the budget for the program this year (up from $17.5M last year), means a lot when other states are cutting such aid. She says folks in this industry must keep writing to their elected reps to make the 4% and 9% tax credits permanent. City and state subsidies are even more important as federal appropriations drop.

4) Diversify
Ivy also says her company, traditionally a pure affordable housing firm, is diversifying into mixed-income. Pennrose just closed a loan with Bank of America for a 104-unit mixed-income development that's a little different: Rather than building in a market-rate neighborhood and including affordable units, the project brings market-rate renters into a low-income neighborhood. And, she says, the market-rate units leased first.
5) Follow Others' Lead
Priya Jayachandran, Danielle Howarth, and Steve Smith at the Renaissance Harborplace on Jan. 16, 2013
Bank of America Merrill Lynch's Priya Jayachandran, whom we snapped with Ballard Spahr's Danielle Howarth and fellow panelist Steve Smith of Enterprise Homes, says DC and Virginia use PILOTs and tax abatements more aggressively than do Maryland operators. Abatements, she says, are easier for governments to grant than up-front cash.
6) Give Them Freedom
Amy McClain at the Renaissance Harborplace on Jan. 16, 2013
Our moderator, Ballard Spahr partner Amy McClain, praised HUD's Moving to Work program, which gives housing authorities a bit more freedom to decide how to spend their annual cash flow and test local strategies.
Christine Madigan at the Renaissance Harborplace on Jan. 16, 2013
Enterprise Homes' Christine Madigan says Section 8 is gaining appeal among traditional investors. Her company was the winning bidder among 18 for the 98-unit Locust House Apartments in Westminster, but she's sure not all 18 of those were affordable players. In fact, a mystery investor recently beat out Enterprise for the 30-unit property Apostolic Towers near Hopkins.
Mike Muldowney, Michael Bainum, and Jon Laria at the Renaissance Harborplace on Jan. 16, 2013
We also snapped CBRE's Mike Muldowney, Enterprise Homes' Michael Bainum, and Ballard Spahr's Jon Laria. Mike says Enterprise's Locust House deal with AIMCO was successful and more Section 8 properties will come to market in the next few months. Jon tells us he and housing department colleague Lila (pictured above with Ivy) won a bet this past Saturday: Long story short, two of their Denver peers will be wearing Ravens jerseys at the firm's annual partners' meeting next week.

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