RAD: A New Source of

Rental SubsidySeptember 29, 2013

2

Authorized in Consolidated Further Continuing Appropriations Act of 2012 (Public Law 112-55)

• Initial program rules outlined in PIH Notice 2012-18 (3/8/12)

• Final program rules outlined in PIH Notice 2012-32 (7/26/12)

• Revision 1 in PIH Notice 2012-32 REV 1 (7/2/13)

Allows public housing and certain at-risk multifamily legacy programs to convert to long-term Section 8 rental assistance• 1st Component, Competitive: Public Housing & Mod Rehab

• 2nd Component, Non-competitive: Mod Rehab, Rent Supp, & RAP

RAD AUTHORITY

Public Housing• Capital repair needs in excess of $25.6B across portfolio, or

$23,365/unit

• Section 9 funding platform unreliable (pro-rations, cuts), inhibits access to private debt and equity capital (declaration of trust)

• Losing 10,000-15,000 hard units/year

WHY RAD?

3

4

2000-12 FUNDING CURVES—SECTION 9

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012$0

$1,000,000,000

$2,000,000,000

$3,000,000,000

$4,000,000,000

$5,000,000,000

$6,000,000,000

PIH Capital FundPIH Operating Fund

Graph does not include $4billion in 2009 to Cap Fund through ARRA

5

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012$0

$2,000,000,000

$4,000,000,000

$6,000,000,000

$8,000,000,000

$10,000,000,000

$12,000,000,000

$14,000,000,000

$16,000,000,000

$18,000,000,000

PBRA TBRA

2000-12 FUNDING CURVES—SECTION 8

Graph does not include $2billion in 2009 to PBRA through ARRA

PBRA OCAF ~4% per year

6

Pre-Conversion Post-Conversion $-

$100

$200

$300

$400

$500

$600

$700

$800

$900

Tenant Payment $318 Tenant Payment $318

Capital Fund $144

Operating Fund $330 Housing Assistance Payment

$474

Sample Public Housing Conversion Per Unit Monthly

$792

RAD PH RENTS—CONVERTING CURRENT FUNDING

Section 9 ACC Section 8 HAP

At closing, funding is

converted to a Section 8

contract rent

7

• Public Housing & Mod Rehab• Can compete to convert assistance to:

– Project-Based Rental Assistance (PBRA) or – Project-Based Vouchers (PBV)

• Cap of 60,000 units (applications must be received by 9/30/2015)

• Convert at current funding only• Choice-Mobility, with limited exemptions• Applications are first-come, first-served until cap reached

1ST COMPONENT—OVERVIEW

8

1st Component—As of July 1• 132 CHAP awards—14,781 units• 51% converting to PBRA; 49% converting to PBV• Over 60% of projects planning to use LIHTCs• ~ 45% of deals using FHA insurance [223(f) & 221(d)(4)]• Over 60 partnering lenders and investors• Leverage ~$815M in debt & equity investments

(conservative)

1st Component—Since July 1• Additional 100+ applications—or +18,000 units

1ST COMPONENT—STATUS

RAD 1ST COMPONENT INITIAL AWARDS—GEOGRAPHY

9,997Units

949Units

2,556Units

1,279Units

Northeast Midwest South West Total

PHAs and Mod Rehab Units Awarded 949 1,279 9,997 2,556 14,781

9

10

Capital Needs• 22% New Construction• 78% Rehab

― 24% proposed Greater than $50K in Rehab― 23% proposed $30K – 50K in Rehab― 21% proposed $10K – 30K in Rehab― 32% proposed Less than $10K in Rehab

PH INITIAL AWARDS—KEY CHARACTERISTICS

11

PHA Objectives• Modernize aging family & elderly properties• Sub rehab of deteriorated properties• Thin densities/mix-incomes via PBVs & transfer

authority• Demolish/replace severely distressed/obsolete

properties• Portfolio streamlining

PH INITIAL AWARDS—KEY CHARACTERISTICS

• Locking in 2012 contract rents for all applications received by 12/31/13

• Allowing a PHA to “bundle” rents to facilitate financing

• Allowing MTW agencies rent fungibility

KEY CHANGES IN THE RAD NOTICE

12

• Mixed Finance projects- Removing unit cap for Mixed Finance projects- Allowing financially distressed HOPE VI projects to apply

• Exempting awarded projects from the Public Housing Assessment System (PHAS)

KEY CHANGES IN THE RAD NOTICE

13

• Eliminating unit caps on: - Mod Rehab projects - # of units a PHA can convert

• Creating new awards for:- Portfolio conversions- Multi-phase conversion- Joint RAD/CNI applicants

KEY CHANGES IN THE RAD NOTICE

14

15

Winter

2012

Sprin

g 2013

Summer

2013

Fall 2

013

Winter

2013

Sprin

g 2014

Summer

2014

Fall 2

0140

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

Awards-to-Date

Awards Expected Based on Applica-tion Trends

Awards Expected Based on Current Outreach

Anticipated Future Awards

Agg

rega

ted

Num

ber o

f Uni

t Aw

ards

Issu

ed

RAD PH AWARDS TREND CHART

16

• For profit and non-profit Developer Opportunities• First new HAP contracts in over 20 years

• Responding to PHA RFP’s for development services• Larger PHAs: mixed income developments, etc.• Mid-sized PHAs: 250 to 2500 units: Development opportunities

not previously available.• Resource: HUD website: PHA profiles; PHA mortage amounts

based on RAD; RAD Inventory Assessment Tool

• Conversion of existing mixed finance developments• Combining other HUD programs, (Choice Neighborhoods,

etc.) with RAD • Development of off-site “transfer of assistance” units

DEVELOPMENT OPPORTUNITIES

Streamlined-Enhanced FHA 223(f) & LIHTCs

• Rehab expenditures of up to $40,000/unit

• Tax credit or Bond Cap allocation in hand

• Processed in Multifamily Hubs

• Using MAP lenders approved for the Pilot

• Goal of 3-4 month turnaround on applications

17

FINANCING: FHA LIHTC PILOT PROGRAM

18

Section 223(f) • Refinance or acquisition• Minor/moderate repairs ($6,500/unit*high cost factor)• Permanent debt with repair escrow - up to 35 years

Section 221(d)(4)• Substantial rehab: 2 major building systems• Construction/permanent debt all in one - initial/final closing• 40-year financing

Mortgagee Letter for RAD Transactions issued 10/12• Eligibility, underwriting criteria, processing & materials

FINANCING: FHA MULTIFAMILY MORTGAGE INSURANCE

19

• TE Bonds and 4% credits• Short bond structure• Higher rents• Lower borrowing rates• HFA support in QAPs for 4% deals: gap funds; scattered

sites; pools; preservation set-asides; etc.

• 9% credits• New construction• Points for HAP contracts for off-sites

FINANCING: LIHTC

20

RAD Notice, application materials, and additional resources can be found at

www.hud.gov/rad

Email questions to radresource.netSign up at radcapitalmarketplace.com

RAD WEB PAGE

CURRENT RAD LENDERS & INVESTORS

Alliant CapitalBoston CapitalCalifornia Community Reinvestment CorporationCenterline Capital GroupCommunity Affordable Housing Equity CorporationCommunity House Partners Development CorporationDirect Tax Credits, Inc.Enterprise Community InvestmentGeorgia Department of Community AffairsGreat Lakes Capital FundHudson Housing CapitalHunt Capital ParntersNational Equity FundNewport Partners LLCOhio Capital CorporationOhio Capital Housing CorporationPNC Real EstatePrestige Affordable Housing Equity PartnersRaymond James Tax Credit Funds Inc.RBC Capital Markets

Arbor Commercial MortgageBeekman SecuritiesCenterline Mortgage CapitalChase BankColumbus Bank and TrustContinental Mortgage CorporationFederal Home Loan Bank of ChicagoHunt Capital PartnersMcCan CommunitiesNew Mexico Bank & TrustNW Financial Group LLCRabobank N.A.Red Stone Equity PartnersSunTrust BankTD BankUS BankRed Stone Equity PartnersRichmon GroupUnion Bank

Bellwether Enterprise Real Estate Capital LLCCapital Fund Services Inc.Crain Mortgage Group LLCFifth Third BankFirst Citizens Bank NAForest City Capital CorporationGreat Lakes Capital FundHighland Commercial MortgageLake Forest Bank & Trust CompanyLancaster PollardLove FundingM&TPNC Real EstatePrudential Huntoon Paige Associates LLCRBC Capital Markets Housing Finance GroupRed Mortgage CapitalRockport MortgageSt. James Capital LLCUS Bank Community Development CorporationWalker Dunlop

21