Rental Development

From its inception in 2000, the Housing Partnership Fund has provided early capital to Network members that are preserving or developing affordable rental homes. Eligible properties must meet minimum affordability standards: 20 percent of the homes must be affordable to residents at 50 percent of area median income (AMI), or 40 percent must be affordable to residents at 60 percent of AMI. Approximately two-thirds of the Fund’s activity has been in the support of acquisition and preservation of affordable rental homes, but there has been substantial investment in new construction as well.

We offer three products:

Rental Predevelopment Loans
Predevelopment loans provide preacquisition capital that helps borrowers determine the feasibility of projects and reach closing. The loans are repaid from the proceeds of acquisition financing.

Short-Term Acquisition Liquidity (STAL) Loans
STAL loans provide ready capital for the acquisition of sites or buildings intended for affordable rental housing. In addition to acquisition costs, STAL funds may be used for immediate repairs and for the refinancing of predevelopment financing. Designed primarily as affordable subordinate capital, the Fund has also taken senior lien positions on smaller projects.

STAL loans are repaid from the proceeds of construction financing, or, on acquisitions that do not require significant immediate improvement, from permanent financing. The Fund typically does not act as a lender during the period of construction or substantial rehabilitation.

Mark-to-Market (M2M) Loans
M2M loans finance the cash flow available to nonprofits that are acquiring a property that has undergone restructuring through HUD's Mark-to-Market program. These loans are typically not secured by the real estate, but are made to the project sponsor, who introduces them to the project as owner equity. They are typically used to assist in the purchase of the property and to fund associated soft costs.

In underwriting a proposed loan, the Fund examines the borrower's capacity and history with projects of the type proposed. We review the history of the project (if occupied), as well as future market assumptions. To the extent that construction or permanent financing is prospective, we examine contingency plans. Because all lending is recourse to the Network member, we also examine the financial condition of the borrower and the parent.

An example of a recent rental transaction by the Fund include financing the acquisition of an existing apartment complex in Rockville, Maryland by the Montgomery Housing Partnership (MHP). In the current climate, the price for the rental community appeared a bargain, and MHP wished to seize the opportunity to guarantee long-term affordability in a traditionally expensive rental market.

For more information, contact Matt Perrenod.