PRESENTATION TITLE Texas Housing Conference July

Report
Year 15 – The End of the Rainbow Where is my Pot of
Gold?
Texas Housing Conference
July 22- 24, 2013
Four Seasons Hotel
Austin, TX
Presenters
Justin MacDonald, MacDonald Companies
Cynthia Bast, Locke Lord
Michael Regan, Boston Capital
Jeff Kunitz, Tax Credit Group of Marcus & Millichap
Chris Thomas Cohn Reznick
APPROACHING YEAR 15
KNOW WHAT YOU HAVE
• STEP 1: KNOW THE PROPERTY
– Physical Condition
– Financial Condition (including capital accounts)
– Market Conditions
• STEP 2: Know the Partners and Stakeholders
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GP/Sponsor/Developer
Investors/Syndicators
Private & Public Lenders
Allocating Agencies
Residents
APPROACHING YEAR 15
• STEP 3: Know your Documents
– Land Use Restriction Agreement (LURA)
– Partnership/Operating Agreement
– Loan Documents
• STEP 4: Know the Restrictions
– When does compliance period end?
– TDHCA Requirements
APPROACHING YEAR 15
• STEP 5: Develop Your Plan
– Talk to TDHCA asset manager
– Talk to investors and lenders
– Talk to your lawyer and accountant
ROFR IS KEY DRIVER
• More typical of a 9% deal than a 4% deal
• Different ROFRs, depending upon year of
allocation
• TDHCA Right of First Refusal provisions different
than federal law
• Right of First Refusal must be satisfied before an
owner can go through the qualified contract
process (if qualified contract even available)
• A property must be eligible to go through the
qualified contract process to be considered for
the At-Risk Set-Aside under the QAP
ROFR PROCESS
• TDHCA Rules Section 10.407
• Generally, two different prices
– Fair market value
• Used in allocation years 1991 - 1995
• Based on appraisal or offer
• Typically 90-day timeframe
– Section 42(i)(7)(B) “debt plus exit taxes”
• Used in allocation year 1995 and 1997 to present
• Became statutory in 1998 (2-year timeframe)
– Texas Gov’t Code Sec. 2306.6726
• Includes debt secured by the property, not in the last five
years
ROFR PROCESS
• The two-year ROFR:
– First six months – Qualified Non-Profit
Organization/CHDO
– Next six months – any Qualified Non-Profit
Organization
– Next twelve months – any Qualified Non-Profit
Organization or tenant organization
– Note governmental entities are excluded, even
though they are permitted in Section 42
ROFR PROCESS
• Required submission
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Price calculation
Property description
All regulatory agreements
Title
Physical needs assessment
12 months operating statements
3 years audits
Photographs
Rent roll
$2500 fee
ROFR PROCESS
ROFR PROCESS
ROFR PROCESS
• What if I get an offer?
– Can accept and move forward, even if ROFR period
has not fully run
– Can wait until end of ROFR period for other offers
– Can decline the offers and hold property
– If sale price changes materially, may need to go
through the process again
• Non-profit offeror must be qualified purchaser
– Previous participation review
– 100% ownership
ROFR PROCESS
• What if I don’t get an offer?
– Can proceed for qualified contract
– Can sell at the posted value or higher
– 24-month period
OWNERSHIP TRANSFER
• Once a buyer is identified Development
Owner must still go through the ownership
transfer process with TDHCA
– Full package
– $500 fee
– Previous participation review
AVOIDING THE ROFR
• Sell before end of compliance period
• Offer to a specific non-profit that is declined (only
available in certain LURAs)
• Sell GP interest only (transfer of all partnership
interests triggers ROFR)
• Sell directly to a qualified non-profit
– Section 10.407(d)
“To satisfy the ROFR requirement, the Development Owner may sell the
Property to the Qualified ROFR Organization selected by the
Development Owner on such basis as it shall determine appropriate and
approved by the Department.”
• Take out the LP, hold, and refinance

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