27 Apr LIHTC Equity Market Moving Forward Cautiously in Light of COVID-10 Pandemic
The coronavirus pandemic, or COVID-19, is having a huge impact on global health and the economy.
At this time, opinions from low-income housing tax credit (LIHTC) investors and syndicators present a wide range of viewpoints that are layered with uncertainty. Cautious optimism and uncertainty about the affordable rental housing investment market seem to be the starting point in the path of next steps, which will be informed by data.
“Our foot is off the gas a bit, but not on the brake,” said Vihar Sheth, director of business development for equity at U.S. Bancorp Community Development Corporation (USBCDC). “We are closing transactions at the price and terms we originally offered and continuing to look at new opportunities with added scrutiny on the financial strength of our partners. No one is running for the hills at this point.”
“We are not seeing a slowdown from investors,” said David Salzman, president at Richman Real Estate Investments Inc. “Our pipeline is bigger than it was this time last year. Investor demand has remained steady.”
“Our investors are honoring their commitments and we are closing deals at the original pricing and terms,” said Scott Hoekman, president and CEO of Enterprise Housing Credit Investment LLC. “We are seeing additional scrutiny of sponsors and underwriting.”
Using Data to Inform Uncertainty
“This is a new type of uncertainty. Though we don’t necessarily know when we will come out of this, we’re taking steps to evaluate the current impact and planning for long-term solutions,” said Josh Levy, managing director and head of production of the Affordable Tax Credit group at Berkadia.
One approach to address investors’ uncertainty may be to examine the underlying economics of the investments. For example, The Richman Group is using data mining to inform its investors and other market participants about portfolio performance, which indicates that things are more hopeful than originally anticipated.
Richman accumulated recent data on a managed portfolio of approximately 15,000 affordable rental housing units across 110 properties.
“It’s still early but so far we are pleasantly surprised by the results of April rent collections. We had feared a much larger decline,” said Brian Myers, president of Richman Asset Management Inc. “As of April 10, 86.2 percent of rents were paid. By comparison, over the same period in March, which we consider a normal month, we collected 91.8 percent of rents. We thought there would be a larger drop off, but our data doesn’t support that.” Myers noted that rent collection rates are virtually unchanged at the portfolio’s senior properties.