Experienced Development Partner Requirement for North Carolina 9% Tax Credit Deals

The 2013 North Carolina Housing Finance Agency (NCHFA) Qualified Allocation Plan (QAP) includes a requirement that all 9% tax credit deals include at least one principal who has successfully developed, operated and maintained at least one 9% tax credit project in the state of North Carolina (see Section IV(D)(1) of the 2013 QAP). All such projects must have been placed in service between December 1, 2006 and January 1, 2012.

Deal Image

The experienced principal must be identified as the Applicant in the preliminary application. In addition, the principal must be either the general partner or the managing member of the ownership entity and remain responsible for overseeing the operation of the project for at least two years after it is placed in service. Five (5) application points will be awarded if the Applicant’s principal office is in North Carolina. The Agency reserves the right to determine whether a principal is, in fact, experienced as required by the QAP.

Allen & Associates has worked with developers on over 300 projects in North Carolina since 2000. Our professional network includes relationships with principals meeting NCHFA’s experienced developer criteria. We can assist in putting together a successful development team for your project.

Feel free to contact me (Jeff Carroll) at 704-905-2276 with any questions you may have regarding your project.

North Carolina Awards: Tax Credit Pricing

One of the most closely followed parameters in tax credit development is equity pricing. Although sometimes quoted as percent yield, equity pricing is usually expressed as the ratio of equity raised per dollar of tax credit over the 10-year compliance period for a project ($ Equity / $ Annual Tax Credit x 10). In the table below we present equity pricing for North Carolina projects awarded credits in 2012.

Equity Pricing, NC, 2012

For projects that received awards in 2012, the average equity pricing was $0.86. Age restricted (elderly) projects averaged $0.86, while general occupancy (family) came in at $0.86. New construction deals averaged $0.86, while rehabilitation deals came in at $0.85. There were no adaptive reuse projects in North Carolina’s 2012 allocation.

The graph below shows the distribution of awards.

Equity Pricing Graph, NC, 2012

The overwhelming majority of projects were priced at $0.86. A handful were priced as high as $0.88 with several coming in between $0.82 and $0.85.

Allen & Associates Consulting, Inc. specializes in development consulting for affordable housing. Feel free to contact me (Jeff Carroll) at 704-905-2276 with any questions you may have regarding your project.

North Carolina Awards: Land Cost per Unit

The next parameter we will consider is land cost per unit. All things being equal, projects with lower land costs per unit will be easier to finance. In the table below we present land cost per unit for projects awarded credits in 2012.

Land Cost per Unit, NC, 2012

For projects that received awards in 2012, the average land cost was $6,868 per unit. Age restricted (elderly) projects averaged $6,506 per unit, while general occupancy (family) came in at $7,049. New construction deals averaged $6,592 per unit, while the allocated land portion of total purchase price for rehabilitation deals came in at $8,011 per unit. There were no adaptive reuse projects in North Carolina’s 2012 allocation.

The graph below shows the distribution of awards.

Land Cost per Unit Graph, NC, 2012

The majority of projects were clustered between $5,000 and $10,000 per unit. Several exceeded this amount; several were lower than this amount. A few had virtually no basis in the land whatsoever (the land was contributed).

Allen & Associates Consulting, Inc. specializes in development consulting for affordable housing. Feel free to contact me (Jeff Carroll) at 704-905-2276 with any questions you may have regarding your project.

North Carolina Awards: Development Cost per Unit

Another important parameter for developers to consider is development cost per unit. All things being equal, projects with lower development costs per unit will require less tax credit. And as we saw in a previous post, tax credit per unit is an important tiebreaker criteria employed by the North Carolina Housing Finance Agency. In the table below we present development cost per unit for projects awarded credits in 2012.

Total Development Cost per Unit, NC, 2012

For projects that received awards in 2012, the average development cost was $121,667 per unit. Age restricted (elderly) projects averaged $121,796 per unit, while general occupancy (family) came in at $121,603. New construction deals averaged $122,455 per unit, while rehabilitation came in at $118,402. There were no adaptive reuse projects in North Carolina’s 2012 allocation.

The graph below shows the distribution of awards.

Toral Development Cost per Unit Graph, NC, 2012

The majority of projects were clustered between $110,000 and $130,000 per unit. Only a few exceeded this amount; a handful came in between $100,000 and $110,000. In order to be competitive, sponsors should attempt to keep their development costs below $130,000 per unit.

Allen & Associates Consulting, Inc. specializes in development consulting. Feel free to contact me (Jeff Carroll) at 704-905-2276 with any questions you may have regarding your project.

North Carolina Awards: Annual Tax Credit per Unit

The 9% tax credit application process is very competitive. Every point counts. Every dollar counts. That’s why seasoned developers look closely at parameters such as land cost per unit, total development cost per unit, annual tax credit per unit, tax credit equity per unit, and tax credit pricing ($ equity / $ tax credit) when putting together their proposals.

In North Carolina the #1 tiebreaker criteria is tax credit per unit. Projects with the least amount of federal credit per unit are given priority over competing projects, all other things being equal. In the table below we give the annual tax credit per unit for projects awarded credits in 2012.

Annual Tax Credit per Unit, NC, 2012

For the North Carolina projects that received awards in 2012, the average annual tax credit was $8,640 per unit. Age restricted (elderly) projects averaged $8,778 per unit, while general occupancy (family) came in at $8,570. New construction deals averaged $9,049 per unit, while rehabilitation came in at $6,942. There were no adaptive reuse projects in North Carolina’s 2012 allocation.

The graph below shows the distribution of awards.

Annual Tax Credit per Unit Graph, NC, 2012

The majority of awarded projects were clustered between $8,000-10,000 per unit. Only a few projects exceeded this amount. In order to be competitive, developers should attempt to keep their projects below $10,000 per unit in annual tax credits.

Allen & Associates Consulting, Inc. specializes in development consulting. Feel free to contact me (Jeff Carroll) at 704-905-2276 with any questions you may have regarding your tax credit development.