Multifamily Housing Finance Companies - Equity & Debt

The biggest issue facing multifamily housing finance companies today is the lack of sufficient equity capital contributions required to close escrow on any construction mortgage financing loan - much less qualify the project for a non-recourse loan (outside the HUD-insurance envelope).  In the 1970s - 1990s the issue facing multifamily housing finance companies was how to compete against the FHA/HUD-insured market that had expanded to truly grotesque proportions.

Rainmaker's approach to multifamily project financing is to provide developers (and housing finance companies) with the opportunity to participate in a four-level equity syndication financing that may close as early as the pre-construction phase of a given multifamily housing development project's roll-out.  The four-tier levels correspond to specific goals that can only be obtained by providing more equity capitalization for a given project.

Rainmaker's structured finance approach to multifamily project development financing incorporates the following key initiatives that serve to provide more at-risk equity financing:

• Statutory Investment Incentives.  The focus is on those investment incentives that may be part of the transaction on an entitlement basis and not subject to some qualification and award process (as is frequently the case with Low-Income Housing Tax Credits).  Rainmaker reviews these matters as part of the market feasibility study deliverable, so it's waiting for the developer as soon as the start of the financial feasibility study cycle.  Rainmaker's goal is simple: rework the incentive so as to create an annuity with the benefit (understanding the benefit will not be collected until the project is placed in service) to provide funds to purchase credit enhancement for the construction mortgage loan (or what amounts to the same thing).

• Condominium Association Plan.  One of the frequently overlooked tools for providing additional at-risk equity contributions.  Condo plans are overlooked because we tend to think of condo plans as the means for selling condominiums as housing to the public, when we should be thinking about condominium plans designed to create additional at-risk capital by applying the sales proceeds to the capital structure in the last 45 to 60 days of the project's construction phase.  Accordingly, these funds may be considered a resource for retirement of the construction loan as well (or what amounts to the same thing - defeasance).

• Tenants-In-Common Plan Fractional Real Estate Syndication.  For the portion of the project space plan that is not part of the condominium association plan we seek to create a tenants-in-common plan of ownership and then syndicate it - as early as the pre-construction phase.  That's right; we're talking about increasing your project's equity capitalization as early as the pre-construction phase.  It is from these resources that a non-recourse loan may be demanded and provided!

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