Date: July 2019
Location: Modesto, California
Financing Amount: $11 million
Financing Type: FHA, LIHTC Equity, Equity Bridge Loan
Scope: 68 units

PNC Real Estate has collaborated with HUD to streamline the application, underwriting and closing processes for transactions with new Low Income Housing Tax Credit (LIHTC) investments to make the FHA product more attractive for borrowers and lenders. The result is HUD’s new 221(d)(4) LIHTC Pilot program.

The Challenge

Renovation financing for Cameron Villa Apartments (“Cameron Villa”), an existing affordable multifamily project located in Modesto, California, represents only the second expedited closing nationwide and the first in California based on the new process. And there could be more to come.

Originally built in 1977, Cameron Villa consists of 68 two-bedroom apartments throughout six, two-story buildings and a single story building containing a community room and leasing office.

The property was acquired by American Community Developers (ACD) in February 2019 for $10,250,000. Cameron Villa needed renovations and improvements to the site, common areas, building exteriors and residential units. The goal was to expand the functionality, increase the property’s aesthetics, bring the property into Section 540/UFAS & ADA compliance, and improve the energy efficiency of the complex. Seven units (10% of the total units) will be converted to Section 504/UFAS compliant and communications features will be installed in three units (4% of the total units) for the benefit of tenants with vision and/or hearing impairment.

The Solution

The transaction required proposed financing under the 221(d)(4) LIHTC Pilot program. Nine percent (9%) Low Income Housing Tax Credits (LIHTC) will also be used to finance the rehabilitation. ACD will serve as the Subject’s Sponsor. Based in Michigan and California, ACD is a highly experienced developer of affordable housing with a long track record of preserving affordable housing.

The Vision

In order to complete the renovations, ACD turned to PNC Real Estate for FHA financing. After working with HUD to develop the Pilot program, PNC Real Estate’s FHA team knew that Cameron Villa was an ideal candidate and ACD was an ideal developer for the Expedited Track of the Pilot program.

The Expedited Track of the Pilot program was designed to significantly reduce the time to receive the HUD Firm Commitment – from 60 days to 30 days. Timing is paramount for 9% transactions. The shortened processing time by HUD gave all participants a greater sense of comfort that the transaction’s closing deadline could be met. The Pilot program was also designed to allow faster review of key loan application items, better communication with HUD staff, and expedited approval of construction change orders.

The Pilot program delivers on HUD’s goal of getting affordable deals done more quickly and efficiently. We consider Cameron Villa to be a tremendous success in that regard.
— Derek Skrzynski, Vice President of ACD

“The loan production team in the San Francisco HUD office was a great partner in this brand-new Pilot process. They worked hard to quickly solve the problems that inevitably arise with these kinds of transactions and were dedicated to closing the deal on time. PNC Real Estate’s knowledge of FHA programs and ability to get deals done continues to impress us.”

PNC’s Leadership

As co-chair and then chair of the LIHTC Committee under the Mortgage Bankers Association FHA Committee, Terry Wellman, Senior Vice President, Agency Finance for PNC Real Estate played a key role in the development of the new Pilot program.

“As part of the LIHTC Committee, I developed a great relationship with the HUD Housing Program Officer that handled all things affordable while previously working through an intense policy issue. That relationship laid the groundwork for the collaboration in the ultimate formulation of the Pilot program,” Wellman recalls. “HUD needed industry feedback to make the Pilot program as successful as possible. The LIHTC Committee was able to solicit suggestions, ideas and best practices to bake into the Pilot program from a group of FHA lenders who were active in affordable housing finance. We developed user-friendly models, checklists and procedures that we knew the industry as a whole could support.”

For Cameron Villa, the Pilot program delivered as promised. The HUD Firm Commitment was issued within 30 days and closing occurred well in advance of the deadline imposed by the 9% LIHTCs.