+ a lihtc update noel henderson-james richman housing resources llc april 2013 a market re-defined...
TRANSCRIPT
+
A LIHTC UPDATE
Noel Henderson-JamesRichman Housing Resources LLCApril 2013
A Market Re-definedLIHTC Since 2007
2007
2013
+Overview
We’ll look back, review some trends, & then gaze, however obscurely through our crystal ball, at what’s ahead.
What we’ll see is that the LIHTC market has become defined – is now redefined – by two interconnected characteristics:
Pricing variability, sometimes dramatic; and, Market segmentation, somewhat defined by
geography, and further sub-market segmentation.
Both these characteristics are (or should be) expected & are natural to a rationale, functional market.
They certainly make the world a more interesting place.
+Trends: Investment Volume
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
Eq
uit
y In
veste
d (
in $
millio
ns)
Fannie & Freddie, we missed you!
+Trends: Yields, 1991 to 2012
Source: Ernst & Young
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Tax Credit Fund Yields vs. After-tax Treasuries and Muni Bonds
After Tax Projected Yield - LIHTC Funds
After Tax Yield 10-Year Treasury
Municipal Bonds - Blended
Tax credits plotted monthly where one or more multi-investor funds reported. Treasury and municipal bond data monthly.Tax credits plotted monthly where one or more multi-investor funds reported. Treasury and municipal bond data monthly.Tax credits plotted monthly where one or more multi-investor funds reported. Treasury and municipal bond data monthly.
+Trends: Yields, 1991 to 2012
Source: Ernst & Young
0
200
400
600
800
1,000
1,200
1,400
1991199219931994199519961997199819992000200120022003200420052006200720082009201020112012
LIHTC spread to tax-affected Treasuries (in bps)
Spread plotted by month where one or more multi-investor funds reported.
+Trends: Yields, 2008 to 2012(for indicative purposes only)
Non-CRA Tax-Adjusted 10-Yr Treasuries
0
200
400
600
800
1000
1200
Non-CRA Spread to Tax-Adjusted 10-Yr Treasuries
+Trends: Yields, 2008 to 2012(for indicative purposes only)
CRA Spread to Tax-Adjusted 10-Yr Treasuries
0
200
400
600
800
1000
1200
Au
g-0
8
No
v-08
Feb
-09
May
-09
Au
g-0
9
No
v-09
Feb
-10
May
-10
Au
g-1
0
No
v-10
Feb
-11
May
-11
Au
g-1
1
No
v-11
Fe
b-1
2
Ma
y-1
2
Red = Heavily-banked
Moderate premium subtracts 50-100bps; Heavy premium subtracts another 100bps.
+Trends: What Yield Data Reveals
Among investors, there is clear segmentation within the market, often along geographic lines.
Roughly, very roughly, there appear to be three separate markets: heavily-banked, moderately-banked and otherwise.
Most times, but not necessarily always, these markets will function in parallel to one another.
Sometimes one submarket might disconnect from the broader markets but eventually in back in-line.
+Emerging Trends: Early 2013
National market is stabilizing at the yield requirements of economic investors, somewhere likely just north of 7.25%;
Expect moderately- and heavily-banked markets to follow suit, although this may take time.
Prediction #1: National market will lead in defining pricing trends.
Prediction #2: Heavily-banked markets will become more defined around regulatory cycles.
Prediction #3: Pricing variance will be greatest in heavily-banked markets.
+Summary
The market has repaired itself; and, it is probably healthier than it was prior to the financial crisis. Capital levels have rebounded and stabilized. More investors and substantially more “economic”
investors… LIHTC is a money making business opportunity. Average pricing has improved and also stabilized. Yields have retreated from recession highs and also seem
to have stabilized.
But the market is radically different from the pre-financial crisis market. More pricing variability around averages and means. Greater segmentation among markets and within markets.
+Summary
Deals in different geographies may see radically different pricing.
Deals in the same market may see radically different pricing, especially true of heavily-banked markets.
Characteristics that now matter much more are: Geography, first and foremost; then, Deal size and opportunities; Developer: track record, financials and relationship; and, Novelty.