CD on Mixed Use Property - Affordable Housing

Posted By: bOaty

CD on Mixed Use Property - Affordable Housing - 07/31/20 04:19 PM

We have a loan on a mixed use property where the bottom is commercial space and the upper floors are apartments. Some of the apartments are under an affordable housing agreement with the municipality and qualify for affordable housing for community development.

Normally we would take the percentage of units/percentage of loan amount but since the commercial portion of the building comes into play how should the CD qualifying dollar amount be calculated?
Posted By: Len S

Re: CD on Mixed Use Property - Affordable Housing - 07/31/20 09:35 PM

You must pass the "primary purpose" test which can be fulfilled in 2 ways: (1) majority of dollars or beneficiaries fulfill a qualified CD purpose or (2) have a document that explicitly states a CD purpose, the deal is structured to achieve a CD purpose and the purpose is or is likely to be fulfilled. In these cases you report 100% of the loan. There is a third alternative (available only under the affordable housing definitions) under which you can claim pro rata credit if you can prove that the project does provide affordable housing for LMI tenants.
Posted By: bOaty

Re: CD on Mixed Use Property - Affordable Housing - 08/03/20 11:18 PM

Len, thank you.

If this were strictly an a apartment complex it would be easy to calculate the percentage of affordable units. Do you have any suggestion on how we would do this since the building also has a commercial component to it?
Posted By: Len S

Re: CD on Mixed Use Property - Affordable Housing - 08/04/20 12:56 AM

I forgot to mention under alternative 3 you report the CD value on a pro rata basis.

I would use SF as one way of calculating the CD value for affordable housing. Or can you allocate the spending between the commercial and the affordable housing components? That has potential. If the project is in LMI tracts or distressed and underserved tracts maybe you could claim credit under revitalization/stabilization since you have a claim that you are financing a project that attracts people and businesses to the area.