Hunt Mortgage, Freddie Mac Team Up on Record Loan
- Apr 29, 2015
Hunt Mortgage Group and Freddie Mac have closed on a $59.6 million loan to finance and rehabilitate 13 Low Income Housing Tax Credit sites totaling 1,590 units in El Paso, Texas. It’s the largest financing closed under the Rental Assistance Demonstration program run by the U.S. Department of Housing and Urban Development and marks the first time RAD is being used in Texas.
It is the first phase of an effort to rehabilitate the portfolio managed by the Housing Authority of the City of El Paso and represents a $250 million initial public/private investment. That number is expected to reach $1 billion over the next five years, according to a statement from Hunt Mortgage and Freddie Mac.
HUD agreed in December 2013 to let the city convert 6,100 units through the RAD initiative, which allows public housing agencies to leverage public and private debt and equity to rehabilitate public housing stock. The program’s goal is to reduce the $25.6 billion backlog of public housing capital improvements.
“The Rental Assistance Demonstration is transforming public housing and will bring unprecedented benefits to local communities through the country by enabling the use of public and private investments to help revitalize and preserve much needed affordable housing,” Greg Calvert, senior managing director and chief credit officer at Hunt Mortgage Group.
In a statement, HACEP CEO Gerald Cichon called the RAD program a “game changer that will transform the way we think about public housing well into the future.”
“This project provides significant benefits to the city of El Paso and its residents, including the creation of over 1,000 jobs and an estimated $1 billion in local economic impact,” added Robin Vaughn, president of Hunt’s Public Infrastructure Capital Markets division.
Three other affiliates of New York-based Hunt Companies Inc. are participating in the project. Hunt Development Group will serve as the development manager. Moss Construction will be the master subcontractor. Hunt Capital Partners secured the Low Income Housing Tax Credit equity from Aetna, MetLife and USAA.
Hunt Mortgage Group and Freddie Mac provided the $59.6 million financing under the Freddie Mac Direct Purchase of Tax-Exempt Loan offering. Freddie Mac added the initiative about a year ago as an alternative financing solution to its bond credit enhancement execution. Shaun Smith, senior director of Freddie Mac Multifamily, said in a company newsletter that the program is particularly attractive to projects developed with the 4 percent LIHTC. It can lower a borrower’s cost of capital, cut issuance costs and simplify the closing process, according to Freddie Mac.