Freddie Mac issued its first non-low-income housing tax credit forward commitment since the financial crisis, providing financing for an affordable housing development in Minnesota.
Mortgage banking firm Merchants Capital obtained the financing from the government-sponsored enterprise on behalf of Real Estate Equities for the development of a $19.7 million mixed-income workforce housing community in Rochester, Minn. The Greater Minnesota Housing Fund is also a partner in the project.
With Rochester ranked among the lowest metropolitan statistical areas for housing affordability, according to a Nationwide Economics report, the 164-unit complex, known as Technology Park Apartments, will help ease the city’s low-income rental crisis. The project closed on Sept. 5, according to Merchants Capital.
Freddie’s commitment was for a 10-year loan with the interest rate locked at the closing of the construction loan.
The apartments will be priced in an affordable range for consumers with an annual income of $40,000, or 60% of the city’s annual median income. About 35% of units will be allocated for annual earners of $55,000, which is 20% below Rochester’s AMI. All other units will be listed about $200-$300 below current market value.
“We appreciate the opportunity to assist in the development of this housing community and the chance to help close Rochester’s affordable housing gap,” said Merchants Capital President Michael Dury, in a press release. “We were able to simplify the process with our ability to provide the construction financing through our parent company, Merchants Bank, and also offer the Freddie Mac Non-LIHTC Forward Commitment product for the long term permanent financing.”
Freddie Mac recently made its first post-crisis equity investment into an LIHTC thorough a partnership with Enterprise Community Investment in October.
“In all of Greater Minnesota Housing Fund’s work to create and preserve unsubsidized affordable housing, we have struggled to crack the code on the production of new affordable units without reliance on public resources. Now, as an equity partner in Technology Park, we are furthering our mission and innovating ways to increase the funding pie with new financing solutions,” said Rachel Robinson, fund manager with Greater Minnesota Housing Fund. “Going forward, Tech Park, with 164 modestly priced apartments, 66 at reduced, affordable rents, will be a pilot for further innovation in this realm.”