The stimulus-supported program--the 1602 Tax Credit Exchange--allows state housing agencies to exchange 2008 and 2009 Low Income Housing Tax Credit allocations for a one-time grant of 85 cents for every $1 of credit exchanged. The program is only now beginning to release funds to affordable housing projects, with this particular one in the first wave, Richard Price, a partner with Nixon Peabody who worked on the deal, tells GlobeSt.com.

"We are at the beginning of the pipeline of actual funding--this property is the first in Delaware to receive funding and is among the first in the country," he explains. Price estimates that there are roughly a dozen projects in line right now to receive much needed funding. Affordable housing finance sources have collapsed with the general capital markets, he notes. In particular, Low Income Housing Tax Credits have been hit with a double whammy--a bad economy coupled with the fact that there is no demand for them anymore as investors do not need them to offset profits they no longer are realizing. "A program like this has been a major boost to developers," Price says.

The project, called Hollybrook Farms, is a 124-unit community here that kicked off when LIHTCs were trading at 92 cents, Layfield tells GlobeSt.com. The project received $7.8 million in equity from the credits for a project that was penciling in at $16 million in development costs. In May 2009, however, the syndicator announced it had to pull out from the deal, leaving the project with a $4.8 million hole to fill--about half of which was construction financing. Fortunately, the syndicator was able to connect the developers with its own warehouse lender--Danversbank in Boston--which filled in some of the gap.

The exchange program plugged in $3.5 million in equity and the $500,000 remaining shortfall was filled through small loans, Layfield explained. Not surprisingly, he deems this one of the most difficult deals he's ever completed. The project is slated for a delivery date of December 2009.

"We will be converting to permanent financing in January," he also reports. Permanent financing was retained--albeit with great difficulty--as the three lenders had to be convinced to stay in place when the syndicator backed out of the deal.

Layfield and his attorneys--George Danneman of Salvo, Landau, Gruen & Rogers in Wilmington also participated in the transaction--worked with the Delaware State Housing Authority to access the program. The project saved nearly 200 construction jobs as well, Layfield noted. "Despite the financing difficulties we didn't have to pull the constructing teams from the project, not even for one day."