[IMGCAP(2)]Meagher tells GlobeSt.com that when the last of theFHA loans has closed, most likely in June, the city will have $100million in proceeds to add to its existing stock of 1,371affordable housing units―most of which serves ascollateral for the new loans―by acquiring additionalaffordable rental units throughout San Diego. The housingcommission's first goal will be to add 350 units and its overallgoal will be to add 1,000 units; Meagher points out that the waythe program is structured, the commission has the potential tocontinue leveraging its portfolio to provide cash flow and funds toacquire additional affordable units, virtually in perpetuity. Theloan program ultimately will provide the housing commission withmore cash flow than it had when the portfolio of 1,371 units wasentirely unleveraged, he notes.

Meagher and Gardiner Champlin, also a managing director inNorthMarq's San Diego office, have worked on developing the programsince before the capital markets hiatus of 2008. Designing andimplementing it involved "a lot of moving parts and a lot ofpeople," according to Meagher. He and Champlin joined Bloomington,MN-based NorthMarq in early 2009 to launch the firm's San Diegooffice, which specializes in multifamily originations.

The unusual structure that NorthMarq has created uses thefederal government's Build America Bonds program to provideinterest rebates on the housing commission's Fannie Mae and FHAloans. The Build America Bonds program, adopted as part of heAmerican Recovery and Reinvestment Act of 2009 to foster investmentby municipalities, will provide the housing commission withinterest rebates of 35% for the full terms of the loans.