PITTSBURGH—Already an active participant in the affordable housing market, PNC Bank has closed a $100-million fund to preserve apartments for low- and moderate-income renters. Known as PNC Affordable Rental Housing Preservation Fund 1 LLC, it's said to be among the first and largest institutionally-managed funds of its kind.

The new fund will be used to acquire affordable properties at the end of their 15-year Low Income Housing Tax Credit compliance period as well as other at-risk affordable rental housing. These properties will be held for a period of time and then sold with the intent of recapitalization with new LIHTCs, thereby extending the contractual affordability period for another 30 years while delivering meaningful risk-adjusted returns to participating investors.

“We've observed that controlling interest in a lot of these properties at the end of their 15-year compliance period was changing hands, and that often the buyers of these interests were not necessarily part of the affordable housing investment/development community,” Todd Crow, EVP and manager of tax credit capital at PNC, tells GlobeSt.com. “These properties were changing hands to people who were more likely than not to convert these properties to market rate rental units as soon as it was permissible.”

Generally, says John Nunnery SVP and manager of preservation investments for PNC, these at-risk properties are “in markets where the spreads between affordable rents and market rents are the greatest. It's in those markets where affordable housing is needed the most, which is ironic. The math is pretty compelling when you can increase rents by a significant amount by converting to market.

“We also see properties where they're also past 15 years and may be in year 17 or 18 on a 30-year extended-use, so really they only have 12 or so years left on their restrictions,” he adds. “When you're that close to the end of your restrictions, it's even more compelling.”

Along with at-risk properties, there are potential buyers that want to extend the assets' affordability. “However, those buyers in many instances seem to be at a structural disadvantage because they have no certainty of execution,” Crow says. In particular, they're not assured of being able to secure the tax credits, thereby making the acquisition a riskier proposition than it would be for an investor that planned a market-rate conversion.

PNC Fund 1 is the financial services firm's first multi-investor preservation fund. It has seven institutional investors, including PNC Bank NA, and will be managed by PNC Real Estate.

PITTSBURGH—Already an active participant in the affordable housing market, PNC Bank has closed a $100-million fund to preserve apartments for low- and moderate-income renters. Known as PNC Affordable Rental Housing Preservation Fund 1 LLC, it's said to be among the first and largest institutionally-managed funds of its kind.

The new fund will be used to acquire affordable properties at the end of their 15-year Low Income Housing Tax Credit compliance period as well as other at-risk affordable rental housing. These properties will be held for a period of time and then sold with the intent of recapitalization with new LIHTCs, thereby extending the contractual affordability period for another 30 years while delivering meaningful risk-adjusted returns to participating investors.

“We've observed that controlling interest in a lot of these properties at the end of their 15-year compliance period was changing hands, and that often the buyers of these interests were not necessarily part of the affordable housing investment/development community,” Todd Crow, EVP and manager of tax credit capital at PNC, tells GlobeSt.com. “These properties were changing hands to people who were more likely than not to convert these properties to market rate rental units as soon as it was permissible.”

Generally, says John Nunnery SVP and manager of preservation investments for PNC, these at-risk properties are “in markets where the spreads between affordable rents and market rents are the greatest. It's in those markets where affordable housing is needed the most, which is ironic. The math is pretty compelling when you can increase rents by a significant amount by converting to market.

“We also see properties where they're also past 15 years and may be in year 17 or 18 on a 30-year extended-use, so really they only have 12 or so years left on their restrictions,” he adds. “When you're that close to the end of your restrictions, it's even more compelling.”

Along with at-risk properties, there are potential buyers that want to extend the assets' affordability. “However, those buyers in many instances seem to be at a structural disadvantage because they have no certainty of execution,” Crow says. In particular, they're not assured of being able to secure the tax credits, thereby making the acquisition a riskier proposition than it would be for an investor that planned a market-rate conversion.

PNC Fund 1 is the financial services firm's first multi-investor preservation fund. It has seven institutional investors, including PNC Bank NA, and will be managed by PNC Real Estate.