WNC Closes Latest Fund 35% Above Target

WNC has closed its Institutional Tax Credit Fund 44 with $135 million in commitments. The fund, which provided tax credits for low-income family and senior housing across the country, originally targeted $100 million in commitments, exceeding its initial fund raising goals. Additionally, the fund had a higher number of economically motivated investors, as a result of the fund’s healthy returns. Tax Credit Fund 44 currently has 24 projects located in 18 states across the country.

“We originally had a target for the fund at $100 million, so we exceeded what we expected by $35 million,” Christine Cormier, SVP of investor relations at WNC, tells GlobeSt.com. “70% of the investors were economic investors, so they invest for yield, and 30% of the investors were banks. The banks have a mandate to do community reinvestment, which means they need to invest dollars into the areas where they have deposits. The mix is typically 50-50.”

Cormier says that the fund’s success has helped to fuel the interest from the return-driven investors over banks in this cycle. “The return on this fund was great for the economic buyers in comparison to alternative investments,” says Cormier. “The return on this fund was between 5.45% and 5.55% after tax. Before tax, it is a 7% return. You aren’t getting too many investment out there at 7%.”

While the fund has closed, all of the funds have not yet been allocated because of the significant increase in fund raising. The 24 properties—a mix of 1,500 redevelopment projects and 500 new construction projects—represents only $118 million. “We still have $17 million more to go. The fund will be larger than 24 properties, and will probably end up with 28 properties,” explains Cormier. The average property size in the fund is $5 million.”

The additional dollars will be allocated over the next six months as a result of the strong investment demand. “We were able to raise $135 million, even though we didn’t have properties to back $135 million yet,” Cormier says. The demand was high—but the supply was low. We closed the fund, but will have no problem filling it. It will probably take another six months.”

In general, the firm—which runs two funds a year—follows a similar strategy for the properties and geographies that is supports with these tax credits. “It is a bidding process, and it is highly competitive,” explains Cormier about the process. “We don’t have a set strategy on the geography. We always want a diversification of states and we always want the best value for our investors, and that is really what drives where we go. We also don’t want an over concentration in any one state, and we make sure that is also under consideration when we bid on properties.”