Thought Leader Presented by KeyBank

Inside the Complex Capital Stack of Affordable Housing Deals

Working with an experienced capital markets team will ensure your next affordable housing deal makes it to the finish line.

Left to right: Sam Adams, Rob Likes, Al Beaumariage,

Affordable housing investment is finally taking flight across the nation. Today, everyone from large publicly traded companies and market-rate multifamily owners to non-profits are increasing their exposure to the niche sector. For both new entrants and seasoned players, the most challenging aspect is navigating the complex capital stack that makes these often challenging deals pencil. 

“Affordable housing requires a complex capital stack, and depending on the type of affordable housing, we can bring them all to the table,” Rob Likes, president, Key Community Development Corporation at KeyBank tells GlobeSt.com. “Core affordable housing is either creating or preserving affordable housing, and we have the balance sheet to provide the lending to create affordable housing; we have the equity investment platform to invest in LIHTC housing; and we have the capability on the mortgage side and the capital markets side.”

KeyBank Real Estate Capital commercial mortgage group offers the full spectrum of capital products for both the development and preservation of affordable housing deals. Within the mortgage platform, KeyBank is an approved national Fannie Mae and Freddie Mac affordable housing lender, an approved HUD lender, executes life company and CMBS and works with public housing authorities and private developers to develop innovative financing solutions. 

An integrated platform like this is invaluable to not only getting a deal to the finish line, but also reducing complexity. “The larger 4% bond deals often benefit from having an integrated investment banking platform to reduce the complexity, cost and time of a deal,” says Key’s Sam Adams, managing director. 

Northwood on the Trail, a 254-unit affordable housing project in the Indianapolis area, makes the ideal case study. The Key team secured a high-leverage bridge acquisition loan and assembled a re-syndication package, which included tax credits and construction rehab financing. Finally, the team provided a $17.8 million permanent loan commitment through Fannie Mae and sold bonds via a public offering. 

“We were able to layout several options for the borrower as they related to the permanent loan side, and we were able to tailor the financing to best suit the needs of the transaction, which was proceeds driven,” Al Beaumariage, national program manager for affordable housing and SVP at KeyBank Real Estate Capital, says. 

Adams adds, “The client knew they had one team at Key that could walk them through each and every part of the deal.”

This execution is also a benefit to the preservation of affordable housing—one of the biggest challenges in maintaining supply. “This was to preserve and extend a low-income housing project where all of the units are low income,” says Likes. “There are many lives positively impacted by having a safe, decent and upgraded unit to live in for a long period of time. When we closed the deal, all of the components closed at the same time.”

With increasingly new players entering the affordable housing space, working with a team experienced in navigating affordable housing deals is essential. Adams notes that KeyBank has taken a long-term mindset to responding to the affordable housing crisis, and the company’s Community Benefits Plan underscores that long-term commitment. 

In 2017, KeyBank launched a Community Benefits Plan with a $16.5 billion commitment, half of which was allocated to affordable housing. KeyBank met that goal a year-and-a-half early and responded by extending and expanding the plan to $40 billion. “Our team will continue to play a large factor in that going forward. Not only is affordable housing important to our country, it is also important to our company,” says Likes. “We are going to do everything we can to help the affordable housing crisis.”

*Disclosure: This article is designed to provide general information only and is not comprehensive nor is it legal, accounting, or tax advice. Credit products are subject to credit approval, terms, conditions, and availability and subject to change. ©2021 KeyCorp. All rights reserved. Banking products and services are offered by KeyBank N.A. Member FDIC Equal Housing Lender