CARMEL, IN (June 27, 2019) – Mortgage banking firm Merchants Capital has secured funding for a new 32-unit workforce housing development in Lafayette, Indiana. This development is part of the state of Indiana’s Lieutenant Governor’s office as a Moving Forward 2.0 workforce tax credit housing development with an emphasis on breaking the barriers that result in generational poverty. Using net-zero construction, the development – known as H38 East Apartments - leverages the Indiana Housing and Community Development Authority (IHCDA) program Moving Forward 2.0, an innovative program aimed at providing affordable, energy-efficient housing and transportation. In partnership with RealAmerica Development, LLC and Area IV Agency, this development will create housing that increases quality of life while decreasing the cost of living for low- to moderate-income individuals and families. The City of Lafayette and Lafayette Housing Authority provided HOME funds and tax abatement for H38 East Apartments. “This innovative affordable housing project, H38 East Apartments, combines a healthy way of living with partnerships that bring together energy efficiency, education and skills development, nutrition and wellness, along with breaking transportation and child care barriers to allow for successful resource and employment development,” said Elva James, executive director of Area IV Agency on Aging and Community Action Programs. All of the units will be priced affordably for low- to moderate-income individuals and families with 30 units priced at 60% of of the area median income (AMI) and two units priced at 50% AMI. Additionally, as part of the Moving Forward 2.0 Program, each household will have the opportunity to participate in an ongoing research study to determine the effectiveness of the program. Michael R. Dury, President of Merchants Capital “This development is one of the first of it’s kind in Indiana, and we appreciate the opportunity to work alongside the RealAmerica and Area IV Agency teams,” said Michael R. Dury, president of Merchants Capital. “Using this unique funding structure, our team was able to provide the construction loan, tax credit bridge financing, and permanent financing which helped streamline the lending process from start to finish.” Using an extremely efficient building design, the new development, located at 3791 Winston Drive, in Lafayette, will include solar power and geothermal features that use 35% of the energy a typical apartment would require. The property is located near Franciscan Health Lafayette East, the YMCA of Lafayette, the Lafayette campus of Ivy Tech, the Tippecanoe Mall and city bus line. “We were honored to be chosen as part of the Moving Forward 2.0 program through IHCDA to help address generational poverty. It truly takes a team to create such an amazing program to help families thrive,” said Ronda Shrewsbury Weybright, president and owner of RealAmerica Development, LLC. “H38 East will do just that with its affordable, net-zero apartment homes and opportunities through supportive services. Seeing the support from the community and businesses coming together to help create such a positive program is remarkable.” Area IV Agency’s onsite Life Skills Coach mentoring program will assist families in areas of life skills, education and career development. Additionally, the development will contract with Enterprise Rent-A-Car to provide a car-share program, Faith Ministries Car Repair and Loan Program, and local transportation providers. H38 East Apartments will also be home to a Community Building with unique amenities, including a classroom, STEM center, technology center, a teaching kitchen and more. Additional community amenities include a playground, community gardens, and recreation and athletic area, along with a fitness and wellness center and a bike-share program.

As we approach the midpoint of 2019, one of the most surprising market developments has been the resurgence of the bond bull market. Yields on US 10 Year securities which is viewed as the benchmark rate for GNMA project loan securities, are currently hovering at 2.14%. For perspective, those levels were last seen September of 2017 and since that point there have been FIVE fed funds rate hikes by the FOMC. Furthermore, over the last six months, we’ve experienced over a 100 basis-point drop in 10 Year yields. To say this would be a surprise to market participants at the beginning of the year would be an understatement. In a Bloomberg survey taken 11/9/2018, the average 2019-year end forecast for the 10 Year Treasury was 3.45%, with most of the market believing there would be two hikes in 2019. As with most market predictions, this may serve as good reminder to take it with a grain of salt. A few factors are behind this resurgent bond market. Geopolitical tensions continue to produce headlines daily. The inability of the U.S and China to reach common ground over the yearlong “Trade War” has lead to lower expectations for global economic growth. According to a study prepared by Trade Partnership Worldwide, if all tariffs proposed by the U.S were implemented, combined with Chinese retaliation, it is estimated to curb U.S GDP by (~1%) annually. Meanwhile, this period of uncertainty has led to a flight to quality in safe-haven assets, which has acted as a catalyst for the bond market rally (yields fall as bond prices rise). Other risks abroad include, a dimming outlook for Euro area growth, potential fallout from Brexit proceedings, and mounting tensions between the U.S and Iran in the Middle East. Another more recent development that could cause some concern would be the commingling of political issues with economic policy as seen with the U.S threatening to place tariffs on Mexico if they are unable to take more action on U.S immigration. With regards to monetary policy, the Fed continues to preach patience going forward. Despite not hitting its 2% inflation target, the U.S economy seems to be on solid ground as we near the later stage of its expansion cycle. However, policy makers are now in the market’s crosshairs, as virtually the entire yield curve is below the fed funds rate and the likelihood of an interest cut in July 2019 is 78% while December 2019 is above 90%. While inflationary data may not support a cut, going forward it will be interesting to see if the FOMC deviates away from its data driven decision making and bows to market forces. After a tumultuous start to the year due to the government shutdown, GNMA project loan securities have come back to life, as investors have tightened spreads ~15 basis points since January. Strong demand looks likely to stay as prepayment speed assumptions tick up. Broker dealers; who provide capital to this space, largely have clear balance sheets and appetite to do deals, feeding the natural supply and demand fundamentals needed to keep spreads in check. We continue to see strong demand for Agency products regardless of spikes in market volatility and lower yields. Spreads on shorter term DUS paper have held firm year to date, while we’ve seen some tightening farther out the curve as more investors are trying to get their hands on yield. Merchants Capital Corp. (MCC) has originated and closed more than $13 billion in loans since its inception in 1990 and now services more than $10 billion. Merchants Capital Markets group serves as a conduit between MCC customers and the real estate capital markets by marketing GNMA and FNMA securities directly to Wall Street in order to obtain the best execution.

CARMEL, IN – Mortgage banking firm Merchants Capital has secured $51 million in agency funding for a homeless shelter in the Crown Heights neighborhood of New York City on behalf of Heights Advisors, a leading social impact investor, and Samaritan Daytop Village (SDV), a nationally-recognized human services organization. The project – known as 267 Rogers - embodies an emerging model that New York City is utilizing to eradicate homelessness in the future. Through the Freddie Mac Affordable Housing Capital Markets Execution (CME) Loan Program, this transaction represented an opportunity for Merchants Capital and Freddie Mac to establish themselves as a key counterparty and partner in financing public-benefit multifamily buildings that serve residents most in need. “It has been deeply gratifying to work on the deployment of capital on a project that allows homeless families to live in dignity,” said Mathew Wambua, executive vice president at Merchants Capital. “Projects like 267 Rogers allow the Merchants Capital team to be creative and innovative in solving problems and seeking new financial strategies and structures to solve those problems while serving an immediate need right here in our community.” The property was effectively built as a 165-unit multifamily development under the typical 80/20 structure in New York City. This property is unique, however, in that rather than renting 80% of the units to market-rate tenants, they instead partnered with the Department of Homeless Services (DHS) and SDV to offer transitional housing to homeless families. Thus, the entire property offers affordable housing wherein, 80% of the units are reserved for transitional housing and the remaining 20% are set aside for families earning 60% of the area medium income (AMI) or below. Through the partnership with SDV, the property is able to offer supportive services to all tenants, including employment and job readiness services, daily living workshops, and personal financial management, as well as education and child care assistance programs. “It is a priority for us to contribute and be responsive to the communities we work within. We are excited to work with Steve Banks and the DHS staff to create fully-integrated, quality housing for families in need,” said Rachel Foster, principal and founder of Heights Advisors. “We greatly appreciate the financing the Merchants Capital team was able to provide. We look forward to continuing to work alongside the city and those in the private and nonprofit sector to bring new solutions to the housing crisis.” In April 2016, Mayor de Blasio announced a major restructuring of the way homeless services in New York City are delivered, creating an integrated and streamlined management structure for DHS and the Human Resources Administration (HRA) under the commissioner of the Department of Social Services. The Mayor’s new anti-homelessness plan represents a paradigmatic shift from the way in which previous administrations have mobilized to combat chronic homelessness, transitioning out of the 360 scattered apartment sites and commercial hotel facilities and replacing them with approximately 90 new multifamily transitional housing shelters. New York City plans to open approximately 20 new multifamily transitional housing shelters annually in the next five years to reach its goal of opening approximately 90 new shelters. 267 Rogers represents one of the first multifamily transitional housing shelters that has been developed as the cornerstone of the new mayoral plan.