CARMEL, Ind. (Nov. 19, 2019) – Mortgage banking company Merchants Capital has secured $5.1 million in financing for an affordable housing development in Dade City, Florida – one of the first to close under the Low-Income Housing Tax Credit (LIHTC) Pilot Program. The loan was secured on behalf of Arbour Valley Communities. The 40-year 221(d)(4) New Construction Loan for the development of Arbours at Hester Lake is among the first to use the expanded LIHTC Pilot Program. The U.S. Department of Housing and Urban Development (HUD) revised the program earlier this year to include new construction and substantial rehabilitation projects using Section 221(d)(4) and Section 220 loans. Through the Pilot, the borrower is able to close the loan much more quickly. Instead of waiting up to 150 days to close, this nimble product speeds up affordable financing by reducing the processing time for LIHTC deals. “This is the first loan for Merchants Capital to be approved under the Pilot Program and one of the first to close under the Pilot in the country – and certainly the Southeast region,” said Matt Kaercher, Merchants Capital senior vice president and leading originator on the deal. “We closed this loan just 60 days from submission, proving Merchants’ expertise in the LIHTC realm and our delivery on the program’s mandate by submitting a clean, thorough package to HUD.” Arbours at Hester Lake’s 80-unit community will provide 12 units for tenants at or below 30% Area Median Income (AMI), 50 units for tenants at or below 60% AMI, eight units for tenants at or below 70% AMI, and 10 units for tenants at or below 80% AMI. “We’d like to thank the entire Merchants Capital team, as well as the HUD staff in Atlanta, Jacksonville and the rest of the Southeast region, for their help in making this financing fast and easy for us to seamlessly begin construction of Arbours at Hester Lake,” said Gabe Ehrenstein, principal at Arbour Valley Communities. “Florida faces one of the worst affordable housing crises in the country, and statewide, a person making minimum wage would have to work 84 hours a week to afford a one bedroom apartment at current fair market rent. We are proud to be bringing these much-needed apartments to Dade City residents as an affordable option.” The loan closed this month with Kaercher and Transaction Manager Gus Gilmore as leading originators. To learn more about Merchants Capital and its services, visit www.merchantscapital.com or find Merchants Capital on Facebook, Twitter and LinkedIn.

While rising home prices are troubling new home buyers, affordability is also a big concern for renters across the nation who have limited housing options — despite earning decent incomes. The National Multifamily Housing Council and National Apartment Association’s Vision 2030 report suggests the nation needs 4.6 million new rental units by 2030 or will face a serious shortage, as the demand for apartments is at an all-time high with the number of renters reaching an unprecedented level. In fact, almost one in eight people in the United States call an apartment home. The pricing of multifamily housing falls into three segments: Affordable housing, which is reserved for individuals or families earning 30–60 percent of area median income (AMI). This segment also includes federally subsidized Section 8 units. Workforce housing, which is priced for individuals or families earning 60–120 percent AMI. Market-rate housing and class “A” luxury apartments. The middle segment, workforce housing, is a huge opportunity for today’s developers. The majority of such developments are simple and have few amenities, but they provide a lower-cost and higher-quality home than any alternative on the market. In this blog, we’ll explore the current housing crisis and explain the role of developers in workforce housing projects as a possible solution to the nationwide shortage. What’s the difference between affordable and workforce housing? As stated above, households that would fall into the workforce housing bucket are understood to have earned income that is insufficient to secure quality housing in reasonable proximity to the workplace. Therefore, these individuals would not necessarily qualify for affordable housing but would have a hard time paying market-rate rent. Workforce housing allows people who work in a neighborhood to live nearby when they’d typically be either priced out by luxury apartment units or wouldn’t qualify for traditional Section 8 units. Workforce housing developments reduce barriers to being successful at work and increase employee retention. On the flip side, affordable housing is reserved for individuals or families earning 30–60% of AMI. The median income for all cities across the country is defined each year by U.S. Department of Housing and Urban Development. The 2019 AMI for the New York City region is $96,100 for a three-person family (100% AMI). A family of three in New York City earning $57,660 or less (60% AMI) a year would be considered low-income and qualify for affordable housing options. And currently, a single minimum-wage worker can’t afford a two-bedroom apartment anywhere in the U.S., according to a 2018 report from the National Low Income Housing Coalition (NLIHC). The cost of rent is a major contributing factor towards individuals living within their means and therefore being successful at work, building relationships with friends and family, being active in their community and more. Housing costs have steadily increased along with growing demand for rental housing in the decade since the Great Recession. At the same time, new rental construction has tilted toward the luxury market because of increasingly high development costs, according to a Chicago Tribune article about the report. The number of apartments and homes renting for $2,000 or more per month nearly doubled in a decade, between 2005 and 2015. Is there a housing crisis? The United States is in the middle of an affordable and workforce housing crisis. Due to increased demand and stunted millennial home ownership, rental markets in major cities don’t question whether rent is rising — but by how much. Reporting by Curbed explains that the crisis is the logical result of economic forces and a failure to build enough low-cost housing: “If you’ve spent any time in the last few years searching for an apartment in the United States, you’ve likely come to the conclusion that current prices are, in a word, unprecedented.” Even some two-income households with people working full time and earning competitive wages, such as teachers and social workers, are struggling to afford a simple apartment. As part of their 2019 “Out Of Reach” study, the NLIHC developed an interactive map that shows how much an individual would need to earn to afford a modest apartment in their state. Hawaii ranks the highest for required housing wage, requiring a $36.82 an hour wage to afford a two-bedroom rental home. That equates to 146 hours of work a week needed at the federal minimum wage to afford a two-bedroom rental home. According to the report, some of the most costly areas are: California: $34.69/hour, 116 hours/week Washington, D.C.: $32.02/hour, 91 hours/week Massachusetts: $33.81/hour, 113 hours/week New York: $30.76/hour, 111 hours/week On the other end of the spectrum, Puerto Rico ranks 52nd in terms of affordability, requiring a $9.59 an hour wage to afford a two-bedroom rental. That equals 53 hours of work a week needed at minimum wage to affordable a two-bedroom rental home — much lower than a place like Hawaii, but still out of reach. More affordable areas include: Arkansas: $14.26/hour, 62 hours/week West Virginia: $14.27/hour, 65 hours/week Mississippi: $14.43/hour, 80 hours/week Kentucky: $14.84/hour, 94 hours/week This is why the role of developers in terms of building and preserving workforce housing options for working low- and middle-class income individuals is important, particularly in costly states and metropolitan cities with sky-high rents. How are workforce housing projects the solution? One example of the workforce housing model working is in Rochester, Minnesota, where we secured financing for a nearly $20 million mixed-income workforce housing community known as Technology Park Apartments. Merchants Capital secured the loan through the first-ever Freddie Mac Non-LIHTC Forward Commitment on behalf of Real Estate Equities. The apartments were financed through a 10-year Freddie Mac Non-LIHTC Forward Commitment loan where the interest rate was locked at the closing of the Merchants Bank of Indiana construction loan. The key to this financing is that it is a great way to take interest rate risk off the table in return for offering more affordable rents, and the loan can be used by for-profit and non-profit organizations. Historically, borrowers were only issued forward commitments for projects with new LIHTC equity, so this product is attractive to borrowers that are not looking to cash out at conversion and want to lock their permanent loan rate up-front at construction loan closing. “We are very excited to be on the forefront of developing a modern workforce housing product that is not heavily reliant on government funding sources,” said Alexander Bisanz, director of acquisitions at Real Estate Equities, said in a Post Bulletin story about the financing partnership with Merchants Capital. The crisis is clear and in front of us. Merchants Capital is proud to have the opportunity to address this problem head on with our partners, therefore assisting in the development of workforce housing communities to close the gap. We recognize more workforce housing developments, and innovation within those developments in terms of financing and other offerings, is the solution to the nation’s multifamily housing crisis. Are you ready to finance a workforce housing project? Contact a Merchants Capital originator at originations@merchantscapital.com today.

CARMEL, Ind. (Nov 11, 2019) – Leading mortgage banking company Merchants Capital today proudly announces it has relocated its New York City office as part of the company’s strategy to expand its national lending footprint while accommodating current and long-term growth. Located at 777 Third Ave. in Midtown Manhattan, the office is one of Merchants’ four production hubs nationwide, in addition to Indianapolis, Chicago and Saint Paul. The new space provides the company with significantly more space to better meet the demands of its growing workforce within New York City. 777 Third Avenue is a 38-story, class A landmark office tower known for its open public areas and distinctive artwork. “We are thrilled to open our relocated New York office in the heart of Midtown East,” said Michael Dury, President of Merchants Capital. “Building a strong team has been a critical component to our success. Moving into a larger, more collaborative space is crucial to further growing our brand and attracting new employees on the East Coast.” Mathew Wambua, Head of Agency Lending at Merchants Capital, is leading the New York team. His recent production helped catapult Merchants Capital into Affordable Housing Finance’s Top 10 Affordable Housing Lenders for 2018, the highest ranking in company history. Joining Wambua in the new office are Loan Originators Ben Levine and Michael Milazzo. Rounding out the space is the underwriting team led by Chief Underwriter Jessica Cherepski and Deputy Chief Josh Canan, who are each recognized in the industry for their knowledge of complex affordable multifamily underwriting. “Our new workspace will allow our employees to operate in a highly communal and efficient manner while also enabling us to perform even better for our clients,” Wambua said. “This space makes us all the more equipped to utilize the tools at our disposal to directly benefit our clients, including expanding on our commitment to innovation and the efficient closure of multifamily loans through the support from our banking operation, Merchants Bank.” The relocation comes after Merchants Capital’s recent ribbon cutting of its new, 120,000-square-foot headquarters in Indianapolis, as well as the opening of a loan production office in Chicago. Since its inception, Merchants Capital has closed more than $13.8 billion in loans and currently services loans in excess of $10 billion. The company continues to seek driven employees for a number of positions in all four offices.

CARMEL, Ind. (Nov. 4, 2019) – Mortgage banking company Merchants Capital has secured $25.5 million in funding for workforce housing development The Wesmont through a 10 year, Freddie Mac Unfunded Forward Permanent Loan on behalf of TWG Development. Located just north of downtown Indianapolis in the Monon16 neighborhood, The Wesmont addresses the need for quality workforce housing in the heart of the city. The property is being developed in an Opportunity Zone and repurposes a former industrial site. Construction is expected to complete within 18 months. The project is funded through a combination of a conventional construction loan from Merchants Bank of Indiana paired with a forward committed Freddie Mac Non-LIHTC permanent loan. Additional funding sources include a private Opportunity Zone investment of approximately $4.6 million along with approximately $460,000 in Indiana Industrial Recovery Tax Credits. Known as the DINO tax credit, these credits provide an incentive for companies to invest in former industrial facilities requiring significant rehabilitation or remodeling expenses. In addition, the project was awarded a $1.47 million tax abatement which will be realized over 10 years. “Merchants is driven by our passion to provide affordable housing options nationwide,” said Brian Emmons, senior vice president of Merchants Capital and leading originator on the deal. “This loan type offers flexible transaction structuring and certainty of execution at lower costs to borrowers like TWG. Our clients get the financing they need for affordable and workforce multifamily properties funded by public or mission-driven financial investment – whether it’s for new construction or major rehabilitation.” The 188-unit mix will provide 19 units for tenants at or below 60% Area Median Income (AMI), 19 units for tenants at or below 80% AMI and 132 units for tenants at or below 100% AMI. The remaining 18 units are set at market rates. The apartment homes will feature a common lounge area with full kitchen, free Wi-Fi, a 24/7 fitness center, business center and an outdoor pool with private pool deck and grilling area. High-end unit finishes include granite countertops, stainless steel appliances, tile backsplashes, spa-inspired bathrooms and private balconies. “TWG is proud to partner with Merchants Capital and Freddie Mac to bring this mixed-income, workforce housing community to the blossoming Monon16 area surrounding the intersection of 16th Street and the Monon Trail,” said J.B. Curry of TWG Development. “The Wesmont is our third phase of involvement in the redevelopment of this dynamic neighborhood, which has enormous potential to serve every income level of the Indianapolis community.  The first two phases include Monon Lofts, serving a mixed-income tenant base and completed in 2018, and the office build out for Lessonly, Inc., completed this past summer.” TWG Development in partnership with Monarch Private Capital finalized the loan structure and successful closing on Aug. 9, 2019.