Invested in housing market

Barry
Barry

Much has changed since Barrington resident Maria F. Barry started in the commercial-credit department of Fleet Boston Financial in 1987, starting with the regional bank’s acquisition by national lending giant Bank of America. Twenty-seven years later, Barry is now community-development-banking national executive for Bank of America Merrill Lynch, in charge of the bank’s affordable and mixed-income housing investments. With demand for rental housing soaring across the country and government-housing subsidies static at best, affordable developers and their lenders are struggling to fill financing gaps.

PBN: Rental demand is increasing, but government spending on housing isn’t, so where does that leave a lender like Bank of America?
BARRY: There is tremendous need and we are seeing deals and projects become a little more difficult to finance because of the level of state and federal subsidies needed. But overall our production has gone up. In 2013 we helped produce 13,600 affordable-housing units nationwide, up from 11,000 in 2012. Also we provided more debt and equity in 2013 than 2012. We are doing more, so there is still a lot of activity out there. It is challenging for developers to pull subsidies together, but they are making it happen. To do that our clients are looking at other solutions, such as mixed income, where the level of subsidy can be less and still have an affordable opponent. The low-income tax credit is still the No. 1 driver in the creation of affordable housing and we invested $1.1 billion in low-income tax credits last year. But I am also seeing clients trying to make projects affordable by combining some local subsidies with historic tax credits or a tax abatement, or something keeping cost down to keep some units affordable.

PBN: On aggregate, are the levels of subsidy available for affordable housing higher or lower than they have been in the past?
BARRY: It varies by geography. When we look at the financing structure for the low-income tax credit, we have overall financing, such as a construction loan, tax credits and then the soft money to help close any gaps. In some states we are seeing it be a little more challenging to get that gap money needed, particularly as state budgets get tighter there is less money to close the gap. But as I said, our production is up so there is a real effort out there to find a way to continue to create affordable housing.

PBN: Is that increased production due to Bank of America being more aggressive or changing its underwriting?
BARRY: Our production is up due to our client relationships and we have really deep client relationships and work with clients across the country. We go with them whatever state they are in and work on helping them finance projects. So it’s a combination of deepening our client relationships and bringing in some new clients to the bank. One area we get positive feedback [in] is our execution and delivery and financing, making it easy for our clients. We have a one-stop [shop], where equity and debt [are] in the same group, so it makes it easier for them.

PBN: How about more locally, is your production up in the Providence metro area?
BARRY: Our Rhode Island business has been pretty steady. It hasn’t shifted much over the past couple of years. But we are very committed to Rhode Island and have financed some pretty terrific projects here.

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PBN: What are some examples of projects you’ve been involved in here?
BARRY: One that was just finished in the first quarter and leased up is the Phoenix Apartments with Omni Development and Wynn Development. It’s an 82-unit rehab in the West End of Providence and we provided the construction financing. We also do a lot of work with NeighborWorks Blackstone River Valley and Joe Garlic. We financed a project called Marshfield Commons – we provided the loan and tax credits –and that is in North Smithfield with 38 affordable rental units in 18 buildings. We have also done mixed income with NeighborWorks and helped finance the Hope Street day care center in Woonsocket with New Market Tax Credits and historic tax credits. In that case and Marshfield Commons, we also invested in the tax credits.

PBN: Is more of what you work on mixed income, as opposed to pure low income, than in the past?
BARRY: We have a lot that are 100 percent affordable and we also have others that are mixed income, particularly in the Northeast. Mixed income really does help balance the subsidies needed, because you are only needing those deeper subsidies for a portion. I have also heard feedback from developers about the benefits of having different incomes together and helping those on lower incomes aspire to something closer to the median. It creates a nice balance in the housing.

PBN: Is it easier to get community and government support for mixed income versus pure low income now?
BARRY: It really varies by geography and market needs. In some cases mixed income is a way of life and it fits that market, where in other cases 100 percent affordable is really what is needed because there is not enough and it is about getting as many units as possible.

PBN: Is the gap in rents between what the market can produce viably and what is considered affordable widening?
BARRY: Again it really depends on the market. In some of the really high-cost markets like New York and San Francisco, there is a large difference between the affordable and market rates and then when you get out of the major cities it becomes less.

PBN: On the tax-credit side, does the economic recovery mean more demand for credits? How is that market doing?
BARRY: There is a significant amount of investor demand for particularly, low-income credits in [Community Reinvestment Act] markets.

PBN: How does that impact developers? Are they getting more for their credits?
BARRY: Given the demand, especially in larger cities, the price of tax credits has gone up, which is helpful to developers trying to finance the projects. Nationwide they are at about 90 cents on the dollar and then it goes over $1 in some high CRA markets.

PBN: When it invests in tax credits, does Bank America work directly with developers or go through brokers?
BARRY: About 70 percent of our tax-credits business is direct with the developer and 30 percent is through syndicators – we don’t think of them as brokers. That is how we balance it out. The main reason is to provide that one-stop shop and a simpler execution. But there are many times when it makes sense to have a syndicator involved due to the client relationship with syndicator or additional expertise to make sure everything goes smoothly. •

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