Development Guidelines

Development Guidelines

Underwriting

Summary of Development
& Acquisition Guidelines

The following provides a general overview of how we view potential projects. These
may be modified to respond to the characteristics of specific markets and/or updated
periodically to reflect evolving market conditions. In selecting projects in which to invest,
the Fund will invest in those which most closely meet the goals of the Fund, which are to:

  • Provide equity financing to qualifying projects which will serve as affordable housing for Maine and New Hampshire’s low and moderate income residents.
  • Provide reasonable safeguards to assure the long-term success of project investments.
  • Encourage the delivery from competent third parties in the social services industry of appropriate and financially feasible services to enable special-needs low income tenants to maintain independent lifestyles in affordable apartments.
  • Provide an adequate return to Fund investors.
  • Create long-term impact in revitalizing communities and their neighborhoods.
  • Support project sponsors who can successfully develop and operate affordable housing.
  • Provide capital for projects which might have difficulty accessing national markets.

The Fund has established investment criteria which are organized as follows:

1. Qualification: Determination of projects which meet threshold criteria for consideration, have the greatest demonstrated need, and exhibit credible potential for meeting the Fund’s goals.

In order to be eligible for Fund equity investment, a development project must meet the following threshold criteria:

  • The project must be residential, providing affordable family, special needs, and independent elderly or assisted living housing, and it must conform to federal and state Low Income Housing Tax Credit (“LIHTC”) requirements.
  • The project must be located in the State of Maine or the State of New Hampshire.
  • If the project is to contain a mix of affordable and market rate units, at least a majority of the total units must be set aside for rent-restricted units expected to generate tax credits.
  • The Sponsor must be an experienced non-profit or for-profit developer, or demonstrate a feasible plan to hire such expertise from third party consultants approved by the Fund.
  • The Sponsor must, in the opinion of the Fund, be “financially responsible” at the time of the Closing.
  • The proposed Property Manager must be an experienced operator of rent- and income-restricted housing projects, with competence in LIHTC administration.
  • Alternatively, the Sponsor must demonstrate a feasible plan to hire tax credit compliance expertise from third party consultants approved by the Fund.
  • The project must have received a reservation of low income housing tax credits from Maine State Housing Authority (“MaineHousing”) or New Hampshire Housing Finance Authority (“New Hampshire Housing”).
  • The Sponsor should demonstrate readiness to proceed.
  • The Sponsor must agree to comply with the Fund’s underwriting requirements.
  • Investments in operating partnerships will range from a minimum of $100,000 to a maximum of $7 million.
  • Unless otherwise approved by a majority vote of the Investor Limited Partners, the Fund will acquire a percentage interest in the Project Owner at least sufficient to control any voting right.
  • The Sponsor must submit a substantially complete application package to the Fund to include:
    • A complete MaineHousing or New Hampshire Housing tax credit application
    • A current development budget and operating pro forma
    • Current resumes for each development team member
    • A project schedule showing milestones

2. Prioritization: Selection among competing qualifying projects for allocation of the Fund’s capital when the needs of potential projects exceed the Fund’s capacity.

If a project meets the threshold criteria, it will be subject to a qualifying review. Priority consideration will be given to projects that meet the following criteria:

  • Targeted Investments: Targeted investments include projects located in communities which are considered to be underserved by affordable housing and/or which are experiencing significant new demand for affordable housing, and projects located in distressed communities which are in the process of implementing a comprehensive program of economic revitalization.
  • Community Impact and Involvement: Investments will be evaluated based on their projected impact on their neighborhood and surrounding community.
  • Strength of Development Team.
  • Population Served by Affordable Units: Projects which serve special needs populations will be considered for investment only where there is an adequate service plan and evidence of adequate financial support.
  • Non-Profit Sponsor: Projects which are undertaken by a community based organization and/or expected to result in a significant increase in community based development capacity will receive priority consideration.
  • Timeliness of completion: Projects which are reasonably likely to complete construction on or ahead of projected schedule.
  • Balance and diversity: Projects which provide balance and diversity within the Fund portfolio, in terms of the population served, sponsorship, location, housing type or reliance on third party service providers will be given priority consideration.
  • Good track record with the Fund.

3. Underwriting: Analysis of whether a project satisfies the Fund’s standards for risk, return, and regulatory compliance.

Once a project has been identified by the Fund as a qualified project, the project will be eligible to move to the next stage of review. For a project to be eligible for detailed underwriting, the Sponsor must at a minimum:

  • Provide evidence of sufficient sources of capital to accomplish the objective, including letters of interest, term sheets, and development timetables for all other sources of funds.
  • Have a reasonable timetable for completion of plans and specifications, and the construction contract bidding process.
  • Provide satisfactory evidence of tax credit reservation.
  • Have provided all documentation requested in form suitable to the Fund.
  • Define all government approvals which are or will be required of the project and under what timetable, and describe a plan which reasonably demonstrates the Sponsor’s ability to obtain such approvals without undue delay.

4. Agreement on Business Terms and Closing: Completion of due diligence, negotiation of Partnership documents and execution of closing requirements.

Using the investment criteria, the following selection process will be used:

  1. Projects in the pipeline will be assessed to determine readiness-to-proceed within the time frame of the Fund.
  2. Sponsors for projects identified as ready to proceed will be given an opportunity to provide information (if they have not already done so) from which the Fund will determine if a project is eligible for the Fund’s investment.
  3. Those projects that meet certain threshold criteria outlined in the qualification section of the investment criteria will be designated as "qualified" and will be prioritized for underwriting.
  4. Once a project has completed detailed project underwriting, we will seek investor approval. After a project has received approval, the Fund will issue a commitment for equity financing for the subject investment, with expiration no more than 90 days from the time of commitment.
  5. If the Fund’s 90-day commitment to an investment is scheduled to expire prior to closing of the investment, a 90-day extension of the commitment for financing may be granted based upon the satisfactory reassessment and determination by the Fund’s staff that the project is at a sufficient level of readiness to close, unless there has been a material change in the project, in which case the investment will be brought back to the investor for reconsideration.
  6. NNEHIF staff will customarily seek approval of an investment amount equal to as much as 110% of the amount contemplated at the time of investor review to accommodate the possibility of an increased allocation of tax credits necessitating an incremental increase in the Fund’s investment. Staff authority to close on an investment amount above the amount contemplated at the time of investor review is predicated on no material change in Investment Structure or Return resulting from the increase in investment amount.

For more information about our development policies and underwriting guidelines, contact:

Tom MacDonald, VP of Acquisitions
207.772.8255 x12