LIHTC Syndication Orig. comp?
Does anyone have insight into market comp/ acq fee split that LIHTC Syndication originators get? Sort of a niche question but hoping someone here has an idea. Thanks!
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Based on the most helpful WSO content, LIHTC syndication typically involves a few key financial components, although specific compensation details for originators can vary. Here's a general breakdown of how the process might work, which could give insight into potential compensation structures:
Developer Fees: LIHTC developers earn their income primarily through developer fees. These fees are considered earned income and are a significant part of the profitability of LIHTC deals.
Acquisition Fees: In the context of multifamily acquisitions, fees can vary. There's mention of a 1% acquisition fee in one of the threads, but this is not specific to LIHTC syndication.
Equity Raise and Syndication: The general partner (GP) in LIHTC deals typically works with a syndicator to determine credit pricing and terms. The GP's work is more akin to securing agency debt than raising LP equity for a market-rate multifamily project. This suggests that the origination compensation could be similar to that of securing debt.
Syndicator Requirements: For those new to LIHTC or with recent staff turnover, syndicators may require a development consultant and third-party property manager, indicating that there are additional costs and potentially reduced compensation for the originator in such scenarios.
Profit Split: There's no specific information on profit split for LIHTC syndication originators. However, in a related context, there's mention of various fees including acquisition, asset management, refinancing, and disposition fees in a real estate profit split scenario.
To get a more accurate idea of the acquisition fee split for LIHTC Syndication originators, one would typically need to look at industry reports, surveys, or directly network with professionals in the field. The specifics can depend on the size of the deal, the region, and the company's compensation structure.
Sources: Q&A: Affordable Housing Acquisitions, Q&A: Affordable Housing Acquisitions, Real Estate Profit Split - Friends and Family - LT Hold, Multifamily Development vs Acquisition Fees, How do LIHTC developers make money?
You can look up comp for some of the nonprofit syndication shops online. Think Enterprise, Ohio Cap, NEF. They all have to file a Form 990 and it includes comp for the highest earners.
Guidestar is a good resource
Late here, but thanks for the tip! Pretty clever. Some EVP’s taking home $800k… not bad.
Yeah solid comp and hours are definitely pretty chill with established relationships. Not a crazy hard job either once you get things rolling. A few top guys at NEF were around of $1.2M in 2022.
What's pricing looking like on 4%s these days?
I heard high 80s
I got a quote for 88 cents last week from a big syndicator.
$0.95 to $1.00 in NYC
Depends on market. Highly competitive CRA markets are still in the $0.90s, less competitive CRA in the high 0.80's, and non CRA and rural markets are in the low $0.80s. Some investors may pay a higher PPC and back load their equity to save their yield. Others will offer a lower PPC and front load their equity. In this rate environment, Equity is cheaper than debt so most developers realize front loaded equity is a better offer as long as the PPC isn't too low.
Thanks very helpful.. What % do they usually pay at closing is it 20-30% if they are in the .80 range?
I'm still dipping my toes into LIHTC, why would someone pay $1.00 per credit? Wouldn't it just make sense to pay your tax liability since you would be taking on construction risk? What am i missing..
A developer may have two "competitive" offers at very different pricing.
Offer 1 may be $0.88 per credit with 10% at closing, 60% at Final CO, 25% at Stabilization, and 5% at 8609 (form that allows you to actually get the credits)
Offer 2 may be $0.83 per credit with 20% at closing, 20% at 50% completion, 50% at Final CO, 5% at Stabilization, and 5% at 8609.
The 2nd offer may seem like its not competitive because its $0.05 less than offer 1, but offer 2 will save the developer a lot more in construction interest expense since they don't have to draw on the construction loan as much and as quickly. All things equal, this would allow more paid developer fee, which is ultimately what the developer cares about.
Part 2 - Most LIHTC investors are banks that are investing to fulfill CRA need, although there are a few economic investors in the market and some insurance companies. If a bank has a ton of CRA need in NYC or California, it becomes a bidding war that drives the pricing up. In some cases even over $1.00 PPC, but these days that's very rare. The highest you'll see these days are around the mid 90's and those are rare outside of NYC and metros in California. This may seem odd but the benefits from investing in a LIHTC deal are not just the tax credits. You also get deprecation and losses.
You may get $10MM of credits over 10 years ($1MM annually) that you paid $0.85 per credit ($8.5MM in equity). Your IRR calc would include the $10MM in tax credits as well as the losses, which in some cases are larger than the credits. You could get $1MM in tax credits and $1.5MM in additional losses for a year.
Hope that helps.
Does the debt or equity side generally make more in LIHTC?
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