As Vice President of Origination at Boston Capital, Mr. Tom Dixon during his 13-year tenure, originated and closed approximately $750 million in tax credit transactions in 15 states. Mr. Dixon is credited with introducing new developer relationships using low floater bonds, assisting developers with feasibility and financial structuring using the Low Income Housing Tax Credit (LIHTC). Mr. Dixon also served on the boards of the New York State Association for Affordable Housing and the Texas Affiliation of Affordable Housing Providers. Mr. Dixon is also a member of the National Association of Home Builders Housing Credit Group. In this Dane PCG profiling series Mr. Dixon answers the challenging question of the direction and future of the affordable housing market due to the recent economic downturn.
1. How would you describe your role and what you do in the industry?
I have a unique, hybrid role specializing in the origination and acquisition of deals at Boston Capital. The first step is origination; I specialize in looking for opportunities i.e. going to a developer who has an application and reviewing the past references of people worked with. This all culminates in bringing the deals to the second stage, the acquisition side. In regards to acquisition I focus on running specific projections on deals and gaining a letter of intent, when these stages are complete the actual transaction begins.
2. What challenges do you foresee in the affordable housing market for emerging developers due to the recent economic downturn? How will this be addressed and rectified?
With the absence of two critical players, Fannie Mae and Freddie Mac the affordable housing market has significantly changed and decreased. In the past the state’s allocating agencies’ mantra was to spread equity as much as possible. This mantra will change in the near future, as state allocations will struggle to find deals and tax credits will spread to the most deserving. Least affected will be the Northeast and Western coasts as well as major metro areas. Facing the most challenges are the Central and Midwest states. Allocating agencies need to distribute funding to larger deals in order to successfully complete them—prioritizing is essential. For emerging developers the selectivity of the market can be seen as the greatest obstacle and the learning curve is extremely steep.
3. In your opinion, what are the most significant differences among the Northeastern affordable housing market and the west coast market?
I believe the two regions are more similar than different. Consequently, the 5 boroughs of New York City and the metro areas of CA continue to have a wide breath of demand. The two markets share the strengths of having large populations and a high demand in units—but one challenge remains tantamount, the lack of available dirt for developers who want to develop ground up. North of Boston states (NH, VT, ME) are experiencing lulls, DC= recession proof, and Portland & Seattle are doing well on multi-family. The Southeast market is strengthening while VT, NH, ME, RI are experiencing losses in population and a weakening of the overall market.
4. How do you see the tax credit market evolving in rural areas such as Midwest and upstate New York?
The National CRA focused investors have limited interest in deals in these particular areas, resulting in local banks or upstate equity funds taking on deals. The biggest challenge is recognizing and finding the quality markets. Rural areas need to source local banks. I also foresee a rise in individuals or “Country Club Raises” where investments from relationships with wealthy individuals are created, helping to fill the gap of missing national investors.
5. Could you briefly compare the pros and cons of financing through low income housing tax credits and conventional financing?
Tax Credit Pros: Affordability, low leverage equity and less debt, access to soft dollars, forgivable interest rates, and capital structure is more positive, opportunity to make developer’s fee, and forgivable debt rates.
Tax Credit Cons: lose the ability to sell early on, prohibited from having market rate units, low debt service ratios, equity investor/provider who has entire new list of due diligence requirements that must be taken into consideration—an entire different due diligence requirements to deal with.
Interview conducted by Kazarae Lowe and Jason Knight. |
