Grant Cooper

If you own land and want to develop multifamily housing on it, you could get an 85%+ LTC construction loan that might even allow for cash out. How? Land equity and an often unknown HUD detail: BSPRA 🧵

Our company was founded a little more than a year ago ... but we've already built our first rowhouse My company is The American Housing Corporation.  We're a real estate development (and manufacturing) company building rowhouses designed for families: the American Starter Home Our mission is to solve the problem (at scale): "How can we build housing in places where young people already live, so they have kids and stay?"

@JohnTX89 Tyler, TX listed as number 22 in the US

The DFW Metroplex is leading the U-Haul Growth Metro list of 2024 Austin and Houston appearing in the top 10 as well

@DallasAptGP HUD also released a "Creating a Middle Income Housing option for 221(d)(4)" memo

Follow up here. New HUD rules were posted in draft form for comment this afternoon. Market Rate properties: New construction Section 221(d)(4) loans will move from 85% loan-to-cost/1.18x debt service coverage to 87% LTC/1.15x DSC, meaning an increase of about 2.3% in loan size Refi under Section 223(f) will also move from 85% LTV/1.18x DSC to 87% LTV/1.15x DSC. Affordable properties (at least 20% at 50% AMI or 40% at 60% AMI): 221(d)(4) will move from 87% LTC/1.15x DSC to 90% LTC/1.11x DSC 223(f) will move from 87% LTV/1.15x DSC to 90% LTV/1.11x DSC

HUD expected to roll back underwriting by end of the month, giving multifamily construction & refi loans a boost: ▪️87% LTC/LTV & 1.15x DSC (up from 85%/1.18x) ▪️~2.3% bigger loan size ▪️40-year rates at 5.75%, refi at 5.45% Banks still around 65% LTC

@jayparsons @mayortoby Could be rents are higher in FL? Avg 4&5 star rents: Houston - $1,664 Tampa - $2,030 Orlando - $1,925 Miami - $2,853

@HUDMFLoans @mayortoby Good point, too. Though didn't slow down Florida.

For apartment supply growth rate in 2024 (last column) Houston ranks BELOW Boston, San Diego, Portland & NYC, and basically tied with LA and San Francisco, according to Yardi. I'd quibble with these numbers a bit, but as I've noted before, the Houston story is compelling. It was the 2nd-fastest growing MSA in the U.S. last year behind only DFW, and likely to remain a top people magnet in coming years too. And yet building apartments at much slower rate than its Sun Belt peers -- especially compared to its Texas sibling, Austin.

@jayparsons @mayortoby Insurance costs…

@mayortoby Lot of developers and investors got burned there in mid 2010s when oil prices crashed, and those scars pushed some of that capital elsewhere for the last development cycle.

Lumber down ~16% in one month Seems like a steep drop

U.S. multifamily housing starts hit the lowest level since April 2020

@DallasAptGP Recently heard that the delays in electrical equipment are not about supply chain, but more due to data center development

Just heard about a deal in South Dallas with very similar numbers to this ~$30M cost and selling for $250M after zoning, power, and water made it suitable for a data center operator

An article from the San Antonio Business Journal noted that multifamily starts in SA in Q1 2023 were around 4,000 In Q1 2024, they reported that multifamily starts in San Antonio were 21 A 99.5% decrease

Working with a new HUD 221d4 focused equity group seeking to provide LP capital on market rate 221d4 new construction deals in DFW They put together the below slide highlighting the cost of capital of a bank loan vs a HUD loan on a merchant build strategy If considering multifamily development in DFW and thinking about HUD, happy to make an intro

@eliastdragon Collin: 0.2% Denton: -1.0% Grayson: 1.2% Tarrant: -0.2%

@HUDMFLoans Can you add Collin, Denton, Grayson, and Tarrant?

With around 33,000 units delivered over the past 12 months, rents in DFW are down slightly YoY Not facing pressure from supply, within some of the surrounding, more tertiary, counties around DFW, rents are up and vacancy rates are low

In 2010, HUD released risk mitigation, changing the underwriting parameters on multifamily loan transactions Market rate 221(d)(4) new construction/sub rehab loans went from 90% LTC, 1.11 DSCR to 83.3% LTC, 1.20 DSCR. It is currently 85% LTC, 1.176 DSCR With volume down, defaults and claims extremely low, and clear evidence that increasing supply promotes affordability, rumors are circulating that HUD could return to the pre-2010 underwriting parameters of 90% LTC, 1.11 DSCR for market rate new construction loans

HUD's multifamily loan default rate is incredibly low In Q4 2023, the default rate was ~0.15% According to the MBA, the CMBS multifamily default rate in Q4 2023 was 4.30%, the life company multifamily default rate was 0.36%, and the bank multifamily default rate was 0.94%

Market currently saying ~60% chance for a rate cut in June How will this change after today?

The global supply chain pressure index hit levels not seen before in 21/22 but has now returned to normal levels Maybe a good sign for inflation and construction timelines

The growth story in TX is alive and well

@DallasAptGP @jayparsons Is there a recording available?

This is what a “media account” looks like Thanks to Jay and the RealPage team for inviting me into the studio for a webinar on attainable housing

The 45L tax credit pairs nicely with the 221(d)(4) loan program Nearly all market rate 221(d)(4) developers pursue Green mortgage insurance premium (MIP), saving 40 bps in rate. Why not opt for the Energy Star certification and get the 45L tax credits ($2,500/unit) as well?