New investors entered in 2017 for low-income segment of 535 Carlton

It's not a huge deal, by the standards of recent Atlantic Yards/Pacific Park gyrations, what with Forest City selling nearly all its stake going forward to Greenland USA, and the Greenland-dominated joint venture Greenland Forest City Partners then selling three parcels to other developers, but apparently a new investor entered into part of the "100% affordable" 535 Carlton last year.

The 298-unit building was developed by entities in charge of the "moderate/middle" units and the 90 low-income units (about 30% of the total), with the latter known as the "Affordable Owner." (Interesting, isn't it, how low-income units translate into "affordable.")

According to a document dated 7/14/17 but not filed in the city's ACRIS database until about six months later, the Affordable Owner, formerly Pacific Park Inc. (which in November 2015 was listed in an SEC document as a Forest City-created subsidiary) was taken over by a new "Investment Member," owning 99.99%, called the U.S.A. Institutional 80-20 Tax Credit Fund VIII LP.

That entity is owned by Richman U.S.A. 80-20 Tax Credit Fund VIII LLC, which is an affiliate of The Richman Group, "America's 7th Largest Rental Apartment Owner," and Tandem CDE Inc., a subsidiary of Signature Bank that specializes in transactions involving the Low Income Housing Tax Credit.

The new Investment Member is making a capital contribution to pay back a $23.7 million loan advanced by one project-related limited liability company (LLC) to the Affordable Owner.

Not unusual

This does not seem to be an unusual transaction. As one CPA firm specializing in such issues explains, it's common for various investors to enter the picture:

Developers may claim LIHTCs themselves. However, due to limitations and the lack of enough taxable income, most developers choose to find tax credit investors, who provide cash that is channeled into the development. The developer can either work with an investor who invests directly into a partnership (or LLC) and receives tax credits or work with a syndicator who acts as a broker between the developer and investor. To benefit from economies of scale, syndicators pool several projects into one LIHTC equity fund. Then, syndicators market the tax credits to investors who essentially invest in a piece of the syndicator’s fund. This spreads the risk across the various projects benefiting from the fund.

A similar transaction has not occurred yet, at least according to public documentation, regarding the similar "100% affordable" 38 Sixth. But it would seem plausible.

535 Carlton Ownership Revision 7-14-17 by Norman Oder on Scribd