To understand why, it helps to visualize what the typical capital stack looks like for a low income housing tax credit transaction. It starts with hard debt from lender based on the income stream, following by tax credit equity and then followed by various layers of soft debt.

When President Trump won his unexpected victory last November, it suddenly dawned on the market that comprehensive tax reform could and probably would actually happen. While this realization was widely celebrated throughout the business community, the LIHTC community had a problem: investors didn't have a clue what the future corporate tax rate would be, as well as other related issues such as depreciation and carried interest. Their response was to low ball bids by assuming a 20% corporate tax in modeling, according to an earlier interview with Shaun Smith, senior director of Freddie Mac's Targeted Affordable Housing group.

The tax credit equity piece has effectively shrunk, quite dramatically, which is why soft money has quickly become more essential than ever before.

Indeed, if the proposed cuts at the Department of Housing and Urban Development materialize, programs like the DC Housing Production Trust Fund will figure even more significantly in these deals.

TOPA Can Complicate Deals

Of course, LIHTC deals were never a cakewalk in the District in the best of circumstances, due to the TOPA rules.

Consider the trajectory of Jair Lynch Real Estate Partners' Regenesis portfolio, which is being sold asset by asset as tenants opt to have their developer of choice purchase their buildings.

Jair Lynch acquired the approximate 500-unit LIHTC portfolio in 2011. So far four of the five assets have closed with only one of the properties acquired by the original contract purchaser — the rest went to TOPA.

“We did get some portfolio offers but the assets were looked at individually because they were not next to each other and because of the TOPA factor,” Orkisz says.

The latest property from this portfolio to close was Petworth Place, a 78-unit community located at 930 Randolph St., NW, which traded for $4.8 million. The tenants assigned their rights to WC Smith.

Greysteel's Ari Firoozabadi, W. Kyle Tangney, Rawles M. Wilcox, Herbert Schwat and Orkisz brokered the deal.

“Petworth Place will continue to operate under the LIHTC program with units reserved for residents whose income does not exceed 60% of area median income,” Orkisz says.