Magna Bank in Memphis, Tenn., has a track record of lending to multifamily housing developments. But the $504 million-asset community bank recently experimented with an affordable housing deal for the first time and liked it.
Magna partnered with $774 million-asset Metropolitan Bancgroup in Ridgeland, Miss., to provide $14 million in financing for Crescent Bluff. The 172-unit apartment project is eligible for federal low-income housing tax credits, an area where Magna sees potential for growth.
"We've seen them from afar in the past, but have never been involved in one," says Ted Simpson, Magna's chief lending officer. "It's a complicated process, and we wanted to roll our sleeves up and understand it and get into that niche."
Magna is one of 26 institutions nationwide on
Crescent Bluff is a rent-restricted property for low-income residents. Monthly rent will be capped at $450, $550 or $665, based on apartment size.
Magna found Crescent Bluff attractive because it helps the bank meet Community Reinvestment Act requirements, Simpson says. The deal also held appeal because it's located near the South Main Arts District of downtown Memphis and Magna tries to be involved in hometown projects.
"We're a Memphis bank with all of our operations in Memphis," Simpson says.
The financial side of the project also looked good, as Magna won't pay income tax on the loan, says Frazer Gieselmann, senior vice president of construction lending. It's also Magna's first development in which it's both lender and investor, as the bank purchased low-income housing tax credits through the Tennessee office of the U.S. Department of Housing and Urban Development.
"Obviously your investment is larger if you are doing lending and equity," Gieselmann says. "But there is more control on what you are doing, and that offsets some of the risk."
Simpson and Gieselmann worked with Metropolitan's chief executive, Curt Gabardi, and senior managing director Maria Garrett.
