A $30 million LIHTC check fills 38 percent of Mesquite's senior stack

Walker & Dunlop has closed roughly $30 million in Low-Income Housing Tax Credit equity for Avanti Hills, the 260-unit affordable senior community KCG Development is building in Mesquite, Texas with The Javelin Group and the Mesquite Housing Finance Corporation as joint venture partners. The check fills 38 percent of a $78.45 million total—about $115,000 a home against a $302,000 all-in unit cost.

Avanti Hills runs on 4 percent LIHTC credits paired with tax-exempt bond financing issued through the Mesquite Housing Finance Corporation, with Walker & Dunlop Affordable Housing Equity as the equity partner and Citi Community Capital and Bank of America on the debt. All 260 homes—135 one-bedroom and 125 two-bedroom—are restricted to households earning at or below 60 percent of Area Median Income, and the new construction is reserved for residents 55 and older with a clubhouse, fitness center and wellness programming on site.

The equity is a tax product sized off a 4 percent allocation and the bond execution rather than a discretionary fund commitment, and the sponsor's work is convening a housing finance corporation, a credit investor and two banks around a single set of rent ceilings. Mesquite says less about investor appetite for senior housing than about how narrow the financing path has become: sponsors who can assemble that group build, and the ones who can't, don't.

New senior supply leans on public credit while stabilized assets trade at going-concern prices, and the gap between the two is the sector's underwriting engine—an argument Avanti Hills fits neatly. The Fort Lauderdale senior project covered earlier this month carried the same signature, with Bank of America and JPMorgan Chase joining six public agencies on a $40.2 million deal. Bank of America's presence on both stacks in the same month suggests the affordable senior construction bid runs through a short list of bank desks—a capacity question before it is a pricing question.

The pair on the debt side is the thing to watch on the next Metroplex deal, because two banks underwriting a $78 million affordable senior project is a functioning market and one bank is a thinner one. How far the equity layer has to stretch past $30 million on the following deal is the arithmetic that decides how many of these get built.