Puerto Rico Housing Finance Authority and Citi Community Capital Partner to Create Revolving Loan Fund to Finance Affordable Housing Development

The Puerto Rico Housing Finance Authority (“PRHFA”), in partnership with Citi Community Capital, a department of Citigroup’s (“Citi”) Municipal Securities Division, has created a revolving loan fund that will provide capital for the construction of for-sale single- and multifamily-homes for low and moderate income residents of Puerto Rico. The Puerto Rico Community Development Fund, a subsidiary of the PRHFA, will utilize its 2009 New Markets Tax Credit (“NMTC”) allocation for the transaction. CBO Financial acted as financial advisor to the PRHFA in securing the NMTC allocation, placing the equity, and structuring the fund.

“The PRHFA team has worked on this transaction for 3 long years,” said PRHFA Executive Director George Joyner. “To the best of our knowledge, the use of NMTC to create a revolving construction loan fund is unique for this program,” he indicated. “We hope this transaction serves as an example for other NMTC recipients, so they too will use their NMTC creatively and not accept the dictum ‘it has never been done’ as the final word on any challenge they may face.”

The creation of the Fund fills a void created by the lack of existing traditional financing sources in the construction lending market in Puerto Rico. According to Estudios Técnicos, a leading economic, marketing strategies and planning consulting firm based in Puerto Rico, this void has created a considerable pent up demand of approximately 10,000 for-sale units annually to low-income individuals. The Fund’s activity will be targeted to disadvantaged communities of higher economic distress, namely those with poverty rates in excess of 30% and unemployment rates at least 1.5 times the national average.

The creation of the Puerto Rico Community Development Fund was jointly announced by Puerto Rico Governor Luis G. Fortuño and Citi North America Chief Executive Officer, Bill Mills, during a meeting held at La Fortaleza. “As a result of this transaction, hundreds of Puerto Rican families will be able to realize their dream of owning their own home,” Gov. Fortuño said. “This is another example of the kind of constructive public-private partnership that has been a hallmark of our administration, and that can serve as a model for other jurisdictions throughout the Nation.”

Fortuño and Mills explained that this highly structured Fund is the first financial structure of its kind created to meet the demand of Puerto Rico’s residents by supplying the capital to develop sustainable communities. The PRHFA and Citi’s participation in the transaction has been arranged through a direct leveraged investment structure, with Citi serving as the tax credit equity investor and the Fund’s sole owner and the PRHFA serving as the Fund’s controlling entity and senior leverage lender.

“We have been in operation in Puerto Rico for more than 90 years and remain dedicated to helping the island fill a critical void in the affordable housing finance market,” said Bill Mills, CEO of North America for Citi. “As we expand in the region, we will continue to look for new and innovative ways to help strengthen local communities.”

The initial phase of the U$45 million Fund will finance the construction of close to 800 units of affordable and social-interest for-sale housing concurrently. Assuming an average construction period of 18 - 24 months, the RLF has the ability to be recycled more to four times, possibly leveraging the U$45 million RLF to provide over U$180 million in financing and up U$225 million in total investment for the construction of over 3,000 for-sale housing units and will have a catalytic effect on job creation and supply of affordable homes for low-income families. The Fund’s initial phase will finance housing developments across the island, including in the municipalities of San Juan, Bayamón, Juncos, Naguabo, and Santa Isabel.

About Puerto Rico Housing Finance Authority (PRHFA)

The PRHFA, a Government Development Bank subsidiary, provides mortgage loans to public and private housing developers for the construction, improvement, operation and/or maintenance of rental and for-sale housing for low to moderate income families. Moreover, it offers mortgage loans to citizens of low and moderate income. It also administers the Mortgage Loan Insurance Program (Act No. 87). Furthermore, the PRHFA administers housing subsidy programs aimed at boosting home purchases, such as, the Economic Stimulus Program by granting second mortgages to be used as down payment in the purchase of first and second homes and My New Home by providing down payment and closing cost assistance bonuses. As of October 2011, the PRHFA has also successfully launched a loss mitigation program known as Protecting your Home intended to reduce the amount of home foreclosures among low and moderate income families with recent financial struggles by providing a mortgage payment subsidy for up to 18 months.

The PRHFA is certified by the U.S. Department of Housing and Urban Development (HUD) to administer the U.S. Housing Act Section 8 voucher program in Puerto Rico and to act as an approved lender for both multi-family rental projects and single-family homes. In 2010, the PRHFA was designated to administer HUD’s HOME Investment Partnerships Program as well.

The PRHFA is also Puerto Rico's State Credit Agency for the Low-Income Housing Tax Credit program under Section 42 of the U.S. Internal Revenue Code (IRC), as amended and the controlling entity of the Puerto Rico Community Development Fund, a Community Development Entity through which, in 2009, the PRHFA received $45 million as part of the New Markets Tax Credits Program under Section 45D of IRC that will foster the for-sale housing market in the island.

About Citi and Citi Community Capital

Citi Community Capital is a premier financial partner with nationally recognized expertise in financing all types of affordable housing and community reinvestment projects. Citi Community Capital's origination, structuring, asset and risk management staff across the country provides creative financing solutions designed to meet their clients' needs. Citi Community Capital helps community development financial institutions, real estate developers, national intermediaries and nonprofit organizations achieve their goals through a broad, integrated platform of debt and equity offerings. Additional information may be found at www.citicommunitycapital.com

Citi, the leading global financial services company, has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management. Additional information may be found at www.citigroup.com | Twitter: @Citi | YouTube: www.youtube.com/citi | Blog: http://new.citi.com | Facebook: www.facebook.com/citi | LinkedIn: www.linkedin.com/company/citi