Municipal Capital Appreciation Partners

Investment in a Portfolio of Promissory Notes

MCAP acquired a 50% interest in a portfolio of promissory notes secured by twelve affordable housing developments in December 2001. The total investment, as of the Second Quarter of 2012, is $13.9 million.


  • Purchase 50% interest in a portfolio of Promissory Notes and other assets secured by partnerships that own twelve low-to-moderate income housing developments.
  • A bulk purchase diversifies risk and lowers transaction costs and lead time
  • Sell or refinance underlying properties prior to the maturity dates of each Promissory Note.
  • If not fully repaid by maturity date, foreclose and seek to enforce general partner financial guarantees

Value-Added Actions

  • Acquired 12 Promissory Notes (i.e., the “original” 12 Promissory Notes)
  • Negotiated preferred return secured by partner’s assets
  • Made a follow-on investment of $3 million
    • In return, MCAP received higher guaranteed preferred return and options to purchase interests in 5 additional properties
  • Played key role in obtaining tax credit allocations


  • Sold all of the original 12 Promissory Notes profitably
    • Five properties were awarded Low Income Housing Tax Credits, which contributed to higher sale prices
  • Acquired five additional Promissory Notes for $1.7 million
    • Sold each of these additional Promissory Notes profitably

Next Steps

  • One remaining asset remains, which is the general partner interest in a defaulted multifamily tax credit property and a majority holder of the defaulted bonds. MCAP expects to restructure the holding through the resyndication of the property with new tax credits (or the sale to a developer who resyndicates new tax credits on the property).