Public-Private Partnerships for Housing Preservation & - - PowerPoint PPT Presentation
Public-Private Partnerships for Housing Preservation & Neighborhood Revitalization Partnerships / Joint Ventures Are You Ready to Tie the Knot Stuart Portney, P.P. , President The Metro Company, LLC American Planning Association National
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American Planning Association National Planning Conference
Monday, May 8, 2017 | 10:30 a.m. - 11:45 a.m.
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American Planning Association National Planning Conference
Monday, May 8, 2017 | 10:30 a.m. - 11:45 a.m.
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American Planning Association National Planning Conference
Monday, May 8, 2017 | 10:30 a.m. - 11:45 a.m.
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American Planning Association National Planning Conference
Monday, May 8, 2017 | 10:30 a.m. - 11:45 a.m.
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American Planning Association National Planning Conference
Monday, May 8, 2017 | 10:30 a.m. - 11:45 a.m.
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American Planning Association National Planning Conference
Monday, May 8, 2017 | 10:30 a.m. - 11:45 a.m.
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American Planning Association National Planning Conference
Monday, May 8, 2017 | 10:30 a.m. - 11:45 a.m.
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American Planning Association National Planning Conference
Monday, May 8, 2017 | 10:30 a.m. - 11:45 a.m.
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American Planning Association National Planning Conference
Monday, May 8, 2017 | 10:30 a.m. - 11:45 a.m.
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American Planning Association National Planning Conference
Monday, May 8, 2017 | 10:30 a.m. - 11:45 a.m.
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American Planning Association National Planning Conference
Monday, May 8, 2017 | 10:30 a.m. - 11:45 a.m.
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American Planning Association National Planning Conference
Monday, May 8, 2017 | 10:30 a.m. - 11:45 a.m.
Monday, May 8, 2017 Housing and Community Development, #9108795 APA’s 2017 National Planning Conference
partners, we make long-term equity investments and originate and acquire long-term mortgages.
billion in debt and equity capital to properties in 44 states and regions – helping to preserve and create 40,000+ units of affordable housing.
income communities to help ensure their affordability and to enhance the quality of life for their residents.
Community Development Financial Institution (“CDFI”) and a member of the Federal Home Loan Bank of New York (“FHLBNY").
Guarantee Program. Our $125 million award will be utilized to fund
the country.
developments
760 vacant, single- family homes
rental units
income
in 1989
incomes
and city ownership
increase in 10-year vacant stock
vacancy in West and North Philadelphia
Managem emen ent O Offices es WPRE RE Neighborhood R Rest.
properties
homes
transit
centers
strength
development entity
stabilization
financing
Transaction C Components
City owned properties Privately owned properties 9% Low Income Housing Tax Credit allocation Tenant based Section 8 vouchers As of right 10-year property tax abatement Tax credit syndicator and investor Construction and permanent financing
Per ermanent Len t Lender er C Capital S Stack ck
First mortgage $1,000,000 (12.5% of the total development cost) LIHTC equity 7,000,000 Total proceeds $8,000,000
Scattered site Capital syndication risk Valuation: single family vs. multifamily Ability to refinance the loan at maturity Non-coterminous term debt and property tax abatement Reliance on portable Section 8 revenue Atypical expense structure Property management Increased project reserves Product marketing to expand investor base Demand assessment Fully amortizing loan Non-programmatic response Stress test without Section 8 Reliance on developer experience Centralized management office
agency priorities
public agency
Phase IV: Proof of Concept Access to commercial banks and the secondary market, including GSE, term debt financing
family-sized units
market rate rents
the portfolio
for homes in proximity to newly renovated properties
1,100 units of quality affordable housing
stability
and School District
and employment opportunities
Nic ole L
Ho using a nd Co mmunity De ve lo pme nt, # 9108795 APA’ s 2017 Na tio na l Pla nning Co nfe re nc e
Ge ne sis Co mpa nie s is a full-se rvic e de ve lo pme nt + c o nstruc tio n firm e nha nc ing urb a n c o mmunitie s lo c a te d in Ne w Yo rk a nd Ne w Je rse y.
Six po rtfo lio s o f b uilding s: Ha ttie Do dso n (L
I HT C)
Ge o rg e W. L
e wis (L I HT C)
L
illia n Upshur (L I HT C)
Ste rling Ho use s (L
I HT C)
129 SI
P HDF C
137 SI
P HDF C
L
Yo rk City
T
hre e hundre d fifty-e ig ht (358) units
T
we nty-e ig ht (28) b uilding s
Mid-Rise Apa rtme nt Building s Co nstruc te d Pre -Wo rld Wa r I
I
L
a st Ma jo r Re no va tio n in mid-90s
No n-Pro fit Owne rship T
a x a nd Mo rtg a g e Arre a rs
Sta tic Re nts Re nta l De linq ue nc ie s Unc o mple te d Audits Co mmunity Co nc e rn
No npro fit o wne r/ g e ne ra l pa rtne r o f the e ntitie s tha t o wn the fo llo wing
re nta l ho using po rtfo lio s
Ha ttie Do dso n (L I HT C)
Ge o rg e W. L e wis (L I HT C)
L illia n Upshur (L I HT C)
Ste rling Ho use s (L I HT C)
129 SI P HDF C
137 SI P HDF C
T
he SI P pro g ra m wa s a la te 1990s NYC a ffo rda b le ho using pro g ra m (no n-L I HT C) a va ila b le to no n-pro fits. Re q uire d 50% o f the units re nte d to ho me le ss individua ls
HPD sub sidy
No ha rd de b t
T
a x c re dit inve sto r in the L I HT C pa rtne rships wa s a fund c o ntro lle d b y Na tio na l E q uity F und
Unde r Se c tio n 42 o f the I
RS Co de , inve sto rs c a n re c e ive a c re dit o n the ir fe de ra l ta x b ill fo r q ua lifie d inve stme nts to lo w- inc o me re nta l ho using inve stme nts
De ve lo pe rs re c e ive upfro nt c a sh fro m inve sto rs fo r
de ve lo ping lo w-inc o me units (<=60% AMI )
10-ye a r ta x c re dit, 15-ye a r c o mplia nc e pe rio d Orig ina l inve sto r c a n e xit a t the e nd o f c o mplia nc e pe rio d Minimum a dditio na l 15-ye a r “E
xte nde d-Use ” fo r L I HT CS a llo c a te d a fte r 1989
Po st-Y15 Owne r Optio ns:
Se ll Re syndic a te (Re fina nc e with L
I HT Cs)
De c isio n ma y b e b a se d upo n:
Missio n L
e rm Ob je c tive s
E
c o no mic s/ Ma rke t Co nditio ns
Ca pa c ity Othe r sta ke ho lde rs
L
F
a ith-b a se d no npro fit
Pro lific Ha rle m de ve lo pe r/ o wne r Oppo rtunity to c a pita lize o n a sse ts (lo c a tio n, timing , ma rke t-
fo rc e s)
Co mmunity-fo c us Othe r driving fa c to rs
Curre nt F
ina nc ing So urc e – NE F L I HT C E q uity Syndic a to r
Re side nts
Ma inte na nc e issue s Sa fe ty c o nc e rns “Sta tus q uo ” issue s
De ve lo pe r
O Jo int Ve nture Disc ussio n
O Se lle r issue s O Po rtfo lio issue s
O Jo int Ve nture Go o d Alte rna tive in Ce rta in Situa tio ns
O Se lle r with stro ng va lue pro po sitio n O Se lle r with a g o o d re puta tio n with funde rs O Po sitive dyna mic s b e twe e n pa rtne rs O F ina nc ia lly Prude nt O Re so lve Co ntro l I ssue s O T he Re la te d-Pa rty Rule
O Sa le Disc ussio n (Multiple Sc e na rio s) O Risk mitig a tio n O Ac c e le ra tio n o f pro c e e ds
Sig nific a nt e xisting inve stme nt
Ha ttie Do dso n (L
I HT C) - $4,456,549 (2021 Ma turity)
Ge o rg e W. L
e wis (L I HT C) - $1,964,596 (2024 Ma turity)
L
illia n Upshur (L I HT C) - $4,527,011 (2010 Ma turity)
Ste rling Ho use s (L
I HT C) - $3,973,182 (2029 Ma turity)
129 SI
P HDF C - $2,576,000 (2031 Ma turity)
137 SI
P HDF C - $1,500,000 (2031 Ma turity)
Po rtfo lio -wide - $18,997,338
Sig nific a nt a ntic ipa te d a dditio na l inve stme nt re q uire d Ma yo r’ s Ho using Pla n
NYC Ho using De ve lo pme nt Co rpo ra tio n (HDC) L
a rg e vo lume -c a p re q uire me nt
Co mpe ting de ve lo pme nt pro je c ts T
ra nsa c tio n c o mple xity
Othe r pub lic -se c to r I
ssue s
L
ie ns a nd Pa ya b le s
Building Vio la tio ns Pro pe rty T
a x Ab a te me nts
O Ro o f re pla c e me nt O K itc he n re pla c e me nt O Ba thro o m re pla c e me nt O Ne w b o ile rs O E ntry do o rs, ve stib ule do o rs, limite d wo o d do o rs fo r b e dro o ms, b a thro o ms a nd c lo se ts O ADA c o mplia nc e O Windo w re pla c e me nt O Ne w do me stic wa te r he a ting syste m O Ne w hydro nic he a ting syste m O Ne w he a ting ra dia to rs thro ug ho ut the a pa rtme nts O Ne w plumb ing fixture s
O No re nt inc re a se s O Re nts b e lo w ta x c re dit re nts re ma ine d O Re nts a b o ve ta x c re dit re nts we re re duc e d O Re c e rtify L I HT C te na nts (o rig ina l T I C a llo ws unit c o mplia nc e if
O SI Ps: c e rtify a ll the te na nts a nd e xc lude o ve r-inc o me te na nts fro m the a pplic a b le fra c tio n O 70-unit ho me le ss re q uire me nt (re q uire me nt re ma ine d fro m o ld SI Ps re g ula to ry a g re e me nt) O Mix o f 50% AMI (HOME units) a nd 60% AMI units
O ADA Co mplia nc e : O Ne w HPD fina nc ing re q uire d 5% o f the units b e ha ndic a ppe d a c c e ssib le (Se c tio n 504) O Sc a tte re d site issue s (c o nde nsing 6 e ntitie s to 1 e ntity) O Co nstruc tio n O Ma na g e me nt O T a x Cre dit & Bo nd I ssue s O Co mme rc ia l T e na nts O Unde rwriting I ssue s O Applic a b le F ra c tio n (SF
I HT C re nta l units / SF
L I HT C re nta l units + SF
Pre -Re syndic a tio n
F e e title a c q uisitio n o f the 2 SI P Po rtfo lio s b y ne w ta x c re dit e ntity
Assig nme nt o f the g e ne ra l pa rtne r inte re sts in the L I HT C po rtfo lio s
Re syndic a tio n
Se ll fe e title to the fo ur L I HT C site s to ne w ta x c re dit e ntity
Qua lifie s fo r a c q uisitio n c re dits a s the re ha d b e e n no inte rve ning fe e title tra nsfe r
Allo we d the pa rtie s to a ddre ss de fe rre d ma inte na nc e , upg ra de ma jo r
syste ms, re pa y o utsta nding pa ya b le s inc luding mo rtg a g e pa yme nt a nd ta x a rre a rs, c o mple te q ua lity-o f-life impro ve me nts a nd mo re g e ne ra lly re ha b ilita te the units
Ca pita l impro ve me nts in a n a mo unt o f a ppro xima te ly $67,000 pe r unit
Ac q uisitio n $26,002,963 Co nstruc tio n/ Re ha b ilita tio n $26,528,164 So ft Co sts $10,063,929 De ve lo pe r’ s F e e $ 7,469,477
T
$70,064,533
c e s HDC F irst Mo rtg a g e $ 4,500,000 HDC Se c o nd Mo rtg a g e $16,161,648 HPD T hird Mo rtg a g e $10,404,049 HPD F
$ 2,702,066 Citi DOJ F unds $ 5,355,000 E xisting Re se rve s $ 2,156,269 Ple dg e d Pa id De ve lo pe r F e e $ 2,000,000 L I HT C E q uity $25,119,353 De fe rre d De ve lo pe r F e e $ 1,666,148
T
c e s $70,064,533
*Pho to Cre dit: Yo uthBuild USA F a c e b o o k Pa g e
T
e ne rg y o f lo w-inc o me yo ung pe o ple to re b uild the ir c o mmunitie s a nd the ir live s. Re ve rse the flig ht o f b usine sse s a nd jo b s fro m the So uth Bro nx. I t wa s the first a nd mo st funda me nta l ste p to wa rd re b uilding a c o mmunity who se na me e vo ke d ima g e s o f b urne d o ut b uilding s, c rime , po ve rty, a nd drug s.
“Today's announcement by Mayor Bill de Blasio to have the City of New York partner with local M/WBE developer Karim Hutson of Genesis Companies in order to provide necessary rehabilitation work for over 300 families living in affordable apartments is a win-win for both our city's residents and for minority-owned businesses.”
(Amsterdam News)
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Douglas P. Koch, MAI, AICP Dauby O'Connor & Zaleski, LLC Monday, May 8, 2017 | 10:30 a.m. - 11:45 a.m. Room: Hall 1A23/24 (JCC)
@dozcpa
3Ps, Housing Preservation, and Neighborhood Revitalization: Introduction to the Entire Panel Presentation
Communities, Govt. and Private Partners begin talking
Legitimization in both Debt & Equity
ranks high on investors agendas.
The 4 F’s, what we have: Foundation, Faith, Fluidity & Familiarity 50 years, trust & believe that it will get done, 10 partners-no problem…and known entities, same participants
What we have and what we should broadcast
– Define the neighborhood (boundaries and linkages) – Assess neighborhood conditions – Frame a Vision for change – Assess Financial requirements – Prepare a timetable and monitoring/evaluation for the plan – Analyze and describe key neighborhood characteristics like the housing market, physical conditions, demographics, social assets, attitudes/perceptions and quality of life issues * (All asterisks note a published source referenced at end of this presentation.)
a development to stimulate neighborhood revitalization.
Neighborhood Defining the neighborhood*(2) – Anchoring Institutions: “The place where the cultural, educational and social activities are focused”. – Public Gardens: “Public Gardens connect us to the natural environment and to one another”, – Homes and Gardens: Privacy, connectedness & nature – Community Streets: “Streets are like hallways in their concept. Streets are three dimensional with tree canopies on top, sidewalks and entrances to other “rooms”. – Neighborhood Niches: "Neighborhood retail locations are both marketplaces and sites for social encounters and exchanges. “
a development to stimulate neighborhood revitalization.
suggests that appraisers and, by extension, real estate investment decision- makers consider five influences when analyzing the ability of any neighborhood to support a particular real estate use.
– Social Influences – Economic Influences – Governmental Influences – Environmental Influences – Characteristics of Real Estate Districts
a development to stimulate neighborhood revitalization.
revitalizing neighborhood. (Beyond your windshield & the internet.)
– Get out of the car and walk the immediate area surrounding the site. If you are not comfortable with the area, chances are potential residents will not be comfortable there either. – Read local, neighborhood and local organizational newspapers – Eat at local restaurants, patronize local businesses. Talk. Carry on a conversation. – Out of Towner? Talk to the hotel staff-not just the manager. Talk to municipal employees, not just the Planning Director. – Be an actor. Shop. Without being deceptive, simply step out of your role as an "analyst" and decide you want to live or work in the area and ask the questions you would ask.
a development to stimulate neighborhood revitalization.
Drawing from the Affordable Housing Investors Council's (AHIC) Underwriting Guidelines and the National Council of Housing Market Analysts (NCHMA) Model Content Standards for Rental Housing Market Studies. *(4) Key issues impacting underwriting and investor decision-making from the case studies relevant to revitalization and preservation development. – Nicole Lockett's Case Study: Genesis Y15+ Harlem Resyndication – Commercial Income: Mixed-use not commonly understood. Typical issues include: » Balancing Local & housing agency incentives with market situation » Commercial leases need to be analyzed and considered. » Specific rent, expense & fit-up clauses need to be underwritten.
Challenges to the market study analyst and the investor due diligence analyst
– Nicole Lockett's Case Study: Genesis Y15 Harlem Resyndication (Continued) » Account for funding sources for units set aside for the formerly homeless and account for rental income or subsidy sources for 15 year compliance period » Units targeted to Mixed Income Tenants need to supported by market evidence for each income type and for precedence within the market. (Not an issue usually in larger cities, but can be elsewhere.)
Challenges to the market study analyst and the investor due diligence analyst
Shelly Cleary's Case Study: West Philadelphia Reinvestment development – Scattered Site: Issues and Mitigants. Scattered site lower density (1 to 10 unit) redevelopment, where many building sites may be dispersed across multiple blocks and neighborhood/submarkets are historically less financially successful than single building sites because of: » A lack of strong brand identity unifying the management and marketing of the housing. Executing agglomeration strategies and common design principles can overcome somewhat. » The lack of care taken to consider the variation from rental submarket and neighborhood characteristics on rents, quality and
codes.
Challenges to the market study analyst and the investor due diligence analyst
Shelly Cleary's Case Study: West Philadelphia Reinvestment development – Scattered Site: (Issues & Mitigants-continued) » The challenge and extra expense in providing maintenance and sufficient tenant service to many sites across multiple blocks. » The difficulty of designing and executing a refinancing or initial investor exit strategy that assures long term preservation of the development. – Single Family or Duplex Home: (Issues & Mitigants.) » 1-2 unit home rental developments are more expensive to operate (property taxes, landscaping, utilities, capital reserves.) » Underwriters & market analysts can be fooled by advantageous market rent/affordable rent advantage. Demand & renter costs different than standard multifamily rental occupancy.
Challenges to the market study analyst and the investor due diligence analyst
Shelly Cleary's Case Study: West Philadelphia Reinvestment development Many Preservation Redevelopment efforts require Rental Subsidies to maintain affordability and prevent displacement » Rental Subsidies require in depth contract and reserve analysis. Section 8 Housing Assistance Plans are generally funded on an annual congressional appropriation basis. Not guaranteed for entire compliance period. » As such, the gap between Section 8 rents and relevant affordable achievable rents may not be considered available for underwritten debt and/or also may need to be alternatively funded through extra reserves in case of subsidy loss. » Understanding and adapting to specific contract terms and underwriting potential gaps improves investor confidence in property investment success.
Challenges to the market study analyst and the investor due diligence analyst
1. Cities in Transition: A Guide for Practicing Planners PAS 568, APA Pages 85 to 96 (Joseph Schilling and Alan Mallach, FAICP) Chapter 6: Designing Strategies to Address the Special Challenges of Cities in
Strategies, and Initiatives" Chapter 7 Planning for Specific Sites and Properties 2. Planning To Stay, Learning to See the Physical Features of Your Neighborhood (1994, by the Design Center for American Urban Landscape, 117 pages), William B. Morrish and Catherine R. Brown.
*NOTE: Footnotes reflect references from the Presentation
3. The Appraisal of Real Estate, 14th Edition, 2015, The Appraisal Institute Pages 166 to 171. 4. Affordable Housing Investors Council's (AHIC) Underwriting Guidelines (http://www.ahic.org/tools-resources/ "AHIC Underwriting Guidelines May 01, 2013) and the National Council of Housing Market Analysts (NCHMA) Model Content Standards (https://www.housingonline.com/wp-content/uploads/2014/09/Final-Model- Content-V3.0.pdf )
*NOTE: Footnotes reflect references from the Presentation
NCHMA RESOURCES PAGE: https://www.housingonline.com/councils/national-council-housing-market-analysts/resources/ MODEL CONTENT STANDARDS FOR RENTAL HOUSING MARKET STUDIES, VERSION 3: https://www.housingonline.com/wp-content/uploads/2014/09/Final-Model-Content-V3.0.pdf VERSION 2: EST. JANUARY 4, 2008: https://www.housingonline.com/wp-content/uploads/2014/09/Model-Content-Standards-V2.0.pdf SUMMARY OF CHANGES (BETWEEN V2 & V3): https://www.housingonline.com/wp-content/uploads/2014/09/Model-Content-Summary-of- Changes.pdf
PROFESSIONAL MEMBER DESIGNATION PROGRAM: https://www.housingonline.com/councils/national-council-housing-market-analysts/nchma- member-designation/ NCHMA MARKET STUDY INDEX: https://www.housingonline.com/wp-content/uploads/2014/09/Final-Market-Study-Index-V3.0.pdf AHIC UNDERWRITING GUIDELINES: https://www.ahic.org/tools-resources (Mar 01, 2013 | pdfAHIC Underwriting GuidelinesRevised 2010)
Questions?
Douglas P. Koch, AICP, MAI dkoch@doz.net, 617-512-6787 501 Congressional Blvd., Suite 300 Carmel, IN 46032 (Doug’s office Waban, MA)
@dozcpa