Asset Management The Next Generation

Challenges Preservation/Sustainability Competition/Mission

Funding Source Properties in Study Units in Study Capital Needs Costs* Total Avg. Per Unit HTF only 1885,790$80,600,533 $17,672 LIHTC only 26221,512$198,465,276 $12,208 Both 19910,514$111,557,831 $13,698 Total64937,816$390,623,639 Five-Year Capital Needs Costs HTF only LIHTC onlyBoth *Includes 26% for related soft costs

Property Resources Only 4% of properties have sufficient replacement reserves to cover at least 75% of their capital costs. Another 25% of properties have sufficient replacement reserves to cover 25% to 50% of their capital costs. Refinance is an option for about 35% of the properties (228 properties); however, only 139 of these 228 properties can fully cover costs through refinancing. How Will We Pay for Needed Improvements?

Ability to Cover Capital Needs Costs Role of Public Funders HTF LIHTC Both

For the 29% (458 properties) However, the portfolio net is $400M positive Ranges of Additional Capital Ranges of Additional Capital Required PropertiesUnitsTotal $Average $ / UAve $ / Property > $0, <$2,500 Per Unit824,247$6,194,513$1,459$75,543 >$2,500/u and <$5,000/u682,491$9,258,859$3,717$136,160 >$5,000/u and <$7,500/u542,783$18,283,951$6,570$338,592 >$7,500/u and <$10,000/u502,836$24,283,095$8,562$485,662 >$10,000/u2047,343$173,315,084$23,603$849,584 TOTAL/AVERAGE45819,700$231,335,501$11,743$505,099 February 2013, Atlanta6

and more Challenges ! Flat incomes limiting rents Decreasing subsidy and grant support Competition from for-profit sector on YR 15 and expiring use in hot markets

Asset Management Plan PROPERTY MANAGEMENT FISCAL MANAGEMENT fiscal systems & risk management (insurance) fiscal policies (consolidation, controls, bad debt write offs…) audit information (debt summaries, reserve requirements, waterfall provisions, additional schedules, reporting timelines) tax returns reporting systems ONGOING ASSET MANAGEMENT LONG TERM PLANNING WORKOUTS/ ACQUISITIONS/ DISPOSITIONS LIHTC Year 15 transitions Major rehabs/ refinances Acquisition of existing properties Managing up - strategic Managing down - supervision financial operations dashboards performance indicator dashboards annual physical inspections reserve requirements summary & monitoring procedures annual property budgets (operations & capital) portfolio wide operational improvements oversee property management / contracts deal books, compliance summaries & reporting schedules emergency plans AM role in development schedule of real estate owned property-by-property plans green management initiatives other initiatives – e.g. equity watch lists to/from portfolio cash impact capital needs studies/ reserve analysis/ rehab planning milestone schedules (refinance/ Year 15/ rent subsidy contracts) roles/ responsibilities/ job descriptions/ supervision policies (fair housing, rent collection, occupancy, screening, eviction…) management plans maintenance plans sample documents (PM agreements, leases)

Portfolio Analysis We group properties in our portfolio (currently 86 properties) using one of these seven main categories: Imminent LP Investor Buyout (1-3 years) Poor financial performance Poor physical condition Deferred developer fee monitoring Potential cash flow opportunities Energy efficiency opportunities Litigation Add secondary categories from same list if relevant Once those groupings are done, we develop short term & long term goals, a financial plan, physical plan & cash flow opportunities (based on the cash flow waterfall) for each property which informs the annual budgeting process.

Strategies for Sustainability Everyone has a role!. Owners Project Resources Improve Operations Local Funders Change payment terms Debt Forgiveness New Capital Regulatory Relief Commerce Change payment terms Debt Forgiveness New Capital Regulatory Relief Owners and Funders are already employing many of these strategies WSHFC Bonds 4% LIHTC 9% LIHTC Private Lenders/Investors Use of Reserves Refinancing

Strategies for Owners Strategies for Sustainability Maximize operations Share reserves among properties Bundle small properties Consider disposition

Strategies to Preserve HTF Portfolio Leverage additional private debt by: subordinating HTF debt, changing terms of HTF debt, or forgiving debt, in case of loan-to-value issues. Fill gaps by reinvesting new HTF dollars or employing new financing strategies, e.g., resyndication through bundling smaller properties. Underwriting considerations – lessons learned for the future. Strategies for Sustainability Promote lifecycle cost view of world to achieve increase in unit years

Strategies for LIHTC Portfolio Allocate new 9% LIHTCs. Combine 4% and 9% LIHTCs. Use 4% LIHTCs with tax- exempt bond financing.* *Contribute additional public dollars to fill gap. Strategies for Sustainability McAllister Village, Ace/REACH Vancouver

The organization’s values and goals guide measurement: Depth of rental affordability? Quantity of apartments or residents? Housing stability? Community development? Economic integration? Educational attainment? Increased household income? Measuring Mission Impact February 2013, Atlanta14

Profit equals a property’s net cash flow after including: Resident services costs in excess of ongoing, restricted funding Reserve deposits needed through sustainability period Asset management costs Measuring Profit February 2013, Atlanta15

The number of years the property can be operated in good condition with the resources it has or will likely continue to generate. Based on evaluation of operating projections, capital needs and reserves. Measuring Sustainability February 2013, Atlanta16

February 2013, Atlanta18

Housing as a Platform Affordability Green Health Neighborhood Revitalization Transit Oriented Development