1. Supportive Housing Partnerships

2. Ability Housing Mission: Vision: How:
Building strong communities where everyone has a home
Vision:
A society where housing is a right, not a privilege; and all individuals have safe, affordable housing in vibrant communities
How:
Develop & operate rental housing
Administer rental assistance
Partner with others to provide individualized supports

3. Ability Housing Northeast Florida Central Florida Developer Services
29 rental homes and four apartment communities in Jacksonville for a total of 238 unit; fifth 80-unit development to be completed by end of 2019
Provide rental assistance to over 100 formerly chronically homeless households access market housing
Central Florida
Two apartment communities under construction in Orange County (243 units); another under construction in Osceola County (80 units)
Developer Services
Assisting a Jacksonville nonprofit construct a 22-unit property; and a St. Petersburg nonprofit construct two 30-unit properties in Pasco County

4. Making Rental Housing Affordable
Subsidize the Tenant’s Rent
Subsidize the Cost of Construction
Subsidize the Cost of Construction and the Cost of Long Term Operations

5. Subsidize Tenant Rents
Tenant Pays 30% of Income for Rent
Program makes up the difference between what tenant can afford and fair market rent
Guarantees both affordability for the tenant and reasonable rate of return for the property owner
Expensive
Limited Congressional Support

6. Subsidize Construction Cost
Currently the main method for constructing/rehabbing affordable rental housing
Low Income Housing Tax Credit
Provides money that does not have to be repaid
Reduces the amount of money that has to be borrowed, which reduces monthly expenses
Reduced monthly expenses means rent can be lower
Challenge – Difficult to serve extremely low income tenants

7. Subsidize Construction and Operations
Subsidy used for construction
In addition, an operating reserve is funded to cover annual shortfall
In Florida:
LIHTC and SAIL used to cover all construction costs
Additional SAIL funds are provided to capitalize an operating reserve to cover annual shortfall between income from rent and actual operating expenses

8. Real estate Development is
Complex
Expensive
Risky
Real estate Development is 

9. Partnerships/Joint Ventures
August 2018
Partnerships/Joint Ventures
One way to mitigate risk
Another Entity provides needed expertise
Another Entity provides needed cash
Another Entity shares/takes the financial risk
Predictable Surprises
Partner Experience
Expectations
Funder/Lender Requirements
Money

10. Characteristics of Deals That Lend Themselves to Partnerships
August 2018
Characteristics of Deals That Lend Themselves to Partnerships
Large Developments with Relatively Large Fees/Cash Flow
Complex Developments
Funder Requirements that Benefit Certain Types of Developers (i.e. Nonprofit Set Asides)

11. What Type of Deals? Single Family Infill? No Less Complex Limited Fees
Subdivision
Yes
Complex
High Fee Potential
Small Scale Rental
Large Scale Rental

12. Hire a Turnkey Developer
Find an Experienced Developer
Negotiate a scope of work
Contract for a fee
You (not the developer) owns project at the end
There are essentially two different legal structures for joint ventures and either one will work. The first is contracting for a fee developer.
In this arrangement, the non-profit owns 100% of the general partnership and contracts with a developer, for-profit or non-profit, to develop the project. It could be a set fee or a split of the developer fee.
The good news is that you are not in bed with your partner for the entire 15 years of the compliance period and the bad news is that you are not in bed with your partner for the entire 15 year of the project.

13. Turnkey Model Characteristics
Developer Typically Wants All or Most of Developer Fee
Developer Typically Does not want to provide any guarantees
Developer wants out of the deal at completion

14. Turnkey Model Challenges
Affordable rental housing provides limited cash flow
Affordable rental housing comes with long affordability periods
Some developers may not adequately supervise construction since they aren’t in the deal long term
Some developers may be more willing to cut corners if they aren’t in a deal long term
DRA aerator at Mercy Example
Construction expense to avoid higher operating

15. Turnkey Challenges Continued
There is still a supervisory role for the entity hiring the developer
There are limited funds from the deal available to pay for this role
The cost of this supervision won’t be made up from cash flow

16. Joint Venture Structure
Limited Liability Company (LLC) Created
The two Entities involved are members
One member typically has a controlling interest (owns 51% of the LLC)
Ownership percentage is unrelated to how fees and cash flow are split

17. Operating Agreements Operating Agreement Created for the LLC
August 2018
Operating Agreements
Operating Agreement Created for the LLC
Controlling Document for the Entity
Operating Agreement must contain all negotiated expectations
Van Halen Story

18. August 2018
Expectations

19. Expectations Level of Approval for Each Partner Capacity Building
Draw Requests
Change Orders
Capacity Building
Opportunity to Learn the Process
Fees and Cash Flow Splits
Guarantees
Handout

20. Guarantees Funders/Lenders typically require
Construction Completion Guarantee
Operating Deficit Guarantees
Environmental Indemnities
If LIHTC, tax credit delivery guarantees
REMEMBER: Lenders/Funders are not a party to the operating agreement

21. Financial Capacity
Funders/Lenders review the Financial Capacity of Borrowers
Liquid Assets and Total Assets
All members of an LLC are typically required to be guarantors
This is true regardless of the language in the operating agreement

22. Risks Who’s going to be on the line for what and when?
The risks in a project are mitigated by financial guarantees. However, in order to sign a guarantee, the investors are going to want to see a positive net worth on your balance sheet. If you need a partner to sign all the guarantees, it will impact your developer fee.

23. Guarantees Construction Completion Lease-up On-Going Operations
Credit Adjuster
Other Guarantees
On tax credit projects, the investors are going to require a number of guarantees because of the requirements of the tax credit program. The usual guarantees are:
Construction completion – has to be completed on time, lien free and all development expenses paid. Permanent financing must be as agreed to in partnership docs
Lease –up – Funding operating deficient during lease-up. There is usual a lease-up reserve in the development budget but if the deficient exceeds the reserve, you’re on the line.
On-going operating – funding for operating deficient after lease-up. They usually burn off in three to five years
Credit Adjuster – If the project doesn’t earn the number of credits expected either because they didn’t spend enough during development or didn’t lease to enough qualified tenants, there is a credit adjuster and $$ will be due to the investor.
Other guarantees can include failure to complete the proper IRS forms or to make housing credit program deadlines that will jeopardize the credits. This includes the 10% carry over, the placed-in-service date and the timely filing of the 8609.

24. Ability Housing’s Experience with Joint Ventures

25. Small Rental Developments
No Economies of Scale, so difficult to structure in a way that has a positive cash flow
Same amount of work as large developments, but
Fewer Units (Mission)
Lower Developer Fees (Money)
No Money, No Mission

26. Large Rental Deals Easier to make work financially
There is typically a split of the developer fee
Experienced partner does most of the work
Experienced partner typically has the better balance sheet and therefore takes the financial risk
Contingent Liabilities
What is the less experienced partner bringing to the deal?

27. Mayfair Village Before After 83 units 12 residential buildings
August 2018
August 2018
Mayfair Village
Before
After
83 units
12 residential buildings
Clubhouse with
computer lab
Onsite laundry facilities
Onsite support services
Originally constructed in 1951, the property suffered from significant deferred maintenance and high crime rates. Ability Housing purchased it in 2008 with interim financing and received permanent financing from the Florida Housing Finance Corporation in 2010.
The community underwent significant rehabilitation. 42 units of housing for homeless individuals and families and 41 units of housing for households earning 50% AMI or less.
Average rent $257

28. Oakland Terrace Before After 60 units 4 residential buildings
August 2018
August 2018
Oakland Terrace
Before
After
60 units
4 residential buildings
Clubhouse with
computer lab
Onsite laundry facilities
Project based rental assistance contract with HUD so tenants pay 60% of their income for rent and utilities and the Housing Assistance Payment Contract makes up the difference
In 1971 a neighborhood church built the Oakland Terrace Apartments, a HUD-assisted property. These apartments have a special
significance to the community because it was built on the location of the former Boylan-Haven School, which was founded in 1886 as Boylan High
School. The school's health training program led to the founding of the Brewster Hospital - which was one of the first such institutions for
African-Americans in Florida and among the earliest of its kind in the South.
Unfortunately, the school was closed in 1959 and the building was demolished in The Oakland Terrace Apartments were built in its
place.
The term of the renewal contract is 20-years ending December 1, 2021.

29. Renaissance Village Before After 52 units 2 residential buildings
August 2018
August 2018
Renaissance Village
Before
After
52 units
2 residential buildings
Clubhouse
Onsite laundry facilities
Onsite support services
where formerly
homeless and at-risk individuals and families
NSP and LISC Another example of where the construction cost was subsidized to eliminate need for debt, reducing the amount of monthly expenses reducing the income needed from rent
Average rent $447

30. Village on Wiley Construction After 43 units 11 residential buildings
August 2018
Village on Wiley
Construction
After
43 units
11 residential buildings
Clubhouse with
computer lab
Onsite laundry facilities
Onsite support services

31. Managing Director, Property Development
Stan Fitterman
Managing Director, Property Development