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 Planning Conference 1 Monday, May 8, 2017 | 10:30 a.m. - 11:45 a.m.

AGENDA • The “Relationship” Paradigm • Your Self - Assessment • Why Joint Venture or Partner - Up • What “Relationship” is Right For You • The Basics in Structuring Joint Ventures • Main Issues to be Negotiated • The Proactive Non-Profit / Public Agency American Planning Association National Planning Conference 2 Monday, May 8, 2017 | 10:30 a.m. - 11:45 a.m.

The “Relationship” Paradigm • Non-Profits / Public • The Courtship Agencies are from • The Engagement Mars, For-Profits are • The Marriage from Venus • Happily Ever After • Single & Happy • The Divorce • Single & Looking • The Dating Ritual OR – Who is in the driver’s seat? American Planning Association National Planning Conference 3 Monday, May 8, 2017 | 10:30 a.m. - 11:45 a.m.

Your Self-Assessment Assess Strengths & Weaknesses • Strong or weak vision? • Extent of local development & management experience and pipeline • Understand community needs? • Will politics help or hinder? • Political clout? Advocacy? • Track record? Service delivery? • Good relationships with locals? American Planning Association National Planning Conference 4 Monday, May 8, 2017 | 10:30 a.m. - 11:45 a.m.

Your Self-Assessment (continued) Assess Strengths & Weaknesses • Parent strength? • Executive leadership? • Stable board & management team? • Own assets? Capital? Financial capacity? • Qualified personnel? Staffing capacity? • Operations – Focused? Strategic? Well- defined policies and procedures? • Capacity for larger projects? American Planning Association National Planning Conference 5 Monday, May 8, 2017 | 10:30 a.m. - 11:45 a.m.

Why Joint Venture or Partner Up • Little or no housing revitalization experience • Capacity building • No financial strength • Not a builder, developer or property manager • Have development and management experience, but want to take on larger projects American Planning Association National Planning Conference 6 Monday, May 8, 2017 | 10:30 a.m. - 11:45 a.m.

Why Joint Venture (continued) • Specific applicable development experience i.e., strong or weak in neighborhood revitalization or rehabilitation? • Do what you do best and partner with others that do what they do best • Need a cash infusion from financial partners • Share risk • Share resources • Share knowledge American Planning Association National Planning Conference 7 Monday, May 8, 2017 | 10:30 a.m. - 11:45 a.m.

What “Relationship” is Right For You • “True” joint venture -- co-general partners or managing members • Non-profit / public agency is general partner/developer -- for-profit is passive financial partner • Non-profit / public agency is project sponsor -- for-profit is developer on a fee for hire basis • Non-profit / public agency is project sponsor -- for-profit is turnkey developer-builder • For-profit is project developer -- non-profit / public agency is community sponsor, service provider and/or property manager on a fee for hire basis American Planning Association National Planning Conference 8 Monday, May 8, 2017 | 10:30 a.m. - 11:45 a.m.

The Basics in Structuring Joint Ventures • Know what field you’re playing on and be sure you can see the goal line • Decide what you need -- know what you want • Each partner needs to bring something of value to the deal (make a list) • Project must meet your objectives • Know your strengths/weaknesses • Understand the deal • Know / learn about your partner • Project must be financially beneficial • Learn by doing and looking over partner’s shoulder • Define roles / responsibilities of all (make a list) American Planning Association National Planning Conference 9 Monday, May 8, 2017 | 10:30 a.m. - 11:45 a.m.

Main Issues to be Negotiated • Purpose • Compensation for services • Ownership structure • Financial guarantees • Percentage ownership • Partnership duration • Partner functions • Buy-sell agreement • Capital contributions American Planning Association National Planning Conference 10 Monday, May 8, 2017 | 10:30 a.m. - 11:45 a.m.

The Proactive Non-Profit or Public Agency • Assesses its strengths and weaknesses • Has a good reason to enter into a partnership • Knows what “relationship” is right for it • Has a clear understanding of the respective roles • Keeps its eye on the ball and on the “bottom line” American Planning Association National Planning Conference 11 Monday, May 8, 2017 | 10:30 a.m. - 11:45 a.m.

Stuart Portney, P.P., President The Metro Company, LLC 242 10th Street, Suite 103 Jersey City, NJ 07302 201-435-6500 portney@metroco.com www.metroco.com American Planning Association National Planning Conference 12 Monday, May 8, 2017 | 10:30 a.m. - 11:45 a.m.

Us Using P g Public-Private P e Partner erships for Ho Housing P Preser ervation on & & Neigh ghborhood D Devel elopmen ent R Revital alization on: Philadelphia C Case Study Monday, May 8, 2017 Housing and Community Development, #9108795 APA’s 2017 National Planning Conference

Shelly Cleary, Senior Vice President The Community Development Trust 1350 Broadway, Suite 700 New York, NY 10018 cdt.biz

Who Are We / What We Do  CDT is a national investor in affordable housing. Working with partners, we make long-term equity investments and originate and acquire long-term mortgages.  In our 17 years of operations, CDT has invested more than $1.25 billion in debt and equity capital to properties in 44 states and regions – helping to preserve and create 40,000+ units of affordable housing.  CDT provides long-term loans and equity to low- and moderate- income communities to help ensure their affordability and to enhance the quality of life for their residents.

Who Are We / What We Do  CDT is a private real estate investment trust (“REIT”), a certified Community Development Financial Institution (“CDFI”) and a member of the Federal Home Loan Bank of New York (“FHLBNY").  CDT received the largest award in the inaugural CDFI Bond Guarantee Program. Our $125 million award will be utilized to fund our efforts in expanding and preserving affordable housing across the country.  CDT is also a member of the Federal Home Loan Bank of New York.  CDT is a Fannie Mae-approved affordable housing lender.

Neighborhood Restoration / West Philadelphia Real Estate  Scattered-site developments  Gut rehabilitation of 760 vacant, single- family homes  Over 1,100 affordable rental units  $160 million invested  100% affordable at 60% or less of area median income  Pilot project completed in 1989

Philadelphia Row Home Neighborhoods  1940s construction  Aging housing stock  Declining household incomes  High rates of vacancy and city ownership  1980 to 1990, 29% increase in 10-year vacant stock  Concentrated vacancy in West and North Philadelphia

Neighborhood Restorations / West Philadelphia Real Estate Site Map Managem emen ent O Offices es WPRE RE Neighborhood R Rest.

Lack of Investment Capital: Community Impact  Blighting effect on nearby properties  Less incentive to maintain occupied homes  Loss of property tax revenue  Loss of working class families  Safety concerns  Depressed property values  Increased city maintenance costs

Why West Philadelphia?  Large inventory of vacant homes  Proximity to city and suburban transit  Proximity to amenities  Proximity to employment centers  Opportunity to develop from strength

Development Model  Property acquisition  Formation of an eligible development entity  Secure financing  Construction phase  Occupancy, lease-up and stabilization  Conversion to permanent financing  Ongoing management

Financial Model 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

Permanent Financing: Lender Underwriting Risks and Mitigants Scattered site Increased project reserves Product marketing to expand Capital syndication risk investor base Valuation: single family vs. multifamily Demand assessment Ability to refinance the loan at maturity Fully amortizing loan Non-coterminous term debt and Non-programmatic response property tax abatement Reliance on portable Section 8 revenue Stress test without Section 8 Atypical expense structure Reliance on developer experience Property management Centralized management office