Transcript Document 7311688

Portfolio Strengthening
Indiana State Housing Conference
09/19/12
Introductions
• Larry Gautsche – President (July 2001)
• Alan Greaser – Director Asset & Property
Management (April 2008), VP Real Estate
(February 2012)
• Jim Davis – VP Finance (March 2007)
Who Is LaCasa, Inc.?
• Located in Elkhart County, Indiana
• 41-year history, 31 staff
• Primary lines of business:
– Homeownership Center – IDA’s, pre/post purchase, foreclosure,
HECM, lending, financial fitness training
– Community Building & Organizing – neighborhood development,
quality of life planning, leadership development
– Resident Services – Immigration, VAWA, Deferred Action
– Real Estate Development – Acq/Rehab, OOR, Permanent
Supportive Housing, NSP, Tax Credit projects
– Property & Asset Management – 267 units under management
– Development – fundraising, volunteer management, brand
management
Pre-Portfolio Strengthening The Properties as of 1/1/07
Scattered Site Family Homes
• 33 units of single family/duplex homes, owned
15+ years
Arbor Ridge Apartments
• 72 units of new construction on one site incl. one
commercial space, 1999-2000
Pre-Portfolio Strengthening The Properties 2007-2008
The Game Changers
• Lincoln Ave. – critical rehabs to maintain
two historic buildings and improve neardowntown neighborhood
• Roosevelt Center, Water Tower Place,
State & Main – rescue existing or in-flight
projects from a failed CDC in the County’s
major city
• Build critical mass in second community
Lincoln Ave. Redevelopment
• 28 unit historic rehab of hotel and commercial
building including one commercial space,
May/December 2007
Roosevelt Center
• Roosevelt Center –
35 units historic
rehab of elementary
school including
commercial condo,
December 2008
Water Tower Place Apartments
• 52 units of new construction senior housing in
one building, May 2008
Elkhart Properties
• Acquisition of 20 units in two buildings including
one commercial space, December 2008
Before And After
• January 2007 – 105
units with one Tax
Credit property and
33 scattered site units
primarily in one
community
• January 2009 – 240
units with four Tax
Credit properties, two
multi-family properties
and 33 scattered site
units in two
communities
Pre-Portfolio Strengthening The Environment
2009 Market Analysis - Occupancy
LaCasa, Inc. Occupancy Graph
2009 Economic Analysis
• Elkhart County has been one of the most recession-impacted
counties in the U.S. The year-over-year increase in the County
unemployment rate was among the three highest in the
country. The absolute unemployment rate peaked at nearly
20% and remains at nearly 17%. In addition, the area has
experienced a very high rate of foreclosure. This has created a
combination of job losses as well as an increase in the availability of
single-family homes for rent. A majority of the job losses were due
to business closure, so recovery will be slow as is depends on the
creation of new businesses, not just rehiring. Accordingly, the local
recovery is expected to take several years as opposed to a
more traditional 12-18 month recovery.
Organizational Focus
• Primarily focused on day-to-day operations
• Struggling with recent portfolio growth
• Did not have a strategic approach to Asset
Management
• Did not have good performance tracking tools
• Could identify several problems but had no
formal approach to prioritize and address them
• Many staff involved in various elements but no
real “team” approach
Portfolio Strengthening Clinic
Portfolio Strengthening Clinic
• Team approach – CEO, Director Asset/Property
Management, CFO, Board member (ex-NEF employee)
• Required a rigorous examination of each property and
the portfolio as a whole (pre-work is critical)
• Developed quadrant analysis of mission vs. profit by
property – brutally honest assessments
• Identified and prioritized improvement opportunities
• Agreed on roles and responsibilities
• Set timeline for action steps
• Developed framework for NWA grant application
Portfolio Quadrant Analysis
High Mission
p
1
3
4
t
u
5
q
Low Mission
6
High Profitability
Low Profitability
2
1 Arbor Ridge Apartments - 1999
Mission - set the standard for affordable housing in Goshen, IN
Sponsor investment - accumulated $36k in inter-company payables
Issues - missing DSCR ratio & reduced cash flow due to high vacancy rates
2 Roosevelt Center - 2008
Mission - neighborhood stabilization
Sponsor investment - accumulated $40k in inter-company payables
Issues - high operating costs compared to pro-forma
3 Lincoln Avenue Redevelopment - 2007
Mission - downtown redevelopment & city center affordable housing
Sponsor investment - $90k project cost overruns but good operating cash flow
Issues - looking to refinance mortgage to pay Lacasa for $90k construction advance
4 Elkhart Properties - 2008
Mission - city redevelopment & save affordable housing
Cash flow - good operating cash flow after lease-up
Issues - need commercial tenant to make cash flow work
5 Scattered Site Rentals
Mission - meet need for affordable housing & neighborhood improvement
Cash flow - acceptably positive
Issues - plan to sell properties as grant restrictions expire and the market will allow
6 Water Tower Place Apartments - 2008
Mission - save senior housing project
Cash flow - acceptable but accumulated $95k in intercompany payables
Issues - need strategy to pay intercompany balance from poor start-up cash flow
Targeted Improvement Goals
• Arbor Ridge/ Roosevelt Center
•
– Establish consistent property valuation methodology and permanently
reduce tax burden
– Reposition hard debt to sustainable levels at favorable long-term rates
– Provide cost structure that can be supported by rent structure below LIHTC
levels if needed to be competitive
– Assure cash availability to fund mgt fees and other inter-company payables
– Develop portfolio-wide approach to managing core operational costs:
cleaning, maintenance, etc.
Organizational Impact
– Complete banking strategy to partner with locally/regionally managed
financial institutions
– Improve consistency and total $ value of payments from properties
– Assure asset and property mgt is a sustainable/profitable line of business
– Develop a defined approach to portfolio management and screening of new
opportunities
Portfolio Strengthening The Outcomes
Arbor Ridge Action Steps
• Declining occupancy – completed rent analysis, set “special
rents” until achieve 95% occupancy, developed tenant
incentives, created “Rent Assist” fund
• High insurance costs – moved risk management program to
legitimate commercial insurer
• High property tax burden – appealed assessment
methodology
• High operating costs – identified “targeted” per unit operating
cost and improvement opportunities
• High debt burden – negotiated principal concession in
exchange for complete refinancing, identified lower cost debt
options, obtained grants for additional principal reduction
Arbor Ridge Results
Occupancy
Occupancy rate at 12/31/08
Occupancy rate for 2009
Change
80%
86%
Occupancy rate for 2011
Occupancy rate YTD 7/31/12
Debt
Mortgage balance at 12/31/08
Interest rate at 12/31/08
Annual debt service in 2008
DSC ratio for 2008
Mortgage balance at 12/31/11
Interest rate at 12/31/11
Annual debt service in 2011
DSC ratio for 2011
91%
93.3%
$
$
$
$
Change
$ 5,558
Per unit operating expenses in 2011
$ 4,386
Net Operating Income
Net operating income in 2008
$ 40,659
Net operating income in 2011
$ 143,428
-21.1%
13.8%
16.6%
957,991
7%
87,816
.41:1
693,996
3.78%
63,912
2.12:1
Operating costs
Per unit operating expenses in 2008
$ 102,769
Net Cash Flow (after debt service and replacement reserve funding)
Net cash flow in 2008
$ (58,049)
$
$
(263,995)
-46%
(23,904)
517%
Net cash flow in 2011
$ 24,512
$ 82,561
Note: Funded three years worth of replacement reserves in 2011
Roosevelt Center Action Steps
• Declining occupancy – completed rent analysis,
“special rents” until achieve 95% occupancy
• High property tax burden – appealed assessment
methodology
• High utility costs – replaced all common lighting
with LED’s/occupancy sensors, installed limited
solar array
• High operating costs – identified “targeted” per unit
operating cost and improvement opportunities
• High debt burden – reduce principal and refinance
at lower interest rate
Roosevelt Center Results
Occupancy
Occupancy rate for 2009 (lease up year)
77%
Occupancy rate for 2011
Occupancy rate YTD 7/31/12
82%
91%
Debt
Mortgage balance at 12/31/09
Interest rate at 12/31/09
Annual debt service in 2009
Mortgage balance at 12/31/11
Interest rate at 12/31/11
Annual debt service in 2011
Change
$
$
$
6.5%
18.2%
379,817
6.29%
35,448
$
146,942
5.46%
14,544
$
Utility Costs
Utility costs in 2009
$
56,476
Utility costs in 2011
$
50,023
-11.4%
Utility costs YTD 6/30/12
$
23,644
-16.30%
$
(233,325)
-13.3%
(20,904)
Improved Performance Tracking
• Weekly
– Cash flow
– Occupancy rates
• Monthly
–
–
–
–
Vacancy/concessions analysis
Operating cost per unit tracking
Net operating income
Debt coverage ratio
• Quarterly
– Collections/bad debt analysis
– NeighborWorks Multi-Family Initiative reporting
Cash Status By Project
LaCasa, Inc.
Tax Credit Subsidiary Financial Summary
September 14, 2012
Arbor
Ridge
Lincoln
Ave.
Roosevelt
Center
Water
Tower
Place
Cash balance (net of remaining monthly mortgage)
Tenant receivables (net of allowance for bad debts)
8/31/2012
Accounts payable - vendors
Intercompany payable to LaCasa (Account # 2025)
Change from 8/31/2012
Change from year end
Security deposits - payable (Account # 2120)
Security Deposits - cash (Account # 1050)
(Over) underfunded security deposits
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Replacement reserve requirement as of 12/31/12
Replacement Reserve balance (Account # 1120)
(Over) underfunded replacement reserve
Operating reserve balance (Account # 1110)
Tax Reserve Account (#1060)
Occupancy Tracking
39
|
Arbor Ridge Apartments
70.0
73.0
95.9%
Lincoln Avenue
0
0
0%
39
|
26.7
29.0
92.0%
39
|
Roosevelt Center
0
0
0%
30.0
35.0
85.7%
39
|
Water Tower Place
0
0
0%
70
73
96%
38
37
36
26
29
90%
27
29
93%
38
37
30
35
86%
29
35
83%
38
37
Sep 2012 Sep 24 Sep 17 Sep 10
Total Occupied Units
Total Units
Combined Occupancy
2012 Y.T.D. 98.4%
51.0
52.0
98.1%
0
0
0%
39
|
0
0
0%
Sep 3
27
29
93%
36
Sep 3
31
35
89%
36
Sep 3
51
52
98%
51
52
98%
51
52
98%
38
37
36
Sep 2012 Sep 24 Sep 17 Sep 10
177.7
189.0
94.0%
Sep 3
70
73
96%
Sep 2012 Sep 24 Sep 17 Sep 10
Total Occupied Units
Total Units
Combined Occupancy
2012 Y.T.D. 90.4%
36
70
73
96%
Sep 2012 Sep 24 Sep 17 Sep 10
Total Occupied Units
Total Units
Combined Occupancy
2012 Y.T.D. 97.6%
Total Occupied Units
Total Units
Combined Occupancy
2012 Y.T.D. 94.9%
37
Sep 2012 Sep 24 Sep 17 Sep 10
Total Occupied Units
Total Units
Combined Occupancy
2012 Y.T.D. 93.6%
Total Tax Credit Properties
38
177
189
94%
177
189
94%
Sep 3
179
189
95%
|
Scattered Site Rentals
Sep 2012
Total Occupied Units
Total Units
Combined Occupancy
2012 Y.T.D. 88.6%
30.3
34.0
89.2%
|
Lincoln West Apartments
Sep 2012
Total Occupied Units
Total Units
Combined Occupancy
2012 Y.T.D. 95.4%
15.0
15.0
100.0%
|
Elkhart Properties
Sep 2012
Total Occupied Units
Total Units
Combined Occupancy
2012 Y.T.D. 86.9%
22.0
29.0
75.9%
|
Total LaCasa, Inc. Properties
Sep 2012
Total Occupied Units
Total Units
Combined Occupancy
2012 Y.T.D. 89.2%
67.3
78.0
86.3%
|
Total Portfolio
Total Occupied Units
Total Units
Combined Occupancy
2012 Y.T.D. 93.3%
Sep 2012
245.0
267.0
91.8%
39
38
37
36
Sep 24
Sep 17
Sep 10
Sep 3
0
0
0%
30
34
88%
30
34
88%
31
34
91%
39
38
37
36
Sep 24
Sep 17
Sep 10
Sep 3
0
0
0%
15
15
100%
15
15
15
15
100% 100%
39
38
37
36
Sep 24
Sep 17
Sep 10
Sep 3
0
0
0%
22
29
76%
22
29
76%
22
29
76%
39
38
37
36
Sep 24
Sep 17
Sep 10
Sep 3
0
0
0%
67
78
86%
67
78
86%
68
78
87%
39
38
37
36
Sep 24
Sep 17
Sep 10
Sep 3
0
0
0%
244
267
91%
244
267
91%
247
267
93%
Operating Costs Per Unit
MFI Performance Tracking - Vacancy
Improved Organizational Visibility
• Board Asset Management Committee
– Project oversight – from ideation to completion
– Portfolio operating performance review
• Board Finance Committee
– More purposeful cash flow focus
– Targeted financial performance metrics
– Organizational debt management
• Extensive graphing of performance metrics
for staff, Management and the Board
Summary
• The NWA Portfolio Strengthening Clinic
was a very valuable process – a
“watershed event” for LaCasa, Inc.
• The subsequent funding NWA and others
provided helped to take our targeted
improvements from ideas to reality
• The MFI process is a valuable discipline
and continuous improvement tool
Questions??
202 N. Cottage Ave.
Goshen, IN 46528
www.lacasainc.net