2018 IHCDA Asset Management Trend Analysis

Transcription

1 2018 IHCDA Asset Management Trend Analysis

2 OVERVIEW Asset Management Policy was created in 2015 to assess IHCDA s rental housing portfolio Housing portfolio is separated into 2 categories Pre-Stabilization and Post- Stabilization Pre-Stabilization = Prior to receiving 8609s i. Monitor projects by reviewing Semi-Annual Progress Reports ii. Objective: Monitor construction and lease-up progress iii. Scope: 2017 and beyond Post-Stabilization = After 1 st year of operation i. Monitor projects by reviewing project specific financial information ii. Objective: Project is meeting all financial obligations and can be self-sustaining iii. Scope: Red flag(s) identified in the Exhibit D: Asset Management Form of the Owner Certification; Projects with 10+ HOME units

3 PROJECT RISK RATING GUIDELINE Affordable Housing Investors Council (AHIC) Risk Rating Guideline System Modified the industry best practice to fit IHCDA s objective Review Category Pre-Stabilization: Post-Stabilization: Risk Rating 1. Closing timeline 2. Construction progress 3. Sources and Uses 4. Lease-up progress 1. Financials 2. Occupancy 1. Reserves 2. IHCDA Loan Payment 3. Physical Inspection 4. Program Compliance 5. Audit Concerns 6. Recapture/Foreclosure A: Excellent B: Average C: Weak D: Moderate Risk F: Significant Risk Projects with C, D, or F ratings are considered troubled projects and subject to ongoing financial monitoring

4 WHAT TRIGGERS EXHIBIT D REVIEW? Physical Vacancy Rate as of 12/31: >8% Amount in operating reserves as of 12/31: <$0 Amount in replacement reserves as of 12/31: <$0 Did the property deposit the required contribution into the reserve account: if No. Net Operating Income as of 12/31: <$0 Debt coverage ratio: <1.1 Property Taxes: If select Property taxes are not paid up-to-date Property Insurance: If select Property insurance is not paid up-to-date

5 2018 Review Summary Post Stabilization Phase

6 2018 REVIEW SUMMARY Total of 100 projects reviewed Majority of reviews are Multifamily and Elderly 62% of reviews have financial weakness Compared to 38% in 2017 due to better targeting and process implementation Risk Rating Multifamily Elderly PSH Transitional Housing A B C D F Total

7 HOW IT COMPARE TO IHCDA UNDERWRITING CRITERIA Majority of the reviews have good occupancy but need improvements on DCR and Cash Flow Initial 15 vs. post 15 performance Significant difference maker for meeting Vacancy and maintaining DCR Unexpected higher % of projects within Initial 15 years experience negative cash flow and low DCR Vacancy DCR Cash Flow <=8% >8% >=1.1 <1.1 NA >=0 <0 Initial 15 (82 total) Post 15 (16 total) Total % of Total 58% 42% 26% 44% 31% 46% 54% % of Initial 15 39% 40% 52% % of Post 15 56% 63% 63%

8 HOW MUCH DID IT COST TO MAINTAIN AN UNIT IN 2017

9 HOW 2019 RHTC APPLICATIONS STACK UP Overall estimates for Multifamily and Elderly are comparable to the 2017 data PSH estimates are below the 2017 data by approx. $1500 QAP minimum guideline may need update

10 2018 SITE VISITS 29 site visits conducted on watch-listed projects IHCDA s first year attempt to understand onsite and operating challenges 29 property managers and 21 owners were interviewed Rewarding experiences and lessons-learned Best practices and common problem on Bad Debt and Rent Collections Staff turnover Understand management challenges in rural properties vs. city Proactive Capital Improvement plans and Replacement Reserve strategy could reduce long term Maintenance cost Property Taxes battle Lease-up phase challenges and its impact beyond Y2 Industry underwriting and construction standard improved over time Average $40K expense gap between Final Application Pro Forma Vs. Actual 2019 RHTC Applicants have better Operating Expense estimates

11 MOVING IHCDA S ASSET MANAGEMENT PROCESS FORWARD How can IHCDA s Asset Management be a resource to you? How can IHCDA help Owners and Managers better prepare properties entering Extended Use period? Recommendation for IHCDA s existing Asset Management process?

12 THANK YOU! ENJOY SPREADSHEET DAY!