Portfolio Metrics Impact on the Owner

Transcription

1 Portfolio Metrics Impact on the Owner Harold Nassau Director of Asset Management NeighborWorks America CHAM

2 TOTAL OPERATING REVENUE TOTAL OPERATING EXPENSES NET OPERATING INCOME/(LOSS) CASH FLOW TO/FROM ORGANIZATION Total Type/Name Location Year 0 BR 1 BR 2 BR 3 BR 4 BR Units DEN- SITY 2014 TOTAL 2014 PER UNIT 2015 TOTAL Y-to_D Y-to-D 2015 PER Annualized Annualized UNIT TOTAL PER UNIT Y-to_D Y-to-D PER PER Annualized Annualized TOTAL UNIT TOTAL UNIT TOTAL PER UNIT PER PER TOTAL UNIT TOTAL UNIT 2016 Y-to_D Annualized TOTAL 2016 Y-to-D Annualized PER UNIT PER 2015 TOTAL UNIT TOTAL 2016 Y-to_D 2015 PER Annualized UNIT TOTAL 2016 Y-to-D Annualized PER UNIT FAMILY NAME Property NAME Property NAME Property NAME Property FAMILY 0 TOTAL SRO NAME Property NAME Property NAME Property SRO 0 TOTAL CONDOMINIUMS NAME Property NAME Property CONDO 0 TOTAL Property 16 0 NAME NAME Property NAME Property ELDERLY 0 TOTAL OTHER NAME Property NAME Property ELDERLY 0 TOTAL TOTAL ALL

3 Property Name Size: Over 70 units or or under 50 units Mission Alignment Meets intended goals Sort of & Doesn't meet intended goals Years Since Placed in Service (or last major rehab) < 10 years years > 15 years Bedroom Density Average BRs per Unit insert # Market Geography strong market Medium market weak market Financial Performanc e Feeds Organizatio n Covers Costs Eats Cash Summary Opportunit y Property, Good to Go, Needs Work NOTES: state strong, or note biggest challenge - color Instructions insert number if info is wrong Drop down menu insert number if info is wrong insert number if info is wrong Drop down menu Drop down menu - use Tabs XXX color cell green, yellow or red #REF! #REF! #REF! #REF! #REF! Opportunity Property #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!

4 ACCOUNTS RECEIVABLE AT YEAR- END REPLACEMENT RSV BALANCES AT YEAR- END OPERATING & OTHER RSV BALANCES AT YEAR-END TOTAL ACCOUNTS PAYABLE AT YEAR- END AMOUNTS DUE TO ORGANIZATION AT YEAR-END NOTES PAYABLE TO THE PARENT ORGANIZATION PER PER Y-to-D Y-to-D PER TOTAL UNIT TOTAL UNIT TOTAL UNIT 2014 TOTAL 2014 PER UNIT 2015 TOTAL 2015 PER UNIT Y-to-D Y-to-D PER TOTAL UNIT 2014 TOTAL 2014 PER UNIT 2015 TOTAL 2015 PER UNIT Y-to-D Y-to-D PER TOTAL UNIT PER PER Y-to-D Y-to-D PER TOTAL UNIT TOTAL UNIT TOTAL UNIT 2014 TOTAL 2014 PER UNIT 2015 TOTAL 2015 PER UNIT Y-to-D Y-to-D PER #1 TOTAL UNIT Loan 1 Likelihood Loan 2 #2 Likelihood Loan 3 #3 Likelihood

5 SECTION A: CURRENT BALANCE SHEET INFORMATION MOST RECENTLY CLOSED CORPORATE BALANCE SHEET AS OF: DESCRIPTION Balance ASSETS Unrestricted Cash $ - Restricted Cash $ - Current Receivables $ - How much of this is due from affiliates? $ - Other Current Assets $ - $ TOTAL CURRENT ASSETS - LIABILITIES Accounts Payable $ - How much of this balance is over 90 days old? $ - Current Accrued Expenses $ - Current Notes Payable $ - How much, if any of this is payable to affiliates? $ - Other Current Liabilities $ - $ TOTAL CURRENT LIABILITIES - Long-term Notes Payable $ - How much of this is due within next 36 month? $ - SECTION B: CORPORATE INCOME & CASH FLOW STATEMENTS FOR LAST 3 YEARS 12-Month Period Ended / / / / / / Total Support and Revenue $ - $ - $ - Total Expenses $ - $ - $ - Change in Net Assets $ - $ - $ - Cash Flow From Operations $ $ - $ - Cash Flow From Investing $ (4,035) $ - $ - Cash Flow From Financing $ - $ - $ - Net Inc(Decrease) In Cash $ - $ - $ -

6 $18,000 $16,000 Inflation-Impacted Cash Flow $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $1,816 $1,801 $1,601 $1,181 $485 ($5,186) ($985) OpEx Rent Loss Reserves DS GPR $2,000 $0 Year-15 Year-10 Year-5 Year-4 Year-3 Year-2 Year-1

7 Portfolio Metrics Painting a Picture Harold Nassau Director of Asset Management NeighborWorks America CHAM

8 NeighborWorks Rental Portfolio

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14 Core Competencies for Asset Management Portfolio Performance Review Portfolio performance against NeighborWorks America s goal of 85% positively performing portfolios. Review of: Cash Flow; Collection Rate; Vacancy Rate; Data Analysis Multifamily Initiative Reporting: 136 Portfolios as of June 30, 2017 # Portfol ios # Units Red (Dark): Red (Med) Red (Light) Orange: Orange: Yellow: Light Blue: Green: Gray: Rolling NCF % GPR -- more than 10% negative Rolling NCF % GPR % negative Rolling NCF % GPR % negative > 30% units negative Rolling NCF > 50% properties negative Rolling NCF Changes in NOI Performance +/- 100% Failure to report a quarter over last 4 qtrs Failure to report significant number of units 0% vacancy for portfolio > 300 units 6 3, , , , , % Collection Rate for 7 11,684 Purple: portfolio > 300 units Pink: DSCR < ,415 6

15 1.Algorithm linking Cash Flow, Vacancy, Collections strong, satisfactory, watch 2. Organizational performance Number 1. s of groups attending clinics Number of groups with onsite AM orientations Number of groups doing Board training on RE Number of groups becoming CHAM member 3. Professional Development CHAM course participants CHAM designations CHAM conference attendees

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17 Key Property Performance Metrics Understanding And Meeting Owner s Objectives Monitoring the Managing Agent Paul Jalen Asset Manager Miller-Valentine Group

18 Understanding And Meeting Owner s Objectives Objectives create the guidelines that become the foundation for successful business planning. Understanding owner s objectives is critical to establishing meaningful performance metrics designed to monitor progress toward meeting owner s objectives. Owner s objectives include: Mission And Core Values Profitability Compliance Customer Service And Retention Portfolio Growth Financing Capability Change Management Competitive Analysis

19 Understanding And Meeting Owner s Objectives Mission And Core Values Understand owner s core values and tailor performance metrics designed to measure portfolio results for owner decision-making. Profitability Revenue maximization and cost control; performance metrics include net operating income (NOI), net cash flow (NCF), operating expense (OPEX), debt service coverage ratio (DSCR) and operating margin. Compliance Adherence to affordability guidelines; performance metrics include monitoring results of resident file and physical inspections conducted by state allocating agencies, local housing authorities, lenders and investors.

20 Understanding And Meeting Owner s Objectives Customer Service And Retention Define customer needs and provide effective venues for delivery; Customers include internal and external key business partners and residents; performance monitoring conducted via periodic updates and satisfaction surveys. Portfolio Growth Growth is planned based on historical data and future projections; performance metrics include portfolio review by product type and asset valuation. Financing Capability Maintaining the ability to finance operations allows an owner to prepare for long-term projects and address short-term capital needs; performance metrics include hard and soft debt maturity monitoring, refinance opportunity analysis and lender relationship management.

21 Understanding And Meeting Owner s Objectives Change Management Preparing an organization for growth and implementing processes that effectively deal with a developing marketplace; objective is to create a dynamic organization that is prepared to adapt to and thrive within a changing industry. Competitive Analysis Comprehensive analysis of competitors activities should be an ongoing business objective; understanding the position of products and services relative to the marketplace allows an owner to better determine improvement potential.

22 Monitoring The Managing Agent Ensure managing agent has an understanding of the expectations of owners and business partners relative to project performance. Establish goals which are aligned with the objectives of owners and business partners; goals should be realistic, specific and measurable. Establish structure to ensure accountability (i.e., standardized portfolio performance reporting). Embrace ongoing communication and collaboration (i.e., periodic performance updates and watch list meetings). Open Discussion: 3rd-Party v. Affiliate Managing Agent

23 Key Property Performance Metrics -Choosing Your Reporting Metrics: Heat Map -Reporting to an Asset Management Committee Valorie G. Schwarzmann, J.D., CPA Chief Financial Officer Homeport

24 What is the Life Cycle of Key Performance Metrics? 1. Choosing Your Property Key Performance Metrics (what criteria are relevant/important to you and what are your ultimate performance goals?) 2. Creating Reports of how an individual property or portfolio is doing against those goals (direct information or exception reporting?) 3. Reporting to the Asset Management Committee 4. Analyzing periodic results and making changes as necessary to meet those goals (using Property Plans)

25 Part I: Choosing Your Property Key Performance Metrics/Criteria 1. Must take into account: a. Owner s Performance Expectations b. Investor s Performance Expectations c. Hard Debt Lender s Performance Expectations d. Soft Debt Lender s Expectations 2. Cash Flow Payment Expectations and Goals 3. Capital & Operating Reserve Expectations and Goals 4. Property Capital Needs 5. Other Facts that impact a particular property (unique circumstances)

26 Property Performance Metrics/Criteria WATCH LIST RATING CRITERIA Must Pays: Cash Flow through NOI: Reserves: Payment of Asset Management fees Property not cash flowing Concern for Replacement Reserves Balance 1. Paying in full and on time YTD 1. Positive cash flow > $25,000 YTD 1. Per Unit Balance > $1,500 per unit 2. Pay> 85% YTD 2.Positive cash flow of $5,000 to $25,000 YTD 2. Per Unit Balance $1,000 - $1,500 per unit 3. Pay > 70% YTD 3.Positive cash flow of $0 to $5,000 YTD 3. Per Unit Balance $750 - $999 per unit 4. Pay > 50% YTD 4. Negative cash flow of $ 0 to ($5,000) 4. Per Unit Balance $500 - $750 per unit 5. Pay < 50% YTD 5. Negative cash flow > ($5,000) 5. Per Unit Balance < $500 per unit Payment of Service Coordination fees NOI - Net Operating Income to Budget Operating reserves needed for operating expenses 1. Paying in full and on time YTD 1. NOI favorable to budget YTD (100%) 1. Operating Reserves for > 6 months Operating Expenses 2. Pay> 85% YTD 2. NOI unfavorable to budget YTD > 97% < 100% 2. Operating Reserves for 4-6 months Operating Expenses 3. Pay > 70% YTD 3. NOI unfavorable to budget YTD 97% 3. Operating Reserves for 3-4 months Operating Expenses 4. Pay > 50% YTD 4. NOI unfavorable to budget YTD < 97% >93% 4. Operating Reserves for 2-3 months Operating Expenses 5. Pay < 50% YTD 5. NOI unfavorable to budget YTD > 93% 5. Operating Reserves for < 2 months Operating Expenses DCR YTD Economic Occupancy Capital repair budget compliance 1. DCR > Occupancy > 96% 1. Capital expenses within budget 2. DCR 1.25 to AHIC Occupancy Standard = 95% 2. Cap exp exceed budget by $5,000 YTD 3. DCR 1.1 to Occupancy at 93 % - 95% 3. Cap exp exceed budget by $5,000 to $10,000 YTD 4. DCR 1.0 to Occupancy at 90% - 93% 4. Cap exp exceed budget by $10,000 to $15, DCR < Occupancy Less Than 90% 5. Cap exp exceed budget by > $15,000 Payment of required RR deposits Delinquency Capital Expenditures Analysis 1. Paying in full and on time YTD 1. Delinquency 0 to 1% 1. Capital expenditures are 80% or less of annual RR deposits 2. Pay> 85% YTD 2. Delinquency 1% to 2% 2. Capital Expenditures are 90% of annual RR deposits 3. Pay > 70% YTD 3. Delinquency 2% to 3% 3. Capital Expenditures are equal to budgeted RR deposits 4. Pay > 50% YTD 4. Delinquency 3% to 4% 4. Capital expenditures have exceeded budgeted RR deposits by 10% 5. Pay < 50% YTD 5. Delinquency > 4% 5. Capital expenditures have exceeded budgeted RR deposits by 20% or greater

27 Part II: Reporting Against Property Criteria/Goals 1. Watch List/Heat Map (Exception Reporting) 2. Financial Results by Product Type 3. Financial Results by Life Cycle 4. Cash Flow to Parent Company against budget 5. Liability Risk Report 6. Executive Summary 7. Individual Property Plans (includes budgets and unique issues)

28 Reporting: Heat Map

29 Reporting: Financial Results 1

30 Reporting: Financial Results 2

31 Reporting: Liability Risk Report Liability Risk Report August 2017 Essential Duties of the Board of Directors: Risk Mitigation The Board of Directors is required to review any risk to the organization arising from the possibility for damages resulting from the purchase, ownership, rental, or use of a property owned by an organization. The Board should be notified by staff of all default notices and significant compliance deficiencies. 1. Incident Reports. The property management companies are required to notify Homeport of any litigation or serious threat of litigation with 24 to 48 hours; are required to notify immediately of any event that results in personal injury, substantial physical damage to any property, or filing of a police report. If an event of this nature involves a resident or specific unit, then full written documentation shall be reflected in the unit/resident file within 24 hours. On January 30, 2017 Homeport was notified by CPO Management Services that they had received a demand letter from a personal injury lawyer representing Charlotte Peoples, a resident of Emerald Glen Apartments, who allegedly injured herself tripping over a pothole in the parking lot at Emerald Glen on August 31, There are no records of a report of Ms. People falling on property. All information regarding the incident have been shared with Westfield Insurance and they are working on gathering facts in this matter. There have been no new developments as of August Physical Property and File Compliance Findings. The property management companies are responsible (1) for the maintenance of the physical property of each partnership property they manage; and (2) for the proper file-compliance of each resident. To confirm that these responsibilities are being appropriately and properly met, Homeport and its partner investors officially inspect the properties annually. Reports are issued and any findings need to be resolved immediately. During 2017, there have been no findings that have remained unresolved and/or uncorrected. 3. City Code Violations. Except as noted below, all city code violations (for items such as uncut grass by lease option tenants, tree limbs that needed to be removed, illegally parked cars, etc.) were immediately resolved during Loan Covenant Tracking. Many of Homeport s rental partnerships are funded with bank debt that require meeting a debt coverage ratio loan covenant, often a minimum 1.15 minimum DCR. The Asset Management department tracks monthly the current debt coverage ratio of each partnership. All hard debt is being paid

32 Part III: Reporting to the Asset Management Committee 1. Must assess the role of staff in asset management of portfolio properties 2. Must assess appropriate level of oversight by the Board and the attendant necessary reporting detail 3. Generally an evolutionary process a. If too low stuck in the weeds b. If too high lack of detail and risks lack of real oversight

33 Reporting to the Asset Management Committee: Detailed by Property

34 Reporting to the Asset Management Committee: Detailed by Property

35 Reporting to the Asset Management Committee: Using An Executive Summary Executive Summary/Dashboards (with other documents supporting behind depending on the level of detail the Committee requests and the evolution of your portfolio and knowledge of Committee members): 1. Cash Flow Waterfall Results (to parent, to partners, etc.) 2. Status of new properties nearing completion 3. Organizational Pipeline 4. Year 15/Property Repositioning 5. Red Flags 6. General Portfolio Items (Real Estate Tax Appeals, Utility Allowance Changes, Lease Option Items, Property Budgets, etc.)

36 Part IV: Analysis of Financial Results Need to go beyond reporting and create Action Plans when something isn t going as expected, not meeting goals, generally issues need addressed, etc. Property Plans: Create and use as Guideline to Keep Everyone on Track to Achieve Best Results (both financially and otherwise) 1. Property Overview 2. Major Items over the years (e.g., debt structure, any refinancing, donated new appliances, physical condition, capital repairs & replacements through insurance, development issues, challenges and opportunities, Year 15 status, possible disposition, etc.) 3. Annual Plan identifying all goals against which budgets are reviewed and against which overall property performance is assessed

37 Example of Property Plan

38 Example of Property Plan

39 Example of Property Plan

40 Watch List Property Plan Summary

41 Which then.the Life Cycle comes full circle 1. Forces periodic review of the metrics you have chosen 2. Are they the right ones for you? 3. Have circumstances changed so need to track something else/something differently? 4. Are you getting the information you need/tracking the appropriate items a. To be sure you re reaching all of your goals? b. Are potential risks being spotted before they become issues?