New Opportunities In Public Housing 2 Amoroso

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New Opportunities In Public Housing 2 Amoroso

  1. 1. Creative New Opportunities for public housing and Section 8 Development Strategies, Financing Tools and Subsidies available to development Presented by Roxanne Amoroso
  2. 2. A Look at the different types of development strategies, what works in today’s economy <ul><li>There are four basic types of </li></ul><ul><li>development strategies </li></ul><ul><li>Acquisition rehab </li></ul><ul><li>New construction </li></ul><ul><li>Adaptive reuse </li></ul><ul><li>Master Development </li></ul>
  3. 3. Acquisition Rehab Strategies <ul><li>Failed condo conversions –bigger is better! </li></ul><ul><ul><li>Look for existing apartments/condos preferably with land for future development </li></ul></ul><ul><ul><li>Look for deals where partial condo sales can be gated out or segregated </li></ul></ul><ul><ul><li>Can the condo docs be undone and can it revert to an all apartment use? </li></ul></ul><ul><li>Pre-foreclosure sales </li></ul><ul><ul><li>Rental stock that has gone to market and did not sell, in trouble deals </li></ul></ul><ul><ul><li>Typically hear about from general contractors, management companies – distress sales </li></ul></ul><ul><li>Bank owned real estate (foreclosures) </li></ul><ul><ul><li>Commonly referred to as REO </li></ul></ul><ul><ul><li>Typically remarketed through brokerage companies </li></ul></ul>
  4. 4. Development Strategy - Acquisition Rehab Failed Condo Conversion Case Study Bonita Fountains aka Eaglewood Apartments, Orlando Florida (acquired 12/20/08)
  5. 5. Development Strategy - Acquisition Rehab Case Study Bonita Fountains aka Eaglewood Apartments, Orlando Florida (acquired 12/20/08
  6. 6. Development Strategy - Acquisition Rehab Case Study Bonita Fountains aka Eaglewood Apartments, Orlando Florida (acquired 12/20/08)
  7. 7. Acquisition Rehab – Bonita Fountains aka Eaglewood Apartments, Orlando Florida
  8. 8. Bonita Fountains Finance Strategy <ul><li>Property initially listed for $67,000,000 or $119,642 unit </li></ul><ul><li>Spent $ 27,500,000 acquisition $49,107 unit </li></ul><ul><li>Construction/Permanent Loan $22,500,000 </li></ul><ul><li>Equity $10,316,595 </li></ul><ul><li>Brownsfield VCTC -$500,000 </li></ul><ul><li>Brownsfield VCTC - $500,000 </li></ul><ul><li>Future bldg materials sales tax -$400-500,000 </li></ul><ul><li>Acquired @ $27,500,000 and developed @ $58,601 unit all including 44 acre tract </li></ul><ul><li>environmental cleanup </li></ul><ul><li>rehabilitation </li></ul><ul><li>infrastructure </li></ul><ul><li>Value </li></ul><ul><li>44 acres of land w/ entitlements for 540 units </li></ul><ul><li>2,000 LF new road and infrastructure for all new units </li></ul><ul><li>560 apartments built in 1987 and 2000 </li></ul><ul><li>Created all new infrastructure for next developments </li></ul><ul><li>Capture sales tax on future building materials </li></ul>
  9. 9. (2) Strategy - Bank owned real estate finding the foreclosed properties <ul><li>Knowing where to look </li></ul><ul><li>Where does the information come from? </li></ul><ul><li>What is public information and what is not </li></ul><ul><li>Who controls the asset? </li></ul><ul><li>Understanding what went wrong </li></ul><ul><li>Determination of value***** </li></ul><ul><li>Financing limitations </li></ul>
  10. 10. Where to look for Bank REOs <ul><li>http://bankofamerica.reo.com/search/propertysearch.aspx </li></ul><ul><li>https://www.citimortgage.com/Mortgage/Oreo/SearchListing.do </li></ul><ul><li>http://mortgage.chase.com/pages/other/co_properties_landing.jsp </li></ul><ul><li>Top real estate brokerage firms bid to be the listing agent to remarket bank owned properties </li></ul><ul><li>Some banks direct sell </li></ul><ul><li>All bank websites have basic information and contact </li></ul><ul><li>Other websites have general info on some bank owned assets such as Loopnet, and broker controlled websites </li></ul>
  11. 11. What are the issues to consider on an REO? <ul><li>Existing asset value is determined by trailing 3 or 12 month NOI (from a lender perspective to acquire debt and finance) less debt available to acquire because performance is below market </li></ul><ul><li>Many buyers are using double digit cap rates for NOI analysis due economy eroding values </li></ul><ul><li>Concessions on rent almost always devalue income stream </li></ul><ul><li>Include reserves above the line when determining value </li></ul>
  12. 12. Trend Analysis – what is it worth?   Cap Rate Analysis Acquisition Cap Rate   Going In Purchase Price XXXXXXXX Trailing 12 months Cash Flow Income – expenses and reserves Trailing 12 months NOI Income- Expense Cap Rate on Trailing 12 mos. Cash Flow Trailing 12 / purchase price Cap Rate on Trailing 12 mos. NOI Cash flow on trailing 12 / purchase price Stabilized Valuation   Year 3 (2011) Cash Flow -projected Cash flow at stabilization Y 3 Year 3 (2011) NOI - projected Project NOI Sale Cap Rate used in Model Cap Rate determined by market Year 3 (2011) proj. value on cash flow Projected Cash flow / cap rate Year 3 (2011) proj. value on NOI Projected NOI / cap rate Value to Project Investment Projected NOI / Total Investment
  13. 13. Trend Analysis – what is it worth?   Cap Rate Analysis Acquisition Cap Rate   Going In Purchase Price $22,500,000 Trailing 12 months Cash Flow $779,763 Trailing 12 months NOI $919,763 Cap Rate on Trailing 12 mos. Cash Flow 3.47% Cap Rate on Trailing 12 mos. NOI 4.09% Stabilized Valuation   Year 3 (2011) Cash Flow -projected $2,606,220 Year 3 (2011) NOI - projected $2,746,220 Sale Cap Rate used in Model 8.00% Year 3 (2011) proj. value on cash flow $32,577,750 Year 3 (2011) proj. value on NOI $34,327,750 Value to Project Investment 104.6%
  14. 14. Conclusions to REO acquisition <ul><li>Must have access to debt </li></ul><ul><li>Debt underwriting more stringent than typical – less debt available </li></ul><ul><li>Must have access to equity*** </li></ul><ul><li>Economy has changed all of the rules! </li></ul><ul><li>If you can buy right on an REO – great opportunity! </li></ul>

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