New Opportunities In Public Housing 2 Amoroso
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Transcript of New Opportunities In Public Housing 2 Amoroso
Creative New Opportunities for public housing and Section 8
Development Strategies, Financing Tools and Subsidies available to development
Presented by
Roxanne Amoroso
A Look at the different types of development strategies, what works in today’s economy
There are four basic types of
development strategies
• Acquisition rehab
• New construction
• Adaptive reuse
• Master Development
Acquisition Rehab Strategies
• Failed condo conversions –bigger is better! Look for existing apartments/condos preferably with land for
future development Look for deals where partial condo sales can be gated out or
segregated Can the condo docs be undone and can it revert to an all
apartment use?• Pre-foreclosure sales
Rental stock that has gone to market and did not sell, in trouble deals
Typically hear about from general contractors, management companies – distress sales
• Bank owned real estate (foreclosures) Commonly referred to as REO Typically remarketed through brokerage companies
Development Strategy - Acquisition Rehab Failed Condo Conversion Case Study
Bonita Fountains aka Eaglewood Apartments, Orlando Florida (acquired 12/20/08)
Development Strategy - Acquisition Rehab Case Study
Bonita Fountains aka Eaglewood Apartments, Orlando Florida (acquired 12/20/08
Development Strategy - Acquisition Rehab Case Study
Bonita Fountains aka Eaglewood Apartments, Orlando Florida (acquired 12/20/08)
Acquisition Rehab – Bonita Fountains aka Eaglewood Apartments, Orlando Florida
Bonita Fountains Finance StrategyProperty initially listed for $67,000,000 or $119,642 unit
Spent $27,500,000 acquisition $49,107 unit
• Construction/Permanent Loan $22,500,000• Equity $10,316,595• Brownsfield VCTC -$500,000• Brownsfield VCTC - $500,000• Future bldg materials sales tax -$400-500,000
Acquired @ $27,500,000 and developed @ $58,601 unit all including 44 acre tract
environmental cleanuprehabilitationinfrastructure
Value• 44 acres of land w/ entitlements for 540 units• 2,000 LF new road and infrastructure for all new units• 560 apartments built in 1987 and 2000• Created all new infrastructure for next developments• Capture sales tax on future building materials
(2) Strategy - Bank owned real estate finding the foreclosed properties
• Knowing where to look• Where does the information come from?• What is public information and what is not• Who controls the asset?• Understanding what went wrong• Determination of value*****• Financing limitations
Where to look for Bank REOs
http://bankofamerica.reo.com/search/propertysearch.aspx
https://www.citimortgage.com/Mortgage/Oreo/SearchListing.do
http://mortgage.chase.com/pages/other/co_properties_landing.jsp
Top real estate brokerage firms bid to be the listing agent to remarket bank owned properties
Some banks direct sell All bank websites have basic information and contact Other websites have general info on some bank owned assets such
as Loopnet, and broker controlled websites
What are the issues to consider on an REO?
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
Many buyers are using double digit cap rates for NOI analysis due economy eroding values
Concessions on rent almost always devalue income stream
Include reserves above the line when determining value
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
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%
Conclusions to REO acquisition
• Must have access to debt• Debt underwriting more stringent than typical –
less debt available• Must have access to equity***• Economy has changed all of the rules!• If you can buy right on an REO – great
opportunity!