Development Process

A publication of Great Lakes Capital Fund

Volume 20 | Issue 4 | 2013

THE

DEVELOPMENT PROCESS

WHY YES, the grass is GREENER over here.

Sometimes brilliant advising and accounting isn’t enough. Allow us to give you an extra nudge over the fence.

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Audit and tax services

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Cost certification

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Market studies

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Securing tax credit equity – Low-income housing – Historic – Energy

Exceptional client service is what separates Baker Tilly from the rest. Our tailored affordable housing services address your needs and deliver the individual attention you deserve. It’s our pledge to you, because in the end, your definition of satisfaction is the only definition that matters.

© 2013 Baker Tilly Virchow Krause, LLP. Baker Tilly refers to Baker Tilly Virchow Krause, LLP, an independently owned and managed member of Baker Tilly International.

Come see what’s happening on our side.

Connect with us: bakertilly.com Don Bernards, CPA, Partner 608 240 2643 | donald.bernards@bakertilly.com

FEATURES STRATEGIC PLAN.......................................................... 6 market RESEARCH...................................................... 8 DEVELOPMENT TEAM................................................. 12 SITE selection & ACQUISITION................................ 14 FINANCial feasibility............................................... 17 APPROVAL PROCESS.................................................. 20 CONSTRUCTION PROCESS........................................ 22 MARKETING PLAN..................................................... 26 COMPLIANCE............................................................ 30

33 DEPARTMENTS CEO’s Message.......................................................... 5 Thank You

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events & happenings............................................ 32 advertiser index..................................................... 34

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Ginosko Development Company “Building a Brighter Future Today” Ginosko Development Company (GDC) is a real estate development company specializing in quality affordable housing creation and preservation. GDC, through its subsidiaries and joint ventures, engages in the acquisition, development, redevelopment, ownership, and operational oversight of multifamily properties primarily in the United States. Its activities include the acquisition and development of residential properties and undeveloped land reserves for development or sale.

Ginosko is the Greek meaning for, “to understand completely” or “to know.”

We at Ginosko Development Company, believe that a thorough understanding and comprehensive knowledge is the unbreakable foundation for any successful real estate venture.

GDC’s communities are known for their careful planning, attention to detail and respect for the environment. GDC strives to lead in the evolution of real estate use in order to meet the market needs of a global economy.

41800 West 11 Mile Road, Suite 209 | Novi MI 48375 office 248.513.4900 | fax 248.513.4904

www.Ginosko.com

CEO’s MESSAGE GOVERNING BOARD Wendell Johns, Chair Retired Michael J. Taylor, Secretary/Treasurer PNC Bank James S. Bernacki Comerica Bank Catherine A. Cawthon Fifth Third CDC Derrick K. Collins Chicago State University

THANK YOU

BY MARK MCDANIEL, CEO/PRESIDENT GREAT LAKES CAPITAL FUND

William C. Perkins Wisconsin Partnership for Housing Development, Inc. James W. Stretz George K. Baum & Company Donald F. Tucker Don Tucker Consulting Paul J. Weaver Retired

CORPORATE OFFICERS Mark S. McDaniel, President & CEO Christopher C. Cox, CFO James L. Logue III, COO Jennifer A. Everhart, Executive Vice President Rick Laber, Executive Vice President Kevin Crawley, Executive Vice President This magazine is published quarterly by the Great Lakes Capital Fund (GLCF) to provide readers with information on affordable housing and economic and community development resources. This publication is copyrighted. The reproduction of Avenues to Affordability is prohibited by law. For additional copies, comments, concerns or to be added to the mailing list, please contact the Great Lakes Capital Fund office at 517.482.8555 or visit www.capfund.net.

Editorial and Advertising Mary McDaniel, CMP • Alternative Solutions, LLC 517.333.8217 • mcdaniel64@comcast.net Graphic Design Melissa Travis • Ink Ideas Graphic Design, LLC 989.272.3101 • www.inkideasgraphicdesign.com Lansing Office 1118 S. Washington Avenue Lansing, MI 48910 Phone 517.482.8555 Detroit Office 1906 25th Street Detroit, MI 48216 Phone 313.841.3751 Indianapolis Office 320 N. Meridian St., Suite 516 Indianapolis, IN 46204 Phone 317.423.8880 Madison Office 2 E. Mifflin Street, Suite 101 Madison, WI 53703 Phone 608.234.5291 Tinely Park Office 18450 Crossing Drive, Suite C Tinley Park, IL 60487

Our 20 Year Anniversary celebration has ended. We celebrated mightily. Our staff committed hundreds of hours of volunteer work and we participated in numerous fund raising activities for charitable initiatives throughout the Great Lakes Capital Fund’s footprint. Our goal was to give back and say “thank you” to all of our partners and programs that have been part of our growth.

In addition to those initiatives, we focused on the future and sustainability of GLCF. We had significant opportunities come to fruition in 2013. Develop Michigan, Inc., a development finance organization, became operational and closed its first fund. The acquisition of the interests of the Delaware Community Investment Corporation occurred in the fall. It will bring a mature loan platform, new investors and geography.

We strengthened the organization of our lending company, Capital Fund Services, significantly as well. We have already seen the fruits of that labor in the recent months.

Our fourth significant development was the implementation of Great Lakes Capital Fund’s Succession Plan. The plan ensures the future sustainability of the GLCF culture and entrepreneurial business practices long into the future. It is one of the most significant undertakings of our history. What a way to celebrate our 20 years of existence!

This edition of Avenues actually revisits one of the most popular editions we did several years ago. We have had numerous requests to update and print the work we did outlining the real estate development process. It’s a soup to nuts outline of the “process” of developing real estate. The core of it is based on all the mistakes I have made over my career in development (and those who we have worked with while at GLCF). This is a great primer for those companies or individuals who want to get into development and it is a good reminder piece for those who are developers.

There is so much more due diligence that goes on in reviewing developer’s ability to develop real estate for a loan or investment. It requires a strong financial statement and a clean track record of previous experience. It is not as easy for a neophyte or fledgling nonprofit to do development as it used to be. You need to recognize your limitations and find strong partners to fill those gaps. We hope you find this helpful as a roadmap.

In closing, I would like to take this opportunity to thank all of our advertisers for the support they given over the years. We have heard from thousands of readers how valuable and timely the information in Avenues is to them. The quality is ensured by the advertiser support. We haven’t always been perfect on our production timing, but we have adhered to the quality of the articles and information we are providing. We won’t ever compromise on that! So again, thank you for all of your support, and from time-to-time patience, in getting this high-quality, widely-read magazine produced every year.

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STRATEGIC PLAN

MISSION & STRATEGIC PLAN

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n these times of scarce resources and great need for the services of community development organizations, strategic planning for an organization is becoming a critical need. Of course resources are tight, so who has time to plan? A good plan can produce the following benefits for an organization: • It Creates a Good Impression: Taking time to solicit input and develop goals is a mark of a well-managed and mature organization. A solid plan makes a positive impression on funders and potential board members.

• An Opportunity for Shared Decision Making: Board members rightly want to feel that they influence the organization.

Community members, clients and staff also want and need to have a say in the direction of an organization. Developing a plan gives those involved a chance to present their ideas in an organized format. These ideas can be discussed and conclu-

be productive will produce better services and more revenue.

A landscaping analogy; if you select the wrong plants for an area, say you have a plant that needs sun and the plant is in the shade, that plant won’t grow well no matter how much you water and fertilize it. The right plant will grow with half the work and will look better besides. So a good plan can help to focus work and scarce resources on activities that are a good strategic fit for your mission, the skills and the resources at hand.

Process Comments So now you are ready to develop a Plan. What to do first?

A critical component to planning is a competent facilitator. You need someone who can make people work, handle disputes and keep everyone engaged. Ask around at state trade associations,

A critical component to planning is a competent facilitator. You need someone who can make people work, handle disputes and keep everyone engaged. sions reached can be documented in writing and referred to in the future.

• Provides for Quality Time: Board meetings may last up to two hours and then Board members go on to other activities.

A full day planning retreat gives Board members and staff a chance to spend time together and get to know each other. A well done Board retreat helps to build solid working relationships that pay off when you need them the most.

• Gathering of Collective Wisdom: A group of ten people, moving in the same direction will generally make a better decision than two or three people that may have limited perspectives. Having a deliberate decision making process is a chance to consult “experts.” Everyone likes to be consulted and you might actually learn something.

• A Tool to Evaluate the Executive Director: A Plan can be used to evaluate the Executive Director. Instead of a global review of the Director’s character or likeability, the Director can be evaluated based on the progress of the organization towards meeting goals in the Plan.

• Increases Organizational Effectiveness: The best reason to prepare a Plan is that it helps the organization to become more effective. Focusing the work on areas that are likely to 6

local universities, the United Way, non-profit intermediaries like Great Lakes Capital Fund and the Local Initiative Support Corporation (LISC). Be sure to interview the person. Look for someone who understands the industry and who brings a depth of experience that will lend credibility to the process.

Whatever you do, avoid having the Executive Director facilitate the retreat. The Director may unconsciously or consciously try to gain support for their agenda. A good Director will see a planning process as a chance to get some outside help and sit back and let the rest of the organization have some input.

Another thing to avoid is for a group (usually staff) to preplan a direction and an outcome to the retreat. This sounds manipulative but it happens more often than you might think. It is tempting to think that you know what is best and you are influencing the direction of the organization for the right reasons. It is good to have ideas but one has to step back and let other people draw their own conclusions. Mature experienced people don’t like feeling like puppets, or wasting their time and everyone should walk out feeling they had a part in the decisions made.

A final word – try not to make a plan that is too long. About 10 pages is a good length. It can have some depth without requiring an hour to read.

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Plan Content Some Board retreats start out by defining or redefining the mission statement. A standard mission question is “What is considered to be the ultimate goal?”

• The provision of affordably priced housing?

• The revitalization of community?

• The achievement of economic development goals?

• The improvement of the lives people who are less fortunate through any variety of means?

• Increase revenues for organization?

This step in the process requires some soul searching and the ability to create a clear statement of “this is who we are and what we’re about.” It includes an analysis of strengths, weaknesses, opportunities and threats. It provides parameters for the organization’s direction.

When the mission and direction are clearly defined, the planning process can focus on objectives and future activities. Questions to be answered include: • Does this mix of activities meet community needs? Is the scale of the solutions big enough to make an impact on the issue?

Are the proposed activities a good fit with the mission of the

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organization?

• Who will do the work? Should the organization partner with another organization and if so, what are the benefits of partnering? Should the staff do the work directly? Will the staff need training?

• Are there financial resources available? Are the benefits to participants and the fees to the organization reasonable in relationship to the level of resources involved?

• Are those involved excited about the planned activities? Is there a good mix of safe, bread and butter/pay the bills type projects and projects that are exciting, thrilling and challenging?

• What are the risks of the proposed activities and projects?

Is there a way to mitigate risks? What is the worst thing that can happen? Can the organization weather the worst case scenario? Are the benefits enough to outweigh the risks?

• How will success be measured?

Having a clear mission and a strategic plan will not safeguard an organization from experiencing grief, but it will generally make things go much smoother. If the planning process is implemented with a significant amount of stakeholder involvement, this helps generate a “buy in” and access to needed resources.

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MARKET RESEARCH

MARKET STUDY

TARGET MARKET & DEMAND

by Kelly Murdock, Community Research Services “Who is our target market?” “Is there a market need?” These are the two primary questions that must be answered by your market consultant.

Projects may vary from community to community, but some elements play an essential role in an affordable housing development regardless of location. Being able to answer these key questions completely will lead to all other answers for your development.

There are a several important factors associated with a market study and how that study is utilized by developers and communities. Clearly identifying your target market and all associated characteristics is the first step.

TARGET MARKET Target market may be driven by a nonprofit’s mission, or a desire to improve a specific neighborhood, which may be primarily occupied by a specific market segment. In other cases the target market may be generally assumed, but unknown in terms of size, composition, or trends. The market analyst needs to provide information on the target market’s identification as a discernible market segment. Proper

identification requires knowledge of the target market’s: • Size • Typical age composition • Typical household composition • Income characteristics • Geographic outreach • Employment and occupation data • Community features that relate to the target market (such as employment concentrations, entertainment locations, primary travel routes, neighborhood boundaries, etc.)

Your analyst should be able to answer these questions to your satisfaction prior to any assumptions regarding market feasibility.

MARKET NEED With a clear indication of target market, the market analyst can provide recommendations regarding market viability.

Within the market study three factors are common to all useful reports.

These factors include: 1. Site and Community Considerations 2. Demand and Supply Considerations 3. Statistical Demand Forecasts Site and Community Considerations First, whether or not there exists a simple and basic need for the project is re-

ferred to as the market feasibility. The first aspect of the feasibility asks, “is there is a need?” By looking at the a few key elements, you can get at the heart of the true need for the project. These elements include: • Prevailing conditions surrounding the site and community • Any referrals by and from the community.

• Recent development trends in the area.

• Various demographic and economic factors associated with the market.

Second, when considering the need and feasibility it is crucial to take into account, “where the need is?” Look at all elements associated with the overall community and environment that would play a factor in the development of the proposed project. Reflect on the following: • The community itself – what have historically been the prevailing housing trends?

• The neighborhood(s) this project will be in – what unique needs may the section of the community exhibit?

• Are there any development barriers in the area, ranging from social or economic conditions, to the prevailing attitudes of the community’s leadership?

• What are the development advantages to providing the units in the area?

Demand and Supply Considerations The second key factor considers the overall supply and demand sides of the market. Demand factors include demographic trends and economic conditions, both of which reflect primary reasons for household creation and housing demand.

These include:

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GREAT LAKES CAPITAL FUND

• Demographics – The “Who.” This gets at the heart of who is demanding the units that the project benefits by considering: The population of the area, the number and availability of housing units and households, the income levels in the target zone, what the housing stock is like, the levels of poverty/affordability, and other “Quality of Life” statistics that can affect who the clients would be.

• Economic Trends - This takes a much closer look at the relevant numbers and financial situation as they relate to a community/neighborhood. Economic trends would take into account the following: the economic background and trends of the area, prevailing wages and salaries of the residents in the community, what the industry and occupations are for the community, key stakeholders and major employers, community patterns (this is especially relevant for urban/suburban settings), and employment trends and changes.

• Market Area. When considering a specific site, the corresponding market area may dictate several features of the development like: the prevailing influences of the community, the characteristics of the neighborhood, transportation issues and market area proxies that can place artificial boundaries on the target zone that could eventually play a critical role in the success of the development.

The supply side, on the other hand, will be articulated through a number of conditions. To put a finer point on it, the supply side can be dictated from readily available resources, the services provided by various developers, and characteristics of the area. This would include: • What the housing options are within a given market area.

• Characteristics of the market like: cost, size, age, features, condition, location, special characteristics, re-

AVENUES TO AFFORDABILITY

strictions, new proposals, occupancy, turnover, etc.

• What are the market types? Rural, suburban or urban?

• What are the amenities that would play a role in the desires of the market?

Demographic and economic figures reflect the prevailing trends of a community.

The supply side data provides a point-intime indication of market conditions that reflect the impact of various site and market factors upon the target market’s need for housing options.

Statistical Demand Forecasts The third and final key factor when working with market studies and research is the demand forecast. Demand forecasts provide a specific statistical measure of the need for various housing options in a given area. It is critical to note that there are many aspects that can play a role in how

this measure is determined. Therefore, be cognizant of the following: • Methodology. There are a very wide variety of acceptable options for how a specific market can and should be measured that sometimes produce differing results.

• Data. Demand forecasts can provide ample information, but do not get caught up in the irrelevant data that does not pertain to the project.

• Interpretation. What are the pieces that determine the “threshold” criteria for the area and the project?

• One View. A demand forecast is only one piece of the puzzle – perhaps the piece that is overly utilized to determine market feasibility. Nothing is more frustrating that an over-emphasis on a single demand forecast or corresponding capture ratio. It is akin to knowing that Goldilocks was caught

Covering all the angles.

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Community ReseaRCh services is a full-service community development consulting firm, with a strong background in real estate research, development consulting, and community revitalization.

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MARKET RESEARCH

by a bear, but being unaware of the rest of the story and what makes the tale interesting and useful.

Now that you have a better sense of the key factors that go into a market study, there are a few important recommendations to be aware of when hiring a marketing firm or analyst to conduct a study.

• A reputable market analyst will determine market feasibility, not financial or economic feasibility.

• A good market study will provide specific pieces of information such as: pricing, amenities, unit characteristics, potential market alternatives/ competition, and market absorption.

• Be mindful that recommendations within a study are dated. Many investors require studies that are conducted within a six month period, if not more recent.

• In most cases, studies are very site spe-

cific. Recommendations and analyses can vary with even the most modest of site changes.

Most importantly, a good analyst will tell you if your project does not work.

Over the past 25 years I have “laid to rest” more projects than any financial entity or housing finance agency. As a 3rd party analyst, this is the best service I can offer to you as a potential applicant. My goal is to provide the strongest recommendations for viable housing developments, or to dissuade my client from making a mistake that will reflect poorly on all parties involved. To do anything different is bad customer service, dishonest consulting, and poor use of methodology.

However, you deserve to know exactly why your proposal is not feasible. Do not accept such answers as “The demand forecast doesn’t work”, or “I just don’t feel it

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will be successful”. Insist on specific reasons, and ask under what conditions (if any) the proposal may be viable in the future.

I also strongly suggest only using market analysts that are members of the National Council of Housing Market Analysts (NCHMA). Members of NCHMA are required to attend continuing education programs each year to maintain membership, along with use of the organization’s best methods and practices. Also, a select group of analysts elect to undergo an optional peer-review process, and those analysts who are successful receive the Professional Member designation from NCHMA. KNOWLEDGE IS POWER Now, you are ready to tackle one of the most important pieces of the development process. But before you do, be aware that there is already a wide range of information out there that can assist you. It is wise to be as aware as possible of the market features that may impact your development prior to engaging any 3rd party market consultant.

The following is a list of some resources that are readily available: • Occupancy and price trends within specific developments and the local neighborhood as a whole. Visit with local managers and owners, but be aware of any answers that reflect a bias toward an individual project.

• U.S Census Bureau (www.census. gov), for basic demographic and economic data.

• HUD (www.huduser.org), for prevailing income and rent limits, among other information.

• Other sources within your community – specifically any housing related nonprofit organizations or housing professionals.

Kelly Murdock is the owner of Community Research Services, LLC, a housing research and community development consulting firm.

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GREAT LAKES CAPITAL FUND

Karl L. Gotting Kenneth W. Beall

Congratulations to Great Lakes Capital Fund on its First 20 Years

Michael G. Oliva Jeffrey L. Green Kevin J. Roragen Richard W. Pennings Ted S. Rozeboom Tracey L. Lackman Michael G. Stefanko Elizabeth Husa Briggs

OVER 40 YEARS OF EXPERIENCE IN AFFORDABLE HOUSING Representing developers and syndicators before the Michigan State Housing Development Authority, U.S. Department of Housing and Urban Development, Rural Housing

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and municipalities, and with private lenders.

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We assist in home ownership, affordable housing, urban renewal, and the fight against homelessness to create vibrant neighborhoods in a thriving state.

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DEVELOPMENT TEAM

SELECTING YOUR

W

TEAM

hen someone is having open-heart surgery, who will they seek out to perform that risky surgery? Their family doctor? Probably not. Individuals choose a specialist to protect their health.

Unfortunately, developers — nonprofit and for-profit alike — don’t always make those kinds of obvious decisions or even have the same clear cut options to choose from when selecting members of the development team. The risks are great, and the qualifications of team members are critical.

The developer needs to manage the team and make sure the members are working effectively with one another.

As an example, the architect should be talking to the contractor when conceptual

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drawings are being done, not after the final drawings have been completed. The property manager should be reviewing those drawings and preparing preliminary operating budgets and providing feedback on items that will make the development more successful and economical.

Developers need to perform thorough due diligence on the past performance of each team member. This includes talking to past clients, checking bank references and lien filing records.

Beware of those who offer to provide services for free or at a reduced cost. Beware of those who want to gain experience by working on the development. Beware of those who are “jacks of all trades, but masters of none”. Again, developers need to seek the best and brightest in their field of expertise, but also those with appropriately related experience. The following is a comprehensive list of the members need-

ed and the roles and responsibilities each team member brings to develop a successful project.

MARKET ANALYST The market analyst should: • Have experience with various financing programs • Have experience doing market studies for affordable rental housing The market analysis will: • Identify depth of housing demand • Establish rents, number of units, bedroom mix, income targeting, amenities • Quantify and assess competition • Determine absorption rates DEVELOPER The developer should: • Have experience in affordable housing development • Have experience in financing programs The developer will be expected to: • Assist In site acquisition • Complete finance application packaging and coordination • Gather financial statements and due diligence • Coordinate the development team • Work with elected officials and agency staff to obtain community approvals

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ARCHITECT The architect should have: • Experience in affordable housing design based on financing programs.

The architect will be responsible for: • Site plans, building plans and specifications • Coordinating with the General Contractor on design and costing specifications • Construction monitoring • Preparation of bid documents • Provide cost certification assistance ATTORNEY The attorney should have: • Experience with housing development and financing programs in the highly regulated area of affordable housing • Have a strong working knowledge of the tax credit code (Section 42) The attorney will be responsible for: • Organization documents • Assisting in local approvals • Legal opinions • Closing due diligence GENERAL CONTRACTOR The contractor should have: • Experience in building the type of proposed product The contractor will be responsible for: • Ensuring all construction is in accordance with plans and specs and in compliance with building codes • Providing value engineering & cost management guidance • Preparing bid packs, analyzing bids from subs & managing their performance • Scheduling and managing inspections • Adhering to all wage & reporting requirements PROPERTY MANAGEMENT The property manger should have: • Experience with managing affordable housing and financing program requirements The property manager will be responsible for: AVENUES TO AFFORDABILITY

• Preparing budgets, marketing and management plans • Meeting compliance requirements • Ongoing maintenance and operations to meet the financial needs of the partnership TITLE COMPANY The title company should have: • Experience with the type of real estate project being pursued and requirements of public and private lenders and investors The title company will be responsible for: • Investigating the lien history and chain of title for each property • Providing title policies • Managing construction draws and reviewing lien waivers • Providing date down title endorse-

.

ments during construction • Providing escrow services ACCOUNTANT The accountant should: • Have extensive experience working with highly regulated tax credit projects • Have a strong working knowledge of the tax credit code The accountant will be expected to: • Review the Tax Credit Application before it Is submitted to ensure accuracy • Certify cost for the 10% Carryover applications • Upon construction completion, submit a Cost Certification to obtain Form 8609 • Complete annual audits for the project operations • Handle tax issues with the project

{Questions answered.} You will benefit from the skills we have refined helping clients like you with the countless business and financial choices faced in putting together a deal. Our experienced consultants bring an in-depth understanding of community development and housing projects and are qualified to deliver knowledge, value, and guidance to help you see your project to completion, resulting in

a higher return on experience.

Contact: Robert Edwards 517.336.7460 robert.edwards@plantemoran.com hcd.plantemoran.com

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SITE ACQUISITION

FINDING & SECURING THE

OPTIMAL PROPERTY This article focuses primarily on site selection and acquisition for a new development but most of the principles apply to acquiring an existing apartment community for redevelopment.

The goal for any developer is to acquire the best possible site that supports their target market. Sometimes, it’s easy to fall into the trap of accepting a “donated” piece of land. However, even a free piece of land has its problems (environmental issues, wetland issues, economically difficult to develop, location, etc.) Site selection involves research about the target community: • Initial discussions with city officials (i.e. planning and zoning administrators) • Review of demographics and growth trends • Review of comprehensive plans • Identification of attributes (i.e. shopping areas, highway access, recreation, schools, etc.) and negative factors This analysis can be aided through the use of aerial photos and satellite imagery, GIS topographical maps, land use plans, zoning and tax assessor maps.

By sharing their vision and development concept with city officials, developers are able to: (a) gauge the level of public support for a proposed development, and (b) gain information about possible target areas, development sites and incentives. The community approval process will go more smoothly if city officials are supportive of the development concept and it fits within the comprehensive plan.

From this research, a group of optimal sites are identified and developers conduct physical inspections of each possible site and they answer questions such as: • Does the site have good visibility and accessibility?

• What is on the neighboring property?

• How is the land zoned? If it would need to be rezoned, who might contest it?

• How close are schools and major grocery stores?

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• Have there been other developments in the area recently (and if so, what types)?

• What are the site’s physical characteristics (i.e. topography, wooded, wetlands)?

• Are there likely to be problems with soil, rock or previous foundations?

• Are utilities available and if so, where are they located and are they adequate?

• Will a storm drain and/or retention pond be required? If so, is there room?

Based upon this initial review, the developer will prioritize the potential sites and begin the process of determining: availability, price and ability to obtain clear title. Developers have found it’s best to have a good working relationship with a title company that can quickly identify possible issues with title as well as help find current owners of land.

As priority sites are identified, developers meet with the property owners to negotiate a possible purchase. They typically use a Purchase Agreement to document the transaction. These are standardized documents which are familiar to property owners.

Although Option Agreements can be used, they tend to be more unique and sometimes generate more scrutiny on the part of the property owner and his/her attorney.

Once the possible sites have been narrowed down to two or three, it is a good idea to get key members of the development team to those sites to highlight possible issues. The architect and engineer are both good at pointing out inherent risks of the land and its slated use (drainage, land quality, etc.) Additionally, the construction team can visualize things such as parking, layout of buildings, etc. If the property is to be financed by a State Agency

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it is helpful to invite them as well to gauge their interest and to get their buy-in. Finally, asking a member of the Equity provider’s team to give input is helpful as well because they typically know the surrounding area and any problems other communities have had with each step of the process (approvals from local municipalities, marketing and lease up).

One of the developer’s main goals is to obtain site control without putting a lot of money at risk. They will arrange for the initial deposit of “earnest money” to be fully refundable within 60 to 90 days if preliminary feasibility test don’t pan out. If the results of the initial “due diligence” are positive, the Purchase Agreements will specify additional timeframes and benchmarks that need to be met before the site is actually purchased. Generally, the developer will advance more money to extend the “hold” on the property if it the initial feasibility looks good. When developers extend the closing date, it’s likely that some of the earnest money will become non-refundable. Here’s an example of how some developers pursue control of property: I. Approach owners a. Developers typically send an initial letter to the owner ex-

plaining their interest in the property. b. They follow up with a phone call and arrange a meeting c. Put together negotiating points and concerns that need to be addressed prior to meeting d. At the meeting, provide site plans and conceptual drawings.

Bring a check and a Purchase Agreement that can be marked up with items discussed at the meeting.

II. Standard items for negotiation a. Include the list of required Due Diligence items in the Agreement with performance benchmarks and timeframes (typically 60-90 days for the first dozen or so items) with the earnest money deposit being fully refundable. The Agreement should stipulate that earnest money will be deposited with a Title Company. b. The Agreement should lock in the acquisition price (or spell out the agreed upon method for determining a fair price). It should provide at least six months for the developer to close on the property (with the option to purchase up to two extensions). For LIHTC projects, State allocating agencies usually require evidence of site control for at least 180 days beyond

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Medallion Management, Inc. Medallion Management, Inc. 834 King Highway Suite 100 Kalamazoo, MI 49001-2578

Medallion Management

Fax: 1-269-381-3609 Phone: 1-269-381-0350 TTY: 1-800-649-3777 www.Medallionmgmt.com

"We specialize in Non-Profit Consulting and Joint Ventures"

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102 South Main Street Mt. Pleasant, Michigan 48858 Phone: (989) 772-3261 www.kmgprestige.com

T 317.636.2000

For more details on how KMG Prestige can benefit your community contact

Karen Mead Vice President of Business & Development (989) 400‐4828 kmead@kmgprestige.com

W ke y s t o n e - co r p . co m

E i n f o @ ke y s t o n e - co r p . co m

Proud supporters of the John H. Boner Community Center

SITE ACQUISITION

the application due date. c. At each extension, it’s likely that additional earnest money will need to be advanced and depending upon the outcome of negotiations, some of the earnest deposit may be forfeited if the developer doesn’t close on the acquisitions by the agreed upon date. However, the preferred outcome is that the project moves forward and most of the earnest money is applied toward closing costs and/or purchase price at closing. d. As part of the negotiation process, developers will sometimes agree to provide the owner with reports produced during the Due Diligence review in exchange for a refund of the earnest money if the purchase is not pursued. e. If an owner is concerned about keeping the property off the market for an extended period, some developers negotiate a 1st Right of Refusal and suggest that the owner leave the property on the market.

Some final tips include: • Investigate several pieces of property in case the first option doesn’t work out.

• Clearly state in the Purchase Agreement who is responsible for paying taxes, insurance, and assessments during the due diligence review period.

• Don’t become too wedded to a site because of ease of acquisition.

• Don’t take for granted the possibility of environmental complications.

• Be aware of possible wetland issues in the area (including Flood Zones/Plains) • Don’t acquire and take title to the property until all project financing is firmly committed and the construction financing is closed.

• The developer’s goal is to acquire the best possible site, so that each developer that follows is working with the second or third best site. written with assistance from Tim Hunnicutt, ZERO DAY; Phillip Seybert, PS Equities; and Karl Gotting, Loomis, Ewert, Parsley, Davis & Gotting.

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GREAT LAKES CAPITAL FUND

FINANCE

FINANCIAL FEASIBILITY Determining financial feasibility for a proposed housing development is like putting together a puzzle. The more pieces that you have in place, the easier it becomes to see the picture emerging and to place the final pieces of the puzzle. Also, if you have an experienced team working together on the puzzle and assembling all of its pieces, this will speed things along and improve the chances for a successful outcome.

A development’s financial feasibility is based upon many factors. The underwriters for prospective lenders and investors work with the development team to analyze each factor. The underwriters ask questions and compile a lot of information to determine if the development will have a strong likelihood for success. The underwriters must identify potential risks and/or weaknesses and then work with the development team to eliminate (or at least mitigate) the potential problems.

The sponsor’s track record and financial capacity will weigh heavily on the underwriters’ analyses. Even if a proposed development passes all of the feasibility tests except for the sponsor’s capacity, this will need to be addressed before lenders and investors approve financing. The underwriters evaluate the financial statements (including contingent liabilities) of the general contractor, developer, sponsor, owner and/or guarantor. In some cases, it may be necessary to recruit a partner to the development who has significant liquidity and net worth in order to meet the guarantee requirements of financiers. In LIHTC developments, the general partner/guarantors need to guarantee: construction completion, qualified occupancy, tax credit delivery, repurchase obligations, indemnifications, environmental representations, covenants and project representations.

Also the underwriters assess the proposed development’s viability based upon: the site, the neighborhood and the market for the intended audience. There needs to be evidence of neighborhood stability — or strong prospects for improved stability. In addition, the development should be located in an area where there is strong demand for the proposed housing type and the intended residents. A 3rd party professional market study is completed to assess and document this. The underwriter conducts a site visit to: verify the findings of the market study, assess comparable properties, and to interview individuals who are familiar with economic and development trends in the area.

The underwriters determine and document if: • the acquisition and development costs are realistic • the potential hard and soft costs been identified and quantified AVENUES TO AFFORDABILITY

114 Unit LIHTC Development

Rental Assumptions

INCOME ASSUMPTIONS % of UNIT DESCRIPTION AMI * 1 bedroom 1 bath Sec 8 50% 1 bedroom 1 bath - Sec 8 60% 2 bedroom 1 bath 40% 2 bedroom 1 bath 50% 2 bedroom 1 bath 60% 2 bedroom 1 bath Sec 8 60% 3 bedroom 2 bath 40% 3 bedroom 2 bath 50% 3 bedroom 2 bath 60% 3 bedroom 2 bath Sec 8 60% * Area Median Income TOTAL

Utility # Units 1 5 20 1 15 24 34 2 8 4

Allow-­‐ ance $75 $75 $115 $115 $115 $115 $130 $130 $130 $130

Monthly Net Rental Rent Allowance $550 625 $550 625 $442 557 $610 725 $610 725 $610 725 $469 599 $663 793 $663 793 $663 793

Total Annual Income 6,600 33,000 106,080 7,320 109,800 175,680 191,352 15,912 63,648 31,824

Total

Per Unit

114

2013 OPERATING EXPENSE ASSUMPTIONS total units 114 Accounting Legal Total Professional Fees Office Rent and Expenses Payroll and Payroll Taxes Workmen's Comp & Benefits Misc. Admin. Expenses: Admin. / Marketing Total Administrative Gas/Oil Electricity Water/Sewer Other (Describe) Total Utilities Extermination Trash Removal Security Janitorial Supplies & Salaries / Grounds Repair Contracts/Work Painting/Decorating Grounds Maintenance Snow Removal Vehicle Expense Total Repairs and Maintenance Total Marketing and Leasing Real Estate Taxes Total Insurance Total Property Management Fee Investor Services Fee (Must Pay) Other Fees (RE Tax 2nd Component) Total Other Fees Total Operating Expenses/Unit Total Net of Other Fees Total Net of Other Fees and Property Taxes Total Net of Other Fees, Property Taxes and Insurance

741,216

15,000 3,000 18,000

158

149,286

1,310

71,764

630

154,950 5,500 27,573 20,984 52,440

1,359 48 242 184 460

51,354

450

551,851 500,497 472,924 451,940

4,841 4,390 4,148 3,964

23,618 90,027 33,141 2,500 6,141 13,389 52,234 0 2,184 8,520 73,761 8,400 13,000 22,085 14,000 13,000 5,500 27,573 20,984 52,440 7,500 43,854

• adequate contingencies and reserves are built into the budget • the projected rents and operating costs are realistic • there is adequate market justification for the development 17

FINANCE

114 Unit LIHTC Development

114 Unit LIHTC development Cash Flow - Operating Pro Forma

DEVELOPMENT PRO FORMA (SOURCES & USES) SOURCES OF FUNDS Bank First Mortgage (30 yr am) Seller Note (30 yr am) Deferred Development Fee

Rate 6.75% 6.75%

LP Capital Contribution Replacement Reserve (Existing) Income from Operations TOTAL SOURCES OF FUNDS

APPLICATION OF FUNDS ACQUISITION COSTS Land Purchase Price: Building & Other Acquisition Costs Subtotal

Per Unit 8,665 16,265 833

Total 987,861 1,854,223 95,000

65,924 981 252 92,921

7,515,369 111,812 28,752 10,593,017

Per Unit

455,000 2,145,000 2,600,000

35,407 2,549 4,613 42,569

4,036,436 290,564 525,900 4,852,900

1,953 4,407 11,395 17,755

222,670 502,392 1,299,000 2,024,062

FINANCING COSTS Const. Loan, Legal, Title & Recording Subtotal

3,736 3,736

425,942 425,942

TAX CREDIT & SYNDICATION COSTS Tax Credit Fees (App, Monitoring, Legal, Acctg) Subtotal

1,360 1,360

155,094 155,094

START-UP COSTS, RESERVES & ESCROWS Marketing, tenant relocation,Rent-Up Operating Reserves (Capitalized) Replacement Reserve (Capitalized) Subtotal

994 2,699 1,000 4,693

113,300 307,719 114,000 535,019

92,921

10,593,017

PROFESSIONAL FEES & OTHER SOFT COSTS Arch, Eng & Env'l Other Soft Costs, Legal, Acctg & Reports Developer Fees Subtotal

TOTAL APPLICATION OF FUNDS

12.15%

14%

• the financial projections meet the underwriting standards of investors and lenders The standard tools used to determine and demonstrate financial feasibility include: 1. Development pro forma — anticipated development costs • acquisition and development costs • professional fees & other soft costs • financing costs • tax credit & syndication costs (if applicable) • start-up costs, reserves & escrows In relation to the above items, key underwriting standards for LIHTC developments include: • There should be realistic and satisfactory construction cost analysis, and specifications for the construction/rehabilitation.

Typically, a 3rd party professional will review the above items.

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Year 1 741,216 (59,297) 681,919

EXPENSES TOTAL EXPENSES:

551,851

NET OPERATING INCOME (NOI) Replacement Reserve (annual funding) NOI ADJUSTED FOR RESERVES

130,068 (34,200) 95,868

DEBT SERVICE Bank Loan Loan Balance Principal Paid Interest-Paid (6.75%) Total Paid DSC Ratio-1st Mortgage

987,861 9,623 60,856 70,479 1.85

Total

3,991 18,816 22,807

CONSTRUCTION/REHABILITATION COSTS Const.Costs, Bldr Fees, Bond, Permits, Etc. Furniture, Fixtures, Appliances & Equipment Construction Contingency Subtotal

RENTAL INCOME Gross Rental Income - Residential Less Vacancy NET RENTAL INCOME

Seller Note Loan Balance Principal Paid (90% of CF after DDF is paid-off) Interest Accrued (6.75%) Total Paid Deferred Developer Fee Loan Balance Principal Paid Total Paid NET OPERATING CASH FLOW

1,854,223 0 125,160 0

95,000 25,389 25,389 0

• Developments claiming acquisition credits must have 3rd party verification for amounts assigned to the land and building. Transfers of real property from related parties must also have the sales price verified by an appraisal.

• Construction contingency requirements: new construction = 5%; acquisition/rehabilitation = 10%; historic rehabilitation & adaptive re-use = 10% minimum.

• Soft costs should be detailed, with full funding of holding costs, lease-up expenses, construction period interest, lender’s fees and legal fees.

• The General Contractor will provide a 100% Payment and Performance Bond or a Letter of Credit in the amount of 25% of construction contract.

• There should be a realistic and satisfactory project completion schedule showing the projected completion date, the placed-in-service-date- and the expected date to achieve the required level of occupancy.

GREAT LAKES CAPITAL FUND

2. Development pro forma — anticipated funding sources and terms • hard debt (“must pay” debt) • soft debt (“cash flow contingent” loans) • seller financing • grants • sponsor loan (or general partner capital contribution) • deferred developer fee (to paid from cash flow) • limited partner capital (typically from the sale of tax credits) In relation to the above items, key underwriting standards for LIHTC developments include: • Commitments or Letters of Intent need to be signed by all lenders.

• Loans should have maturity dates (terms) of at least 18 years unless they fully amortize prior to this.

• Amortizing “must pay” debt should be no more than 30% of total development costs.

• Deferred developer fee should not exceed 50% of total developer fee and the anticipated project cash flow will completely pay off the deferred developer fee note by year 12.

• Loans should have fixed interest rates. Variable rate financing is only allowed if there is an interest rate cap (and the projected Net Operating Income can support loan repayment at the highest interest rate).

• Permanent loans need to be non-recourse to the general partner.

• Federal funding (i.e. HOME $’s) should be invested as a loan (except for certain situations and upon the advice of the tax attorney).

• Generally, when sponsors receive non-federal grants, these should be lent to the partnership so they can be counted in basis. These sponsor loans can be deferred, but need to show a possibility for repayment from operations.

• If the project receives Historic Tax Credits, these will reduce the LIHTC basis.

3. Operating pro forma - anticipated revenue • residential income (tenant-paid rents) • rental assistance payments (Section 8, Rural Rental Assistance, etc.)

• other income (carport, laundry, late fees, etc.)

• commercial income (if applicable) • reduce revenue by anticipated vacancy & rent loss 4. Operating pro forma – anticipated expenses & payments to reserves • property management fees, professional fees & administrative costs • marketing & leasing costs • utility costs paid by the development AVENUES TO AFFORDABILITY

• repairs & maintenance costs • property taxes and insurance costs • investor service fees (asset management fees) • required annual payments to operating and/or replacement reserves 5. Operating pro forma – anticipated debt service & other payments • hard debt • soft debt • seller note • sponsor loan and/or deferred developer fee note • payment of other fees (partnership management fee, tenant services fee, incentive management fee, etc.)

In relation to the above items, key underwriting standards for LIHTC developments include: • Income growth will be trended at a rate which is based upon historic trends in the area (and typically no more than 2% per year).

• Rents usually need to be 10% below the lower of the market rent or the maximum 60% tax credit rent.

• Operating expenses will be trended at 3% per year (or more if conditions warrant).

• Vacancy is typically set at 7%-8% for physical and economic vacancy (bad debt). [Developments with fewer than 20 units should be underwritten with vacancy of at least 10%].

• Debt Coverage Ratio (DCR) of 120-125% is required for “must pay” debt and it should remain above 110% throughout the compliance period.

• Replacement reserves will be $300/unit/yr for family developments and $250/unit/yr for senior developments.

Amounts may be higher depending upon development amenities. Also, certain developments may require a funded reserve at closing.

As you can see, there are a lot of “puzzle pieces” associated with a proposed housing development. Developments financed with LIHTC and/or Historic Tax Credits can be particularly complicated. Underwriters are responsible for working with the development team to assemble, assess and document all of the pieces. In doing so, they need to identify and address any areas of weakness and then work with the development team to secure financing approvals so the proposed development can move toward closing and implementation.

Please see the adjoining examples of documents typically used to analyze a LIHTC development: • Development pro forma • Cash flow pro forma • Rent grid • Operating expense budget

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APPROVAL PROCESS

community & financing

approvals This step in the development process involves two items which are generally done simultaneously: getting community approvals and getting financing approvals. Depending on the community and the complexity of the financing, these processes usually take three to nine months to complete. The main community approvals that need to be secured include zoning, site plan, tax abatement, and permits.

As developers go through the site identification and control process, they should gauge the level of community support for their proposed project and work to build alliances with key community leaders, elected officials and planning/zoning administrators. This is an important time for the development team members to work in concert with one another to make sure that design and engineering issues are addressed while steps are taken to secure public support for zoning, site plan and tax relief approvals.

Given the stigma that is attached to affordable housing proposals in some communities, developers need to spend a considerable amount of time educating and persuading community residents and elected officials about the merits of the proposed development to overcome “NIMBYism’’, or Not In My Back Yard-ism.

As developers work with the community to secure the necessary approvals, they submit applications for financing with lenders and investors. Project financing generally has three categories: 1. Predevelopment financing. Predevelopment financing supports items such as: market study, earnest money deposit for property acquisition, application fees, environmental review(s), preliminary designs, etc. It is the riskiest financing since there is no guarantee the application will be successful or the study results will be favorable.

2. Construction financing. This carries moderate to high risk and supports items such as: acquisition, “hard” construction costs, “soft” costs and possible funding of reserves (if required during construction by lenders or investors). This financing is obtained usually after significant approvals like zoning changes, or other soft funds have been awarded.

3. Permanent financing. This generally has the least amount of risk; but the source and terms need to be “locked-in” prior to closing. With housing tax credit developments, many funding sources actually do “double duty” because they provide both construction and permanent financing.

The basic approval steps followed by organizations that pro20

vide financing include intake/application, underwriting, commitment, due diligence, closing and disbursement.

During the initial intake and application phase, developers must familiarize themselves with the submission requirements, timing issues, terms and conditions for each funding source. The developer assembles a checklist of submission requirements for each funding source and manages the work of the development team members to submit the necessary documents.

When using tax credits as part of the financing structure, it is critical to have the proper ownership structures in place as debt and equity sources are arranged and secured. This ensures that funds can be tracked through the appropriate partnership accounts for tax purposes. Lenders and investors generally require the following information at initial intake/application: • Information about the proposed development • Development Pro Forma (proposed sources and uses of funds) • Operating Pro Forma (anticipated rents, income, expenses and payments toward reserves and debt • Development team qualifications including financial statements from the developer.

• Evidence of site control and community support • Phase I Environmental Site Assessment (& Phase 2 if necessary)* • Market Study (demonstrating demand for the proposed development, identification and description of existing supply, and absorption estimates)* • Supportive Service plans (for residents with special needs).

• Part 1 and Part 2 approval from the National Park Service (only if the project plans to access Historic Tax Credits) *Items such as market studies and environmental assessments are time sensitive - so these may need to be updated if they were completed more than 6 months prior to closing.

Underwriters for the lenders and investors review the items submitted and test the assumptions. They identify the possible risks that could lead to financial loss. They work with the developer to mitigate risks and they often request additional information from the developer before making a final determination about providing funds. When each funding source is approved, a preliminary financing commitment is signed and the developer receives a checklist showing the items required for final closing and disbursement. For construction and permanent financing, the approvals are conditioned upon all other funding being committed before closing.

GREAT LAKES CAPITAL FUND

Due Diligence Requirements During the approval stage of the development process, it’s critical for developers to have excellent communication with and among the team members. As the architect and general contractor negotiate design modifications requested by local building inspectors, the equity investor and lender need to determine the impact these changes will have on the financial underwriting of the project.

The developer is ultimately responsible for orchestrating the efforts of the team as the project makes its way through the approval process maze.

A. Organizational Documents Existing Partnership; General Partner(s); Parent/Affiliate of General Partner(s); Withdrawing Partner; Developer; Corporate Guarantor(s)

o Project Ownership Organizational Structure/Chart o Existing Agreement of Limited Partnership [Operating Agreement]

o ALTA Survey o Plans and Specifications o Building Permit(s) o Availability of Utilities Letters o Site Plan Drawing and Approval

and all amendments

o. Certified copy of Certificate of Limited Partnership [Articles of Organization] and all amendments*

o. Certificate of Non-Cancellation [Status]* o Employer Identification Number(s) (EIN) from the IRS o Certified copy of Articles of Incorporation [Articles of Organization]*

o Certified copy of Bylaws [Operating Agreement] o Corporate Resolutions o Authorization to become GP o Authorization to execute syndication documents o Authorization to enter into all loan and grant agreements o Designate signatory to sign documents o Incumbency Certificate as to Officers [Members], continuing force and effect of articles, bylaws (include number of pages) and resolutions

o Certificate of Good Standing [Status]* o General Partner’s Disclosure Statement o Audited Financial Statements of General Partner, Developer and Guarantor(s) * These items are required to be certified within 30 day of closing.

B. Loan Documents o Pre-Development Loan o Construction Loan o Permanent Loan o Subordinate Loan(s), if any C. Construction Documents o Construction Contract o General Contractor Disclosure Statement o Project Cost Summary / Trade Payment Breakdown o Building Construction Delivery and Lease up Schedules o Draw Schedule including all soft costs o Architect Disclosure Statement o Architect Agreement

D. Title Documents o Contract to Purchase, if any o Deed o Applicable Easements o Owner’s Title Commitment/Policy o Copies of all encumbrances and exceptions noted in title/policy o Settlement Statement o UCC Tax Lien and Litigation Searches E. Property Documents o Phase I Environmental Report and any other existing reports o Environmental Agreement(s), if any o Radon Results o Soils Report o Management Agent Disclosure Statement o Marketing Plan o Insurance Certificates o Appraisal o Market Study o Tax Abatement (PILOT) o Zoning Letter & Ordinance o Rehabilitation Requirements (if acquisition) o Rental Assistance Agreement o Supportive Services Agreement(s) F. Business Transaction Documents o Financial Projections for Project o Evidence of Low Income Housing Tax Credit o Historic Tax Credit Documents (if applicable) PLEASE NOTE: This Preliminary list is not a complete checklist of all document requirements since document requirements will vary with project and/or loan type.

Upon execution of a commitment letter and/or receipt of the tax credit application with all exhibits, a comprehensive due diligence checklist will be provided.

CONSTRUCTION PROCESS

the construction phase

By Ed Bobinchak and Conrad Schewe As construction is typically the largest cost in an affordable housing project, selection of the general contractor is one of the most critical decisions made while assembling the project team.

The best way to ensure the contractor is up to the task is to choose a contractor who is experienced in constructing the product type that is being developed. A contractor experienced at rehabilitation of vacant historic structures may not be qualified to undertake a new construction project, and vice versa. Start by interviewing other developers who have been successful with similar projects.

Take their recommendations and create a list of two to four qualified contractors. Then use other development team members to interview those general contractors to determine who is the most likely to work smoothly with the other members of the team.

During the interview process, ask questions about the contractor’s financial strength: • Who are his or her suppliers?

• Does the contractor have lines of credit or cash on hand that will support 30 to 45 days between delivery and payment?

• Can the contractor secure a “Payment and Performance Bond” of sufficient size for the proposed project?

• Does the contractor have more than one subcontractor in each of the major trade areas?

• Are the subs also able to wait on payment for up to 30 days?

Part of the interview should also focus on capacity: • How much of the proposed work will be done by the contractor’s own crews and how much will be done by subcontractors?

• How long of a history does the general contractor have with

22

major subs?

• Even if virtually all of the work will be done by the subcontractors, who will be the on-site superintendent for the general contractor? How many years of experience does the on-site superintendent have with this type of building?

• Do the Project Manager and other office-based staff have experience managing similar projects with similar sources of financing?

• How many other contracts will the general contractor be managing at the same time?

• Keep in mind that even the largest and most well-funded general contractors can get into trouble on jobs where their office and on-site staff are learning “on the job” or when working with subcontractors for the first time.

Lastly, make sure the contractor is experienced in managing the documentation side of the project by asking: • What is your record of completing the contractors cost certification within 30-45 days of completion of construction?

• What is your experience with Davis Bacon requirements, if this applies for the proposed project? (Davis Bacon wage rates are not required for LIHTC alone, but many Federal sources of funds require Davis Bacon wage rates and record-keeping).

Also ask the contractors about their experience building in the target community. Building inspectors and the way that they interpret and enforce building codes can vary from community to community. Even the most experienced contractors can get into trouble if they try to “re-train” the local building officials to see and do things the contractor’s way. A contractor who has a cooperative relationship with the local building officials will usually finish ahead of a contractor who argues with the building officials on every issue—even if the contractor wins every argument.

Always be aware that contractor’s and owner’s interests and motivations are not necessarily the same. The owner needs to be very hands on—visit the site often, make sure things are being ordered on time. In short, the contractor needs to be carefully managed.

Once selected, have the contractor work with the architect and design team to begin the process of creating the project budget.

Typically, a project has advanced the design documents to the “schematic” stage of completion for pricing purposes prior to the submission of a LIHTC application to the housing finance agency.

The contractor should bid these plans out to qualified subcontractors and establish the initial project budget. In many cases it GREAT LAKES CAPITAL FUND

will be necessary to perform some “value engineering” to modify the plans or select different materials or equipment to get the project within budget. If done properly, value engineering does not mean that the contractor simply substituted cheaper materials, but made suggestions for alternate materials or methods that met the project specifications while also lowering the overall cost.

At this point, the general contractor prepares a Trade Payment Breakdown (TPB) which details a price for every major trade item and also includes prices for the contractor’s overhead, profit, general conditions, permits, bonding and insurance. The contractor also provides a building schedule which details not only when construction will be started and completed, but also when each building will be ready for occupancy. It is important to communicate to the contractor that the flow of the LIHTC generated by the project is tied to the completion and lease up of each unit. If the project is placed in service or leased up later than agreed to by the developer and the investor, then there are likely adjusters (penalties) due from the developer to the investor since the actual LIHTC generated will be less in the first year than projected.

It is also the developer’s job to make sure that the general contractor and the subs do not need to wait for more than 30 days for

payment. Make sure that a construction loan or line of credit is in place that is large enough to keep the subcontractors “on the job” continuously. If subcontractors fear that payment deadlines may be missed, they may start looking for other work. If a payment deadline is missed and the subs do start another job, the entire construction schedule will be thrown off before the workers come back to the job.

The general contractor should hold regular “draw meetings” at the same time and day each month. The architect, the general contractor, and inspectors from lenders all need to get together to review the work that is finished. The general contractor should have already prepared a draw (typically American Institute of Architects AIA G702 and G703 forms) showing all of the items on the Trade Payment Breakdown, percentage of completion of each item and the amount due at this draw. The general contractor should also have conditional waivers of lien signed by each subcontractor being paid from this draw, and unconditional waivers from all subcontractors who were paid from the previous draw.

The architect and inspectors should sign-off on these documents prior to payment on that draw request.

Another important document that lenders will want to see at

QUALITY·SERVICE·ETHICS

McCartney & Company, P.C. Certified Public Accountants Celebrating Over 50 Years of Excellence

1961—2011

Providing a full range of services to a diverse clientele. Committed to exceeding our clients’ expectations.

Specializing in affordable housing .

2121 University Park Drive, Suite 150 Okemos, Michigan 48864 Telephone (517) 347-5000 Fax (517) 347-5007 www.mcco-cpa.com

AVENUES TO AFFORDABILITY

23

CONSTRUCTION PROCESS

each draw is a “date-down title endorsement.” This is a supplement to the original title-insurance policy, showing that the title company recognizes the value added to the property due to the construction. The Title Company also makes sure that no liens have been placed against the property since the last disbursement of funds.

If all goes well, construction will proceed according to the general contractor’s schedule and payments will match the amount of construction that is completed. However; when problems occur, any changes in work should be documented by written change orders and approved by the architect, the lender and the developer. Therefore, try to budget at least 5% as a contingency for new construction and 10% as a contingency for rehabilitation projects. Hopefully, these contingencies won’t need to be touched and toward the end of construction, they can be re-programmed for “enhancements” (improvements beyond the original specifications).

However; if the contingency is too small (or non-existent), remember that the only way extra costs can be covered is by reducing the developer fee.

If things do not go smoothly, the project may be plagued with construction liens or subcontractors who hold the permit on a crucial building component but

24

who refuse to complete the work without payment for questionable work or approval of disputed change orders. As with all construction disputes, if these arguments wind up in court, in front of an arbitrator or at a bonding company, everyone loses.

The time and expense of settling disputes through such channels seldom make up for the delay in construction and occupancy.

The developer should always ask the general contractor to disburse project funds through a title company. The developer places the appropriate amount of cash in the title company’s account and the title company is then responsible for collecting waivers of lien and disbursing funds directly to the subcontractors. In the case of disputed disbursements, the title company typically will hold 1 ½ times the disputed amount for future settlement of the conflict while providing the developer a clean title commitment update.

Remember that most construction contracts call for final payment to be made “upon substantial completion.” In general, substantial completion is regarded as the date when the project receives its “Certificate of Occupancy,” not when all work is complete. In most cases even after a development receives a “C of O” there is a detailed punch list of work to be

completed. This list should be compiled on a room-by-room basis (usually by the architect in consultation with the owner and the management company) and delivered to the contractor in writing. Most contracts provide for a 10% “retainage” to be held back from each disbursement to cover such final items. If the contract does not provide for such a retainage, then be sure to withhold sufficient funds from the final payment to cover the cost of bringing a new contractor to complete the work.

Even when construction is completed and certificates of occupancy are received for all units, the job of the general contractor is not complete. It is essential that the contractor turns documentation over to his or her accountant as soon as possible so that an accurate “Cost Certification” can be delivered to the developer. The developer must have the contractor’s cost certification before he or she can have the project cost certification prepared, which determines the final eligible basis and, therefore, the amount of tax credits that will be generated by the project.

Glossary of Construction Terms General Contractor: Licensed Builder who holds the contract with the Developer. He or she pulls permits, is responsible for building to architects specifications, provides 100% payment and performance bond or letter of credit (percentage to be agreed to by lender and/or investor), and guarantees all work for 18 months. Must carry liability insurance and worker’s compensation insurance even if all work is done by subcontractors.

Conditional Waiver of Lien: Agreement by contractors that WHEN they are paid a specific amount, they will have no right to place a lien against the property.

Construction Loan: Loan available to cover construction costs and is repaid out of equity and permanent loan proceeds. Typically, this is not a revolving loan but is drawn on a monthly basis.

Cost Certification: Accountant’s certification that costs submitted for a project are accurate, and list which items can be included in the project’s eligible basis. This certification is required from both the General Contractor and the Developer in order to receive a final determination of Low Income Housing Tax Credits.

Date-Down Title Endorsement: Supplemental endorsement provided by a Title Company, show-

GREAT LAKES CAPITAL FUND

ing that there are no liens against the property and recognizing the increased value due to construction.

Draw Meetings: Monthly meetings where General Contractor gives developer a request for a payment for all work that has been completed since the last draw. Request must be approved by architect and lender prior to payment.

Equity Syndicator: Such as Great Lakes Capital Fund.

Final Inspection: Inspection by a building inspector prior to issuance of a Certificate of Occupancy.

Licensed Builder: Has a current Builder’s License from the State. May also need to be licensed within a particular municipality or jurisdiction.

Line of Credit: Approval of a “revolving loan” up to a maximum amount. This loan can be drawn down and repaid repeatedly for a period of time or until conversion to a permanent loan. This is useful when other financing sources may take more than 30 days to fund after work completion.

Liquidated Damages: Clause in construction contract that assesses monetary penalty for late completion or delivery of the building for its intended use.

Trade Contractors: Licensed Plumber, Electrician, or Heating and Air Conditioning contractor.

Responsible for pulling permits for their area of specialty and for having work inspected at rough and final.

Payment and Performance Bond: Commitment Issued by a Bonding Company that if the General Contractors fails to complete the contract, the Bonding Company will step into finish the work as specified.

Permanent Loan: Long-term loan (18 years or longer) to be paid down on a monthly basis out of operating income. Typically requires 90 days “break-even” operations to draw down loan.

Retainage: Percentage of each draw request that is held by the developer until project completion. Typically, this is 10% at the beginning of construction but may be reduced as the project is completed (example - 5% after 50% or 75% completion).

Rough Inspection: Inspection by a state or local building official for structural and mechanical work before it is covered by drywall or insulation.

Subcontractor: Independent contractors hired

by General Contractor. These “subs” generally perform one item on the Trade Payment Breakdown (TPB) General Contractor’s itemized cost, showing cost of each major building element. Includes subcontractors cost for insurance, permits, tap fees and bond.

Unconditional Waiver of Lien: Agreement by contractors that they have been paid and have no right to place lien against the property.

Value Engineering: Process by which General Contractor, Subcontractors, Architect, and Developer work together to find the most economical approach to building what is desired and required.

AVENUES TO AFFORDABILITY

Strength in numbers.

3,000 clients | 45 states | 140 employees thanks to our clients, doz is celebrating

www.doz.net

25 years of service.

866.848.5700

Investing in Neighborhoods & People.

Herkimer Apartments, Grand Rapids, Michigan will provide permanent supportive housing for chronically homeless and disabled individuals. Founders Bank & Trust partnered with Heartside Nonprofit Housing Corp. to receive an FHLBI AHP grant of $369,258.

Visit www.fhlbi.com to learn more about housing and community development programs.

25

MARKETING PLAN

MARKETING YOUR DEVELOPMENT

by ELAINE M. SIMPSON, OCCUPANCY SOLUTIONS, LLC Marketing goals provide the direction of your marketing campaign for your community. Without goals, it is impossible to know what needs to be done. Goals need to be not only long-term but short term, specific, realistic and provide aspirations for what you want to achieve through your marketing efforts. Once the goals are established, you need to create specific steps, objectives and strategies to help reach your goals.

First, what is Marketing? Many people confuse marketing with the leasing because both involve the act of attracting customers so that they rent your apartments. Leasing occurs when the customer rents at your community. Marketing, however, is the art of grabbing the potential renter’s attention, which will, hopefully lead to a move in. The goal of marketing is to leave an impression on the consumers, making your community more recognizable and memorable to them than other properties in the market. The key to marketing is providing knowledge about your apartments, management team and lifestyle you provide to the prospective resident.

Basic Elements of Your Marketing Plan • Prepare marketing budget • Identify your target market • Identify unique aspects of apartments and community • Compare your community with competition in the market • Communicate your message about your community • Choose methods of distribution • Track results Before creating your marketing plan, you must refer to your budget or create a budget specific to this plan. Most communities do not have unlimited financial resources and must be careful on how the time and money is spent. Start with an overall budget amount and then break it down into line items identifying the

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various types of marketing. This means that you have to decide which method of marketing will bring you the most attention from prospective residents. Your marketing budget has to include the cost for each type of marketing, advertising or campaign including the frequency which will drive the total expense for that line item.

Your Target Market is not solely based on your income requirements. Since marketing is based on what will bring the prospect to your community, it is only natural to consider the prospects’ needs and wants. Remember, your prospects are your target audience, and you must understand and determine how your community addresses their needs and desires directly before you can begin creating your marketing plan. By identifying what you have to offer and who finds that valuable, you determine your target market.

Points to consider • What does the prospect want?

• What does the prospect need?

• What is something that will benefit them?

• What makes the prospect want to rent from you?

• Determine who your target audience is and why they would rent from you.

Before you can begin to market your apartment community, you must define what your apartment community offers and how your residents will benefit from living at your community. Start with defining what you offer and what that entails. Outline specific characteristics along with the pros and cons of those characteristics. Outline how it can benefit the prospect and what your community and team can provide the prospect once they become a resident. Identify unique aspects of apartments and community that are desirable and make you stand out from your competition.

GREAT LAKES CAPITAL FUND

It is impossible to please everyone, but some marketers insist on trying. There is a common fear of excluding potential residents without broad marketing campaigns. In reality, however, targeted marketing campaigns are more effective at drawing in your prospective resident. Understanding specific customers and meeting their needs will increase your community’s appeal and fill vacants faster than marketing that is aimed at everyone.

Tips to remember • Know all aspects of your community including the apartment features and benefits, the community’s amenities, location advantages and services that you or a strategic partner agency provides to enhance the lifestyle of your residents.

• What does your community offer the prospect that is appealing enough to convert the prospect into a resident?

• Define your community’s qualities and benefits.

• Identify what makes your community stand out from other communities in the market.

• Compare your community with your competition When communicating with prospects through marketing efforts, the message shouldn’t be all about the rent or about the rental program associated with your community; it should be about the value and service you offer. Only 1/3 of customers completely base their decisions on the rate, even in the affordable and low income markets. Most prospects are looking for value. In order to sell your value to customers, you need to understand what it is they value. Once you have established the value of your community, you need to follow a few basic guidelines.

• Link your community’s strengths with value for prospects and residents.

• Have confidence in your community and the positive impact you make on your residents’ lives.

• Sell the lifestyle of living at your community.

• Offer extraordinary service.

Market funnels are traditional tools used by marketers. The marketing funnel contains the stages that a prospect takes on the way to leasing an apartment at your community. The funnel may vary slightly, but there are basic stages in the AIDA funnel that remain the same. These stages are awareness, interest, desire, and action.

Awareness The first stage of the marketing funnel is Awareness. This is the stage where the prospect is first exposed to your community.

There are many different ways that a prospect can become aware of your community. For example, word of mouth creates aware-

AVENUES TO AFFORDABILITY

ness. Other methods include discovery through communications and successful marketing. Awareness can lead to the next stage of the funnel, which is why you must do everything that you can to ensure that awareness is always a positive experience. Pleasant leasing experiences will create positive word of mouth, and effective marketing will generate positive attention.

Interest The second stage of the marketing funnel is interest. When awareness is positive, interest will develop. This occurs when the prospect actively shows interest in renting at your community.

There are specific strategies that will help develop interest and move the prospect along to the next stage of the funnel. Specifically, you need a value proposition for the product.

Create a value proposition • Advertise benefits • Show advantages over competition • Show how living at your community will positively impact the prospect’s life When you successfully engage interest, prospects will be able to reach the stage of desire.

Desire Once a prospect has developed interest in your community, desire is not far behind. At this point, prospects aspire to rent at your community. The key to establishing desire is convincing prospects that your community will meet their needs. During the telephone conversation and leasing visit, demonstrate to the prospect how your community will fit their needs. Once prospects experience desire, it is easier to convince them to take action.

Action Action occurs when the prospect completes the application and/or puts a deposit down to reserve a specific apartment. Prospects must be led to take action by the marketer, and there are different methods to improve the odds of customer action. These procedures are known as calls to action. Calls to action motivate the prospect to act by contacting the apartment community. Examples include: “Call today to reserve your apartment” or “Contact us for more information”, “Come see for yourself”. Not including calls to action is the chief mistake that marketers make when using a marketing funnel.

There are many marketing avenues to consider when creating your outreach plan: Local Newspaper, Outreach, Resident

27

MARKETING PLAN

Affordable Housing Specialists Development • Management • Investment • Consulting 3333 Founders Road, Ste 120 | Indianapolis, IN 46268 | www.crestlinecommunities.com James Wilson | 317.257.8922 ext. 11 | jmwilson@crestlinecommunities.com

Construction & Renovation for Residential, Commercial, Industrial & Multifamily • Affordable Housing • Commercial • Residential • Disaster Restoration

“Your Contractor for Life”

31313 Northwestern Highway, Suite 206 Farmington Hills, MI 48334

Referrals, Television Ads, Radio Spots, Sign Spinners, Rental Magazines, Flyers etc. Determining what type of marketing will work best for your community will depend on your target market. But keep in mind that solid internet presence and using social media are essential to marketing success. Many marketers believe that our prospects and residents who live at Affordable and Low Income Communities do not use the internet to search for housing and therefore don’t put much focus on having an internet presence as part of their marketing plan. It is believed that basically a digital divide exists in American society between higher-income and lowerincome households because lower income households don’t have computers in their home and have limited access to the internet but a recent report from Pew Internet and American Life Project (2012) found that households with less than $30,000 annual income: • 41% have Broadband at home • 62% Use the Internet • 86% Own a cellphone • 43% Own a smart phone Marketing success should not simply be assumed. True marketing success will be apparent in the metrics. Many marketers, however, do not bother to track metrics.

This mistake prevents marketers from adjusting the marketing plan that would increase occupancy. The metrics that need to be monitored will vary with the media and platforms used. There are, however, basic metrics that typically need to be monitored.

• Lead source • Leads per month • Move Ins per lead source • Conversion rate of lead to applicant and lead to move in • Denials and cancellations per source (may determine that source is not effective) • Cost per lead • Cost per lease (most important in determining if source is truly effective)

p 248-855-3500 • f 248-855-2420

www.gfisherconst.com

28

GREAT LAKES CAPITAL FUND

COMPLIANCE

RECERTIFICATION ISSUES TO MONITOR

by DON KLUMP, COMPLIANCE SPECIALIST, GREAT LAKES CAPITAL FUND

As an owner of a Low Income Housing Tax Credit property, there are many issues that you must monitor on a consistent basis. During the annual recertification, you will find updated information regarding the household composition, household income, student status and any changes in subsidy if applicable. On a property-wide basis, you should keep track of any unit transfers, next available unit rule, unit vacancy rule, applicable fraction, and the minimum set-aside. Let’s examine each issue individually: Recertification A recertification of a resident must be completed by the owner on an annual basis. If the resident is not receiving assistance, the recertification must be implemented as of the first day of the month that the resident moved into the home.

For example, if the move-in date is January 15, 2014, then the recertification date should be January 1, 2015.

Student Status A household that originally qualified may be disqualified as a Tax Credit unit if it fails to qualify because of a change in student status. It is imperative that management inform the resident at move in of the importance of reporting and change in their student status. If you find an individual is now a full time student and does not meet any of the exemptions in a 100% tax credit project the lease cannot be renewed or tax 30

credits may be recaptured. For a mixedincome project, if the lease is renewed, the unit is no longer a Tax Credit Unit.

Number of Household Members Any change in the number of members in a household during a lease term should be closely monitored. If a Tax Credit household wishes to add an adult family member, the applicant must go through the entire qualifying process. The applicant’s income must be added to the existing household income, and if the applicant’s income causes the household to exceed 140% of the current maximum income, then the next available unit rule goes into effect. If the Tax Credit household subtracts a family member, be sure to check the new household income against the lower income threshold for violation of the 140% rule.

Unit Transfers If a Tax Credit household wants to transfer to a Tax Credit unit in another building, the household must be treated like a new move in. For 100% Tax Credit projects, the transfer request must be denied if the household’s income exceeds the current maximum qualifying income. For Mixed Income Projects this unit could be absorbed as a market unit.

If a Tax Credit household wants to transfer to a different unit within the same building, the current resident may transfer even if the household’s income exceeds the

PRE-WATCHLIST RED FLAGS Property managers and limited partner investors work together to monitor the operations of each development. The two primary functions include compliance and financial operations. If either one of these aren’t attended to, a development will likely end up on a “watch list” (translation: more scrutiny and reporting requirements). Here are some items that Investment Managers and Compliance Specialists monitor because they are “red flags” for possible trouble ahead.

• Construction and/or leasing delays • Decrease in occupancy • Low rent collections ratio • Operating expenses above/below* projects • Decrease in cash flow • Aged accounts payable • High resident turnover • High incidence of noncompliance/8823’s • Deferred maintenance*

current qualifying income. They do not need to be recertified at this time. (Be sure to monitor the effect on the applicable fraction. If the unit being moved into is smaller than the unit being moved out of, an applicable fraction violation could occur.)

Next Available Unit Rule Under the Next Available Unit Rule, all households must initially qualify under GREAT LAKES CAPITAL FUND

the selected 20/50 or 40/60 test. If one qualified household’s income increases and exceeds 140% of the current qualifying amount, it still qualifies as a Tax Credit unit as long as the current and subsequent available units of comparable or smaller size are rented to a Tax Credit qualified household in that building. This applies until the percentage of low income units or square footage in the building (excluding the over-income units) is equal to the required Applicable Fraction. Keep in mind that the Next Available Unit Rule is applied on a per building basis, and the units must be rent restricted.

Unit Vacancy Rule A vacant unit is a unit that was formerly occupied by low-income individuals. It may continue to be treated as a Tax Credit unit for purposed of the set-aside requirements (as well as for determining qualified basis), provided reasonable attempts are made to rent the unit and no other units of comparable or smaller size in the project are rented to non-qualifying individuals.

Applicable Fraction The qualified basis of any qualified low income building for any taxable year is an amount equal to the applicable fraction of the eligible basis of each building. Thus, the applicable fraction is the smaller of the unit fraction or the floor space fraction.

The applicable fraction is applied on a per building basis. Violations of the applicable fraction result in qualified basis violation and will affect the Owners ability to claim credits. The qualified basis violation is one of the most common violations in the Tax Credit Program, and qualified basis violations in one building cannot be corrected by exceeding the applicable fraction in another building.

Minimum Set-aside The minimum set-aside was selected by the owners as either 20/50 or 40/60.

Under the 20/50 program, the project meets the requirements that 20% or more AVENUES TO AFFORDABILITY

of the residential units in the project are both rent restricted and occupied by individuals whose income is 50% or less of area median gross income. The same rationale applies to the 40/60 program.

The minimum set-aside selection is irrevocable for the entire compliance period. It is always calculated on a unit basis, and never on a square footage basis.

The minimum set-aside is monitored on a project basis and not on a building basis.

Failure to maintain the minimum set-aside requirement in any year after the first year of the credit period results in recapture of previously claimed credit, and no future credit can be claimed. However, an owner who can again satisfy the minimum setaside requirement may resume claiming credit after that date.

FOR questions, contact any Great Lakes Capital

List of Reports Reviewed During Orientation Meeting • Management Agent’s Monthly Financial Report • Weekly Marketing Reports during lease-up • Construction Field Reports during construction • Quarterly Financial Statements • Annual Operating Budget • Annual Estimates of Profit and Losses and Tax Credits • Annual Audited Financial Statements • Annual Federal and State Tax Returns

Fund employee who will be happy to assist you!

Count on Us. Count on More.

For most people, it’s just a briefcase. For our clients, it’s a symbol of expertise, courage, and unwavering service. For Clark Hill attorneys and other professionals, it represents a toolkit of integrated resources, networks, and talented teams—all centered on anticipating and responding to your ever-changing business needs and challenges.

With Clark Hill at your side, you can be assured that we will be there, always, when and where you need us, giving you the competitive edge to stay ahead and win in the marketplace.

800.949.3124 | clarkhill.com © 2013 Clark Hill PLC

31

EVENTS & HAPPENINGS

Fund 28 Closes – Delivering $109 Million of Capital Across Midwest Great Lakes Capital Fund (GLCF) is pleased to announce the closing of its most recent fund, Great Lakes Capital Fund for Housing Limited Partnership XXVIII, or Fund 28, with $109 million raised to support affordable housing across the Midwest.

Seven investors contributed to Fund 28, comprised of 5 banks and 2 insurance companies. One investor is a first time Housing Tax Credit investor and contributed $25 million to the Fund. The funds will support seventeen community development projects in Michigan, Illinois, Indiana and Wisconsin. The community development projects will add 1,040 units of affordable housing to the GLCF portfolio, which now totals over 31,000 housing units.

Fund 28 includes ten multifamily properties, two senior living properties, two properties serving those with special needs, two projects that combine multifamily and senior living, and one project that combines multifamily and special needs.

LEFT: Creston Plaza is the proposed comprehensive redevelopment of an existing 100 unit affordable development located at 1014 Clancy Avenue, Grand Rapids, Michigan.

BELOW: Homes for Heroes is the proposed new construction of 44 one-bedroom apartments of permanent, supportive housing targeting lowincome veterans in Gary, Indiana.

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First Michigan-Based Privately Operated Development Finance Organization Launches Great Lakes Capital Fund is pleased to announce that it has launched a new real estate financing tool, Develop Michigan (DMI), for Michigan-based projects. Develop Michigan will play a dynamic role in financing commercial real estate projects, thus augmenting current efforts to transform and rehabilitate Michigan communities.

Develop Michigan is an innovative nonprofit development finance organization formed through a partnership between the Michigan Strategic Fund, Michigan Economic Development Corporation, Great Lakes Capital Fund and the Development Finance Group. The core financing activities of DMI will include mezzanine capital (subordinated debt with preferred equity features), senior debt and gap financing in conjunction with foundation, local, state or federal below-market financing sources. jack brummett Honored for Affordable Housing Achievements and Contributions At the annual statewide conference, IHCDA and IACED, along with their award sponsors and colleagues, recognize organizations and individuals for their outstanding projects and services.

Great Lakes Capital Fund was proud to be represented in two of the five award categories given at the conference. Jack Brummett, Senior Vice President with Great Lakes Capital Fund received the Michael Carroll Community Economic Development Leadership Award.

YOUnity Village, in Terre Haute was the esteemed recipient of the Lt. Governor’s Award for Excellence in Affordable Housing and Community Development – Urban. The team consisting of Mental Health Association of Vigo County, Great Lakes Capital Fund, the Hamilton Center, Halstead Architects and the Whitsett Group collaborated to create an innovative 30 unit development that provides housing and services to those individuals experiencing chronic homelessness in the Terre Haute area.

GREAT LAKES CAPITAL FUND

Longtime MSHDA Leader, Gary Heidel, Accepts New Role Gary Heidel, Director of Policy & Market Research at the Michigan State Housing and Development Authority (MSDHA), has been appointed Chief Placemaking Officer for MSHDA. Gary will be responsible for overseeing the Community Development Division, the Downtown and Community Services Division, the State Historic Preservation Office, Urban Revitalization, and Cultural Economic Development. Gary has been at MSHDA since 1986 and brings a wealth of experience to this new position. GLCF wishes Gary continued success as an advocate and leader of community and economic development.

GLCF Annual Company Picnic

GLCF Delivers FREE Training and Educational Seminars

Great Lakes Capital Fund proudly offered three educational training seminars, “Connecting the Dots with Customer Service,” aiming to enhance the management and maintenance practices in our industry. The free seminars took place in Fort Wayne, Indiana; Mt. Pleasant, Michigan and Madison, Wisconsin and featured three industry experts as speakers. Many thanks to our speakers Donna Hickey, Mark Cukro and Elaine Simpson and participants (nearly 200 housing professionals attended!) who made these educational seminars series a smashing success!

PLEASE MARK YOUR CALENDAR for GLCF’s 2014 Spring Educational Conference, which will offer new and returning participants in-depth information and best practices on how to succeed in the affordable housing industry. The spring conference is open to General Partners, Attorneys, Accountants, Housing Authority Contacts, Property Management Executives and Site Personnel and is scheduled for May 20-22, 2014 in South Bend, Indiana.

This year over 50 GLCF employees and their families traveled to Hawk Island Park in Lansing, Michigan for the Annual Company Picnic.

Games were organized for both young and old to enjoy, and the park’s MANY amenities (including fishing, horseshoes, boat rentals and more) provided a fun-filled day for all!

Seminar Presenters (L to R): Donna Hickey, Mark Cukro, Elaine Simpson, GLCF Staff Members Josh White and Mary Welch.

AVENUES TO AFFORDABILITY

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ADVERTISER INDEX Baker Tilly Virchow Krause, LLP................................................ 2

KMG Prestige...........................................................................16

Chesapeake Community Advisors, Inc.....................................24

Loomis, Ewert, Parsley, Davis & Gotting, P.C............................11

Clark Hill.................................................................................31

Love Funding...........................................................................10

Community Economic Development Association of Michigan.. 16

McCartney & Company, P.C.....................................................23

Community Research Services.................................................... 9

Medallion Management, Inc.....................................................16

Crestline Communities.............................................................28

MHT Housing, Inc...................................................................35

Dauby O’Conner & Zaleski......................................................25

Michigan State Housing Development Authority......................11

Douglas Company....................................................................34

Milner & Caringella, Inc............................................................. 7

Economides Incorporated Architects........................................23

O’Brien Construction Company, Inc.........................................29

FHLB Indianapolis...................................................................25

Pillar Capital Finance...............................................................36

G. Fisher Construction.............................................................28

Plante Moran............................................................................13

Ginosko Development Company................................................ 4

Vogt Santer Insights..................................................................15

Keller Development....................................................................7

Wolverine Building Group........................................................15

Keystone Construction Corp....................................................16

We build more than just affordable housing... ...We build award-winning communities!

Emerald Springs Development, winner of Affordable Housing Finance Magazine’s 2012 Readers’ Choice Awards

Single & Multi-Family

■

Senior Communities

■

Historic Rehabilitation

1716 Perrysburg Holland Rd | Holland, OH 43528 | Phone: 419.865.8600 | Fax: 419.866.8835 | www.douglascompany.com

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GREAT LAKES CAPITAL FUND

Promises Made, Promises Kept.

Syndicators and lenders will attest to our rock solid reputation.

For more information, contact Krystal Covington 248.833.0558

Great Lakes Capital Fund 1118 S. Washington Avenue Lansing, MI 48910 www.capfund.net

FHA HUD Auburn Hills, MI

FHA HUD Waterford, MI

FANNIE MAE DUS Indianapolis, IN

FHA HUD Jackson, MI

$7,996,800

$20,127,800

$24,200,000

$5,023,300

FEBRUARY 2013 223(f)

FEBRUARY 2013 223(a)(7)

MAY 2013

APRIL 2013 223(a)(7)

FHA HUD Sterling Heights, MI

FANNIE MAE DUS Baton Rouge, LA

FHA HUD Savannah , GA

FHA HUD Southfield, MI

$11,018,700

$10,730,000

$1,120,500

$4,274,200

APRIL 2013 223(a)(7)

MAY 2013

FEBRUARY 2013 223(a)(7)

MARCH 2013 223(a)(7)

FHA HUD • STANDARD DUS PILLARFINANCE.COM

MARK WIEDELMAN (248) 290-2200 ANAND GAJJAR (212) 651-0830