In close collaboration with the not-for-profit owners, HVPG undertakes the following responsibilities:
- Funding pre-development costs
- Creation of construction scope
- Obtain construction pricing
- Oversight of construction
- Create financial underwriting
- Negotiate with agencies, lenders and tax credit investors
- Hire and manage consultants (architect, engineers, expeditors, sustainability consultants, etc)
- Manage relationships with local, state, and federal agencies
- Determining what physical improvements should be made
- Determining what service enhancements should be made (if any)
- Construction & Project completion guarantee
- Lease-up guarantee
- Operating deficit guarantee
- Long-term LIHTC guarantee
We will discuss at length the mission of your organization and its priorities for the property, the onsite staff and the residents to ensure that our proposal and the project itself will meet the needs of the organization and the community.
We will request to review financials and to visit the site in order to present the Board with a curated proposal with accurate assumptions regarding the financing and scope of work required to achieve the project’s goals.
HVPG will work closely with the Board to finalize the partnership terms and to ensure that all parties are comfortable with their roles in the project moving forward and with the proposed timeline.
As the developer and in close collaboration with the not-for-profit organization, HVPG will: lead the selection of the development team, secure financing, finalize the scope of work and oversee tenant meetings to ensure that all stakeholders are prepared for upcoming renovations.
HVPG works hand in hand with management to create and execute a temporary tenant relocation plan in addition to directly overseeing all onsite construction throughout the entire renovation period.
HVPG remains involved post-construction as a partner and co-owner, offering asset management and support for the property management staff throughout stabilization and compliance.
HVPG (we) would help your organization refinance through either a FHA/HUD refinance or a 4% Low Income Housing Tax Credit/Tax Exempt Bond transaction. We would work with local and state agencies to maximize the financial support for the project, typically in the form of subsidies and grants.
This would benefit your organization in several ways. You would get a newly renovated property at no out-of-pocket expense to your organization. You would also have the opportunity for an upfront cash payment as well as increased long-term cash flows from operational efficiencies.
Aside from having the prerequisite expertise and experience, we set ourselves apart in our flexibility. We are comfortable playing different roles, depending upon your organization’s interest and needs. We can simply act as a Fee Developer guiding your organization through the complicated process. We can also act as a development partner, providing financial guarantees and covering all out of pocket expenses with the project.
We would be happy to walk you and your organization through the details of how the transaction would be structured. In short, your organization will be able to maintain a long-term ownership position and can keep control of the operations if it desires.
This is entirely negotiable. You let us know what you want us to do. We would usually provide financial guarantees, obtain financing, oversee the construction, and assist in all aspects of permanent loan conversion. Our long-term involvement depends on the final deal structure and the guarantees provided. We would expect you to provide us with all pertinent information about the property. We would also expect to work closely with you in determining together what improvements should be made to the property and what services can be enhanced/offered.
Our compensation depends entirely on the role that we would play. The more financial risk we take on, the more we would look to share in the economics of the transaction. We are flexible in what roles and responsibilities we would take. If the organization would like to retain ownership, we would provide development expertise, pre-development funding and construction-completion guarantees on a fee-for-service basis. In this case, we would act as a Fee Developer and not join in the ownership of the property. We would only receive payment out of developer fees which are paid by the rehabilitation budget – NOT by the organization. In a co-development scenario where we assume all or a portion of the construction-period financial guarantees, the organization could potentially receive the up-front payment, a portion of the developer fee and cash flow.
Is there a need to restructure the ownership of the building? If so, how does the organization maintain control of operations?
It depends on how we finance the rehab. If we use tax credits, then we’d have to restructure ownership during the tax credit compliance period. The organization would maintain ownership (along with tax credit investors) during this time and have opportunity to control operations. After compliance, the tax credit investors exit and the organization retains ownership. If we did an FHA/HUD refinancing, then the current ownership of the building will not change.
If there is a need to restructure to bring in investors, exactly how would this need be accommodated? What percent of ownership would we be able to maintain?
This is relevant if we pursue refinancing utilizing tax credits and tax-exempt bonds. This is something with which we have extensive experience and expertise. We would oversee the entire process including working with the investors. The question about ownership is a complicated one. During the tax credit compliance period the tax credit investors technically are involved in ownership. They exit after compliance. The long-term ownership of the property is not impacted by this financing structure. To the extent that you want us to help with long-term financial guarantees, we can. We would look for a fair compensation for that risk (usually in the form of a split of ownership), which is entirely negotiable.
In most instances, such a refinancing can provide the organization with additional capital to support its mission. Is this from the reduced interest expense, reductions in other operating expense?
The organization can benefit in different ways, including but not limited to a potential upfront payment, management fees, and increased long-term cash flows from operational efficiencies.
If the HDFC acts as fee owner only, the potential cash payment would be paid to the sponsor. This can be structured to achieve your goals.