Estimating Predevelopment Hydrology for Urbanized Areas in ...
Rural LISC seminar asset mgmt follow up · Life Stages of a Project Predevelopment Construction...
Transcript of Rural LISC seminar asset mgmt follow up · Life Stages of a Project Predevelopment Construction...
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Fundamentals of Asset Management
Rural LISC Seminar Follow up Session
August 28, 2017
Goals of this session
• Review online course
• Answer follow up questions
• Discuss asset management best practices
• Next steps for Rural LISC
Review
•What is “effective asset management”
• Active, Strategic and Long Term Approach
• How is asset management different than property management?
Module 1: Asset Management ofAffordable Housing
Key takeaways
• Defining asset management
• Double bottom line theory (or triple bottom line!)
• Distinguish between property and asset management responsibilities
Property vs. Asset Management
PROPERTY MANAGEMENT
• Marketing
• Screening/Occupancy
• Rent Collection
• Day to Day Operations
• Record Keeping
• Financial Reporting
• Maintenance
• Management Staff Supervision
ASSET MANAGEMENT
• Hiring/Firing Evaluating the Property Manager
• Strategic Planning and Goal Setting
• Refinancing Decisionmaking
• Management of Reserves
• Investor Communications
• Hiring Accountants, Lawyers
Life Stages of a Project Predevelopment Construction Lease Up Operations/Management Disposition/Exit
Market Analysis and
Marketing Plan
Establish Scope
of Work
Outreach and
Marketing
Budgeting Negotiate partner
exit (LIHTC
properties)
Financing Plan Manage
Construction
Screening Financial Management Restructure and
refinance debt
Community Outreach Quality Control Compliance and
Reporting
Occupancy Management Reposition
Funding Applications Rent Collection Rehab property
Capital Reserve
Planning
Maintenance and capital
repairs
Turnover
Compliance and reporting
Resident services and
community relations
Module 2: Performance Indicators
Operating indicators:
• Gross Potential Rent
• Vacancy Rate
• Rent Collection Rate
• Turnover Rate
• Vacant Unit Turnaround/Make Ready Time
Expense Measures
•Operating costs
• Benchmarking and PU/PY Operating Expenses
• Trending – comparing year over year; can use to project out expenses over time
Module 3: Finance – Debt and Cash Flow
Key takeaways
• Most projects are financed with hard debt and equity or soft debt
• Hard debt = ‘must pay debt’
• Soft debt = public resources that are equity like (Deferred payment, cash flow payments, etc. ie HOME funds. Structure varies based on local and state policies Comes with restrictions
• Equity = LIHTC or grant funding (some states provide HOME as grant funding)
Cash flow calculation
Calculating cash flow is one of the most critical technical aspects of asset management
Cash Flow Calculation
• Effective Gross Income
• Net Operating Income
• Debt Coverage Ratio
• Net Cash Flow
Cash Flow Distributions
How do Owners Get Cash Flow from their properties?
There are various ways owners/sponsors can receive revenues from properties, depending on financing structure, and state and local regulations and policy.
• LIHTC projects - defined in the Partnership Agreements• State and local requirements – set out in loan and grant agreements
• Percentage of net cash flow • Deferred developer fees• Asset management fees• Resident services fees
Next Steps: Implementing Best Practices
• Asset Management Responsibilities and Staffing
• Dashboards
• Deal books
• Capital planning
Essential Tasks
• Annual budgeting with property manager
• Annual goal setting
• Operating budget variance review (monthly)
• Performance standards review
• Monitoring cash flow and DCR; comparison with lender requirements; owner/sponsor distributions
• Overseeing property management
• Review annual audit and tax returns; corporate filings
• Capital planning
• Refinance/recapitalization planning
Developing Dashboards
Dashboards for tracking performance standards
Performance standards to track include
•Gross potential rent
• Vacancy loss
• Rent collection
• Turnover rate
• Vacant unit turnover/make ready time
•Maintenance measurements
• Expense performance standards: operating costs, trending, benchmarking
Deal Books
Important transaction details from the closing• Major terms and conditions of all financing and funding • Loan agreements, regulatory agreements, grant agreements• Affordability restrictions• Operating pro forma/projections• Sponsor’s financial rights – ie cash flow distribution definitions and calculations
• Rehabilitation scope of work • Warranties• Resale or disposition restrictions or rights
Periodic updates• Update pro forma and compare to projections• Capital needs assessment
Capital Planning/Capital Needs Assessments
• Capital Needs Assessments review the condition of major building systems and elements (ie exteriors, major building systems, cabinets and floors, plumbing fixtures, etc.) and estimates at what point in the future these elements are likely to require replacement, as well as estimating the cost of replacement
• Provides a year by year projection of expenditures against the resources available over the property's life
Energy Benchmarking and Tracking
Why benchmark and track?
Available tools
• Energy Star Portfolio Manager energy tracking tool (free)
•Wegowise
• EnergyScoreCard
•Greenprint center for Building Performance
Benefits of an Aggressive Asset Management Strategy
• Improve cash slow
• Ensure subsidized rents are maximized
• Stronger marketing/screening efforts can increase rent collection
• Improve property reputation; waiting list growth
• Increase occupancy rate
• Decrease turnover rates; Turnover/Decrease make ready expenses