COVER STORY

NRP Diversifies to Grow

AFFORDABLE HOUSING FINANCE • May 2008

BY BENDIX ANDERSON

GONZALES, LA -- The Louisiana office of The NRP Group, LLC, opened in May 2006 in a single-family home in this small town outside of New Orleans. It was just nine months after Hurricane Katrina made landfall.

“It was kind of like starting over,” said Curtis Cheney, vice president of development for NRP. Cheney has worked with NRP since it was founded in 1995. Just as he did in those early days, he made a lot of cold calls from his home office here to local officials and potential development partners.

There was one crucial difference, however, between NRP’s new beginning on the storm-ravaged Gulf Coast and its early days more than a decade earlier in Ohio: NRP is now one of the biggest names in affordable housing.

NRP started 1,765 units of affordable housing in 2007, and for the second year in a row, has been named the No. 1 developer by AFFORDABLE HOUSING FINANCE.

Headquartered in Garfield Heights, Ohio, NRP plans to keep growing in 2008, despite another hurricane in the capital markets, which lowered the value of the subsidies NRP relies on and killed two planned developments. To weather the storm, NRP is finding shelter in its strong relationships and reputation. The developer is also expanding into new housing markets like Louisiana and building a business in high-end rental housing.

The falling price of federal low-income housing tax credits (LIHTCs) has blown deep holes in NRP’s budgets. The developer expects investors to pay prices in the high 80-cent range, on average, for each dollar of NRP’s tax credits this year. That’s down from 94 cents in 2007. Dropping prices this year combined with local resistance forced NRP to pull the plug on two large deals in Texas totaling hundreds of units.

NRP plans to start construction on 1,327 units of affordable housing in 2008, down from 1,765 the year before. But the company plans to make up for these losses by building high-priced rental apartments, based out of its new conventional housing headquarters in Dallas. NRP expects to start 570 units of high-end rental housing in 2008, bringing its total starts up to 1,897 for the year.

NRP’s experience and strong reputation are helping protect its affordable housing business in 2008 from even lower prices: NRP is earning 5 cents on the dollar more for LIHTCs from investors like MMA Financial, LLC, than less experienced developers.

Less experienced developers also must contend with tougher terms that require higher project reserves and more developer guarantees, according to Chris Tawa, senior vice president for MMA Financial. Inexperienced developers may not even get an offer from investors like MMA.

MMA typically invests in four to six of NRP’s projects a year. The investor appreciates NRP’s willingness to act on its advice, like the recommendation that NRP upgrade its asset management systems and expand its staff. NRP did both, in addition to opening new offices to increase its business in Arizona, North Carolina, and Texas.

“They respect the relationship,” Tawa said. “They get high marks for that.”

NRP’s track record also helps the developer compete for state and local subsidies, according to Michael Lyttle, director of policy and public affairs at the Texas Department of Housing and Community Affairs.

“We do value experience,” said Lyttle. “NRP certainly falls into that category … they have a real nice product on the ground.”

NRP is also working to break into new affordable housing markets. “We are focusing on growth states and large cities,” said David Heller, managing member of NRP. In 2008, NRP plans to expand its business in Arizona, Florida, Michigan, North Carolina, Texas, and, of course, Louisiana.

NRP’s first homes at Beechgrove Subdivision, its first Louisiana affordable housing project, were slated to open in April. The firm partnered with local nonprofits Jefferson Housing Foundation and Caleb Community Development Corp. to develop 160 lease-purchase homes on a site in Jefferson Parish, just outside New Orleans.

This year, NRP will apply again for tax credits in Louisiana, with plans to eventually expand into Alabama and Mississippi. “We’re planning to be here for the long haul,” said Cheney, who is considering office space in New Orleans for NRP’s new branch.