Once upon a time, Gary Gorman was an attorney, representing developers and syndicators.
There he was, seeing and touching the affordable housing business from up close. It was right there in front of him, but it still wasn’t close enough to suit him.
Deciding he’d “rather be a player than a referee,” Gorman launched his own affordable housing company in 1984. In the 33 years since its formation, Gorman & Co. has become one of the nation’s top affordable housing developers.
The company has come a long way since its first development, a 24-unit project called Seminary Park Apartments in the little town of Evansville, Wis., which it still owns. “It had about four different layers of financing, and I think I made $1.50 an hour,” Gorman says.
So much for storybook beginnings. Instead, this is a tale about building dreams brick by brick, development by development.
Over the years, Gorman, who is CEO, and his team have diligently built their business. They have gone on to develop more than 80 other properties that provide nearly 5,000 units of affordable housing. In 2016, the company had a big year, starting construction on nine developments with 776 affordable homes, to rank No. 10 on this year’s AHF 50 list of top developers. The firm also completed seven developments with 470 units last year.
Gorman & Co. anticipates having a busy 2017, as well, with construction expected to start on 10 developments with more than 1,000 units.
To Gorman, the firm’s business plan is simple. “We go to leaders in the community, and we ask them what they would like done,” he says. “If their goal is consistent with our core competency, we work with them to try to get those things done.”
Simple maybe, easy no. The firm’s ambitious developments are often the catalysts needed to transform struggling neighborhoods. For example, in Milwaukee, a city hard hit by the foreclosure crisis, the company has worked with the community to convert vacant, city-owned houses into affordable housing. The Northside Housing Initiative, which has involved rehabilitating more than 300 troubled homes in multiple phases, has also served as an important job training program.
Jack Manning, president and CEO of Boston Capital, which has financed 14 of Gorman’s developments, praises the firm’s creativity and collaborative approach.
“From low-income housing tax credit [LIHTC] properties to condominium development to substantial renovation to operation of hotels, Gorman is the type of company that loves innovation,” says Manning.
Creativity will be critical as the industry enters unsettled times. Uncertainty about tax reform has triggered a drop in LIHTC prices, and interest rates have already risen this year.
“We’re spending a lot of time talking with our capital partners, our investors, about what pricing and terms they are comfortable with,” Gorman says. “Clearly, pricing is down.”
But, he adds quickly that he remembers his first LIHTC deal, in 1987, when the housing credits sold for 46 cents on the dollar. That’s less than half of what many of today’s deals are used to receiving. “Deals got done,” he says.
Five key markets
For Gorman, the pivotal step to success has been attracting key people to the firm, which has a workforce of about 250. “People ask me what my job is,” he says. “My job is to attract and retain talented people.”
This includes COO Tom Capp, who came aboard in 1994 and directs the development platform. He brings both a planning and a political background, including serving as mayor of Fitchburg, Wis. Most important, he shares Gorman’s focus on community building.
While the firm has grown into a national developer, it has targeted five main states, with market presidents in Arizona, Colorado, Florida, Illinois, and its home base of Wisconsin.
“It’s a real deep dive in those states,” Capp says. “Each state we’ve gone into, we’ve focused on our entire team thoroughly understanding that market.”
This starts with the market presidents, all of whom come from high-capacity nonprofits. This has been important because almost all of Gorman’s developments are in partnership with a nonprofit or community group. The market presidents have been able to hit the ground running and understand the mission and policy side of the business, says Capp.
A good example is Brian Swanton, who previously served as president and CEO of Community Services of Arizona, a nonprofit developer of mixed-income housing. He now heads Gorman’s efforts in Arizona and is working on several developments, including one for veterans and their families in Tempe.
In the firm’s succession plans, Swanton will step into the CEO spot next year.
Housing for veterans
Working with the city and nonprofit partner Save the Family Foundation, Gorman is developing the 50-unit Valor on Eighth near Arizona State University. Forty-five of the apartments will be affordable, targeting families earning no more than 40%, 50%, and 60% of the area median income, with 15 units having project-based Sec. 8 vouchers.
The $14.3 million project is scheduled to be completed by the end of this year. The development is being financed with about $11.8 million in LIHTC equity from Enterprise Community Investment and American Express.
Gorman is also nearing completion on Esperanza En Escalante, a 44-unit development that targets homeless veterans in Tucson. The community shares the same name as its nonprofit partner. The $9.9 million development also uses LIHTC financing from Enterprise and American Express.
“Gorman & Co. represents the best of affordable housing and community development,” says Brian Windley, vice president, syndication, at Enterprise Community Investment. “Enterprise has partnered with Gorman over the years to develop and preserve well-designed homes made affordable for seniors, low-income families, and veterans. We have great respect for their approach to revitalizing communities across the country.”
Gorman continues to broaden its scope. The firm has recently become involved in several Rental Assistance Demonstration projects with public housing authorities in Arizona and Illinois.
It’s another chapter in the firm’s story, but in many ways Gary Gorman has already accomplished what he set out to do—be a major player in the industry.