Editor’s Note: The number of affordable units started by developers in 2012 has been revised since press time of the print edition, and Pennrose Properties has moved into the No. 1 spot of the Top 50 developers list. The online version of the articles and the digital edition have been corrected.
The 2012 AHF Top 50 Lists
Cover Feature: Growth Curve
Pennrose continues affordable focus while branching out into other housing
- Company Profile: No. 4 - GHC Housing Partners
- Company Profile: No. 24 - Gene B. Glick Co., Inc.
- Company Profile: No.37 - Omni New York, LLC
- Company Profile: No. 13 - Prestwick Development Co.
- Company Profile: No. 21 - Beacon Communities
- Company Profile: No. 46 - Coachella Valley Housing Coalition
The nation’s top affordable housing developers started construction on more new developments in 2012 than they did the year before even as government funding tightened.
The for-profit and nonprofit companies on Affordable Housing Finance’s latest Top 50 list broke ground on 18,791 affordable units in 264 developments last year. That’s a roughly 8 percent jump from the 17,438 units in 213 projects started by the same developers in 2011.
A steady flow of low-income housing tax credit (LIHTC) capital and continued low debt helped make deals feasible.
Developers were also pushing hard to break ground on as many projects as possible in the last year and a half in order to meet the deadlines for using the temporary 9 percent fixed rate on housing credits. The tax credit floor has since been extended by Congress.
“Everyone in the industry, Pinnacle included, struggled with the expiring full 9 percent LIHTC,” says David Deutch, a partner at Pinnacle Housing Group in Miami. “Before Congress acted to extend it, Pinnacle had put itself in a position to minimize the risk of losing the full 9 percent credit as much as possible.”
The firm worked closely with all its “third-party professionals to get construction drawing finished and submitted to local jurisdictions for permitting approvals in an expedited manner to maximize its ability to meet the placed-in-service deadline,” Deutch says.
The only list of its kind, The AHF 50 reveals how many units are under development by the leading national and regional developers. The ranking is based on the number of affordable housing units started in 2012.
There are three ties so this year’s list includes 53 firms—35 for-profits and 18 nonprofits.
Philadelphia-based Pennrose Properties continues to be one of the nation’s top developers, jumping to the No. 1 spot, after beginning construction on 1,070 units in 14 developments.
The NRP Group, headquartered in Cleveland, and New York-based L+M Development Partners both posted big numbers to rank No. 2 and No. 3, respectively.
Despite widespread concern about changes to the LIHTC program and diminishing local resources, The AHF 50 firms expect to start construction on even more housing, 305 projects and 28,539 units, this year.
Separate lists highlight the top owners and firms involved in the preservation of existing affordable housing through acquisitions and the rehabilitation of their own properties.
This year’s Top 50 owners hold 5,462 projects with more than 543,000 affordable units. The Michaels Organization in Marlton, N.J., continues to be the nation’s largest affordable housing owner, with a hefty portfolio of 323 properties and 45,960 units.
The results are compiled from a voluntary survey. This year, nearly 100 companies participated. Developers and owners with general partner interests are urged to take part in next year’s poll.
Bracing for the future
Although The AHF 50 captures only a small segment of the affordable housing being built each year, the survey provides a vivid snapshot of the industry.
This year, the climate is changing. Developers are much less optimistic about finance conditions than they have been the past two years. Only 9 percent of all firms surveyed expect conditions to be better in the coming months while the rest think they will be worse or remain the same.
“I do believe the mood of the industry has become more conservative as uncertainties with tax credit pricing and federal government priorities remain unclear,” Deutch says.
The level of concern about the possible elimination or changes to the LIHTC program has escalated in the wake of tax reform talks. Forty percent of the developers selected it as their top concern this year followed by fewer local and state resources, 27 percent.
A year ago, it was the reverse with 39 percent worried about cuts to local resources and 27 percent most concerned about changes to the LIHTC program.
“We want to make sure the tax credit program is alive and well, and is not subject to any cuts in Washington,” says Eugene Schneur, co-managing director and co-founder of Omni New York, LLC. “The LIHTC is the engine that drives the affordable housing market—both for acquisition/rehab and new construction.”
The NRP Group, Pennrose, AMCAL Multi-Housing, Steadfast Cos., and St. Anton Partners are among the big affordable housing builders who reported entering or expanding their market-rate apartment activities in an effort to grow their businesses as well as prepare for fewer affordable housing resources.
“We’re trying to diversify our portfolio,” says Pennrose President Mark Dambly. “We’ve completed four conventional properties, have a few under construction, and more in the pipeline.”
The Michaels Organization increased its portfolio in student housing and military housing management.
Several developers, including St. Anton, G.A. Haan Development, and Realtex Development Corp., pushed into new states or regions during the past year.The past year will also be remembered for some large and unique challenges. On the East Coast, Hurricane Sandy damaged properties owned by seven of the top firms.
On the West Coast, developers in California were hard hit by the dissolution of local redevelopment agencies statewide, which had provided about $1 billion for affordable housing each year. About 40 percent of the firms on The AHF 50 developers list are headquartered or have a significant presence in the state.
USA Properties Fund also said the loss of redevelopment funds was leading the firm to look more at acquisition and rehab opportunities.Overall, firms may be looking to buy more properties if new construction gets harder to do and older properties come up for sale.
“We’re seeing a lot more competition in the acquisition/rehab market than when we started in 2004,” says Omni’s Schneur. “It seems now when we look at deals, there’s a lot of other affordable housing buyers and nontraditional affordable housing players looking at the affordable housing space.”