South Florida nonprofit bites the dust because of rising real estate costs and shrinking resources, and the fight is on to keep its portfolio affordable.
Greater Miami Neighborhoods (GMN), a wellknown nonprofit developer of affordable housing in Miami-Dade County, had been in business since 1985. For more than two decades, the group developed or assisted in the development of more than 5,000 units of affordable rental and homeownership housing valued at more than $300 million. All that came to a halt in January when GMN filed for Chapter 11 bankruptcy, citing rising real estate costs and increasing competition for shrinking resources for affordable housing.
In preparation for bankruptcy, the Miami-Dade County Commission approved transferring GMN’s interests in 18 properties with more than 2,000 units to two other parties: a Bostonbased nonprofit, Preservation of Affordable Housing (POAH), and Enterprise Community Investment, Inc., based in Columbia, Md. The Urban League of Greater Miami took over the interest payments on three properties. But the fate of many of these precious assets remains to be decided.
Help from POAH
POAH, a national nonprofit focused on preserving and restoring affordable housing, said it agreed to purchase eight properties consisting of 1,244 units from GMN. However, it’s not a done deal, said Amy Anthony, POAH’s executive director.
“We gave GMN a loan for it to remain alive long enough for the Chapter 11 process to work its way through the court, which will likely take ’til sometime this fall,” said Anthony. “Under our proposal to the bankruptcy court, we made an offer for the properties. If the court approves of our plan, the court will offer the sale of the properties to the public under our terms. So we will be uncertain about whether we will actually get the properties for some time. Offering the properties [to the public] has to happen as part of the process, but it would be happening under circumstances that would tend to favor POAH as the buyer.”
POAH and GMN’s plan to the court also lays out how creditors would be paid. Creditors include the Florida Housing Finance Corp. and Housing Venture Partners. POAH would pay creditors “out of cash flow over time in a structured way,” Anthony said.
GMN approached POAH a little more than a year ago for help with preserving affordability at eight assets in its portfolio that receive subsidies from the Department of Housing and Urban Development (HUD).
“We both felt that these properties were the most difficult properties to save because a project-based subsidy was involved,” said Anthony.
They agreed that a Chapter 11 workout was the best course of action.
“A Chapter 7 bankruptcy would have involved a trustee and the court alone deciding how to deal with the assets in a way that would pay off creditors,” noted Anthony. “That would have made it virtually impossible to hold onto the HUD-assisted housing.”
If POAH gets the properties (“We’re hopeful,” said Anthony, especially after POAH met with state housing officials who approve of the nonprofit’s plan), the move would mark the nonprofit’s first foray into the Sunshine State. POAH plans to renovate some of the developments, paying for repairs from credit enhancements and refinancing the properties.
Unlike POAH, Enterprise Community Investment, Inc., was involved in a long-term relationship with GMN. Enterprise served as a limited partner in 13 GMN projects, said John Brandenburg, vice president of asset management for Enterprise. The nonprofit contacted Enterprise for help around December of 2006.
“[GMN] agreed to move out of the projects they had with us and that we would step in and become interim general partner,” said Brandenburg. “It really took a year to unravel. We also changed management over to a third-party manager.” Banyan Property Management, Inc., based in West Palm Beach, stepped in to assist Enterprise.
Three of the 13 developments were transferred to the Urban League of Greater Miami, a local nonprofit, and an Enterprise entity took on the remaining 10, which are all located in the Greater Miami area save for one in Ocala and one in St. Petersburg, said Alan Kaufman, Enterprise’s director of asset management.
Enterprise’s goal is to bring in a third party as general partner.
“We are currently talking to some organizations about possibly stepping in and taking over the portfolio,” said Brandenburg. “We believe with some creative management that the performance of the portfolio can be pretty good—certainly better than break even.”
Kaufmann said that the 10 projects are running at occupancy rates of between 97 percent and 100 percent.
Conditions at some of GMN’s properties have not been as good as their occupancy rates.
In 2007, tenants at three developments in Cutler Ridge and Naranja complained of rodent infestations and other poor conditions. New management was later appointed.
“The goal is not to disrupt the tenants’ lives at all, but to maintain them and make them better,” said GMN’s bankruptcy attorney, Jonathan Vair.
If POAH and Enterprise are successful —and they look like they are on track to save the apartments—residents’ lives should get much better. Anthony said that GMN going under should be a wakeup call for nonprofits dedicated to preserving affordable apartments.
“The nonprofit sector has to do more to assure that we are ready to pick up the pieces. We need to be ready for the next time.”