DENVER—The deteriorating housing market of Florida recently became an important backdrop for Boston-based Preservation of Affordable Housing, Inc. (POAH), on a twofold basis.
First, it was the setting for the nonprofi t's most recent land deal, with POAH purchasing six projects for $49.2 million from Greater Miami Neighborhoods, Inc., a nonprofit who closed its doors after 20 years in the affordable housing industry . Greater Miami Neighborhoods filed for Chapter 11 reorganization in January 2008 reporting assets of less than $10 million and debts up to $50 million.
Second, Florida has become somewhat of a poster child for POAH's mission to help mold affordable housing policy by lobbying the Department of Housing and Urban Development (HUD) to implement policies that will focus on supporting and sustaining the parent companies, as opposed to focusing solely on the deals being made.
“Nonprofits are going to be under stress, and deals are going to be harder to do,” says Amy Anthony, president and CEO, who founded the nonprofit in 2001 with a mission to purchase large, multifamily properties and refinance them for long-term affordability.
A prime example is the Florida deal Anthony just went through. In order to make sure that the properties would be transferred to POAH void of any potential liens, a strategy was devised to have a “structured bankruptcy” where POAH actually financially helped Greater Miami Neighborhoods throughout the process. “For us it was a good experience,” she says, reflecting on the deal. But during the time, “I was not sure it was going to work out, that is until we got through to the end.”
Working through a process like this is one that Anthony says she would not be surprised if she has to do again with the way the economy is going, yet she points to the negative effect on nonprofits.
“There will be other situations where a portfolio will be under stress, and acquisitions will be more challenging,” she says, adding that the need for affordable housing will only grow in line with the downfall of the economy. Enter POAH's push for policy changes.
“HUD needs a different way of thinking. In the past, syndication was flowing, and syndicators were willing to take the risk on small nonprofits,” Anthony says. “Now there is a lot of stress, and HUD can help with guidelines for getting nonprofits in a stronger position going forward.”
POAH is No. 4 on the list of firms completing acquisitions in 2008 and No. 26 on the Top 50 owners list, with 6,197 units as of Jan. 1. The organization has acquired 40 percent of its portfolio in the past two years.
POAH has reined in its finances by sticking to a strategic model based on underwriting to ensure cash flow from properties to support the organization's core operations. But with credit lines frozen and the collapse of the tax-exempt bond market weighing heavier on affordable housing, Anthony looks to her staff to keep the juices flowing.
“During very tough times it is a challenge for us to be creative, but everyone [at POAH] is very entrepreneurial, which is very important to the mission of what we do,” she says.