A Mississippi developer proves that quality affordable housing isn't the only thing needed in rural communities.
RIDGELAND, MISS. Quad States Construction, LLC, an affordable developer based here, proves that quantity is a good thing, especially in rural areas with a dearth of affordable housing options.
The firm has completed only about 1,000 units so far, but has plenty more waiting in the pipeline.
“I have five projects under construction,” said Dale Lancaster, president of the firm’s development and construction entities. “No, six. No, seven. There’s that one in Pickens, Miss.”
Lancaster runs the company along with Ike Larue, chief financial officer, and Craig Crawford, head of the construction team. As its name indicates, Quad States works in four states: Arkansas, Mississippi, Louisiana, and Tennessee.
The developer builds exclusively subdivisions —single-family rental homes on individual lots. The projects, which average about 40 units each, receive lowincome housing tax credits (LIHTCs) and U.S. Department of Agriculture Rural Development funds. Market-rate units make up 20 percent of the units in the subdivisions.
“These subdivisions are rentals,” noted Lancaster. “We have to go through the same process for approvals that a normal subdivision developer would have to go through when the intent is on selling homes.”
The company would like to have the option to sell the homes as affordable after the 15-year compliance period and/or be able to build additional units on vacant lots at the subdivisions. Currently, residents aren’t leasing to own homes in the subdivisions.
Longer construction period
Building a subdivision actually adds another six months to the construction period, as compared to the standard apartment community. “With apartments, you can get in and get out,” said Lancaster. Quad States used to build “standard” apartments, but now focuses exclusively on the subdivision model.
“Cities like them better,” said Lancaster. “You don’t have the NIMBY issues. Especially in the South, where there is typically more land available, people prefer subdivisions over apartment buildings.”
Quad States is at work on three projects in Louisiana, two each in Arkansas and Tennessee, and that one development in Mississippi.
The firm was struck a blow last year when one of its principals, architect William P. Joseph Jr., died in a plane crash. As a result, new tax credit applications were temporarily reduced from about 20 per year to around five per year.
“2007 was a busy year and a tragic one,” said Dana Mayo, senior vice president of acquisitions for SunAmerica Affordable Housing Partners, an arm of AIG, a financial and insurance services firm. SunAmerica has been investing continuously in LIHTCs since 1988.
“Last year, we closed seven deals with Quad States, and in June [we closed] our 13th deal with Dale.” That deal is a 48-unit subdivision called Prairie Creek in Brownsville, Tenn.
‘Give and take’
SunAmerica is Quad States’ main equity partner. SunAmerica has also provided debt on a majority of the developer’s deals.
“We met Dale in mid-2006. He was having some trouble finding syndicators. We stepped in and provided debt and equity. And we’re still with him,” said Mayo.
The relationship works, said Mayo, because of “give and take on both sides.” It helps that Quad States is involved in building many developments, even though each consists of generally no more than 50 units.
“We do as much work on a 300- unit deal as we do on a 30-unit deal. You have a lot of fixed costs and the same legal work,” said Mayo. “It makes sense that we fund projects on a repeat basis.”
Mayo noted that in the current chaotic LIHTC environment, Sun- America has not changed its pricing on credits, as several others have. “We use our own money to invest in tax credits. We haven’t stopped investing,” he said.
Many of Quad States’ projects include extra land on which another 60 to 100 units could be built.
“That’s attractive because you have the ability to build into the project,” said Mayo, adding that the firm has not done this yet. “We see this as potentially improving operating efficiencies down the line. And it has the potential to help Quad States’ business to grow.”
“We’d like to get into other states,” said Lancaster. “We’ve got our hands full right now. There’s plenty of need where we are.”