Hand spun capital: tax credit alternatives
Nonprofit affordable housing developers with strong established banking relationships and the savvy to explore alternative financing sources are finding a competitive edge in overcoming the challenges of today's credit and equity markets. They are turning to new and traditional financing options to deliver much needed affordable and mixed-income rental communities where a dearth of that product exists today.
One conventional source is a ground lease, which offers developers long-term possession of a site without the up-front costs associated with purchase. Abode Communities is in pre-construction planning on two joint-use projects slated to rise on land owned by the Los Angeles Unified School District (LAUSD). The joint-use and the long-term ground lease will help to reduce Abode Communities' development costs.
Despite the credit freeze, the 40-year-old Los Angeles-based nonprofit architect, developer and manager of affordable housing has four projects in the early phases of development, in addition to the joint- use projects with the LAUSD, and continues to seek new opportunities.
"The industry has lost 50 percent of its equity investment and we've definitely had to pull back a little on our pipeline expectations, but our pipeline remains relatively robust. Because we have strong relationships with local government, banks and with investors, we feel we will be able to sustain what's going on in the market over the next 18 months," said Abode Communities President Robin Hughes.
Abode Communities began life as the Los Angeles Community Design Center (LACDC), a volunteer architectural firm, during the community design center movement of the 1960s, one of around 15 or 16 such groups created throughout the country as a way for the architectural profession to engage in the civil rights movement.
During that time, community design centers were established in urban locations where professional architects could best provide pro bono services to neighborhood groups and local government working around community development issues. A number of them emerged from universities. The then-LACDC was created through the School of Architecture at the University of Southern California Los Angeles and evolved over the years from an architectural to a planning firm, hiring its first employee in 1973 and beginning affordable housing production in the mid-1980s.
"We've continued our community-based approach somewhat, but today we primarily design and develop affordable housing for our own portfolio as the developer, architect and property manager and have four programming areas that serve as business lines within our organization," said Hughes.
Those business lines are the architectural group, made up of professionally licensed designers and architects that primarily do work for the company's own portfolio, the development
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