Asset Management s Seat at the Table or Creating

Asset Management’s Seat at the Table or Creating an Asset Management Organizational Culture Presented by: Molly Rogers Director of Asset Management May 4, 2015

Who We Are Home Forward, the Housing Authority of Multnomah County, (in Portland, Oregon) • Serves over 15, 000 households and more than 33, 000 residents • Oversees 6, 500 housing units (public housing, project based Section 8, and real estate developed and acquired) • Administers approximately 8, 800 Section 8 rent assistance vouchers

FACTS AND FIGURES 1941 1993 3 Portfolio Types 4 Property Management Companies 5 (Re)Developments Home Forward founded. Home Forward expanded business lines from Public Housing to Tax Credits 1) Affordable Housing (includes tax credits), 2) Public Housing, and 3) Master Leased Home Forward Property Management = 1/3 of units Third Party Property Management = 2/3 of units RAD, Section 18 Disposition and New Development

Three Portfolio Types Affordable Housing – Financed through debt and equity – Rents not tied to income unless subsidized – Restrictions based on area median income – Operating and replacement reserves Public Housing (Traditional) – HUD regulated – Rent is a formula based on income – No debt – No reserves Master Leased – Nonprofits operate home for special needs populations – Group homes or homeless shelters – Funded by City, County or State 4

Three Portfolio Types Affordable Housing Public Housing (Traditional) Master Leased 44 properties 33 properties 35 properties 18 tax credit partnerships 4, 644 apts. Average: 106 apts. per property 1, 352 apts. Average: 41 apts. per property 519 beds or apts. Average: 15 beds/apts. per property 5

Asset Management Staff Rental Properties/ Units Total # of Mixed. Finance and Tax Credit Properties Financial and Administrative Role in Mixed Finance Properties Asset Management Division # of staff members -6, 515 units -3 HOPE VIs -112 properties -13 HUD mixedfinance properties -25 tax credit partnerships GP and property manager; provider of PBS 8 subsidy; Provider of ACC subsidy (HOPE VI); Ground lessor Organizational Location 6 Total: -1 Director -4 Asset Managers -1 Specialist Finance and Accounting; Director reports to CFO 6

Waves of Change for Asset Management 1. Change from direct federal subsidy to public-private partnerships 2. HUD’s directive to “asset manage” public housing 3. Fulfilling the goals of the Real Estate Portfolio 4. Organizational structure and leadership 5. Future – expanding role and impact 7

Time Line of Home Forward’s Development or Acquisition of Real Estate, (By Portfolio Type, Inclusive of Currently Owned/Ownership Interest) 9

HUD Directive Towards Asset Management Based on Harvard Cost Study: Required all PHAs of 250 or more units convert to asset management, consistent with the norms in the broader multifamily management industry. Five core elements of asset management: Funding, Accounting, Budgeting, Management, and Oversight and Performance Assessment 10

Fulfilling Goals of AM: The Triple Bottom Line Mission Sustainable Real Estate Diversify Agency Funding 11

Asset Management as a Strategic & Managerial Function Combining with mission/ strategic plan of organization Longer term planning horizons Planning with financial milestones in mind Coordination of physical asset management over life cycle of project – from development through operations and capital improvements 12

Financial Goals Clearer on portfolio level goal for unrestricted cash to support other Home Forward programs Manage portfolio within the context of the multifamily marketplace Difficult choices between cash back to Home Forward and investment at the property level at a time of federal disinvestment We need to balance consistent cash year after cash with setting enough aside in a general capital reserve 13

Understanding the Multi. Family Marketplace Source: Portland State University Center for Real Estate Quarterly Multifamily Market Analysis, Summer 2014 14

Fulfilling Goals of AM: Diversification of Agency Revenue Mission Sustainable Real Estate Diversify Agency Funding 15

Offsetting Subsidy Proration Trends 120. 0% 110. 0% 100. 0% Section 8 Voucher Funding 90. 0% Section 8 Admin Fees Public Housing Op Subsidy 80. 0% $1 M from AH Unrestricted Cash 70. 0% 60. 0% CY 08 CY 09 CY 10 CY 11 CY 12 CY 13 CY 14(est) 16

Organizational Leadership and Structure • Strategic Operations Plan – Goal 2 • Changed Board Development Committee to Real Estate and Development Committee (READ) • Hired more highly qualified staff in asset management • Developed clear portfolio level responsibilities and property specific decision making for asset managers 17

Asset Management Selects Property Management 18

Real Estate Study Group • Established a multidisciplinary team of directors to make high level real estate decisions • Charged with establishing criteria for sell, buy, and preservation decisions and creating a framework for allocation decisions 21

Real Estate Study Group Members

Internal Expansion of Asset Management Can be more difficult for asset manager to represent owner’s interests when working with internal managers Expand Asset Management into entire Home Forward portfolio for cost discipline Move towards treating all real estate as one portfolio beginning with accounting and asset management models including building reserves and management fees at all properties From VIVA Consulting 23

Next Steps Subsidy Conversion: 1. Section 18 Disposition or 2. Rental Assistance Demonstration Program Tax Credit Equity: 1. 4%/bond Rental Assistance Demonstration Program 24