Date post: | 26-Dec-2015 |
Category: |
Documents |
Upload: | magdalene-woods |
View: | 212 times |
Download: | 0 times |
U.S Department of Housing and Urban DevelopmentOffice of Affordable Housing Programs
Under Contract with ICF International
Monitoring the Health of Your Multifamily Developments
Monitoring Multi-Family Developments
Page 2
What Is A Successful Home-Assisted Rental Project?
Owner/manager understand & comply with applicable programmatic regs
Project can repay loans
Project revenue covers operating costs over long term
Attractive and well-maintained
Public agency/owner/manager know early warnings & prevent problems from occurring
Monitoring Multi-Family Developments
Page 3
Basic HOME Principles During the “affordability period”
HOME units:• Are rented only to Low- and Very-Low-
Income Households • Have rents at/below HUD-established
limits• Are maintained in standard, decent
condition • Are rented with leases and fair housing
procedures
Monitoring Multi-Family Developments
Page 4
Compliance Monitoring Important to ensure that rental
projects meet compliance requirements for affordability period
If project is not compliant:• Are not providing quality housing to
eligible households • Requires a lot of PJ oversight• May fail and HOME funds have to be
repaid
Monitoring Multi-Family Developments
Page 5
Enhanced Monitoring But to be successful, projects must
also be physically and financially viable, and this affects their ability to remain in compliance
Can’t just monitor for compliance, also must monitor for viability
Monitoring Multi-Family Developments
Page 6
Rental Compliance System Can consider rental project compliance
as system of integrated steps• Success at each step affects all others• Feedback from steps at end of process
used to improve overall performance
Many PJs “compartmentalize” staff, tasks & processes• Do underwriting staff confer with
monitoring staff about potential project risk areas?
• Does data from monitoring affect future underwriting decisions?
Monitoring Multi-Family Developments
Page 7
RENTAL COMPLIANCE SYSTEM (cont)
Underwriting Selects Projects That Are Likely to Succeed
PJ/Owner Agreement
Outlines Obligations
Application Process Reinforces HOME
Compliance Standards
PJ Watches For Troubled Projects
and Intervenes Early
PJ Monitors Each Project For Compliance in Key Areas:
Affordability; Tenant Relations; Unit Quality
Owner Addresses Monitoring Findings &
Reports to PJ
PJ Actively Manages Its Portfolio of Projects
Monitoring Multi-Family Developments
Page 8
Periodic Reporting
Annual Rent and Occupancy report from owner is required (§92.252(f)(2))
• Suggest additional and more frequent reports
Benefits of periodic owner reports:• Help verify project compliance• Track property performance over time
Reports should:• Include quantitative and narrative
information• Be easy to complete and read
Monitoring Multi-Family Developments
Page 9
Annual Report To PJ
HOME requires annual rent and occupancy report to PJ from owner
May include non-financial, financial, and narrative information• Non-financial information relates to
occupancy and property quality• Financial information relates to
property’s income, expenses, cash flow• Narrative information typically covers
property management issues
Monitoring Multi-Family Developments
Page 10
PJ Monthly Or Quarterly Reports Not a HOME requirement
• May help PJ catch problems earlier
Suggest obtain periodic reports from owner or property manager on:• HOME unit status• Overall occupancy rates• Unit turn over• Property financial status• Significant maintenance issues
Attach a rent role
Monitoring Multi-Family Developments
Page 11
Reviewing Reports
Steps in reviewing reports:• Establish indicators • Compare properties to indicators• Review for “red flags”• Categorize properties:
Good, fair, poor, troubled• Follow-up with appropriate action
Important to review reports periodically – don’t wait for end of year
• Lots of problems can pile up in a year!
Monitoring Multi-Family Developments
Page 12
Early Intervention Requires Information
It is cheaper to fix a problem early, than late
Monitoring Multi-Family Developments
Page 13
Reporting, Generally
How others report:• Baseball, Weather, Stock Market,
Healthcare• Industry standards (RBI, heating degree
days, Nasdaq index, cholesterol level)
MF industry lags
Monitoring Multi-Family Developments
Page 14
Baseball – Key Indicators Pitchers
• W/L Ratio• ERA• BB/K
Batters• Slugging• BA• OBP
Monitoring Multi-Family Developments
Page 15
Weather: Brilliant Info Design Multidimensional
information• Long-term and
short-term trend• Recent actuals and
near-term projections
Monitoring Multi-Family Developments
Page 16
What If…Applied to MF Larger bars show
portfolio range
Smaller bars show peer range
Boxes show actual performance of asset
Context, historical trend, projected outcomes
Monitoring Multi-Family Developments
Page 17
Key Indicators – Multifamily Financial
• Debt Service Coverage• Net Cash Flow (NCF) – The bottom line
(result)
Operational• Vacancy, Collections• Operating Expenses (vs. budget, or as a
ratio)• Average Days Vacant
Make-Ready
Monitoring Multi-Family Developments
Page 18
Cause and Effect Follow the Flow of Effect and Cause
(Diagnostic Drill-Down)• Effect (NCF) vs. Cause (VL)• Effect (VL) vs. Cause (Make-Ready)• Effect (Make-Ready) vs. Cause (staffing
levels, finances, management)
Then, Address the Cause
Which, Affects the Effect
Monitoring Multi-Family Developments
Page 19
KI – Net Cash Flow All Potential Revenue (rents, other) Minus all Income Loss (VL + CL) Minus all Expenses (OpEx, R4R) Minus all Required Debt Service Equals NCF Important because it is the result of
other indicators Important because it’s a measure of
‘cushion’
Monitoring Multi-Family Developments
Page 20
Meaninglessness
NCF at Whispering Pines is ($55) PUPA.
Yes, negative NCF is bad, but…
What about mission,
Or context…
Monitoring Multi-Family Developments
Page 21
NYC Marathon Gerard Vigneron
4:58:31
34,277
80
1st in Peer Group
Record: Bob Horman (80) 3:39:18
Monitoring Multi-Family Developments
Page 22
Peer Reporting Context Matters
Good peers are narrowly defined…
…which requires a lot of uniform data…
…which no one really has…
StrengthMatters
Monitoring Multi-Family Developments
Page 23
StrengthMatters™ Data Warehouse for
Peer Benchmarking
www.strengthmatters.net
Members upload electronically to a common CoA
On-line, live, dynamic reporting functionality
Transparency
Monitoring Multi-Family Developments
Page 24
Alternatives for Context If not peer comparisons, then what?
• Exception (worst-first, or red-flag reporting)
• Trending (property vs. its own history)• Comparisons to budget (property vs. its
own goals)• Comparisons to underwriting proforma
(property vs. its own expectations) Feedback loop
Monitoring Multi-Family Developments
Page 25
Exception Reporting Worst 10% get 90% Trick is: Which are the ‘worst 10%’? Sorting ‘Worst-First’ Red-Flag Reporting Sorting by actuals and ratios
• Total NCF vs. NCF/Unit Property A: ($500)/year (but ($25)/unit) Property B: ($100)/unit/year (but ($4k))
Using ‘Bins’
Monitoring Multi-Family Developments
Page 26
NeighborWorks America MFI
Measures 7 Key Indicators on 1,000 properties, quarterly
Results for each property is ‘binned’ based on range of outcomes: Excellent, Good, Fair, Poor.
NCF is measured: NCF as a % of GPI (EGI)• Bin 1 (Excellent): >10%• Bin 2 (Good): 5-10%• Bin 3 (Fair): 0-4.99%• Bin 4 (Poor): NCF <0% (i.e., negative NCF)
Monitoring Multi-Family Developments
Page 27
Exception Reporting into ‘Bins’
Monitoring Multi-Family Developments
Page 28
Drilling Down into the Bins
Monitoring Multi-Family Developments
Page 29
More Drilling Down
Monitoring Multi-Family Developments
Page 30
Yet More
Monitoring Multi-Family Developments
Page 31
Trending Allows for seeing relative
performance (the subject as its own peer)
Familiarity
Don’t actually need charts or graphs
Monitoring Multi-Family Developments
Page 32
Percentiles Shows relative performance, without
showing other data
Percentile is ranking: 75th Percentile means three quarters scored lower, one quarter scored higher
Multiple percentiles (each say something different)
• NCF/unit among all properties: 75th
• NCF/unit among peers (urban high rise, §8): 39th• NCF total: 99th• NCF change year-year: 10th
Monitoring Multi-Family Developments
Page 33
Enough About Reporting: Other Monitoring Techniques Site Visits and Drive-Bys
Encouraging Third-Party Info• How’s My Driving: 1-800-555-1212
Compliance Monitoring: Relationship between financial problems and occupancy compliance
Capital Needs Analyses
Monitoring Multi-Family Developments
Page 34
Capital Needs CNA is a reliable predictor of financial
crisis
EUL, RUL, Cost are predictable.
Decent CNA can give 3+ years warning of capital shortfall
Combine with analysis of NCF, refinancability, rent increase potential, etc.