CREJ

February 2021 — Multifamily Properties Quarterly — Page 39 www.crej.com Affordable Housing I got into affordable housing almost by accident. In 1998, I was developing a luxury apart- ment community in Parker. With 280 Class A apartments and a luxurious clubhouse, it was the first high-end, luxury apartment in Parker. We named it Trailside, due to its location adjacent to the Cherry Creek Trail. While working on Trailside, a bro- ker told me about a parcel of land in Commerce City where there had been no new apartments built for 30 years. It was clear that the kind of project I was developing in Parker would not be successful in Com- merce City. There, the market cried out for new, affordable apartments for families and working people. At that time, it was hard to raise investment capital for multifam- ily projects. It was even harder for a project in Commerce City, where the median income was relatively low. I quickly dropped the idea of building a smaller version of the Parker proj- ect in Commerce City. But the question remained: What to develop in Commerce City? I researched various housing and financing programs and finally came upon Section 42 and the low- income housing tax credit program. As I learned more about the com- munity, got to know many people and learned of their struggles to find quality affordable housing, I was determined to learn and master affordable housing development. That’s how it all started and now, 22 years later, I can look proudly at 22 communities and over 3,000 units of affordable housing. There are many reasons why, after all these years, I continue to be deep- ly involved in the development pro- cess that leads to a successful afford- able community. From finding and acquiring a site or a building for reno- vation, to working with the commu- nity to ascertain its need and desires, designing the building and get- ting it financed, built and occupied, the process brings me personal and professional satis- faction. This community involvement can become remarkably interesting and intense, especially if there is neigh- borhood opposition to affordable housing. Known as NIMBY (not in my back yard), this opposition usual- ly results from a lack of understand- ing of what affordable housing really is. Fear of change or a drop in prop- erty values often are concerns that can be overcome through educa- tion, in-depth explanations of what affordable housing looks like, who the residents will be and even visits to existing affordable communities. Over the past decade, communi- ties and their governing bodies have become more accepting of affordable housing, which is important because community support and political will are critical to affordable housing development. Working with our architects and engineers also is exciting. Conceptu- alizing the proposed new building on the site takes imagination and incor- poration of lessons learned from building and operating prior projects. Meeting the multiple approval hurdles can be difficult and time- consuming but often results in better projects. Receiving Colorado Housing and Finance Authority approval for tax credits, working with lenders, tax-credit investors and attorneys, obtaining site plan and construction drawing approvals, issuance of build- ing permits and the problem-solving and decision-making at each step are but a few of those hurdles; but overseeing the 12- to 18-month build- ing period is engaging and provides daily, weekly and monthly rewards as buildings rise from the ground. The reaction and excitement of our residents is incredibly satisfying and rewarding. Being told that a walk-in closet is almost as large as any apart- ment a resident has ever lived in, or that residents have never felt health- ier since they moved in, has its own rewards. The total lease-up of a 100- unit new community in just three days, two months before the building was ready for occupancy, showed me that the need for affordable housing continues to be strong. Knowing that I am providing good-quality afford- able housing for over 5,000 hardwork- ing people is another reward. There also is the fact that our com- panies provide jobs for 85 people, including property managers, leasing agents, maintenance personnel, com- pliance and administrative support staff. No one lost their job during the Great Recession or the current pandemic, demonstrating the robust nature of affordable housing. Our employees are valued and as com- mitted as me to affordable housing. I keep developing affordable hous- ing because the need continues, the challenges persist and the excite- ment and fun are unending. In many ways, affordable housing is the Rubik’s Cube of real estate devel- opment. The challenge never goes away, is full of different problems to solve on each new project and con- tinues to make it a thrilling and ter- rific journey. s An accidental journey into affordable development Arthur McDermott President, McDermott Properties, arthur@ mcdermott properties.com P edcor Cos. is a vertically inte- grated suite of companies engaged in development, con- struction and management activities, based in Carmel, Indiana, and specializing in affordable housing. Our team has developed a portfolio of 26,379 apartment units in 151 communities across 20 states over the past 33 years, including six large apartment communities along the Front Range. Across our entire portfolio, roughly 75% of our units were developed as affordable housing using low-income housing tax credits. Although the company has been involved in some other development activities, it is safe to say that the main focus of devel- opment activity is affordable housing through the LIHTC program. The mission is to provide high-quality affordable housing solutions in areas of opportunity that cultivate thriving communities and a higher quality of life.We are family owned and oper- ated with a passion for building vibrant, inclusive commu- nities that provide essential hous- ing for our nation’s workforce. From the beginning, the principals of Ped- cor recognized that the public-private partnerships made possible through the LIHTC program could indeed allow them to do well by doing good. Over the years, by doing deals in differ- ent communities around Indianapolis at first, and then branching out to neighboring states, the team devel- oped an understanding of what is common to LIHTC development across different sites, municipalities and states, and what is always unique to a deal. Through this process, the com- pany has been able to expand coast to coast (counting a diagonal step from Colorado to Arizona), and we estimate that we’ve provided homes to more than 100,000 households. We have been doing our part to efficiently develop large-scale, 100% affordable apartment communities across the nation. There are three results from this activity – households in need get access to high-quality affordable housing; our nonprofit and governmental agencies partners advance their missions directly and receive compensation to help them do so indirectly; and we make a liv- ing. The beauty of the LIHTC program is in its public-private synergy. As is evident from the markedly greater success of LIHTC housing versus the public housing of the 20th century, the LIHTC model of incentivizing profit and nonprofit-motivated professionals is a winning one. Developing afford- able apartments is a much more diffi- cult process to complete as compared with market-rate development. One needs both passion and skill to be suc- cessful in this field. Many people wish that their money-making work had a greater humanitarian impact, and others wish their humanitarian work made more money. The LIHTC pro- gram allows its participants to make a living and make a positive impact at the same time. It really is the best of both worlds. Our firm came to Colorado 11 years ago when we noted extreme rent growth was outpacing the develop- ment of additional affordable housing units, indicating extremely fast-grow- ing demand for affordable housing. Being long-term owners of the apart- ments we develop and construct, and by selecting target markets where there is high demand today, we miti- gate the risk of demand falling over time. Initially, we joined the crowd of developers competing for 9% tax cred- its and were discouraged two years in a row. Leveraging our vertical integra- tion and decades of experience-driven expertise with invaluable advice and assistance from some of the greatest minds in affordable housing finance Beauty of LIHTC is in its public-private synergy Patrick Stoffregen Vice president of development, Pedcor Cos., pstoffregen@ pedcor.net Ryan Rodgers Vice president of development, Pedcor Cos., rrodgers@pedcor. net Moss Photography Westwood Crossing in Denver is a 100% affordable development available for house- holds with incomes no greater than 60% of the area median income. Please see Stoffregen, Page 40 Ashley Estates in Loveland was financed with U.S. Housing and Urban Development 221(d)(4) financing with 4% credits and private activity bonds. The 100% affordable project rents to residents making 60% of the area median income and offers a mix of 224 one-, two- and three-bedroom units.