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Strategic Planning Under Asset Management

Strategic Planning Under Asset Management. Learning Objectives. Understand the asset management life cycle Connect the PHA’s mission and overall strategic plan to asset management plans for each property Review roles and functions of board, management, and HUD in long term planning

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Strategic Planning Under Asset Management

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  1. Strategic Planning UnderAsset Management

  2. Learning Objectives Understand the asset management life cycle Connect the PHA’s mission and overall strategic plan to asset management plans for each property Review roles and functions of board, management, and HUD in long term planning Examine basic information required for long term planning

  3. Asset Management Lifecycle Acquisition & Development Activities • Project Operations • Project management • Capital improvements • Compliance Repositioning Or Disposition Activities Year 1 Year X Holding Period

  4. PHA Mission • The PHA’s mission is critical to making organizational design as well as long-term investment decisions. Major mission questions for PHAs include: • Who to serve? • Quality of housing desired? • Standard of affordability? • Housing or services? • Financial viability of properties vs portfolio? Let’s discuss these………..

  5. What if a Goal is to Attract More Working Families? • May affect the types of services offered • May affect the number of properties that are desirable based on location (near transportation, employers) • May require a more organized marketing effort • May affect office hours (may need evening or weekend hours for leasing)

  6. What if a Goal is to Provide the Highest Possible Quality of Housing? • May affect the way maintenance staffing is organized • May affect marketability to wider range of incomes • May affect priority of capital spending and financing • May affect priorities in annual budget

  7. What if a Goal is to Provide an Expansive Range of Resident Services? • May affect number of households served (and revenues) at properties (e.g. using a unit for services, sharing with manager) • May affect marketability • May affect prioritization of resources – less available for bricks and mortar

  8. What if a Goal is for Each Property to Be Financially Viable On Its Own? • May require repositioning of one or more properties • May affect staffing levels at properties • May affect delivery of services at properties • May affect how capital spending is prioritized

  9. Learning Activity #1 • What is the PHA’s mission? • Does the PHA have goals that guide the accomplishment of its mission? • Would more specific goals be helpful in attaining the objectives of asset management? What would they be?

  10. Creating an Asset Management Plan for Each Property • Current conditions • Long term plan (sometimes called an investment plan) with link to mission and goals • Hold and defer • Repair and hold • Upgrade (rehab) and hold • Reposition • Replace • Dispose • Tie plan to physical needs assessment (PNA) • Identify financial resources, including capital fund • Immediate plan (next 3 to 5 years), including fungibility • Link to annual budget

  11. A Look at Entitles, Roles and Function Entity Role Function Owner Policy/Investment Decisions PHA Board PHA Staff or Mgmt Company Management/ Administration Operator Oversight and Monitoring Regulator PIH Field Offices

  12. Key Information • The following information is essential to making good investment decisions: • Physical needs assessment (PNA) • Market data • Asset value • Possible funding sources

  13. PNAs A “good” PNA will identify and provide cost estimates for: Immediate physical needs Physical needs over the expected building viability term Also consider “as-is” versus “upgrade” options

  14. Washington Park PNA – Summary Report

  15. Learning Activity #2 The Karson Housing Authority receives $500,000/year under the Capital Fund program. It spends 10% on “administration” (management fee). Assume the rest is spent directly on capital work. Also assume that the agency provides about an equal proportion of its Capital Funds to Washington Park and Chapin Street, on a per-unit basis. • Approximately how many years will it take for Washington Park to meet current needs with available Capital Funds?

  16. Learning Activity #2 - Solution Approximately how many years will it take for Washington Park to meet current needs with available Capital Funds?

  17. Why Collect Comparable Market Data? • Establish flat rents • Better know the “competition” • Better inform investment decisions

  18. What Type of Market Data is Most Useful? • Information regarding the “competition” • Rents • Amenities and concessions • Occupancy levels, etc. • Information on the “neighborhood” • Trends • Demographics (incomes, etc.) • Supply • Demand

  19. Washington Park Market Data Summary Report

  20. Learning Activity #3 Consider the market data for Washington Park. • In their present condition, 2-brm units at Washington Park could rent for $500. With repairs, the units could command $525. With upgrades, rents could increase to $560. What does the relationship of these numbers imply? • As an income producing asset, Washington Park is currently valued at $1.2 million ($8,000/unit). In contrast, the as-is land value is $900,000. What is the significance of these two numbers? How important is market value to this project?

  21. Funding Sources The following are the main sources of funding to address public housing capital needs. • Operating budget* • Operating reserves* • Capital Fund • Financing proceeds (CFFP, OFFP, other) • Energy service contracting • Tax credits • Sales proceeds • Other

  22. Capital Fund Financing Program (CFFP) • Allows PHAs to leverage their Capital Fund (CF) grant (i.e., “grant acceleration”) • PHAs can use one-third of the CF grant to pay for debt service payments, with HUD approval • Loan terms can extend to 20 years • Proposed rule published July 18, 2007, but applications currently being approved on case-by-case basis

  23. Learning Activity #4 • The Karson HA's yearly CFP grant is $500,000 of which 1/3rd can be used for debt service under the CFFP, thus $166,667 is available • How much could the Karson HA leverage under the CFFP if they were to obtain a loan for 6% interest for the following periods using the amortization factors that have been provided: • 10 years (.13323) • 15 years (.10126) • 20 years (.08597) Hint - the loan amount can be obtained by dividing the CFP funds available by the amortization factor.

  24. Resources • Additional information on the Capital Fund, Capital Fund Financing Programs, Operating Fund Financing Programs, Physical Needs Assessments, etc., are available through Public Housing’s Office of Capital Improvements at: http://www.hud.gov/offices/pih/programs/ph/capfund /index.cfm

  25. Questions? • What questions do you have regarding any of the materials we have covered?

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