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Asset%20Management%20of%20Debt%20and%20Equity%20Investments

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Title: Asset%20Management%20of%20Debt%20and%20Equity%20Investments


1
Asset Management ofDebt and Equity Investments
  • Presented by
  • Armando Pérez
  • Principal, Director of Asset Management

2
Headlines
  • More similarities than differences between debt
    and equity investments and how they are managed
  • The objectives and incentives of debt providers
    are determined by the structure of their
    investments
  • Understanding debt drivers is key to effective
    asset management and issue resolution whether
    you are the asset manager or the developer.

3
MMA Provides Equity and Debt
  • LIHTC Corporate Tax Credit Funds
  • Multi-investor, Private, Guaranteed
  • Debt Products
  • Construction loans
  • Permanent financing
  • Tax exempt bonds
  • One-Stop Shop for Affordable Debt Equity
  • Combined debt and equity teams
  • Unified application, underwriting closing
    process

4
So We Manage Debt Equity Products
  • MMA Equity Portfolio 1,950 properties
  • Tax Credits
  • Low Income Housing
  • Historic Rehabilitation
  • MMA Debt Portfolio 625 properties
  • Construction Loans
  • Bonds
  • Permanent Loans
  • Fannie Mae, Freddie Mac, HUD

5
Debt and Equity Have Similarities
  • Capital investments
  • In affordable multifamily property
  • Specified yield requirement
  • Long term
  • Impacted by asset performance
  • Dependent on developer strength

6
but Different Structures
  • LIHTC Investment
  • Ownership Interest
  • Pass-through entity
  • LP or LLC
  • Limited control limited liability
  • Tax-advantaged return
  • Tax credits and losses
  • Debt Capital
  • Mortgage loan
  • Secured
  • First lien position
  • Cash return
  • Debt service

7
So Focus and Aims Are Not The Same
  • Debt
  • Payment of debt service
  • Property performance
  • Liens
  • T I escrows
  • Default losses
  • Value of collateral
  • Equity
  • Yield
  • Credits and losses
  • Loss of ownership (recapture)
  • Long term viability
  • Property performance

8
MMA Asset Management
  • Oversees debt and equity investments under a
    single organizational structure
  • Teams are organized around property lifecycle and
    geography, not debt or equity products
  • Debt expertise is provided through specialization
    and processes

9
Asset Management Structure
Capital Transactions Team
Asset Management Team
Development Management Team
Stabilized Portfolio Team
Northeast
Southeast
  • Risk Management
  • Investment Performance
  • Workouts
  • Dispositions
  • Refinancings

Central
West
Admin. and Technical Support
Operations Team
Analyst Pool
Compliance Team
Tax Team
10
MMA Asset Management
  • Assigns one AM per property, regardless debt or
    equity product
  • Property monitoring activities are similar for
    debt and equity
  • Physical, management, financial reviews
  • Focus is on asset performance, which impacts both
    debt and equity

11
MMA Asset Management
  • Manages the portfolio from an investment
    perspective
  • AMs understand debt and equity and can translate
    how a given issue affects each of these different
    investments
  • Debt portfolio managers support this investment
    perspective

12
MMAs Investment Perspective
Property Life-Cycle Phases
First 18 to 24 mos. Next 6 to 12
mos. Remaining holding
period
  • Development
  • Due diligence
  • Construction
  • lease-up
  • Yield delivery
  • Loan conversion
  • Initial tax credit
  • compliance
  • Initial Operations
  • Capital and operating
  • escrow releases
  • Final tax credits (8609s)
  • Permanent loan sizing closing
  • Stabilization (DSC)
  • On-going monitoring
  • Stabilized Phase
  • Financial budget review
  • Tax return review
  • Physical inspection
  • Management evaluation
  • Compliance monitoring
  • Partnership loan agreement
    administration

Risk Management
Tax Credit and Debt Portfolio Managers
13
to Maximize Performance Mitigate Risk
RISK MANAGEMENT
PORTFOLIO MANAGER
ASSET MANAGER
  • Monitoring
  • Analysis
  • Performance
  • Tracking
  • GP/Borrower
  • Relationship
  • Problem Deals
  • Deal Strategies
  • Issue Resolution
  • Products
  • Capital
  • Relationships
  • Business Focus
  • Risk
  • Profitability

Leverage expertise Investment perspective Effectiv
e strategies
Investment performance Profitability
14
Final Words A Debt Perspective
  • Lenders make capital investments, but they are
    different than LP equity interests in a property
  • As capital providers, lenders have clear
    objectives and motivations
  • When there is a problem, understanding debt
    drivers is key to effective issue resolution
    whether you are the asset manager or the
    developer

15
Asset Management ofDebt and Equity Investments
  • Presented by
  • Armando Pérez
  • Principal, Director of Asset Management
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