June 01, 2022
This edition of Developer Tips for Success features CEO of Bloc Global Group, Herschell Hamilton and Mike Carpenter, Principal and head of Bloc’s Development Division. Participation in the Low-Income Housing Tax Credit (LIHTC) program and other federal housing programs requires significant individual and team experience/expertise, a tolerance for financial risk, and an ability to obtain major banking and credit relationships. We hope hearing from successful AHFA developers will inspire and educate others who are interested in becoming affordable housing owners/developers or increasing their level of experience.
Q: How long have you worked in the affordable housing industry?
A: We initiated our first affordable project in 2006. This was a 100-unit apartment project in the Oxmoor Valley area of Birmingham. This project was delivered in partnership with Pennrose Properties of Philadelphia, Pennsylvania, and the Housing Authority of the Birmingham District (HABD).
Q: What inspired you to participate in developing affordable housing?
A: We became aware of the tremendous need for quality affordableand workforce housing at that time, and decided to focus time, attention, and resources to fill the need. To our knowledge in 2006, there were not many diverse firms domiciled in Alabama developing affordable housing, and we saw this as a way to serve our community.
Q: What are the key challenges or barriers to participating in this industry?
A: As with many diverse businesses, the greatest challenge is access to capital, and access to a track record needed to support application for funding from state and/or federal sources. Lack of access to capital is a compounded challenge for real estate developers, as projects require a developer to carry the financial burden for a project for two years or more before you get to a financial closing, where you begin to recover your costs and build toward project profitability.
Q: What are some of the challenges you’ve experienced along the way that have helped you grow and led to your expertise?
A: We were able to overcome the initial access to capital and track record challenges by doing strategic partner sourcing. We identified a firm that shared our passion for development in this area and worked with them to build our internal capacity and expertise over the long term. When we compete for projects, we work to understand local political and civic influences, which can sometimes be challenging, but we always pull together the best team to make a compelling case for our selection. Developing projects with Department of Housing and Urban Development (HUD) funding to public housing authorities using low-income housing tax credits (LIHTC) can be a complicated process. Again, we have teamed with national partners to help us navigate the requirements and in doing so have developed the expertise in-house.
Q: Please share any tips to becoming a successful owner and/or developer.
A: You must be assertive in your hunt for projects, and patient as you move through the development process (which includes project modeling, site due diligence, site acquisition, project funding, project construction, and project occupancy). From start to finish, a typical project could take 2-4 years before tenants occupy your development. You must have a strong team AND be well capitalized! This is an incredibly competitive industry. Be flexible and nimble. Real estate development is inherently full of unexpected challenges.
Q: What do you see as the greatest benefit of affordable housing?
A: Our developments provide quality housing options for working class families to live and raise their families in stable and neighborly environments. There is a dignity associated with a loving home, and families often need additional support to get on their feet and move toward true self-sufficiency. We vividly remember an energetic and spirited elderly woman in Memphis. At our ribbon cutting for the new senior housing development and with tears in her eyes, Ms. Jones said “I never thought in my wildest dreams that I would ever live in a home this nice.” As developers, we have a role in creating housing that makes life better for others. That is our greatest reward!
Q: Is there anything else that you would like to include?
A: We are enormously proud of the work that we do. To date, we have successfully participated in the delivery of over 3,000 housing units, both family and senior developments throughout the southeast United States. We appreciate the support of our public partners, public housing authorities, and state finance agencies like AHFA.
