HUD Albuquerque Multifamily MFT – Multifamily for Tomorrow August 20, 2014 ` Presented by Michael Gamez, Project Manager

MFT – Multifamily for Tomorrow By 2016, the Office of Multifamily Housing (MFH) will complete a transformation of the way we work from a 1970s operating model to a 21st-century model that: Applies industry best practices Improves our ability to manage risk Increases accountability Improves national consistency

MFT – Multifamily for Tomorrow Workload Sharing Account Executive Model Streamlined Organizational Model

Workload Sharing Distribute workload evenly across the country Address fluctuations in work volume Reduce wait time for customers

Account Executive Model Multifamily Asset Management Account Executive Today’s Project Managers Focus on non-troubled properties Troubled Asset Specialist New position Focus on troubled properties

Streamlined Organizational Model Consolidate 17 hubs to 5 hubs Streamlined decision-making Enhanced accountability

Timeline MFT will take place over five Waves All Waves will be complete by Spring 2016 Wave 1 will be completed in January 2015 (Albuquerque, Des Moines, Houston, Little Rock, New Orleans, Oklahoma City, Omaha, St. Louis, San Antonio, Shreveport, and Tulsa) MFT will take place over five Waves

Three types of Action Plans: When a property is classified as Troubled (rating of 1-5), a formal Action Plan is required to identify specific steps to improve performance. MPIP: Marketing and Physical Improvement Plan EMPIP: Expense Management and Process Improvement Plan CP: Capital Plan Three types of Action Plans:

Marketing and Physical Improvement Plan For revenue issues Goal: Increase revenue by raising community awareness, better targeting tenants, and improving the property’s appeal and safety. Indicators: Poor curb appeal Poor reputation Low occupancy & high turnover Low rents Lack of amenities Criminal activity Tenant complaints

Expense Management and Process Improvement Plan For expenses issues Goal: Reduce waste and inefficiency in the project’s budget and operations. Indicators: Increasing operating expenses High accounts payable balance Improper distributions and withdrawals of project funds Poor Management and Occupancy Review (MOR) rating Failure to file annual financial statements Failure to maintain property Unresponsive to tenant and HUD inquiries

Capital Plan For debt issues Goal: Improve the viability of the project through the reduction of debt service or injection of additional funding. Indicators: Difficulty paying debt service High interest rate High loan age Low reserve for replacement account balance Project is in need of extensive rehabilitation

Developing an Action Plan Discuss HUD’s observations and solicit owner’s feedback Establish reasonable benchmarks Prioritize tasks Establish timeline HUD initiates meeting with owner Submit monthly updates to HUD Assess effectiveness of plan Close monitoring, extend timeline, or take further action Once Action Plan is approved

Marketing and Physical Improvement Plan (MPIP) Case Study #1 Marketing and Physical Improvement Plan (MPIP) Marble Apartments – Carlsbad, NM 40% vacancy rate Extended vacancies Vacant units are boarded up Frequent burglaries and drug activity Frequent tenant complaints about lighting in parking lot Negative publicity in local newspaper What would you do?

Marketing and Physical Improvement Plan (MPIP) Case Study #1 Marketing and Physical Improvement Plan (MPIP) Marble Apartments – Carlsbad, NM Meet with local law enforcement and review calls for service logs Set up police substation Improve curb appeal to attract new residents Improve lighting, gates, and surveillance systems Assess tenant selection criteria and house rules Update Affirmative Fair Housing Marketing Plan Hire an experienced management agent

Expense Management and Process Improvement Plan (EMPIP) Case Study #2 Expense Management and Process Improvement Plan (EMPIP) Bosque Apartments – Santa Fe, NM Accounts payable balance of $180K Contract with Billy’s Landscaping for $10K monthly Unpaid property taxes Annual financial statement is past due Owner does not respond to HUD’s phone calls or emails Unauthorized withdrawal of $30K from reserve account Deferred maintenance issues Overgrown weeds What would you do?

Expense Management and Process Improvement Plan (EMPIP) Case Study #2 Expense Management and Process Improvement Plan (EMPIP) Bosque Apartments – Santa Fe, NM Submit Monthly Accounting Reports to closely monitor expenses Examine contracts and compare rates Examine process for obtaining and awarding contracts Develop preventative maintenance schedule Develop prioritized plan of action to reduce payables Develop formal staff training program Hire an experienced management agent

Case Study #3 La Cumbre Apartments – Las Cruces, NM What would you do? Capital Plan (CP) La Cumbre Apartments – Las Cruces, NM Difficulty making monthly mortgage payments 95% occupancy rate 12% interest rate Mortgage matures in 2020 Low reserve for replacement account balance What would you do?

Case Study #3 La Cumbre Apartments – Las Cruces, NM Capital Plan (CP) Contact lender to lower interest rate or extend amortization period Refinance and rehabilitate the property Request approval for owner advances Sell property to another entity with the ability to infuse capital

Michael Gamez, Project Manager Contact Information Michael Gamez, Project Manager 505-346-6932 Michael.A.Gamez@hud.gov