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Asset Management Strengthening your Portfolio

Asset Management Strengthening your Portfolio. Why non profit sponsors need asset management support And how to do it. Why Portfolio Strengthening?. 2006 Negative cash flow: 1/3 MF properties

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Asset Management Strengthening your Portfolio

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  1. Asset Management Strengthening your Portfolio

    Why non profit sponsors need asset management support And how to do it.
  2. Why Portfolio Strengthening? 2006 Negative cash flow: 1/3 MF properties 309 of 1,200 properties below required Debt Service Coverage: (< 1.15 DSCR adjusted for reserve) Portfolios bleeding NWOs; not feeding them More than 20% portfolios were negative Underwriting that limit Sponsor’s access to cash flow or asset management fees.
  3. Asset ManagementGoals Maximize Revenue for NWOs from portfolios Address problems in portfolios Identify opportunities to improve revenues Improve asset values Better underwriting for future deals .
  4. Key Asset Management Challenges Maximize property manager performance Using replacement and operating reserves efficiently Additional capital for repositioning Real estate taxes – valuation Excessive debt: aggressive underwriting Regulatory restrictions and changing demographics and markets
  5. Why Sponsors must asset manage Property Managers have no incentive to Manage under budget Lower expense by cheaper vendors/sources Maximize rents Provide long term planning Maximize income Setting management incentives Some HFAs and Equity investors are offering Sponsors incentives for performance
  6. Reserve Management Non profits are not capitalized to front capital improvements Managing capital improvement costs money: Sponsors should charge for oversight Reserve funds are based on ‘replacement not true need for capital
  7. Asset Management Restructuring As costly and complex as Development- Without development fees! Preservation is not supported strongly as new development Capital for green efficiency and competitive marketability is difficult to obtain
  8. What NeighborWorks is doing:Portfolio Strengthening Strategies Clinics: NWO Action Plan Identify stakeholders – who can share risk Develop operating benchmarks Design refinance or restructure plan Define capital investment strategy Grants Up to 3 years of grants through competitive applications Capital Grants for refinance, debt restructure, capital investment for operating efficienciesor market positioning Expendable Grants for unwinding partnerships; legal and accounting issues; technical assistance
  9. Organization Impact at 30,000 feet:Increased Annual Cash Flow $4.0 million more in annual cash flow with 29 pre-2011 PS groups on same properties 2005 to 2010 Even Better: $8 million overall increase in annual cash flow from when started in PS Equals 60% annual cash on cash return on $6.3 million in NWA investment
  10. Portfolio Impact at 10,000 feet: Cash Flow Impact Cash Flow for PS Groups from start 10 of 15 NWOs starting out negative are now positive 23 of 29 NWOs show positive cash flow 4 NWOs show decline or negative cash flow Same Properties: 2005 to 2010 Non-PS NWO Portfolios: $13 million to $15 million in CF: 15% growth Pre-2011 Portfolios in PS: $30,000 to $4.1 million: 1300%
  11. Property Impact at 1500 feet Positive / Negative Performing Properties 16 of 29 PS NWOs show fewer negative and more positive performing properties 2005 to 2010 8 of 29 show no change; 5 show decline Performance Change Debt Service Coverage 18 NWOs in PS show a positive impact in DSC 8 NWOs show decline
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