BY SEAN CARPENTER— Are you finding deals are getting tougher to close with the new restrictions banks are pushing on applicants? Is it taking longer to get a deal done? Have you stopped looking for new projects to acquire?
The last few years have been a very difficult period in real estate history. Some markets have declined upwards of 50 percent in value with no light at the end of the tunnel. Not very good news if you started your “buy and hold” in 2007, but will certainly work better for you now as you pick properties up for a fraction of their price of years ago.
Now as cap rates are heading into the two digits in some larger metropolitan areas, while dipping to 5% in others, this could be a market they have never experienced.
So what can we do to get some of these declining assets? The banks that were lending up to 125% a few years back have either left the market or cap an acquisition at 70% loan to value. The remaining 30% is up to the investor. But raising the 30% slows down transactions and your friends in Congress have attempted to help.
In July 2008, the President signed the Housing & Economic Recovery Act (HERA), which among other things, provided $4.5B to all 50 states, some territories like Puerto Rico and the Virgin Islands, and the District of Columbia, to combat neighborhood declination by foreclosure. These funds, known as the Neighborhood Stabilization program, were supposed to help investors, both for and non-profits, buy and rehabilitate foreclosed buildings in order to prevent the stable households from losing too much value. In February 2009, Congress added an additional $4.5B to the program, now known as NSP II, to further carry out the NSP mission.
This is nothing new. The federal government has been investing in real estate for years, at least since HUD was conceived during the Johnson administration in 1965 as part of the Great Society initiative. HUD allocates through the individual States and territories upwards of $20B per year to facilitate economic development and housing activities. Additionally, many states have programs of their own that can match federal funds in addition to over $5B in tax credit programs available to stimulate acquisition, rehabilitation and new construction.
Sean Carpenter is the President and Chief Executive Officer of Shamrock Development Associates, Inc., Government Deal Funding, LLC and all of its affiliated companies. Shamrock is a full scale development, consulting, public relations, corporate marketing, and asset/ property management firm.
His knowledge of public programs has brought him to teaching opportunities to share his insight throughout the United States.
Sean began his career in real estate as an Acquisitions Officer for a national Low Income Housing Tax Credit syndicator, working on LIHTC transactions in the Southeastern and Northeastern regions of the United States. Additionally, he was an Asset Manager at Massachusetts Housing Finance Agency where he maintained a portfolio of federally subsidized properties by conducting annual inspections, regular financial and rent increase analyses, and participated in workout and recapitalization strategies. Most recently, Sean has served as a Project Manager with a national development company focusing on the preservation of expiring use affordable housing. Mr. Carpenter was also on the staff of a Massachusetts State Senator working with constituents on a wide variety of public policy issues.
Sean is a graduate of the University of Massachusetts at Dartmouth where he holds a Bachelor of Arts Degree in Political Science. Additionally, he holds a Certificate of Real Estate Finance from Boston University. He has previously served on the University Of Massachusetts Board Of Trustees, Southeastern Massachusetts University Building Authority. Additionally he serves a number of businesses, organizations and not-for profit agencies in an advisory, financial, organizational and business management role. His community involvement includes serving as a Representative Town Meeting Member and a call/volunteer firefighter, and various community boards in the Town of Auburn, MA. Mr. Carpenter is also a member of the Sigma Tau Gamma Fraternity and is a published author.