By Osei Rubie, founder & president, National Standard Abstract
The multifaceted housing development sector of New York’s real estate market involves both the growing need for affordable and supportive housing, and heightened demand for market-rate housing.
Today, developers increasingly look to the joint venture partnership model to broaden their capacity for various projects, or to find greater opportunity for investment.
Having provided title insurance services for several complex transactions in this space, the utilization of joint venture partnerships is increasing for the development and preservation of affordable housing.
Joint venture partnerships continue to evolve, thereby expanding the landscape of affordable, supportive and market rate housing.
While the joint venture model has long been an option for housing developers, it has been used widely recently.
A joint venture partnership is established when two or more entities — typically a combination of nonprofit and for-profit housing developers — collaborate to pool resources and gain greater access to funding.
How has this trend grown? A study by the Supportive Housing Network of New York attributes the change to shortages in City-owned land and changes to housing finance and social service agency term sheets that permit for-profit entity involvement.
What is particularly interesting about the use of these partnerships is that as each player’s needs, objectives and resources vary, the partnership structures will vary from one deal to another to adequately meet those needs and objectives and protect the parties involved.
The resulting partnerships have undertaken strong projects throughout New York to meet the need for affordable housing and positively impact surrounding communities.
A joint-venture agreement that assigns rights and responsibilities appropriately from the start is crucial.
L+M Development Partners, a for-profit developer, says of its joint venture partnerships, “Partnerships are vital to the world of affordable housing and they allow us to better serve the communities in which we work. They are also a prime example of the whole being greater than the sum of its parts.”
Essex Crossing, a Manhattan development project, involves three for-profits: L+M Development, BFC Partners and Taconic Investment Partners, collectively known as the Delancey Street Associates Partnership.
It demonstrates the size and scope of some joint venture partnerships and economic benefits to the local community. It will include a new Essex Street Market, contractor opportunities for minority and women-owned businesses and 500 affordable rental units.
The South Bronx Overall Economic Development Corporation (SoBRO), a nonprofit developer, holds supportive-housing projects, among others, in its portfolio. One such project is the Jasmine Court Apartments. Developed with for-profit partners and a social-service provider, Jasmine Court is five stories with 115 units of supportive housing for formerly-homeless individuals.
In addition to the immediate community benefit of housing for the formerly homeless, such projects create employment opportunities for local residents, as City and State housing agencies often stipulate.
Nathaniel Montgomery, SoBRO’s Senior Vice President of Real Estate Development, highlights the impact of participation of diverse partners. “Each development project is different for a variety of reasons. Therefore, the benefits realized by the parties involved in the JV partnership are often predicated on the perceived value of the parties involved.”
He also points out the importance of the joint venture agreement and the role of legal counsel in structuring the partnership.
“The underpinning to a successful JV partnership is an experienced attorney. A well written JV agreement can reduce, and in some cases eliminate, any confusion as it pertains to the roles and obligations of each party to the agreement.”
Kenneth Morrison, principal of Lemor Development Group, a for-profit developer based in Harlem, offers an example of where a joint-venture partnership preserves affordable housing.
At the 15-year mark, developers reposition their housing portfolio. He explained that a non-profit without a strong balance sheet and operating capital would benefit from a partnership with a for-profit entity with the required capital and balance sheet.
Such a partnership presents a new investment opportunity for the for-profit developer and a new asset. The vetting process includes individual members of each entity, and can present challenges.
Further, Mr. Morrison states that the exit strategy must be clearly outlined from the onset to make the partnership successful.
National Standard Abstract and SoBRO will partner to bring a panel discussion on Joint-Venture Partnerships in Affordable, Supportive, and Market-Rate Housing on Thursday, April 7, at the Bronx Museum.
For details, email Osei@NationalStandardAbs.com