Related Affordable on Preserving Affordable Housing
- Mar 04, 2013
New York—Matthew Finkle knows the importance of preserving affordable housing units. The new president of Related Affordable has preserved more than 9,000 units since he joined Related Companies in 2003. MHN talks to Finkle about his new position and his strategy for acquiring and preserving new affordable housing properties.
MHN: Congratulations on your new position. What are your top priorities as president of Related Affordable?
Finkle: Related has built a really good platform for affordable housing preservation going back to 1972. In the past 12 years or so, we’ve built a nice portfolio of preserved assets. The strategy going forward is twofold: One is to continue to excel at that business, which really involves buying transactions one deal at a time, because every transaction is unique and takes quite a bit of forensic analysis to figure out how to do a preservation play. Second is to take the strength of Related, which is our financial strength, and build the platform into new areas. That could include things such as buying portfolios of deals from owners who might otherwise look to sell one deal at a time. We approach them with our access to capital and take a big bite at one time.
We are also looking to expand our footprint quite a bit. We operate in 13 states and about six major metro markets, and we’ve historically moved into a new market based on a deal being available. Instead of reacting to opportunities, we’re going to become more proactive and define three or four strong target markets for us to be in. And those could be state-wide or within a state. By virtue of analyzing those markets and comparing that to what we’re good at, and the competition, we’re going to identify areas to expand. We’re also going to be talking to owners of assets who are willing to exit those deals by virtue of selling their interests. When you buy a property, you can either buy the asset or you can buy someone’s ownership interest in it. The challenge in buying ownership interest is that it’s not a position that can be mortgaged, so it’s somewhat difficult to finance. With our access to capital at Related, we can get access to deals and preserve them by virtue of being able to buy out the partners and then execute our long-term preservation play. Our idea is really to take our knowledge of the business and knowledge of our people, and marry that with the capital that we can bring to the table, and really amp up the business on an exponential basis, build the platform and continue to grow dramatically.
MHN: Do you know which areas in particular that you’re going to target?
Finkle: We actually don’t. For example, we’ve never done a transaction in Pennsylvania, and the nature of our business is that the programs that we use to preserve affordable housing are all state- and sometimes city-run programs, so they’re all a bit different, and they all have some nuances. For us to figure out if we should do deals in Pennsylvania means we need to study them. We need to figure out who else is doing business there and see if we would be able to be competitive and whether or not it makes sense financially and structurally to do those types of deals.
MHN: Last year, Related preserved more than 1,000 affordable units. What’s the plan for this year?
Finkle: For the past couple of years we’ve been the top two or three acquirer nationwide of affordable housing and preservation. I would expect us to remain there, if not hopefully take over the number one spot. One of the main aspects of our business is not only acquisition, but also preservation. Related is proud that we’ve never taken a project to market, so to speak, particularly here in New York. There are a lot of players out there who look to buy affordable housing properties and exit the affordability restrictions, and we do the exact opposite. We seek to work with HUD and other agencies to maintain that affordable [status]. And it’s important to us to do that—we’ve always done that since 1972 when the company was founded.
MHN: So you try to work with all the government programs.
Finkle: One of our core competencies is that we understand the programs exceptionally well, and the agencies we deal with, such as HUD on the national and local basis, they look at us as a sophisticated owner, buyer and preserver in New York, and this is the same, if not more so, in states such as Illinois, where we do a lot of preservation work. I think you really need to have that level of sophistication to be a player.
MHN: Is there anything you’d like to add?
Finkle: Related is really committed long term to affordable housing. [Related Chairman and Founder] Stephen Ross himself has developed a huge amount of affordable housing that we still look after, and it’s going to remain a core part of our business forever. I think that the emphasis that Stephen, [CEO] Jeff Blau and [Related President] Bruce Beal are placing on the affordable team, and the desire for us to increase the size, breadth and depth of our business is really a testament to their long-term commitment to this type of housing. Related is well known for the Time Warner Centers of the world and luxury apartment buildings, but they want us to be equally known for strength in affordable housing preservation.