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LIHTC Operating Cost Trends

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LIHTC Operating Cost Trends

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  1. LIHTC Operating Cost Trends Michael Novogradac, CPA Managing Partner 2014 Fall Industry Meeting Novogradac & Company LLP Hilton Portland and Executive Tower October 7-8, 2014 Slides prepared by

  2. Outline Why Do We Care? Data Details Findings Expenses, In-Depth Other Observations

  3. Why Do We Care? www.novoco.com

  4. Sensitivity to Changes in Annual Expenses www.novoco.com

  5. Leverage Ratio: Market Rate vs. LIHTC $11,418 OPEX is 55% of revenue at year 16 OPEX is 82% of revenue at year 16 $8,000 $8,074 $7,793 OPEX is 75% of revenue at year 1 $6,837 $5,460 OPEX is 50% of revenue at year 1 $5,920 $6,388 $6,232 $4,100 $4,000 $4,400 Year Sources: IREM/REIS, AMI Growth Estimates, Novogradac Valuation Database

  6. Data Source Information AUDITED FINANCIALS 7% 93% Over 2,100 Properties Over 585,000 Units LIHTC Market Rate www.novoco.com/products

  7. Data Source Information 2013 data submissions… are due Oct. 31,2014 Look for an update in February of 2015! Current dataset 2010 2011 2012 2013 2014 2015 www.novoco.com/products

  8. What Have We Found? www.novoco.com/journal

  9. What Have We Found? www.novoco.com/journal

  10. LIHTC Operating Expenses Growth is Outpacing Other Growth Indicators www.novoco.com/products

  11. Median LIHTC Property Operating Expenses by Category 2010 Total: $4,162.68 2011 Total: $4,324.64 2012 Total: $4,440.27 2010 2011 2012 www.novoco.com/products “Same Store Analysis” Used

  12. Median LIHTC Property Operating Expenses by Category Property Insurance $225 $231 $262 5.4% 5.3% 5.9% 2010 Total: $4,162.68 2011 Total: $4,324.64 2012 Total: $4,440.27 2010 2011 2012 www.novoco.com/products “Same Store Analysis” Used

  13. Median LIHTC Property Operating Expenses by Category Property Insurance Real Estate Taxes $259 $253 $281 6.0% 5.7% 6.8% 2010 Total: $4,162.68 2011 Total: $4,324.64 2012 Total: $4,440.27 2010 2011 2012 www.novoco.com/products “Same Store Analysis” Used

  14. Median LIHTC Property Operating Expenses by Category Property Insurance Management Fees Real Estate Taxes Tied to change in rental income $419 $434 $394 9.8% 9.7% 9.5% 2010 Total: $4,162.68 2011 Total: $4,324.64 2012 Total: $4,440.27 2010 2011 2012 www.novoco.com/products “Same Store Analysis” Used

  15. Median LIHTC Property Operating Expenses by Category Property Insurance Management Fees Real Estate Taxes Administration $565 $560 $548 13.2% 12.6% 13.1% 2010 Total: $4,162.68 2011 Total: $4,324.64 2012 Total: $4,440.27 2010 2011 2012 www.novoco.com/products “Same Store Analysis” Used

  16. Median LIHTC Property Operating Expenses by Category Property Insurance Management Fees Utilities Real Estate Taxes Administration $728 $768 $780 17.5% 17.6% 17.8% 2010 Total: $4,162.68 2011 Total: $4,324.64 2012 Total: $4,440.27 2010 2011 2012 www.novoco.com/products “Same Store Analysis” Used

  17. Median LIHTC Property Operating Expenses by Category Property Insurance Management Fees Utilities Real Estate Taxes Administration Repair & Maintenance Repair & Maintenance vs. Replacement Reserves? $706 $736 $645 16.6% 16.3% 15.5% 2010 Total: $4,162.68 2011 Total: $4,324.64 2012 Total: $4,440.27 2010 2011 2012 www.novoco.com/products “Same Store Analysis” Used

  18. Median LIHTC Property Operating Expenses by Category Property Insurance Management Fees Utilities Real Estate Taxes Administration Repair & Maintenance Payroll $1,131 $1,100 $1,163 26.2% 26.2% 26.4% 2010 Total: $4,162.68 2011 Total: $4,324.64 2012 Total: $4,440.27 2010 2011 2012 www.novoco.com/products “Same Store Analysis” Used

  19. Operating Expense Change Over the 3 Years “Same Store Analysis” Used

  20. Operating Expense Change Over the 3 Years “Same Store Analysis” Used

  21. Comparing Acq/Rehab Properties with New Properties www.novoco.com

  22. Administrative Costs Per Unit LIHTC Properties vs. Market Rate Properties www.novoco.com/products

  23. LIHTC Property Operating Expenses Slightly Decline as the Size of the Property Grows 50 units: $4,937.22 200 units: $4,768.68 300 units: $4,659.54 100 units: $4,880.39 Number of Units www.novoco.com/products

  24. LIHTC Property Administrative Expenses Also Slightly Decline as the Size of the Property Grows 50 units: $709.46 200 units: $585.93 300 units: $515.78 100 units: $665.63 Number of Units www.novoco.com/products

  25. www.novoco.com/products

  26. www.novoco.com

  27. BIG DATA BIG DATA Robust Data VS. www.novoco.com/products

  28. Keep Up to Date on Future Editions! www.twitter.com/novogradac

  29. Questions? ? www.novoco.com

  30. LIHTC Operating Cost Trends Michael Novogradac, CPA Managing Partner 2014 Fall Industry Meeting Novogradac & Company LLP Hilton Portland and Executive Tower October 7-8, 2014 Slides prepared by