A longtime Atlanta-area affordable housing developer is going out of business after 25 years.
Faced with too many challenges, Progressive Redevelopment, Inc. (PRI), once one of the largest nonprofit owners of affordable housing in the state, expects to transfer the last of its properties within the next six months.
It has been a slow wind down for the organization, which has given President Bruce Gunter time to reflect on what went wrong and the lessons learned. He cites the old cliché of success being a poor teacher. "I've been in a very good school the last couple of years," he says.
At PRI's height in 2009, the organization had 27 properties, 150 employees, and $17 million in revenue. During its long history, it has developed 4,200 units in Georgia on its own, in partnerships, or as a consultant.
PRI was a nonprofit that walked the walk, trying to serve the poorest individuals. About 44 percent of its units were rented to very low-income residents.
In a cruel twist, that became part of the problem for PRI. There were too many very low-income residents without adequate rental subsidy in too many older properties without equity for capital improvement, according to Gunter, who co-founded the organization.
Most of these deals were done 10 or 12 years ago. "We locked in those very low rents," he says. "Typically, we would buy an older property and rehab it. The rehab standards 12 years ago were not as high as they are today. We didn't have enough rental subsidy and capital structure. The bottom line is if we did the same thing today, they would have been done a lot better."
The lower the income profile being served in a development also usually means more layers of financing are needed and more regulations are involved. This resulted in compliance demands that outpaced PRI's administrative capacity, according to Gunter.
The organization began adding larger properties to diversify its portfolio a few years ago, but that strategy came too late.
The recession also smacked Atlanta hard. PRI's development revenues declined, and its collection losses increased.
PRI's demise offers several valuable lessons.
Gunter says the firm should have hired an asset manager earlier. Many of the problems, which originated in property management, went undetected for too long.
He also says that as a nonprofit it should have built relationships with foundations early on. "We had a good reputation and a strong mission that foundations would have appreciated," he says.
Like many other developers, PRI had grown attached to the low-income housing tax credit program and focused its attention on that funding stream. Having foundation support would have helped provide alternative revenue.
If there is a silver lining, it's that most of the properties have been transferred to new owners and will come out stronger. One project has been bulldozed to create green space, and another is slated for demolition. At the beginning of March, PRI had six properties left that it was trying to get into good hands.
Gunter says starting and working at PRI provided "a chance to leave an impact."
"The takeaway is one of gratitude," he says. "We were around for 25 years in some of the toughest situations."