12 Things Developers and Asset Managers Can Do—Together—to Create Operationally Resilient Properties
Operating conditions for rent-restricted affordable housing are extraordinarily challenging and volatile today, as we’ve discussed previously on this blog. The construction market has its own volatility challenges.
Within the funding system we have, developing a project that is structured to withstand this wild environment and sustain operations over time is (I’m sorry to say) not easy in 2025. Many projects coming online are faltering out of the gate.
But some projects are launching on better footing. And when they do, it is in part because development teams are bringing an operational lens to the development process.
At the 2024 Housing Oregon conference in September, I invited three highly experienced asset managers to share how their housing teams are approaching development differently.
The panelists offered practical tips on how developers and asset managers can collaborate, at every phase of the development process, to bolster the operational resiliency of affordable housing properties being planned today.
They are: Mary Eileen Langsdorf Hanson of Community Development Partners, Melissa Baker of Enterprise Community Investment, and Natalie Thornton of HDC (then with Community Partners for Affordable Housing).
This article summarizes some of their excellent advice. You can watch the video of the whole panel discussion above—and find more videotaped presentations on affordable housing topics on our Resources for Housing Professionals page.
Feasibility Phase
Is your proposed development feasible to finance, build, and operate? Does the development opportunity align with the sponsor organization’s mission and financial goals? Here are two ways developers and asset managers can work together to reach a go/no-go decision:
Sketch out realistic operating projections. Your project’s operating budget will be highly uncertain at this point in the development process. But often, more is knowable than it may appear.
Before greenlighting a project for predevelopment, delete wishful operating assumptions from the project proforma. Now, not later, is the time to gather real market data and to project all essential expenses, including adequate staffing of resident services and asset management.
Consult multiple sources to find truly relevant comparison properties and to stay ahead of market trends. Asset managers, use your networks to find high-quality data and vet assumptions. Tips:
On the income side, don’t automatically plug in the project’s most restrictive program max rents! Consider that in the Portland-metro area’s softening rental market, market-rate units are renting at or below HUD max rents at 60% AMI today. A rent-restricted 2-bedroom unit cannot compete against a similarly priced market-rate 2-bedroom with superior amenities.
On the expense side, use free resources such as Cohn-Reznick’s 2023 Affordable Housing Tax Credit Study and sources such as Enterprise to get current median operating expense data for affordable properties and guidance on market trends. Hook up with the Property and Asset Management Work Group (PAMWG), a statewide peer-learning group facilitated by HDC, to access more insights and property-specific data.
Plan and implement a cross-disciplinary investment review process. Form an investment committee (or just pull together the right people) to inform your feasibility analysis and guide a decision about whether to proceed. Invite folks from development, accounting and finance, and asset management to participate. Create a formal or informal process to explore key questions and reach a recommendation.
Some discovery questions for your investment committee to consider:
What lessons did we learn from our most recent development?
What practical assumptions and guidelines should inform the development proforma? (E.g., “Eliminate 1-bedroom units at the 60% set-aside, because we know they are challenging to lease.”)
Would this development be subject to jurisdictional mandates (e.g., inclusion of ground-floor commercial) or other conditions that could distract from our mission?
Some evaluative questions:
Is this development opportunity a good fit for our organization and the communities we serve?
Is the proposed partnership deal structure one that we can effectively manage and oversee for the lifetime of the building, not just during the tax-credit timespan?
Predevelopment Phase
There’s nothing “pre-“ about predevelopment. Most of the important decisions about your project will be made during this phase, major funds will be spent, and binding contracts will be signed. As in feasibility, it’s critical for asset management to be at the table. Two of the many tasks that development and asset management should do jointly before a project closes financing:
Carefully review partner agreements and renegotiate as needed. Work collaboratively to ensure that every line of the property management agreement and limited partner agreement (LPA) is carefully reviewed and terms are negotiated as favorably as possible.
Remember, your housing team will be on the hook for whatever the LPA says, regardless of who is in the investor chair at Year 15 Exit (if it is a LIHTC deal). It is essential that asset managers pay close attention to Year 15 exit terms—don’t count on attorneys to use previously standard industry boilerplate—and to push for the cash-flow waterfall (usually noted as “Distribution of Cash Flow” in the LPA) to distribute any fees to the non-profit sponsor first.
Revisit the lease-up budget and lease-up reserve account. (Then increase both.) The domino effects of an underfunded, less-than-expertly coordinated lease-up could be disastrous for your project, endangering stabilization and tax-credit delivery. Managing these risks requires close collaboration among all players on your development and operations teams.
Empower asset management to carefully review the credit delivery schedule. Make sure you’ve established a more-than-ample lease-up budget and funded a robust lease-up reserve, using input from property management and data from recent actuals. Know what the plan is when—not if—construction completes later than anticipated and the lease-up hits roadblocks.
Construction Phase
When it comes to multifamily housing design and finishes, asset managers know a ton about what works and what doesn’t for different resident populations, property management, and resident services. Besides which, they need to understand the physical asset they will be responsible for maintaining. For both reasons, development and asset management should be in close communication during the construction phase.
Make tough calls and respond to crises in a hurry. Construction delays at a recently developed project were causing the developer and contractor to make haste, leading to construction errors and gaps. When it was discovered that there was an issue with failing windows, asset management stepped in and paid for a third-party forensics professional to document the issue—thus ensuring, as the keys were handed over, that the deficiencies would be addressed.
At another project, construction pricing went up, and a decision was made to remove most of the security cameras from the construction budget. Asset management was the voice in the room recommending that electrical wiring for the cameras be installed as planned, so as to vastly reduce the cost of security improvements later.
When there’s no time to lose, a developer may be tempted to leave asset management out of the loop—but often that’s exactly when it’s wise to pull asset management in.
Bring your organization’s housing design manual to design meetings. You have a housing design manual, right? It’s where your housing team stores all those great nuggets of wisdom, like whether to use rubber cove base or wood trim in bathrooms and which controlled access systems work best. It addresses your housing program’s basic design standards, e.g., “always include at least 18 inches of counterspace next to the kitchen range” and “always install bathroom floor drains in PSH units.”
A housing design manual is a great resource to have when your architect asks for input, pronto, about unit layouts and finishes. If your organization has yet to invest in creating one, now is the time to start drafting it.
Lease-Up/Closeout Coordination
Everything you’ve done so far to get development and asset management working together will set you up for a successful lease-up. But there is still more to do. Two crucial joint responsibilities:
Refine and implement a lease-up plan, starting 6 to 8 months before TCO. The lease-up team should be working to pre-lease units 60 to 90 days before a project receives its temporary certificate of occupancy (TCO). In the current environment, any delay in getting units occupied will increase the project’s risk of hitting potentially devastating stabilization challenges.
A lease-up is an operation unto itself, which can’t be implemented overnight or in a vacuum. It takes time to place and schedule short-term staff—and they might become unavailable if construction delays shift the lease-up timeline. To ensure the speediest possible lease-up, development must keep asset management in the loop; and both teams must collaborate to prevent snags and solve problems creatively.
Book expenses and revenues correctly. As with a speedy lease-up, accurate accounting increases a property’s ability to stabilize and convert to permanent financing. Development and asset management should both carefully review the project’s financials every month during the lease-up/close-out period. Are any development costs being booked as operations costs? If so, work together to re-book them to the correct cost centers.
Keeping accurate books is essential to understand the project’s operational finances, to identify and address problem issues, and to demonstrate to funders and investors that the project is ready to convert.
Every Phase
Here are four ways that asset management and development teams can successfully collaborate throughout the whole development process.
Make collaboration possible by doing it efficiently. Use technology and thoughtful planning to bring relevant voices to the table without inviting every person to every meeting. Make information available so that folks can do work asynchronously.
Manage information flow, don’t obstruct it. The development project manager plays an essential role managing communication and information flow among team members. But consider empowering project team members (e.g., architect and asset management) to communicate and share information directly, when needed. That way, communication can happen even when a project manager is juggling a million things during intensive periods in the development process.
Come prepared. Reduce the need to make hurried one-off decisions during the busiest periods of the development process. Invest time, outside of the development process, to create general organizational standards for anything from site selection to building design.
Use your power to negotiate—and to say no. Recognize that everything is negotiable. When policies and conditions are unfavorable, you have a right to push back. If a development opportunity doesn’t meet your required conditions, let it go.
Review
Ready to review? Below are the 12 things listed above that asset managers and developers can do together to create operationally resilient properties. Watch the video to get even more advice and tips.
Feasibility
Sketch out realistic operating projections.
Plan and implement a cross-disciplinary investment review process.
Predevelopment
Carefully review partner agreements and renegotiate them as needed.
Revisit the lease-up budget and lease-up reserve account. (Then increase both.)
Construction
Make tough calls and respond to crises in a hurry.
Bring your organization’s housing design manual to design meetings.
Lease-Up/Closeout Coordination
Refine and implement a lease-up plan, starting 6 to 8 months before TCO.
Book expenses and revenues correctly.
Every Phase
Make collaboration possible by doing it efficiently.
Manage information flow, don’t obstruct it.
Come prepared.
Use your power to negotiate—and to say no.
Need help improving the resiliency of your properties? Visit HDC’s Asset Management page to contact our asset management team. We’re here to assist you!