Who wins the most competitive tax credit awards in Florida?

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Who wins the most 9% tax credit awards in Florida? The question proved difficult to answer and some major caveats are in order. During the three-year period of 2014, 2015, and 2016, the Florida Housing Finance Corporation received 702 applications for 9% tax credits. The Florida Housing Board of Directors approved preliminary awards for 85 of these. Subsequent protests led to final orders and settlements which resulted in a few additional awards, as well as some of the 85 awarded deals being deemed ineligible. I used applications and preliminary awards for the information below, I’ll correct for additional awards and ineligible applications another time. The award amount comes from preliminary awards (based on figures provided by applicants), not from final credit underwriting reports.

During the period evaluated (2014, 2015, and 2016) it was often difficult to tell exactly who was applying for tax credits. Actual applicant entities are created for a specific property; similarly, the names of developer entities listed in applications often don’t reflect the parent organization. For this reason, I used the contact person listed in the application. One person who is especially active (and successful) changed organizations during the time-period evaluated. I decided to combine his applications from both employers, which include the same PHA co-developer. His former employer submitted additional applications, but did not win any preliminary awards. Obviously, in this case, the person and not the organization is critical.

Another name appeared as the contact for several applications, some of which were successful. The name is listed on CAHP’s website as a member associated with an organization with which I am unfamiliar. Searching for the applicant and developer names on Sunbiz, I found that McCormack Baron Salazar is part of the ownership structure for each of them. Accordingly, I added that organization to the developer column for those applications.

A few organizations submit applications under different contact names; I consolidated these into a single record for the rankings below. There are some practical difficulties gleaning this information from Florida Housing’s website. Several applicants write their names differently on different applications. For example, “Matthew” is sometimes “Matt”; “Elizabeth” is sometime “Liz”; and “Kimberly” is sometimes “Kim”. Similarly, “Jr.” and “Sr.” appear inconsistently and sometimes wihtout the period. As I imported these names into Excel, I made the names consistent, removed all periods, and trimmed excessive spaces (e.g. “John Q.   Doe” became “John Q Doe”). To keep things simple, I limited the evaluation to the Geographic RFAs, Preservation RFAs, and Revitalization RFAs.

The following RFAs were evaluated:

RFA 2014-104, RFA 2014-106, RFA 2014-114, RFA 2014-115, RFA 2014-116

RFA 2015-104, RFA 2015-106, RFA 2015-107, RFA 2015-108, RFA 2015-111, RFA 2015-113

RFA 2016-110, RFA 2016-113, RFA 2016-114, RFA 2016-116

I did not include solicitations which involved non-competitive funding, credits paired with SAIL, or other more narrowly focused RFAs (e.g. housing for persons with a disabling condition). In order to focus in on regular competitors, I filtered out all applicants who had submitted fewer than 4 applications over the three-year period.

The results are presented below in three ways: 1) highest percentage of wins (preliminary awards as a percentage of applications submitted); 2) total number of preliminary awards; and 3) total amount of the preliminary awards (annual tax credit requested in application).

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A quick summary of applications reveals a few important pieces of information.

First, there are very few active organizations consistently pursuing tax-credit financing in Florida. Only 37 organizations submitted 4 or more tax credit applications during 2014, 2015, and 2016. Of those, only 28 won a single preliminary award. Among those 28 organizations, the median developer submitted 13 applications over the three-year period. Those applications yielded the median developer 2 preliminary awards; a success rate of 15.4%.

Second, those few active professional developers utilize very different strategies. HTG submitted 26 applications (55%) more than Southport, but ended up with the same number of preliminary awards. However, HTG’s deals are much larger, and the total amount of its preliminary awards is 63.7% larger than that of Southport. (I’ll evaluate the geographic dispersion of applications and wins another time. Presumably there is a relationship between the firms’ performance and the areas where they operate). HTG stands apart in its successful use of what I’ll call a “brute force” strategy. Although all of the top ten developers – by any of the measures above – submit many more applications than their competitors, HTG submitted 5x the median number of applications. Although the company’s success rate is well below median, the sheer volume of applications yielded a full pipeline of deals (without even counting any 4%/SAIL awards). Conversely, some organizations, especially those which frequently partner with PHAs, have success rates 2-3x that of the median competitor.  Norstar won 6 preliminary awards from just 20 applications. Roughly half of the regular competitors submitted around 10 applications during the three-year period, winning 1 or 2 preliminary awards. Again, an important caveat is that the protest process can lead to additional funded deals. Therefore, this quick evaluation does not reflect each and every 9% tax credit award in Florida.

Third, some developers are more successful than others. Given the role of the “lottery” as a tie-breaker, as well as the impact of the county award tally, it may be more accurate to say that some developers are luckier than others. Either way, some developers persevere in the face of loss over and over. One developer submitted 30 applications during the three-year period without winning a single preliminary award. That means someone spent $90,000 in application fees, did not win, and continues to compete for tax credit funding. Conversely, Atlantic Pacific submitted just 23 applications, which yielded more than $100,000,000 in tax credit equity.

Thank you for reading. Feel free to check out the data I used. If you see any errors, please leave a comment below.