Low-Income Housing At about the same time the company started its business, HUD decided that developers could use HUD’s financing programs with limited partnerships. “We fell into it. It provided a vehicle that didn’t require a great deal of investment on our part,” says Goldston.
The program enabled high-income investors to invest money, which The Wallick Cos. could in turn use as equity. The investors became limited partners and could use the tax losses and depreciation to shelter income from other investments. And, they could receive a return on their investment by paying less taxes.
The rates of return were usually greater than what the investors could get from other standard investments, says Goldston. Prior to 1969, if you used HUD financing you couldn’t use limited partnerships.
This new flexibility enabled The Wallick Cos. to make a business out of this program. “We became developers out of necessity. We couldn’t find enough third-party general construction work to keep everybody busy. So, we began a development operation,” he says.
In 1969, the company started to develop moderate- and low-income housing projects. It was able to take advantage of new HUD programs that were aimed at housing low-income residents. “We became the so-called experts,” says Goldston. “Jack Wallick [who died in 1995] was an engineer; he was the builder. I was a CPA. I learned all those programs inside out.”
While many developers avoid working with HUD because of its reputation of having a slow response time and a lot of red tape, Jim Carswell, the company’s CEO, points out that people who wanted to work with HUD stuck around and learned how to do it. “Yes, it’s a government program and, yes, there are bureaucrats,” he says. “But there are bureaucrats in every lending organization across the country, whether it be HUD or a bank.”
The key, he says, is to build relationships with the people with whom you work. “I don’t think it’s the programs that are the problems, you work around those. It’s the individual relationships with the HUD staff. They are people too. I think some of our people have great relationships with HUD’s staff. And that’s the reason we do so well with its programs,” says Carswell.
Adaptation Anyone who’s been in the real estate business for a while knows that tax laws and HUD programs change periodically; a successful company needs to know how to adapt to those changes.
“In 1985, the HUD Section 8 program was discontinued, so the company responded by expanding into congregate housing using the then new HUD programs for congregate housing, which was a moderate program known as 221(d)4,” Goldston says. “We went with what the marketplace had out there for us to do.”
In 1986, the Internal Revenue Act eliminated the tax angles that the company used to help finance projects. In addition, the company was faced with a situation where there weren’t any Section 8 projects, and congregate housing couldn’t be syndicated. So, in 1987, The Wallick Cos. built a luxury, high-rise condominium in downtown Columbus. That was the first and only time the company did this type of project. “We went in and did whatever the marketplace needed at that point in time,” says Goldston, “but moderate- and low-income housing is our forte.”
And, to continue to adapt to the real estate market, the company began working with the Low-Income Housing Tax Credit program in 1988.
“The economic conditions out there haven’t affected us in housing,” says Goldston. “If they were to affect us in housing a few years from now, we’d look around and see what we could do.” But, he points out, “There’s been a HUD housing program of some kind since 1937, and there’ll be something again.”
Expansion But, the company is not going to wait around for the next great financing program. Instead, it has expanded out of its core market – the Midwest – to the Southeast and Southwest to seek new opportunities with development and construction joint venture companies. This year, it plans to start separate management companies in the Southeast and Southwest.
“Until about four years ago, our philosophy about expansion was to expand out from the Columbus area into the surrounding Midwest and, specifically, in Arizona, in which we had a joint venture operation going [TA-Wallick Construction L.L.C.],” says Goldston. “The Arizona joint venture operation was the first time that we had done anything with another organization or in which anybody who was associated with the company ended up with a portion of the equity in that operation. Thanks to Carswell, we have moved to a philosophy that in order to expand, we had to put good people in those areas [into which] we want to expand and we had to give them a piece of the action as individuals.”
For Steven L. Tofel, president of TA-Wallick Construction, becoming The Wallick Cos.’ first joint venture partner was an easy decision. “They share the same high standards, integrity, consistency and fairness – they are ideal partners,” he says. “[Plus,] a lot of people will say they will do the right thing. But when it costs money, that’s when people fail. If [The Wallick Cos.] makes a mistake, they will correct the problem.”
For instance, there was a large beam that held the roof up over a pool that started to split in a large high-rise condo project, says Tofel. “They made good and replaced it. It cost a lot of money, but they came through.”
The countless stories of The Wallick Cos. coming in on time and on budget, and fulfilling its commitments led Mark Shoemacher to join the company. He is a former employee of the Columbus Housing Authority and now a principal in Partnership Equities Southwest L.L.C., the Southwest development arm of the Wallick Cos.
But Shoemacher also joined the company because “Goldston is extremely knowledgeable and you know when he says something, you can take it to the bank,” he says.
But in the end, Shoemacher stays with the company because of the integrity with which the company operates.
The example that sticks out most in his mind is an affordable housing project that The Wallick Cos. bid on in Logan, Ohio. “By the time we were ready to start construction, we knew we couldn’t build it for what we put on the table,” he says. “We could have walked away, but Sandy said ‘No, we have to build it,'” says Shoemacher. “We didn’t make any money on that project, but Sandy felt there was an obligation on the table. Our reputation and integrity was more important than the profit.”