Redevelopment Before A.F. Evans acquired Monterey Pines, the U.S. Department of Housing and Urban Development (HUD) considered it the most troubled project in the Western region. “Based on our reputation, HUD allowed us to step in and buy the property,” says Robertson. “We put together a strong financial plan to raise money to do [$25 million worth of] improvements to the property.”
With all of the company’s projects, the team has a clear focus on what it needs in order to develop and finance a project, says Warren from CHFA. “They’re very practical and pragmatic. When issues and problems arise, they have solutions and they are reasonable ones that everyone [working on the deal] can live with.”
The typical projects the company acquires are not badly maintained, they’re just 20 to 25 years old, explains Evans. If the budget allows, new energy efficient windows are added. However, upgrades usually include renovating kitchens and bathrooms and changing the carpets and painting, he says. More common exterior improvements include replacing siding, adding pitched roofs and balconies and redoing the landscape, adds Robertson. When appropriate, the company adds a swimming pool and community center.
At several properties, the company installed computer technology centers that allow residents to obtain computer literacy training, give them access to the Internet and offer literacy classes.
A minimum upgrade will cost the company anywhere between $3,000 to $5,000 per unit. More comprehensive rehabs can cost between $20,000 to $30,000 per unit.
Future Prospects In an age of economic uncertainty, Evans is glad that he designed the company so that overhead costs are paid from the cash flow and property management fees. As a result, the company is not compelled to develop anything, he says.
“Right now, interest rates are low and, although the economy is down, we’re still looking at developing properties that will come on line two years from now,” says Evans. In addition, the company continues to look for acquisition opportunities [in its current region as well as Arizona and Las Vegas], but will acquire only at a cap rate of 8.5 or better.
And in the true spirit of a medium-sized company, A.F. Evans will continue to take opportunities as they come along. In the early ’80s, the company became more involved in market-rate projects. In 1989 A.F. Evans took on an assisted living project because it was being developed in Walnut Creek, Calif., close to where Evans lives and he was very familiar with that particular area.
The company’s goal is to build more inner-city developments or market-rate housing, less affordable housing, some homeownership – either condominium or single family – and at least a few more senior projects. However, the future plan will be to focus on “opportunities that present themselves,” he says.
No matter which direction the company chooses, some things will never change, such as the struggle to raise capital. “We’re constantly looking for sources of capital and partnerships,” says Evans. “Some companies do it by merging or going public and that is not something that we want to do. We want to stay private and, therefore, we have to generate all of the capital internally.”
Having more access to capital will ultimately allow the company to be able to construct bigger inner-city projects on its own, which is what Evans would like to see the company accomplish.
The combination of staying private and having greater access to capital will allow A.F. Evans to continue to meet its mission – to provide innovative solutions toward the fulfillment of diverse housing and community development needs.