Boulos Greg / November 9, 2020
In this episode, host Greg Boulos sits down with Dana Totman, President and CEO of Avesta Housing. Avesta Housing is a nonprofit affordable housing provider whose mission is to improve lives and strengthen communities by promoting and providing quality affordable homes for people in need. Avesta has seen significant growth over the past 20 years growing from 800 units to over 2900 units. Discover how Dana determines which sites to develop into affordable housing, his advice on getting into the development business, and his passion for climbing mountains.
Greg Boulos (Greg): We’d like to welcome our listeners to the Boulos Beat Podcast. I am your host Greg Boulos. The Boulos Company is northern New England’s largest commercial real estate services firm, with offices in Portland, Maine and Portsmouth, New Hampshire. We’ve been selling and leasing real estate in Maine and New Hampshire since 1975. This is a series providing insight into Maine’s real estate movers and shakers. And speaking of movers and shakers, we’d like to welcome Dana Totman to the Boulos Beat. Welcome, Dana.
Dana Totman (Dana): Thank You.
Greg: Dana became CEO and President of Avesta Housing in 2000. Under his leadership, Avesta has seen significant growth over the past 20 years. Growing from 800 units to over 2900 units and a staff of over 290. Dana’s awards are too numerous to list but for some of them, they include induction into the Junior Achievement Maine Business Hall of Fame, Maine Business Leader of the Year Award, MREDA’s Robert Patterson Jr. Founders Award and on and on. Prior to joining York Cumberland Housing, which later became Avesta, Dana was Deputy Director of the Maine State Housing Authority of 1994 to 2000. Prior to that, he was Director of Coastal Economic Development Corporation. Dana attended Duke University’s Government Leadership program and completed programming with the Kennedy School of Government at Harvard. Dana grew up in Maine on a farm – a dairy farm in Topsham, actually, with his parents and three siblings. His parents were involved in the community and although they didn’t have much money, they were always donating milk, meat, and vegetables from their farm to anybody In need. Today, Dana lives in Portland with his wife, Donna, of 33 years and his two grown sons, Andrew and Adam. Again, welcome Dana and thanks for being here.
Dana: My pleasure.
Greg: To start off with, Dana, tell us the story of you being dragged around the community in Topsham by your mother when you were a little kid when she was seeking donations for the United Way. Actually, United Fund back then, if I’m not mistaken. And how later in life, that connected the dots for you between giving and helping. And also, how did you end up getting a feisty Siamese cat out of the deal?
Dana: *chuckles* It’s a very vivid memory. My mother would volunteer to go collect money for the United Fund. I was probably about ten years old. I don’t remember exactly what, I don’t much really understand what it was trying to do, but I knew she was asking for money to help people in some way. So we would go down the road and, um, she didn’t want to leave me at home alone, so I would bring my baseball cards, or homework, or whatever to pass the time. I really didn’t like having to sit there in the back of the car while she would run into house after house. She went into this one house and she came out, and in most cases, people would give and she’d put a checkmark that they’d give a dollar or two dollars, or whatever it was. She came out from this one house, and said, “I don’t think they’re going to contribute, but they asked if we would take their cat.” And this family lived just a few houses down from our farm and ultimately this Siamese cat had kept scratching their slew of kids. I think they had six or eight kids. And so they asked if she would take the cat off their hands. And so she came and she said they didn’t have any money to contribute. It was then that I started to realize that that particular family probably needed the help of the United Fund and I understood it. Others were able to contribute, this family was in need, and so I kind of connected the dots of need versus giving. The cat was named Tom. I always remember it had like aftershave lotion smell to it because the kids kept putting stuff on it, that’s why they were getting scratched. And we brought it home and it was a really mean cat, I think I still have scratches to this day. But it really was that first window into understanding people have needs and this family had needs and others were able to contribute to help out.
Greg: So you think that maybe that was the foundation for getting you started at least thinking of what you might do later in life in terms of really helping people?
Dana: Yeah it was, it was part of it. My parents were very involved in the community, whether it was girl scouts, or softball, or baseball, or building committee, or planning board, or police commission. My parents would volunteer on those committees. It wasn’t easy. My father wouldn’t finish milking the cows until 7:30 at night and then he’d have to rush in dead tired and go off to some meeting. I watched them helping out in the community. I know my father’s father was a select man in town and head of the fair association, so there was just this community involvement that kind of resonated, I think, with myself and my three siblings.
Greg: Dana, could you give the listeners who don’t know, kind of give a view of Avesta from 30,000 feet. What does Avesta do?
Dana: Our mission is to improve lives and strengthen communities by promoting and providing quality homes for people in need. So, we are trying to help people that have housing challenges. That may be an elderly woman who is a widow and no longer can live by herself. It may be a new immigrant family. It may be an intact family here whose income just isn’t enough to pay their housing. But we really try to provide safe, decent housing that’s affordable. That takes many different forms. In some cases, we provide some services in addition to the housing. But people who have housing needs that they cannot meet with their own resources, we try to help them.
Greg: When you took over Avesta Housing, I think it was 2000. I believe you told me that 80% of the developments were senior housing and today it’s more like 50%.
Greg: I’m wondering why the shift?
Dana: The shift – our offices at that point were in a part of a senior development that we had in Gorham. And primarily the developments were rural. They were in Alfred, Standish, Buxton, Bridgton, Naples. They were primarily for seniors. They were primarily fully subsidized and they were rural. And so we were kind of doing that, but there had been a shift in federal and state policy to start doing housing using this tax credit resource. And it was also a major emphasis – this was during and following Angus King’s administration – to pay attention to smart growth. And so the idea was to focus a bit more on the cities and the service centers and it kind of became pretty obvious to us that rental housing, which is what we do, is in the urban areas. Rural tends to be more home ownership and that’s not much what we did. So when we were recruiting for staff, it made sense that people involved in the rental world probably were in Portland, or South Portland, or Westbrook, or Biddeford, not out in Gorham where we were. So in 2003, we moved our office to Portland. And then at the same time, we realizing it was kind of a void in Portland of no nonprofit doing significant affordable housing development. In Portland, there really wasn’t much going on at all, for-profit or nonprofit. So it turns out, we really filled quite a niche there that there was a need for affordable housing. And the need was also clear that it was not just seniors. It was families and workforce housing. That was more what we saw in those urban areas.
Greg: So you talk about workforce housing. Is there a difference between workforce housing and affordable housing? If so, what is that?
Dana: There really isn’t a technical difference. There are a lot of different terms thrown around in the work we do. Subsidized housing to low-income housing to affordable housing to workforce housing to senior housing. A lot of loosely-used terms. We prefer to use the word affordable housing, because that is what it is. There are folks that are working, certainly, in our housing and certainly to help them remain in the workforce and to be able to have a place to stay. It is housing for the workforce. It is also housing for families, who tend to also be in the workforce. So there’s a lot of different terms.
Greg: So can we call it affordable workforce housing for families?
Dana: Sure. I mean that’s fair. They may unfortunately lose their job due to something like a pandemic, in which case they are trying to get in the workforce, but they’re not in the workforce. Again, they are kind of raw, general terms that we try not to get too hung up on and focus on the fact that people need it.
Greg: You’ve run this business for 20 years. Do you have some core beliefs or core guidelines that run your business? I’m sure you just don’t wing it totally.
Dana: No, no I don’t. I think a fundamental belief that I have, or approach to nonprofit management, I’ve done this most of my life, is I want our nonprofit to be a very healthy organization and I use approaches that many might think is just in the private sector. I’m going to run this like a business. And it’s going to be as healthy and the healthier our organization is, the more impactful we will be fulfilling our mission.
Greg: You mean financially healthy, of course.
Dana: Yeah. So, we want to have appropriate reserves. We want to invest in technology. We want to pay good salaries. We want to really make sure that our infrastructure, our capacity is strong, and if we can do that as an organization, we will be far more impactful in helping people. Some nonprofits are struggling to invest in their infrastructure, or in paying their staff, or having money in reserves. You know, they are very committed to their mission, but they never quite get that strength, that financial capacity that’s needed. So I think that’s a core belief. I do not want to be worrying about next week’s payroll. I want to have a strong organization that we’re focused on new projects, new help that we can provide to people in need.
Greg: That way you know you’re around for the long term.
Dana: Yes. I mean it’s not without some debate. Clearly, do we pour dollars in reserves or do we help somebody who’s homeless today? And so there is that appropriate balance that we seek.
Greg: The tension between the two.
Dana: Yeah, yeah. It’s tension or balance and, you know, ultimately there are banks lending us money and tax credit investors investing in us and they’re going to look at these ratios of what we have for assets and everything, so we need to be in good shape financially.
Greg: So when you started with Avesta, what was the first project – I’m sure you remember this – that you built?
Dana: Yeah. There’s two. It’s hard to say which one I could take credit for building because there were several underway when I got there and one that opened three months after I got there. And so there were staff very much involved. It was a family development out in Bridgton and it was kind of down a rural road on 80 acres, not close to walking distance to anything. I remember going to a little bit of a grand opening we had there and kind of shaking my head, saying “Why?” This is kind of isolating the poor. This is not connecting them to anything. The community is not happy. So I kind of – that’s the one I remember most – beyond the fact that we had a grand opening and I think maybe eight or 10 people came and we had some carrot sticks and celery and juice to give out. It seemed a little just underwhelming. We gotta do better than this. So that will kind of set the stage. After that, you know, I think a couple of ones that came along early at about the same time. One was a 48 unit senior development in Windham. We actually had taken an award from rural development and another award from HUD and the tax credit award from Maine State Housing Authority, combined these three resources into one 48 unit development. That had a lovely community room, not far from the major 115- 302-intersection there in Windham. It was a really cool project, so that one I was really happy with. Really, really hard to bring those pieces. Another one that happened pretty early in my tenure was Pearl Place on Pearl Street in Portland. It was the old F.W. Webb building. At the time, people said we were crazy to want to do something here in Bayside. It was just scrapyards, why are we paying that much for real estate. We paid over a million dollars.
Greg: Did you buy that from Ted West?
Dana: Yes, yeah.
Greg: I actually put a bid in on that property. Ted West beat me out on it.
Dana: Yeah, no it was just out there and people said you’re crazy to spend that much money.
Greg: Big piece of dirt.
Dana: But I said, well it won’t be crazy if we can get 100 units of affordable housing there.
Greg: And that’s been very successful.
Dana: And we got 116 units there. And it really did start to create a lot more attention of Bayside becoming residential in nature. It helped, I think, move along one of the scrapyards to move out. And it really started to give a residential feel there. And clearly, the new Mainer population primarily that lives there works in many of the nearby businesses in Portland. It’s just wonderful homes for them, close to the high school and the schools and everything. So it’s been a great success. But, it was – our neck was sticking way out when you invest over a million dollars and don’t have any of the development money yet in hand. But it was a bit of a leap that we took that this would be a good thing, and it’s been a good thing.
Greg: It was good instinct.
Dana: And lucky. *laughs*
Greg: When you developed that site, I’m just curious, as there any hazardous waste in the dirt?
Dana: Oh yeah, yeah. I mean, it was ash because the –
Greg: That was fill from when the great fire –
Dana: Yes, fill from the great fire. They dug down and we had to fill that out and also, it took us two or three times to get our financing, so it sat empty for two or three years while we were trying to develop it. And so, the Miss Portland Diner car was parked there for about a year, there was a house being relocated from the corner of Forest Ave and Cumberland Ave that was going to be a part of the development there that ultimately failed – that house had been relocated there. That had to be resettled. And so it was a bit of a place where you put misfit old buildings and old vehicles there until eventually we had enough money to tear it down. Those buildings were able to be put on their own foundations.
Greg: Dana, when you consider purchasing a piece of property to develop, what tells you that yeah man, that’s going to be a great site, that’s going to be a winner, versus not? What strikes you as the “a-ha” moment for buying?
Dana: It’s “how does it fit?” How does what we’re trying to do – how is this going to fit for the people that are going to live here? This is going to be their home. How are they going to – how is this going to work for them to get to and from their work or to and from their services? So we really kind of look at the location first, and then we start to look at very specifically what size can we put in here? Can we put what we want to do – at least 20 units? Preferably 30 units or more. So, is the zoning okay? Or is the municipality likely to work with us on the zone? And then, you know, another thing that we kind of always look at is “does somebody want it here?” I mean, we’ve gone to some towns where somebody has got to be wanting you to be there, so obviously people are in need, if the community supports affordable housing, if it lines up well with the scoring criteria that Maine State Housing has for choosing projects. We consider all of that, but ultimately somebody has to be supportive of it being here. And it may be an affordable housing task force in the local community. It may be a senior group in a community. It may be the local state rep, or maybe a neighborhood, because there’s probably going to be somebody not supportive, particularly the nearby neighbors who have got to experience the change.
Greg: The envy effect. Not in my back yard.
Dana: Yeah and we’ve certainly been roughed up a few times with that. Ultimately, we want to make sure it is a feasible project and that somebody really is supportive of it being there.
Greg: And you’ve been doing this for over 20 years with Avesta. What’s your favorite project?
Dana: Um, it’s –
Greg: Or is that like “name your favorite child”?
Dana: Um, a little bit like naming your favorite child. On any given day, you know, one child is in the dog house and the other’s doing good – same with our properties. But Logan Place is absolutely my favorite. We –
Greg: Logan Place is where?
Dana: Logan Place is on Frederic Street in Portland and we bought this land at the end of Frederic Street. Frederic Street is a dead end street near the county jail on that part of St. John Valley area. And we bought the end of the street and there had been a landscape company there. I think there had been a car repair place the city was using to impound cars when they had tow them. And so we bought enough at the end there and our idea was let’s try to do a couple of developments. At the same time, we were having some discussions with Preble Street and were saying sheesh, what would it take to really create some housing that would work for people that are homeless? And we realized there was a population that tended to be the most disadvantaged, most struggles in their lives, had been homeless for years and years, had been failed in many program after program after program. They either couldn’t follow the rules, or had a disability, or a mental health/substance abuse challenge in their life. They were chronically homeless and spent a lot of time in jails and emergency rooms. What if we created housing for them? And just said this is for you. And so we did. And we also said we’re going to have at least two staff on site here around the clock to provide some guidance and observation to make sure people are behaving appropriately for residential housing. And so it was one of the first in the country that did this housing-first model. And it worked. We moved 30 people in there that had lived on the streets for ever and ever and they – many of them turned their lives around a bit. The police – the emergency room visits went down by 80%. Encounters with police and jail time went down by 78%. The amount of money we saved in keeping people out of prison and out of the emergency room and from flopping in and out of homelessness pays for the project itself. Ultimately, there’s a lovely little community there of 30 people that are incredibly supportive of one another. We did that in 2005 and there’s still a couple of the original folks there. It’s been very successful.
Greg: Do they pay rent?
Dana: They pay a small piece and many are receiving SSDI. This is not a population that’s ready to go to work. They are very disabled.
Greg: So how do you finance the project?
Dana: We finance the building and the construction with tax credits and some layers of grant money to pay for the building. Portland Housing Authority is a great partner. They provided vouchers that paid the rent for those 30 residents. And then the hardest part is to provide money to pay for the services to have Preble Street, in this case, to have staff there 24 hours a day. Some of the stories there are just incredible. There was just a guy there whose daughter had lost touch with him and she was an attorney in Portland at a big law firm. And she lost touch and she heard this guy on the radio talking about being stabbed while they were doing a special on homelessness. He was stabbed under a bridge and she reconnected with him.
Greg: And that was her father?
Dana: That was her father. Horrible, horrible battle with alcoholism and that was what had torn their family apart. He was a difficult resident there. He never did beat alcoholism, but he lived there for ten years and was quite the life of the place. He behaved and she got to visit and reconnect with her father. It was just incredible. At the time, he never would have lived another year outside. And so, there are – and he passed away three or four years ago. The leading reason people have left there was death. It amazing what we had to do to help people with their physical needs, dental in particular. Living on the streets that long, there’s a lot of head injuries, there’s arthritis, there’s sclerosis in some cases.
Greg: It’s a hard life.
Dana: It’s a hard life.
Greg: So, we know what your favorite project is. What’s your least favorite project?
Dana: It may that one in – God, I shouldn’t say this, it’s pretty dangerous. I guess I would just say some of the older ones that are particularly family developments that are isolated like the one in Bridgton. We’ve got another one in Parsonsfield.
Greg: Ones you’ve inherited.
Dana: Ones we’ve inherited that don’t really connect the population to the community and they kind of isolate the poor people.
Greg: In the past 11 years, the economy has been unbelievable, the best I’ve ever seen it. Then came along a little thing called COVID-19. For our viewers, we’re taping this on August 4th, 2020. Tuesday, August 4th. I’m wondering, what’s been the short-term effect the COVID pandemic has had on your rentals?
Dana: You know, amazingly, our rental revenue and people paying has not dipped much. It’s really incredible that we were prepared that we were going to lose rent revenue. We would struggle with mortgages and all the things that we need the revenue for to support. It’s really not a whole lot different than it was the same period, you know, if you compare July and June and May’s data this year versus last year. So, I guess that’s good but we’ve been digging a little bit deeper and interviewing some of the folks that live in our housing and we’re realizing that, well, they may have paid with their stimulus check. Maybe they had some savings. Maybe, you know, they cobbled together money and I think we’ve found that a large percentage are not paying other bills. Many are relying on soup kitchens or food pantries. So people have cobbled together resources thus far, but we are a little bit worried going forward for sure. We think the state or federal assistance will likely help out with that. So that’s the one thing is the rent has been okay, but we’re still worried going forward. The second thing is we have a lot of projects in development. We have four in the middle of construction now, each ten million dollar projects. We’ve got ten others lined up. There’s been a devalue in the tax credit, which is what we use to build these with. So we’ve got bigger gaps and so our development process is slowing down a little bit while we try to deal with that. That’s the second thing. And then the third thing I would observe – we have two assisted living facilities and we have just been all hands on deck to make sure that that frail senior development, like we know has hit other assisted living facilities and nursing homes and long-term care facilities. We have done everything possible to protect those residents and we have had no positive cases –
Greg: Knock on wood.
Dana: Knock on wood. -at these facilities, but it’s taken a huge effort. The point of that is, and it’s kind of true with all of our developments, we try to create some sense of community where people help one another. Somebody may babysit a child or somebody might give somebody a ride to the store to pick up something that’s needed – a real sense of community. Now we’re trying to discourage any sense of community, that we want people to stay away. We were even locking up our community rooms because, you know, to minimize exposure. It’s the hard piece that we’re –
Greg: That has effects on mental health.
Dana: Oh God, yes. I think we all struggle from it. It’s like sheesh, I don’t get to do the things I like. You know, I just want to give my sister a hug, or I just want to sit next so and so at the bar and have a beer after work. It’s just some things you can’t do that, whatever it is. For our residents, they’re no different. So they’re living with isolation and less contact. We do a lot. We’ve been providing them iPads and training on how to use iPads and iPhones. We do wellness phone calls and checks to see how they’re doing. We’re doing our best, but nevertheless, this isolation that’s going on there – that is a concern.
Greg: What about design changes as a result of COVID going forward? Do you know of any at this point?
Dana: We’ve been researching some and certainly entrances. Do we go back to garden style and have people enter their own apartments? Or de we have more the hotel style where you go through a front door and everybody. We’ve always been trying to create gathering places. Whether it’s around the mailboxes or around the community room or around a kitchen or a reading area. So we’re really trying to revisit it. I think probably the most important thing is getting the internet connected at high speed everywhere.
Dana: And some of our developments where people are all downloading videos at the same time and kids are trying to do homework and everything, it’s been a struggle technologically. I think that that’s probably, maybe been, I won’t say the easiest, but perhaps the most important thing that we get that up so that everybody can be completely online, going at the speed they need to go.
Greg: I know you have all different types of projects, but is there a typical make-up of tenants in Avesta Housing? Are they market rents or a combination market rents, subsidized rents, kind of mixed?
Dana: Most of the housing that we’re creating now is funded with tax credits. What that means is ultimately we have no debt, or very little debt on our buildings, so we don’t have to make that mortgage payment. Because of that, we then can charge less for the rent. This is all regulated by the various investors and players involved. So if the market rents are 1400 dollars, we might be charging 900 or 1000 dollars. So that’s the type of housing that we’re creating now. About half what we’re doing now is for families and half is for seniors. Of the families in the greater Portland area, probably two-thirds are new Mainers that are living in our housing, whether that’s South Portland or Westbrook or Portland. It’s a large segment.
Greg: When you say “new Mainers,” we’re talking about immigrants?
Dana: Immigrants and asylum seekers, refugees that are here. So that’s a big portion of our family housing here. Senior housing is a variety of folks. Some are still working – seniors, part-time. Most are collecting social security or some sort of income support because they’ve retired. And so the seniors is a mix, probably 60-70% female.
Greg: Because the men die off early?
Dana: Men die off early and in Maine in particular, our observation – and this will certainly change with time – particularly if you picture a couple living in a rural or suburban area, be it Gorham or Standish or Pownal or what have you. If the man dies first, what we find is his widow tends to want socialization, doesn’t want to be left in the house because it brings back memories of him. She’s inclined to want to move and the family will support that. That’s very general terms. If the wife should die first, and it should be the elderly male spouse who is left, he tends to want to tough it out. “I can cook, I can take care of this place. I’m fine.” It’s just kind of a Maine thing.
Dana: Certainly my parents, you know, my mother died first and my father, you know, we couldn’t drive him out of the damn farmhouse because, you know, he made it very clear that he was leaving there in a pine box.
Greg: And did he?
Dana: No, no. We got him into assisted living for a year, almost dragging and kicking. He was, I mean, just like so many, unkempt, not taking care of himself. He moved into The Highlands in Topsham, and gained ten pounds, started shaving and cleaning up and putting his teeth in. He passed away a year later the father we remember, rather than this disheveled guy.
Greg: Plus the socialization, too.
Greg: That’s a nice development. Dana, you seldom sell any projects, but when you do, why do you?
Dana: We like to have projects that give us critical mass in an area because we want to manage our properties. So we, you know, occasionally we’ll end up with a project that is a little bit outside of a cluster of projects and we may sell one, or we’ve sort of tried an experiment that didn’t work. You know, we were attempting – we had a development that we tried to do without any federal or state resources and thought maybe just by being efficient and charging less, we could make it affordable. We could, but when we started looking more closely, well, we didn’t have a sprinkler system in there, which is normally what we had. It didn’t meet our standards. So there’s this national experiment called “Naturally Occurring Affordable Housing.” So we dipped our toe in and tried that once and didn’t really like it, so we sold it.
Greg: So I know every time you finance a project, I know every project is different, but is there kind of a template you could quickly walk us through in terms of how do you finance these deals? Let’s say you’ve got a 10 million dollar development. How much equity? How much debt? Is there a grant in there? Tax credits?
Dana: All of that. *chuckles* A ten million dollar development, I’m going to paint two different pictures of how we would do it today. A state receives an allocation of what’s called 9% housing tax credits. They receive enough to fund five or six projects a year. So we compete –
Greg: And they get this from the federal government.
Dana: From the federal government. So from the IRS, Maine gets this allocation. So, we compete and if our project is located in the right area and gets all the points that Maine Housing has, then we win maybe one or two of those every year. That 9% tax credit will pay for maybe 6.5 million dollars of that ten million dollar project.
Greg: Because you sell those tax credits.
Dana: Right. We find investors –
Greg: At a discount, I assume?
Dana: Yeah, it’s a ten year tax credit, so there’s projections and there’s certainly a demand. Higher demand sometimes than other times. But we sell those and we might get anywhere from six or seven million dollars from those tax credits. Then we will try to add some other layers of financing. The state gets a federal home block grant and they also have a state home fund funded with the real estate transfer tax of Maine State Housing. We might get a layer of that and let’s say we’re starting off at 6.5, so say we get maybe a million dollars from that. We then may apply to the federal home loan bank, which is an association of community banks funding mechanism. And they might give us 750,000 dollars and now 6.5, 7.5, 8.25.
Greg: They give it to you?
Dana: Yes. It’s a grant, or an award, with a lot of restrictions. We need to, again, if we don’t do everything, they can call it, but it’s given to us – it doesn’t have to be paid back if we perform. So we may get that for 750,000. If it’s Portland or some other communities, we might go get a TIF. A tax increment financing award, which basically we then take the taxes that we’re not paying and use that money to borrow some more. So that might be worth a million dollars or 500,000 to a million dollars. So 6.5, 7.5, 8.25, let’s we’re now up to nine million and it’s ten million. We may borrow that last one million from Maine State Housing Authority and we’ll pay five or six percent debt on it for 30 years. The loan payment per unit might be a hundred dollars. That’s the sources of the ten million and then we’ll build it and then we go on from there.
Greg: So generally speaking, very low debt.
Dana: Very low debt.
Greg: This seems like it gives you an advantage over for-profit developers and does that raise any problems?
Dana: With what we get, we’re agreeing to always rent it at much less than somebody else would. I guess it’s an advantage for the business as there’s no shortage of people in need, but certainly any profit or cash flow is restricted as well that we get. So anyway, that was the 9% credit. The other area that we try to specialize in – the state also gets an allocation of 4% tax credits. That would only provide three or four million of that ten million dollar stack. So then we have got to be very creative in coming up with those other layers of money. There was recently a state housing tax credit added that will be one of those layers. There was a senior housing bond passed by the voters here a few years ago. That’s a source. So it’s not unusual to have six, eight, ten different layers of financing. When we get these 4% tax credits, which are practically an unlimited amount in the states, we want to put them to use. They’re right there but we get a big gap there between four and ten million dollars to fill in.
Greg: It sounds incredibly complicated in terms of juggling all these potential sources and trying to line them all up.
Dana: Every one of these eight or ten has their own lawyers or their own closing requirements. I mean, it is incredibly complicated. It’s incredibly expensive just structuring the deal. In general, what we say, the first layer in, the first dollar in is the hardest to get, as well as the last dollar in. Those are the two. We can sort of get the money in the middle, but getting the first one to want to invest in the project and the last one to get us to the finish line are the hard ones.
Greg: I was going to ask you what keeps you up at night, but I’m guessing putting together a deal like that and hoping it all comes together.
Dana: Yeah, um, that doesn’t keep me up as much as when we are out-buying land and making some investments. Spending very real money, hoping that we are going to get these. In some cases, we haven’t even started applying for the money, so when we have a million, two million dollars or more tied up in pre-development and hoping they all get funded. That keeps me up. But the other thing, probably the thing that keeps me up the most, is worrying about the residents. We’ve got three thousand households that, you know, is their misfortune going to become their way? Is there a tragedy? Is there a fire? Is there a misfortune?
Greg: Because you manage these as well.
Dana: We manage these and we certainly feel a responsibility and we have a responsibility to make sure that we’re providing a safe environment, but things happen. So that’s the scariest part. You know, around the country, there’s occasionally a fire or a shooting or something that is just very scary and that’s really what keeps me up. There’s not a whole lot we can do about it except take all the necessary precautions ahead of time.
Greg: So when you’re looking at a site to buy, let’s say it’s a great site, downtown Portland. You must be at a disadvantage in going after those big sites, because if I’m selling this property –
Greg: If I’ve got a for-profit developer writing a check versus you folks, who may not be able to pay as much, and say just let me tie this up for three years.
Greg: While I get all the – how do you do it?
Dana: *laughs* There are some sites we just, you know, we can’t compete, you know, we’re not going to. Ultimately, we’re trying to spend around 10-15 thousand dollars per housing unit. So if we can pay 400,000 dollars, then a credit union or coffee shop can pay 900,000 dollars for that same piece of land, we lose. Increasingly, though, we’ve been able to be a little more competitive. We find sites that work. When we tie it up for that long period of time, that’s when it’s hard. Some sellers, like when buying an old school from a municipality, can be pretty patient. But somebody who needs to sell it to send their kids to college or something, that’s a very different, more pressing matter. We will sometimes take a risk and just buy it because it’s a really good site and it’s on a bus route or close to a hospital or something. So we take that gamble sometimes and just buy it and just hope that something gets built. So far, we having struck out on any of those, well, I can think of one. It wasn’t a big investment, but usually we’ll get something developed there eventually. The other thing we try to do is we go back and look at all our existing sites and we may say sheesh, could we put another 20 units on? We already own it, in which case, there’s not that risk. Obviously, there’s risk when you start spending money on architects and engineers.
Greg: Let me ask you this question. Let’s say I own a piece of property worth a million dollars and I’ve got a for-profit developer here who would pay me a million dollars for the site. You can afford to pay me 500,000 dollars. Can I sell it to you, but kind of donate some of that money that I would otherwise get and get a tax credit?
Dana: You can, yes, but IRS looks very closely at it. The donation has to be real, it has to be appraised. It is a possibility.
Greg: So I’ve got a site worth a million bucks. I sell it to you for a half a million dollars and I give a half a million dollar contribution.
Greg: That still doesn’t make me whole with the other guy.
Dana: No, right.
Greg: You know, if you’ve got a community-minded developer.
Greg: What advice would you give to somebody who is thinking of getting into the development business.
Dana: Try it out for a while. Work with somebody that knows what they’re doing. Our piece within the development world is affordable housing. That’s sort of a niche business. Make sure your values kind of line up with ours. I mean, we’re not all doing this to make a lot of money. In our case, we’re doing it to make a community better. So if your objectives and your values kind of got to line up with the organization that you’re with. And if you go out on your own, you’ve got to have some resources to do that.
Greg: You talk a little bit about demand for affordable housing. It seems like, at least in Portland, what I hear a lot from the politicians, we need more housing, we need more housing, we need more housing – affordable housing. Is that true?
Dana: Yeah, we do. We have 3300 households on our waiting list. We’ll have probably 300 openings this year. So that’s a long wait for 2700 of them. We have three developments under construction. One is in South Portland on Westbrook Street.
Greg: Is that Red Bank?
Dana: Near that, brick hill. And that is 65 units. We’ve had 600 people inquire to move in and it will be completed in January. We have 48 senior units being developed on outer Brighton Avenue at Wessex Woods. I think there’s 520 people. That also will be ready December-January. Then we have one down on Cumberland Ave that is 73 units and we have 580 or so. That won’t be ready until February. We have one in Lewiston that will not break ground and start until this fall, September/October. It hasn’t even started and it will be a year’s construction. We’ve got like 200 people inquire. So there’s real demand.
Greg: Is that true for senior housing too?
Dana: Even more so. The seniors, our typical senior developments that might be in one of these rural areas that we talked about earlier, might be 30 units. Probably has a waiting list of 250-300 people and probably with have three or four openings a year. So when you tell somebody that calls and says “I want to get on the waitlist of Wood’s Edge in Alfred,” and we say okay there’s 160 ahead of you and you’re an 83-year-old widow. It’s a tough message to send.
Greg: Yeah, because they’re wondering if they are going to live long enough to get in there.
Dana: Right, they’re not. That’s why we need to build more.
Greg: More. As a nonprofit, is it true that you don’t pay real estate taxes?
Dana: No, it’s not true. We pay about two million dollars in real estate taxes.
Greg: Is it a negotiated amount with the city?
Dana: No, because we use these tax credits, we create limited partnerships for each one and those limited partnerships are taxable. And so, while occasionally we do have TIFs, we generally pay a thousand dollars per unit.
Greg: In real estate taxes?
Dana: In real estate taxes. So yeah, we pay a couple million dollars. Almost a million in Portland alone.
Greg: Because I think the perception is, you know, if it’s a nonprofit, they don’t pay any taxes.
Dana: No, we pay a lot of property taxes.
Greg: I’m sure people will be happy to hear that. You know, looking into your crystal ball, over the next ten years or so, what do you see happening to residential real estate here in Maine, and I’d say Portland, in particular?
Dana: This pandemic has made the concept of a home very different. Something we’ve never seen. Now, a home is where your child is educated, so it’s a school. Restaurants are far less, so it’s kind of where you dine. It’s where you spend your time. It’s where you watch movies. You know, you don’t go to the theater, you watch Netflix. A home is part school, part restaurant. You’re spending so much time there that I think there’s going to be, well for one, I think there’s going to be an uptick in people wanting to live in Maine. I think sort of the real urban movements that we’ve had, you know, from what I’m hearing from brokers is that people are saying well jeez, I can work from anywhere, so why don’t I live here in Maine or New Hampshire where it’s beautiful.
Greg: What I’m hearing from my counterparts in the residential world is demand is off the shelf. It’s crazy. In my neighborhood, where I live, there was a New Yorker came up and bought a house sight unseen three houses from me. Paid what we consider was a huge amount of money and he hadn’t even seen the house. His broker did a video. He did it because he had young children and he wanted to get them out of the city. I’m seeing that over and over and over.
Dana: So I think there will be a demand, you know, the same time this haves and have-nots gulf, I’m worried is going to get bigger and that’s driving up prices. The people that are doing the service jobs and medical assistants or working retail, I don’t know where they’re going to find their path. I think we really have got to get busy on the affordable housing side. Last year there were 185 new affordable units created in all of Maine.
Greg: That’s it?
Dana: That’s it. We’ve got to five-ten times more than that to meet demand. I think we need 22,000 new units in Maine is what the housing authority estimates and I think it’s the right number. We’re not going to get there at 185 a year. We need 500-1000 a year.
Greg: So what are some of the hindrances to getting there?
Dana: Resources. Federal and state resources, partly. The other, I think, is just getting our system of production up and going so that, in addition to Avesta, there’s public housing authorities and there’s private developers that everybody is out trying to do this, and Maine State Housing Authority is creating an environment and the state is creating an environment where this is a priority. We’re going to count and keep track. Okay, 185 isn’t enough. How many are we going to do this year? Let’s set some goals. Say, if we want to do 600, let’s tell the world that then hold ourselves accountable.
Greg: In closing, I want to end with a personal question. I wanted to ask you about climbing. I know you summited Kilimanjaro, which is Africa’s highest peak. It’s considered one of the seven sisters.
Dana: Right, right. Each continent, seven summits.
Greg: You also hiked the Appalachian Trail and jaunted through the Alps. Any other peaks in your future? What about Everest?
Dana: Everest, hm. I might try to do the Everest base camp expedition. Yeah, I’ve been hiking mountains since high school and love it and have a core group of college friends. We go off and try to make weekends of this. Occasionally, we do a bigger expedition. In addition. I go with my two sons a lot and they, too, like it. But I also have some knees that are worn out doing, so I need to –
Greg: You can get new ones!
Dana: I’m scheduling that. *chuckles* I might be stymied for a bit with some bad knees. I don’t really know what else I’d like to hike or climb. I’ve done different – I’ve been to South America three times, and Colorado, and the John Muir and Pacific Crest Trail, large chunks and pieces of that.
Greg: What did you do in South America?
Dana: I did Cotopaxi, Aconcagua, and Coropuna. Aconcagua is one of the seven summits. It’s the second highest peak to Everest, among them.
Greg: So that’s higher than Kilimanjaro?
Greg: How high is that?
Dana: 22,800 feet.
Greg: Kilimanjaro is 19,400 right?
Dana: Right. And I didn’t make it to the top of Aconcagua.
Greg: You didn’t have to say that. People would have assumed that you did.
Dana: Right, well I climbed it. I didn’t say I climbed it to the top. We were eight hours from the top and a big storm came in and we had to get off mountain. I wouldn’t mind doing that again and making it to the top, because I didn’t make it last time.
Greg: What people don’t realize is the difference between climbing a mountain and summiting a mountain.
Dana: Right, right. More important than either of those is returning.
Dana: So that’s what I always keep in mind. So I don’t know. New Zealand looks like an incredibly beautiful place with some cool long trails there. So again, I don’t know if I’ll have time to do these, or the health to do them, but I still think about it.
Greg: Well, we hope that you do. Dana, thank you for being our special guest here today on The Boulos Beat, The Boulos Company podcast. I really appreciate you taking the time to do that. You can learn more about Avesta Housing on their website, which is www.avestahousing.org, on Facebook and LinkedIn at Avesta Housing, and on Twitter @avestahousing. If you would like to learn more about The Boulos Company, please be sure to visit us at www.boulos.com. You can find us at The Boulos Company on Facebook, LinkedIn, and @theboulosco on Instagram and Twitter. And lastly, and in closing, if you want to know the secret to owning real estate, it’s pretty simple – just be sure to outlive your dad.
Recorded and Produced by AV Technik.