Ray, Douglas From: Todd Alexander Sent: Wednesday, March 07, 2018 1:40 PM To: David Lakari; Ray, Douglas Subject: RE: Opportunity Zones Doug: Thank you for considering our input. A few specific recommendations both, of which are within the context of creating middle-market, mixed-income housing. Background: Renewal Housing and its affiliate Leon N. Weiner Associates LLC, are affordable housing development companies. LNWA was formed in 1949 and is based in Wilmington, DE. Renewal was started by David about 20 years ago and is based here in Portland. In our primary business preserving and recapitalizing existing affordable housing properties we work exclusively out of state, primarily in the Midwest and mid?Atlantic regions. Our partners in DE have developed a lot of different housing projects over the years and are currently active in both market rate housing and hotel development. We have considered doing work locally -- and David and I have done a couple of very small, infill for?sale projects in Portland. Here in Maine, the market that interests us is the one that is currently most underserved housing that is affordable to folks in the 60% to 120% AMI levels. As you are aware, there are plenty of financial programs available for housing targeting 60% AMI and below. Conversely, the capital markets are able to meet demand for market rate housing. The big void right now is in financial resources to meet the housing needs of middle income Mainers particularly here in southern Maine, where land and construction pricing skews development activity towards very high end projects. We see this same problem occurring in other states and localities where we work. Recommendations Opportunity Zones: 0 Portland Peninsula: Virtually all of the census tracts on the Portland peninsula are QCTs. An Opportunity Zone designation in these areas, coupled with well crafted program guidelines, could serve as a catalyst to draw investment into middle income housing projects. Currently, these projects are not financially feasible, or marginally viable, because the 60% to 120% rent levels do not support the financing required to cover total development costs. Specifically, the cash flow generated from these properties generate yields on the equity investments (typically 20-30% of total costs) that are either negative or hover in the very low single digits; generally, not sufficient to attract the necessary capital. If an investment, however, is in an Opportunity Zone project and came from a capital gain in another investment, the ?return? from sheltering the tax on the capital gain would be sufficient for the investor and, in turn, allow the development to target a mix of below market rent and income levels. The QCTs where I think this program/housing product would work best are those areas on the peninsula that are still very transitional; Bayside (5.00, 6.00) and St. John?s Street/Libbytown (13.00). The other census tract to consider is 11.00, which covers the old Mercy Hospital campus, which will be vacated in another few years when the hospital completes its consolidation to Fore River Parkway. This is an ideal, large-scale, mixed-income housing redevelopment opportunity for Portland. Downtown Waterville: The other market that we are watching closely is Waterville. Due to Colby?s efforts, we think there could be some interesting housing opportunities. Subsidized, low income (LIHTC) housing is probably not the most immediate or appropriate need here. However, the unsubsidized housing market in Waterville has been and likely will continue to be very fragmented and unable to truly support new market rate 1 developments. The Opportunity Zone designation (tract 241.01), coupled with Colby?s investments, and some other local sources (local Affordable Housing designation) might be enough to attract private capital into some moderate-size housing projects targeting 80% to 100% AMI households. Thank you again for consideration of these suggestions. If you have any follow up questions, lam available by phone or to meet in person at your convenience. Respectfully, Todd Todd M. Alexander Renewal Housing Associates, LLC Leon N. Weiner Associates, Inc. 2 Union Street, 5th Floor Portland, ME 04101 p. 207 347-3018 c. 207 749-7257 From: David Lakari Sent: Wednesday, March 07, 2018 8:08 AM To: Ray, Douglas Cc: Todd Alexander Subject: Opportunity Zones Doug Thanks for the call on Monday. My partner Todd Alexander is working on specific QCT recommendations for Portland and Waterville, and will get them to you shortly. I will be out of the office for the next several days, but we understand your goal is to have all recommendations in by the end of this week, as there is only a small time window for the Governor to make his decisions. David David Lakari Renewal Housing Associates, LLC 207-774-5341 office 207-450-5341 mobile From: Ray, Douglas Sent: Tuesday, February 27, 2018 12:09 PM To: David Lakari Subject: EXTERNAL E-MAIL Hi David Per Commissioner Gervais? request, attached is the press release DECD sent out yesterday re. Opportunity Zones. Any questions, please don?t hesitate to give me Best, Doug Doug Ray Director, Legislative Affairs Communications Maine Department of Economic Community Development 59 State House Station Augusta, ME 04333-0059 207-624-9802 (M) 207-441-2391 Douglas.ray@maine.gov Disclaimer The information contained in this communication from the sender is confidential. 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