Construction Today - October 2009 - (Page 148)
Residential | CHELSEA INVESTMENT CORP. Model of Affordability CHELSEA INVESTMENT IS PREPARED TO MANAGE BUSINESS IN THE RECESSION. BY BROOKE INFUSINO y some standards, Chelsea Investment Corp. might be considered somewhat of a protector of Southern California’s affordable housing market. The Carlsbad, Calif.-based affordable real estate development, financing and management firm is preserving the model in a time when affordable housing seems to be an endangered species regionally. In the time since President Jim Schmid founded the firm in the mid-1980s, Chelsea Investment has had quite an influence on the regional market. It develops, builds, leases and owns affordably priced, high-quality apartment homes, and has developed and financed more than 5,100 affordable housing units valued at more than $690 million, including inclusionary developments, rural developments and special needs housing. When Schmid launched the company, it completed jobs in the commercial and multifamily residential sectors. As a survival strategy when the economy was hit hard in the 1990s – and financial institutions were failing and homes sales were on the decline – Chelsea Investment developed a niche in affordable housing. A lawyer by trade, Schmid understood the tax and credit concepts that developers must know to be successful in this market. Although the Department of Housing and Urban Development (HUD) has made affordable housing one of its priorities, some states are facing funding shortfalls in their efforts to make new projects a reality. California is one of those states. In the face of immense budget deficits, the state has had to cut back on funding of affordable housing. When one looks at the factors impacting real estate development and affordable housing – declining tax credits, the disappearance of redevelopment funding and difficulties with California’s budget in general – one can see why new put-in-place projects have slowed. But Schmid refuses to look at things negatively, nor through rose-colored glasses. “We are certainly being touched by the credit crunch, and the credits right now are closer to 65 cents on the dollar, so the value has diminished about one-third of what it was,” Schmid notes. “That’s not so much of a problem, but the underwriting standards have Investment develops, builds, »Chelseaand owns affordable apartments. leases Chelsea Investment Corp. www.chelseainvestco.com • Headquarters: Carlsbad, Calif. • Employees: 35 • Services: Multifamily affordable housing “We’re not changing our business model so much as we are trying to gain access to new funding sources.” –Jim Schmid, founder and CEO changed. We have been able to borrow less, which generates less equity for the deal, so there is a bigger funding gap.” Chelsea Investment has had to work a bit harder and think more creatively to maintain business. “We have had to do a better job,” Schmid notes. “We have to be better in the land acquisition process and resort to other sources of subsidy such as redevelopment agencies. They have really stepped up to the plate and agreed to put more money into these deals.” Other state sources, such as funds from California’s Proposition 1C, filled some funding gaps, although Schmid says some funds are difficult to access because they are contingent on selling of bonds – an activity that has slowed significantly in the past eight months. Despite challenges, Schmid is keeping a positive outlook, and his firm continues to secure new projects. “We are going to stay the course in the future,” Schmid says. “There is some federal money and there are more sites available because we are not competing with home and condo builders. Construction costs are also down, so we’re confident. We are also going to seek out new investors and new-to-us banks. We’re not changing our business model so much as we are trying to gain access to new funding sources.” Giving Credit Where It’s Due Schmid says multifamily tax credit housing in California today is almost indistinguishable from market-rate housing. Chelsea’s communities feature moderate-sized units, curb appeal and amenities such as community rooms and activities designed for the project’s intended target market. “They all look like the market-rate projects CONSTRUCTION-TODAY.COM OCTOBER 2009
Table of Contents for the Digital Edition of Construction Today - October 2009
Construction Today - October 2009
Regional Spotlight: Southwest
Ledcor Construction Hawaii LLC
C.H. GUERNSEY & Co.
First Gulf Development Corp.: Meadowvale Corporate Centre
Jacobsen Construction: Workers Compensation Fund Headquarters
Novak Construction Co.
Affordable Concepts Inc.
HBD Construction Inc.: Edwardsville Crossing
Ledcor Construction: Napa, Calif.
Mared Mechanical Contractors Corp.
Myers & Chapman Inc.
Summit Contractors Group Inc.
Wilcox Construction Inc.
Special Focus: Mergers & Acquisitions
Hensel Phelps: Phoenix Sky Harbor Intl. Airport Sky Train
Circle Construction LLC
Electrical Contractors Inc.
Everett, Wash., Department of Public Works
Imco General Construction Inc.: Arlington WWTP
New Prince Concrete Construction
R.N. Rouse & Co. Inc.
Stanek Constructors Inc.
Fort Lewis: New Barracks, Army Growth Complex and Support Battalion
Torcon Inc.: Brookhaven National Laboratory’s National Synchrotron Light Source II
Bovis Lend Lease: FBI Denver HQ
Stuart Olson: University of Lethbridge Markin Hall
Bird Construction Co.: Shearwater Helicopter Base
Carbon Constructors Inc.
Consultants & Builders Inc.
Emerick Construction Co.: Rock Creek Middle School
Broadmoor/Boh Brothers Construction Co.: U.S. Coast Guard Integrated Support Command
Cahill Contractors Inc.: The Oakland Museum of California Phase 1
Flintco Inc.: Germantown Women & Children’s Pavilion
Gamma Construction Co.
Kreizenbeck Constructors: BSU Student Union
Pizzagalli Construction Co.: FAHC Radiation Oncology
Robins & Morton: Lincoln Hospital
Steele & Freeman Inc.
Tenderloin Neighborhood Development Corp. (TNDC)
W.G. Yates & Sons Construction: Armed Forces Retirement Village
BBL Construction Services LLC: The Glen at Sugar Hill Apartments
Chelsea Investment Corp.
Affirmed Housing Group
Westland Construction Inc.: Bridges at Citifront
Product Showcase: Plumbing Equipment
Hunzinger Construction Co.: Johnson Controls Headquarters
B.L. Harbert International LLC: S.O.F. 5th Special Forces Battalion Operations Complex
Duke Construction: Monarch Beverage Co. Headquarters
Irish Construction Co.
TMU LLC (Triune)
Last Look: Consultants & Builders Inc.
Construction Today - October 2009