With changing financial markets, Boston Capital Corp. stays ahead through diversity and solid planning.
Aventure into the apartment housing market in 1974 has propelled Boston Capital into being one of largest lenders of affordable housing funding in the nation and a portfolio that backs it up.
This Boston-based financial powerhouse merits the highest praise for being one of the national leaders in affordable housing underwriting and acquisitions in the United States. Boston Capital Corp. has grown into a major, diversified real estate finance corporation that controls more than $5.5 billion in real estate and over 1,800 properties in 48 states. The company has generated seven affiliates that control a wide range of products including housing tax credit equity, bridge and mezzanine loans, debt and equity for net-leased properties and mortgage financing for all commercial property types.
Boston Capital is ranked among the top five multifamily owners in the nation with more than 81,000 units, according to the National Multi Housing Council's 1997 survey. The main financing for these developments has come from Low Income Housing Tax Credit (LIHTC) programs funded by institutional and private investors. The investment properties are held a minimum of 10 years per government guidelines and held as long as 15+ years. The rule for affordable housing that the government uses is no more than 100,000 units per year are to be built nationwide.
The company got into the LIHTC program in 1986, and since then Boston Capital has grown to approximately $600 million in apartments per year through acquisitions. "Several years ago, Boston Capital Corp. set a goal to become a full-service provider of real estate finance. Today, I am proud to say we have attained that goal, and we focus on continued growth and diversification," says Chris Collins, managing partner for Boston Capital Corp. "Among other things, we've developed an expertise in linking foreign investment capital to domestic real estate, a field which has unlimited growth."
Boston Capital believes that low-income housing is a long-term investment, and it has taken steps to secure foreign capital and build relationships to prosper into the next decade. "We represent several foreign investors and high-net worth individuals that have an appetite now for those type of acquisitions," says Collins.
Boston Capital has been in the affordable housing lending business for more than 23 years. As well, the firmsets high standards for helping developers through focused asset management. The company is a major player in the tax credit business, but also has other financial products. "As the result of being a major player in the tax credit business, we have developed some capabilities that have been the platform for building a family of seven companies and a wide variety of financing products," says Collins.
"Our basic philosophy is to provide a good service to the developers to establish a strong relationship, because we really look at this as a partnership with the developers and the people living in the complexes," says Herbert L. Collins, co-founder and chairman of Boston Capital Corp. "In addition, we have played a key role in the preservation and the development of the tax credit housing program providing a good business tool for our developers."
The intense competition from institutional investors has been spread over the last five years and has become the major thrust in providing equity capital for tax credit properties. "We have had the ability to increase our institutional investments each year over the past four years. Last year we invested equity of $250 million in affordable housing tax credit properties; this year that number will be in excess of $300 million," says John P. Manning, co-founder, president and CEO of Boston Capital Corp. "So every year we've been able to post a gain, despite the fact it has been very competitive."
The company has no plans to go public anytime soon, but there is expansion in the near future. "I think there are opportunities to expand, and in Boston we have 180 employees. Presently we're in the process of setting up regional offices and strategic relationships," says Chris Collins. Boston Capital has more than 425 financial firms nationwide that offer its products, including stock brokerages, financial planners and mainstream insurance company affiliates that represent more than 53,000 investors. To show how effectively the tax credit program works, Boston Capital funded an affordable housing community in Branson, Mo., the new entertainment mecca over the past few years.
The one problem with Branson's infrastructure was a shortage of housing for the employees that work in the restaurants, casinos and other entertainment venues. "You have an economy that develops overnight, and you have a tremendous need for affordable housing. You have service people and hospitality people, so they need places to live," says Richard J. DeAgazio, president of Boston Capital Services Inc. "If you're going to have an economy that's going to develop, you have to service the people that service the community."
Boston Capital specializes in small multifamily communities, mainly second-tier markets, that render housing to demographic groups such as the elderly, middle-income individuals and people that have an average income of less than 60% of a specific area's median household income. "We're in all areas of the country. We like the rural suburban and non-metropolitan areas, for there are less problems in terms of operating and owning properties, just by the very nature of where they're located," says DeAgazio.
Boston Capital's portfolio is growing at a rate of about 6,000 to 7,000 new units per year, and this is accomplished mostly by investments in domestically funded programs such as its Series 30 Tax Credit Fund, which will close in mid-September, and its new Series 31 fund that will open in September.
"Smaller deals are better due to diversification, as in the total number of units. Our Series 30 fund will close with 24 properties in 11 states and will be $25 million. We do three of these funds per year, and the Series 31 will be between $40 million to $50 million," says DeAgazio.
One factor that distinguishes Boston Capital from the competition is The Boston Capital Foundation. The foundation gives back to the affordable housing community and provides stability through particular services. "The foundation provides assistance to many of the activities within that industry, for instance working with the tenant groups and non-profit agencies that have a mission to help the properties in low income areas," says Herb Collins. "I might say it is simply doing some good for the community that we've primarily based our business on."