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HomeMy WebLinkAbout1987-11-25-FEAS-contract.pdf 11/25/87 CONTRACT TOWN OF LEXINGTON - ABT ASSOCIATES, INC The Town of Lexington hereby contracts with Abt Associates, Inc for performance of services during the period December 1, 1987 to March 4, 1988, to conduct an Evaluation of Investor Interest in Equity Sharing with Renters The scope of services is given in Abt Associates' proposal of November 10, 1987, addressed to Mr Stephen Baran The contract is as follows The Equity Sharing Challenge Grant will be used to conduct a feasibility study to evaluate whether investors who are both civic- minded and profit-minded would be inclined to enter into equity sharing allowing the Town of Lexington to maintain its stock of affordable housing in the face of actual or potential condominium conversion Generalizability to other cities and towns in the Commonwealth should also be considered II The following tasks will be undertaken For each task, the objectives of the study as stated in the Request for Proposal are CCC indicated after the heading for that task. 1 Assessment of Ownership Potential for Current Emerson Garden Residents (Objective 1) Drawing upon information provided by Town officials and the Emerson Gardens Tenant Association, we will assess the ability and desire of current Emerson Gardens renters to purchase their existing residences under Equity Sharing or similar investment opportunities In order to assess the desirability of equity sharing for other renters in Lexington, but without stirring up unjustified fears of condominium conversions, we will also make telephone contact with managers of other rental projects (Battle Green and Captain Parker) as well as with officials of the Lexington Housing Authority and as representatives of interest groups such as the Council on Aging 2 Equity Sharing Experience (Objectives 4 and 5) We propose to conduct a limited review of the offerings and performance of up to five major syndicators of equity sharing financing We will look at examples of both successful and unsuccessful equity sharing projects and attempt to determine the financial and social conditions which promote successful equity sharing investments The issues to be addressed are overall price, price of investment shares, level of residential equity, financial profile of residents, effects of tax law changes, marketing strategies and sources of investment capital We will also address the legal issues in Items a-c of Objective 5 that arise in the formation of equity share corporations 3 Review the History of Affordable Housing in Lexington (Objective 3) We will talk with the staff member of the Planning Board who is preparing a history of affordable housing in Lexington and with other Town staff and representatives of interest groups that may be Contract Town of Lexington and Abt Associates, Inc Page 2 suggested by you in order to learn who are the principal actors in providing housing in Lexington and what some of the relevant community attitudes are This information will be summarized in the draft Social Feasibility Report 4 Analysis of Government Programs (Objective 6) We propose to review options and provide an opinion as to whether money made available through HUD, the EOCD, the Mass Land Bank, or other sources can help write down the cost of the Emerson Gardens or subsequent projects in Lexington. Among the programs to be explored is the feasibility of ConOp, a program funded by the Mass Land Bank, to promote the formation of limited equity cooperatives The limited equity cooperative, in addition to providing current residents with an equity share in a converted residence, places caps on the amount of profit that can accrue by selling the property, thereby serving the additional purpose of maintaining affordable housing Section 705 rental assistance money has recently been made available to residents of limited equity cooperatives, again serving the purpose of providing housing in Lexington for low- and moderate-income families 5 Options Available with the Current Developer (Objective 1) We propose to explore with the current owner of Emerson Gardens his general willingness to sell all or a portion of Emerson Gardens under terms that could promote a successful equity sharing proposal 6 Development of Illustrative Investment Alternatives (Objectives 1 and 4) Taking into account the characteristics of current residents and the developer, as well as the experience of comparable equity share arrangements and government programs applicable to this situation, we propose to create an investment proposal, including a Pro Forma financial analysis and determination of ROI for an Equity Share offering on Emerson Gardens This preliminary investment proposal will attempt to represent the best financial arrangements for both residents and investors We will analyze, based solely on financial considerations, how the ROI and level of risk of the preliminary Equity Share proposal compares to other investment instruments 7 Survey of the Investment Community (Objectives 1 and 2) Paying special attention to those members of the institutional investment community who reside in Lexington and serve a Lexington-based clientele, we propose to survey up to five members of the investment industry to assess the feasibility of the preliminary Equity Share proposal as well as marketing considerations and changes which would make it more marketable 8 Survey of Local Employers (Objectives 1 and 2) The changes in federal tax law have transferred many of the tax benefits of real estate to corporations while taking them away from individuals The concept of housing as a new employee benefit has already begun in the Boston area We propose to survey the five major employers located in Lexington (drawing on information from the Chamber of Commerce) as well as investment counselors located in Lexington to determine the attractiveness of equity share investment not only from a purely financial point of view but also from the point of view of community service and employee attraction, retention and loyalty Contract Town of Lexington and Abt Associates, Inc Page 3 There are three deliverables the Social Planning Report, the Market Research Report, and the Final Report, which will incorporate the revised versions of both the Social Planning and Market Research Reports The Market Research Report will assess the market feasibility of equity sharing and related investment options as a means of addressing the displacement of renters from Emerson Gardens and preserving affordable housing in Lexington Assuming that such investment options are feasible, the Market Research Report will include a recommended action plan (Objective 7) for effecting an equity sharing development at Emerson Gardens or at other sites as the opportunity arises The Social Planning Report will be integrated with the Market Research Report to assess the interest and support of local investors and local corporations in this vehicle for affordable housing III In consideration for the above described study and reports, the Town of Lexington agrees to pay according to the following schedule as invoiced by Abt Associates Inc upon completion of the described tasks Funding will be paid to a maximum of $31,500 Date A. Work plan (proposal) & Contract Signing $9,450 Dec 1 B Submission of draft Social Planning Report; Market research progress briefing $6,300 Jan 29 • Comments by the Town of Lexington within 10 (ten) days after receiving the Draft final report as in C below C Submission of Draft Market Research report $6,300 Feb 12 • Attendance at Equity sharing informa- tional forum • Comments by the Town of Lexington within 10 (ten) days after receiving the Draft report D Final Report (including both Market Research and Social Planning) $9,450 Mar 4 TOTAL. $31,500 This contract is signed on behalf of the Town of Lexington and Abt Associates by their representative officers duly authorized to take such action so as to constitute this a valid and binding contract, effective for the time set forth. TOWN OF LEXINGTON ABT ASSOCIATES, INC By' By• ALLAQ e ntah Ma44s V�� PrEsj no&