EDGE Communications from the
Portfolio Management Frontline
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October 24, 2019
WHAT IF MITCH DANIELS WERE PRESIDENT…
not apply to the current occupant of 1600 Pennsylvania Avenue. His body of work as Governor of Indiana is memorialized by setting aside differences and focusing on agreement of policy to attain growth and prosperity for all citizens of the state. He certainly was ahead of many regarding roads and infrastructure, a seemingly forgotten part of the 2016 campaign promises. Let’s pretend, for a just a moment, that the occupant of the White House is Mitch Daniels: addressed the press today with Chancellor Merkle from Germany who is here on a state visit. He discussed the working relationship between the President Daniels
European Union and the United States and the increase in trade. Now over 4%, he specifically cited the increase in the GDP of both the EU and the United States. This came upon the trade deal completed in 2018 with Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the United States. The Transpacific deal, experts have noted, allowed for Japan to exit its 20-year deflationary slump and restart its economy. Once enacted, China halted its unfair trade practices - specifically, the unauthorized use of intellectual property.
by: Jeff Whiting, President & CEO
Vin Scully once eulogized a dying Los Angeles Dodgers rally by paraphrasing thepoet JohnGreenleaf Whittier with the observation, “The saddest words of tongue and pen are these: What might have been.” The topic at hand is a flight of fantasy. What might have been had Mitch Daniels run for President in 2016 and won the election? Let’s start with the tenor of today’s politics and progress to policy. Mitch Daniels was, and still is as the President of Purdue University, a cordial, civil and thoughtful individual. These three adjectives do Campaign Quarters is the adaptive reuse of the former Durbin Hotel and Knights of Pythias Lodge, that was rehabilitated in downtown Rushville, IN. Originally built in 1850, Campaign Quarters maintains its historic significance as part of the National Register of Historic Places. A fun fact to note: during the 1940’s the Durbin Hotel served as Wendell Wilkie’s... PROPERTY HIGHLIGHT: CAMPAIGN QUARTERS
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HR CONTENT
EMPLOYEE SPOTLIGHT: KEVIN KURUZAR
Kevin Kuruzar, Senior Vice President - Fund Management, joined CREA in July of 2012. Kevin oversees all aspects of Fund Management, including the management of day- to-day activities of CREA’s fund entities post-closing, all investor reporting, and maintenance of all active lower-tier and fund-level financial projections within the CREA portfolio...
by: Katy McShane
CREA has been hosting interns for over ten years. In fact, our first intern was current employee Brian Villa, VP - General Counsel who first came to us 11 years ago in the summer of 2008. Brian reconnected with CREA a few years later and joined us as a full-time employee in 2013...
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P2 WHAT IF MITCH DANIELS WERE PRESIDENT?, CONT. P3 PROPERTY SPOTLIGHT
P4 PORTFOLIO MANAGEMENT GETS ACTIVE FOR NUMEROUS CAUSES P5 AN INSIDE LOOK AT CREA’S INTERNSHIP PROGRAM
P6 EMPLOYEE SPOTLIGHT: KEVIN KURUZAR P7 GOOD TO KNOW
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WHAT IF MITCH DANIELS WERE PRESIDENT?, CONTINUED
Worldwide GDP is now trending over 6% due to the U.S. led trade agreements. Worldwide Inflation has remained in check at just under 2%, allowing for more purchasing power among all nations and their citizens. The Tax Reform Act of 2018 has created an alignment of economic activity and 21st century revenue. According to Fox Business News, business investment has never
that none of this would be possible without the support from his friends across the aisle. He pointed to both Minority Leader, Pelosi, and Minority Leader, Schumer, as instrumental in allowing for a near unanimous vote on both the TRA of 2018 and the Infrastructure, Security and Jobs Act of 2017. Secretary of the Treasury, Jamie Diamond, noted in a separate press release that the U.S. Debt outstanding under President Daniels has fallen from
Tax Credit Improvement Act sponsored by Senator Todd Young of Indiana. The White House has said this is a priority for our nation and its time that we address the affordable housing crisis impacting our country. When asked about this legislation at the press conference, President Daniels backed the bipartisan legislation and suggested, notwithstanding some differences in the details, the bill itself is something we should pass and pass now. One matter that may become an election year issue is that interest rates have normalized after the last 10 years of Federal Reserve injections of liquidity via quantitative easing and excess reserves by its members. The 10-year Treasury Bond closed at 3.25% which is higher than most of the industrial world. Although the interest rates have risen under the Daniels administration, the amount of interest paid on the national debt has fallen due to the President’s insistence that every department be held accountable to the U.S. taxpayer, as well as the enactment of the TRA of 2018, which has increased Capital Gains Tax and eliminated the concept of carried interest. Occasionally, one can wonder about what might have been. Perhaps this just a subtle way of wishing we had adults at the table. Maybe we still can.
been higher. Like the tax policies President Daniels enacted while Governor of Indiana, the TRA of 2018 has allowed for greater business
“The topic at hand is a flight of fantasy. What might have been had Mitch Daniels run for President in 2016 and won the election?”
just over $18 trillion in 2016 to $12 trillion, mainly due to the increased tax revenues generated by
investment while supporting the social welfare net. Thus, all citizens of the United States have been allowed greater educational and employment opportunities. Part of the TRA 2018 has also allowed for greater spending for infrastructure by utilizing private public partnerships. Experts now agree that this spendingbill, enacted shortly after President Daniels took office, has created greater border security due to the investments made at the country’s airports, seaports and electrical grids. During today’s press conference, President Daniels was gracious to all members of Congress noting
the TRA of 2018.
Vice President, Joni Ernst, and Secretary of State, John Kerry, will be joining the State Dinner this eveninghaving just completed their negotiationswithRussia, Syria, Iraq, Iran, and Israel. Although nothing has been officially announced, CNN is reporting a breakthrough in the ceasefire that has been in place since July 1st. When asked to confirm the rumors of a peace treaty, President Daniels deferred the question until a formal treaty can be brought forth to the Senate for ratification.
In other news, the Administration is supporting the Affordable Housing
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PROPERTY SPOTLIGHT: CAMPAIGN QUARTERS
...campaign headquarters as he sought the republican nomination for the 1944 election, which he eventually lost to Thomas Dewey (who then lost to Franklin D. Roosevelt). As a project that has improved community and economic development, housing, transportation, and overall quality of life, Campaign Quarters was designated as a Stellar Community by the State of Indiana, receiving priority funding from public
and private sources.
PROPERTY QUICK FACTS Location : Rushville, IN Units : 26 Construction : Rehab Ground Up Resident : Senior 55+, Family Community : Rural Developer : MV Partners, LLC
The amenities are superior to most rental projects in the area, including: dishwasher and microwaves, walk- in closets, on-site management, exercise room, computer room, limited access entries and security cameras. Additionally, the property is located within 0.5 miles of a grocery store, convenience store, neighborhood shopping, community shopping center, laundromat, high
school, bus stop, library, government offices, a senior center and park.
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PORTFOLIO MANAGEMENT GETS ACTIVE FOR NUMEROUS CAUSES
2019
World
Transplant
The World Transplant Games is put on by the World Transplant Games Federation with the purpose of, “promoting education around transplantation in order to promote the physical success of transplant surgery and the need to raise public awareness and increase organ donation” (wtgf.org).
Games
As a four time participant in theNational Transplant Game, Nancy Havlin stepped on the stage at the World Transplant Games and it paid off. This year, Nancy brought home gold in Bowling Singles and Bowling Women’s Doubles.
Congratulations, Nancy!
JDRF One Walk, Indianapolis 2019
overall in their division and 9th in the real estate/land development industry, a few employees came home with medals. Neil Snorten, Jarrod Campbell and Carrie Daniels won gold in the basketball shootout, and Kelli Ozdemir earned a bronze For the fifth year, CREA joined Team Sturge-Weber Foundation (SWF) for the scenic seven mile run along the seaside of Cape Cod on August 18. Team SWF was led by partner client Pam McIntyre, whose son, Ryan, was diagnosed with Sturge-Weber syndrome at six months old. This year, employees Tony Bertoldi, and sleep overs, her disease is still something that must be managed every day. On the DiaBEATers page, Kelli said, “It is always on our minds. We are constantly counting carbs in our head. Constantly looking at our phones to see what Ella’s blood sugar is. It is hard to let go, even though I know Ella has such a good handle on it herself. I can’t imagine her dealing with this all on her own when she goes off to
As the mother of a child with type 1 diabetes, Kelli Ozdemir is a huge supporter of JDRF. For another year, Kelli’s fundraising team, “Ella’s DiaBEATers” joined together to raise funds and participate in the JDRFOne Walk in Indianapolis. Their combined efforts reached over $9k. While her daughter, Ella, is a typical kid in many ways, participating in gymnastics
Aaron Carpenter, Phil LaRocca, Kelli Ozdemir, Ben Riesmeyer, Omar Rosas and Brooke Solis all took to the pavement and fundraised to benefit SWF. Over $26K was raised through employee efforts to contribute to The Sturge-Weber Foundation overall fundraising total of over $275k this year! Way to go, team! college. That’s why we need a cure. That’s why we fundraise. That’s why we walk.”
2019 Falmouth Road Race
Indiana Sports Corp Corporate Challenge
medal in t h e women’s division for the 5k.
For the first year, CREA’s Indianapolis employees participated in the Indiana Sports Corp Corporate Challenge. While the CREA team placed 18th
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AN INSIDE LOOK AT CREA’S INTERNSHIP PROGRAM ... Over the last three years, our summer internship program has evolved and we have been working on fine-tuning it to provide the best, well-rounded experience for our interns. During the year, we host anywhere from four to six full-time summer interns for a 12-week period. collect feedback to continuously improve CREA’s internship program for the following years’ “class”. net and the Indiana Chamber, networking with other central Indiana interns, participating in continuing education events, and simply having a chance to explore Indianapolis destinations like the Indianapolis Zoo, Children’s Museum and The Symphony. As part of community engagement, we also partner with Second Helpings for an afternoon of volunteering together in their Hunger Relief Kitchen.
After on-boarding, interns are provided with a detailed weekly event schedule of specific group activities, including an introduction to our industry andweekly lunch-and-learns provided by each department within CREA. These lunch-and-learns allow interns to get a basic understanding how each department fits within the organization, how employees interact with other departments, and how individuals were introduced to the industry and to CREA. To better familiarize themselves, interns have the opportunity to enjoy lunch with CEO, Jeff Whiting, and other executive staff, as well as participate in company sponsored social events.
After recruiting, interviewing and extending offers for our paid internships, we take great care in on- boarding the group, getting them acquainted with each other, and assigning each a mentor from within their department to provide support for the entirety of the program. The stage is set with a meeting to discuss expectations and goals from managers and interns alike. There is a formal check-in at the midway mark, as well as an evaluation of the program at the end. We always
All of these scheduled events are in addition to their daily work schedule within their specific department, participating in meetings, and contributing to actual, meaningful projects and tasks. We have hosted 23 interns so far and are already excited for the summer and intern “class” of 2020!
CREA partners with Indiana INTER.
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EMPLOYEE
SPOTLIGHT:
KEVIN
KURUZAR,
CONTINUED
...Kevin began his career at the public a c c o u n t i n g firm Dauby O ’ C o n n o r
and all revolve around getting the most out of the technology available to us. This is vital as we add around 70-80 lower-tier partnerships and a handful of funds every year, while investor reporting requests continue to vary. Tell us about your team. What type of backgrounds do they have? How long have they been with CREA, etc.? The FM team has grown and had completely turned over the last several years. Other than Kelli Ozdemir, I am the only person still in FM since my first day at CREA in 2012. The department has grown from five people then to twelve today. There are four Vice Presidents and seven Fund Analysts, with varying backgrounds and anywhere from two months to thirteen years of affordable housing experience. There isn’t enough space to fit eleven individual compliments, so I’ll just say that I’m extremely appreciative of everything they do. They make FM, and really all of CREA in some respects, run smoothly. I’m not even aware of every little thing they do, and I don’t have to be, because they always do what is right. They put in a lot of effort, and they are always looking out for both our investor and our developer partnerships. They make my job easy. What’s the most challenging thing about FM and the work you do to protect the investors’ benefits? A couple of things come to mind. FM leans toward looking out for our
investors’ interests, but we have to be mindful that developers are our partners, too. CREA is also the GP/ MM of these funds and is trying to make a profit, as well. Balancing all of these interests, being in the middle of issues and making suggestions that simultaneously affect investors, developers and CREA all at once, is a unique space in this industry. It comes with its challenges, but we genuinely care about treating all parties involved fairly, and we always put investors and developers ahead of CREA, which sometimes makes it simple. The other thing is tax season, due to sheer volume of work. FM reviews about 600 property-level and about 70 fund-level audits and tax returns. To fit this all in during a period of just a few months, on top of the day-to-day tasks, is taxing… no pun intended. Oh yeah, and tax reform was easily the least cool thing that’s happened in my career, and right when I was promoted! You’ve been with CREA for over 7 years now, what is it about the company that keeps you coming to work here every day? The work/life balance, culture and friendships I have made. It sounds cliché, and a lot of companies say it, including past employers I’ve had, but CREA truly stresses and implements these ideas and has therefore become a part of my life - not just my job. I don’t have to say it or ask for special privileges. CREA just understands my priorities in life and I’m given the flexibility to make those my priority - even on weekdays,
& Zaleski, LLC in 2006 where he supervised audit engagement teams of affordable housing partnerships, developers and other participants in the affordable housing industry. Kevin holds a Bachelor of Science in Accounting and Finance from Indiana University and is a licensed Certified Public Accountant in the state of Indiana. Learn more about Kevin in this Q & A: It’s been almost 2 years since you became Head of Fund Management (“FM”); how are you liking your new role and what changes have you implemented within your department? The role has been challenging and satisfying at the same time. It took some time, but I think I’ve struck a nice balance between being consistently challenged and finding a comfort zone. There is never a dull day. I felt overwhelmed at times at first, probably due to self-pressure, but those days have become less frequent. Regarding implementing changes, I initially wanted FM to simply keep up with the growth that the rest of CREA has experienced. Now, I try to be more forward- thinking, to get ahead of where I think we’ll be or need to be. All changes made and all future plans center around gaining efficiencies and being able to do more with less,
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as long as I maintain dedication to our work. My wife and son will be here for Halloween and they come visit the office a few times every year. Friday happy hours with CREA- provided drinks at 4pm throughout the summer are a nice touch, even if I don’t participate in all of them. Finally, who actually celebrates International Talk Like a Pirate Day and the Summer Solstice as a defacto company holiday? Not just celebrates them, but plans them for months? My wife thinks we are crazy. When you aren’t focused on tax credits, IRRs and depreciation, what do you enjoy doing? Spending time with my wife (Leah) and son (Elijah). We love watching Elijah grow and learn new things. We often go to parks and try to get him out to see the world, and keep him off our cell phones and tablets - which, he can proficiently operate. When I have time to myself, golfing and fishing are my two main pastimes. Anything on or near water is a big draw for me, and I try to spend as much time as possible in the summer at my family’s lake house in Michigan. I recently began contributing my time to a local organization called the Fathers and Families Center here in Indianapolis, which focuses on providing fathers from challenging backgrounds with resources, guidance and support to take on the responsibilities of being an engaged parent. CREA continuously encourages community involvement to all employees, providing tools and paid volunteering hours to allow us to explore opportunities such as this. I’m very appreciative of that because I may otherwise not be able
to dedicate the amount of time a commitment like this deserves. You have the cutest little baby boy. How old is he now and what is he up to? Thank you! Elijah turned two years old a few months ago. He is in full transition mode from “little baby” to “big boy.” Leah and I cherish every day with him; I think we do a great job of never taking our time with him for granted. We just took a fall break trip to Chicago where we visited Lincoln Park Zoo, Shedd Aquarium and Navy Pier, and just checked out Chicago in general. The moments that stick out the most are the small ones, like when he rattles off a new phrase or some new words
2011 and2012, so theCredit Periods for those deals will burn off in five years. Dispositions will ramp up and, while they may not catch Acquisitions any time soon (10 years maybe?), one day we’ll plateau. CREA’s revenue sources are becoming increasingly portfolio driven…we’ve already seen the start of that trend. Therefore, I think we’ll see more focus on managing the existing portfolio as effectively and efficiently as possible, probably involving a CREA-owned asset and fund management software and reporting platform. Other than that, there will probably be some new deal/fund structures and offerings that I can’t even imagine yet. I’ll leave that to Jeff Whiting and Executive Management to figure out, and FM will be there to support those efforts.
in such a matter-of-fact, adult-like tone. “Elijah, you want to put on your pajamas and go to bed?” “No, I don’t feel like doing that right now Daddy. But, maybe later.” He’ll say something new like that every few days and my wife and I will just make eye contact and smile. Lastly, he is very excited to be a big brother, which should happen right in the middle of tax season…timed that one perfectly! If you had a crystal ball, what do you see the FM department and CREA looking like and doing in 5 years? Since I’ve been at CREA, everything has been about growth. The number of CREA deals and funds is what drives FM’s workload. CREA’s first major growth stint occurred around
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AWARDS & KUDOS
Phoenix Manor - IAHC Excellence in Affordable Housing Awards, Senior Phoenix Manor consists of 33 affordable, senior homes in Ft. Wayne, IN. Amenities include: movie theater, library, fitness center with senior-oriented equipment, computer room, game/activity room, indoor walking path, an apple orchard, labyrinth, bocce ball court/horse shoe pit, and on-site manager and maintenance technician. 43 Town Square - Merit at the AIA Akron Design Awards “The historic 1926 First National Bank and Lima Trust building, renamed as 43 Town Square, is located at the corner of West Market Street and North Main Street at 43 Town Square in Lima, Ohio. The 102,000-square-foot building was previously used as a bank, retail space, and offices, and is listed on the National Register of Historic Places. Designed by Weary & Alford of Chillicothe, Illinois, the building is characterized by its Commercial Style elements and features a limestone facade with limestone details typical of the Renaissance Revival.” - Perspectus Architecture Grace Meadows - 2019 Excellence in Rural Housing Award from RD’s Hillsboro Area Office “The award recognized Grace Meadow...for its excellent physical enhancements including restored outdoor benches, beautification to the playground, and new raised garden beds. In addition, the Woda Cooper management team’s efforts to enhance community life, through organized cookouts for residents and a summer lunch program for community/neighborhood children, were applauded.” - Woda Cooper Companies Highland Hall - Seniors Housing Winner of Affordable Housing Finance Readers’ Choice Awards “The adaptive- reuse of the property involved a major rehabilitation, including installing a new roof, restoring portions of the building that couldn’t be saved, and recreating the original facade. The building exterior reflects the history of the site while the interior has been adapted into modern apartments, including several that are fully accessible.” - Affordable Housing Finance
• Engagement letters: Submit by 10/31/19 to your assigned Asset Manager or audits@creallc.com. • 3rd Quarter Reporting: Submit by 10/31/19 to your assigned Asset Manager, OCT 31 REPORTING DEADLINES
DEC 1 DEC 15
• 2020 Budgets: Submit by 12/1/19 to your assigned Asset Manager.
as well as a copy to crea@integratec.biz.
• For our Limited Partners: 3rd Quarter Reports will be issued by 12/15/19.
GOOD TO KNOW
Asset managers will be reaching out to confirm actual tax credit delivery for those properties with first year credit delivery in 2019.
2019 Tax Season Guidelines have been sent out to all of our GP and accountant contacts.
Any properties that are not operational in 2019, get a jump start on tax season and request an audit waiver now!
CREA, LLC / 30 S. MERIDIAN ST, STE 400 MARKETING@CREALLC.COM / CREALLC.COM
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