The VIRGINIA HOUSING DEVELOPMENT LLC
On March 22, 2010, VIRGINIA HOUSING DEVELOPMENT LLC (the “VHDLLC”) was formed by ARHA through Resolution 471 for the purposes of developing or redeveloping affordable housing projects designated by ARHA. The mission is dissected from ARHA’s overall mission and the VHDLLC was limited in its undertakings by virtue of its identity with ARHA to those undertakings that ARHA would approve of. It is essentially the vehicle through which the ARHA Department of Development will carry out its responsibilities and therefore it will continue in its oversight of all development and redevelopment efforts as well as for the Bond Program.
Since the time of its formation, the VHDLLC, successfully acted as the master developer in Quaker Hill, earning a developer fee large enough to capitalize projects that fall within the mission of the ARHA. Additionally, because it has capacity to act as the affordable housing (“component”) developer on the mixed-finance redevelopment efforts that have been underway since 2006, the VHDLLC’s base operations can be sustained through 2015 with earned developer fees from the West Glebe and James Bland redevelopment efforts.
The vision of the New ARHA has consistently been to create sustainable, entrepreneurial activities by which the increasing costs of the ARHA Central Office Control Center (“COCC”) could be reduced. By the efforts of the VHDLLC to complete those tasks germane to the development functions of ARHA; the expenses related to the development function are then carved out of the ARHA structure giving relief to the ARHA budget. Further, by charging a fee for its services, the VHDLLC is now sustainable as a Strategic Business Unit (“SBU”) of ARHA. As an SBU, the VHDLLC is understood to be a business unit within the overall corporate identity of ARHA but which is distinguishable from ARHA because it serves a defined external market where management can conduct strategic planning in relation to specific development efforts. It is envisioned that other ARHA departments will eventually function as additional SBUs.
In addition to being self-sustaining, the VHDLLC is envisioned to be a profit center and those profits would be unencumbered funds that could be used by ARHA on an as needed basis. The COCC costs of ARHA are decreased because the development arm supports itself; there is a correlation between the success of the VHDLLC and the COCC. In fact, the costs related to the development arm of ARHA are carved out of the COCC in the current budget and as of this date an obligation of the VHDLLC. Just as this action carves out the expenses related to development, it also carves out the revenues. The reason for not showing the profits of the Company in the ARHA budget is because they cannot be stated as a fixed value that is sustainable on an annual basis. Because they are variable, they should not be used to balance the ARHA budget. We also do not wish to deplete the profits of the VHDLLC by balancing the ARHA budget such that the VHDLLC would have no capital by which to invest in opportunities as they arise that would further the mission of the VHDLLC and by association, ARHA.
In the redevelopment of Samuel Madden Homes (Downtown), the development function of ARHA was carried out by competitively procuring and then managing a development partner who provided full services to ARHA. These projects were successful in the short term in that the development efforts were profitable enough to build replacement housing that carried no debt service. In the long term, the projects served as a vehicle to train ARHA staff to ultimately take over a larger share of the responsibilities so that development efforts would result in yet higher profits to ARHA. In fact at Quaker Hill ARHA acted as the sole developer and those actions resulted in the maximum return.
The VHDLLC will not only need to sustain its own operations but will also need access to capital funding in order to serve as a master developer or as a component developer in joint venture transactions for specific projects which are identified as viable and meeting the mission of ARHA. By acting in this manner over time, ARHA, through the VHDLLC, will advance in an orderly manner the planning, development and implementation of our real estate portfolio.
Virginia Housing Development LLC will be managed by the ARHA, which shall exercise full and exclusive control over the affairs of the VHDLLC. It is envisioned that the ARHA Board will appoint a separate board for the VHDLLC and give them such titles and powers as the ARHA may choose. The VHDLLC’s Board is envisioned to act independently but with accountability to the ARHA Board of Commissioners. By acting in this manner we are also removing some amount of the liability associated with the development functions from ARHA.
The primary objective of the VHDLLC is to develop Quaker Hill, Glebe Park, James Bland and Pendleton Park as the core business for the first four years; serving 254 low income households while building our in-house capacity and client base. Staff of the VHDLLC will assist in the development of the Strategic Facilities Recommendations and Redevelopment Assessment sections of the Strategic Plan. Based on the outcome, we will begin the planning on those properties identified as prime candidates for redevelopment and take the necessary steps to complete the planning and implementation of the redevelopment effort. While our primary responsibility is to ARHA’s portfolio it is our ultimate goal to perform on a larger stage than Alexandria.