Changemakers Series

David Block, Evergreen

By Nik Edlinger on Aug 10, 2020 in People

The pandemic has impacted every segment of the housing industry, but it poses an even higher risk for the most vulnerable in our society. Safe, secure and stable housing has never been more essential.

David Block is the director of development for the Evergreen Real Estate Group, which builds, acquires and manages affordable and market-rate multifamily communities across the Midwest. Their portfolio comprises a large number of independent senior living communities, and the company has excelled in adaptive reuse. That is, converting older buildings like hospitals into subsidized communities for those in need.

Welcomed by local agencies and appreciated by residents, these unique projects have also caught the attention of Senior Housing News. They’ve given Block the title of Changemaker and interviewed him for his insights on innovative housing solutions as well as the company’s COVID-19 response. Keep reading for excerpts from the talk.

Has the COVID-19 pandemic affected Evergreen’s senior housing business? Do you think that it could lead to any longer-term changes in senior living?

It’s been all hands on deck for our entire team. We have a portfolio of about 10,000 units [including] total units that we own, units that we manage for others, and of that, I think a little more than half are seniors. Our property management side has been working very hard to make sure that the senior sites, in particular, are secure. We’re not limiting visitors yet because these are, by and large, independent living facilities. They’re apartment buildings. They’re not health care facilities like those that have been hardest hit.

We’re certainly sending out information to our tenants. We’re making sure that our staff are trained in the hygiene and the protocols that are out there to try to slow the spread of this virus. We’re certainly looking to try to take care of our residents. There’s been a lot of turbulence in the capital markets right now. We’re seeing that more on the bond side than on the tax credit side, but it’s a very difficult time to try to close a transaction, particularly if you’re in the municipal bond market.

If you’re doing the 4% non-competitive credit, then you’re trying to sell a bond to what may be a much more limited or more risk-averse market than we had even a few weeks ago. We’re working through it. Usually, if one way is blocked for us, we will try to find another way, but it’s scary times out there right now. We’re hoping that construction doesn’t slow down because we are under construction at our Ravenswood project. So far, it hasn’t, but subcontractors are like everybody else. They’re concerned for their health and their family’s health. We’re worried that they may say, “Look, we don’t want to be out right now, even if we’re working on a large construction site, we don’t think it’s safe.” If that happens, then we need to figure out what we do from there. I’m not sure that anybody has a plan for this yet.

Do you think the senior living industry is changing fast enough? For example, in meeting that need for affordable housing or even middle-market housing?

I think the senior housing industry as a whole has done a wonderful job in creating beautiful, comfortable, very well integrated facilities for people who have the ability to pay $6,000, $8,000 or $10,000 a month to be part of a continuum of care.

The bigger challenge that I think remains unanswered is nobody, as far as I can tell, and I count us among that, has really answered that middle-market model effectively, because the economics of it are not set up. The population there has too many resources and perhaps an income that is just too high to be accommodated in the real affordable housing, but they can’t afford the high-end product that’s out there.

I think as a society, we have probably failed to identify ways to help bridge that gap, whether it’s through public programs or through other incentives to lenders and investors to make that middle-market housing possible. We think on the affordable side, it’s simply a question of far too much demand and not enough resources to build it. If the number of tax credits and the availability of soft resources to support those tax credits doubled, I think we would fill that pipeline immediately, and there still wouldn’t be enough new affordable housing produced to meet all the demand that’s out there, but at least it would be a step in the right direction.

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You mentioned the middle market as a big challenge that no one really has figured out yet. Is that something that Evergreen is thinking about? Do you see some creative public/private partnership possibilities?

We’re pretty resourceful when it comes to using public funds. We are not afraid of any of the public tools that are out there to help make a project work. We’ve used just about all of them. At the end of the day though, we’re not magicians. We can’t manufacture a return for an investor and we can’t manufacture an artificially low interest rate.

If the industry is being driven by investor returns and by a particular interest rate environment, which, for the last few years has been about as low as it ever gets, and we’re still not able to deliver those mid-market products, then you really do need other tools. You do need the tools from the public sector in order to make that work. The problem is that almost all of the public sector tools are geared toward the low-end affordable housing end of the income spectrum.

There really aren’t any public tools available to help serve that middle-market of families from between 60% or 80% of area median income, up to 120% or 140% that are of median income. It’s interesting. I think it is definitely too early to say, given that we’re still in the crash of a really scary crisis right now. It is my hope that maybe if something good comes out of this pandemic that we’re living through — and a lot of people are going to lose their jobs and seniors may be more vulnerable than they were before — it is that the public sector steps up with some new tools that we can use to help provide more comfortable housing for seniors and retirement, additional assisted living tools to help seniors age comfortably in place. I think all of those tools are needed and maybe this crisis, something good will come of it.

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Read the full interview with David Block on SHN.