With its focus on forming strong relationships built on mutual trust and shared goals, Security Properties has become a leader in affordable housing acquisition and rehabilitation throughout the United States.
The firm, founded in 1969 and based in Seattle, acquired 3,166 affordable units in 2016 alone. Its 2017 pipeline includes over 1,300 units closed to date, with a total portfolio in excess of 19,000 apartment units.
“Security Properties is a long-term oriented investor and developer,” says Bryon Gongaware, Managing Director of Affordable Housing for the firm. “You can see that from our track record, and we continue with that philosophy today.”
Financial advisor Paul Pfleger founded Security Properties when several high-net worth clients were looking to defer their tax liability. He also had developer friends in search of capital. He introduced the two, and the rest is history.
The company quickly grew into one of the largest syndicators of affordable housing, but federal tax law changes in 1986 eliminated accelerated depreciation and dramatically changed the syndication business, leaving Security Properties in search of a new operation business platform with an enormous portfolio of properties to work with.
“In the mid-1990s, a new CEO realized we had a huge asset base with which to build a dynamic business platform,” Gongaware says. “The company decided to sell off a number of properties and use the capital to start two complementary business lines-Investments in conventional multi-family housing and development of high-end mixed-use properties.”
That decision established the three basic tiers of the company: affordable housing, ground-up development and conventional multifamily acquisition and renovation.
By the end of 2005, Security Properties had re-engaged its affordable housing acquisition efforts and closed on its first tax credit acquisition rehab community.
“We have continued to expand our affordable housing acquisition and development efforts ever since,” Gongaware says.
The firm’s successes and expectations are built on good relationships that help navigate the ups and downs of the investment world.
In 2010, Security Properties Residential (formerly known as Madrona Ridge Residential), the management unit for most of Security Properties’ holdings, was added to the mix. All four business units work across any economic environment, with affordable housing offering an offset to the risk typically seen in ground-up development.
ALWAYS MOVING FORWARD
In addition to protecting its capital partners, the team at Security Properties works hard to connect residents and build communities. The company is an active partner in search of creative ideas for new development opportunities.
“We want our residents to feel like the property is their home,” Gongaware says. “The more they do, the better the residents will take care of the property and create a high-quality community that people are proud to be a part of for the long term. That reinvestment in the community preserves the property for the long term and helps break the cycle of need for the affordable housing.”
The firm invests in resources to meet the needs of their residents and connect them back into the community. This means, for example, that properties have dedicated community space for residents and are located near public transportation. The communities also have computer learning labs for writing resumes, assessing job skills, finding job opportunities and learning English as a second language.
And, an after-school snack program provides much-needed resources for children with families that don’t have the resources for nutricious snacks and balanced meals.
“We are creating a community as opposed to just a place to put your head down at night,” Gongaware says. “Our mission is to create high quality housing where we would want our families to live. We want to create a sense of place in which to grow.”
CURRENT AND FUTURE PLANS
Marcella, acquired in 2016, is the latest example of that connectivity. It’s a 40-year-old, 206-unit senior citizen Section 8 property in Arvada, Colorado, that just recently completed a substantial tax credit renovation.
Gongaware says that most of the company’s properties have “what we refer to as a little pet project that is new and unique.” Marcella, for example, features a photovoltaic system on the roof to offset some of the property’s electrical expenses.
Denver is a part of Security Properties’ national reach into six key geographic regions that have a thriving economic engine and feature an affordable housing demand factor that drives on-going, long-term stability and cash flow.
Target markets are the Pacific Northwest (Washington, Oregon and Idaho), West (California and Nevada), Mountain West (Colorado and Utah), Midwest (Illinois, Minnesota and Wisconsin), Mid-Atlantic (Washington D.C., Virginia, Maryland and North Carolina) and Northeast (New York, Massachusetts, and Connecticut).
A long-term focus is fundamental for the vision of Security Properties to overcome market uncertainty, especially in light of potential tax reform happening at the federal level.
That said, Gongaware feels the last months have seen investment opportunities stabilize, with more tax credit equity investors aggressively coming back to the table.
“We are 10 percent below peak tax credit pricing that existed prior to the 2016 election and we still don’t have the framework for potential tax reform,” he says. “But we remain bullish about the investment in and preservation of affordable housing over the long haul.”
This bullishness is built on a long-term perspective, as the tax credit environment has proven to be a successful production engine for affordable housing over the past 30 years.
“At Security Properties, the tools are in place for long-term success and sustainability,” Gongaware says. “We continue to make investments and secure strategic relationships with that long-term vision in mind. Every step along the way, we have the mindset and vision to improve the communities where we work. We are focused on providing outstanding living experiences for our residents and exceptional returns for our investors.”
