Wayne Schiferl, a tax partner in the construction/real estate group of accounting firm Baker Tilly Virchow Krause, LLP, has extensive experience in affordable housing and real estate land development. Schiferl also boasts a deep understanding of what it takes to plan for affordable-housing projects and is skilled in the use of the Low Income Housing Tax Credit to help bring more of these projects to Minnesota. Schiferl recently spoke to Minnesota Real Estate Journal from his office in Minneapolis about the help he and his fellow real estate accountants can bring to developers.
Minnesota Real Estate Journal: How did you get involved in the real estate end of accounting? Wayne Schiferl: It happened by default, as most things happen. I grew up in a real estate family. I went to school to become a CPA. After graduating, I went to Arthur Anderson where I was put on the real estate group. That was in 1988. I spent five years on the real estate group, up to 1991. That was probably, if you remember, the worst time to be in real estate. I learned all I could there and moved on to a niche real estate accounting firm. It was a small firm with big clients. I spent a lot of time there structuring multi-family and Section 8 deals. I spent a lot of years learning and honing my skills there.
About seven years ago, my firm merged with Baker Tilly. We have a great affordable-housing practice now. We deal with the whole lifecycle of real estate, from finding equity and debt to helping with structured transactions. We work on new-construction consulting. We help clients maximize the value of their properties. We help clients with exit strategies if they want to exit their properties. We work on refinancing opportunities for clients who want to take the cash flow out of these properties or improve the cash flow in them. From inception to exit, we handle all of the real estate needs of our clients.
MREJ: You’ve helped a lot of clients access the Low Income Housing Tax Credit. How important is this credit to the development of affordable housing today? Schiferl: The tax credit is the crux of today’s affordable-housing market. Section 8 has been cut back dramatically. The only redevelopment tool for creating affordable housing now is the Low Income Housing Tax Credit. If that credit goes away, the number of housing units that can be preserved as affordable will dramatically drop. It’s a great preservation tool. It works not only for development and the jobs that development brings, but also for providing and preserving housing for those who otherwise couldn’t afford it. Without that credit, affordable housing doesn’t work.
MREJ: Can you share with me an example of how you’ve recently helped a client with an affordable-housing challenge? Schiferl: I had a client who had an old Section 8 deal, a deal that was 25 years or so old. With Section 8 properties, the cash flow on HUD rent and subsidies isn’t much. You don’t make a lot of money on cash flow with a HUD deal. You get the money upfront. We were able to help the client with an application to the Minnesota Housing Finance Agency for a 9 percent tax credit. With that credit in place, our client was able to find a new investor in the project. The new investor bought into a new partnership with our client. Together, they were able to rehab the entire housing development in Rochester, Minnesota. They put in new cabinets, carpets, windows and siding. They brought everything up to code. They basically refreshed the whole property.
MREJ: What impact have the renovations had? Schiferl: The client still has the Section 8 subsidy. But because the client was able to rehab the entire property with the additional money from Minnesota Housing Finance Agency credits, the property is now repositioned for another 15, 20 or 30 years. As part of the rehab work, they replaced all the old oil boilers with high-efficient gas boilers. That dropped 30 percent to 40 percent of the development’s utility costs. What was once a property with no cash flow has now become one with a steady cash flow for our client. The maintenance costs of the development have gone down, too. This was really a storybook project. Everything just clicked.
MREJ: What was your client’s reaction to this? Schiferl: The client wasn’t all that surprised. My clients do count on me to get this stuff done for me. The client was very happy, though. I helped them coordinate everything. It takes a while. This client had never done a credit deal before this one. This whole process from the very beginning took about four years. From the time when we actually started the project it took about four years. We had to buy out an old investor, find a new investor, get applications in and approved and close on construction financing. We had to arrange permanent financing, too. It was not an overnight type of deal. It’s all very complicated.
MREJ: Are people in the construction and commercial real estate industries aware of the work that accounting professionals like you do in this field? Schiferl: A lot of people think that all we do is tax and audit work. But there is a lot of work that we do in conjunction with attorneys and consultants. A lot of my clients come to me with some wide-ranging problems. It’s my job to do what I can to find them solutions. We want to educate everyone on the tax credits available to them. We want to educate them on what is out there for them.
MREJ: What do you enjoy most about working with real estate clients? Schiferl: It is never the same. There is always a different project or a different issue. It is not mundane. Every situation is different. You can’t put the information into a flow chart that tells you to do this or do that. Everything has its own unique twist. Just look at all the regulations and tax-law changes that we see. There was once a time when they’d pass a law and it would remain on the books until someone removed it. Now it’s on the books for a couple of years you hope they extend it. Things change so quickly today.
MREJ: When you’re not working, how do you like to spend your time? Schiferl: I’d like to say I spend my free time running. But I can’t really say that. I do like to spend time with my family, though. I enjoy the time I can spend with my family. I do this work so that I can spend time with them. That’s what it’s about.