Photo courtesy of Penrose
Karmen Cheung
Regional vice president, Pennrose
Age: 34
Industry experience: 10 years
Former churches and schoolhouses across Massachusetts have been converted into housing by Pennrose, a mixed-income housing developer. The Philadelphia-based company is raising its Greater Boston profile this year with construction of 95 Everett, an 88-unit affordable complex overlooking the Massachusetts Turnpike in Allston, and continuing its conversion of the former Blessed Sacrament Church in Jamaica Plain into 55 apartments.
This summer, it’s scheduled to start construction on the first phase of the 220-unit Massachusetts Veterans Home at Chelsea project, while seeking approval for a 42-unit housing development in Chatham and a 60-unit project in Harwich. Last fall, nine-year Pennrose employee Karmen Cheung was named the company’s regional vice president of New England, overseeing its activity in Massachusetts, Connecticut and Rhode Island.
Q: Pennrose has won multiple competitions to redevelop municipally-owned properties as housing. What are the advantages of those projects?
A: First off, we are kind of a sucker for old buildings. New England in particular has a lot of historic buildings that are beautiful. They don’t build them like that anymore, and oftentimes these buildings, especially schools, are located in places where there’s already infrastructure, where they’re close to town centers or they’re close to the neighborhood amenities. And also, any development is change, and change is scary. When the change comes with it preserving a piece of the community’s history, that makes it more palatable and more welcomed by the neighborhood, and that’s kind of our desired approach. We want to build projects that are supported by the community, and when you’re doing adaptive reuse, that’s much more likely. And I think from the financing perspective, one of the benefits of doing it in the state of Massachusetts is that in addition to federal historic tax credits, there are state historic tax credits. So those resources really make it possible to pursue these opportunities.
Q: How does Pennrose define its current business model, and what are the advantages of a for-profit entity focused on mixed- and affordable housing?
A: It’s mixed-income housing, and the financing structure for any developer, whether you’re a for-profit or nonprofit developer, for affordable housing is essentially the same. There’s no difference in what developer fee we would get or what rents we can charge. The rules are the same. What is really the engine across the country for how these projects get built is through the low-income housing tax credit, and in the state of Massachusetts, we also have a state low income housing tax credit, and also an amazing plethora of other state resources that go towards affordable housing. 95 Everett utilizes a lot of those resources in order to get the project financed and built, because rents are restricted, so it caps what rental revenue you can generate, so in order to finance the project, you need a lot of those subsidies.
Q: What’s the biggest hurdle in the capital stack for the type of projects Pennrose pursues?
A: The cost of construction is so out of whack now, so the scarce state resources that have always been challenging to secure, are now even more competitive. The availability of rental subsidies has been significantly challenged over the last year or two, and the demand for tax credits from banks has been reduced, so that makes it harder to secure investors for the tax credits. Over the last year or two, we’ve seen pricing for those tax credits decline.
Q: Has Pennrose actively sought more development sites on the Cape?
A: Those are all requests for proposals, either through the town or an affordable housing trust, so that’s how we found those parcels. We’ve also spent a lot of time on the Cape because we recognize that’s an area where there are significant stressors on stable year-round housing, and that’s an area of concern for the commonwealth. So that’s why we started to create a cluster, basically.
Q: How else do you find deals? Are you approached by developers with stalled sites approved for commercial uses?
A: Not so much recently, but last year there were a lot of people with stalled sites that were looking to see if affordable, or a mixed-income approach would be a more viable path forward. The challenge is that oftentimes the land values for those projects are higher than what a typical affordable housing project would be able to support, so most of the projects that we have pursued and opportunities that we’ve been able to secure are either very patient sellers who are interested in selling for reasons beyond just recouping like the highest land value, or municipal or government-owned RFPs.
Q: How would passage of the Yes In God’s Backyard [YIGBY] bill affect Pennrose?
A: For most development projects, one of the riskiest parts is the zoning process and the length of time it takes to go through. The YIGBY bill allows churches [and other houses of worship] to to more easily build housing on their properties, and the churches are a perfect ally, because their constituents will benefit, and they’ll have more density around them. These are usually properties that are located in places where it would make sense to have housing.
Q: Your professional bio mentions that you grew up in an affordable housing complex in New York City. Does that influence your approach to your job?
A: Oh yeah. I grew up on the Lower East Side, and to this day, I don’t really know what it was financed with, but I should look into it. It is kind of Section 8 affordable housing. It’s not owned by the New York City Housing Authority, but all of the units are subsidized. It just is what set me on this whole path, because growing up, housing stability was not something I even thought about. And all of the housing that we are building, it’s to create an environment where the families that move in don’t have to worry about having stable housing. It’s something that’s a good environment to live in. I didn’t even realize that it was really what’s quote-unquote affordable housing. It’s just where I lived. It was a safe place, and people were there for a long time. My parents would know other parents in the building. Even though it’s New York City and it’s a massive place, there was a lot of stability. There wasn’t a lot of turnover, and it created a really safe environment for us growing up.
Cheung’s Five Favorite Podcasts
- “The Ezra Klein Show”
- “Acquired”
- “Search Engine”
- “The Rent Roll with Jay Parsons”
- “99% Invisible”
