Photo courtesy of Pennrose
Karmen Cheung
Regional vice president, Pennrose
Age: 34
Industry experience: 10 years
Former factories, schools and office buildings across Connecticut are being revitalized as residences by Pennrose. The Philadelphia-based mixed-income housing specialist has steadily raised its profile in recent years as a regional leader in the adaptive reuse and redevelopment realm. Last fall, nine-year Pennrose employee Karmen Cheung was named the company’s regional vice president of New England, overseeing its activity in Connecticut, Massachusetts and Rhode Island. Pennrose’s Nutmeg State portfolio includes projects at public housing properties and vacant office buildings in Hartford, former factory sites in Naugatuck and Torrington and a former schoolhouse in New Haven.
Q: What do developers need to know about the financing ecosystem in Connecticut for mixed-income housing, including public subsidies?
A: In Connecticut, the Brownfields program is something we utilize on almost every project that we do. There’s very rarely such a thing as a clean site anymore, and a lot of the projects are in cities or municipalities that are former industrial cities, where they have a manufacturing past. So we utilize Department of Economic and Community Development funds a lot for support, and there’s a significant amount of state resources that are being devoted to affordable housing. For permitting, we haven’t utilized the Section 8-30g [affordable housing zoning law] thus far, because we’ve essentially been working with the municipality to build where they intend to have multifamily housing.
Q: What’s next in Pennrose’s development pipeline across the state?
A: The Village at Park River in Hartford is a redevelopment of a former state public housing site, and we have a second phase that is going to head toward construction soon. We’re lining up an investor right now. We also have an office-to-residential conversion in Hartford on Trinity Street, right across from the state Capitol. In Torrington, we are in the early stages of doing another phase on Route 8 with another 120 units proposed right in the downtown. In Naugatuck, we have a project that should be complete in the next two months, totaling 60 units. And we’re heading toward construction closing for the [former Horace H.] Strong School, an adaptive reuse project in New Haven, that’s fully approved for 58 units. We’re headed towards closing this fall.
Q: Pennrose has won competitions to redevelop vacant municipal 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.
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.
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: Beyond public surplus property dispositions, 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 Connecticut House Bill 5396, dubbed the “Yes in God’s Backyard” bill by supporters, affect Pennrose’s opportunities?
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 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”
