WNC Packages Projects for Investors Seeking Tax Breaks
Will Cooper Sr. knew he had a good idea that wouldn’t fly.
But when he was asked to make a formal presentation to top leaders of Rockwell International, Cooper says he was surprised by the reaction.
“Ten minutes into the discussion it became clear that they weren’t going to build modular homes,” he recalled recently. “But I saw their eyes light up because they were all high-salaried executives who were looking for ways to defray their taxes.”
What had piqued the interest of Cooper’s audience was a discussion of tax law changes enacted by Congress that year. In particular, they were interested in new incentives to boost multi-family apartment development.
So Cooper left Rockwell and opened WNC & Associates Inc. in 1971, finding apartment and housing projects that could earn investors tax breaks.
“It seemed like a good time to take advantage of what we had learned,” said Cooper, 69.
Working out of his house, he brought investors and developers together, packaging deals to raise more equity and enhance investment savings.
“Will was one of the first people in California to grasp the complexities of tax changes and how they would alter the low-income housing markets,” said Patrick Sabelhaus, a Sacramento-based lawyer who represents the California Council for Affordable Housing.
“He is considered a significant contributor to what has become a very large industry.”
The former one-man shop now is based in Irvine and has 80 employees, about 50 of whom work in Orange County. Others are assigned to WNC offices in Washington, D.C., Connecticut, Texas and Minnesota.
First on Bandwagon
Cooper didn’t make a name for his company just in the ’70s. He is credited by many with being the first private entrepreneur in California to take advantage of low-income tax credits enacted by Congress in 1986. The creation of Section 42 in the federal tax code gave developers new incentives to build affordable housing, earmarking billions of dollars of tax deferments for individual and corporate investors.
Federal tax credits made available for low-income projects total more than $40 million a year to California developers. But since those tax cuts can be spread over a decade, that amount equates to almost $400 million, according to Cooper.
The state also offers tax credits amounting to another $35 million annually that California developers can use to build more housing for low-income families.
“The tax credits have become a very competitive business,” said Will Cooper Jr., who is president of WNC. “Usually there is a 5-to-1 ratio of availability of credits for every request.”
Changing Focus
The Irvine-based firm has moved away from the crush for approval, instead focusing on working with developers already in line for tax credits.
“We bring equity to the table,” said Will Cooper Jr. “Then we bundle projects and take them to the public as an investment or to institutional parties.”
WNC now manages eight institutional funds that average around $30 million apiece. It also has sponsored 15 public funds in the past decade averaging around $25 million each.
The publicly registered, limited partnerships are marketed by securities brokers and insurance agents.
“These are sold in the open marketplace to Main Street firms and investors rather than through Wall Street brokers,” said Will Cooper Sr.
WNC collects fees on the transactions and takes stakes in many of the projects. It currently oversees a portfolio of more than 600 properties in 40 states valued at more than $1 billion.
“In the beginning, we might have bundled a couple of properties to raise $500,000,” said Will Cooper Sr. “Now, we’re working on $45 million deals with a dozen or more properties.”
WNC, which invested $120 million in new properties last year, plans to keep expanding. “We expect to increase our investments by 15% to 20% a year,” said David Shafer, the company’s new executive vice president. “Our goal is to grow but in a controlled manner.”
WNC is hopeful that a new round of congressional tax reforms this year will pump federal tax credits up by about 40%. It is also lobbying state and local politicians to put on the November ballot an $800 million bond issue to support more development of low-income housing.
“That would give us below-market financing to mix with tax credits so we can help the single-family and multi-family markets,” said Will Cooper Sr.
Move Planned
But whether those lobbying efforts succeed or not, WNC plans to move into larger headquarters. The company is negotiating a long-term lease for space in an Irvine building.
“Our property management operations have been growing steadily and we need a larger building for both that side and the investment side of the business,” said Will Cooper Sr.
WNC now manages about 1,000 apartment units nationwide. Within the next three to five years, the company would like to increase that total to more than 5,000 units. And after spending $16 million last year to develop six Orange County apartment properties, WNC is looking to invest more in local real estate.
To keep up with all of the growth, the company recently promoted Will Cooper Jr. The previous president, John Lester Jr., was moved up to vice chairman to work directly under Will Cooper Sr., who is WNC’s chairman.
Ray Olsen, a former United Dominion Realty Trust vice president, has joined the firm to take the newly created position of president of WNC Management Inc.
Shafer was also recently promoted from senior vice president.
“This is a very busy and exciting time for us,” said Will Cooper Jr. “The demand for more affordable housing has never been greater. We feel like we’re in a great position to take advantage of that and help bring more investment capital into the affordable-housing market.” n
