CoreVest and the I/DD Community
148 homes, 518 I/DD tenants, 1 loan…How?
What is a Developmental Disability (I/DD)?
In general, a developmental disability includes, but is not limited to, people who have an intellectual disability, autism, cerebral palsy, severe seizure disorder or a severe head injury that occurs before the age of 22. I/DD Results in substantial functional limitations in three or more of the following areas of major life activity: Self care, Receptive and expressive language, Learning, Mobility, Self-direction, Capacity for independent living, Economic self-sufficiency.
CoreVest's Rental Portfolio Loan allowed Terebinth Group, Indiana’s largest provider of housing to the I/DD community, to cross-collateralize their real estate portfolio into one blanket mortgage.
About Our Sponsor: Terebinth Group
In 2010, Len Grabovsky founded Apex Realty Group (ARG) with his wife, in-laws and parents. Being constrained by their collective personal capital, they’re responsible management of assets and service to the community still allowed them to build a rental portfolio of 90 single family homes serving nearly 295 individuals with I/DD.
With this accomplishment in their rearview, the older generation of owners in ARG wanted to enjoy their success but Len, being an ambitious visionary, knew there was more opportunity out there if he could find the right capital partners and form a new company to be the vehicle for his ambitions. Len then met Andy Rosenthal, later becoming his brother-in-law, who helped expand the business.
For a while, Andy was satisfied with his career. “I was selling software to hedge funds and doing great. We had a kid, a dog, and a condo.” But he became disillusioned and wanted more meaning in his professional and personal life. “Selling software to help hedge funds make more money doesn’t have an altruistic, positive effect on the world,” he said. When approached by Len about expanding ARG, Andy agreed with the idea that with the proper capital and/or financing, Len’s model would flourish.
Unfortunately, Len’s model was ahead of its time. Lenders, banks, GSEs and the likes had not yet opened-up the doors for SFR portfolio financing. As a result, ARG was hamstrung and forced to knock on all the doors of all the local banks to get whatever financing they could convince the lending institution to give them. Those loans would have low LTVs, poor amortizations, high pre-payment penalties and shorter terms.
“CoreVest’s product is a dream come true for our businesses Apex Realty Group as well as Terebinth” – Andy Rosenthal
In 2016, Andy and Len, along with their wives, co-founded the Terebinth Group. With the aid of one of the biggest CDFI for the disabled community, The Disability Opportunity Fund (DOF) led by Charlie Hammerman, Terebinth essentially became “ARG on rocket-fuel.” Terebinth is now the largest, family-owned provider of housing to people with intellectual and developmental disabilities, or I/DD, in Indiana.
The Indianapolis-based company owns and operates 148 high-quality homes worth about $18 million, which provides housing for more than 500 individuals throughout the state. “In short, we find homes, fix them up, customize them to suit the tenants—think wheelchair accessibility, replacing door knobs with door levers, waterproof flooring, installing roll-in showers, etc.—and then rent them directly to the individuals,” he said. “We’re a real estate company focused on providing quality, safe, affordable housing to a vulnerable community. These people simply don’t have the same level of access to a home that I would live in myself.”
One such case involves Millie, a woman with developmental disabilities whose behavior and development were regressing in a nursing home, according to her advocate Gina Borneman. “Len and Terebinth Group worked directly with us to get Millie out of a place where she was not receiving the level of care she needed and into a home,” said Borneman. “We all worked together to find the right roommates and area. I have never seen a landlord do this. For these clients, having a place to really call home can be invaluable to their quality of life, self-esteem, and rehabilitation. “Millie is home,” said Borneman.
As altruistic and passionate as Andy and Len are to be a positive force in this community, how do you refinance $9m worth of real estate into long term debt when your tenants pay their rent to a third party and the third party is responsible for remittance to you?
For time and memorial, owner/operators of this kind would be hard-pressed to find a lender who would entertain this setup. Specifically, if the tenants are paying the third party, but the third party decides not to pay the owner, how does the lender foreclose on paying tenants to recoup their losses? In the case of Andy and Len, it becomes more sensitive when you consider these paying tenants are folks from the I/DD community and would have done no wrong in the aforementioned example.
At CoreVest, our Rental Portfolio Loan allowed Andy and Len to cross-collateralize their real estate portfolio into one blanket mortgage. With their willingness to work with both legal and underwriting, Andy and Len provided an opportunity for us as a lender to get comfortable with their niche business model and ultimately set precedent for owner/operators in the I/DD community to now have a place to come for their long-term financing needs.
For strategic purposes, it was decided that we’d break up the portfolio into 4 deals. Terebinth entered underwriting and closed their first two refinances within 60 days and immediately started focusing on deals 3 and 4. Moreover, the financing is now affording them the opportunity to continue expanding at an exponential rate. Although they are already helping hundreds of Hoosiers, Indiana has an estimated 74,000 or 71 percent of individuals with I/DD who live with a family caregiver, and 24 percent live with a caregiver at least 60 years old, according to that same study. That said, the more access to capital they can have, the more people they can help.
Needless to say, we are proud to be the financing partner behind such an incredible organization like Terebinth whose primary goal is to help a severely underserved yet extraordinary community of Americans.