Talking Heads Jeffrey Whiting, CREA, LLC
By Darryl Hicks
10 min read
Listening to Your Clients
Jeffrey Whiting made headlines this summer when he announced that the Indianapolis-based syndication company he started in 2001, City Real Estate Advisors, found a new financial backer, Stone Point Capital through Omni Holding Company, LLC, and changed its name to CREA, LLC.
Whiting started CREA with one employee, himself.
Today, CREA has 81 employees, who have raised $3.2 billion in Low-Income Housing Tax Credit (LIHTC) equity that has financed the construction/rehabilitation of 337 properties and 30,390 units of affordable housing in 43 states.
Whiting is one of the affordable housing industry’s most important thought leaders and policy advocates, which is why Tax Credit Advisor sat down with him to talk about the recent transaction, what makes him and his company successful, and where he sees the affordable housing business headed.
Tax Credit Advisor: Where did you grow up? Where did you go to college? What was your college major? How did you become involved in affordable housing?
Jeffrey Whiting: I grew up in Fort Wayne, Indiana and attended Indiana University as a Business-Finance major. My introduction to affordable housing started in the late 1980s. I was the youngest guy on a municipal bond desk right after the ’86 tax act. My shelf life was pretty short at that point because municipal bonds were being altered by the tax code. Being the youngest guy, I was the most vulnerable. An old sales guy walked up to me and said, ‘There is a new section in the tax code. I am not sure what it is, but I think some of my clients could buy these credits. Can you figure it out?’ That’s how I got introduced to the Low-Income Housing Tax Credit. It was a small, regional municipal bond firm called Summers & Company founded by a gentleman named Tom Summers. He was like a father to me. Tom took me under his wing and taught me the rules of business and how to conduct myself, which I still follow to this day.
TCA: You started CREA by yourself 15 years ago and grew the company into one of the largest LIHTC syndicators in the country. What led to the creation of CREA? What do you attribute the company’s success to?
Whiting: I left the municipal bond side of the business and brokered LIHTC deals from 1990 to 1995. In 1995, Tom passed away and Summers & Company faded into the mist. Around that time, I went to work for a developer, a great group of guys at Pedcor Investments in Indianapolis. I learned an enormous amount from Bruce Cordingley and Phil Stoffregen, two of the main principals. If Tom Summers was like a father to me, then Phil Stoffregen was, and still is, like a brother to me. Phil taught me as much about LIHTC, tax laws, and real estate as I could have learned in any school. One day, I proposed the idea for a syndication platform, that we could do more than just what we worked on because of our ability to finance deals. Bruce and Phil considered my plan, but chose not to pursue it. But I couldn’t let go of the idea. Several guys I worked with at Summers & Company moved to another broker/dealer in Indianapolis called City Securities. I pitched the idea to the Board of Directors and they took a chance on me. I was employee number one. We just kept working at it, doing deals in Indiana and then concentrically around the state of Indiana and we kept growing and growing.
TCA: Now that you have a new owner, what role will Omni play in the day-to-day operation of CREA?
Whiting: Before answering that question, I’d like to briefly discuss the sale itself. Roughly 75% of the shareholders in City Financial, the holding company for City Securities, CREA and City Securities Insurance, are 70 and older. It’s a privately-held company operating in a brutally competitive fixed-income market. The owners looked at this deal and concluded strategically that it was time to divest of CREA. The board of directors had been looking at strategic alternatives and once they concluded that there was not much growth in fixed income, it was time to start divesting. CREA had a wonderful relationship with the parent company, but understood the challenges that it faced and said, ‘Let’s try to find the right home for us.’ Stone Point/Omni is a capital partner in the purest sense. It has no day-to-day operational oversight. We have Board meetings similar to the structure we had with City Financial, which was, ‘When you need something, come ask us. Otherwise, do your thing.’
TCA: What new services will CREA offer its client base?
Whiting: We want to maintain the same consistency that we have had over the past 15 years. For the next 12 to 18 months, we want to show that we are the same company and that we are going to keep the same strategy and culture. I am more concerned about where the market is headed, as opposed to products we could be offering.
TCA: How is CREA different from its competitors? What added value do you bring to your developer clients and to your investor clients?
Whiting: The most valuable lesson I ever learned was to just listen. When there is a need from our partners, developer or investor, we want to be there to serve their needs – not ours. We differentiate ourselves from within and that shows the outside world who we truly are. So the number one priority for us is our partners. Their interests always come first. The number two priority is our employees. We make sure every employee is empowered to do their job and give voice to their opinion. They can have a very long, productive career with us. If an individual comes into my office and says, ‘Jeff, this is the growth path I want to pursue. I want to go from being an Acquisitions Analyst to being an Account Manager, and ultimately an originator,’ then my job is to ensure that individual achieves his or her personal goals. Even if they approached me and said, ‘I want to be President of a syndication company,’ my job is to see that they become President of a syndication company. I’ve had people approach me about this and I’ve said, ‘I will see what I can do to get you there, but here is the caveat: it won’t be CREA, because I really like my job.’ The third piece to the puzzle is our shareholders. Notice how they are last. If you put the shareholders first, you are putting your interests ahead of your clients and your employees. And by putting clients and employees first, we create shareholder value.
TCA: How do you position CREA to compete in a very competitive market place with direct CRA motivated investors?
Whiting: It is a tough business. There is a reason why they call it work. From our perspective, it is about client-relations and making sure we hear what our clients are saying. We want to take care of their needs. If we do that in a way that appears as though it’s easy, even when this is a hard business to be in, then people will want to work with us. Nobody likes noise. We don’t create problems just to demonstrate we have a solution. All that does is create undo anxiety and aggravation. Our job is to eliminate the angst of transactional finance for developers and investors. We differentiate ourselves in a way so that people like to work with us because it is a smooth process. We listen to their needs and are reliable.
TCA: What types of new (perhaps non-traditional) investors are you cultivating?
Whiting: First and foremost, we take care of the investors that we have. Our partners have been very good to us over the years, so when we have product that they want – we call them first, because we are a loyal group. However, we are still working on those large publicly-traded “C” Corporations that just cannot wrap their heads around 15-year investments. Our main focus is still financial services, insurance companies that are not active in the marketplace, and banks that are continually growing and getting close to the asset threshold under the Community Reinvestment Act.
TCA: Advocacy plays a big part in your life. You are a past President of the Affordable Housing Tax Credit Coalition and past Board member of the National Housing & Rehabilitation Association, which supports this newsletter. Why is advocacy so important? How can younger professionals get involved? What issues are you currently focused on?
Whiting: Mike Novogradac once told me, ‘You’re either at the table, or on the menu.’ Which is really good advice for somebody young who wants to get involved. It’s not hard to get involved. You show up and you listen. You learn more by sitting around the table with people like Mike Novogradac, Bob Moss, Rick Goldstein, Bobby Rosen, and Jim Miller, all of them smart on advocacy and policy. When you start listening to them, you realize that participation is the key to all of this. Then you realize that making the credit better not only benefits your business and the industry at-large, but our society. In CREA’s 15 years of business, I’ve never seen a greater demand for affordable housing than we have right now. When you realize the small things we can do within NH&RA,
NCSHA, HAG, NAHB and the Affordable Housing Tax Credit Coalition, talking to members of Congress and their staffs about making policy changes that benefit individuals and families, you get a real sense of satisfaction. It is amazing how many studies have come out over the past five years from some of the finest minds in America showing how Maslow got it right about the hierarchy of needs. Shelter is a basic need. When you don’t have shelter, then you’re really not able to create a stable environment, not just for yourself but for your children. If a child has a stable home, then nourishment becomes easier. Once a child has those two basic needs, they have the beginnings of an educational process, which allows them to escape a generational cycle of poverty and homelessness. That’s why I’m involved in advocacy.
TCA: Where do you see the affordable housing industry, and your company, headed over the next 5 years?
Whiting: I think the goal for the industry is to see the Cantwell/Hatch bill become law, which increases the LIHTC by 50% over five years. There are also some technical corrections that have been introduced by Senator Cantwell, which are really good ideas. Senator Cantwell is a true champion for affordable housing. It is important that we continue to build support in Congress and that they understand that this is an effective program – one of the few that Congress ever passed that does exactly what it intended to do. As for CREA, our next five years are dependent on where we see the market go in the next 12 to 18 months. We continue to gain market share. We are blessed to be working with so many quality developers and active investors, who we want to ensure are properly served. We do not want to get too big that we can no longer serve them. I think there is a limit to what you can do in this industry. Whether it is me or our chief operating officer, we want to be accessible. If we are no longer accessible, if we are too busy to take phone calls or sit down to have a conversation one-on-one, then that’s when we’ve become too big for our own good and that defeats everything I have been taught over the years.
