Talking Heads:Brian Tracey Community Development Lending and Investments Executive, Bank of America
By Darryl Hicks & Thom Amdur
10 min read
One major difference between the current recession and the one that occurred a decade ago is that major depository institutions are financially stable and providing much needed capital to the communities they serve.
Bank of America Community Development Banking, for example, is on track for another record year and may provide as much as $5 billion in financing for affordable rental housing in 2020, making it one of the largest providers of such financing in the country. One of the bank’s leading executives in this effort is Brian Tracey.
In his role as Community Development Lending and Investments Executive for Bank of America, Tracey leads a team of real estate professionals who provide tax credit equity and debt financing for affordable rental housing and other community development projects nationwide.
NH&RA President Thom Amdur sat down with Tracey to talk about his upbringing and how it influenced his professional career, how things have progressed at the bank through the COVID-19 pandemic and other marketplace observations.
Tax Credit Advisor: How did you end up in banking? How has your background impacted your professional life in community development?
Brian Tracey: My interest in community development is not driven by the nuts and bolts of financing or the challenges of putting together deals, but rather where I came from and how I was raised. My mother cleaned houses. My grandmother lived the last years of her life in public housing. But I was influenced most by my father. He worked in a textile mill for 40 years. He quit school in the 11th grade. He was a farm worker first before his uncle got him what was considered a much better job in the mill. The job paid 26 cents an hour. He left the mill when he was 60 as the textile industry was fading. He still needed to work, so he bought a truck and became a landscaper, turning something he enjoyed, working outside in his garden, into a new career. He worked into his 90s and died this past April at the age of 100. We weren’t poor, but we were very much blue collar. My approach to management comes from remembering the managers at the mill my father worked at. Think Norma Rae, if you’re familiar with that movie. When I became a manager in my late 20s, I did exactly the opposite with the people I worked with and managed. These were good life lessons that stayed with me for much of my life and it led me to really want to work in community development.
TCA: Was there an obvious path when you got into banking to get into community development?
BT: My introduction to community development banking was by accident. In the depths of one of the recessions that came through the DC metro area in the 90s, the bank was looking for someone on the risk side. I got tapped on the shoulder one day and was moved to that area for a while. Part of my responsibilities was supporting community development banking. I knew nothing about Low Income Housing Tax Credits. I remember having a conversation and asking ‘where’s the developer’s cash? I don’t see them putting in 25 percent of the equity that we require.’ It must have been very frustrating for others to work with me. But once I got more experience, I learned the mechanics of the tax credit and that banks do great work in affordable housing. They provide capital in low- and moderate-income communities, rural and urban. I soon figured out this is what I wanted to do.
TCA: You’re now one of the top community banking executives at the bank. Are there any highlights along the way?
BT: When I first joined community development banking 20 years ago, we were viewed within the bank as a philanthropic activity, rather than a profitable business. That perception has changed. The bank discovered that the risk/return equation made sense in lending and investing in low- and moderate-income communities. That we could help people and at the same time make a reasonable return. I started out working in Baltimore. West Baltimore, East Baltimore in particular. We proved that if we could successfully provide financing there, other lenders and investors would follow. And there’s similar examples in all of our markets across the country. The growth of Community Development Banking at Bank of America and the growth of NH&RA shows that there’s a lot of validity to that argument. There is always a moral and ethical argument that should never go away, or never be forgotten, but there’s also this compelling financial argument for private dollars to go into these communities. NH&RA is one of the critical sources for getting that word out.
TCA: How is the current financial downturn related to COVID-19 different from others that you’ve experienced in the past? What lessons that you learned from more recent, challenging periods have you applied to the work you’re doing today?
BT: Since the last downturn in 2008-2009, we’ve followed five factors that determine where to put our money: relationship, risk, return, regulation and responsibility. Regulation being the Community Reinvestment Act. Those factors really served us well in the last dozen years since the most recent significant downturn. We don’t do deals just because there’s a compelling story. We need to trust the folks that we’re doing business with. We also don’t chase projects just to check the regulatory box. This particular recession is more severe than anything we’ve experienced in the past, but not within the affordable housing sector. We continue to hear from our clients that their projects are holding up well, that people have prioritized paying their rent. One thing I would point out that’s different in a positive sense from past downturns is that financial institutions are much better prepared during this particular crunch. In 08/09, the banks were the ones being helped. Now the banks are in a position to provide aid. That’s a critical distinction.
TCA: How are you and your team addressing the extended period of remote working and the challenges of managing remote teams and navigating the really tricky health concerns?
BT: Bank of America has been very supportive, providing not just the ability to work from home but also the resources to do that. We’ve learned that we’re just as productive working remotely. And contrary to expectation, I think it has also brought our team much closer together. I manage an impressive group of people, both smart and committed, and that has proven to be a powerful combination. Despite everything that’s happening around us, we expect to close more loans and investments than ever before in the 30-year history of Community Development Banking at Bank of America. The other thing that we pass on repeatedly is the “oxygen rule.” We tell our folks that we know you’re committed to serving your clients, helping your colleagues and their families, getting deals done and helping people in the neighborhoods in which we work. But we remind people that in order to do all that, you really need to be helping yourself. Remember when we used to travel on airplanes, with the instructions to put on your oxygen mask first before helping others? We remind people to take care of their physical and mental health first.
TCA: There are still concerns about residents being able to pay rent and certain asset classes are obviously more impacted than others. How is Bank of America underwriting transactions differently today compared to pre-COVID?
BT: As you can imagine, we spend quite a bit of time talking about underwriting. We’ve never been the most aggressive lender or investor. At the same time, we’ve not been the most conservative lender either. We’ll create and innovate and do things with the right clients in the right markets that other lenders and investors can’t do. We’ve maintained that approach consistently year after year. One new issue that’s really important is health concerns for residents, construction workers, property managers and service providers at our “tenant in place” rehab projects. The safety concerns for these types of projects are very much top of mind for us and for our developers.
TCA: Over the past decade, there has been a trend to combine housing and retail. Given the current environment, how do you view mixed-use or community development transactions that aren’t necessarily housing?
BT: Mixed-use projects, especially the retail component, are being scrutinized more closely, for obvious reasons, given what’s happened to that sector generally. Also, we are seeing increased use of income averaging and properties involving twinned transactions with nine percent and four percent credits being coupled in the same project. We’re comfortable with the risk of both those structures when appropriately managed. We understand the benefits from the social policy standpoint of mixed-income projects. Historic Tax Credits is another subset of our existing business that we’d like to grow. That initiative is being led by Claudia Robinson, who has long been recognized as an expert in this type of financing since the 1990s. We see opportunities there for a variety of reasons, primarily budget pressures, which have reduced various sources of government subsidies for housing. Historic Tax Credits can fill that gap.
TCA: What initiatives and solutions are you or the bank focused on that you think would be most effective in addressing our current national need for expanding affordable housing and community development?
BT: The policy change that I hear most often is fixing the four percent tax credit rate at four percent. We all know the critical need for affordable housing. I mentioned the budgetary pressures at state and local levels, which are curtailing sources of financing. Right now, we’re seeing historic lows of three percent and change for the four percent rate. That simple action of fixing the rate would increase significantly the supply of available tax credits.
TCA: The tragic deaths of George Floyd and Breonna Taylor have raised public awareness of the inequities that still exist in the U.S. and have created a new sense of urgency. In the streets, but also in a lot of corporate boardrooms, there’s a sense that we need to do a better job around diversity and inclusion in how we hire and where we make investments. How has Bank of America responded to this issue?
BT: The most evident response is Bank of America’s commitment, announced in June by Chairman Brian Moynihan, to provide $1 billion over four years to advance support for racial equality, economic opportunity and healthcare. That umbrella commitment encompasses quite a few things. That includes things as detailed as revisiting the vendors that Bank of America does business with. There have also been announcements concerning charitable grants provided through the Bank of America Foundation, and we plan to make direct equity investments in Black- and Hispanic-owned businesses to help supply growth capital, as well as to invest substantially in programs to create future entrepreneurs. It’s a commitment not just in dollars, but to specific actions within various components of Bank of America. And then, finally, and equally important, a different perspective, different awareness as to these issues of racial equality and social justice.
