The Greenbelt Development Corporation (GDC) Board of Directors held a strategic planning work session on November 29th.
As reminder, GDC is GHI’s wholly-owned for-profit subsidiary and income from GDC (generated by the Parkway Apartments) helps reduce member fees. Also, the GDC Board of Directors are the same people who currently serve on GHI’s Board.
The two-hour meeting saw the Board review GDC’s:
1) Strategic objectives
2) Plan to replace major components in the Parkway Apartments
3) GDC’s immediate priorities along with goals and objectives for the next 2-5 years.
Here are interesting highlights from my notes.
Per the recommendation of GHI’s Audit Committee, GHI and GDC will have a written agreement detailing their responsibilities to each other.
The GDC Board and GHI’s General Manager Eldon Ralph returned several times to the point that GHI/GDC have to develop a strategy for identifying and evaluating properties before acquiring additional apartment buildings. That strategy could include working with a commercial real estate broker to scout opportunities.
The GHI Board’s proposed bylaws amendment is critical to that strategy because the amendment could allow GHI to purchase property without a member vote.
GHI’s Long Range Planning Committee will be asked to consider business-expansion opportunities that may eventually involve GDC such as building new commercial/residential structures on GHI property, leasing space to telecommunication companies for high-speed internet/cell towers, and starting or buying a home-improvement business to service GHI members and other Greenbelt residents.
$3.9 million is the total annual adjusted expenditures for the 30-year replacement reserve study (taking into account a 2.5% inflation rate). The replacement reserves fund would pay for necessary capital improvements to Parkway Apartments such as replacing heat pumps, boilers, roofs, water pipes, etc.
GDC does NOT have a replacement reserves program and would have to fund improvements through borrowed money and (very modest) rent increases.
GHI’s investment policy allows GHI to lend money to GDC and treat it as an investment so GHI members would not have an opportunity to vote on the transaction. If such a loan were made, Audit Committee chairperson Molly Lester noted that the agreement should be written with a provision requiring repayment from GDC in case GHI has an urgent need for that money.
GDC Board members discussed how companies typically save for planned capital expenditures. While rental properties often do NOT set aside cash in the entity, the property owners can save the money in a different entity. The Board will further consider how best to establish a replacement reserves fund for the Parkway Apartments.