Tod finance summit12_6_12
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Tod finance summit12_6_12

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Presentations from the MAPC TOD Finance Summit on December 12, 2012

Presentations from the MAPC TOD Finance Summit on December 12, 2012

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  • Or screen goes blank through speakers for transfer of ppt to A/V table laptop
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  • Bob – Boston LISC general overview for the audience members not familiar with us. Since 1981, Boston LISC has been working towards this vision by providing funding, financing, and technical assistance to Community Development Corporations (CDCs), Non-Profit and For Profit Developers, and policy and advocacy organizations in Greater Boston. With Boston LISC’s support, community developers have been able to and will continue to provide affordable housing, spark economic development, and increase access to high-quality education, transportation, and other crucial resources
  • RCRF – mention the in three neighborhoods in Boston where transit investment and transit service is important focus of community.
  • Reconnecting America, “Case for TOD Demand Update”, February 2008 http://www.reconnectingamerica.org/resource-center/books-and-reports/2008/center-for-tod-demand-estimate-update/ Convegence Partnership, “Healthy, Equitable, Transportation Policy: Recommendations and Research”, PolicyLink Prevention Institute Convergence Partnership, Unusually long distances between home and jobs for low-income and minority workers are well documented by researchers and are a cause of poverty.11 Today, about six million households live within a half-mile of a transit station. The demand for housing adjacent totransit is projected to reach 16 million by 2030.29 To meet this demand, 10 million housing units will need to be built within a 10-minute walk of transit stations. This movement toward denser, mixed-use forms of development presents a golden opportunity to create mixedincome transit villages, providing healthier environments, especially for low-income families. Enabling low-income households to live in TODs will give them access to pedestrian-/ bicycle-friendly environments that encourage an active, healthy lifestyle and that are closer to amenities, such as full-service grocery stores offering fresh fruits and vegetables.
  • Mention Stephanie’s study on transit use changes by gentrifyers – want to live near transit, but don’t always use it, resulting in decreased transit use While lower income households who frequently lack a car, or for whom the cost of driving eats up a significant portion of household income, should be able to take advantage of living in a transit oriented neighborhood, there is often pressure to target new transit-oriented development to higher income households.
  • There are places where some gentrification is good, ; but we need to work intentionally to develop and preserve affordable housing
  • I don’t think it is that busy….I don’t know how ot make less busy. I think we want to have some more visually interesting slides, so I’m hesitant to remove this, even thought I think this will be coverecd by MAPC. You could refer to earlier presentations, if any covered, and then hit the low income number harder (see last sentence - low income families spen dup to 55% of income on transportation when they live in auto centric n’hoods!)
  • “ A Heavy Load”, Center for Housing Policy, 2006 http://www.nhc.org/media/documents/pub_heavy_load_10_06.pdf HOUSING AND TRANSPORTATION are the two largest expenses for most households in the 28 metropolitan areas in this study. For households of all income levels, 27 percent of income goes for housing alone and another one-fifth goes to the cost of getting around. Together these items account for almost 48 percent of household income. Working Families with incomes between $20,000 and $50,000 spend a similar percentage of income on housing; however, their transportation costs consume almost 30 percent of their income.
  • Equitable transit oriented development can be encouraged and incentivized through several strategies:
  • Mention the 8 CDC TOD compact group We completed a feasibility assessment – part of the package sent out in advance. LISC completed a feasibility study that assessed the pipeline, the lending challenges, available resources and identified the “gap” Developers needing to put more of their own cash in earlier, which is difficult… Multiple sources of predevelopment funding are needed, which is inefficient
  • (credit enhancement for the deals?) CDC, non-profit and for-profits
  • Note credit enhancement role in partnership with existing network of CDFI and community development lenders and address the gaps and challenges.
  • Note local decisionmaking
  • Additional commercial focus – seeking additional funding to broaden the commercial/retail uses. We are fine tuning specific definitions with funders On connectivity note that TOD projects are pedestrian and bike friendly, connect to adjacent services and overall neighborhood, and the transit system itself , and should be built with green and smart growth principales in mind. The fund will look or these characteristcis
  • we would be able to use this fund to drive change and flexibility in the predevelopment lending system. The CDFI lenders’ eagerness to work with the Fund (and cover their risk) will allow the Fund to negotiate for better rates, streamlined process, make it more user friendly and align underwriting standards. This ‘system change’ was one of the things she was looking for. Also we made the case that this Fund will tee up and shape a pipeline in alignment with state policy.
  • Predef financing Systems change stuff too shuld be mentioned here.
  • Segue to next presentation….
  • Found 5 levels of walkability – attached to econ perf

Tod finance summit12_6_12 Tod finance summit12_6_12 Presentation Transcript

  • Transit-Oriented DevelopmentFinance Summit • December 6, 2012 •
  • Marc D. Draisen Executive Director Metropolitan Area Planning Council
  • GROWING STATIONAREASTHE VARIETY AND POTENTIAL OFTRANSIT ORIENTED DEVELOPMENTIN METRO BOSTON
  • Transit Station Area TypesMetro Core Neighborhood Urban Gateway Commerce Trolley Suburb Subway Park SuburbanSeaport / Transformatio TransformatioAirport nal Subway Town & Village n Undeveloped
  • TOD Potential TOD Potential 76,000 housing units 133,000 jobs  Major component of projected regional growth - 31% of housing demand 56% of job growthTOD in the Pipeline and Additional Potential 140,000 120,000 Additional potential for 100,000 16 million sq ft. 80,000 60,000 Potential for addl 35 million sq. ft in 43,400 units the development 40,000 pipeline 20,000 32,700 units in the pipeline - Housing Units Employment
  • Bob Van Meter Executive Director Local Initiatives Support Corporation Boston
  • Creating an “Equitable Transit OrientedDevelopmment Accelerator Fund (ETODAF)” Bob Van Meter, Executive Director Kristin Blum, Senior Program Officer December 6, 2012 7
  • Boston LISCLocal Initiatives Support Corporation (LISC)’smission is to help neighbors build community.We believe that everyone should have theright to live in a SAFE, HEALTHY,PROSPEROUS NEIGHBORHOOD FULL OFOPPORTUNITIES. Boston LISC * December 6, 2012 8
  • LISC is an Established CommunityDevelopment Lender• Invested over $400 million in loan capital nationally since 2004• Boston LISC has a 30-year track record• Over $45 million in loans in greater Boston with a loss rate of about 1%.• LISC lends to non profit and for profit borrowers for affordable and mixed income housing, commercial and retail and other community development needs Boston LISC * December 6, 2012 9
  • LISC’s TOD Background In the past 4 years, LISC has invested: • $20 million in equity investments (New Markets and Low Income Housing credits) • $5.7 million in loan capital • $500,000 in grant funding Supporting a range of TOD projects and locations totaling: •625 units of affordable and mixed income housing; and •150,000 square feet of commercial space Boston LISC * December 6, 2012 10Boston LISC * March 14, 2012
  • TOD as part of Building HealthyCommunities of Choice LISC’s approach includes economic development, public safety, active transportation options, access to food Resilient Communities/ Resilient Families TOD can bring economic diversity in stronger market communities with access to transit Boston LISC * December 6, 2012 11
  • Benefits of EquitableTransit-Oriented DevelopmentFor Households For Communities Households have Less dependence on increased access to automobile use jobs and services Reduce pollution Combined cost of Pedestrian friendly housing and transportation is environments with reduced services in walking/ Low income families biking distance have access to Communities serve a affordable housing in range of incomes in gentrifying transit communities mixed-use settings Boston LISC * December 6, 2012 12
  • The Market is Demanding More TOD• Today, about 6 millionhouseholds live within ½mile of transit• Demand for transitaccessible housing isprojected to reach 16million by 2030!• Meeting this demandmeans building 10 millionhousing units within a 10-minute walk of transit, or2,000 units near everystation in the U.S. “This movement toward denser, mixed-use forms of development presents a golden opportunity to create mixed-income transit villages, providing healthier environments, especially for low-income families.” –Convergence Partnership Boston LISC * December 6, 2012 13
  • The case for Equitable TOD “Equitable TOD” prioritizes investments that:  Support production and preservation of affordable housing near transit  provides other transit-accessible community services such as schools, health clinics, and food stores; and  enhances access for transit-dependent populations through connecting bicycle and pedestrian facilities. Equitable TOD is about creating equal opportunities for people of all incomes to capture the benefits of transit oriented locations. Market pressures often target new development to higher incomes; but lower income households are the highest users of transit. Boston LISC * December 6, 2012 14
  • Distinct roles for equitable TOD inthree different locations  Strongermarkets  Emerging/gentrifying markets  Weaker markets Boston LISC * December 6, 2012 15
  • Strong Market Neighborhoods Market-rate TOD is happening in many suburban and stronger market urban locations Affordable housing needs to be part of the housing mix in these locations; Equitable TOD is an opportunity to provide this. Housing near transit provides better connections to jobs and services, and lowers housing/ transportation costs for low- and moderate-income families Boston LISC * December 6, 2012 16
  • Gentrifying Neighborhoods =Affordability at Risk Those who rely on transit the most or who stand to gain the most quality-of-life benefits from new transit also face the greatest risk of being displaced by the rising property values associated with new and expanded transit Equitable TOD in these neighborhoods can reduce displacement and preserve affordability Boston LISC * December 6, 2012 17
  • Weaker Market Neighborhoods:Catalyzing Revitalization TOD can be part of a revitalization strategy that improves the neighborhood and attracts private investment; Additional development, with increased density and foot traffic, can attract investment and improve property values; and Increasing connections to jobs and services for neighborhood residents can result in equitable outcomes Boston LISC * December 6, 2012 18
  • Transit Accessibility Matters to Affordability “The average American household spends more on transportation (16%) thanon food or healthcare. Low-income families may spend up to 55% of income on transportation when they live in auto-centric environments.” Source: Center for Neighborhood Technology (CNT), 2012 Boston LISC * December 6, 2012 19
  • Why ETOD: Low-Income Households Most Burdened by Rising H+T Costs While median-income households in the largest 25 U.S. metros have paid 44% more for housing and transportation over the last decade, they have earned only 25% more in income Working families making $20,000- 50,000/yr pay 10% more of their income on transportation costs (~30%) than average households (~20%)Source: “Losing Ground”, Center for Housing Policy, 2012 Source: “A Heavy Load”, Center for Housing Policy, 2006 Boston LISC * December 6, 2012 20
  • Why ETOD: Low-Income and Minority PopulationsMost Burdened by Long, Burdensome Commutes A recent Northeastern University study found that, in Boston: • White commuters who drive have the shortest commutes (27 min), and black commuters who bus have the longest (46 min) • Black commuters spend an extra 66 hours/year waiting, riding, and transferring than white “…affordable housing is scarce bus riders and often far from desireable Source: NEU Dukakis Center for Urban and Regional Policy, 2012 subway and rail stations.” Boston LISC * December 6, 2012 21
  • Strategies to Create ETOD Policy changes in public funding allocation mechanisms to prioritize TOD (underway) Land disposition to include equitable development Transit system improvements and expansion Develop financing tools to facilitate and prioritize TOD such as LISC’s proposed fund and the Healthy Neighborhoods Equity Fund to provide capital Boston LISC * December 6, 2012 22
  • Development of Fund Concept LISC started looking at the feasibility of a TOD fund at the request of philanthropic partners and our CDC partners with active projects in TOD corridors Identified Needs:  Low interest, patient, flexible capital  Higher loan to value limits  Help with carrying costs  Early planning reinforced by TOD Gap Finance Analysis findings Boston LISC * December 6, 2012 23Boston LISC * March 14, 2012
  • Financing Challenges to TOD  Small scale, strategic land assembly is critical to creating larger parcels but is perceived as risky by lenders.  The competitive funding environment means projects must demonstrate high readiness. Holding periods are growing.  Non-profit TOD borrowers have difficulty meeting the LTV requirements of existing lenders. Boston LISC * December 6, 2012 24Boston LISC * March 14, 2012
  • Financing Challenges  Lack of financing available for carrying costs strains community based and nonprofit developers  Developers need to access multiple sources of predevelopment capital for the same deal  Alternative site control arrangements (option payments, rights of first refusal) are not always pursued Boston LISC * December 6, 2012 25Boston LISC * March 14, 2012
  • ETODAF: Addressing the Challenges  Provides access to streamlined, lower cost capital to close the LTV gap and unlock existing lender network funds;  Allows efficient acquisition of strategic TOD parcels;  Provides predevelopment capital to advance critical projects efficiently;  Reduces risks by offering recoverable grants for early feasibility expenses and for option payments. Boston LISC * December 6, 2012 26Boston LISC * March 14, 2012
  • Fund Overview (ETODAF) *The ETODAF- managed by Boston LISC- will provide critical early stage capital and streamline access to capital to acquire and jump start equitable TOD developments.Key funders are: State Government - EOHED is considering a MassWorks grant through MassDevelopment for top loss reserve. PRI requests are currently being considered by the Hyams Foundation and The Boston Foundation LISC intends to seek PRIs from additional local and national funders interested in participating Grant funders: LISC has secured start up funding from Hyams Foundation and Barr Foundation. Boston LISC * December 6, 2012 27
  • Fund Structure Boston LISC will manage the fund as a local financing tool: Fund will provide credit enhancement to allow a higher Loan to Value ratio (LTV) in the form of subordinate loans behind acquisition loans. Acquisition/first lenders will provide a loan at 80- 90% LTV; Fund will provide a second loan to allow a total LTV from 110-120% to allow financing for carrying costs and other predevelopment expenses.Boston LISC * March 14, 2012 Boston LISC * December 6, 2012 28
  • Eligible ProjectsEligible uses of the fund:Affordable housing, mixed-income housing,mixed-use development, and neighborhood retail,commercial or community space (non-housinginvestments to be limited to 10-15% of fund).Projects will need to meet Fund definitions:  PROXIMIITY to transit;  CONNECTIVITY and orientation to transit; and  AFFORDABILITY. Boston LISC * December 6, 2012 29
  • Proposed Terms  Rate: Fund second loan 3-4%; community development lenders: 4.5% to 6%  Term: up to 3 years  Types of Loans  Acquisition of strategic properties  Predevelopment  Holding Costs  Lines of credit for multiple TOD activities and uses  Bridge loans and other loans based on project needs to move advance TOD projects  Recoverable grants for option payments and early feasibility expenses  Loan to Value: up to 110-120% on secured loansBoston LISC * March 14, 2012 Boston LISC * December 6, 2012 30
  • Size and Scale $2 million of public top loss plus $6 million of PRI capital will leverage $25 million ++ of CDFI $30-35 million =Total initial Fund Recoverable grant poolThe fund will revolve and scale up Boston LISC * December 6, 2012 31
  • How the Fund Makes a Difference Fills equity and loan to value (LTV) gap Covers holding and interest costs Encourages alternative site control arrangements by providing recoverable grants for this purpose Systems change in predevelopment system Boston LISC * December 6, 2012 32
  • What would the TOD Fund do? Streamline Process Manage Risk  Leverage capital,  Mitigate risks that prevent underwriting expertise, existing lenders from and technical assistance participating in TOD projects of the existing network of funders  Provide PRI investments for LTV gap at low cost  Streamline the process  Utilize recoverable grants for of raising early stage the riskiest components and capital encourage alternative site control arrangements  Leverage public investment and private  Manage the pipeline by capital to respond to teeing up compelling projects financing challenges that respond to State priorities.  Reduce the need for multiple predevelopment  Engage public partners as sources for one project stakeholdersBoston LISC * March 14, Boston LISC * December 6, 2012 33
  • Implementation Schedule1. Secure investments for fund: 1st quarter 20132. Close fund: May 20133. Available for loans: Beginning May 2013 Boston LISC * December 6, 2012 34
  • Anticipated outcomes  Competitive, well funded non-profit sector able to advance equitable TOD transactions efficiently;  Affordable and revitalizing TOD in Fairmount Corridor and Gateway Cities to lead the market;  Mixed use, affordable urban village development to complement transit improvements;  Preservation of affordable housing in key urban transit corridors to avoid displacement as the market heats up; and  Creation of new affordable housing in gentrifying and stronger markets. Boston LISC * December 6, 2012 35Boston LISC * March 14, 2012
  • EDOTAF Aligned with OtherImportant Initiatives for Greater Impact Supports 13 of the 65 MetroFuture goals for TOD, Smart Growth, Development of Affordable Housing Throughout the Region, particularly:  Increasing affordable housing for working families  Providing housing choices throughout the region without displacement. Mass. Smart Growth Alliance’s Great Neighborhoods Initiative Commonwealth’s new production goals and Compact Neighborhoods initiative Boston LISC * December 6, 2012 36
  • Complements CLF’sHealthy Neighborhoods Equity Fund Conservation Law Foundation Ventures (CLFV) and Mass Housing Investment Corporation (MHIC) are working to develop Healthy Neighborhoods Equity Fund The funds will be complementary (LISC: early stage capital; CLFV/MHIC: permanent equity) Boston LISC * December 6, 2012 37
  • Thank you! Bob Van Meter, Executive Director, Boston LISCKristin Blum, Senior Program Officer, Boston LISC bvanmeter@lisc.org kblum@lisc.org www.bostonlisc.org @LISC_Boston Boston LISC * December 6, 2012 38
  • Bill ColemanMaggie ChurchJoe FlatleyConservation Law Foundation Ventures Massachusetts Housing Investment Corporation
  • Healthy Neighborhoods Equity Fund TOD Summit Presentation December 6, 2012
  • What is the Healthy Neighborhoods Equity Fund? $100M “blended” private equity fund – Transformative mixed-income, mixed-use projects in selected transit corridors – “Blended” structure of PRIs, mezzanine debt, and traditional PE – Innovative mix of institutional and social impact investors – Staged capitalization commencing 3rd quarter 2013 with $30MM first phase CLFV/MHIC collaborative response to TOD funding gaps and opportunities for TBL outcomes– Leverage/finance upside not valued by underwriters– First bottom line: attractive risk-adjusted market returns– Second and third bottom lines: avoided VMTs, local economic development, improvements in public health The Fund conceived and managed as part of an integrated overall capital program– Capital program design informed by findings from GLC gap analysis– Coordinated synergy with LISC– Addresses multiple regional MetroFuture goals– Leverage state resources with new private capital– Managed by MHIC, a proven institutional fund manager
  • Why CLF / CLF Ventures?• CLF/CLFV mission “wheelhouse”• History with “Big Dig” mitigation• Private markets as part of social/environmental solutions• Sponsor transformative projects by eliminating chronic funding gaps
  • What is CLF’s Role?• Promote re-emerging interest in TBL outcomes• Apply research linking TOD and health outcomes to investor strategies• Collaborate with MHIC to capitalize the Fund• Define/design metrics and participate in governance through formal committee or 501©3• “Chancellor of Metrics” – guardian of project selection criteria and outcome metrics
  • Role of Private Equity• Leverage other sources of public/private financing• Recognize longer term upside of market rate housing/retail/ C&I in unproven markets• Accelerate larger scale mixed use projects in transitional markets• Unlock projects which might otherwise be infeasible (e.g. complex infrastructure/brownfield issues)
  • The Triple Bottom Line (TBL) Financial Returns (8-15% ROI) Environmental ReturnsCommunity Development Returns What’s New: Health Outcomes
  • Healthy Communities Create Triple Bottom Line Returns Increased real Quality estate values Improved housing for all tax base income levels Safer, more Lower walkable healthcare neighborhoods + Economic costs + Environmental Access to jobs + Community Returns = and economic mobility Healthy Communities Increased Improved transit ridership health and well-being Reduced Reduced GHG VMT emissions
  • Convergence of Health andCommunity Development Metrics Source: Institute of Medicine, 2012
  • HNEF Fund Metrics: Project Selection Criteria Multi-modal transportation access Potential for long-term growth Community support for new development Opportunities to improve community health
  • HNEF Fund Metrics: Project Outcomes Increasing walkability and health/wellness opportunities Reducing VMTs; increased mode share for walking, biking, and transit Improving energy and environmental performance Implementing community vision/ goals AND…. Creating jobs and economic activity Expanding access to healthy food Increasing the range of quality housing options
  • Roxbury Impact Zone AnalysisCLFV selected four large-scale, mixed-use TOD projects in Roxbury to test theviability and potential impact of the Healthy Neighborhoods Equity Fund Parcel 10/ Tropical Foods Bartlett Place Parcel 25/ 1400 Tremont Street Tremont Crossing Impact Zone
  • Data Sources American Community Survey, State of Place™, Boston Public Health, Boston Police Department, and the Boston Behavioral Risk Factor Surveillance System  ACS provides estimates for the current year based on the most recent 5 years.  State of Place™ pilot study used to assess neighborhood walkability.  BBRFSS is a phone survey requested from the Boston Public Health Commission.  21 census tracts were analyzed for the study. All tracts are at least partly within ¼ mi. of the selected sites. Figures are proportional to the area of the tract within the study if not wholly included.
  • Transit Accessibility • Green Line • Orange Line • Silver Line • Commuter RailTransit stations within a ½ mile buffer of the sites
  • Transportation Mode Share Mode share of ‘outgoing work’ trips is not very different in all of Roxbury compared to the overall Boston split. However, the lowest income areas within the neighborhood have much Roxbury greater transit mode share. (outgoing work trips vs. Boston average) ‘Incoming work’ trips into the neighborhood are significantly more auto-centric than the Boston average. Census Tract 805: Roxbury Dudley Square, Lower Roxbury (incoming work trips) (outgoing work trips) vs. Boston averageSource: U.S. Census Bureau: American Community Survey : 2010
  • Poverty Rate Parcel 10/ Tropical Foods Bartlett Place Parcel 25/ 1400 Tremont Street Tremont Crossing Boston average: 23.3%Source: U.S. Census Bureau: American Community Survey , 2010
  • Unemployment Parcel 10/ Tropical Foods Bartlett Place Parcel 25/ 1400 Tremont Street Tremont Crossing Boston average: 6.3%Source: U.S. Census Bureau: American Community Survey , 2010
  • Health: Diabetes Hospitalization (2002, 2008, 2009 combined) Roxbury: 2.7/ 1000 Boston Average: 1.2/ 1000Source: Boston Public Health Commission, 2011
  • Health: Heart Disease Hospitalization (2007,2008,2009 combined) Roxbury: 30.3/ 1000 Boston Average: 19.4 / 1000Source: Boston Public Health Commission, 2011
  • Rent-Burdened Households 41%* of Impact Zone Household’s Gross Rent as a Percentage of Household Income (GRAPI) is over 35% Boston Median Family Income: $58,600Source: U.S. Census Bureau: American Community Survey , 2010*Source: U.S. Census Bureau: American Community Survey, 2005-2009for Tracts 803, 804, 805, 806, 814, and 817
  • Bartlett Place 2556 Washington StreetDeveloper:Bartlett Place Land Inc.(partnership betweenNuestra Comunidad Dev.Corp. and WindaleDevelopers)Proposed Uses:• 56,000 SF of• Commercial/Retail• 300 residential units:• mix of rental andhomeownership units• 60% affordable and• 40% market rateTotal Investment: $137 m
  • Cumulative Project Impact New Affordable/ Market Office Arts/ Total Jobs Workforce -Rate and retail cultural Investment Housing Housing (SF) (SF)BartlettPlace 142 120 180 56,000 $137,000,000Parcel10/TropicalFoods 145 48 18 50,500 $44,000,000Parcel 25 500* 65 200,000 $95,000,000TremontCrossing 1,738 240 700,000 58,000 $300,000,000TOTAL 2,525 233 438 1,006,500 58,000 $576,000,000
  • Building Out a Community VisionRoxbury Community Master Plan:Boston Redevelopment AuthorityArts & Cultural HeritageEconomic Development & Job CreationTransportationHousingCommunity-Wide Urban DesignRecommendationsResilient Communities/ ResilientFamilies: Mission 180 - LISCCommunity Vision: Addressing communitydevelopment through a public health lens, andworking with residents to improve healthoutcomes.
  • Connecting the MetricsHealth Impact Assessments(three of four projects): Awaiting funding decision from Mass. Dept. of Public Health HIAs to be completed over 6 months (January - August 2013) Will help inform health and wellness metrics for the FundState of Place™ WalkabilityAnalysis Build on baseline walkability rating for the neighborhood Examine most promising opportunities to increase walkability Benchmark economic benefits of increased walkability
  • State of Place™ Built Environment Tied to Economic Value Correlated Economic + $9 sf office rents + $7 sf retail rents +80% retail Performance revenues + $300/unit res. rent +81 sf for-sale res. value From Brookings Institution report, “Walk this Way”Source: Leinberger and Alfonzo. Brookings Institution: “Walk This Way” Report, May 2012
  • Uses of HNEF Financing• Healthy neighborhoods need a mix of uses and a mix of incomes.• Affordable housing has programs (such as the Low Income Housing Tax Credit) that provide needed equity.• Commercial space, particularly in mixed-use buildings, is difficult to finance, without pre-leasing by credit tenant. Pre-leasing, particularly on transformative projects is difficult to secure.• HNEF is designed to meet those gaps in financing of market-rate housing and commercial development.• HNEF equity is expected to finance 5% to 25% of total development costs of a project, taking advantage of the increase in future value of transformative TOD projects.• This range reflects the differing ability of project developers to invest their own equity, or secure equity from other sources. It also reflects projects’ varying degree of upside potential.
  • HNEF Financing Terms• Projects will deliver return to investors over a 7 to 12 year period. Investor returns will be generated via a share of project cash flow, along with priority distributions from refinancing or equity take-outs, and is expected to be in the range of 8-15%.• While HNEF improves project feasibility, the trade-off is that it also requires the developer to share future upside with the HNEF investors.• Terms for individual projects will depend on the degree of risk as well as the potential for upside returns.• Sample terms (illustrative only):  HNEF will receive an annual preferred return of 4%  HNEF will receive 50% share of cash flow after preferred return  For a project with substantial lease-up (or similar) reserves, 75% of release of reserves will go to HNEF  Payout from refinancing in 7-10 years to achieve target return of 15%, plus share of equity upside above that
  • Project Characteristics• Mixed-use, mixed-income• Commercial: retail and/or office and/or light industrial• Market rate housing• Project size of $10 million to $50 million• Project has commitment of developer equity• Project has commitment of bank (or other private) debt equal to ~70-75% of value, based on current market comp’s• Project has commitment of public and philanthropic funds in process• Project has a financing gap of 5% to 25%• Project has increase in anticipated future value – based on transformative impact – equal to or greater than the financing gap• Pro-forma indicates return of 8% to 15% on investor equity over 7-10 years• Developer is willing to give up cash flow and equity growth to repay investor
  • Gap Financing Assumes Value = Cost • Debt = 75% of Value • Value based on current comp’s
  • Gap Financing Increase value shared between developer and HNEF Equity repaid as Increased value supports higher debtValue based on current comp’s Value based on transformation
  • Sample Project• Mixed-use: Housing along with commercial/retail• Mixed-income: Affordable and market rate housing• Commercial: 15,000 square feet• Housing: 50 units of rental housing, 20% of which are affordable Uses Sources Acquisition $1,000,000 State LIHTC Equity $1,000,000 Construction $13,300,000 Other Public $3,600,000 Soft Costs $3,000,000 NMTC $4,500,000 Dev. Overhead $900,000 Debt $6,900,000 Developer Fee $800,000 Developer Equity $1,000,000 Reserves $1,000,000 Total $17,000,000 Total $20,000,000
  • Sample Project• Mixed-use: Housing along with commercial/retail• Mixed-income: Affordable and market rate housing• Commercial: 15,000 square feet• Housing: 50 units of rental housing, 20% of which are affordable Uses Sources Acquisition $1,000,000 State LIHTC Equity $1,000,000 Construction $13,300,000 Other Public $3,600,000 Soft Costs $3,000,000 NMTC $4,500,000 Dev. Overhead $900,000 Debt $6,900,000 Developer Fee $800,000 Developer Equity $1,000,000 Reserves $1,000,000 Total $17,000,000 Total $20,000,000 GAP $3,000,000 Equity from HNEF
  • Fund Structure and Capitalization• The HNEF will be a structured fund with a capital stack aimed at ensuring the fund can make transformative investments while meeting institutional investors return expectations.• There will be a “top loss” investor with a tolerance for absorbing risk and lower return expectations, which will offset the return expectations of other investors.• Program related investments from foundations and social impact investors will form the second tier, who can be expected to moderate their return expectations depending on the strength of the other bottom lines.• Private (institutional) investors will make up the balance of the fund.• The overall goal of capital development will be to attract investors that will tolerate a 8-15% blended return. Another objective of the Fund will be to create a blended equity structure with different timing and risk requirements to meet the complex needs of various TOD projects.• Projects will be underwritten for financial feasibility by MHIC, while CLFV will review for conformance with HNEF’s healthy community goals.
  • Capital Structure
  • Synergy with LISC Fund• Building healthy communities in TOD locations requires a mix of uses, including affordable and market rate housing, as well as retail and commercial development.• The CLFV/MHIC and LISC Funds complement each other in filling the financing gaps necessary to create such communities.• The two Funds differ in timing and project type. The LISC Fund is intended to provide early pre-development financing to accelerate the financing of mixed-use projects in TOD locations. The CLFV/MHIC Fund is intended to provide patient equity for projects that include market and moderate income housing, as well as commercial and retail uses.
  • Office& Retail/ CLFV/ MHIC Commercial and Industrial Healthy Neighborhoods Equity FundMixed-Income/ Transportation Market-rate Infrastructure Housing Transit-Oriented Development: Closing the Financing Gap Acquisition/ Pre-dev. Affordable Parks and Housing Construction Open Space LISC ETOD Perm. Financing Accelerator Fund (Debt) Community Facilities
  • Achieving Regional and Statewide Goals• Statewide Goals: • Commonwealth of MA: 10,000 new MF units/ year • HNEF project criteria are consistent with Commonwealth of Massachusetts “Compact Neighborhoods” principles• MetroFuture Goals: • TOD neighborhoods in greater Boston have the potential to accommodate 76,000 new housing units and 133,000 new jobs over the next 25 years
  • Questions? Clarifying questions about Equitable TOD Accelerator Fundor Healthy Neighborhoods Equity Fund
  • BREAK
  • Gregory Bialecki Secretary Executive Office of Housing and Economic Development Commonwealth of Massachusetts
  • Christopher B. Leinberger President, LOCUS Responsible Real Estate Developers and Investors
  • Thank you for attending today!