Innovative Financing Tools to Support Mixed Income Transit Oriented Development

Innovative Financing Tools Innovative Financing Tools to Support Mixed‐Income Transit‐Oriented Development Wednesday, October 13 10:45 a.m. ‐ 12:00 p.m.

Innovative Financing Tools to Support Mixed- Mixed- Income Transit-O i t d Development I Transit-Oriented D T it l t ULI Fall Meeting Washington DC October 13 O t b 13, 2010 Aaron Miripol Urban Land Conservancy (ULC) Denver, Colorado www.urbanlandc.org

About Urban Land Conservancy (ULC) • 501(c)(3) nonprofit, supporting organization to the Denver Community Foundation. Established 2003, staffed 2007 • Mission: To acquire, develop, and preserve community assets in urban areas in the Denver Metro area • Invested over $21 million in real estate, serving over 10,000 low and moderate income people • 400 full and part-time jobs are supported by ULC real estate investments • Promote community development; strengthen neighborhoods through preservation of key areas of influence • Preserve community assets in existing or emerging neighborhoods to ensure their continued public benefit • Acquire strategic sites in anticipation of market changes through land banking along q g p g g g g transit corridors •2 When possible use 99 year land lease with partners to ensure permanent public benefit

Make-Up of Denver p 598,707 residents 240,000 households 15,000 businesses 13,000 13 000 nonprofits (metro-wide) Land locked Both a City and a County “Strong M “St Mayor” political system ” liti l t

Opportunities during difficult economic times; TOD Fund Build out of FasTracks over the next decade - Over 120 miles of additional track and 59 new stations Increased demand for housing within ½ mile of light rail stations 40% of growth projected from households at or below 80% AMI Opportunity to purchase land now 4

How the TOD Fund works Finance land and property acquisition 1,200 ff d bl h 1 200 affordable homes over the next 10 years th t - 60% AMI rental, 95% AMI ownership - Goal of 15% of homes for 30% AMI Quickly provides patient, high-risk capital at low cost Purchase and hold sites for up to 5 years

How the TOD Fund works (cont…) ULC: 10% investor and sole borrower Enterprise Community Partners: Assemble loan capital; fund manager; largest investor City of Denver: Top loss funding of $2 5 million $2.5 MacArthur Foundation Housing Preservation Award: $2 million PRI and $250,000 grant for early warning system illi d $250 000 tf l i t

TOD Fund Waterfall Position Organization Amount/ Rate Equity Urban Land Conservancy $1.5 million /0% First Loss City of Denver $2.5 million/0% Second Loss Enterprise Community Partners $1 million/ 2% Third Loss Mac Arthur Foundation $2 million/ PRI 2% Third Loss CHFA $2 million/ 2% Third Loss Rose Community $500,000/ 2% Foundation Senior Debt Enterprise Community Loan Fund $6 million / 5% (with Wells Fargo and US Bank) Senior Debt Mile High Community Loan Fund g y $500,000/ 4% , TOTAL $ 15 Million/ 3.5%

Economics of Affordable Housing on the West Corridor There are 1 424 affordable h h 1,424 ff d bl homes within a ½ mile radius of the West Corridor i hi il di f h C id light rail line today. The West Corridor will add roughly 15,000 total homes by 2030 If only 10% or 1,500 of these homes are affordable, it would double the f l f h h ff d bl i ld d bl h number of affordable homes currently within ½ mile of the West Corridor According to an National Association of Home Builders (NAHB) model, the economic impact of building these affordable homes would be: i i t f b ildi th ff d bl h ld b First year of construction: $140,488,000 in local income, $12,195,000 in taxes and other revenue for local government, and 1,785 local jobs. Annual, ongoing local impacts: $40,732,000 in local income, $5,609,760 in A l i l li t $40 732 000 i l l i $5 609 760 i 8 taxes and other revenue for local government, and 468 local jobs.[1] [1] Source: “The Economic Impact of Low Income Housing Tax Credit Development Along Transit Corridors,” NAHB Housing Policy Department, June 2010.

Context 9

The West Line Corridor 10

Model for the TOD Fund Jody Apartments Located less than 300 feet from a future RTD light rail stop on the West Corridor. ULC has extended a 99-year land lease to a nonprofit, NEWSED, that bought the improvements on the site: four rental buildings serving over 100 residents. 52 of the 62 apartments are permanently affordable, with 12 of the 52 committed to households at 30% AMI and below. Total acquisition and rehab: $3.25 million

First TOD Fund Acquisitions Yale Circle 1.2 acre of vacant land located next to the Yale light rail station (below) Land Price= $1.45 million/$25sq. Ft. Preliminary plans include a 70+ multi-family apartment complex utilizing 9% Low Income Housing Tax Credits; application of tax credits would occur in 2011. Total Development Costs = $11.5 million Dahlia Apartments Dahlia went into foreclose in 2008 and consists of six buildings with thirty-six 2-bedroom apartment homes in northeast Denver. Dahlia was the first TOD Fund acquisition and includes the use of Neighborhood Stabilization Funds (NSP) of $450,000. Enterprise Community Loan Fund, provided a $1,000,000 loan from the Fund and ULC is partnering with Hope Communities with the permanent take out. Total acquisition and rehab: $1.75 million

Future of TOD Fund TOD Fund addresses less than 5% of the Metro Denver work force housing needs. needs Expand to at least $25 million by 2012 (regional fund) Need investments from other local municipalities beyond Denver to succeed as “regional” Fund New enabling legislation allows RTD to partner with for profit and non-profit developers at transit stations Get beyond silo thinking: State Divisions of Housing, Transportation, Energy, Labor need to invest in Fund Over $150 million of investments leveraged by Fund and more than 2,200 jobs created

Deciding to Partner on TOD Fund Advantages: Expertise Risk Innovation Enhance community relationships Disadvantages: Loss of control L f t l Layers of complexity

National Perspective Approximately 15 acquisition funds exist around the country Most target affordable housing Some target transit corridors Denver, Portland – few examples specific to both TOD and affordable housing funds in development in Bay Area and Washington DC 15

Why TOD matters Low and moderate income families spend a disproportionate percentage of their income on housing and transportation Low income households are most likely to utilize public transit regularly and pay cash fares Green TOD yields important environmental rewards including reduced sprawl, traffic and green house gasses 16 Transit access improves education, job and amenity access

Trends Philanthropic i t Phil th i interest in acquisition funds ti i iti f d Funds are always challenging to establish and operate Each story is unique and dependent on existing local collaborations and culture Collaboration is key, regional collaboration is increasingly required! 17 Nonprofits need to know regional entities to succeed

Benefits of Transit-Oriented Development Gives developers a financing tool to help mitigate risk at transit sites & encourages partnerships with CDCs. CDCs Fund preserves land and buildings around transit corridors to e su e o g e co ensure long term community benefit u y be e Increases ridership on public transit Balances redevelopment efforts along transit Provides employers with access to an expanded workforce Infill development (high density) helps reduce negative environmental impact with infrastructure already in place. 18

Creating Great Communities for the Bay Area Creating Great Urban Land Institute Washington, DC October 2010 Heather Hood, Initiative Officer www.sff.org

Mission of the Foundation The San Francisco Foundation mobilizes e Sa a c sco ou dat o ob es resources and acts as a catalyst for change to build strong communities, foster civic leadership, and promote leadership philanthropy. www.sff.org 2

www.sff.org 3

A Growing Region Berkeley Oakland San Jose Marin San Francisco Silicon Valley www.sff.org 4

New Transit Investments Lead the Way • $60 million MTC million- planning funds • 100 station area plans • $12 billion- local bonds • $1.5 billion- state infrastructure funds i f t t f d • Potential of what could come from the Reauthorization of the R th i ti f th Federal Transportation Bill in 2011 www.sff.org 5

Our Goal By 2030 all people in the Bay Area will live in complete communities, affordable across all incomes, with access to quality transit. www.sff.org 6

Strategy • Engage deeply in 25 local planning efforts to influence 100 plans • Target low and moderate income neighborhoods g • Get mixed-income TOD built • Build a regional policy framework www.sff.org 7

www.sff.org 8

www.sff.org 9

1. CAPACITY BUILDING Need a picture of affordable hsg here 2. POLICY AND ADVOCACY 3. DEVELOPMENT • Secure sites for mixed- income development • Develop property acquisition fund • W k with cities to identify Work ith iti t id tif land and new partnerships • Cr t market incentives Create rk t i ti for developers • Craft messages and media with regional agencies www.sff.org 10

Bay Area Development Opportunities Scarcity of Development Sites Near Transit 35.0 Thousan of Acres 30.0 Near Existing or g nds 25.0 Planned 20.0 Transit 15.0 10.0 5.0 0.0 Vacant or Underutilized Land www.sff.org 11

The “capital stack” for the Bay Area TOD Fund for Affordable Housing • Banks, insurance companies • Other direct commercial lenders 1. 1 Senior loans • B d financing Bond fi i • Foundations and Intermediaries 2. L 2 Low-interest loans i l (Such as the Ford Foundation, the (Program-Related Fund Manager and other CDFI’s, and community Investments) foundations’ PRIs) • State & local funds (Such as the Metropolitan 3. Equity or Grant $ Transportation Commission) • Federal funds • Foundation grants www.sff.org 12

Innovative Financing Tools to Support Mixed-Income TOD Brian Prater Managing Director, Western Region Low Income Investment Fund October 13th, 2010

Low Income Investment Fund (LIIF) • National Community Development Financial Institution (CDFI) • 501(c)3 nonprofit organization • Headquartered in San Francisco, with offices in LA, New York, and D.C. ffi i LA N Y k d D C • Primarily work on Eastern seaboard and in the Western U.S. • Founded in 1984 (26 years old) ( y )

LIIF s LIIF’s Vision The Low Income Investment Fund creates pathways of opportunity for low income people and communities. LIIF serves the most vulnerable people and places.

LIIF s LIIF’s Activities • Mission-driven organization • Poverty alleviation • Financing – l i i loans, grants, other h • Fund structuring and management • New Markets Tax Credits • Technical Assistance • Policy work

LIIF Programs • Affordable housing • Education • Childcare and child development • Green and sustainable development • Transit-oriented development (TOD) • Healthy f d H l h foods

What We’ve Done We ve • Invested $900 million in communities nationwide • Leveraged $5 4 billion of additional $5.4 investments • Partnered to h l create 55,000 units of P d help 55 000 i f housing, 159,000 childcare spaces, and 50,000 seats f students d 50 000 for d

The CDFI Approach • Support holistic strategy • Community engagement • Policy/advocacy li / d • Public/private partnerships • Complementary programs • Technical assistance

CDFIs and TOD • Partner to deliver needed program, policy and technical pp assistance support • Consult with partners and design tools to deliver needed financial products p • Aggregate public, CDFI and/or private capital into structures that share risk p • Assist in identification of new sources for community projects yp j • New paper: CDFIs and TOD

Possible Needs for TOD • Low cost, patient capital for predevelopment and acquisition • Creative solutions to “carry” problem • Flexible capital to fill construction period gaps • Mini-perm or permanent capital to complement other sources • Methods to share risk across partners • Regional solutions g

CDFI Financing Tools g • Fund and fund like structures fund-like • Direct loans, including bridges • Syndications/participations S di ti / ti i ti • New Markets Tax Credits • Other facilities with top loss • Limitations: Term and total $$ size

Example of a Fund Structure E l f F d St t

LA County Housing Innovation Fund • $60MM, 5 year fund • LIIF, Century Housing, CSH, LA County, Citi, County Citi and OneCalifornia Bank • $20MM County, $8MM CDFI, and $32MM of private capital f i t it l • Layered structure to provide risk protection to private capital • Delivers acquisition/predevelopment loans of up to 100% LTV at 6-6.5%

Los Angeles County Housing Innovation Fund Structure LIIF Class A Senior Class A Senior Class A Senior Originating (Administrative Agent Lender Lender Lender And Master Servicer) Lenders Mezzanine Position LIIF LA County Fund, LLC (Class B Lender) • Up to $60MM fund • Class A Senior Lenders will lend up to $32.1MM; Class B Lenders up to $8.1MM; and LACHIF investment up to LACHIF LLC $19.8MM. Class B Lenders will share ownership of LA Century Housing County Fund, LLC. Holds $19.8MM (Class B Lender) • Project loans will be funded by Class A lenders loan from County Loan (53.5%), Class B Lenders (13.5%), and the County (33%). • Pooled Risk for Class A Senior Lenders. County funds will support Class A Senior Lender funds until all County funds CSH are exhausted exhausted. (Class B Lender) A Piece A Piece A Piece Project Loans B Piece B Piece B Piece (Up to $5MM each) (LIIF) (Century) (CSH) County County County Funds Funds Funds

Summary of B A S f Bay Area TOD Fund and Proposed Program

Equitable TOD • TOD projects have historically benefited affluent populations – Market rate/high end housing and shops • Yet TOD can greatly benefit low income communities – Families making $20,000 to $50,000 pay as much as 57% in housing + transportation – Public transportation can save families as much as $ $9,000 annually – Connect LMI people to the regional economy

Program/Fund Overview • Competitive RFP for $10MM in MTC recoverable grant funds bl f d • CDFI Consortium – comprised of six CDFIs with complementary skills • Partnership among p g foundations, CDFIs, banks, and public sector • Regional scale – 9-county Bay Area • Demand Analysis

Components • Loan Fund: $50MM or more • Proposed Grant Pool • Technical Assistance h i lA i • Program Assessment • Learning through case studies, best p practices and convenings g

Loan Fund Structure • Uses $10MM in MTC funds as top loss protection for other lenders • Maximizes ability to attract investors through risk structure • Reduces costs to b R d borrowers • Allows more flexibility of loan products • Ensures fund sustainability y

Bay Area TOD Fund Structure ($50MM Fund) CDFIs and Banks LIIF (Class A Lenders) (Administrative Agent Up to $25MM And Master Servicer) Originating Bay Area TOD Fund, LLC CDFIs (mezzanine) • Class A Senior Lenders will lend up to $25MM; Class B MTC Lenders (originating CDFI/mezzanine) up to $7.75MM; (Class B Lenders) PRI up to $6.5MM; Class C Lenders (originating CDFI) up Up to $7.75MM Grants $10MM to $750M and MTC investment (grant) at $10MM. CDFIs to LLC will share ownership of Bay Area TOD Fund, LLC. • Project loans will be funded by Class A lenders (50%), (50%) Originating Class B Lenders (15.5%), PRI (13%), Class C Lenders CDFIs (1.5%) and the MTC (20%). PRI Source(s) • Pooled Risk for Class A Senior Lenders. MTC funds will (Class C Lenders) support Class A Senior Lender funds until all MTC funds Up to $750M are exhausted. Loans up to p $6.5MM to LLC Class A Class A Class A Project Class B Class B Class B Loans (Up to $7.5MM each) PRI PRI PRI Class C Class C Class C MTC MTC MTC

Fund Priorities • Creation and preservation of affordable housing • Mixed-income Mixed income housing • Complementary services, such as childcare, h l h clinics, etc hild health li i • Healthy foods • Neighborhood retail

Loan Fund Products • Maximum loan size up to $7.5MM $7 5MM • Acquisition (7 yr terms) • Predevelopment d l • Construction bridge loans • Leverage loan (NMTCs) • Mini permanent Mini-permanent loans

Favorable Product Terms • Better than regular CDFI products • Up to 110% Loan-to-value • Interest rate of l than 6% f less h • Terms of up to 7 years • Larger loan sizes ($7.5M) • Potential for larger financing packages • Multiple takeout scenarios

Timeline • Currently finalizing capital raising • $45MM in preliminary pipeline • Geographically diverse projects G hi ll di j • Nonprofit and for profit developers • Projected fund closing 1st quarter 2011 • Drinks for all

Innovative Financing Tools to Support Mixed Income Transit Oriented Development

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Innovative Financing Tools to Support Mixed Income Transit Oriented Development Presentation Transcript