SOCIAL FINANCE: AFFORDABLE HOUSING CASE STUDIES Ministry of Municipal Affairs & Housing (MAH) 777 Bay Street, Boardroom D ...
PRESENTATION SUMMARY <ul><li>NYC ACQUISITION FUND </li></ul><ul><li>US AFFORDABLE HOUSING BONDS </li></ul><ul><li>TCHC BON...
FUNDS <ul><li>New York City Acquisition Fund </li></ul><ul><li>Motivation:  formed in 2006 to address the shortage of affo...
FUNDS <ul><li>Partners/Investors:  Collaboration with the City of New York, major foundations (ie. Ford Foundation, Rockef...
FUNDS <ul><li>Contribution:  Borrowers must contribute five (5) per cent of pre-development or acquisition costs as equity...
Serviam Gardens:  $3.6 million loan an 83-unit complex for low-income seniors in the Bronx.
BONDS <ul><li>US Affordable Housing Bonds </li></ul><ul><li>Long history:  concept of a public housing bond first emerged ...
BONDS <ul><li>Example: Chicago Housing Authority </li></ul><ul><li>Federal support through the Capital Fund Financing Prog...
BONDS <ul><li>HUD Contribution:  The agreement provides that the federal government will loan the local authority a suffic...
BONDS <ul><li>Challenge:  Economic downturn of 2008 slowed construction plans for CHA </li></ul><ul><li>On the road to suc...
Toronto Community Housing Corporation (TCHC) Bond: Regent Park Revitalization
BONDS <ul><li>TCHC Bond Issue </li></ul><ul><li>Regent Park Development Initiative:  six phases of development over 15 yea...
BONDS <ul><li>TABLE: ANATOMY OF THE TCHC DEAL </li></ul>Major partners:  Fasken Martineau, Ogilvie Renault, Major Fis, Mor...
BONDS <ul><li>TCHC Bond Issue: Lessons </li></ul><ul><li>Canadian  capital markets  are supportive. </li></ul><ul><li>Gett...
Upcoming SlideShare
Loading in …5
×

Social Finance Applications: Case Studies for Affordable Housing

1,917 views

Published on

An overview of three case studies outlining social finance vehicles for the acquisition, construction, and retrofit of affordable housing in US and Canada. This presentation was prepared for the Ministry of Municipal Affairs and Housing (MMAH).

Published in: Investor Relations
0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
1,917
On SlideShare
0
From Embeds
0
Number of Embeds
202
Actions
Shares
0
Downloads
32
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide
  • There were many reasons that TCHC moved forward in a non-traditional way with the issue of the public bond: Nature of Regent Park financing need made a traditional building-by-building (mortgage) financing approach problematic because of dynamic timetables and full scale demolotion/reconstruction needs. Large, unsecured financing provided ability to manage revitalization for maximum efficiency without having to worry about mortgage security issues: fewer transactions, no property registration required, and flexibility to adjust to development schedule.
  • Canadian capital markets are supportive. There was strong interest and high level involvement in the deal from many major capital market players. Getting a high credit rating was critical as it allowed investors to move into an unfamiliar sector, simplified the marketing task, and created a great deal of demand. Canadian banks were very supportive with major financial institutions involved in the deal. Asset security not important, City of Toronto funding agreement eliminated perceived risks Process took time, money, and management attention. The deal took three years from start to finish, with a significant amount of energy becoming familiar with the intricacies of the process. Scale of the investment and story was extremely important. According to TCHC, it was much easier to borrow $250 million than $15 million, and these borrowing costs dropped to a level nearly the same as the City of Toronto. In addition, revitalization was seen as a major, simple story, attracting major players. Support of stakeholders was critical. Board of Directors kept informed at every step of the way; despite arm’s length relationship, City of Toronto ultimately had to sign off on the transaction
  • Social Finance Applications: Case Studies for Affordable Housing

    1. 1. SOCIAL FINANCE: AFFORDABLE HOUSING CASE STUDIES Ministry of Municipal Affairs & Housing (MAH) 777 Bay Street, Boardroom D January 19 th , 2011
    2. 2. PRESENTATION SUMMARY <ul><li>NYC ACQUISITION FUND </li></ul><ul><li>US AFFORDABLE HOUSING BONDS </li></ul><ul><li>TCHC BOND ISSUE </li></ul>Central Question: What are examples of social finance or impact investing tools that support the development, acquisition or construction of new affordable housing units?
    3. 3. FUNDS <ul><li>New York City Acquisition Fund </li></ul><ul><li>Motivation: formed in 2006 to address the shortage of affordable housing in New York City </li></ul><ul><li>Goal: support the development of 30,000 low income housing units in New York City </li></ul><ul><li>Target ventures: for-profit and non-profit affordable housing developers who refurbish existing units or build new housing </li></ul><ul><li>Fund size: ~ $200 million </li></ul><ul><li>Investment size and term: Up to $7.5 mil (new build) or $15 mil (acquisition); lending period of up to three years </li></ul><ul><li>Financial return (investor): variable interest rate currently indexed to prime (minus 40 – 60 basis points) </li></ul>
    4. 4. FUNDS <ul><li>Partners/Investors: Collaboration with the City of New York, major foundations (ie. Ford Foundation, Rockefeller Foundation), and private investment groups (ie. JP Morgan Chase Bank) </li></ul><ul><li>Layered: Bank consortium provides senior debt as lending capital while other investors provides guarantees in the form of low-interest subordinated loans </li></ul>
    5. 5. FUNDS <ul><li>Contribution: Borrowers must contribute five (5) per cent of pre-development or acquisition costs as equity </li></ul><ul><li>Max. loan value: for-profit developers are eligible for loans up to 95 per cent of the lesser of appraised value or purchase price while the number goes up to 130 per cent for non-profit developers </li></ul><ul><li>Other fund models: </li></ul><ul><ul><li>JP Morgan Urban Renaissance Property Fund: $175 mil. fund with market returns targeting urban development and redevelopment of affordable using using &quot;green&quot; specs from solar heating to recycled building materials </li></ul></ul>
    6. 6. Serviam Gardens: $3.6 million loan an 83-unit complex for low-income seniors in the Bronx.
    7. 7. BONDS <ul><li>US Affordable Housing Bonds </li></ul><ul><li>Long history: concept of a public housing bond first emerged in New York City in the 1930s </li></ul><ul><li>Model: Basic structure often meets same characteristics as other Tax Exempt Municipal Bonds </li></ul><ul><ul><li>Issuers: cities, counties, special-purpose districts, and any other governmental entity (or group of governments) below the state level </li></ul></ul><ul><ul><li>Exemption: Interest income received by bondholders is exempt from federal and state income tax </li></ul></ul>Aside: Build America Bonds increasingly popular amongst housing authorities: issuers can choose whether they offer a tax credit for the buyer or a direct payment from the federal government equal to 35% of the interest costs.
    8. 8. BONDS <ul><li>Example: Chicago Housing Authority </li></ul><ul><li>Federal support through the Capital Fund Financing Program (CFFP): to raise funds to accelerate major modernization projects. To date, 137 US housing authorities US have HUD-approved transaction bonds or loans totalling more than $3.7 bil. </li></ul><ul><li>Purpose: Public housing authority (PHA) bond proceeds provide low-rent housing through new construction, rehabilitation of existing stock, purchases from private builders or developers, and leasing from private owners. </li></ul><ul><li>Tax exemption: Interest on the bonds is exempt from federal income taxes and may also be exempt from state and local income taxes. </li></ul>
    9. 9. BONDS <ul><li>HUD Contribution: The agreement provides that the federal government will loan the local authority a sufficient amount of money to pay principle and interest to maturity. (ie. debt service payments) </li></ul><ul><li>Security: The loans or bonds are obligations of the PHA. HUD does not guarantee or ensure these loans or bonds. </li></ul><ul><li>Deal: In 2001, CHA became the first PHA to gain HUDs approval for a rated bond transaction. The deal was worth $291 million, with an AA Rating from S&P. </li></ul><ul><li>Goal: Support its Plan for Transformation to replace over 18,000 distressed units with 25,000 new or modernized units (Focus: Rehabilitate 9,400 units of seniors housing) </li></ul>
    10. 10. BONDS <ul><li>Challenge: Economic downturn of 2008 slowed construction plans for CHA </li></ul><ul><li>On the road to success: As of the end of FY2009, CHA has completed 17,812 public housing units or 71.25% of the Plan for Transformation’s overall unit delivery goal of 25,000 units. Timeline for achievement moved to 2015. </li></ul>
    11. 11. Toronto Community Housing Corporation (TCHC) Bond: Regent Park Revitalization
    12. 12. BONDS <ul><li>TCHC Bond Issue </li></ul><ul><li>Regent Park Development Initiative: six phases of development over 15 years for mixed housing, including 2,083 Rent Geared to Income (RGI) units, 700 affordable rental units, 3,500 market rental units, and 250,000 sq ft. of commercial space </li></ul><ul><li>Total cost: $1 billion [TCHC and the City of Toronto: $450 mil., Priv. interests and commercial service providers: $500 mil., Fed. and prov. govts: $60 mil.] </li></ul><ul><li>Motivation: flat, fixed revenues; aging buildings with significant capital repair needs; poorly planned community in need of revitalization </li></ul><ul><li>Nontraditional financing provided flexibility and scale </li></ul>
    13. 13. BONDS <ul><li>TABLE: ANATOMY OF THE TCHC DEAL </li></ul>Major partners: Fasken Martineau, Ogilvie Renault, Major Fis, Morrison Park Advisors
    14. 14. BONDS <ul><li>TCHC Bond Issue: Lessons </li></ul><ul><li>Canadian capital markets are supportive. </li></ul><ul><li>Getting a high credit rating was critical. </li></ul><ul><li>Canadian banks were very supportive. </li></ul><ul><li>Process took time, money, and management attention. </li></ul><ul><li>Scale of the investment and story was extremely important. </li></ul><ul><li>Support of stakeholders was critical. </li></ul>

    ×