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Beyond the BCA CHF Canada presentation.pptx

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Presentation made to a workshop for co-op staff April 11, 2018

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Beyond the BCA CHF Canada presentation.pptx

  1. 1. 0 Refinancing for Section 95 WEBINAR Beyond the BCA: Change is Coming April 11, 2018
  2. 2. 1 Beyond the BCA: Change is Coming 10 am: Introductions: Brian Eng: CoAction Mary Ann Hannant: CHFT Bill Bacon: HSC 10:15 to 10:30: Why Refinancing? Why Now? Dave Howard, CHF Canada 10:30 to 11:30: Asset Management Planning David Spackman, CHF Canada 11:30 to 12:15: What is Your Lender Thinking? Heather Simpson, Alterna 12:15 to 12:30 How Does CHF Canada Support the Co-op with Financing? Dave Howard, CHF Canada 12:30 to 1:00 Lunchbreak (Sponsored by H.S.C. and Alterna Savings) 1:00 to 2:00: Refinancing Panel/Hear from Co-op Managers Bob Brocius: Windmill Line Coop/ Brynn Teall: Oak Street Brian Eng: Windward Coop
  3. 3. 2 Co-operative Housing Federation of Canada •  Most of CHF Canada’s members are housing co‑ops. There are 902 member housing co-ops (outside of Quebec). •  CHF Canada has been the national voice of co-op housing for 50 years. •  More than eight out of 10 housing co‑ops outside of Quebec are members of CHF Canada. •  CHF Canada is a co‑operative, owned and controlled by its members. It is governed by its Board of Directors, which currently has 16 directors: 10 representing the provinces and territories, one representing the aboriginal community and five directors elected at-large.
  4. 4. 3 CHF Canada’s Enterprise Services
  5. 5. 4 Purpose of the Refinancing Program §  As CMHC 35 year operating agreements and mortgages finish over the next three to four years, co- ops need to invest in their buildings and properties. §  Across Canada, aging housing co-operatives need new capital for repairs, renovations, modernization. §  An injection of new capital into this housing stock is needed to insure ongoing viability. §  CHF Canada negotiated with CMHC to allow prepayment of existing CMHC mortgage.
  6. 6. 5 EOA •  55,000 co-op homes in Canada will be out of their operating agreements by 2020 •  Not just about end of obligations to CMHC •  Housing stock is aging •  Most co-ops have not saved enough in Reserves •  Focus has to be on long-term planning
  7. 7. 6
  8. 8. 7 Key Results of Refinancing Program §  Pilot project - January 2011 – Alterna Savings credit union was asked to help CHF Canada develop and test the feasibility of new mortgage loan. Mondragon Co-op was first co-op approached.
  9. 9. 8 Key Results of Refinancing Program §  30 co-ops funded successfully to date (approx. $90 million in new loans) 19 co-ops are in the process to fund in the near future §  Average loan: $3.0 million (smallest = $350K, largest = $9.0 million) §  Average new spending per unit: $52,000 §  By 2017, 13 credit unions are offering new mortgages (across Canada)
  10. 10. 9 Assessing the Impact of Refinancing Housing Co-operatives In 2016 and 2017 CHF Canada asked Etho-Economics to conduct a study of five housing co-ops that had refinanced. The study was intended to look at impacts of refinancing in four areas: •  Economic Health •  Environmental Impact •  Social Benefits •  Improved Governance
  11. 11. 10 Assessing the Impact of Refinancing Housing Co-operatives Economic •  Reduced cost of debt service post-refinancing •  Extended life of buildings due to renova8ons •  Generally reserved increased, opera8ng costs decreased •  Decrease in maintenance costs •  Increased demand for membership / decreased vacancy loss •  Improved board capacity for financial management
  12. 12. 11 Assessing the Impact of Refinancing Housing Co-operatives Environmental •  New, improved energy-saving features/Increased energy efficiency •  Reduced energy/water consump8on •  Some air quality improvement •  Much higher encouragement of sustainable behaviour Governance •  Improved member participation and sense of community •  Improved Members Mee8ngs •  Reasonable and predictable housing charge increases •  Increased member satisfaction and retention
  13. 13. 12 Assessing the Impact of Refinancing Housing Co-operatives Social •  Better comfort for members •  Capacity development in asset management and financial planning •  Increased accessibility •  Improved pride in units •  New skills and knowledge
  14. 14. 13 Our Lending Partners •  Alterna Savings •  Credit Union Atlantic •  Desjardins •  League Savings and Mortgage •  Libro Credit Union •  Kawartha Credit Union •  Kindred Credit Union •  Meridian Credit Union •  Motor City Credit Union •  Your Neighbourhood Credit Union •  Servus Credit Union •  Sudbury Credit Union •  Your Credit Union
  15. 15. 14 Planning for long term success EOA: Federally funded co-ops David Howard David Spackman
  16. 16. 15 What we know to be true… •  Teenagers in groups are dangerous •  Elvis is alive and hidden in a witness protection program •  Turtles got flushed into the New York sewer system and still live there •  Change is BAD
  17. 17. 16 Set the record straight… About rules: §  All of your co-op’s by-laws remain in place until such time as you amend or replace them §  The laws as stated in The Co-operative Corporations Act still apply §  the Ontario Human Rights Code still applies §  Other provincial and municipal laws still apply §  The rules in your Operating Agreement will not
  18. 18. 17 Set the record straight… About selling units to the members: §  Section 171.2 of the Co-operative Corporations Act states, “(1) A non-profit housing co-operative shall not distribute or pay any of its property to its members during its existence or on its dissolution.”
  19. 19. 18 Set the record straight… About RGI assistance and housing charges §  The RGI assistance as you now receive it will end when your operating agreement ends §  CHF Canada’s members have successfully lobbied for replacement programs (TBA). §  Agreement extensions are being provided for 2 years while an alternate RGI system is implemented.
  20. 20. 19 Set the record straight… About RGI assistance and housing charges §  Agreement extensions for the purpose of subsidy DO NOT extend all previous operating agreement rules.
  21. 21. 20 Setting the record straight… About HST Rebates §  Because eligibility for the HST rebate is based on how much funding your co-op gets from the government, when you no longer receive government funding you will no longer be eligible for the HST rebate
  22. 22. 21 Setting the record straight… About lowering the housing charges §  Co-ops will need as much revenue as possible to fund their capital needs for the future §  No safety net of going to CMHC if you find yourself in need of money for capital repairs §  Your co-op may need reserve funds or want to re-finance to improve member standard of living, the co-op will need the cash flow to support capital repairs.
  23. 23. 22 Setting the record straight… About being fully independent §  The co-op will be a fully independent co-operative corporation assuming all the risks and opportunities that go along with that §  Careful planning is needed because new business failure in North America: 35-56% within 5 years §  In co-ops housing terms that would mean up to 30,000 of our homes could be lost by 2025
  24. 24. 23 Planning for EOA Co-ops will need: An asset management plan §  an up-to-date Building Condition Assessment §  a long-term financial forecast §  sufficient funds for the BCA and to improve member homes §  a plan to implement large scale repairs and improvements §  plans to to save energy and improve universal design §  a plan to maintain an affordability mandate
  25. 25. 24 Financial Stability How do we renovate our buildings, reduce vacancies, and stabilize operating costs without driving housing charges through the roof? 24
  26. 26. 2525 Building Condition Assessment Reserve fund forecast Financial statements •  Reserves and renovations •  Long term operating budgets •  Housing charges & market projections •  Support for low income members Housing charges Reserves & Financing Energy efficiency Universal design Community infrastructure Improved standard of living Accessibility/Aging in place Mixed income community Crea8ng Financial Stability
  27. 27. 26 Assess Needs Planning •  Dream, planning session - what do we want for our Co-op? •  Gather Ideas, input and hard data •  Choose a financial plan and direction •  Prioritize - Plan – Standard of living, quality of life •  Implement Standard of Living for all ages and abilities •  Maintain a mixed income community •  Set and Maintain Quality Standards
  28. 28. 27 Assess Needs Planning data, Building Condition Assessment l  Document review l  Site inspection l  Prioritized Capital Replacement Plan l  Life cycle spreadsheet Results: §  Which capital items you need to replace first. §  How much you will need to spend each year over 25 years.
  29. 29. 28 Assess Needs Planning data: Reserve Fund Forecast (RFF) l  The difference between your current reserves and contributions to reserves and the spending in the BCA l  How much money you should be putting into your replacement reserve each year. l  How much you can expect to earn on your replacement reserve investments l  What impact this will have on housing charges
  30. 30. 29 Assess Needs Planning data, Financial Statements l  What are our current reserves? l  Are they fully funded? (Do we have the cash to match the liability?) l  What is our annual contribution to reserves? l  Do we transfer any surplus to reserves? l  Do we spend our full maintenance budget each year? l  Do our housing charges keep up with inflation? l  Can we implement all the repairs called for in the BCA?
  31. 31. 30 Assess Needs Planning needs Housing charges and affordability mandate l  Do your current housing charges create an annual surplus? l  Do your housing services provide on time maintenance, capital replacement, quality of life improvements? l  Will completing the work raise housing charges? l  How do your housing charges compare to local market? l  Will higher housing charges be a problem, are expectations realistic?
  32. 32. 31 Develop Strategies Planning: who will ? •  Lead the planning and implementation process •  Set the stage; dream, direction, standard of living •  Procure data and reports, BCA, AMP, financial statements •  Review data and craft a plan for the co-operative •  Set milestones and monitor progress Board, Management, Consultant, CHF Canada?
  33. 33. 32 Create Solutions: Asset management Plans The BCA calls for “replacement to original” Do we want to rebuild 1980? Building systems l  Building envelope & Insulation l  Plumbing systems l  Mechanical & electrical Community Infrastructure l  Appliance alternatives l  Recycling l  Accessibility/aging in place l  Food security l  Quality of life
  34. 34. 33 Create Solutions: Asset management Plans • Green Infrastructure/ lower costs to members Electric Hydronic baseboard heater Programmable thermostat High efficiency boiler 9 unit apt.
  35. 35. 34 Create Solutions: Asset management plans • Green Infrastructure/lower costs to members Windows + insulation +siding Shingles + venting + insulation
  36. 36. 35 Create Solutions: Asset management Plans 35
  37. 37. 36 Create Solutions: Asset management plans • Universal design & site accessibility
  38. 38. 37 Create Solutions: Asset management Plans • Universal design & fixture improvements Low flow, universal design Energy star best performance
  39. 39. 38 Universal design & fixture improvements
  40. 40. 39 Create Solutions: Community infrastructure 39 Personal Food security Recycling
  41. 41. 40 Invest resources Planning questions, •  What is the cost of minimum BCA requirements? •  How does that compare to reserves and contributions (RFF) •  Are we fully funding our capital requirements? •  Can we fund capital requirements if we redirect loan payments at EOA? •  Are we meeting an affordability mandate or criteria? •  Can we use some cash flow to support mixed income community? •  Would financing assist us to achieve our goals?
  42. 42. 41 Develop Strategies Planning: reallocate current mortgage cash flow at EOA ? •  Reallocate all mortgage payments to reserves or some needed for low income members? •  Can we phase all required projects to fit with cash flow or does standard of living decline? (Do all of the BCA!) •  Do we have human resources to phase all projects? •  The BCA only replaces to original. •  Do we want or need to do more? Review data and create solutions for the co-operative Board, Management, CHF Canada?
  43. 43. 42 Develop Strategies Redirect loan payments – positive •  Phasing allows co-op to remain mortgage free? •  Some units receive immediate improvement, •  Some units receive aging in place improvements •  Overhead costs improve; slowly •  Standard of living improves over time ( approx. 20 year implementation) 42
  44. 44. 43 Develop Strategies Redirect loan payments – negative •  Phasing requires annual human resources commitment •  Projects every year are disruptive and difficult •  Phasing increases costs with smaller projects •  Overhead costs improve s. l. o. w. l. y. •  Some units receive immediate improvement. Some don’t •  Some units receive aging in place improvements. Some don't •  Current cash flow pays for future living standards •  Current cash allocation subject to annual board decisions •  Standard of living improves over time ( approx. 10 to 20 yrs.) 43
  45. 45. 44 Develop Strategies Planning, Financing - negative •  Financing is a time consuming project •  Co-op has a mortgage? •  The lender will have some rules •  Large projects are disruptive and difficult 44
  46. 46. 45 Develop Strategies Financing – positive •  Economies of scale for projects and project management •  Improved standard of living now for all members •  Lower unit overhead costs now for all members •  Provide accessibility & aging in place, as required •  Housing charges are stabilized into the future •  Members share equally over time in cost of improvements •  Mortgage payments place discipline on future boards •  Units are marketable 45
  47. 47. 46 Invest resources: Reserves aren’t always enough Financing as a tool
  48. 48. 47 Invest resources Refinancing can help close the gap refinance
  49. 49. 48 Invest resources: refinancing Refinancing •  Funding for major capital repairs •  Invest in green infrastructure •  Modify units to meet changing needs of members •  New development / acquisition & rehab How? •  CMHC Direct Lending? •  Commercial market / Credit Unions or Banks ? •  Sector based lending service.
  50. 50. 49 Improving Lives Planning, •  Set aside time to plan •  Appoint Governance & management to lead •  Get the data, BCA, RFF, Financial statements. •  Review building condition, reserves, & requirements •  Review replacement to original and desired improvements •  Review capacity to support mixed income community •  Make a long term plan & consider financing as a tool •  Get expert support, planning and project management 49
  51. 51. 50 CHF Canada Asset Management Support CHF Canada services Technical report procurement •  BCA & RFF •  Technical investigation •  Asset management plans Refinancing program •  Analysis •  Application assistance •  Board, member, & management education Technical services procurement (with HSC) •  Scope development, tendering documents & procurement •  Project management
  52. 52. 51 How CHF Canada supports the co-op 1.  Helps finalize key capital needs/costs 2.  Provides expert financial advice that calibrates: §  Borrowing for capital repairs/renovations §  Total borrowing (mortgage payout plus capital renewal from borrowing) §  Amount of monthly payment §  Ongoing repair/replacement needs and reserve contribution
  53. 53. 52 How CHF Canada supports the co-op 3.  Prepares application to Credit Union 4.  Reviews Credit Union’s offer with co-op and negotiates any changes to: §  Interest rate §  Conditions 5.  Handles the “paperwork” with co-op and Credit Union
  54. 54. 53 How CHF Canada supports the co-op (cont.) 6.  Handles provincial government, Agency and CMHC approval processes (for co-ops out of their operating agreement this does not apply) 7.  Organizes mortgage support agreement between co-op, Credit Union and CHF Canada for loan monitoring 8.  Provides annual report to Credit Union, based on co- op’s annual information return 9.  Intervenes at lender’s request if financial performance warrants it
  55. 55. 54 Mortgage Support Agreement §  Co-op’s auditor will continue to report to the Agency or equivalent until the new mortgage is paid and conducts a yearly review of operations. §  Co-op must continue memberships in CHF Canada, local CHF Canada member federation and credit union during the new mortgage §  Co-op will give CHF Canada notice of adverse financial change, material loss, termination of property manager, or litigation §  Reasonable access to the property or the co-ops books, etc §  CHF Canada provides an annual report to the credit union on the co-ops operations and financial status.
  56. 56. 55 What your co-op has to budget in terms of costs §  CMHC prepayment fees – (Section 95 co-ops only) §  About 0.5% lenders fees §  Asset Management Services Fees §  CHF Canada Refinancing fee (sliding scale) §  Property appraisal §  Legal costs of deal closing and registering mortgage
  57. 57. 56 The Process •  Co-op contacts CHF Canada representative to confirm interest in the re-financing program. •  Co-op provides 3 years Financial Statements and a Building Condition Assessment (BCA) to CHF Canada. •  Co-op Agency provides most recent operating review and commentary (“ thumbnail“). •  CHF Canada’s Asset Management Services develops with the co-op a long term asset plan and provides recommendations regarding financing repairs.
  58. 58. 57 The Process •  CHF Canada meet with Co-op Board to review findings, answer questions and determine how best to proceed. •  If re-financing recommended, Board arranges General Membership meeting. •  CHF Canada present findings to membership, Board provides recommendation, membership votes and a Resolution to proceed, or not, is obtained. •  If proceeding, CHF Canada and Consultants provide required information to Credit Union and assists with their review issuing a “term sheet.”
  59. 59. 58 The Process •  Prior to funding of the new mortgage, CHF Canada, the Credit Union lender, and the Co-op execute the tri-partite Agreement. •  At this point with all the Third Party reports completed and legal work for the new mortgage also completed, then funds are advanced and the CMHC mortgage is repaid. Additional monies will be advanced on a monthly basis as work progresses. •  On-going capital works continue until completion with regular inspections/monitoring by Project monitor/engineer.
  60. 60. 59 Shoreham Halifax 59
  61. 61. 60 Windfield Co-op, Guelph ON
  62. 62. 61 Asset management David Spackman 1 888 314 9015 dspackman@chfcanada.coop Refinancing David Howard 1 800 268 2537 ext 239 dhoward@chfcanada.coop
  63. 63. 62 Any questions?

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