Innovative Financing ToolsInnovative 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 MixedInnovative Financing Tools to Support Mixed--I T itI T it O i t d D l tO i t d D l tIncome TransitIncome Transit--Oriented DevelopmentOriented Development

ULI Fall Meeting Washington DC ULI Fall Meeting Washington DC O t b 13 2010O t b 13 2010October 13, 2010 October 13, 2010

Aaron Aaron MiripolMiripolUrban Land Conservancy (ULC)Urban Land Conservancy (ULC)Urban Land Conservancy (ULC)Urban Land Conservancy (ULC)

Denver, Colorado Denver, Colorado www.urbanlandc.orgwww.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 peoplepeople

• 400 full and part-time jobs are supported by ULC real estate investments

• Promote community development; strengthen neighborhoods through preservation of key areas of influenceareas 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

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q g p g g g gtransit corridors

• When possible use 99 year land lease with partners to ensure permanent public benefit

Make-Up of Denverp

598,707 residents

240,000 households

15,000 businesses

13 000 nonprofits (metro-wide)13,000 nonprofits (metro-wide)

Land locked

Both a City and a County

“St M ” liti l t“Strong Mayor” political system

Opportunities during difficult economic times; TOD FundTOD Fund

Build out of FasTracks over the next decade

Over 120 miles of additional track and 59 new stations- 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

4

Opportunity to purchase land now

How the TOD Fund works

Finance land and property acquisition

1 200 ff d bl h th t 101,200 affordable homes over the next 10 years

- 60% AMI rental, 95% AMI ownership

- Goal of 15% of homes for 30% AMI- 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; fundEnterprise Community Partners: Assemble loan capital; fund manager; largest investor

City of Denver: Top loss funding of $2 5 millionCity of Denver: Top loss funding of $2.5 million

MacArthur Foundation Housing Preservation Award: $2 illi PRI d $250 000 t f l i tmillion PRI and $250,000 grant for early warning system

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 CommunityFoundation

$500,000/ 2%

Senior Debt Enterprise Community Loan Fund (with Wells Fargo and US Bank)

$6 million / 5%

Senior Debt Mile High Community Loan Fund $500,000/ 4%g y ,

TOTAL $ 15 Million/ 3.5%

Economics of Affordable Housing on the West CorridorWest Corridor

h 1 424 ff d bl h i hi ½ il di f h C idThere are 1,424 affordable homes within a ½ mile radius of the West Corridor light rail line today.

The West Corridor will add roughly 15,000 total homes by 2030

f l f h h ff d bl i ld d bl hIf only 10% or 1,500 of these homes are affordable, it would double the number of affordable homes currently within ½ mile of the West Corridor

According to an National Association of Home Builders (NAHB) model, the i i t f b ildi th ff d bl h ld beconomic impact of building these affordable homes would be:

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.

A l i l l i t $40 732 000 i l l i $5 609 760 i

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Annual, ongoing local impacts: $40,732,000 in local income, $5,609,760 in 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

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The West Line Corridor

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Jody ApartmentsLocated less than 300 feet from a future RTD light rail

Model for the TOD Fund

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.30% AMI and below.

Total acquisition and rehab: $3.25 million

First TOD Fund Acquisitions

Yale CircleYale Circle1.2 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 taxHousing Tax Credits; application of tax credits would occur in 2011.

Total Development Costs = $11.5 million

Dahlia ApartmentsDahlia ApartmentsDahlia 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 theLoan 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 needsTOD Fund addresses less than 5% of the Metro Denver work force housing needs.

Expand to at least $25 million by 2012 (regional fund)

Need investments from other local municipalities beyond Denver to succeed as “regional”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 Fundto 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:Advantages:

Expertise

RiskRisk

Innovation

Enhance community relationshipsEnhance community relationships

Disadvantages:

L f t lLoss of control

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

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Washington DC

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

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Transit access improves education, job and amenity access

Trends

Phil th i i t t i i iti f dPhilanthropic interest in acquisition funds

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 CDCssites & encourages partnerships with CDCs.

Fund preserves land and buildings around transit corridors to ensure long term community benefite su e o g e co 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

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environmental impact with infrastructure already in place.

Creating Great Communities for the Bay Area

Creating Great Urban Land InstituteWashington, 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 esresources and acts as a catalyst for change to build strong communities, foster civic leadership and promote civic leadership, and promote 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• $60 million- MTC planning funds

• 100 station area plansplans

• $12 billion- local bonds• $1.5 billion- state

i f t t f dinfrastructure funds• Potential of what could

come from the R th i ti f th Reauthorization of the 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 neighborhoodsg

• Get mixed-income TOD built

• Build a regional policy • Build a regional policy

framework

www.sff.org 7

www.sff.org 8

www.sff.org 9

1. CAPACITY BUILDING

2. POLICY AND ADVOCACY

3. DEVELOPMENT

Need a picture of affordable hsg here

• Secure sites for mixed-income development

• Develop property acquisition fund

W k ith iti t id tif • Work with cities to identify land and new partnerships

Cr t rk t i ti • Create market incentives for developers

• Craft messages and media

www.sff.org 10

Craft messages and media with regional agencies

Bay Area Development Opportunities

Scarcity of Development Sites Near Transit

Near Existing or

30.0

35.0

nd

s of

Acr

es

gPlanned Transit20.0

25.0

Th

ousa

n

10.0

15.0

0.0

5.0

www.sff.org 11

Vacant or Underutilized Land

The “capital stack” for the Bay Area TOD Fund for Affordable HousingBay Area TOD Fund for Affordable Housing

1 Senior loans

• Banks, insurance companies• Other direct commercial lenders

B d fi i

2 L i l

1. Senior loans • Bond financing

• Foundations and Intermediaries2. Low-interest loans

(Program-Related Investments)

(Such as the Ford Foundation, the Fund Manager and other CDFI’s, and community foundations’ PRIs)

3. Equity or Grant $3. Equity or Grant $

• State & local funds(Such as the Metropolitan

Transportation Commission)• Federal funds

www.sff.org 12

• Foundation grants

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 DevelopmentNational Community Development Financial Institution (CDFI)

• 501(c)3 nonprofit organization• 501(c)3 nonprofit organization

• Headquartered in San Francisco, with ffi i LA N Y k d D Coffices in LA, New York, and D.C.

• Primarily work on Eastern seaboard and in the Western U.S.

• Founded in 1984 (26 years old)( y )

LIIF’s VisionLIIF s Vision

The Low Income Investment FundThe Low Income Investment Fund

creates pathways of opportunity for

low income people and communities.

LIIF serves the most vulnerable peopleLIIF serves the most vulnerable people

and places.

LIIF’s ActivitiesLIIF s Activities

• Mission-driven organizationMission-driven organization

• Poverty alleviation

i i l h• Financing – loans, grants, other

• Fund structuring and management

• New Markets Tax Credits

• Technical AssistanceTechnical Assistance

• Policy work

LIIF ProgramsLIIF Programs

• Affordable housing• Affordable housing

• Education

• Childcare and child development

• Green and sustainable developmentGreen and sustainable development

• Transit-oriented development (TOD)

H l h f d• Healthy foods

What We’ve DoneWhat We ve Done

• Invested $900 million in communitiesInvested $900 million in communities nationwide

• Leveraged $5 4 billion of additional• Leveraged $5.4 billion of additional investments

P d h l 55 000 i f• Partnered to help create 55,000 units of housing, 159,000 childcare

d 50 000 f dspaces, and 50,000 seats for students

The CDFI ApproachThe CDFI Approach

• Support holistic strategySupport holistic strategy

• Community engagement

li / d• Policy/advocacy

• Public/private partnerships

• Complementary programs

• Technical assistanceTechnical assistance

CDFIs and TODCDFIs and TOD

• Partner to deliver neededPartner to deliver needed program, policy and technical assistance supportpp

• Consult with partners and design tools to deliver needed financial productsp

• Aggregate public, CDFI and/or private capital into structures that share riskp

• Assist in identification of new sources for community projectsy p 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 Toolsg

• Fund and fund like structures• Fund and fund-like structures• Direct loans, including bridges

S di ti / ti i ti• Syndications/participations• New Markets Tax Credits• Other facilities with top loss• Limitations: Term and total $$ size

E l f F d St tExample of a Fund Structure

LA County Housing Innovation Fund

• $60MM, 5 year fund$60MM, 5 year fund

• LIIF, Century Housing, CSH, LA County Citi and OneCalifornia BankCounty, Citi, and OneCalifornia Bank

• $20MM County, $8MM CDFI, and $32MM f i t it l$32MM of private capital

• 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 FundStructure

Class A SeniorLender

Class A SeniorLender

OriginatingLIIF(Administrative Agent

Structure

Class A SeniorLender Lender

LIIF

LenderLenders

Mezzanine Position

(Administrative AgentAnd Master Servicer)

Lender

LACHIF LLC

LA County Fund, LLC• 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 $19.8MM. Class B Lenders will share ownership of LA

LIIF(Class B Lender)

Century Housing

Holds $19.8MM loan from County

County Fund, LLC.

• Project loans will be funded by Class A lenders (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 are exhausted

Century Housing(Class B Lender)

CSH

Loan

are exhausted.(Class B Lender)

A PieceA PieceA PieceProjectB Piece(CSH)

County Funds

B Piece(Century)

CountyFunds

B Piece(LIIF)

CountyFunds

ProjectLoans(Up to $5MM each)

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

Equitable TOD

• TOD projects have historically benefited affluent populationsaffluent populations

– Market rate/high end housing and shops

• Yet TOD can greatly benefit low income• Yet TOD can greatly benefit low income communities

– Families making $20,000 to $50,000 pay asFamilies 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 bl f drecoverable grant funds

• CDFI Consortium – comprised of six CDFIs with complementary skills

• Partnership among p gfoundations, CDFIs, banks, and public sector

• Regional scale – 9-county Bay Area

• Demand Analysis• Demand Analysis

ComponentsComponents

• Loan Fund: $50MM or moreLoan Fund: $50MM or more

• Proposed Grant Pool

h i l A i• Technical Assistance

• Program Assessment

• Learning through case studies, best practices and conveningsp g

Loan Fund StructureLoan Fund Structure

• Uses $10MM in MTC funds as top lossUses $10MM in MTC funds as top loss protection for other lenders

• Maximizes ability to attract investors• Maximizes ability to attract investors through risk structure

R d b• Reduces costs to borrowers

• Allows more flexibility of loan products

• Ensures fund sustainabilityy

Bay Area TOD Fund Structure($50MM Fund)

CDFIs and Banks

(Class A Lenders)Up to $25MM

LIIF(Administrative Agent

($50MM Fund)

Bay Area TOD Fund, LLC

Up to $25MM(Administrative AgentAnd Master Servicer)

OriginatingCDFIs (mezzanine)

MTC

Grants $10MM to LLC

• Class A Senior Lenders will lend up to $25MM; Class B Lenders (originating CDFI/mezzanine) up to $7.75MM; PRI up to $6.5MM; Class C Lenders (originating CDFI) up to $750M and MTC investment (grant) at $10MM. CDFIs will share ownership of Bay Area TOD Fund, LLC.

• Project loans will be funded by Class A lenders (50%)

(Class B Lenders)Up to $7.75MM

Originating• Project loans will be funded by Class A lenders (50%), Class B Lenders (15.5%), PRI (13%), Class C Lenders (1.5%) and the MTC (20%).

• Pooled Risk for Class A Senior Lenders. MTC funds will support Class A Senior Lender funds until all MTC funds are exhausted.

PRI Source(s)

Loans up to

OriginatingCDFIs

(Class C Lenders)Up to $750M

Class A

Project

p$6.5MM to LLC

Class A Class A

MTC

ProjectLoans(Up to $7.5MM each) PRI

Class B

Class C

MTC

PRI

Class B

Class C

MTC

PRI

Class B

Class C

Fund PrioritiesFund Priorities

• Creation and preservation of affordableCreation and preservation of affordable housing

• Mixed income housing• Mixed-income housing

• Complementary services, such as hild h l h li ichildcare, health clinics, etc

• Healthy foods

• Neighborhood retail

Loan Fund ProductsLoan Fund Products

• Maximum loan size up to $7 5MMMaximum loan size up to $7.5MM

• Acquisition (7 yr terms)

d l• Predevelopment

• Construction bridge loans

• Leverage loan (NMTCs)

• Mini-permanent loansMini permanent loans

Favorable Product TermsFavorable Product Terms

• Better than regular CDFI productsBetter than regular CDFI products

• Up to 110% Loan-to-value

f l h 6%• Interest rate of less than 6%

• Terms of up to 7 years

• Larger loan sizes ($7.5M)

• Potential for larger financing packagesPotential for larger financing packages

• Multiple takeout scenarios

TimelineTimeline

• Currently finalizing capital raisingCurrently finalizing capital raising

• $45MM in preliminary pipeline

G hi ll di j• Geographically diverse projects

• Nonprofit and for profit developers

• Projected fund closing 1st quarter 2011

• Drinks for allDrinks for all