IMPACT INVESTING AND HOUSING FINANCE

Transcription

1 MAY 2018 IMPACT INVESTING AND HOUSING FINANCE 1 As of September 30, 2016 Savanah at Southport Apartments, West Sacramento, CA

2 THE FOCUS ON IMPACT INVESTING HAS BEEN GROWING News Articles Containing the Phrase Impact Investing, Globally Source: GIIN from Google, as of end of

3 THE NUMBER OF IMPACT INVESTORS HAS ALSO BEEN INCREASING Pre Number of Organizations Making First Entrance Cumulative 0 Source: 2017 Annual Impact Investor Survey, GIIN

4 IMPACT INVESTING SITS BETWEEN RETURNS-ONLY INVESTING AND PHILANTHROPY Traditional Investing Responsible Investing Sustainable Investing Impact Investing Venture Philanthropy Traditional Philanthropy Invest for financial returns. Screen out certain types of investment (weapons, tobacco, alcohol, etc.). Invest in ESG leaders and in sustainable sectors (water, energy efficiency); engaging on ESG issues. Invest to create measurable social impact and financial return. Fund socialpurpose organizations through a mix of grants and investments. Grants for social-purpose organizations. Source: Adapted by Julia Balandina Jaquier from Bridges Ventures in Guide to Impact Investing 4

5 HOUSING LEADS IMPACT INVESTMENTS BY SECTOR 30,000 25,000 20,000 15,000 10,000 5,000 0 Housing Energy Microfinance Fin Services (excl) Food & Ag Healthcare WASH Foresty & Timber Education Manufacturing ICT Infrastructure Arts & Culture Other Source: 2017 Annual Impact Investor Survey, GIIN 5

6 IMPACT INVESTMENTS IN HOUSING GO BY A NUMBER OF DIFFERENT NAMES ü Impact-oriented strategies in housing often go by different names: community investing, ethical investing, green investing, mission-related investing, responsible investing, sustainable investing, and values-based investing. 6

7 IMPACT VEHICLES COME IN DIFFERENT SHAPES AND SIZES ü Below-market debt funds: Used for acquisition of land, existing affordable housing, new construction and substantial rehab often as a bridge to tax credit syndication. Examples include the New Generation Fund in Los Angeles. ü Private equity funds: Used largely for acquisition of existing subsidized and unsubsidized affordable housing. Examples include Avanath Capital Management and Enterprise Multifamily Opportunity Fund. ü Real estate investment trusts: Used for acquisition of existing subsidized and unsubsidized affordable housing. Examples include CDT and HPET. ü Targeted local funds: Local communities are building their own targeted opportunity funds. 7

8 CASE STUDY: HOUSING PARTNERSHIP EQUITY TRUST ü Housing Partnership Equity Trust is a social purpose REIT that acquires and preserves affordable and workforce housing throughout the United States in partnership with its nonprofit member/investors. ü HPET s Nonprofit Partners include 14 of the nation s largest affordable housing developers and operators who own a combined portfolio of over $8 billion and employ over 3,900 real estate professionals operating in 40 states and the District of Columbia. ü HPET is providing investors with a triple bottom line return: economic, mission and environmental. ü Today HPET owns 15 properties with 2,955 units, representing $284 million in acquisition value. 8

9 HPET S INVESTMENT STRATEGY ü Invest in a diverse portfolio of good, well located properties in markets with high demand for affordable and workforce housing serving tenants earning 50% to 80% of area median income ( AMI ) ü Utilize Cash Flow, Value Add and Redevelopment investment strategies to acquire properties that achieve our mission and create long-term value for our Investors and Nonprofit Partners ü Invest in opportunity markets near job centers with access to good schools, public transportation, ample retail, medical services and other community amenities ü Utilize a conservative level of long-term property debt, taking advantage of preferential debt pricing and local subsidies ü Manage properties aggressively to contain costs and ensure rent increases are fair and reasonable, property turnover is minimized and property occupancy maximized ü Provide amenities that provide a good living experience to people of modest means 9

10 HPET S PORTFOLIO OVERVIEW EDEN Woodside Court Fairfield, CA EDEN Quail Run San Leandro, CA EDEN Savannah at Southport West Sacramento, CA LINC Pacific Villas Stockton, CA NEVADA HAND Meadow Ridge Las Vegas, NV CPLC Courtyards at Encanto Phoenix, AZ HISPANIC HOUSING Mallard Point Channahon, IL MERCY 2000 Illinois Aurora, IL HFA/NHT Bradford Hagerstown, MD CPDC Woodmere Trace Norfolk, VA AEON Goldenstar Maplewood, MN AEON Sun Place Roseville, MN AHC Dunfield Townhomes Nottingham, MD CPDC Dove Landing Virginia Beach, VA AHC The Birches Silver Spring, MD 10

11 HPET S PORTFOLIO OVERVIEW HPET has a portfolio of 2,955 units totaling $284 million in acquisition value Property Name Location Transaction Type Units Year Built Year Renovated Acquisition Date Purchase Price HPET Equity as of 3/31/ Illinois Ave Aurora, IL Value Add Apr-2013 $5,200,000 $2,550,649 Woodside Court Fairfield, CA Cash Flow Jul-2013 $12,000,000 $3,389,165 Woodmere Trace Norfolk, VA Value Add Sep-2013 $15,250,000 $6,887,984 Mallard Point Channahon, IL Cash Flow, Value Add N/A Sep-2014 $19,400,000 $5,291,490 Birches Silver Spring, MD Cash Flow N/A Dec-2014 $33,500,000 $7,450,644 Bradford Hagerstown, MD Cash Flow Jan-2015 $26,250,000 $7,898,428 Savannah West Sacramento, CA Cash Flow N/A Dec-2015 $30,000,000 $7,305,582 Dunfield Nottingham, MD Cash Flow Dec-2015 $52,000,000 $9,391,151 Dove Landing Virginia Beach, VA Value Add Jan-2016 $18,000,000 $7,425,859 Goldenstar Sun Place Maplewood, MN Roseville, MN Cash Flow N/A N/A June-2016 $10,050,000 $3,005,176 Meadow Ridge Las Vegas, NV Cash Flow N/A Aug-2016 $22,600,000 $6,726,612 Encanto Phoenix, AZ Cash Flow N/A Oct-2016 $8,800,000 $2,645,435 Pacific Villas Stockton, CA Cash Flow Dec-2017 $6,500,000 $2,005,155 Quail Run San Leandro, CA Cash Flow Mar-2018 $24,000,000 $7,471,497 2,955 $283,550,000 $79,444,827 11

12 HPET S TRANSACTION PROFILE Tenant Profile Property Profile Employment Status Hourly, salaried or part time Location Near employment, transit, schools, community amenities Income Range Typical Employment $20,000 to $80,000 per year Retail, Construction, Service Sector Unit Mix Number of Units Acquisition Costs Studios, 1, 2 and 3-bedrooms 30 to 418 units (230 average) $7 million to $60 million Average Family Size One to four members per household Econ Occupancy at Acquisition 79% to 99% Needs Transportation, jobs, income stability, good schools Econ Occupancy at Stabilization 92% to 99% Credit History Rent Payment 1 Minimum credit scores, demonstrated income, rental history $570 to $1,388 per month Rent at Acquisition and Stabilization Community Facilities $570 to $1,316 $546 to $1,484 Community Room, Dog Parks, Fitness Center, Pool, Playground 1 Profile information is as of September 30, 2017 for all properties exclusive of Courtyard at Encanto and Pacific Villas. For Courtyard at Encanto the profile information is as of October 17, 2017 and for Pacific Villas the profile information is as of December 12, 2017, each property s respective acquisition date. 12

13 MISSION RETURN HPET S OPPORTUNITY AND AFFORDABILITY SCORECARDS Job Centers Retail Grocery Parks Schools (>5 Rating) Head Start Program Community Health Centers Transit to Urban Core TOTAL PORTFOLIO (% of units) 1 100% 100% 81% 89% 74% 100% 94% 94% HPET s properties are located in markets with amenities that allow our residents the opportunity to thrive Number of Units Average Rents 1 60% of AMI 2 80% of AMI 2 100% of AMI 2 TOTAL PORTFOLIO 2,955 $985 $1,030 $1,372 $1,715 Average portfolio rents remain affordable across HPET s markets at 57.4% of AMI 1 As of December 31, 2017 for all properties exclusive of Quail Run which was acquired on March 20, Affordable rents determined using Novogradac Rent & Income Limit Calculator 13

14 FOR ADDITIONAL INFORMATION: Anne Segrest McCulloch President and CEO Housing Partnership Equity Trust 820 First ST NE, Suite 760 Washington, DC Hpequitytrust.com