Can t Find It Anywhere, But Here! Midwest Housing Development Fund, Inc.

Transcription

1 Can t Find It Anywhere, But Here! Midwest Housing Development Fund, Inc Annual Report

2 Midwest Housing Development Fund, Inc. Our Mission Promote sustainable community development and improved quality of life in the Midwest by providing resources for the development of affordable housing. Our Service Midwest Housing Development Fund is a community development financial institution that provides technical assistance and loan products for the development and sustainability of affordable housing throughout Nebraska, Kansas, Iowa and Oklahoma. The technical assistance that we provide increases capacity for local organizations to develop housing that is most needed in their communities. It is most often provided in connection with the use of our loan products in order to ensure successful financing of the property. The technical assistance is provided at no cost to our partners and we strive to make our loan products simple to utilize and at a below market cost. Our Results Since formed in 2000, Midwest Housing Development Fund has had great success. We have raised loan capital of over $2 million and have made loans exceeding $2.6 million. In 2005 alone, the following are some of our highlights: $900,000 of loans made to help create affordable housing $800,000 of loan capital raised from our investors to be used in our loan pool 300 units of affordable housing developed 300 below median income households will be provided with quality housing over the next year $20,000 net income $69,000 net assets $0 losses, $0 delinquencies, $0 defaults 501c3 status obtained and structure changed from an LLC to a nonprofit corporation Midwest Housing Development Fund Annual Report

3 Obstacles of Affordable Housing Development A ffordable housing in certain markets and for certain populations is needed now more than ever. In certain communities new businesses are opening and bringing new jobs and employees to the community. In certain communities existing housing is becoming unsuitable and unsafe. In certain communities the aging population has no options other than their existing home or the nursing home. Whatever, the case, affordable housing is in great demand and it is one of the key ingredients to a healthy, stable community. However, with the constant shrinking of public financial resources, increasing costs of construction and rising operating expenses, it is becoming more and more difficult to provide this housing. In today s market, sponsors of affordable housing need to incur substantial costs just to apply for financing. Once financing is finally approved, sponsors need to incur yet more costs in order to get the financing closed and then there is often a waiting period to actually obtain the funds. Often a financing gap still exists due to timing differences with the financing sources or additional costs that are not covered by the traditional sources. In small, rural communities, conventional permanent loans to finance a portion of the property may not be available, especially with fixed interest rates and competitive terms. In addition to financial products, many inexperienced sponsors of affordable housing need some assistance with pulling together the initial financial feasibility and development plans. Our Solution to Affordable Housing Development M idwest Housing Development Fund works to fill these gaps in order to make affordable housing development possible. This is accomplished by utilizing a loan pool that is capitalized by low cost, long term capital from various investors. Funds from this loan pool are loaned out to sponsors of affordable housing properties when they are unable to otherwise fill a financing need. We do not compete with traditional lenders. We make loans that traditional lenders are unable to make. Our loans have: Simple application process Quick turnaround Low origination fees Below market interest rates Flexible repayment terms based upon the specific property s needs In addition, Midwest Housing Development Fund staff will provide the sponsor with no cost technical assistance. This technical assistance focuses on financial structuring and feasibility and creating capacity in the local community. Loans are made to affordable housing properties that serve households at or below 60% of the area median income. When approving a loan, we consider market needs, how the property will satisfy these needs, community support and the sponsor s ability to support the property. Our loans must be repaid, they are not grants. Therefore, we all have the incentive to be successful and work together to create quality affordable housing. 2 Midwest Housing Development Fund Annual Report

4 Predevelopment Loans Predevelopment Loans Predevelopment loans were the very first loan product offered by Midwest Housing Development Fund. Providing predevelopment loans is generally considered to be a high risk for lenders and therefore, they are generally not available in the traditional financing markets. This can cause a large impediment to the development of affordable housing where it is most needed. Predevelopment loans are provided as follows: Post-allocation loans are generally made in the amount needed by the sponsor up to $50,000. Loans are made once financing sources have been conditionally awarded. Loans are used to pay for costs incurred to move the financing award from a conditional approval to an actual award of financing. Stone Ridge Apartments Webster City, Iowa Predevelopment loan provided for application fees and market study. Antlers Hotel Spirit Lake, Iowa Predevelopment loan provided for up front development costs. Pre-allocation loans are generally made in the amount needed by the sponsor up to $25,000. Loans are made before financing sources have been approved. Loans are used to pay for market studies, site control, initial plans and specifications, application fees and other costs incurred in preparing financing applications. Allowable uses of loan proceeds include site control and expenses associated with purchase, engineering, architectural, site plans, financing application fees, permit fees, market studies, surveying, environmental site assessments, appraisals and organizational expenses. Fixed below market interest rate set at the time of loan closing. The predevelopment loans made in 2005 were fixed at 5% to 6% interest. Payment terms are generally interest accruing with a balloon payment due at maturity. Maturity is typically 24 months or the closing of the construction loan. Miami Heights Omaha, Nebraska Predevelopment loan provided for costs related to the financing applications and to purchase land. Typical collateral is a guaranty from the sponsor. Image provided by Holland Basham Architects. 4 Midwest Housing Development Fund Annual Report

5 Construction Loans Construction Loans Construction loans are made after the financing sources have been approved and construction is ready to begin. Construction loans are made on a short term basis and are used to pay for construction related costs until the traditional financing is secured. In some cases, construction loans are also made to pay for construction related costs that are not covered by the traditional lender. Construction loans can also be provided if the loan to value ratio of the property is not high enough to allow the traditional construction lender to provide 100% of the needed construction financing. Construction loans are provided as follows: Loans are generally made up to $250,000. Allowable uses of loan proceeds include any development cost that is included in the final sources and uses. Adel Assisted Living Adel, Iowa York Place Crown York, Nebraska Short term construction loan provided until conventional lender closed. Construction loan provided to help fund the construction costs. Fixed below market interest rate set at the time of loan closing. The construction loans made in 2005 were fixed at 5% interest. Payment terms are generally interest accruing with a balloon payment due at maturity. Maturity is typically the closing of the traditional construction loan or construction completion. Typical collateral is either a first or second lien position on the real estate and/or a guaranty. The Nathan Omaha, Nebraska Short term construction loan for costs incurred in order to enable the conventional construction loan to close. 6 Midwest Housing Development Fund Annual Report

6 Gap Financing Loans Gap Financing Loans Loans are generally made up to $250,000. Village at Heartland Park Seward, Nebraska Stephen Center Omaha, Nebraska 10 year loan to help pay for infrastructure costs Pass-through loan of a State of Nebraska grant Allowable uses of loan proceeds include any development cost that is included in the final sources uses. and Fixed below market interest rate set at the time of loan closing. The gap financing loans made in 2005 were fixed at 5% interest. Payment of principal and accrued interest is based upon the specific property and is generally either monthly, quarterly or annually. In the case of a timing delay with another source of financing, principal and interest can be deferred until the permanent financing is obtained. Maturity can be anywhere between one and ten years and is based upon the specific property and the source of repayment. Typical collateral is either a lien position on the real estate or a guaranty. Ralston House Omaha, Nebraska 3 year loan to help pay for interior amenities pass- grant Gap financing loans are also used to allow Midwest Housing Development Fund to serve as a through agency for such things as federal grants. These loan amounts will mirror the related income. Gap financing loans are made after the property has been constructed and placed in service. Gap financing loans are necessary when the total costs of the property exceed the available sources of financing. This most frequently occurs when sources of funds such as AHP, HOME, or Trust Funds are either delayed or not approved. It is also expected to occur when a property s actual costs exceed budgeted costs or when unexpected costs arise such as additional construction requirements from local government agencies. Loans are only approved if a source of repayment is identified. Gap financing loans are provided as follows: 8 Midwest Housing Development Fund Annual Report

7 Permanent Loans Permanent Loans Albion Manor Albion, Nebraska Permanent loans are made after construction is complete and the project is placed in service. Permanent loans will only be offered after conventional lenders have been given the opportunity to provide the financing. The need for these loans generally occurs with small projects in rural communities where the local lender is not able to provide a competitive permanent loan. A contributing factor is that typically affordable housing properties must obtain a fixed interest rate on their permanent loan and many small lenders are not able to offer fixed rate financing. Also many small lenders cannot offer a 30 year amortization period that is typically needed by the property. Permanent loans will be offered as follows: Loans are generally made up to $250,000. Allowable uses of loan proceeds include repayment of a construction loan or refinancing of an existing permanent loan. Kountze Park Crown Omaha, Nebraska Fixed below market interest rate set at the time of loan closing. The permanent loans made in 2005 were fixed at 5% interest. Monthly payment of principal and interest generally based on a 30 year amortization schedule with a 15 year balloon payment. Maturity is generally 15 years. Typical collateral is a first lien position on the real estate. Crestland Beatrice, Nebraska 10 Midwest Housing Development Fund Annual Report

8 Loans Made as of 12/31/05 Oak Ridge Apartments, Ogallala, Nebraska Predevelopment Loan Pine Grove, Wymore, Nebraska Permanent Loan Southwood Crown, Hastings, Nebraska Construction Loan Ralston House, Ralston, Nebraska Predevelopment Loan and Gap Financing Loan Burt and Washington County HDC, Blair, Nebraska Predevelopment Loan North Star Development, Iowa and Nebraska Predevelopment Loans River City, Mason City, Iowa Construction Loan Pleasant Ridge, Harlan, Iowa Predevelopment Loan Yorkshire Manor, Fremont, Nebraska Predevelopment Loan Canterbury Village, South Sioux City, Nebraska Predevelopment Loan Villas at Crystal Court, South Sioux City, Nebraska Gap Financing Loan Sibley Apartments, Kearney, Nebraska Permanent Loan Miami Heights, Omaha, Nebraska Predevelopment Loan East Meadows, Crete, Nebraska Permanent Loan West Meadows, Crete, Nebraska Permanent Loan Kountze Park Crown, Omaha, Nebraska Permanent Loan West Park Townhomes, North Platte, Nebraska Gap Financing Loan York Place Crown, York, Nebraska Construction Loan Crestland, Beatrice, Nebraska Permanent Loan Village at Heartland Park, Seward, Nebraska Gap Financing Loan Adel Assisted Living, Adel, Iowa Construction Loan Albion Manor, Albion, Nebraska Permanent Loan J Development Company, Omaha, Nebraska Predevelopment Loan Antlers Hotel, Spirit Lake, Iowa Predevelopment Loan Nathan Development, Omaha, Nebraska Construction Loan Aequitas Development, Iowa Predevelopment Loans Holy Name Housing Corporation, Omaha, Nebraska Predevelopment Loan Stephen Center, Omaha, Nebraska Gap Financing Loan 12 Midwest Housing Development Fund Annual Report

9 Why You Should Invest Midwest Housing Development Fund is a tool to invest into your community and to provide: Our Investors as of 12/31/05 finan- The tremendous results achieved by Midwest Housing Development Fund are only made possible through cial investments from the following partners: leveraging of private and public resources capacity building of nonprofit and community based organizations development of much needed and frequently difficult to produce sustainable affordable housing economic development by providing housing for local employees and by improving neighborhoods so that more people are nearby to work and shop community stability In addition to all of the social benefits, an investment in Midwest Housing Development Fund can bring a return on your investment. Many of our investments are 10 year loans which we pay quarterly interest of 2% to 5%. The investor will get their capital back at year 10 or they can reinvest it with us for another term. We also have three to five year loans and have just received a five year line of credit that we can draw on when needed. Many of our investors receive CRA credit for their investment and our ability to leverage their funds with others, gives the investor more CRA credit for their investment dollars. Midwest Housing Development Fund has been in operation since 2000 and has had $0 loan losses. At this time, none of our current loans are in jeopardy as all of the properties are moving forward. This success of our loan fund is due to the hands on involvement of Midwest Housing Development Fund in the development stages. We know the properties and the sponsors and are able to determine the potential success of each property. We will keep working with the sponsor and the various financing sources until the property is a success and we are repaid. Bank of the West CDFI Fund Fannie Mae Farmers & Merchants Investment, Inc. Freddie Mac Iowa Finance Authority Kutak Rock McAuley Fund U.S. Bancorp Community Development Corporation Wells Fargo Community Development Corporation 14 Midwest Housing Development Fund Annual Report

10 Our Board of Directors Top Row: Mr. Richard Schenck, Wells Fargo, Omaha, Nebraska Ms. Kim Kuhle, US Bank, Lincoln, Nebraska Mr. James Rieker, Midwest Housing Equity Group, Omaha, Nebraska Mr. Jim Zimmerman, Capitol Federal Savings Bank, Topeka, Kansas Bottom Row: Ms. Christine Hensley, Bank of the West, Des Moines, Iowa Ms. Danielle Hill, Nebraska Developers Association, Lincoln, Nebraska Sr. Marilyn Ross, Holy Name Housing Corporation, Omaha, Nebraska Mr. Jim Cain, Iowa Coalition for Housing and Homeless, Des Moines, Iowa Not Pictured: Ms. Judy Taylor, Paul VI Heights Neighborhood Association, Lincoln, Nebraska 16

11 13057 W. Center Road, Suite 20 Omaha, Nebraska Phone: Fax: Contact: Becky Christoffersen