JF LeverAge Finance Program Expanding Affordable Aging Services, Housing, & Innovations A collaboration of Grantmakers in Aging, LeadingAge, & the National Cooperative Bank 1 Agenda JF Introductions What Is the goal? What Is the need? Who are the partners? What will it do? How is it funded? (Questions welcome throughout) 2 1
What Is The Goal? NG Bring together philanthropy, service providers, and the financial community in a new way to meet the growing need Accelerate development of new models and capacity through: A dedicated program familiar with the industry and government reimbursements A consistent source of affordable and flexible financing Credit support for emerging innovations not qualifies for conventional debt Provide a new and scalable debt source that can reduce dependence on philanthropy by readily combining with: Existing/remaining federal and state debt sources & guarantees Public subsidies Sponsor resources Provide an opportunity for LeadingAge and GIA members to help through mission deposits 3 Introductions - The Partners JF John Feather, CEO, Grantmakers in Aging Niles Godes, SVP, Housing and Capital, LeadingAge Robert Jenkens, Director of Social Impact Initiatives, National Cooperative Bank (NCB) 4 2
LeadingAge NG Mission: To expand the world of possibilities for aging Members: 6,000 mission driven not-for-profit aging organizations 39 state affiliates Aging stakeholders: Consumer groups, foundations, research partners, related business, and consultants Touch 4 million lives every day Member Services: Affordable independent housing High quality long-term care, including nursing home and assisted living Home and community-based services, including home care, hospice, PACE, adult day care, meals on wheels Many others 5 National Cooperative Bank Mission: To meet the financial needs of organizations operating with cooperative principles (coops & not-for-profits) Organized under the National Consumer Cooperative Bank Act in 1978 Owned by 2,600 cooperative & not-for-profit customers Driven by a federal best efforts mandate to support: - Cooperative expansion - Programs serving low-income communities (35% of lending) - Community development Assets: $1.6 billion Assets under management: $7.5 billion (NCB & investors) IDC safety & soundness rating is superior the highest ranking possible 6 3
NCB Health Care & LTC Lending Actively lending to healthcare and long term care industry since 1980 Approximately $1billion in health care, LTC, and aging focused financings to date Experienced and comfortable with public payors, including Medicaid & Medicare $5.4 billion in low-income financing originations since 1980 Current mission portfolio - $450 million 7 NG What Is The Need? 65+ population will grow by 15 million between 2010-2020, a 36% increase 1.8 million new affordable rental units are needed for the 65+ population by 2020 The number of elderly homeless is expected to increase by 1/3 between 2010 and 2020. Long term care expenditures will increase 26% between 2010-2020 At a time of increasing demand, traditional sources of funding are decreasing 8 4
Current Options & Need HUD, Fannie Mae, Freddie Mac, USDA, bonds, & commercial banks HUD and other government financing programs remain important options but Good for some projects - poor fit for others due to inflexible guidelines Declining federal guarantee support & related program volumes Limited applicability of bond financing due to size, costs, and volume caps Commercial banks short terms create interest rate risk Conventional lenders lack of expertise in specialized healthcare lending limits access Lenders discomfort with new models disadvantages evolving innovations LeverAge Focus Senior Housing: Flexible mortgage lending Up to 30-year amortization and 10-year term NCB interest rate discount of ½% - 1 ½% Supports growth of senior affordable housing and housing with services Aging Services: Consistently available working capital and cash flow loans Up to 7-year term NCB interest rate discount of ½%+ Supports expansion of proven aging services that are scalable Critical Programs & Innovations: Credit support for new models selected by LeverAge Partners 10 5
LeverAge Parameters Loan size: Small to medium size ($500,000 to $12,000,000) Term: Longer-term (10-year for real estate loans, up to 7-years for business lending ) Rate: Below market (50 150 basis points [0.5 1.5%] or more below NCB commercial rates) Amortization: Long (30 years on real estate, varies for business lending) Affordability: Mixed income with minimum mission standards 11 NCB Contribution Leverage: NCB matches 5 & 10-year mission deposits dollar for dollar Interest rate: Additional rate subsidy through discounted NCB net interest margin Origination fee: Below market origination fee Credit Risk: NCB assumes the credit risk for standard loans Refinance Risk: NCB assumes refinancing risk for standard loans 12 6
Benefits for Innovations Scalable program w/knowledgeable and sympathetic lender Consistently available fixed-rate debt supports rapid housing and services expansion and innovations Program fit and flexibility designed specifically to serve evolving affordable aging services and housing programs, including Medicaid, Medicare, and other healthcare components (i.e., no box ) Affordability & credit support requires less public subsidy and charitable support NCB expertise in non-traditional market, regulatory, revenue, and expense issues and risks allows more deals to move forward 13 Borrower Benefits Low issuance fees via commercial bank lending and NCB discount Interest rate stability over 7-10 years Credit support enhances projects debt capacity and reduces reliance on grants and equity investments facilitating spread Below market interest rate supports more debt (5.5% - 17% more debt on $5M debt/$260k-$725k) Lower rates = lower interest costs (9%-23% interest rate savings on $5M loan/$245k-$741k over 10 years) Longer-term reduces refinance risk for borrower and lender (interest rate capacity at end of 10-years term increases 125 basis points over 5 years) 14 7
AdvantAge Mission Deposits & Investments Mission Fund LeverAge mortgages lending and working capital loans to affordable long-term care, senior housing, and aging services Provide below market rate interest rates and longer terms to support affordable projects 15 AdvantAge Mission Deposits Terms 5- & 10-year terms Interest rate of 0.75 to 1.5% Minimum deposit: $100,000 Early withdrawal penalty: Yield maintenance If deposits not deployed with in 18-months, CD balance may be withdrawn without penalty or repriced to market Benefits Provide stable, low cost, and long-term funding base for affordable housing and services Mission deposits leveraged 2x dollar for dollar by NCB Mission deposits FDIC insured up to $250,000 NCB very well capitalized, has highest IDC safety and soundness rating of superior indicating institutional strength Mission deposits not exposed to LeverAge loans credit risk (i.e., do not provide credit support for LeverAge loans) 16 8
AdvantAge Mission Investments Terms 5- & 10-year terms Interest rate of 1.50% 3.00% Subject to program credit loss (if any) Minimum deposit: $100,000 If investments not deployed with in 18-months, CD balance may be withdrawn without penalty or repriced to market Benefits Provide stable, subsidized funding and credit enhancement source for housing and services innovations (e.g. first loss reserve or similar) Supports development and spread of affordable and emerging aging services and housing that may not otherwise qualify for lending 17 AdvantAge Mission Deposits & Investments Leading Age Shared Mission/ LeverAge GIA NCB LeadingAge and GIA have made founding deposits LeadingAge assisting NCB to make deposit appeals to their well funded members 18 9
JF Discussion 19 Learn More with ASA s Premier Programs 1) Fundamentals of Gerontology A five-week online certificate course Learn more and register: http://www.asaging.org/usc-gero 2) The 2015 ASA Leadership Institute Also apply for a SWA roundtrip airfare scholarship. Learn more and register: http://asaging.org/leader 10