Capital Impact Partners Advances Financing Efforts to Support Affordable Housing, Education, and Health Care in Low-Income Communities
First quarter lending in underserved communities totals $26 million
Arlington, VA (June 30, 2017)—Capital Impact Partners announced today that it provided $26 million in project financing during the first quarter of 2017, supporting increased access to health care, education, affordable housing, and healthy food around the U.S. Other first-quarter highlights include an “AA” issuer credit rating from S&P Global Inc., the launch of a key job-creation program, and the release of important new affordable housing research.
“2016 was a year marked by change across this country, driven by people who felt they could no longer access the American dream,” said Ellis Carr, president and CEO of Capital Impact Partners. “As a social change organization, we have continued to pivot to meet their needs by employing a multi-pronged approach that includes targeted financing, cutting-edge research, and new innovation programs. That effort, along with being recognized by S&P Global, further reinforces the fact that we can be both mission-oriented and financially sound.”
This past January, S&P Global, the world’s leading provider of independent credit ratings, assigned Capital Impact Partners an “AA issue credit rating with stable outlook.” The ratings analysis recognized Capital Impact’s strong asset quality and liquidity, minimal risk profile, and consistent growth in loans and assets. Capital Impact is one of only five Community Development Financial Institutions (CDFIs) to receive an S&P Global credit rating, a crucial metric used by corporate and philanthropic investors in investment decision-making.
In an effort to create quality jobs for women aged 50 and older, Capital Impact launched a national program to scale worker-owned home care cooperatives. The initiative is funded with $200,000 from the AARP Foundation Identifying Evidence-Based Solutions for Vulnerable Older Adults grant competition and focuses on a key demographic that’s been particularly impacted by economic inequality and job insecurity. These women comprise a vast majority of the home care work force—and the program aims to provide them with opportunities for competitive wages, quality training, and career advancement through home care cooperatives.
Capital Impact also published new research and recommendations to help developers, investors, and policy-makers address the risks of resident relocation and displacement that disproportionately impact low-income residents when cities begin to revitalize. Applicable nationally, the report, entitled “Baseline Study to Address Displacement and Relocation Tied to Multifamily Redevelopment in Greater Downtown Detroit,” lays out a range of strategies—from adopting tenant notification standards to providing financial transition assistance to affected households—that can help mitigate the negative social and financial consequences relocation may have on residents.
Capital Impact’s recent loans have supported projects across fives states: California, Louisiana, Michigan, Washington, and the District of Columbia. Notable among these were a number that financed increased access to education, affordable multi-family mixed-used housing development, health care, and healthy food. This work is expected to create upward of 200 permanent and construction-related jobs, further helping those who live in the communities Capital Impact serves.
“Our ability to deliver financing that is aligned to new programs and cutting-edge research allows us to strategically amplify our efforts to ensure we are taking an effective ground-up approach to overcoming systemic issues that impact low-income communities,” said Scott Sporte, chief lending officer for Capital Impact Partners
First-quarter financing highlights include:
Increasing Access to Health Care
Through its CPCA (California Primary Care Association) Ventures Loan Fund, Capital Impact provided Families Together of Orange County Community Health Center (FTOC),in Southern California, with a $200,000 working-capital loan. The service area of the organization encompasses the part of Orange County—generally recognized as an affluent community—with the highest concentration of low-income residents. FTOC provides a full range of free medical, dental, and optometry visits to uninsured and underinsured patients whose income and lack of coverage qualify, as well as a sliding-scale fee schedule to other patients. Also notable is their 15-passenger van service that provides free transportation to and from all appointments.
This financing will help FTOC cover operational expenses during the crucial transitional period after it receives Federally Qualified Health Center (FQHC) “Look-Alike” status. During this time the center faces many challenges, including both temporary and general operating expenses, as they get their prospective payment system (PPS) in place and funds stabilize their budget.
“Capital Impact Partners’ assistance will help us to become established in the community and continue offering all of the services our community needs. Capital Impact is making a difference where it is needed most—in the good health of our families,” said Alexander R. Rossel, CEO of Families Together.
Providing High-Quality Education
Bright Star Valor High School, in Los Angeles’s San Fernando Valley, was able to purchase a facility that will become their permanent home through a $3.2 million acquisition loan provided by Capital Impact and the Low Income Investment Fund (LIIF). The renovated 30,000-sq.-ft. building will be able to house 500 9th-12th-grade students, most of whom qualify for the Free or Reduced Lunch (FRL) program. The new facility will include 23 classrooms (including a science lab, music room, and media center), as well as a multi-purpose room, counseling center, special education center, and lunch courtyard. The project is helping to create four permanent and 100 construction jobs.
The school is known for providing a strong college prep curriculum and regularly outperforms neighboring public schools. Its location—less than a mile from the Bright Star Valor Middle School—will enable a seamless transition for students transitioning to high school. Capital Impact provided 50 percent of the loan, and LIIF the other 50 percent.
In one of its largest deals of the quarter, Capital Impact contributed $6.6 million to a $35 million New Markets Tax Credit (NMTC) transaction financing Mamie D. Lee (MDL), a mixed-use development that includes two charter schools and a FQHC in the Takoma Park neighborhood of Washington, DC. This refinancing will help MDL reduce their loan payments and enable more of their finances to go to supporting these organizations.
The MDL site houses Bridges Public Charter School, which serves 428 pre-K-5th-grade students, including 65 percent who qualify for FRL and 25–40 percent who have special needs, as well as Briya Public Charter School, which uses a special family educational model to serve 100 infant-pre-K children as well as 209 adults (97 percent of the student body qualify for FRL). Both schools were given 15-year charters by District of Columbia Public Schools (DCPS) and both have shown consistently strong academic performances. Briya sub-leases space to Mary’s Center, an FQHC that provides medical, dental, and behavioral health care, as well as health education and social services, to students and nearby residents.
The property is located in Takoma Park, in the northernmost corner of Washington, DC. Although the area is generally mixed-income, the MDL site is in a highly distressed census tract that has a median income of 35 percent of the Area Medium Income (AMI) and a poverty rate of 20 percent. Despite a rank of second among all DC neighborhoods in its need for new, high-quality schools—especially for elementary education—the area has only one public school and a small number of charter schools. MDL has allowed the school to serve these students at a state-of-the-art, centralized campus. Capital Impact partnered with the LIIF, City First Bank, and Reinvestment Fund on the project.
Scaling Affordable Housing and Housing Cooperatives
To increase affordable housing in the most rapidly gentrifying areas of New Orleans, Capital Impact joined with the Crescent City Community Land Trust and the Ford Foundation to finance the Bourgogne Bywater project. This mixed-use, multi-family development will replace an unused warehouse with 98 housing units—10 of which will remain affordable to people living at or below 50 percent of AMI for at least a 50-year period—and 6,000 sq. ft. of ground-floor retail. The total amount of financing was $2.2 million.
Capital Impact also joined with several partner organizations to help long-term, low-income Washington, DC, residents stay in their homes. The joint transaction financed the acquisition of Takoma Place Apartments, an affordable housing development in the Brightwood neighborhood of the city’s Ward 4, where 100 percent of the residents are classified as low-income. Originally constructed in 1953, this 1.6-acre complex comprises four four-story walkups, with 101 two-bedroom and four one-bedroom units. At the end of the Low Income Housing Tax Credit (LIHTC) compliance period the owner put the building up for sale and the tenants selected NHP Foundation to purchase the building under the Tenants Option to Purchase Act for $16 million.
Many of the current 250 residents have lived at Takoma Place for more than 20 years, even as the area has rapidly gentrified. This includes many who are now aging and sharing their apartments with children and grandchildren. According to census tract data, the area population is: 61 percent Black, 19 percent White, 17 percent Hispanic, and 2.7 percent Asian/Pacific Islander. It has a poverty rate of: 20 percent, an unemployment rate of 18 percent, and a homeownership rate of just 53 percent. Capital Impact is co-lender on a $7.5 million subordinate loan ($2 million plus $5.5 million from LISC) to finance the acquisition, while Citibank is provided the $8.9 million senior loan.
The site is conveniently located adjacent to a new development that will include additional housing, office buildings, charter schools, and commercial space.
Neighborhood stability for low-income residents was also the focus of a $680,000 financing deal in Bremerton, Washington. This loan will allow the residents of a 48-site manufactured-home community to acquire the property that their mobile homes sit on. The project employs a resident-owned, cooperative model that is supported by ROC USA, a long-time partner of Capital Impact. While 57 percent of the residents are at or below 30 percent AMI, 28 percent are at or below 50 percent AMI. Ownership of the property will give residents more control over their property and avoid rent increases while building long-term equity. The Northwest Cooperative Development Center has been providing technical assistance to NHC since September 2016, and will continue to work with them over the life of the loan.
Continuing Detroit’s Revitalization
Capital Impact’s focus on inclusive growth continues in Detroit with the Coe at West Village development. This project will convert a vacant lot into a mixed-use development, with 11 new row houses and space for two retail businesses – resulting in a number of permanent and construction jobs. Three units will be earmarked for affordability and rented at 80 percent of AMI in a neighborhood where there are few housing options for lower-income residents. The project will be located in the heart of West Village, an area that has experienced a surge of residential and retail openings over the past few years. A designated historic district, West Village is one of Detroit’s most architecturally diverse neighborhoods, and provides a walkable option to Midtown and Downtown. Capital Impact provided two loans, for a total of $2.6 million, one of them under its Detroit Neighborhoods Fund.
Capital Impact has also partnered with the Housing Partnership Network to support their long-term multi-project vision in the city. One of the projects includes a mixed-income, mixed-use development located between the Eastern Market and Downtown neighborhoods of Detroit. This project is expected to include 150-200 units of multifamily housing and 20,000–25,000 sq. ft. of retail and a food hall that will serve as the centerpiece of the development. A second project involves CIP and Develop Detroit working to save and rehabilitate a 73-unit, 100 percent LIHTC property that is 80 percent occupied and located in the North End/New Center area of Detroit. This property was in default of its existing mortgage, putting the units at risk of foreclosure, and this transaction will improve the unit quality and prevent displacement of tenants in an area that is experiencing rapidly rising rents. Capital Impact provided a $2 million enterprise loan to Develop Detroit.
Increasing Access to Healthy Food
Through its Michigan Good Food Fund, Capital Impact provided $445,000 to Ken’s Fruit Market (KFM) in Grand Rapids, MI, to help refinance its high-cost start-up debt incurred from various bank and individual loans. The substantial yearly savings will allow KFM to add more healthy food to its inventory, hire 30 full-time employees, and more efficiently serve its mixed-income clientele with fresh, locally-sourced groceries.
KFM currently operates three neighborhood stores, providing the surrounding community with a large selection of produce, as well as meat, poultry, a deli, full dairy section, and dry goods. Many of the items are locally sourced, and KFM has strong relationships with Michigan farmers and other purveyors. Each of the stores serves a diverse base of clientele, including low- and middle-income, White, Black, and Hispanic populations. Approximately 15 percent of KFM sales are electronic benefit transfer (EBT), an electronic system that replaced food stamps and allows state welfare departments to issue benefits via a magnetically encoded payment card. KFM was recently approved as a Double Up Food Bucks location, which would allow people who purchase Michigan-grown produce using their EBT cards to earn reward money to buy fresh produce of equal value. This will help sell more local produce and better serve low-income customers.
Following the successful renovation of Imperial Fresh Market in Detroit, Capital Impact partnered once again with The Shina Group, this time to transform a vacant grocery store in Kalamazoo, MI, into a multi-use center anchored by a 28,000-sq.-ft. grocery store. Kalamazoo is a blighted community on the west side of the state, and the project is located in a highly distressed census tract surrounded by food deserts. The project will increase access to healthy food, reactivate a currently dark intersection, and bring more than 100 jobs to the area. Capital Impact provided $6 million leverage debt into an $8 million New Markets Tax Credit (NMTC) transaction in partnership with Baker Tilly Virchow Krause, LLP, and McCormack Baron Salazar, which provided the allocation.
About Capital Impact Partners: Through capital and commitment Capital Impact Partners helps people build communities of opportunity that break barriers to success. We deliver strategic financing, incubate new social programs, and provide capacity-building to help ensure that low-to-moderate-income individuals have access to quality healthcare and education, healthy foods, affordable housing, and the ability to age with dignity. A nonprofit community development financial institution, Capital Impact Partners has disbursed more than $2 billion to revitalize communities over the past 30 years. Our leadership in delivering financial and social impact has resulted in Capital Impact earning S&P Global “AA” and Aeris Four Star-AAA-Policy Plus ratings. Headquartered in Arlington, VA, Capital Impact Partners operates nationally, with local offices in Detroit, MI, and Oakland, CA. Learn more at www.capitalimpact.org.