For anyone seeking to access lending for community development projects, understanding the different types of loans can be confusing.
At Capital Impact Partners, our commitment to fostering positive social impact drives us to support mission-aligned real estate developers and community development leaders with a range of flexible and affordable financing solutions.
Our community development lending offerings include predevelopment loans, real estate acquisition loans, construction loans, working capital loans, refinance loans, New Market Tax Credit (NMTC) leverage loans, and NMTC Qualified Low-Income Community Investment (QLICI) loans.
Our loan products are designed to help our borrowers achieve their goals and revitalize communities, whether that constitutes developing or preserving affordable housing, creating jobs through a small business, or building the resilience of communities through access to health care, healthy food, and education.
In this series of blogs, we aim to shed light on the diverse types of loans we offer and explore their significance within the context of Capital Impact’s mission-driven financing, in the hope that it will provide clarity to help borrowers make informed decisions about applying for community development loans.
We walk through the different types of loans we use to support developers and community leaders in bringing their community-centered projects to life:
As a mission-driven developer, organization, or business looking into community development projects, you may be coming across language that might sound confusing and be challenging to understand. What is a CDFI? What is NMTC? What is LTV?
At Capital Impact Partners specifically, we offer flexible and affordable financing to a broad range of community development projects that deliver social impact, including community health centers, public charter schools, small businesses, cooperatives, healthy food retailers, affordable housing developments, and dignified aging facilities.
This glossary aims to demystify terms to help you navigate through our lending and programmatic services and offerings. Below you will find definitions of terms divided into the following thematic sections:
Community Development Financial Institutions (CDFIs)
Community Development Financial Institutions (CDFIs) are mission-driven private sector financial institutions that focus on serving people living with low incomes and people who have historically been locked out of the financial system. Their work entails providing lending for small businesses and community projects, affordable housing, and essential community services in the United States.
As a CDFI, Capital Impact Partners has delivered community facility financing, capacity-building programs, and impact investing opportunities to champion key issues of equity and social and economic justice since 1982.
Community Development
Community development activities tackle underestimated populations that do not have equitable access to affordable housing, health care, healthy food, and education, nor connections to capital, entrepreneurship, and quality jobs, to help them become stronger and more resilient.
At Capital Impact Partners, and together with the Momentus Capital branded family of organizations, we offer a continuum of capital products and services to transform how capital and investments flow into underestimated communities and drive community-led solutions that support economic mobility and wealth creation.
Lending Process
Capital Stack
Debt coverage ratio (DCR) is a measurement of a firm’s available cash flow to pay current debt obligations. While a DCR of 1.25 is the minimum requirement for most lenders, a higher number — such as 2 — shows lenders you are financially stable and can repay your debts. A higher DCR can also mean a potentially lower interest rate as lenders see you as less of a risk for defaulting on your loan.
Loan Term
The term of a loan is the period of time a borrower has to repay the loan. This choice affects their monthly principal and interest payment, their interest rate, and how much interest they will pay over the life of the loan.
A term sheet is a nonbinding agreement that shows the basic terms and conditions of an investment. The term sheet serves as a template and basis for more detailed, legally binding documents. Once the parties involved reach an agreement on the details laid out in the term sheet, a binding agreement or contract that conforms to the term sheet details is drawn up.
Underwriting
Underwriting is the process of your lender verifying your income, assets, debt, credit, and property details to issue final approval on your loan application.
Loan Types
Predevelopment Loan
A predevelopment loan serves as a critical lifeline during the earliest stages of a development project. It specifically targets the upfront costs associated with project planning and preparation, enabling developers to refine their visions and align them with the needs and aspirations of the communities they aim to serve. This loan bridges the gap between concept and execution, ensuring a solid foundation for success.
Real Estate Acquisition Loan
A real estate acquisition loan is a type of loan that is used to purchase real estate. This type of loan is often used by community developers to acquire existing property or development land that they plan to preserve or redevelop for affordable housing, commercial development, or other community-benefit purposes.
Construction Loan
A construction loan is a short-term loan that propels your development project from the drawing board to a physical structure. It provides the necessary funding to cover the costs associated with building, renovating, or expanding community assets. Construction loans may also cover the costs of buying land, drafting plans, taking out permits and paying for labor and materials. Construction loans typically have higher interest rates than other types of loans because lenders are taking on more risk by financing the construction of a new property.
Business Acquisition Loan
A business acquisition loan is a financial instrument designed to provide funding for individuals or businesses to purchase an existing business. These loans are often sought by entrepreneurs looking to expand their business portfolio, individuals seeking to become business owners, or existing business owners interested in diversifying their operations by acquiring complementary businesses. In the case of community developers, the specific goal would be to further community development initiatives.
Loan Refinancing
A refinance refers to the process of revising and replacing the terms of an existing credit agreement. Borrowers usually choose to refinance a loan seeking to make favorable changes to their interest rate, payment schedules, or other terms outlined in their contract. If approved, the borrower gets a new contract that takes the place of the original agreement.
New Market Tax Credit (NMTC) Qualified Low-Income Community Investment (QLICI) Loan
The capital that a community development entity provides to a qualifying project is known as a Qualified Low-Income Community Investment (QLICI) and it is a seven-year, interest-only loan.
Health Care
Integrated Care
Integrated care is a unique approach to health care that is characterized by close collaboration and communication between multiple doctors and healthcare professionals. In other words, it is a type of healthcare where all of your doctors work together to solve issues with your physical, mental, and behavioral health. At Capital Impact, we support the Integrated Care model because it improves the quality of care, promotes better health and lower costs while creating thousands of jobs, spurring economic development.
PACE (Program of All-inclusive Care for the Elderly)
Area Median Income is the income for the median household in a given region. If you were to line up each household from poorest to wealthiest, the household in the very middle would be considered the median.
Tenant Opportunity to Purchase Act (TOPA)
TOPA, or “Tenant Opportunity to Purchase Act”, is a type of anti-displacement housing policy that gives tenants options to have secure housing when the property they rent goes up for sale, while also preserving affordable housing.
Cooperatives
Food Co-ops
A food co-op is a grocery store that is totally independent and owned by the community members who shop there. An illustrative example is ChiFresh Kitchen, a food co-op owned by justice-involved Chicagoans. ChiFresh won a Co-op Innovation Award and was not only able to continue its expansion, but also pivot to provide freshly cooked and culturally appropriate foods to those impacted by COVID-19.
Housing Co-ops
A housing co-op provides an alternative to the traditional methods of acquiring a primary residence. It is a type of residential housing option that is actually a corporation whereby the owners do not own their units outright. Instead, each resident is a shareholder in the corporation based in part on the relative size of the unit that they live in. Capital Impact Partners has helped ROC USA, a nonprofit that helps residents form cooperative corporations to purchase their manufactured home communities from private owners and manage their neighborhoods in perpetuity. They have gone on to become a powerhouse in this area, helping thousands of residents become homeowners and community stewards.
Worker Co-ops
Worker cooperatives are values-driven businesses that are owned and operated by their employees. Capital Impact has made a $1 million preferred equity investment in Obran Cooperative, a unique company that operates a number of worker-owned healthcare companies.
Worker Co-op Conversions
Worker co-op conversions – or employee ownership conversions – occur when businesses transition from a traditional ownership structure to employee ownership. Essentially, the business owner sells the business to the employees. These conversions (PDF) can drive company productivity while rewarding the people who are contributing to the company’s success, as well as helping to preserve the company’s mission and values.
In 2021, Capital Impact Partners financed the worker co-op conversion of Ward Lumber. This new cooperative is another example of the power of worker co-op conversion to maintain and increase wealth and stability within communities.
Since our inception, we have served sectors, industries, and borrowers not served by the traditional financial system.
Like many CDFIs, Capital Impact provides more flexibility than traditional lenders in some key areas like loan-to-value limits and financial covenants that borrowers must meet.
However, our credit guidelines — the policies that guide our loan structures and lending decisions — are built on the traditional approach to credit that has deep roots in a financial system that intentionally excluded some people for much of its history. Often, our lending team seeks one or several “exceptions” to our credit guidelines to accommodate the diverse needs of our borrowers.
Creating flexible financing is both a mindset and an approach. To do so, we need input from our clients and communities to rethink and reshape our products and requirements. When done correctly, this approach gears us away from the extractive patterns of traditional financing and closer to confirming that when people are given the opportunity to succeed, their communities, local residents, and our country thrive.
We have spent the last several years providing capacity building and support to community-rooted developers across the country. Having seen in our own lending that these developers were not well represented and hearing the barriers that they face in scaling up to work on more and larger projects, we determined that we needed to take bigger steps to address the need.
How We Are Doing Things Differently
In that light, we spent the better part of 2022 reviewing and revising our lending requirements and processes to be more equitable, to better support community-rooted developers and borrowers from all walks of life in having access to the capital and opportunities they deserve.
As a part of the Momentus Capital branded family of companies, it also became important for Capital Impact to revise and improve efficiencies in lending approval processes to account for a combined strategy.
Because one of the most important parts of transformation is transparency, we want to share the recent updates to our credit guidelines with our communities, partners, and other stakeholders.
EDI program graduates benefit from training and access to capital.
An Overview of Our New Credit Guidelines
Equity Commitment
Developer Experience
Staying true to our vision, we want to be able to support community-centric developers who might not have had the opportunity to build and sustain a track record in the markets where they are active.
Old guideline: requirement of three completed and operating projects
New guideline: one completed project and have been in operation for 3+ years
We are committed to looking at the borrower as a whole, taking into account their background including education, work history, participation in the EDI program or other capacity building initiatives, as well as any relevant experience with joint venture partners and consultants.
Developer Equity
We wanted to lighten the load on a borrower to bring a certain amount of cash to each project.
Old guideline: 25 percent equity requirement for predevelopment costs in cases where there is real estate collateral
New guideline: 10 percent equity requirement for predevelopment costs
This change benefits borrowers by allowing them to preserve their funds and use them toward working capital, growing/expanding their business, hiring staff, etc.
Guarantee Requirements
Given that most of the borrowers we work with have limited resources, we have eliminated the requirement of a strong guarantor possessing liquid assets and cash flows.
We still expect people who own 20+ percent of a business and are actively engaged in the business to issue guarantees, but we now look at guarantees as an assurance of the borrower’s commitment to the project rather than as a source of repayment.
Small Multifamily Project Guidelines
We are mindful that not every developer has the expertise and capacity to pursue larger-scope projects with more than 20 units. This, however, should not impede them from having the opportunity to start smaller projects that may be a better fit for their current experience level.
Old guideline: stringent requirements on projects under 20 residential units; did not allow developments with less than 10 units
New guideline: Eliminated requirements on projects under 20 residential units and now allow developments with fewer than 10 units
Smaller unit projects often have higher credit risk because a single vacant unit could jeopardize the project’s ability to make loan payments. However, smaller projects are an important stepping stone for many developers trying to build their portfolios, and we can mitigate the risk with other things like operating reserves and technical assistance.
That being said, we do have minimum loan sizes (now $500,000), but this does not have to impede borrowers from coming to us, as we are actively building a partner network to which we can refer clients in need for smaller loan sizes.
Streamlining Lending Approval Processes
As a mission-driven organization, it became all the more important for us to improve efficiencies in lending approval processes so as to be able to serve entrepreneurs and their communities seamlessly.
To that end, we have worked on the follow updates:
Eliminated credit committee approval to be able to issue term sheets to borrowers;
Reduced the size of our credit committee and streamlined approvals for lower-dollar loans;
Moved away from issuing commitment letters upon loan approval, and switched to issuing approval letters that are less of a legal document and more of a summary of terms. The reasoning behind this is that we want to avoid putting borrowers in a position where they have to make legal decisions prior to engaging legal counsel, and we also want to streamline our process to close loans more quickly.
Pivoting to Achieve Financial Equity for Our Communities
The changes above are only a starting point. We are committed to adapting to the needs of our borrowers by adding new products and continuing to evolve our credit guidelines in a way that meets the needs of our borrowers. In addition, we are building out a more robust network of technical assistance for our borrowers that ultimately reduces credit risk to both the borrower and the lender. One great example of that is our EDI program. Through EDI, we aim to provide capacity building in the form of training, mentorship, access to technical assistance, and predevelopment grants (where/when available) to community-centric developers, so as to enable them to succeed in projects appropriate to their levels of expertise.
We are continuing to think through how we can fold equity into our credit guidelines to transform how capital and investments flow into communities. We are excited to share more about our journey as we grow and evolve to serve communities.
2022 is a special year for us at Capital Impact Partners as it marks our 40th anniversary. Four decades of leaning into helping people build communities of opportunity and developing pathways to success.
And while this is an exciting time for us as we embark on a new strategy under Momentus Capital, it is equally important to remember our roots as a champion for the cooperative movement.
Co-ops represent a cultural shift away from blind profit toward shared social benefit. It is a model that challenges the status quo and offers workers, especially workers of color, an alternative to extractive systems.
These principles not only shaped our work in the very beginning, but continue to anchor our strategy as we grow and evolve and develop new business lines and affiliate organizations. They even underpin our newest vision statement to help create an economic system that respects and uplifts all peoples’ right to achieve the dreams they have for themselves, their communities, and generations to come.
Our Co-op Beginning
While we are now a national organization of nearly 300 staff members across our family of organizations, Capital Impact’s beginnings were quite humble.
One our our first pamphlets…many names ago.One our our first pamphlets…many names ago.
In 1978, Congress rightly saw the need to better support the cooperative movement. That led to the passage of the National Consumer Cooperative Bank Act and the creation of the National Cooperative Bank.
Four years later, a tiny division known as the Office of Self-Help Development and Technical Assistance was launched to provide more focused work on bringing co-ops to underestimated communities and contribute to the economic development for people living with low-to-moderate incomes.
Over time, this effort grew and went through several different names before becoming Capital Impact Partners – the nonprofit Community Development Financial Institution we are today.
To date, Capital Impact has lent nearly $315 million in support of food, worker, and housing cooperatives, and has provided $725,000 in grants for co-op development.
More important than the numbers is the incredible journey of discovery to imbue our work with a co-op lens and shape the impact we can have with communities. It is a journey that has cemented our role as a mission-driven organization dedicated to fostering health, wealth, and justice for underestimated communities.
Expanding to Support Community Development
As our cooperative work expanded across the country, so did our support for community development more broadly. We saw that, for communities to be healthy and thrive, they needed a spectrum of vital social services, from health care to education to affordable housing.
Farmers workers in California often have very little access to health care, so OLE Health takes health care into the fields.
Some of my favorite stories are about projects we’ve financed over the years that have had great impact on their respective communities. Like OLE Health, a health care provider in Northern California that recognized roadblocks to patient care and created programs to meet patients where they are. And Montessori for All, a free public charter school in Austin, Texas dedicated to “diverse-by-design” education, with a mission of achieving equitable academic outcomes for students across socioeconomic levels.
California farmworkers receive health care at a makeshift clinic created by OLE Health.
It was also a time where we expanded our approach to not just think as a lender, but how we could amplify community development through other organizations.
That led to Capital Impact joining with several leading nonprofit organizations to help form ROC USA Capital, a nonprofit that helps residents form cooperative corporations to purchase their manufactured home communities from private owners and manage their neighborhoods in perpetuity. The true power of what this means can be seen in Takesa Village, a community that we helped to finance so they could become stewards of their land.
ROC USA has championed the dignity inherent in all forms of housing, particularly manufactured housing, and build the power of manufactured home communities to control their own destinies
ROC USA, a longtime partner of Capital Impact Partners, helps residents of manufactured home communities, like Takesa Village, to purchase their community and operate it cooperatively, which has preserved affordable housing options across the country.
Evolution Toward Holistic, Place-Based Investment
Over the years, not only has our scope of work developed — but so did our footprint. We saw an opportunity to support Detroit communities in a holistic manner that would advance economic prosperity and social justice for longtime residents, an opportunity that led to a concerted place-based strategy.
In the early 2000s, when the Great Recession sent the Motor City reeling, we were asked by the Kresge Foundation to be part of the Living Cities Integration Initiative. This effort was designed to support the city’s revival by joining with other organizations to invest in a “place-based” strategy designed to foster holistic ecosystem change.
It proved to be a seminal moment for our organization. This strategy allowed us to draw and define on a map the different parts of the city where we knew our work would be most effective. It taught us the importance of what it meant to stand shoulder-to-shoulder with a community, understand the barriers it faced, and work with community members to implement their solutions.
This type of engagement at the local level provided a real understanding of what was going on in the neighborhoods that we serve.
Some great examples of developments we invested in Detroit and Michigan include The Auburn and Casamira — which brought affordable housing options and mixed-use space to local communities — and Imperial Fresh Market, a grocery store that serves its community in northwest Detroit with fresh, healthy food daily.
Imperial Fresh Market has supported its Detroit community with access to healthy food and quality jobs since the Shina brothers opened more than 20 years ago.
We found this approach so impactful that we applied this place-based strategy to our approach in other parts of the country, including northern and southern California, Michigan and northwest Ohio, Texas, the New York Tri-State area, and the Washington metropolitan area.
Equity is the Beginning of Wealth & Health
Our work on the ground in Detroit also revealed another opportunity we had overlooked. While we were making good strides in our lending, we were missing entire swaths of the population who simply never had the opportunity to launch the kinds of projects we supported.
Opportunity has been historically driven by access to quality education to build quality jobs that build generational wealth. For residents of underestimated communities, access to the financing, training/education, and networks that would help them open businesses or engage in real estate development to build local wealth and health have been systematically denied.
That realization led to the creation of our EDI program – a program that provides training, mentorship, and access to capital for developers of color – which has since expanded beyond Detroit to the Washington metropolitan area; the San Francisco Bay Area; and Dallas, TX, and has served more than 200 developers.
Through our EDI program, developers across the country get a foothold into the real estate development industry, with training, mentorship, and access to capital.
In leading this investment in developers of color, we listened to their needs around access to capital. Listening to the financing gaps they experienced led to us creating the Diversity in Development Loan Fund in Detroit and the Washington metro area, which will soon be expanded nationally.
Our work in listening to community members to develop products and services to support their needs has not gone unnoticed. Fast Company recently recognized Capital Impact’s work in their 2022 list of the Most Creative People in Business.
It was this understanding of the need to listen to communities and ensure that our strategy addressed systemic issues and barriers that led to another seminal program.
In 2015, we created and have continued to manage our Co-op Innovation Award to amplify innovative co-op business models in communities living with low incomes and/or communities of color. Since that time, we have supported 17 co-ops nationwide and disbursed $685,000 in grants, which helped our awardees leverage more than $9.1 million in additional funding from foundations, investors, and government.
Cooperatives are powerful tools for economic stability and wealth building. Our Co-op Innovation Award has given seed funding to innovative co-ops fostering self-determination nationwide.
Cooperatives have so much power to create economic stability and self-determination for residents of underestimated communities, and the power becomes greater when it can be scaled. Another conversation that we have been taking part in is around the potential of employee co-op conversions to foster a deeper level of economic mobility and stability. These conversions happen when a business owner sells the business directly to their employees, rather than into the market. With Baby Boomers retiring, many healthy businesses have no one to inherit the business and no buyers; as a result, these businesses are closing in record numbers, and that trend was only exacerbated by the COVID-19 pandemic.
In 2018, we published “Co-op Conversions At Scale,” a market research report to assess the growth potential of employee ownership (worker co-op) conversions in several markets, and convened CDFIs, small banks, and credit unions to learn about opportunities for scaling and financing co-op conversions.
In 2021, we turned that research into action and financed the employee ownership conversion of Ward Lumber, a 130-year-old business in New York, allowing more than 40 employees to become worker-owners.
What we learned is that true transformation comes from deep investments in local ecosystems to change the systemic and historical issues that have kept communities from building generational wealth that would help them thrive.
New Horizons for Addressing Systemic Disinvestment
Today, we continue the throughline of our work, which centers on building prosperous communities through economic, social, and racial justice. We are challenging ourselves to think bigger and more creatively about how to work hand-in-hand with community members to foster equitable and inclusive opportunities for wealth building.
In July of 2021, Capital Impact Partners, CDC Small Business Finance, and Ventures Lending Technologies came together to create the Momentus Capital family of organizations. This milestone was achieved through two years of work to come together as a new enterprise.
Momentus Capital is a first-of-its-kind financial organization that brings together leading companies rooted in social mission. Momentus Capital offers a continuum of financial, knowledge, and social capital to help local leaders build inclusive and equitable communities and create generational wealth. Together, we are now able to leverage our 80+ years of experience to offer our borrowers and partners an even more comprehensive set of solutions – including lending and impact investments, training and access to networks, and innovative technology – while also being more innovative and nimble than we could when operating separately.
Most recently, we began looking at the opportunity to offer more than just loans and grants, but also actual equity investments in companies run by diverse entrepreneurs and/or serving communities of color. Much like in other areas we focus on, Black communities are drastically underserved by the venture capital community. We decided this was another place we could make a difference by offering. To address this issue, we launched our impact investments program, which combines venture debt, revenue/profit-sharing agreements, and preferred equity investments to aid growth-stage businesses led by diverse entrepreneurs and employee-owners.
While we invest in a broad range of companies, it is critical that cooperatives be represented.
One of our very first investments was in Obran Health, a unique company that operates worker-owned healthcare companies. When Obran Health sought to acquire Physicians Choice Home Health, a home health care provider in Los Angeles, we provided a $1 million preferred equity investment. This allowed Obran to avoid the traditional route of syndicated loans and debt which would have hampered their long-term growth.
Innovating Systems for Thriving Communities
The opportunity for community impact is immense. Healthy communities are built by their residents. Small business owners, developers, and other local leaders are the engines of job creation and economic activity in communities across the country. When these leaders have the opportunity to succeed, their communities, local residents, and our country – thrive.
And while we are looking forward to catalyzing profound community transformation through Momentus Capital, we recognize that we are here because of the 40 years of expertise we have built with our colleagues and partners. We will always remember our roots in the cooperative movement and will continue investments to expand that community. From loans and grants to seminal research and equity investments, our work through Momentus Capital opens up a whole new area where we can uplift co-ops and support their work.
I am so proud of where Capital Impact Partners has come in the course of the last 40 years, and I cannot wait to see how Momentus Capital will innovate holistic approaches to get resources into the hands of more local leaders, entrepreneurs, and their communities.
As we continue to celebrate this milestone year, watch our 40th anniversary video series. The series includes rich reflections from the very people who have helped make us who we are, like Terry Simonette, my predecessor and Capital Impact’s longest-serving CEO; Paul Bradley, president of ROC USA; alumni of our Equitable Development Initiative; and so many more.
Watch our 40th anniversary video series!
I invite you to subscribe to our YouTube channel to hear these stories and experiences first-hand. We’ll continue to reflect on, recognize, and celebrate our 40 years in the months to come. I look forward to our continued work together to foster communities of opportunity because we are stronger together, and together, we are creating new pathways to build inclusive and equitable communities by providing people access to the capital and opportunities they deserve.
While the essence of our mission has remained the same over the years, it’s the people – staff past and present, our partners, the communities we’ve had the privilege of working in, and the countless other stakeholders — who are responsible for our journey and our evolution. It’s you who I find the most inspirational. You are the ones who have helped Capital Impact Partners become who we are today — a national Community Development Finance Institution (CDFI) committed to building a nation of communities built on a foundation of equity, inclusiveness, and cooperation.
I’m proud to celebrate and share this milestone with all of you.
Oakland, Ca. is a vibrant place, a reflection of the communities within its borders. However, Oakland also experiences poverty, limited social services, and crime, which hold its communities back from achieving their full potential.
Over the past several years, Oakland has seen an influx of residents as the demand for housing in the San Francisco Bay area has driven many people there, on top of the residents who already called the city home.
Fruitvale Transit Village is a vibrant hub within Oakland, providing community development and a neighborhood center based on economic development and transportation.
In the early 2000s, Unity Council, based in Oakland, made a bold gamble: create a transit-oriented development that co-located housing, commercial development, and community space in the city’s Fruitvale neighborhood. Why? To expand access and opportunity through employment and transportation, while also creating ownership and small business opportunities to foster wealth creation.
Realizing that such an undertaking could not be done in a vacuum, the Fruitvale Transit Village brought together community members, stakeholders, government officials, and nonprofit and civic organizations to come up with a plan that would enhance local assets and help the neighborhoods build wealth and power.
The result: neighborhood transformation that centered the needs of the residents by providing easy access to social services, education, retail, and more. It is so popular that it quickly became the fourth busiest stop on the Bay Area’s subway system and a generator of wealth and community assets through local businesses and job creation.
Capital Impact Partners is proud to have partnered with Unity Council to support this community-centered development, as well as specific community partners within the development, such as La Clinica de la Raza. This type of collocation investment fits right in with our focus on holistic, community-centered development that community members value, as well as our commitment to financing to close the wealth gap.
In this Q&A, Unity Council’s Director of Development and Communications Dana Kleinhesselink and Director of Real Estate Development Aubra Levine talk about the community will and economic investment that made this innovative project possible, and why they feel this model is invaluable for other communities and developers across the country.
Q: What is the history of the Fruitvale community in Oakland?
Dana: Fruitvale is the largest Oakland neighborhood with this many people coming from various cultures and speaking various languages.
Q: What kind of investment has there been in this neighborhood?
Dana: Fruitvale lacked traditional banks or lending products over the course of decades. Home ownership development was not really a focus here. Additionally and unfortunately, there is crime in the area, which has been the main news story and really has overshadowed the positive things that this community brings.
Q: What was the genesis of Fruitvale Transit Village? How did the transit-oriented part come about?
Dana: In the 1990s, Bay Area Rapid Transit (BART) revealed a plan to create a four-story parking garage right in the middle of what is now the Village. Fruitvale had a bad reputation, there was crime and poverty, and the idea was to make a seamless transition for riders from their vehicle to BART, without interacting with the community. Our neighbors and our founder saw that as really problematic and they started countering the narrative, because our community is a BART rider as well. Our community deserves to have a seamless experience from their home to BART.
So, the community started organizing to say, “okay, why don’t we find a better way, and let’s bring BART in as a partner.” And that is what we did. Now we have a strong relationship, and I think Fruitvale is the fourth busiest station in the system. The amount of revenue generated by riders there, and the amount of revenue generated in the community because BART is so accessible, is really unquantifiable.
Q: What community needs does this development address?
Dana: Unity Council was looking for ways to stabilize the Fruitvale neighborhood by owning and controlling real estate. We had done a few real estate development projects already. And the idea — to quote our founder, Arabella Martinez — was, “In order to have wealth in this neighborhood, the community must own and control the assets.” We conducted broad outreach over a long period of time to make sure that what we were proposing was actually consistent with community needs.
We were committed to lifting up local businesses instead of installing a whole bunch of big box stores and national chains; we made sure that community services were a key feature. The Village includes a high school, a library, a health clinic, an early childhood development center, and a senior center. Most of the commercial square footage in the Village is actually community serving. It was never really intended to be a cash cow. It was intended to be a place for the community. Additionally, we know that community ownership leads to stability. Unity Council wanted to bring community members to the table and create ways for the community to engage in economic growth through ownership.
In order to have wealth in this neighborhood, the community must own and control the assets.
Arabella Martinez, Unity Council founder
Q: This project provides multiple services in a central location. Why is that valuable?
Dana: It’s incredibly important to have a hub of services, and we’ve actually incorporated this into our five-year strategic plan, under a strategy we call “Neighborhood Hub Approach.” In the growing body of research regarding vital social services, there is wide recognition that a broad range of social, economic, and environmental factors shape individual and community health outcomes. The Unity Council defines a “healthy neighborhood hub” as a place where people live healthy lives, feel safe, have a sense of belonging, are able to — and want to — stay in their neighborhood, and where they can access supportive services.
The cluster of services accomplishes two practical functions:
it draws in a wide range of people to visit for a variety of reasons.
There are reasons for children under five, commuters, seniors living with low incomes, and high school students to all come to the Transit Village, which provides a solid consumer base for the community organizations and businesses located there. It provides a sense of vibrancy all day and evening long. People come to shop and eat at the restaurants, but they may also be coming to go to their local health care provider or visit a resident that lives in an apartment on-site; and
co-locating services lowers the barriers to access to those services for people most in need.
Many of the programs and services at the Fruitvale Transit Village are targeted to families living with low incomes. It is almost a “one-stop shop” approach for many of these families who may receive child development services from the Head Start facility, health care from La Clinica de la Raza, and legal support from Centro Legal de la Raza, all in one location.
Q: Why Fruitvale? What made this location/community right for this development?
Dana: Fruitvale has a rich history of activism and organizing and really doing for ourselves what others will not do for us. This community tries to find ways to build capacity within our own people, which has created so many opportunities today. The Fruitvale Transit Village is just an incredible economic engine.
We see many small business owners using community lending products like Kiva loans and nontraditional financial products that help because they have been excluded from traditional financial products. We see a lot of cooperative businesses here as well. We have found that the Fruitvale Transit Village, by being this anchor development, and with Unity Council working with so many partners locally, has really helped to foster opportunity in this area.
UCLA conducted a 10-year longitudinal study on Fruitvale Transit Village’s effectiveness, in terms of improving educational outcomes, increasing financial wealth for families in the neighborhood, and small business development. It showed that the makeup of the community as well as the age diversity has really stayed the same over 10 years, while rates of home ownership, rates of small business ownership, and rates of educational attainment have all increased.
Q: Fruitvale Village is unique, being a mixed-use, transit-oriented development. Did you experience any difficulty in finding a lender for this project?
Aubra: We did have a bit of difficulty in finding a lender. The feedback that we received was really in that it comprises commercial uses, residential uses, and community facilities. A lot of the lenders that we reached out to were really interested in supporting our mission, but did not understand how to underwrite those three things together. They could not quite wrap their heads around the mixed-use components.
We are very mission-aligned with Community Development Financial Institutions, and we have developed relationships with larger banks as well. There is a lot of support for the work that we do.
It was really wonderful to work with Capital Impact Partners because you got it right away. Capital Impact is local, and understood the project in a very literal way, having stood there. It was really wonderful to be able to find that in a lender.
It was really wonderful to work with Capital Impact Partners because you got it right away. Capital Impact is local, and understood the project in a very literal way, having stood there. It was really wonderful to be able to find that in a lender.
Aubra
Q: What tools did Capital Impact provide that made the process work?
Aubra: Capital Impact Partners, from the start, was willing to be collaborative. The commitment to making it work, to saying yes, to finding the “where there’s a will, there’s a way” mentality was crucial to making the transaction happen. The team that we engaged with on a day-to-day basis was really well organized and on top of the underwriting. They made the process feel seamless, especially as they were coordinating with the co-lender on this refinance, LISC.
Additionally, through the Bond Guarantee Program, Capital Impact was able to provide more competitive terms than other lenders that we reached out to.
Combining transit orientation with vital social services like health care, education, and affordable housing creates Unity Council’s vision of a “healthy neighborhood hub.”
Aubra: Our mission as an organization is to build wealth for the community. It is to reduce poverty and disrupt cycles of poverty that are generational. What we know is that to attack poverty head on, you cannot do it in a piecemeal manner. You cannot just look at education or home ownership or workforce development or career development. You really need to work holistically and weave them together and provide a safety net that is truly integrated.
That multifaceted, easily-accessible, integrated approach is probably the most labor intensive way to do it, but I think it is the most effective, our neighborhood hub approach.
Equally, it was important that this community was already an existing transit hub. I do not think the Transit Village would have worked as well if we just decided to form a hub around a random bus stop.
Q: What would your advice be to other organizations looking to build similar projects in their community?
Aubra: I think that Unity Council paved the way and made it a little bit easier for community organizations, for funders, to learn from our path and see that this is possible in their community, there is return on this investment, and that is the right thing to do. I definitely think it is possible, and I recommend it.
Dana: Have a bold vision, be collaborative, work with the right partners, and engage community stakeholders for their input to make sure it is consistent with community needs.
Contact us today to start a conversation about how Momentus Capital can support your journey to success.
This blog was published about the Bay’s Future Fund in partnership with LISC Bay Area. Find information about this development on the Bay’s Future Fund website.
By Ashlee Cunningham, Senior Specialist, Housing and Community Development
In Detroit, long-term disinvestment in the city’s neighborhoods has led to unequitable barriers to opportunity. Systemic racism and disenfranchisement limited opportunities for many Detroiters, more than 80 percent of whom are Black. That has kept many people from securing equitable access to safe, affordable housing; starting businesses; and other pathways to wealth building. As Detroit has worked to overcome bankruptcy, investment in the city has compounded these issues by leaving people living with low incomes with little ability to keep up with the pace of growth and gentrification for the neighborhoods they have called home for decades.
February 4, 2020 (Redwood City, CA) – Bay Area elected officials, community, faith, and business leaders, and philanthropic funders marked the first anniversary of the Partnership for the Bay’s Future by announcing the recipients of the Partnership’s first-ever “Challenge Grants” to seven Bay Area local governments and nonprofit partner organizations that are developing innovative housing policies. The Partnership also announced commitments that will allow it to reach its $500 million investment goal ahead of schedule and has already closed seven loans to entities building new affordable housing or preserving existing affordable homes.
The Partnership for the Bay’s Future is a unique cross-sector effort to tackle housing issues in the Bay Area with a dual-pronged approach: supporting policies that preserve and produce affordable housing and help protect renters through its Policy Fund, and directly investing in projects that will create more affordable homes through its investment arm, the Bay’s Future Fund. The Partnership launched in 2019 with the ambitious goals of protecting 175,000 households over five years and preserving and producing more than 8,000 homes over the next decade in San Francisco, San Mateo, Santa Clara, Alameda, and Contra Costa counties.
“The housing crisis requires bold action on multiple fronts and it requires that all sectors come to the table to drive new solutions—the government, the private sector, philanthropies, advocates, and faith leaders,” said California Governor Gavin Newsom. “The Partnership for the Bay’s Future and its multi-sector public-private approach reflects that—and will help move our state forward on one of the biggest issues we face.”
“The Bay Area poses one of the largest challenges we face in creating solutions that address the affordable housing crisis,” said Diane Borradaile, Chief Lending Officer at Capital Impact Partners. No one organization can go it alone. That is why we are thrilled with the leadership shown by the Chan Zuckerberg Initiative, along with the San Francisco Foundation, Ford Foundation, and LISC to bring together these new investors. Their support amplifies our ability to deploy the financing tools that mission-driven developers need to deliver projects that impact and help families who have deep and abiding connections to the Bay Area.”
“All Californians deserve a place they can call home, where they feel a sense of belonging in their community, and where they can build a better future for themselves and their families,” said San Francisco Foundation CEO Fred Blackwell. “The Partnership for the Bay’s Future enables Bay Area communities to help residents live in homes they can afford through its focus on local policy change and investment in building and preserving affordable homes, as well as protecting renters.”
Challenge Grant Recipients: Protecting Renters and Preserving Affordable Homes
The Partnership’s first group of Challenge Grant recipients were on hand for today’s anniversary event. The grantees are local government entities and community organizations working to advance policy solutions to protect renters and preserve existing affordable housing:
Alameda County and Resources for Community Development
City of Berkeley and East Bay Community Law Center
City of East Palo Alto and the East Palo Alto Community Alliance and Neighborhood Development Organization (EPA CAN DO)
City of Oakland and the Bay Area For All (BA4A) Preservation Table
City of Palo Alto and SV@Home
City of Redwood City and Legal Aid Society of San Mateo County
City of San Jose and SOMOS Mayfair
Proposed policies are an innovative collection of approaches to the region’s housing problems, including new systems to provide renters and communities with the right to purchase affordable homes before they are sold to outside investors, ensure county-wide protections for renters, and establish new approaches to building community wealth. As part of the Challenge Grant award, each grantee jurisdiction has been matched with a mid-career fellow. The fellows will provide needed capacity and expertise to accelerate solutions, and grantees will have access to technical assistance and expert consultants to help them implement policy changes identified in the grant proposals.
Investing in Affordable Homes
The Partnership’s Bay’s Future Fund has garnered commitments from a spectrum of investors and partners who have pledged resources, including Facebook, Morgan Stanley, CZI, First Republic, San Francisco Foundation, Genentech, Silicon Valley Community Foundation and others. LISC, serving as fund manager, is partnering with Capital Impact Partners and the Corporation for Supportive Housing to co-invest additional resources. As one of the nation’s largest affordable housing investment funds, the Bay’s Future Fund is designed to address the affordable housing crisis in the Bay Area with flexible, innovative financial products.
“Investors are connecting their capital to their values in order to make Bay Area housing more affordable and anchor economic opportunity throughout the region,” said LISC president and CEO Maurice A. Jones. “And, this is just the beginning. We have a robust pipeline of development projects, a committed lineup of local partners, and a diverse group of investors from health care, finance, technology, and philanthropy — all focused on ways to positively impact the housing outlook for families and to keep communities competitive.”
To date, the Bay’s Future Fund has closed seven loans totaling nearly $30 million that will produce or preserve more than 800 units of housing — providing shelter for 1,800 individuals — 97 percent of which are affordable to households earning less than 80 percent of the Area Median Income. These investments leverage an additional $100 million in funding from other sources. The transactions are supporting a range of housing strategies, including permanent supportive housing, co-living spaces, senior housing, and housing that is affordable by design. Projects include new construction, renovation, and preservation.
“The Partnership for the Bay’s Future is uniquely positioned not only to bring flexible capital to the table to substantially grow the number of affordable homes in the region, but also to champion policies that will both increase housing and protect vulnerable renters,” said Chan Zuckerberg Initiative’s Director of Housing Affordability, Caitlyn Fox. “While we’ve made notable progress, the work has just begun. The future of the Bay Area depends on collaborative efforts to ensure that people of all backgrounds and income levels can live, work, and thrive here.”
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Partnership for the Bay’s Future
Launched in early 2019 after more than a year of conversations with community and faith leaders, housing experts, elected officials, nonprofit and for-profit developers, business leaders, and residents, the Partnership focuses on solving interconnected challenges: housing, transportation, and economic opportunity. The Partnership’s affordable housing efforts center around two key funding components. The first is the Bay’s Future Fund, managed by Local Initiatives Support Corporation (LISC), one of the largest nonprofit community development financial institutions in the country. The fund was designed to address the funding gap that limits the ability of mission-aligned developers and other interested entities to obtain the capital necessary to create quality, affordable homes. Simultaneously, the Policy Fund, under the stewardship of the San Francisco Foundation, provides grants to Bay Area cities and counties, and their community partners, to enact local policies that protect renters and preserve and produce affordable housing.
Community Development Financial Institutions (CDFIs) have been bringing investment to Detroit for more than two decades. The mission-driven approach and unique tools that CDFIs bring to the market have played a critical role in the development of new housing and community facilities like grocery stores and schools in the city.
By Ashlee Cunningham, Detroit Housing & Community Development Specialist
Long before Midtown Detroit—or Cass Corridor, as 39-year-old Wayne State University graduate and artist Rachel Barker prefers to call it—was booming with aesthetically pleasing coffee shops, hip art galleries and expensive retail stores, it was the neighborhood where Barker found the first apartment that she called home.
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