In this series about community development lending, we aim to shed light on the diverse types of loans we offer, in the hope that it will provide the clarity our borrowers need to make an informed decision about applying for a community development loan.
In this second installment, we explain what real estate acquisition loans are, and how developers and community leaders can utilize them to bring their community-centered projects to life.
What is a 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.
How are Real Estate Acquisition Loans Used in Community Development?
Real estate acquisition loans can be used to purchase a variety of properties, including:
Vacant land for the development of new affordable housing, commercial space, or other community facilities
Existing buildings that will be renovated or converted into community facilities
Distressed properties that need to be rehabilitated or redeveloped to revitalize a neighborhood or community
Vacant land for the development of new affordable housing, commercial space, or other community facilities
Capital Impact Partners has closed on a real estate acquisition loan to Medici Road to purchase a vacant plot in Washington D.C.’s Ward 7. Medici Road plans to develop the land into a 17,000-square-feet building with 12 condo units for sale at prices affordable to D.C. residents earning 80 percent of the Area Median Income – a path to intergenerational wealth building, and a way for long-time residents to stay local in a gentrifying neighborhood.
Existing buildings that will be renovated or converted into community facilities
The Betty M. Condra School for Education Innovation in Lubbock, Texas, was acquired with a real estate acquisition loan issued by Capital Impact Partners. The acquisition of this two-story building increases the school’s capacity by 70 percent.
Distressed properties that need to be rehabilitated or redeveloped to revitalize a neighborhood or community
An illustrative example is that of Skyland Apartments in Washington, D.C. ‘s Ward 8, which was acquired by Enterprise Community Development (ECD), a leading nonprofit affordable housing development firm in the Mid-Atlantic region. With an acquisition loan issued by Capital Impact Partners, ECD’s development of Skyland Apartments preserves 224 affordable residential units and eight commercial units. The residential units are occupied by families earning at or below 60 percent of the local Area Median Income.
Access to Capital, Flexibility, and Partnership Building
Real estate acquisition loans can provide a number of benefits for community development projects. They can provide community developers with the financial resources they need to purchase land or properties that they might not be able to afford otherwise. The flexibility of being able to purchase any property allows community developers to tailor their projects to the specific needs of the communities they serve.
Real estate acquisition loans can also help community developers to build partnerships with other organizations, such as lenders, investors, and government agencies. These partnerships can provide additional resources and support for community development projects.
Check out our mission-driven lending page for more information about our products to find out which might work best for you.
In this series about community development lending, we aim to shed light on the diverse types of loans we offer at Capital Impact Partners, in the hope that it will provide the clarity our borrowers need to make an informed decision about applying for a community development loan. In this first installment, we delve into the essence of predevelopment loans, exploring what they are and how developers and community leaders can utilize them to bring their community-centered projects to life.
What is a 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.
Exploring Site Selection and Due Diligence
Choosing the right location is paramount in community development projects. Predevelopment loans allow developers to explore potential sites, conduct due diligence, and assess the feasibility of their projects; this phase involves considerable research and assessment. From evaluating zoning regulations and environmental factors to assessing community demographics and market demand, developers can make informed decisions that contribute to the long-term success of their initiatives.
Capital Impact has financed a predevelopment loan to Chestnut Neighborhood Revitalization Corporation (CNRC) to assess the feasibility of constructing The Ivory, a five-story, mixed-used, mixed-income development in the Chestnut neighborhood of Austin, Texas. The Ivory’s construction is expected to preserve the history, legacy, and culture of Chestnut, once a flourishing artistic, cultural, and commercial hub for the African-American community. Â
Engaging Stakeholders and Building Partnerships
Predevelopment loans not only provide the financial means for planning but also facilitate collaboration and partnership building. Developers can leverage these loans to engage with stakeholders, including community members, local organizations, and government agencies. Through consultations, workshops, and community meetings, developers can gather valuable input, build consensus, and establish partnerships that enhance the overall project design and increase its positive impact.
An illustrative example is Russell Woods, a 102-unit assisted living senior housing development located in Detroit. Capital Impact has financed a predevelopment loan to Icon Heritage Partners to ensure that collaboration with the City of Detroit was established so that the renovation of the property fit within the city’s Strategic Neighborhood Plan.Â
Navigating Regulatory Requirements and Permitting
Complying with regulatory requirements and obtaining necessary permits can be complex and time-consuming. Predevelopment loans enable developers to navigate these processes efficiently by allocating funds for legal and consulting services, permit fees, and other regulatory expenses. This support streamlines the development timeline and minimizes potential obstacles, ensuring smoother project progression.
Mitigating Risks and Demonstrating Viability
Developing a successful community-centered project involves potential risks. Predevelopment loans mitigate these risks by providing financial resources to overcome obstacles encountered during the planning phase. By demonstrating project viability and commitment, developers enhance their credibility when seeking additional financing from lenders or investors for subsequent project stages.
TBV Courtyard, a 12-unit affordable multifamily development in the South Annex neighborhood of Richmond, California, is a great example of how additional project financing comes more easily when project viability is demonstrated. TBV Courtyard represents phase two of a larger development plan to provide a total of 105 units of affordable housing to the neighborhood. Given that phase one’s predevelopment studies proved viable, the process to receive financing for phase two was seamless.
Check out our mission-driven lending page for more information about our products to find out which might work best for you.
Stay tuned for the next installment in our blog series, where we explore real estate acquisition loans, another type of loan that moves community development projects forward.
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 disinvested and underestimated 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.
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.
By Candace Robinson, Director, Strategy for Aging in Community, Capital Impact Partners, and Amy Herr, Director, Health Policy, West Health Policy Center
This blog originally appeared as a Fast Fact on the Build Healthy Places blog. Read the original blog here.​​
Fact:
On average, only 35 affordable rental homes exist for every 100 extremely low-income renter households (households that earn 30 percent of the median income). Twenty-six percent of extremely low-income renters are seniors.
By Candace Robinson, Director, Strategy for Aging in Community, Capital Impact Partners, and Amy Herr, Director, Health Policy, West Health Policy Center
This blog originally appeared as a Fast Fact on the Build Healthy Places blog. Read the original blog here.​​
By Candace Robinson, Director, Strategy for Aging in Community, Capital Impact Partners, and Amy Herr, Director, Health Policy, West Health Policy Center
This blog originally appeared as a Fast Fact on the Build Healthy Places blog. Read the original blog here.
By Candace Baldwin, Director of Strategy, Aging in Community
Wouldn’t we all like to age in our homes and communities, surrounded by what is familiar, supported by a health care team that really understands who we are and how to serve us as individuals with unique needs? This kind of age-friendly health system has generally been an anomaly in the United States, particularly for low-income, older patients. Coupled with the fact that 90 percent of older adults want to age in their own homes, integrated care models are best supported at the community level.
By Kaitlyn Akin, marketing intern at the Calvert Foundation
I am willing to admit that, at first glance, investing in seniors doesn’t seem to be the sexiest of financial decisions. In a world where technology is constantly advancing and public dialogues are cluttered by a sea of ever-changing viral issues, the elderly are rarely the most popular conversation topic.
By Katherine Groves & Daniel Ramirez, Loan Originations Team
When Tri-City Health Center (TCHC) opened in Fremont, CA in 1970, it was one of just a handful of clinics serving low-income, minority women from Fremont and the neighboring Alameda county cities of Union City and Hayward.
