Progress Report:Interfaith Disaster Redevelopment Finance Fund and Access to Capital Grants Fund November 15-16, 2007 Palais Brogniart, Paris
Project History • Outgrowth of Interfaith Center for Corporate Responsibility (ICCR) Access to Capital Working Group’s response to hurricanes Katrina and Rita • Small group established to explore opportunities for community investing • Trip to New Orleans area in May 2006 solidified understandings of need and opportunity • Potential for both grants and concessionary investments emerged
Project History • Gap identified in faith community’s “readiness” for investment response following disasters • Leadership group visit in January 2007 explored opportunities and partnerships in detail. • Host roles for MMA CDI and JFSJ confirmed in Summer 2007
Project Leadership • Jeffrey Dekro and Amanda Joseph, Jewish Funds for Justice • Donna Meyer and Joseph Gonzalez, Christus Health • Bill Mills, Good Steward Fund and Highland Associates • Mary Baudouin, The Jesuits, New Orleans Province • Mark Regier, MMA Community Development Investments • Lori Scott, MMA CDI and Calvert Social Investment Foundation
International Disaster Response Finance Fund (IDRFF) Purpose • Permanent facility for response to disasters by faith-based institutional investors • Initial efforts focused on Gulf Coast recovery • Designed to leverage unique insight, flexibility, and collaborative opportunities of faith community.
Need for IDRFF • 300,000 units of housing were damaged or destroyed by Rita and Katrina. Majority still to be repaired or replaced. • 19,000 abandoned homes are being acquired by the state, reshaping fabric and viability of some neighborhoods. • Low income people were disproportionately affected. • Many aspects of rebuilding for a much smaller city remain disjointed, posing new risks to those returning. • “Gap” funding often needed to help leverage or complete holistic community revitalization.
IDRFF Rationale • Faith-based organizations are among “first responders” to major disasters • Faith-based investors often wish to follow or support their disaster response agencies, but lack mechanisms to do it well or safely. • Faith community has unique leveraging opportunities and capacity that can be exploited: • On-the-ground perspectives • Institutional, community investing relationships • Corporate engagement and advocacy
IDRFF’s Unique Proposition • IDRFF will seek out investment opportunities that have been overlooked or not yet addressed • IDRFF will engage in partnerships and will seek to leverage or augment other successful programs where feasible • IDRFF will be structured so that capital can reach its intended neighborhoods as effectively and efficiently as possible • IDRFF investment targeting will be guided by a committed, interfaith team connected to the region and faith-based organizations active on the ground.
Investor Opportunity Investment proceeds professionally managed and targeted to Gulf Coast recovery Product structured to manage risk to investors while providing direct connection to unique “high social impact return” Investment size: $100,000 to $1,000,000+ Investors can choose senior tranche, subordinate tranche or donation to support net assets and/or operations. Term: 3+ years Rate 0 – 3%. Below market rate augmented by social return.
IDRFF Capitalization $1,000,000 $10,000,000 $500,000
IDRFF Structure IDRFF will be a Program of Mennonite Mutual Community Development Investments (MMA CDI) $13 million fund, 8 year history with no losses 47 investments reaching community development organizations nationally and internationally, 22 investors Fund managed by the Calvert Foundation MMA CDI will work in conjunction with the IDRFF Project Development Committee to guide needs assessment and identification of investment options Sustainable business model that will generate income to cover most expenses. Minimal grant support will be needed for specific operations.
IDRFF Development Timeline • Goal: launch fund in January 2008 • Today: Reaching out to investors to inform them of opportunity and gauge interest levels • Market study underway to determine specific demand for financing. Financial projections to be completed for the Fund. • Term sheet available to investors in November 2007 with details of investment options • First investor closings January 2008 • First loan closings following investor closings • Impact on Gulf region starts in early 2008!
IDRFF Market Study(in progress) • Professional evaluation of market opportunities in order to properly structure loan products and fund. Research seeks to: • Assess nature and extent of demand • Explore most promising lending opportunities • Analyze fit between lending opportunities and fund/investor requirements • Assess capacity of potential partners • Research phase also includes analysis of other entities working in the region and how IDRFF will be differentiated
IDRFF Market Study:Challenges in the Gulf Region • Only a portion of the pre-storm population has returned • So much housing was damaged that there is a housing shortage and costs have been driven up • Large number of properties in limbo (unrepaired, partially repaired, vacant or abandoned) • Federal relief funds and insurance payments have been slow in coming & unequal to costs of rebuilding • Gaps in public utilities and infrastructure • Limited availability of basic services including things like medical care and schools • Uncertainty about vulnerability to future hurricanes • Local government & other institutions struggling with the scope of the rebuilding tasks that they face
Risk Management • IDRFF will manage risk on behalf of investors using the following tools: • Net asset cushion, loan loss reserves and loan guarantees that would be used first in the event of loss ($1 million, minimum) • Emphasis on partnering with experienced organizations • Seeking out high quality projects with clear social impact • Professional underwriting and loan management • Piggyback on MMA CDI’s successful loan program
IDRFF Fund Availability & Impact IDRFF funds will be available to high-performing nonprofit entities that provide affordable housing, small business development or other community benefit activities in the Gulf region IDRFF will target intermediary loan funds, community development banks and loan funds IDRFF will see unique opportunities and partnerships to fill-in gaps or complete larger packages of investment affecting or reshaping entire communities.
IDRFF Investment Opportunity(example) • In the wake of the vast devastation brought on by Hurricane Katrina, ASI is dedicated to furthering its mission to provide financial products and services to traditionally underserved working-class populations in the New Orleans area. • HOPE helps low-wealth families purchase their first home and also supports entrepreneurs and small businesses. • Jericho Road Episcopal Housing Initiative is a faith-based nonprofit organization, providing working families and individuals affordable housing opportunities in New Orleans neighborhoods.
Grants Strategy to Complement Investment Strategy • Interfaith Disaster Response Grants Fund (IDRGF) will complement and coordinate with the IDRFF. • IDRGF will utilize existing relationships within the faith community and broader community investment field to make a flexible and unique contribution to rebuilding efforts supporting neighborhood-based redevelopment. • IDRGF will aid the overall faith community in making grants that leverage other, more sizeable, community investments from IDRFF and elsewhere, including banks and public financing entities.
Proposed IDRGF Grants • By 2009, $1 million in grants will be allocated for the following purposes: • Grants that link community organizing efforts with community investment initiatives • Equity grants to stabilize IDRFF borrowers and to make mortgages more affordable • Grants to write down the cost of IDRFF loans • Subsidy grants for predevelopment deals by IDRFF’s borrowers • Operating support for IDRFF’s borrowers • Grants to facilitate financial literacy education for constituents of IDRFF borrowers
IDRGF Structure • IDRGF will be hosted by Jewish Funds for Justice (JFSJ) • JFSJ will convene an IDRGF Access to Capital Grants Advisory Committee, to include representatives from JFSJ, CHRISTUS Health, MMA CDI, significant IDRGF funders, investors in the IDRFF, and other experienced, interested parties. • Many members of the IDRGF Advisory Committee will also be members of the IDRFF Advisory Committee.
For further IDRFF or IDRGF information Mark Regier, Manager, MMA Community Development Investments, email@example.com, 574.533.9511 Lori Scott, Program Manager, Community Investment Partners, Calvert Foundation, Lori.Scott@calvertfoundation.org, 305.868.0228 Jeffrey Dekro, Jewish Funds for Justice, firstname.lastname@example.org, 215.483.4004