Progress Report: Interfaith Disaster Redevelopment Finance Fund and Access to Capital Grants Fund

1
Progress ReportInterfaith Disaster
Redevelopment Finance Fund and Access to Capital
Grants Fund
November 15-16, 2007 Palais Brogniart, Paris
2
Project History

• Outgrowth of Interfaith Center for Corporate
  Responsibility (ICCR) Access to Capital Working
  Groups 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

3
Project History

• Gap identified in faith communitys 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

4
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

5
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.

6
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.

7
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

8
IDRFFs 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.

9
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.

10
IDRFF Capitalization
1,000,000
10,000,000
500,000
11
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.

12
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!

13
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

14
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

15
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 CDIs successful loan program

16
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.

17
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.

18
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.

19
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
  IDRFFs borrowers
• Operating support for IDRFFs borrowers
• Grants to facilitate financial literacy education
  for constituents of IDRFF borrowers

20
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.

21
For further IDRFF or IDRGF information

• Mark Regier, Manager, MMA Community Development
  Investments, mark.regier_at_mma-online.org,
  574.533.9511
• Lori Scott, Program Manager, Community Investment
  Partners, Calvert Foundation, Lori.Scott_at_calvertfo
  undation.org, 305.868.0228
• Jeffrey Dekro, Jewish Funds for Justice,
  jdekro_at_jewishjustice.org, 215.483.4004