Distressed Communities to Get $100M Lift from Bank of America, Enterprise, LISC

The U.S. Department of the Treasury has completed the inaugural round of its Community Development Financial Institutions Bond Guarantee Program, and a partnership involving Enterprise Community Loan Fund Inc. and the Local Initiatives Support Corp. is among the chosen ones. The Treasury approved term sheets for $100 million in bonds to the team to be utilized to back affordable housing and other commercial development projects in low-income communities.
Lori Chatman, of Enterprise

Lori Chatman, of Enterprise

The U.S. Department of the Treasury has completed the inaugural round of its Community Development Financial Institutions Bond Guarantee Program, and a partnership involving Enterprise Community Loan Fund Inc. and the Local Initiatives Support Corp. is among the chosen ones. The Treasury approved term sheets for $100 million in bonds to the team to be utilized to back affordable housing and other commercial development projects in low-income communities.

Per terms of the CDFI Bond Guarantee Program, the Treasury will guarantee an annual sum of as many as 10 bonds at a minimum of $100 million each. The bonds, which feature maturities up to 29.5 years, are to be purchased by the Federal Financing Bank upon issuance. Enterprise and LISC decided to join forces on the program application.

“We are two organizations that have a similar history, a similar commitment to housing and housing needs and then more broadly, community development needs,” Lori Chatman, president, Enterprise Community Loan Fund, told Commercial Property Executive.

Bank of America is part of the partnership and will issue the bonds to Enterprise and LISC through its Trisail Funding Corp. subsidiary. Each organization will have $50 million in proceeds from the bonds. Enterprise plans to use its $50 million for a range of commercial development projects, including providing permanent mortgages of as much as $2 million for affordable multi-family properties.

“In terms of the affordable housing market, we’d like to think that the biggest impact is another source of capital and more so, a source of capital that could be particularly useful to those owners and those projects where an agency execution is not available to them,” Chatman added. “We’re looking at multi-family housing where there is a need for a permanent mortgage that does not easily fit into the other housing project options like FHA, Fannie Mae and Freddie Mac.”

LISC plans to direct its $50 million in bond proceeds toward the financing of affordable housing, as well as charter schools, community health centers and additional economic development endeavors.

“Community development has been changing lives in low-income neighborhoods for many years,” Michael Rubinger, LISC president & CEO, said in a prepared statement.¬†“But the reality is that financial markets don’t operate efficiently in distressed areas. With this program we can begin to change that–not just because of the important work we’ll be able to support, but because of the performance data we can generate. It will help encourage the private market to expand in places it doesn’t now function.”

It’s too early for Enterprise and LISC to divulge specific projects to be financed, but the organizations feel the timing is right to think ahead to the future of the CDFI Bond Guarantee Program. The program statute allows for a maximum of $1 billion in bonds annually, and the Treasury has been authorized to guaranty up to $500 million in bonds in fiscal year 2013. But there are no guarantees, so to speak; as it currently stands, the program’s authorization lasts through fiscal year 2014.

“We are all interested to ensure that we continue to make the best of the program, especially if we can see something that continues into the future,” Chatman concluded. “So I think that that’s the big challenge–how do we really continue to make this source available to communities for the long term.”