Overview presentation on social finance

1. Social Finance for Affordable Housing
An opportunity to mobilize private capital for public good
Prepared by Adam Spence
December 2012

2. Summary
What is the objective of this presentation?
 What is social finance?
 Why is social finance important for affordable
housing?
 What are examples of social finance in affordable
housing?
 What are the challenges and opportunities for
social finance in affordable housing?
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3. What is social finance?
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4. About
What is social finance?
Social finance (or impact Profit
investing) is an investment
approach to solve social or
environmental challenges
while generating financial
returns. This includes
investments that range from
producing a return of
principal capital to offering
market-rate or even market-
beating financial returns. Planet People
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5. Planet Bean Coffee in Canoe-Creek Hydro in
Guelph BC
• $250k loan & share • $5M loan for the
issue for expansion First Nations plant
• Revenues grew • generate annual
from $500k to revenue of $1.6M
$2.6M Regent Park in • power for 1,700
• increased global & Toronto homes
local impact; • $1B revitalization
doubled co-op • $450M worth of
membership market-rate bonds
at 5% per year over
40 years
• over 6,000 mixed-
income housing
units & community
facilities
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6. Two Key Features
Energy efficiency
Prime + 2%
Poverty reduction
Social housing units
Impact + Return
8%
Carbon reduction
Jobs for marginalized
1% p.a. over three years
populations

7. About
What are the characteristics of the social finance marketplace?
 Global marketplace is estimated at $100
billion, projected to grow to $400 billion over
next 10 years
 Canadian marketplace estimated at ~$2
billion in assets, projected to grow to $30
billion over next 10 years
 History: Canada has a long history of social
finance activity
 Key sectors: Clean technology, sustainable
agriculture, and affordable housing
 Strong interest amongst governments and
institutional investors, with pioneering
efforts from leading foundations and
individual investors

8. About
What is the spectrum and source of social finance investments?
Project or program Loans, loan guarantees, real estate Private
grant mortgages, patient debt and equity, public
funding, general equity, community bonds, housing equity, fixed income
donations bonds, social impact bonds, etc.
Below Market Rate Market Rate Impact SUPPLIERS OF CAPITAL
Conventional  Mainstream Banks
Grants Impact Investments Investments
Investments  Community Development
Finance and Credit Unions
 Foundations (Mission-related
investing)
 Government
 Community Loan Funds
 Alternative Financial
Institutions and Funds
 Private Equity Funds Social
Enterprise Funds
 Individual Investors
(Angels, VCs, wealthy
individuals)
Negative Expected Financial Return Market Rate Expected Financial Return

9. About
What are potential products and financing sources for housing providers?
Products
 Mortgages and second mortgages
 Loans and loan guarantees
 Bonds and debentures (including community bonds))
 Fund
 Equity
Financing Sources
 Mainstream Financial Institutions (eg. RBC)
 Alternative Financial Institutions (eg. Alterna)
 Alternative Lenders including funds, and foundations (eg.
CAIC, IO)
 Private Offerings (eg. Community bond, promissory note)
 Internal Equity
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10. So what?
Why is social finance
important for
affordable housing?
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11. Alignment
Why is social finance important for supportive housing providers?
 Housing demand: There is significant demand for new supportive housing
stock in Canada, with 520,700 Canadians living with mental illness that are
inadequately housed. 154,000 Ontarians are on the waiting list for housing.
 Financing needs: There have been a number of identified financing needs
amongst individual housing providers, including mortgage financing, project
bridge financing, and matched financing. There is tremendous need for
stock maintenance and improvement and opportunities for energy
efficiency retrofits.
 Government revenues: Capital funding support is restricted, and operating
funding growth is constrained.
 Early adopters: Growing number of affordable housing providers turning to
alternative financing to tackle these problems and turning to
investors/lenders for funding.
 Financing leverage and revenue streams: You have potential revenue
streams and assets for leverage to obtain financing.
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12. Alignment
What are key advantages for supportive housing providers in the social finance
marketplace?
Advantages
 Signature impact investments have been
affordable housing investments. TCHC Housing
Bond, YWCA Community Housing Bond.
 There is demonstrated interest in affordable
housing by investors. 75% of impact investors
would be interested in affordable housing bonds
 Social housing is a proven impact investment
with a track record. Asset performance over
last 30 years in Ontario.
 Supportive housing has the potential for scale
that matches investor interest and capacity.
Investment sizes in millions and tens of millions
of dollars in real estate.
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13. What are examples of social
finance for affordable
housing in Ontario?
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14. YWCA Elm Centre is an innovative
residential community located in the
heart of downtown Toronto. The
YWCA Elm Centre (an $80M project)
offers 300 affordable apartments for
low-income women and their
families, women living with mental
health and addiction issues and
families of Aboriginal ancestry.
Innovative Financing
• Community Housing Bond
• Infrastructure Ontario Loan
• Municipal Loan
• Government credits/rebates
• Cash flow driven by rent
supplements
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15. Centretown Citizens Ottawa
Corporation (CCOC) is the owner
and developer of Beaver Barracks: a
254-unit affordable housing project
located on Metcalfe, Argyle and
Catherine Streets in downtown
Ottawa. The $65 million
development of Beaver Barracks
took place in two
phases, comprising five buildings.
The project mixes bachelor, 1-
bed, 2-bed and 3-bed apartments
and townhouses.
Innovative Financing
• Equity (Internal financing)
• Infrastructure Ontario Loan
• Government credits/rebates
• Alternative Lender (Religious Pg 15
Order)

16. 25 Leonard Avenue is a four-story
building close to Toronto Western
Hospital that was original built as
doctor’s offices. St. Clare’s
Multifaith Housing converted the
doctor’s offices into small
apartment units (Phase 1).
Subsequently St. Clare’s added
two floors with 26 prefabricated
apartments (Phase 2). In
total, there are 77 units in the
complex, with a development cost
of $8.1 million.
Innovative Financing
• Alternative Lender (CAIC)
• Leveraged equity by extending
amortization of first mortgage
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17. What are the challenges
and opportunities for social
finance in affordable
housing?
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18. Challenges
What are key challenges for supportive housing providers in use of social finance
amongst supportive housing providers?
 Stable revenues: Challenges financing
current stock, some funding sources are
winding down, and the ability to generate
income from new and current sources is
limited.
 Financial capacity: Capacity to service debt
and strength of balance sheets.
 Organizational capacity: Financial literacy
and technical expertise.
 Policy barriers: Federal and provincial
policy barriers can increase costs, increase
the time for development, and reduce the
capacity of providers to build new units.
 Capital supply: Familiarity with and Photo Credit: Kevin Van Paassen , The Globe and Maill
aversion to nonprofit housing providers.
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19. Opportunities
What are opportunities to advance social finance in supportive housing?
 Models: There are a number of models that
can be adopted or adapted to local contexts.
 Constituency: There is a strong, motivated
constituency of supportive housing providers,
mental health advocates, government
representatives and financial leaders
supporting a common aim.
 Strategic Solutions: There are a number of
strategic, pragmatic solutions that could have
a significant impact on the ability to grow the
stock of supportive housing in Ontario.
 Capacity-building: There are great tools and
resources that can be shared through strong,
ready-built networks to share
recommendations, models and lessons
learned.
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20. Thank You http://impactinvesting.marsdd.com
aspence@marsdd.com