This document summarizes a webinar about refinancing for housing cooperatives. The webinar covered why refinancing is important now, asset management planning, perspectives from lenders, and how CHF Canada supports cooperatives with financing. Panelists shared experiences from refinancing cooperatives. Presenters discussed the end of operating agreements, assessing capital needs, and strategies for long-term financial stability including refinancing and improving energy efficiency. CHF Canada's services for asset management planning and their refinancing program were also outlined.
2. 1
Beyond the BCA: Change is Coming
10 am: Introductions:
Brian Eng: CoAction
Mary Ann Hannant: CHFT
Bill Bacon: HSC
10:15 to 10:30: Why Refinancing? Why Now?
Dave Howard, CHF Canada
10:30 to 11:30: Asset Management Planning
David Spackman, CHF Canada
11:30 to 12:15: What is Your Lender Thinking?
Heather Simpson, Alterna
12:15 to 12:30 How Does CHF Canada Support the Co-op with Financing?
Dave Howard, CHF Canada
12:30 to 1:00 Lunchbreak (Sponsored by H.S.C. and Alterna Savings)
1:00 to 2:00: Refinancing Panel/Hear from Co-op Managers
Bob Brocius: Windmill Line Coop/ Brynn Teall: Oak Street Brian Eng: Windward Coop
3. 2
Co-operative Housing Federation of Canada
• Most of CHF Canada’s members are housing co‑ops.
There are 902 member housing co-ops (outside of
Quebec).
• CHF Canada has been the national voice of co-op
housing for 50 years.
• More than eight out of 10 housing co‑ops outside of
Quebec are members of CHF Canada.
• CHF Canada is a co‑operative, owned and controlled by
its members. It is governed by its Board of Directors,
which currently has 16 directors: 10 representing the
provinces and territories, one representing the aboriginal
community and five directors elected at-large.
5. 4
Purpose of the Refinancing Program
§ As CMHC 35 year operating agreements and
mortgages finish over the next three to four years, co-
ops need to invest in their buildings and properties.
§ Across Canada, aging housing co-operatives need new
capital for repairs, renovations, modernization.
§ An injection of new capital into this housing stock is
needed to insure ongoing viability.
§ CHF Canada negotiated with CMHC to allow
prepayment of existing CMHC mortgage.
6. 5
EOA
• 55,000 co-op homes in Canada will be out of their
operating agreements by 2020
• Not just about end of obligations to CMHC
• Housing stock is aging
• Most co-ops have not saved enough in Reserves
• Focus has to be on long-term planning
8. 7
Key Results of Refinancing Program
§ Pilot project - January 2011 – Alterna Savings credit
union was asked to help CHF Canada develop and
test the feasibility of new mortgage loan.
Mondragon Co-op was first co-op approached.
9. 8
Key Results of Refinancing Program
§ 30 co-ops funded successfully to date (approx. $90
million in new loans) 19 co-ops are in the process
to fund in the near future
§ Average loan: $3.0 million (smallest = $350K,
largest = $9.0 million)
§ Average new spending per unit: $52,000
§ By 2017, 13 credit unions are offering new
mortgages (across Canada)
10. 9
Assessing the Impact of Refinancing Housing
Co-operatives
In 2016 and 2017 CHF Canada asked Etho-Economics to
conduct a study of five housing co-ops that had
refinanced. The study was intended to look at impacts of
refinancing in four areas:
• Economic Health
• Environmental Impact
• Social Benefits
• Improved Governance
11. 10
Assessing the Impact of Refinancing Housing
Co-operatives
Economic
• Reduced cost of debt service post-refinancing
• Extended life of buildings due to renova8ons
• Generally reserved increased, opera8ng costs decreased
• Decrease in maintenance costs
• Increased demand for membership / decreased vacancy loss
• Improved board capacity for financial management
12. 11
Assessing the Impact of Refinancing Housing
Co-operatives
Environmental
• New, improved energy-saving features/Increased energy efficiency
• Reduced energy/water consump8on
• Some air quality improvement
• Much higher encouragement of sustainable behaviour
Governance
• Improved member participation and sense of community
• Improved Members Mee8ngs
• Reasonable and predictable housing charge increases
• Increased member satisfaction and retention
13. 12
Assessing the Impact of Refinancing Housing
Co-operatives
Social
• Better comfort for members
• Capacity development in asset management and
financial planning
• Increased accessibility
• Improved pride in units
• New skills and knowledge
14. 13
Our Lending Partners
• Alterna Savings
• Credit Union Atlantic
• Desjardins
• League Savings and
Mortgage
• Libro Credit Union
• Kawartha Credit
Union
• Kindred Credit Union
• Meridian Credit Union
• Motor City Credit
Union
• Your Neighbourhood
Credit Union
• Servus Credit Union
• Sudbury Credit Union
• Your Credit Union
15. 14
Planning for long term success
EOA: Federally funded co-ops
David Howard
David Spackman
16. 15
What we know to be true…
• Teenagers in groups are dangerous
• Elvis is alive and hidden in a witness protection program
• Turtles got flushed into the New York sewer system and
still live there
• Change is BAD
17. 16
Set the record straight…
About rules:
§ All of your co-op’s by-laws remain in place until such time
as you amend or replace them
§ The laws as stated in The Co-operative Corporations Act
still apply
§ the Ontario Human Rights Code still applies
§ Other provincial and municipal laws still apply
§ The rules in your Operating Agreement will not
18. 17
Set the record straight…
About selling units to the members:
§ Section 171.2 of the Co-operative Corporations Act
states, “(1) A non-profit housing co-operative shall not
distribute or pay any of its property to its members
during its existence or on its dissolution.”
19. 18
Set the record straight…
About RGI assistance and housing charges
§ The RGI assistance as you now receive it will end when
your operating agreement ends
§ CHF Canada’s members have successfully lobbied for
replacement programs (TBA).
§ Agreement extensions are being provided for 2 years
while an alternate RGI system is implemented.
20. 19
Set the record straight…
About RGI assistance and housing charges
§ Agreement extensions for the purpose of subsidy DO NOT
extend all previous operating agreement rules.
21. 20
Setting the record straight…
About HST Rebates
§ Because eligibility for the HST rebate is based on how
much funding your co-op gets from the government,
when you no longer receive government funding you will
no longer be eligible for the HST rebate
22. 21
Setting the record straight…
About lowering the housing charges
§ Co-ops will need as much revenue as possible to fund
their capital needs for the future
§ No safety net of going to CMHC if you find yourself in
need of money for capital repairs
§ Your co-op may need reserve funds or want to re-finance
to improve member standard of living, the co-op will need
the cash flow to support capital repairs.
23. 22
Setting the record straight…
About being fully independent
§ The co-op will be a fully independent co-operative
corporation assuming all the risks and opportunities that
go along with that
§ Careful planning is needed because new business failure
in North America: 35-56% within 5 years
§ In co-ops housing terms that would mean up to 30,000 of
our homes could be lost by 2025
24. 23
Planning for EOA
Co-ops will need: An asset management plan
§ an up-to-date Building Condition Assessment
§ a long-term financial forecast
§ sufficient funds for the BCA and to improve member homes
§ a plan to implement large scale repairs and improvements
§ plans to to save energy and improve universal design
§ a plan to maintain an affordability mandate
25. 24
Financial Stability
How do we renovate our buildings, reduce
vacancies, and stabilize operating costs without
driving housing charges through the roof?
24
26. 2525
Building Condition Assessment
Reserve fund forecast
Financial statements
• Reserves and renovations
• Long term operating budgets
• Housing charges & market projections
• Support for low income members
Housing
charges
Reserves &
Financing
Energy efficiency
Universal design
Community infrastructure
Improved standard of living
Accessibility/Aging in place
Mixed income community
Crea8ng Financial Stability
27. 26
Assess Needs
Planning
• Dream, planning session - what do we want for our Co-op?
• Gather Ideas, input and hard data
• Choose a financial plan and direction
• Prioritize - Plan – Standard of living, quality of life
• Implement Standard of Living for all ages and abilities
• Maintain a mixed income community
• Set and Maintain Quality Standards
28. 27
Assess Needs
Planning data, Building Condition Assessment
l Document review
l Site inspection
l Prioritized Capital Replacement Plan
l Life cycle spreadsheet
Results:
§ Which capital items
you need to replace first.
§ How much you will
need to spend each year over 25 years.
29. 28
Assess Needs
Planning data: Reserve Fund Forecast (RFF)
l The difference between your current reserves and
contributions to reserves and the spending in the BCA
l How much money you should be putting into your
replacement reserve each year.
l How much you can expect to earn on your replacement
reserve investments
l What impact this will have on housing charges
30. 29
Assess Needs
Planning data, Financial Statements
l What are our current reserves?
l Are they fully funded? (Do we have the cash to match the liability?)
l What is our annual contribution to reserves?
l Do we transfer any surplus to reserves?
l Do we spend our full maintenance budget each year?
l Do our housing charges keep up with inflation?
l Can we implement all the repairs called for in the BCA?
31. 30
Assess Needs
Planning needs
Housing charges and affordability mandate
l Do your current housing charges create an annual surplus?
l Do your housing services provide on time maintenance, capital
replacement, quality of life improvements?
l Will completing the work raise housing charges?
l How do your housing charges compare to local market?
l Will higher housing charges be a problem, are expectations
realistic?
32. 31
Develop Strategies
Planning: who will ?
• Lead the planning and implementation process
• Set the stage; dream, direction, standard of living
• Procure data and reports, BCA, AMP, financial statements
• Review data and craft a plan for the co-operative
• Set milestones and monitor progress
Board, Management, Consultant, CHF Canada?
33. 32
Create Solutions: Asset management Plans
The BCA calls for “replacement to original”
Do we want to rebuild 1980?
Building systems
l Building envelope & Insulation
l Plumbing systems
l Mechanical & electrical
Community Infrastructure
l Appliance alternatives
l Recycling
l Accessibility/aging in place
l Food security
l Quality of life
34. 33
Create Solutions: Asset management Plans
• Green Infrastructure/ lower costs to members
Electric Hydronic baseboard heater
Programmable thermostat
High efficiency boiler 9 unit apt.
35. 34
Create Solutions: Asset management plans
• Green Infrastructure/lower costs to members
Windows + insulation +siding Shingles + venting + insulation
41. 40
Invest resources
Planning questions,
• What is the cost of minimum BCA requirements?
• How does that compare to reserves and contributions (RFF)
• Are we fully funding our capital requirements?
• Can we fund capital requirements if we redirect loan
payments at EOA?
• Are we meeting an affordability mandate or criteria?
• Can we use some cash flow to support mixed income
community?
• Would financing assist us to achieve our goals?
42. 41
Develop Strategies
Planning: reallocate current mortgage cash flow at EOA ?
• Reallocate all mortgage payments to reserves or some
needed for low income members?
• Can we phase all required projects to fit with cash flow or
does standard of living decline? (Do all of the BCA!)
• Do we have human resources to phase all projects?
• The BCA only replaces to original.
• Do we want or need to do more?
Review data and create solutions for the co-operative
Board, Management, CHF Canada?
43. 42
Develop Strategies
Redirect loan payments – positive
• Phasing allows co-op to remain mortgage free?
• Some units receive immediate improvement,
• Some units receive aging in place improvements
• Overhead costs improve; slowly
• Standard of living improves over time ( approx. 20
year implementation)
42
44. 43
Develop Strategies
Redirect loan payments – negative
• Phasing requires annual human resources commitment
• Projects every year are disruptive and difficult
• Phasing increases costs with smaller projects
• Overhead costs improve s. l. o. w. l. y.
• Some units receive immediate improvement. Some don’t
• Some units receive aging in place improvements. Some don't
• Current cash flow pays for future living standards
• Current cash allocation subject to annual board decisions
• Standard of living improves over time ( approx. 10 to 20 yrs.)
43
45. 44
Develop Strategies
Planning, Financing - negative
• Financing is a time consuming project
• Co-op has a mortgage?
• The lender will have some rules
• Large projects are disruptive and difficult
44
46. 45
Develop Strategies
Financing – positive
• Economies of scale for projects and project management
• Improved standard of living now for all members
• Lower unit overhead costs now for all members
• Provide accessibility & aging in place, as required
• Housing charges are stabilized into the future
• Members share equally over time in cost of improvements
• Mortgage payments place discipline on future boards
• Units are marketable
45
49. 48
Invest resources: refinancing
Refinancing
• Funding for major capital repairs
• Invest in green infrastructure
• Modify units to meet changing needs of members
• New development / acquisition & rehab
How?
• CMHC Direct Lending?
• Commercial market / Credit Unions or Banks ?
• Sector based lending service.
50. 49
Improving Lives
Planning,
• Set aside time to plan
• Appoint Governance & management to lead
• Get the data, BCA, RFF, Financial statements.
• Review building condition, reserves, & requirements
• Review replacement to original and desired improvements
• Review capacity to support mixed income community
• Make a long term plan & consider financing as a tool
• Get expert support, planning and project management
49
52. 51
How CHF Canada supports the co-op
1. Helps finalize key capital needs/costs
2. Provides expert financial advice that calibrates:
§ Borrowing for capital repairs/renovations
§ Total borrowing (mortgage payout plus capital
renewal from borrowing)
§ Amount of monthly payment
§ Ongoing repair/replacement needs and reserve
contribution
53. 52
How CHF Canada supports the co-op
3. Prepares application to Credit Union
4. Reviews Credit Union’s offer with co-op and negotiates
any changes to:
§ Interest rate
§ Conditions
5. Handles the “paperwork” with co-op and Credit Union
54. 53
How CHF Canada supports the co-op (cont.)
6. Handles provincial government, Agency and CMHC
approval processes (for co-ops out of their operating
agreement this does not apply)
7. Organizes mortgage support agreement between co-op,
Credit Union and CHF Canada for loan monitoring
8. Provides annual report to Credit Union, based on co-
op’s annual information return
9. Intervenes at lender’s request if financial performance
warrants it
55. 54
Mortgage Support Agreement
§ Co-op’s auditor will continue to report to the Agency or
equivalent until the new mortgage is paid and conducts a yearly
review of operations.
§ Co-op must continue memberships in CHF Canada, local CHF
Canada member federation and credit union during the new
mortgage
§ Co-op will give CHF Canada notice of adverse financial change,
material loss, termination of property manager, or litigation
§ Reasonable access to the property or the co-ops books, etc
§ CHF Canada provides an annual report to the credit union on
the co-ops operations and financial status.
56. 55
What your co-op has to budget in terms of costs
§ CMHC prepayment fees – (Section 95 co-ops only)
§ About 0.5% lenders fees
§ Asset Management Services Fees
§ CHF Canada Refinancing fee (sliding scale)
§ Property appraisal
§ Legal costs of deal closing and registering mortgage
57. 56
The Process
• Co-op contacts CHF Canada representative to confirm
interest in the re-financing program.
• Co-op provides 3 years Financial Statements and a
Building Condition Assessment (BCA) to CHF Canada.
• Co-op Agency provides most recent operating review
and commentary (“ thumbnail“).
• CHF Canada’s Asset Management Services develops
with the co-op a long term asset plan and provides
recommendations regarding financing repairs.
58. 57
The Process
• CHF Canada meet with Co-op Board to review findings,
answer questions and determine how best to proceed.
• If re-financing recommended, Board arranges General
Membership meeting.
• CHF Canada present findings to membership, Board
provides recommendation, membership votes and a
Resolution to proceed, or not, is obtained.
• If proceeding, CHF Canada and Consultants provide
required information to Credit Union and assists with
their review issuing a “term sheet.”
59. 58
The Process
• Prior to funding of the new mortgage, CHF Canada, the
Credit Union lender, and the Co-op execute the tri-partite
Agreement.
• At this point with all the Third Party reports completed and
legal work for the new mortgage also completed, then funds
are advanced and the CMHC mortgage is repaid. Additional
monies will be advanced on a monthly basis as work
progresses.
• On-going capital works continue until completion with regular
inspections/monitoring by Project monitor/engineer.
