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Number of closed loans 1,103
Total real estate projects 558
Total loan volume $451.9 MM
Total project costs$1.4 Billion
Jobs created/maintained 54,592
A Focus on Low-IncomeCommunities & Special Needs Populations Throughout the Midwest
Capital Solutions
Real Estate
Services
ResearchPublic Policy
Community
Strategies
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Building better futures for families, children, students, patients, and individuals with disabilities
Capital Solutions Program• Accessible capital for nonprofits• Tailored solutions for community facilities• 5-year to 15-year loans • Financing from $10,000 to $1.5MM
Real Estate Services• Affordable facilities planning and project
management • Effective community development
Research• Community investment analysis• Nonprofit financial health studies
Public Policy
Community Strategies
What is driving the creation of social enterprises?
4 factors:
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Federal budget
Emphasis on outcomes
Foundations want to demonstrate outcomes
Re-examination of how charitable activities are helping or hurting those being served.
Factors to consider when contemplating a social enterprise
Does the proposed social enterprise provide employment or training opportunities for your clients?
Can it provide quality goods or services at a competitive price?
Will it be profitable for the nonprofit?
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Laying Groundwork: Assessing Readiness
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Project Readine
ss
Strategic Plan
Board Buy-In
Financial Health
Predictable Future
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PROGRAM SPACE # of rooms SqFt. per room Total SqFt. needed
Classroom/Training 2 800 1,600
Counseling rooms 6 100 600
Conference room 1 400 400
ADMINISTRATION # of employees #SqFt. per employee
Total SqFt. needed
Executive Director 1 150 150
Director of Counseling 1 100 100
Social workers 8 80 640
Reception Area/Admin Area
1 300 300
MISCELLANEOUS # of rooms SqFt. per room Total SqFt. needed
Kitchen/Pantry 1 300 300
Toilet Rooms 3 75 225
Maintenance 1 150 150
Circulation @ 30% 1,340
TOTAL SPACE NEEDED 5,805 Square Feet
Sample Space Plan
Laying Groundwork:
Location Considerations
Client
• Current clients• Potential customers
Area
• Geographic/community boundaries• Residential vs. commercial
Access
• Access to site/public transit• Access to funding by geography
Market
• Real estate market/conditions• Distance to competitors and
collaborators
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Current Populatio
n
Potential New
Population
Ideal Target Area
Laying Groundwork:
Location Considerations
Project Development Budget
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Technical Assistance Worksheet #8: Creating a Project Development Budget
Property Acquisition
Construction (“Hard” Costs)
Soft Costs• Architecture/Engineering• Financing, legal• Developer/project manager
Furniture and Equipment
Other• Contingency• Construction Interest• Organizational/ramp-up costs
Acquisition$1,382,32
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Hard Costs $373,038
Soft Costs $78,469
Furniture, Fixtures, and Equipment $72,000
Contingency $78,526
Total $1,984,360
SampleDevelopment Budget
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Developing
A Program Expansion Budget
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Technical Assistance Worksheet #2: Projecting New Operations and Monthly Cash Flow
Project Revenue
• New/expanded program revenue• New revenue sources• New fundraising
Project Expenses
• New personnel• Added costs based on more activities• Increased facility size and occupancy costs• Reserves• Start up costs
Compare New Revenues and Expenses
• Is there a surplus?• How does it change over the projection period?
Revenues Current Operations
New Operations
Government Contracts
$489,600 $734,400
And Service Fees
Fundraising (10%) $48,960 $73,440
Total Revenues $538,560 $807,840
Expenses
Personnel & Benefits
$389,180 $511,253
Program Expenses $98,000 $130,000
Other Expenses $47,500 $71,250
Total Expenses $534,680 $712,503
Revenues Minus Expenses
$3,880 $95,337
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LayingGroundwork:Sample ProgramExpansion Budget
What is the surplus?
Revenues - Expenses = $95,337
What debt can that support annually (with a debt coverage ratio of 1.2)?
$95,337 / 1.2 = $79,448 annually
What is the monthly payment?
$79,448 / 12 = $6,621 monthly
LayingGroundwork:EvaluatingFeasibility
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Technical Assistance Worksheet #6: Making A Facility Decision
No upfront costs
Flexibility for future
Less responsibility for maintenance
Landlord pays for improvements
Adds to landlord assets
Renovation costs
Long term solution
More control over property
Adds to agency assets
Real estate appreciation
Significant upfront costs
Renovation costs
LayingGroundwork:Lease vs. Buy
LEASE
BUY
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Financing: Potential Sourcesof Funds
Grant funds or foundation program related investments• Location-specific
• Initiative-focused (example: Illinois Clean Energy Community Foundation for “green” projects)
Capital campaign• Historic Tax Credits, TIF funds,
Community Development Block Grant (CDBG) funds, New Market Tax Credits (NMTC), and many others
Bank or CDFI financing• Tenant build out allowance
• Rent escalation
• Utilities and common area maintenance
Government resources:
Agency equity
Project financing can be as simple as securing a single loan or grant …
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Project Costs $ Amount Sources of Funds
$ Amount
Acquisition 275,000 Agency equity 300,000
Renovation 300,000 IFF loan 275,000
Total $575,000 Total $575,000
Financing: Sourcing
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Project Costs $ Amount Sources of Funds
$ Amount
Acquisition 1,900,000 IFF loan 1,300,000
Construction 10,950,953 LIHTC equity 8,071,727
Soft costs 1,486,083 HOME loans 3,250,000
Reserves 339,050 Ground lease 1,900,000
Developer fee 1,574,844 Bank legal equity 50,000
Foundation grant 600,000
Government grant 239,082
Donation tax credits 258,000
Energy tax credits 36,632
Federal loan 252,000
Deferred developer fee
293,489
Total $16,250,930 Total $16,250,930
Financing: Sourcing
… or more complicated involving many layers of financing.
Coordinating the timing of financing sources and construction timelines is critical to project success.
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Important Five Factors: OrganizationalCapacity
Management experience and track record
Board composition, structure and engagement
Business model and program outcomes
Industry reputation and standing
Policies, procedures, systems and controls
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Important Five Factors: FinancialCapacity
Revenue mix, operating costs and profitability
Liquidity and Cash Flow
Leverage
Credit experience and track record
Readiness Indicators: • Liquidity/Cash• Working Capital• Net Assets• Debt Coverage• Days Receivable• Days Payable
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Important Five Factors: Capital
Cash Investment or Contribution to Project
• Sourced from existing reserves• Sourced from grants
Cash or other resources to support project risk
Cash to support start up expenses
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Important Five Factors: Collateral “Second Way Out”
Building at project site
Equipment
Other assets (buildings, pledges, cash)
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Important Five Factors: Conditions for opening a social enterprise
Market demand
Competitive landscape
Legislative concerns
Sector risks for agency
Demographic served
Economy
Assess your strengths and weaknesses from a lender’s perspective using the five factors
Determine what steps can be taken to strengthen your organization’s application
Work with your board and leadership team to establish benchmarks to achieve access to capital
Seek specific input and guidance from your bank or real estate expert to acquire potential resources or external expertise
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What if I am not ready?