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Stewart Pearson

Quote Quiz – Who Said?

"When I hear the words Creative Financing

I reach for my revolver.“

A: Hermann Goering

B: Mark Carney C: CMHC

Quote Quiz – Who Said?

"A real estate loan requires a marketable security that provides for the repayment of principal and interest from reliable and predictable net cash flow.”

A: Chartered Banks

B: Life Insurance Companies

C: Pension Funds

D: Credit Unions

E: CMHC

F: All of the Above

Quote Quiz – Who Said?

"We want to help but we all have to tighten our belts – that includes housing, healthcare and education.” A: All levels of government

Financial Environment

Low Interest Rates from Bonds, GICs etc

Volatile Financial Markets - equities, commodities

International Risk – Europe

Weak US Economy

Huge Debts – Developed World (US, Europe)

Political Uncertainty – Europe, US, Middle East

Investor Sentiment

Preservation of Capital

Modest Returns Anticipated

Basic Aversion to Risk but Need for Yield

Risk/Return Tolerance

Guarantees and Covenants

CMHC Insurance

Provincial and Municipal Credit Enhancement

Asset Leveraging Working Group

Refinancing of Social Housing through Debt Restructuring

“Financing Capital Improvements and the Renovation of Social Housing in Ontario”

Report – December 2010

(HSC Website)

Asset Leveraging Working Group

Raise capital without additional Operating Subsidy

Investment in Existing Housing – Renovation

Investment in Energy and Operating Technology

Portfolio Refinancing for New Construction

Asset Leveraging Working Group

Next Steps Review of the various housing programs and the constraints to be overcome – MMAH to prepare case studies

Develop refinancing tools and financing structures – input from Service Managers and Infrastructure Ontario

Addressing end of operating agreements, preserving affordable rental and capital repair shortfall

Innovative Ways to New Housing

Housing Services Corporation Regeneration Forum

May 29, 2012

Tim Welch Tim Welch Consulting Inc.

Phone (519)624-9271 E-mail: twelch@twcinc.ca

www.twcinc.ca

2

Government Funding Dwindling resources, IAH funds modest, not just for

new construction, and mostly allocated

Housing sector should continue to advocate for new resources, but in the meantime...

Proponents need to be creative, Service Managers and Provincial and Federal governments must be flexible

Need to look at other sources of financing/equity/investment

And strongly hope for continued low interest rates.

3

Considerations What level of affordability (80% or 100% of ave.

market), consider affordable ownership

Who to house – existing residents such as overhoused?

Type of construction – walk up? stick-built? LEED Platinum?

Financing – ability to mortgage on title, creativity with cash flow, soft costs for small projects

Fundraising

4

Stretching AHP/IAH funds Land – intensifying on existing non-profit and co-

operatives with program support

Cambridge Kiwanis

FAILA, Kawartha Lakes

Tilsonburg non-profit

5

New Housing Development Concepts Halam Park Co-op Hamilton

Haliburton Community Housing Corp

Hamilton, Pocket Housing

And

LHC redevelopment – intensification, sale of units

6

Resources Land: is it appropriate/ too dense; can it be

contributed given existing operating agreements?

Existing unused/underutilized buildings

Government support – capital and operating/support

Pre-development CMHC seed, PDF

Fundraising – private contributions

Operating surplus’ of existing providers

Private builders loan/investment

Social enterprise grants, loans or investment

7

Cambridge Kiwanis 23 new units in self contained apartment building on

empty parking lot on existing non-profit site

All in cost of $159,000/unit - $3.66 m (includes HST)

$116,ooo per unit in IAH funding

Land equity, $150,000 operating surplus loan gradually repaid from operating surplus

Potential loan from Community Forward Fund brings possibility of more green features such as ICF construction, solar hot water

8

Kiwanis assumptions Building logistics

19,500 sq. Ft. 20 one bdrm, 3 two bdrm.

4 floor with elevator, woodframe with concrete floor at $117 per sq. ft plus contingency

Could change to block, light steel or ICF with Community Forward Fund (approx. $350,000 at 5-6%)

Assume land value of $10,000 per unit

2 tier DCs of $335,000, $39,000 school bd DCs

Remaining soft costs –architect, engineer, legal, development consultant $250,000

10

Kiwanis operating assumptions Rents

$448 + hydro for 9 one bdrms (65% of AMR)

$561 + hydro for 11 one bdrms (80% of AMR)

$661 + hydro for 3 two bdrms (80% of AMR)

Costs include

$55 per month/unit heating

$35 per month/unit water

$1,200 per year/unit maintenance

6% for capital reserves

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Kiwanis assumptions (cont.) Infill related savings

No borrowing/carrying costs or property taxes on land

No CMHC mortgage application fees,

lower legal fees re no severance, no registering separate first mortgage on title.

No snow plow costs (covering unused parking lot)

Modest increase in number of units means no cost of building or operating staff space, tenant meeting space

12

FAILA, City of Kawartha Lakes 25 unit addition to existing 25 unit n/p completed

2009

$153,000 per unit all in cost (ICF construction)

$70,000 per unit capital funding from AHP, plus City grant of $10,000 per unit to offset city fees

Equity: land contribution and $40,000 operating surplus

elevator, common rooms already exist

Legal costs related to severance/easements/new corporation etc. - $20,000

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14

Fenelon Falls 25 unit addition

15

Tillsonburg mnp 13 unit addition, completed 2009

Total all in cost $129,000 per unit – total $1.66 m.

Proponent equity of land

Used existing elevator, common room and hallways, very cost efficient construction

County/town DC offset grants of $3,000 per unit

AHP $70,000 per unit for 12 units

County “grant” of $65,000 for 13th unit

IO debenture@4.41% 10 yr term for $642,000

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Tillsonburg 13 unit addition

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Tillsonburg complications Long complicated severance and ministerial consent

($3,000 per unit legal costs- $40,000 total)

Why require appraisal when existing mortgage of $27,000 per unit and non-profit has run successfully for 25 years – where is the risk??

Halam Park Co-op Hamilton Existing well run 92 unit family townhouses

No existing one bedrooms for co-op empty nesters

Propose 8 one bedroom semis (no rezoning) rents to be 80% of AMR plus utilities

All in capital funding of $153,000/unit: $1.22 m. total

Co-op contribute $200,000 from operating surplus

City DCs $27,000 per unit offset

Community Forward Fund $400,000 loan

Looking to access government funds of $65,000 per unit (approx. $520,000) will result in feeing up family housing in existing co-op units

19

Haliburton Community Housing Corporation Add seven units to existing non-profit (previously

HCHC converted vacated office space to five apts.)

Need is greatest for low end of market rents

All in costs of $156,000 per unit

Operating surplus contribution of $339,000 plus land, uses existing elevator, converts part of office space

$510,000 loan through CAIC, not registered on title through SHSC loan guarantee

No ministerial consent but confusion of first mortgage approval led to significant delays, uncertainty, then unexpected municipal charges further put pressure on budget

20

Pocket Housing, Hamilton Concept of small self-contained bachelor apts,

building eight units on existing single family lot

If land contributed, financially viable at $60,000 per unit of capital funding

May have financing through Community Forward Fund in partnership with Hamilton Community Foundation

21

22

Local Housing Corporations Variety of concepts being examined by LHCs outside

of Toronto

Idea of selling off some scattered homes to develop moderately higher number of units, with lower operating costs (increase from 28 singles/semis to 32 townhouses, lowering operating costs)

Further idea of duplexing/granny flats for scattered singles

redeveloping some sites at significantly higher densities with most of new rental units at market – maybe with private developer partnership

23

Keeping Positive! Work with your Service Manager, especially explore

potential of more flexibility for Consents under Housing Services Act

Its worth exploring potential partnerships with a private builder/developer/investor

Examine social enterprise –alternate funders but advocate to them for longer repayment, low rates

Fundraising can be part of the answer

And keep on advocating to Federal and Provincial governments for new funding for new housing.

24

2

Making Every Resource Count

HSC Regeneration Forum

OTTAWA COMMUNITY HOUSING CORPORATION

May 29, 2012

3

OCH Housing Portfolio

• 14,827 homes for over 32,000 people

• 16 million square feet

• Estimated value $2 billion

• 55% high rise apartments, 35% townhouses

• Modest growth - Affordable Housing Program

• Aging stock with average age of 35 years

• Building Condition Assessment 2008 identified:

$211 million backlog in capital repairs, plus

$121 million required over next 5 years

4

Capital Repair and Investment

• Investing in Ontario ($8.9 million)

• Social Housing Repair and Rehabilitation

Program ($38.6 million)

• Renewable Energy Initiative ($3.5 million)

• Commitment of OCH Capital Reserves

• Financing through Infrastructure Ontario

• Significant Reduction in Repair Backlog

5

Repair Backlog with 2010 Funding

-

100

200

300

400

500

600

700

2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038

Year

$ M

illio

ns

6

Long Range Financial Plan

• Identify funding, financing and revenue

required to maintain and repair housing

portfolio

• Multiple initiatives (and investments)

required to control costs and increase

revenues

• Redevelopment requires grant funding

affordable debt and capital investment

Sustainable Funding

• City of Ottawa Operating Agreement

• Rent Supplement Agreements

• Annual Capital Funding plus …

• Grants from Senior Government

• Energy Grants (REI plus)

• OCH Green Fund

• Charitable Foundation

Debt Financing Strategy

• Debt Financing with Infrastructure Ontario

• 2010 Debenture Debt: $18.7 million

• Limited Capacity for Debt Payments

• 2011 Mortgage Re-Financing

• 2 mortgages (on 1 property) paid at renewal

• New debt on 2 properties - payments less

than old debt, fixed rates, 25 yr amortization

• $1.3 million raised for Capital Reserves

2012 Debt Re-Financing

• 8 Pooled Mortgages renew in 2012

• Pay off old mortgages at renewal

• No penalties, modest costs

• New debt with Infrastructure Ontario

• 30 Year amortization, fixed interest rate

• $17 - 18 million for capital repairs

• City of Ottawa guarantees payment (equal to current debt subsidy)

Control Expenses, Reduce Costs

• Improve Purchasing Practices

• Develop Cooperative Purchasing Opportunities

• Standard Requirements, Aggregate Spend

• Utility Retrofits

• Fast Payback on Water and Sewer Bills

• Positive Environmental Impact

Develop Non-Rental Revenue

• Parking: track actual costs (e.g. snow clearing, paving, insurance) and potential income (from tenants and non-tenants)

• Rooftop Rentals

• Communications Agreements

• Marketing and Advertising

• Laundry Services

• Non-Residential Leases

Non-Rental Revenue

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Budget2008 2009 2010 2011 2012

Parking 1,258,994 1,281,439 1,453,943 1,598,032 1,653,900

Laundry 643,249 643,249 643,249 643,249 643,400

Appliance Rental 6,330 5,865 4,890 4,230 3,800

Non Residential Leases 273,560 275,101 276,717 279,237 279,600

Rooftop Leases 146,277 232,912 287,332 341,054 402,000

Marketing and Advertising 1,500 18,093 116,981 95,569 41,200

Total 2,329,910 2,456,659 2,783,112 2,961,371 3,023,900.00

Actual Activity

Leverage OCH Assets

• OCH Vision of Future Housing Portfolio

• Tenant and Applicant Needs

• Operating Costs and Energy Efficiencies

• Capital Repair Requirements

• Market Opportunities

• Develop Public and Private Partnerships

• Identify Communities for Redevelopment

• Limited sale of properties to fund capital contribution for new housing

OCH Financial Strategy

• Ensure accountability and governance

• Improve management through better

reporting, analysis and forecasting

• Work collaboratively with funders, partners

• Develop purchasing and risk management

practices

• Develop internal audit and review

• Resourceful, innovative, tenant-centred