Agenda - Council - 06/28/2016 - Laserfiche WebLink

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Assess feasibility nfrisk-sharing Sfraftg'8S Achieving a more socially and economically integrated region and narrowing regional disparities through purposeful housing investments means shifting paradigms and thinking big. In particular, investors in market -rate ortax credit properties may need assurance— in some form of risk mitigation—toexpand the types of projects in which they will invest. One possible means of addressing these concerns would be to use the financial strength of multiple organizations, orthe financial strength of multiple projects, to create a risk pool. Conceptually, this would function similar to risk pools used by insurance companies, which band together to guard against catastrophic risks such as floods or earthquakes. But risk pools for housing investments would protect the investors' interest, as opposed to self-interest as with insurance company risk pools. Contributors would be financially and mission -motivated stakeholders who have avested interest inthe project -specific and larger regional outcomes. If claims against the pool were required, the individual loss to Specific contributors would be mitigated. Girni|8r|y. 8 portfolio of individual projects —all with individual risk profiles but critically including "o|arn dunk" projects that receive the highest tax credit pricing or attract broader capital interest in proven sub -markets —may be a means toreduce risk byspreading itacross projects. Thioapproachrneetothekeyconceptofriok pooling, where demand variability is reduced if demand is aggregated across locations, increasing the likelihood that high demand from one customer will be offset by another. Another potential means to assuage investor concerns would befor the same mission -oriented participants to provide aforrn of direct investment guarantee based on the anticipated appreciation 0fthe worth of property or properties involved and their intended use. While the overall utility and practicality of these strategies is admittedly unknown at present, their regional focus and potential application are worth exploring in the face of our region's significant housing challenges. In addition to the primary goal of attracting investor interest in alternative types of opportunities, an extremely powerful signal would be sent about regional cooperation and innovation that can effect real change. Finally, a concerted effort by one or more mission -oriented government or nonprofit funderoto provide "mezzanine" financing tailored to individual development projects and circumstances could help mitigate risk and encourage development. In essence, a mezzanine lender would occupy a middle position in the 'capital stack' and would contribute low-cost debt 0requity, or both. Such 8 lender would negotiate with other parties in the transaction tocoordinate: * Whose money will beused when inthe project tirne|ine. * When and under what circumstances equity investors will have their capital and any profit paid. * Who will suffer losses and inwhat amounts should the project fai|toreachconotruction and operating utageu, goes into foreclosure or conservatorship, or has a change in ownership and management. FOUR: Opportunities for Collaboration