low income investment fund brian prater, director, california lending and strategic opportunities...
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Low Income Investment Fund
Brian Prater, Director, California Lending and Strategic Opportunities
June 28, 2010
Charter School Facilities InstituteNational Charter School Conference
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Who We Are
• National CDFI headquartered in San Francisco with offices in Los Angeles, New York and Washington D.C.
• Has participated in projects in 26 states, but primarily focuses on West and East coasts.
• Makes loans to build affordable housing, charter schools, childcare facilities, and other community facilities
• Business lines include direct lending, structuring loan participations, capital raising, fund creation/management and loan servicing
• Has been allocated $139 million in New Market Tax Credits since 2007
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What We’ve Done
• $740 million deployed since inception (1984)• $5.1 million of additional investments leveraged• Created and supported:
– 54,000 units of housing– 123,000 spaces for child care– 2.5 million square feet of commercial or facility
space– 44,000 spaces for school students
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General Underwriting Guidelines
• 5 C’s of Credit
– Character
– Capacity
– Capital
– Collateral
– Conditions
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General Underwriting Guidelines
• Analyze the Following:
– Borrower/Tenant
– Project Financials
– Real Estate
– State and Local Climate
– Other External Conditions
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Borrower Characteristics:Management
• Management analysis is a critical underwriting area for charter school loans
• Important factor in borrower’s ability to maintain and increase cash flow (primary source of repayment)
• Look for experience:– Management capacity– Board capacity– School principals– Teachers
• Understand the growth plan
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Borrower Characteristics: Management
• What to look out for:– Hostile relationship with local
District/Authorizer– Key person/founder risk– Tension between board & management– Insufficient resources to handle growth
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Borrower Characteristics:Program Quality
• What to evaluate: – Performance (Academic)– Strength of Parent Organization – Mission– Curriculum– Teacher/Staff Quality– Educational Resources– Assessment– Target Population
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Borrower Characteristics:Program Quality
• What to look out for:– Difficulty of retaining quality staff
– High student turnover
– Program experience/knowledge may be centralized
– Low probability of charter renewal/revocation
– Insufficient community and/or political support for expansion
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Borrower Characteristics:Financial Capacity
• Balance Sheet– Examine ratio of Debt to Equity
– Look at trends in Unrestricted Net Assets
– Analyze liquidity
• Contingent liabilities– How many other guaranties is the Guarantor providing?
– Is the guaranty meaningful?
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Borrower Characteristics:Development Capacity
• Key questions: – Has the Borrower ever purchased a property?
– Has the Borrower ever developed a building?
– Is the Borrower retaining a development consultant?
– Check references
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The Project:Assessing the Real Estate
• Location• Value – Loan to Value• Lien Position• Zoning and Entitlements• Highest and Best Use/Other Uses• Environmental Issues• Local Charter School Market
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The Project:School Operating Pro Forma
• Revenues: Public, Private, Philanthropy• Expenses: Personnel, Operating, Facilities• Enrollment and Average Daily Attendance (ADA)• Projections vs. Historical Operating Expenses• Debt Service Coverage Ratio and Other Measures• Trends and Growth Patterns• Turnover and Waiting Lists• Sensitivity/Refinance Analysis
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Contact Us
Low Income Investment Fund www.liifund.org
Judith Kende Brian PraterDirector DirectorNew York Region California(212) 509-5509 x.11 (415) [email protected] [email protected]