m ortgage - hscorp.ca · no borrowing/carrying costs or property taxes on land ... unexpected...
TRANSCRIPT
MMORTGAGE ORTGAGE CCAPITAL APITAL CCOMPANY OMPANY LLIMITEDIMITED
STRATEGICSTRATEGICMMORTGAGE ORTGAGE CCAPITAL APITAL CCOMPANY OMPANY LLIMITEDIMITED
STRATEGICSTRATEGIC
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: [email protected]
www.twcinc.ca
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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.
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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
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Stretching AHP/IAH funds Land – intensifying on existing non-profit and co-
operatives with program support
Cambridge Kiwanis
FAILA, Kawartha Lakes
Tilsonburg non-profit
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New Housing Development Concepts Halam Park Co-op Hamilton
Haliburton Community Housing Corp
Hamilton, Pocket Housing
And
LHC redevelopment – intensification, sale of units
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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
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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
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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
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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
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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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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 [email protected]% 10 yr term for $642,000
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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
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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
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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
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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
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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.
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Making Every Resource Count
HSC Regeneration Forum
OTTAWA COMMUNITY HOUSING CORPORATION
May 29, 2012
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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
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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
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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
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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