CHICAGO—As reported last week in GlobeSt.com, the Community Investment Corp. has just begun raising another $200 million for an ongoing lending facility that which will finance the acquisition and rehab of affordable privately-owned rental housing in the metro area over the next five years. CIC president Jack Markowski tells GlobeSt.com that the group is reaching out to many potential new investors. CIC last did a similar round of fundraising about five years ago, and signed a five-year agreement with 40 investors in 2010.
New potential investors on his target list include major financial institutions like TCF Bank and Wells-Fargo, and smaller community banks such as North Community Bank, Community Bank of Oak Park-River Forest, and many others. Markowski, a former commissioner of housing for Chicago, says Fannie Mae and Freddie Mac are other possibilities. “Fannie Mae did not renew with us last time, but I want to have another go at them.”
“We’ve already had consultations with our top 11 investors, those that have invested over $10 million,” he adds. “We surveyed them, gauged their appetite for renewal, and are now finalizing the new agreement.” At $72 million, Bank of America was the largest investor in the last round, and CIC has already received new commitments from Chase, Northern Trust, BMO Harris Bank, PNC Bank, the Wintrust Financial Corp., the PrivateBank and MB Financial Bank.
Markowski expects that once they secure the new funding, CIC will make about $40 million in new loans per year, a modest boost from the $30 million in loans he expects to make this year. The group was founded in 1984, and has provided more than $1.2 billion for 55,000 units of affordable housing in low-to-moderate income communities. A typical loan for CIC is about $500,000 for a 20-unit building.
“We were originally created as a vehicle for the banks to reach these territories,” he adds, and participating “also helps them service their Community Reinvestment Act requirements as well. We have more expertise in this type of lending,” so many institutions, even the large ones, have come to depend on CIC. “Some of these banks don’t want to take on loans that are under $10 million.”
However, according to Markowski, the other thing they get from the CIC loan program is “positive returns.” In today’s low-interest environment, returns are about 3.3%, but over the last 25 years, CIC investors have averaged a 6.3% return.
“There is nobody else doing this, at least on our scale,” ensuring that the loan program plays a key role in the area’s housing economy. “The vast majority of affordable housing is not public housing, and it’s not coming from tax credit deals. It’s the ordinary corner apartment buildings and the six-flats. About 75% of affordable rental housing in the US is privately-owned affordable housing.”
“People think you lose affordable housing through gentrification, and in the stronger neighborhoods you do have rising rents, but in the weaker neighborhoods, the real threat is one of deterioration and disinvestment.”