Stewart Pearson STRATEGIC

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2 Stewart Pearson STRATEGIC MORTGAGE CAPITAL COMPANY LIMITED

3 Quote Quiz Who Said? "When I hear the words Creative Financing I reach for my revolver. A: Hermann Goering B: Mark Carney C: CMHC

4 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

5 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

6 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

7 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

8 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)

9 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

10 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

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12 Innovative Ways to New Housing Housing Services Corporation Regeneration Forum May 29, 2012 Tim Welch Tim Welch Consulting Inc. Phone (519)

13 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

14 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

15 Stretching AHP/IAH funds Land intensifying on existing non-profit and cooperatives with program support Cambridge Kiwanis FAILA, Kawartha Lakes Tilsonburg non-profit 5

16 New Housing Development Concepts Halam Park Co-op Hamilton Haliburton Community Housing Corp Hamilton, Pocket Housing And LHC redevelopment intensification, sale of units 6

17 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

18 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

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20 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

21 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 11

22 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

23 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 13

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25 Fenelon Falls 25 unit addition 15

26 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 10 yr term for $642,000 16

27 Tillsonburg 13 unit addition 17

28 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??

29 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

30 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

31 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

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33 23 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

34 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

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36 OTTAWA COMMUNITY HOUSING CORPORATION Making Every Resource Count HSC Regeneration Forum May 29,

37 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 3

38 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 4

39 $ Millions Repair Backlog with 2010 Funding Year 5

40 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 6

41 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

42 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

43 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)

44 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

45 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

46 Non-Rental Revenue Actual Activity Budget Parking 1,258,994 1,281,439 1,453,943 1,598,032 1,653,900 Laundry 643, , , , ,400 Appliance Rental 6,330 5,865 4,890 4,230 3,800 Non Residential Leases 273, , , , ,600 Rooftop Leases 146, , , , ,000 Marketing and Advertising 1,500 18, ,981 95,569 41,200 Total 2,329,910 2,456,659 2,783,112 2,961,371 3,023,

47 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

48 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