October 2019 – Capital Impact Partners is a nonprofit Community Development Financial Institution focused on advancing issues of social and economic justice through mission-driven lending, capacity building, and impact investing. Since its founding in 1981, the institution has invested $2.7 billion to help people build communities of opportunities that break barriers to success.
Capital Impact provides access to capital for projects in underinvested areas, working directly with borrowers to get the most complicated and impactful transactions done. Typical loans range from $1 million to $7 million and are real estate back loans for community facilities, ranging from predevelopment and construction loans to term loans.
Today, Capital Impact works in underserved communities located in five core geographies: the D.C. metro area, where its headquarters are located; Oakland and the Bay Area of Northern California, New York and New Jersey; Detroit and greater Michigan; and the Texas Triangle (Austin, Houston, and San Antonio). Its primary programs focus on health care, affordable housing, education, healthy foods, dignified aging, and cooperative development.
Jessel Amin, Manager of Investments and Structured Finance at Capital Impact Partners, says that the organization has moved toward a placed-based strategy targeting capital investments across multiple sectors at once to deliver long-term value to underserved communities.
“The availability of quality health care, housing, education, and healthy foods works together to create a stronger community,” said Amin. “We cluster our investments in places where we have roots and are better positioned to leverage a deeper understanding of the context of our work, past investments and relationships, and market knowledge to maximize our impact.”
With mission-driven lending and impact investing as core activities, Capital Impact strives to maintain a diverse capital base to meet its funding needs. Therefore, it relies on a variety of sources to provide funding for its programs, including traditional bank loans, private grants, rated bonds issued in the capital markets, and government funding. The organization became an FHLBank Atlanta shareholder in 2015 as it was looking to further diversify its funding sources and begin focusing on more on-balance sheet lending growth.
Amin says that access to FHLBank Atlanta’s advances helped Capital Impact scale its balance sheet more rapidly between 2015 and 2018 by leveraging the easily accessible, flexible, and lower-cost funds FHLBank Atlanta offers.
“We were seeking funds to increase our lending capacity and, in particular, we were looking for capital that was more flexible than other sources we rely on,” said Amin. “A change in our investment strategy provided us with the specific collateral that enabled us to borrow from FHLBank Atlanta.”
“We can access advances quickly and easily and at a lower cost compared to other sources, which allows us to ultimately pass on any savings to our borrowers,” continued Amin.
Community Revitalization through Housing Preservation
While Capital Impact does not use advances to match-fund specific loans or programs, it has a substantial lending portfolio for housing initiatives, which aligns well with FHLBank Atlanta’s housing finance mission. Guided by the premise that the availability of quality affordable homes is a starting point for building thriving neighborhoods, the organization has invested approximately $300 million to support 38,000 housing units in 250 communities.
“Mixed-use, mixed-income neighborhoods with easy access to employment and social services contribute to the vibrancy and growth of a community,” said Amin.
Through its housing programs, Capital Impact pursues affordable housing preservation as well as new construction with the goal of preventing displacement in neighborhoods that are gentrifying rapidly.
For example, Washington, D.C.’s Department of Housing and Community Development (DHCD) selected Capital Impact to manage the city’s new Affordable Housing Preservation Fund. Capital Impact is leveraging funding from DHCD to deploy at least $20 million in low-cost and flexible financing to private nonprofit and mission-driven for-profit developers that have multifamily housing projects in the District. Amin says that Capital Impact is on track to surpass the program’s first year goal of preserving 750 housing units.
Capital Impact also focuses on developer diversity and inclusion as part of its efforts to create community stability in areas that are increasingly a target for development.
The organization’s Equitable Development Initiative in Detroit provides training, mentorship, and financing to minority developers to help them participate in Detroit’s revitalization. Amin says that this program is an evolution of Capital Impact’s role of just providing financing to also providing capacity building.
With the experience he gained through Capital Impact's Equitable Development Initiative, Damion Ellis is working to turn an abandoned building into multifamily apartments that will include a combination of market-rate and affordable housing options that will further support inclusive growth in Detroit.
Developers participate in the program for approximately two years, and the ultimate goal is to better position them to build the skills and resources to qualify for traditional bank lending. Based on the success of the Detroit program, Capital Impact is expanding the initiative to D.C.
“Programs like these are part of Capital Impact’s inclusive strategy where we look to achieve a balance between investments in a community and ensuring that those long-term residents who have lived and contributed to a community can remain and benefit from its improvement,” said Amin.
Project Spotlight: Worthington Woods
Location: Congress Heights, a residential neighborhood in Washington, D.C.’s Ward 8, a long disinvested area of the city.
Worthington Woods provides 394 units of affordable housing to more than 900 people. It is operated under a Regulatory Agreement that limits rents to no more than 60 percent of area median income based on household size. The Worthington Woods Tenant Association assigned their rights under the Tenant Opportunity to Purchase Act to the Montgomery Housing Partnership (MHP) in exchange for a commitment to preserve the property as affordable, make improvements, and avoid tenant displacement. The housing community is near shops, groceries, and three bus lines. Capital Impact provided MHP with a $6.1 million loan as part of a $40 million transaction to purchase the property.
The Federal Home Loan Bank of Atlanta is not a registered investment advisor. Nothing herein is an offer to sell or a solicitation of an offer to buy any securities or derivative products. You should consult your own legal, financial, and accounting advisors before entering into any transaction.