January 2016 cic DEVELOPMENTS

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1 January 2016 cic Community Investment Corporation Chicagoland s Leading Multifamily Rehab Lender DEVELOPMENTS A Community Development Financial Institution Member, Federal Home Loan Bank of Chicago A 501(c)3 Nonprofit Organization Recipient of the 2012 MacArthur Award for Creative and Effective Institutions In 2015, cic programs invigorate Chicago-area neighborhoods In FY2015, CIC continued the important work of providing badly needed financing to small entrepreneurs for the acquisition, rehabilitation and preservation of affordable housing. This financing included $30 million in loans and grants for 1,342 units of affordable rental housing in 28 Chicago-area communities to households at or below 80% of area median income. In addition, CIC played a direct role in preserving over 7,300 additional affordable apartment units for a total of 8,650 affordable units preserved in FY2015. This was made possible through CIC s array of creative programs and interventions, as well as the dedication and hard work of the CIC staff, board of directors and investor partners. The programs of CIC and its subsidiary, Community TAKEN TOGETHER, Initiatives, Inc., included the Multifamily Loan Program; Energy Savers loans and grants; 1-4 Unit CIC PROGRAMS Rental Redevelopment loans; the Troubled Buildings HELP TO CREATE Initiative; Property Management Training; and The HEALTHIER Preservation Compact. Through these programs, activities in neighborhoods included direct lending, buying and NEIGHBORHOODS selling troubled properties, housing court receiverships, and working in partnership with government agencies and neighborhood groups to preserve affordable units in areas where a strong housing recovery is pricing out low- and moderate-income residents. As CIC President Jack Markowski said when discussing CIC s 2015 successes, Our various financing programs allow CIC to address multifamily and 1-4 unit buildings, provide energy efficiency, and tackle vacant and troubled buildings. Taken together, these programs help to create healthier neighborhoods. The commitment of investors to CIC continued in FY2015: CIC renewed the Multifamily Note Purchase Agreement in March 2015, with 37 investor banks committing $200 million to multifamily lending over the next five years. The CDFI Fund awarded CIC a $1.25 million grant to support financing for affordable housing throughout the Chicago area. CIC was awarded a $9 million program-related investment from the Federal Home Loan Bank of Chicago and membership in the FHLBC, opening up new avenues for capital and partnership. See inside for highlights of our FY2015 programs and successes. 222 South Riverside Plaza, Suite 2200 Chicago, IL

2 cic programs & successes in 2015 Multifamily Loan Program makes a difference The Multifamily Loan Program, CIC s longest standing program, recently completed its 31 st year. Since 1984, the program has loaned more than $1.2 billion to acquire, rehab and preserve 55,000 units of affordable housing. In FY2015, CIC approved 53 loans totaling $23.1 million under the Multifamily Loan Program. The loans financed the acquisition and rehab of 706 residential and 24 commercial units. All of the units were affordable at 80% of area median income, and 67% were affordable at 50% of area median income. A CIC financed building can create tremendous change on a block and in a neighborhood. In some areas, multiple CIC-financed deals occur in close proximity, compounding the positive change. One example of a deal financed by CIC in FY2015 which fits this description occurred in Chicago s Greater Grand Crossing community. In 2014 and 2015, CIC began noticing problems with two developments totaling more than 100 units in the 7600 block of South Stewart. Open air drug trade was a major problem and had led to vacancies and sub-par units. The existing owners struggled with handling the external elements that hampered their ability to offer good quality housing. Kevin Nugent and Eric Green of WPD Management had made a name for themselves by acquiring 6- to 24-unit buildings needing rehab and bringing them back online with quality units occupied by stable tenants. At meetings of the South Shore Community Investors Association, Kevin and Eric learned from CIC staff of the opportunity to acquire the 62-unit complex of buildings on the north end of the block at 76th and Stewart. After quickly stabilizing the first property, Kevin and Eric were approached by the owners at the south end of the block about purchasing their 45-unit property as well. Undaunted at the prospect of owning the entire west side of the block, Kevin and Eric felt it presented them with the opportunity to have a significant impact on the neighborhood. Less than a year after acquiring more than 100 units in the area, WPD Management became the catalyst for the complete stabilization and revitalization for this part of the Greater Grand Crossing community. Energy Savers lowers the cost of comfort Since 2008, CIC and its partner Elevate Energy have offered multifamily building owners the Energy Savers program to reduce operating costs by conserving energy and cutting utility bills. By increasing energy efficiency, building owners can more easily provide comfortable units with affordable rents. On average, they achieve savings of 30% in energy use and cost. Energy Savers has become the most successful program of its kind in the country. Since the program s inception, 133 loans for $15.8 million and 58 grants for $2.8 million have been approved, representing 6,500 units. On average, CIC provides financing of $2,850 per unit to fund energy conserving retrofits. In FY2015, CIC approved 11 loans totaling $627,000 for 222 affordable housing units. CIC also expanded its energy retrofit loan offerings to include Multifamily On Bill energy loans. These loans are repaid as part of a building s monthly utility bills and not secured by mortgages, thus providing energy retrofit financing for properties that are unable to take secured subordinate debt. CIC offers On Bill loans for properties with 5 to 50 residential units and for loans of $20,000 to $150,000 at a fixed rate for fully amortizing terms of up to 10 years. In addition to helping rental properties, the On Bill energy loans also offer financing to centrally-heated condo buildings. The Paxton Condominium at 68th and Paxton in the South Shore neighborhood took advantage of the On Bill loan in The 18-owner association had a failing steam boiler which cost approximately $5,800 monthly in gas and water bills. 2 CIC DEVELOPMENTS

3 A special assessment for the cost of the boiler would have been a prohibitive expense for some of the owners, several of whom live on fixed incomes. The On Bill loan made sense, with the projected savings being equal to or greater than the monthly loan payment. Furthermore, the new steam boiler qualified for a cash rebate from the utility company, which went directly to bolster the association s cash reserve. Work on the Paxton Condominium was completed before cold winter weather arrived, and the association members will enjoy two months of savings before the first loan payment appears on the utility bill. They can rest easy knowing that the boiler is operating safely and efficiently. 1-4 Unit Rental Redevelopment loans break new ground CIC secured investor commitments for the 1-4 Unit Rental Redevelopment Loan Program in 2014 and approved its first loans in The program provides long-term financing for investor-owned buildings in strategic targeted neighborhoods that have undergone foreclosure and abandonment. CIC launched the program after analysis by The Preservation Compact demonstrated that no lender or program provided financing for owners to redevelop groups of 1-4 unit buildings, which constitute nearly half of Chicago s rental housing stock. The program fills this financing gap, transforming vacant and distressed 1-4 unit buildings from eyesores into affordable rental housing, and encouraging private investment in neighborhoods that need it the most. The 1-4 Unit Rental Redevelopment Loan Program was capitalized with $26 million from 11 financial institutions and the MacArthur Foundation, as well as a loan loss reserve from the Illinois Attorney General s Office. During the program s first full year of lending, CIC approved 12 loans for $5.5 million for buildings with 105 residential units. Two loans totaling $884,000 were granted in FY2015 to partners Mark Ainley, Bryan Sonn and Cliff McCue. Located on Chicago s South Side, the financed properties included seven single-family homes, two 3-flats and a 4-unit building. The partners used their own financial resources to acquire and rehab buildings, and CIC s 1-4 Unit Rental Redevelopment Loan Program to recapitalize their investments. GC Realty & Development, the partners company, manages the properties. GCR&D manages over 500 residential units and almost a million square feet of commercial real estate space. The operation has seen significant growth in the last seven years and contributes much of its success to its ability to quickly restore troubled buildings into income-generating properties. The Preservation Compact convenes public, private, nonprofit leaders Led by CIC, The Preservation Compact was originally convened and funded by the MacArthur Foundation. The program brings together the region s public, private, and nonprofit leaders to promote policies to preserve affordable rental housing in Cook County. Through a leadership committee and working groups, The Preservation Compact focuses on expanding energy retrofits, increasing financing for 5- to 49-unit buildings, developing preservation strategies for 1-4 unit buildings, and coordinating public agencies to preserve at-risk publiclyfunded properties. Three highlights of FY2015 include: Working with utility companies to allocate $11.5 million in increased funding for On-Bill financing for energy retrofits; Raising the issue of the lack of available financing for 5- to 49-unit buildings at the national level, resulting in new initiative from HUD and FHFA; and Preserving five properties with 700 units through the collaboration of a number of government agencies. Convening government agencies and neighborhood groups to preserve affordable housing is hard but important work. In FY2015, The Preservation Compact worked with a wide variety of stakeholders on buildings that would likely lose affordable units in neighborhoods. An example of this work was the Presbyterian Homes, located on Chicago s North Side. Last fall, it looked like these three affordable senior properties with 111 units were about to be lost and elderly residents displaced when Presbyterian Homes announced plans to sell to market rate developers. The Preservation Compact worked closely with a number of partners to convince the owner that an affordable housing proposal could work, and identified resources to preserve the affordable housing. CIC DEVELOPMENTS 3

4 After much involvement from neighborhood groups, public officials and developers, the Chicago Housing Authority stepped forward. CHA concluded that the most efficient way to preserve this housing was for CHA to buy the buildings directly and add them to its stock of public housing in areas that are otherwise not affordable to low-income residents. The purchase appears to be headed toward a positive resolution. This experience demonstrates the impact that a multifaceted effort of community leaders, elected officials, for-profit and not-for-profit developers, and public agencies can have on preserving affordable housing where it is most needed. The Troubled Buildings Initiative targets areas in need CIC began the Troubled Buildings Initiative in It was administered by CIC s affiliate, Community Initiatives, Inc. Through TBI, CII uses code enforcement to improve the physical condition and management of multifamily buildings. The buildings referred to TBI are typically properties most in need of repair, posing the worst problems to their communities. TBI has taken action on 830 buildings with 14,701 housing units, and 488 buildings with 9,807 units have been recovered. In FY2015, the program recovered 81 buildings with 1,474 units and addressed problems at an additional 52 buildings with 732 units. Buildings with deep financial problems, serious social problems such as gang activity, and numerous code violations are often too expensive for private developers to take on, putting the buildings at risk of abandonment and demolition. Because such buildings are located primarily in low-income communities, the net result is often a loss of affordable units in neighborhoods that need them most. Through CII s direct intervention strategies, neighborhoods become safer places to live and do business. The building at 3550 West Franklin was part of CII activities in FY2015. This 17-unit building had been converted fraudulently to condos and was in great disrepair. CII was appointed limited receiver of the building to vacate it and keep it secure. Through TBI Housing Court efforts, the building was then deconverted from condos, and CII was able to market and sell the property. The new owner utilized the TIF Vacant Multifamily Rehab Program, which is also administered by CIC and allows developers of multiunit rental housing to use TIF funds in designated districts. The new owner rehabbed the building, which is now occupied and well managed. The property is no longer an eyesore, and it provides tenants with safe, quality, affordable units. Property Management Training offers tools for success In July of 1998, CIC launched its Property Management Training program, an initiative designed to provide information and resources to owners and managers of multifamily rental properties. The program s centerpiece is the four-evening course entitled The Basics of Residential Property Management. PMT also offers sessions that concentrate on a single topic, such as boiler repair or tenant screening. Since its inception, PMT has provided training to more than 15,000 owners and managers. In FY2015, CIC presented 70 training sessions attended by 1,405 current or prospective managers and owners of affordable housing. Staff also answered over 1,700 requests for assistance coming directly to CIC or referred to CIC by Chicago s 311 hotline for landlords and building managers. A host of impressive local leaders in real estate instruct portions of the Property Management Training courses. One leader who has participated as an instructor for many years is F. Willis Caruso of the Fair Housing Legal Support Center & Clinic at The John Marshall Law School. Professor Caruso provides invaluable information for property managers on fair housing law, prohibited acts, protected classes, discrimination, and other fair housing issues. Professor Caruso has extensive experience in private practice. He also has served as General Counsel of the CHA and of the Leadership Council for Metropolitan Open Communities. CIC DEVELOPMENTS 4

5 Reflecting on a successful 2015, moving forward in 2016 Jack Markowski This issue of CIC Developments provides an overview of CIC s housing and community development work in We say that CIC is Chicagoland s Leading Multifamily Rehab Lender, and multifamily rehab lending is certainly the foundation of our activity. But CIC does so much more. CIC lends for acquisition, rehab, and to conserve energy in Chicago s multifamily buildings. CIC also... Lends to investor-owners of 1-4 unit properties in areas where there are a great number of foreclosed properties and little homebuyer demand. Trains landlords to effectively manage their properties to provide the best experience for their residents, their communities, and their investors. Works with the City of Chicago to aggressively pursue code enforcement against negligent property owners and to push for new ownership, when necessary. Partners with the City to pursue coordinated reinvestment in targeted low- and moderateincome communities. Re-assembles distressed condos into viable multifamily properties and moves 1-4 unit and multifamily buildings into the hands of new owners who rehab them and provide strong management and maintenance. Advocates and coordinates policies to preserve affordable rental housing, whether by promoting investment in low- and moderate-income communities or by working with public agencies to preserve affordable housing in strong markets. Obviously, CIC does none of this alone. In every one of our activities, we work with a variety of partners to promote affordable housing and community development. Our partners include investors in our programs, public officials and agencies (especially the City of Chicago), affordable housing advocates, and property owners and managers. And perhaps our most important partners are our borrowers, who dedicate their lives and their financial resources to owning and operating affordable rental housing throughout the Chicago area. We are grateful to all of our partners, who enable us to successfully pursue our wide range of activities. And as we begin 2016, we want to ask you: What can we do better? Is there a financial product that you d like to see us offer, or do we need to tweak one of our current products? Are our pricing and loan terms competitive? What can we do to improve the customer experience and the communication from CIC? What are the financial needs that are currently not being met in our communities? Drop us a line. Let us know what we can do to improve our service. We look forward to working with our partners to expand our impact on affordable housing and community development in Jack Markowski CIC President CIC DEVELOPMENTS 5

6 cic Corporation 222 South Riverside Plaza, Suite 2200 Chicago, IL Community Investment Non-Profit Org. U.S. Postage PAID Chicago, IL Permit No What s Inside January 2016 cic programs invigorate neighborhoods page cic programs and successes page 2 cic President Jack Markowski, moving forward in 2016 page 5 Contact cic for all your multifamily financing needs! MORTGAGES FOR BUILDING PURCHASE AND REHAB QUICK ACQUISITION LOANS 1-4 UNIT RENTAL REDEVELOPMENT PROGRAM ONE-OF-A-KIND ENERGY RETROFIT LOANS COMPETITIVE RATES AND TERMS cic - CHICAGO S LEADING MULTIFAMILY REHAB LENDER Our attentive, professional staff will help you meet your investment goals. CONTACT A cic LOAN OFFICER: Follow CIC on Twitter