11/25/2013 | By Sarah Borchersen-Keto
As demand for affordable housing grows in the United States, Community Development Trust (CDT) anticipates that the $125 million it recently received under an inaugural federal bond guarantee program from the Treasury Department will be “fairly well distributed across the country,” according to CDT President and CEO Joseph Reilly.
“There are a number of opportunities that have arisen already that need that type of financing,” Reilly told REIT.com. He added that CDT may make as many as 60 loans with the amount. CDT received the largest portion of the Community Development Financial Institutions Bond Guarantee Program’s total allocation of $325 million.
Founded in 1998, New York City-based CDT is a private, hybrid REIT that is active on the debt and equity side of affordable housing projects. It has loans and investments in 41 states.
“Our mission is to provide long term financing both on the debt and the equity side for the preservation of affordable housing, but we also seek to provide attractive returns for our investors,” Reilly explained.
CDT has paid more than $51 million in dividends over the past 15 years, according to Reilly, and the gross market value of its assets is about $760 million. CDT’s net worth stands at approximately $150 million, and since inception, it has provided more than $950 million in long-term debt and equity capital for 33,000 housing units.
In addition to the $125 million bond allocation, Reilly points out that CDT has raised approximately $50 million in capital this year. CDT owns about 5,200 units and is involved on the debt side in about 17,500 units.
“Those two portfolios are performing very well. Affordable housing is very much in demand in almost all markets and the occupancy levels in those 23,000 units are about 96, 97 percent at this point,” he said.
Earlier this month, a Senate Banking, Housing and Urban Affairs Committee hearing addressed the issue of affordable hearing. Ethan Handelman, vice president for policy and advocacy at the National Housing Conference, highlighted the “large and growing need” for affordable housing. Handelman cited data showing that more than one in four working renter households spent more than half of their income on housing costs in 2011, an increase of more than three percentage points since 2008.
Looking ahead, Handelman told the hearing that rental housing demand will rise, driven by the more mobile “Echo Boom” sector and a larger proportion of minority and low-wealth households.
Meanwhile, a report from Harvard’s Joint Center for Housing Studies earlier this year observed that the housing recovery has pushed up rents, while high unemployment has pushed down real income for a broad spectrum of households. These trends have added millions to the number of households struggling to afford housing, the report said.
Reilly noted that CDT sees itself as a long-term player in the business: “We’re not looking to have an exit strategy after a couple of years… we feel that providing long-term capital is an important factor in encouraging the stability of affordable housing.”
CDT’s most recent transaction involves a partnership with Proto Property Services to purchase and rehabilitate a 360-unit property in New York’s Coney Island area. CDT’s equity investment for the purchase and rehabilitation is expected to help preserve affordable housing in an area hit hard by Hurricane Sandy.
Reilly noted that in terms of acquisitions, CDT basically has two targets – either a property that’s coming toward the end of its low-income housing tax credit compliance period or a Section 8 property.
“We’ve got to look for good, cash-flowing projects that make sense for the company and our investors,” said Reilly, adding that geographically, “we’ll go just about anywhere.”