"Mission Money" Keeps Commercial Realty Markets Afloat
Chicago, Illinois, October 8, 2008 – Swooning financial markets continue dislodging all sectors of real estate capital with a vengeance. Funding sources retreat from income-property lending on a daily basis because of liquidity concerns, profitability, overexposure and a host of other factors plaguing this sector. No conventional lenders are immune including banks, life insurance companies, savings institutions and private funding sources.
Yet a few bright stars shine in the otherwise pitch-dark capital markets. These stars are lenders with funding goals and objectives that are not exclusively driven by profits. The Real Estate Capital Institute identifies this group of funding sources as “Mission Money” who provide “Policy Proceeds.” The four highlights of Mission Money are as follows:
1. Purpose: Mission fund objectives vary focusing on public policy (e.g., affordable housing, urban renewal), labor creation, specific geographic investing and property types to name a few. Typical examples include generating jobs through union labor funds, constructing affordable apartments and reinvigorating economically deprived commercial areas. Often times, many of these objectives are bundled – e.g., affordable housing with union labor in redeveloping urban “infill” areas endowed with heavy tax incentives.
2. Property Types: Unlike pure non-profit funding sources, Mission Money exclusively targets income properties, namely commercial and multifamily properties.
3. Policy Proceeds: Direct funding structures include construction, interim and permanent loans as well as equity contributions. Popular indirect fundings include tax credits, tax breaks and rebates.
4. Sources: The lending arena includes federal governmental agencies (e.g. Freddie Mac, Fannie Mae, FHA and the Treasury) and local municipalities (tax increment districts), endowments, pension funds, life companies and private capital providing funds directly (construction and permanent funds) and indirectly (tax credits).
According to John Oharenko, an industry veteran who serves on the advisory board of The Real Estate Capital Institute®, “In 2009 and 2010, Mission Funds will play an even more important role in supporting real estate capital markets as many conventional funds stay sidelined.” He adds, ” Even as conventional markets recover, Mission Money will remain a reliable source of funds for developers, investors and others willing to learn about and implement these targeted programs.”