Community Finance Ltd launches a community programme for investors today, offering a $40 million bond to enable the Salvation Army to build 118 homes for vulnerable people throughout Auckland.
The first 52 units, in Royal Oak, have been completed and are fully occupied. Others will be built at Flatbush & Westgate, where preliminary works are underway.
Community Finance was established last year with capital from 4 stakeholders: the Lindsay Foundation, the Wilberforce Foundation, Christian Savings & the Matua Charitable Trust. Chief executive James Palmer said its aim was to channel low cost finance to community housing providers, because successive governments & the private sector hadn’t been able to meet New Zealand’s housing need.
“Our strategic intent is to position Community Finance as the investment vehicle of choice for committed funders who wish to make a difference to the provision of housing in New Zealand. Community Finance is a new impact investment platform designed to connect investors wanting to make a positive social, financial or environmental impact with those who are actually making that impact, such as charities, socially minded business or community housing providers.”
The way it works
Community Finance will issue a community bond to investors for individual projects. These bonds are secured by a first charge over the borrower’s land (&/or other assets) and will pay interest on a quarterly basis.
These securitised bonds enable funds to be raised by multiple investors who share the same specific pool of security. Community Finance passes these funds through to the borrower, aiming to do so in the most cost-effective way so borrowers enjoy below-market rate funding.
“Our finance model enables investors, philanthropists & foundations to invest in a meaningful & ethical way to help develop thriving, diverse & inclusive communities. We are committed to giving Kiwis a helping hand into their own home and working to meet the growing need for safe, secure & affordable homes.”
Through the Community Finance programme, “residents will not only enjoy brand new stable accommodation but will also receive the benefit of wrap-around services such as financial literacy training, counselling services, addiction support care (if required) & other social services.
“We will be paying investors 2%/year and the Salvation Army will be borrowing at 2.99%/year, making their project cashflow positive from day one. The financial savings here will enable the Salvation Army to increase its capacity to develop further housing to the most vulnerable people of New Zealand society.”
Community Finance charges less than 1%/year to manage both the investments & lending. Investors receive regular reports on the direct social impact of their investment as well as a financial return of between 2-2.5%/year – similar to the financial returns on corporate bonds & term deposits.
Attribution: Community Finance release.