Tangible Impact: Financing the YWCA Elm Centre
The YWCA Elm Centre has received a great deal of attention for its size, unique focus on women, and sustainability aspects. However, there is another aspect of this project that deserves attention: the use of social finance by issuing a promissory note, referred to as a community housing bond.
Imagine being in one of the following situations:
- You're a single mother with two kids going to elementary school.
- You're struggling to pay rent with your minimum wage job.
- You suffer from chronic depression and have no partner.
Now imagine being in all three at once.
The YWCA Elm Centre, a 300-unit affordable housing project that launched in May, aims to support women facing exactly such challenges - it is targeted at single low-income women, women with children, women living with mental health and addiction issues and families of Aboriginal ancestry. The complex, which occupies an entire city block, is located at the intersection of Elm and Elizabeth Streets and consists of three modern towers and a heritage building surrounding a courtyard.
The Elm Centre is not just a permanent affordable housing complex - it is also a community hub, with a 180-seat auditorium, reception hall and courtyard, a number of community meeting rooms, and even a restaurant. Wigwamen Inc., a First Nations support organization, and the Jean Tweed Centre, which supports women with addiction-related problems, also have space here. It's a great place for anyone to live, with apartments that are available for rent at under market value, in the heart of downtown, in a safe and secure child-friendly complex.
Clearly, this is a project that has the potential to transform the lives of hundreds of families.
Accordingly, then, the YWCA Elm Centre has received significant coverage in the press since its launch in late May. There has been coverage on CBC, Metro Morning and the Globe and Mail, along with features in the Toronto Star, Inside Toronto, MSN and Canadian Architect. Music director and professor Stephanie Martin even composed and performed, along with a group of volunteer sings, a commemorative choral piece entitled "A Place Where I Am Home”.
Much of this coverage has focused on the following aspects:
- Size and scale - this is one of the largest affordable housing projects built in Canada in the last decade
- Women-centred - there is a unique focus on building a residential community for women, and
- Sustainability - the building has been designed to meet the LEED silver standard, with five green roofs and two rooftop gardens, and uses a geothermal/in-slab radiant heating and cooling system, one of the largest of its kind in Canada.
There is yet another unique and impressive aspect, however, which has not received as much attention as it deserves: the use of social finance as part of the overall financing (approximately $80 million). The YWCA Elm Centre received approximately $37 million in financing and incentives from the federal, provincial and municipal governments, and a loan of $26 million from Infrastructure Ontario. This left a shortfall of approximately $16 million, most of which was covered through a highly successful fundraising campaign.
As part of the financing strategy, the YWCA chose to try an innovative approach and issue a community housing bond (promissory note) worth $1 million, setting an example of leadership in adopting social finance.
As Hadley Nelles and Adam Spence described in a recent blog post, affordable housing is an area where there is clear need and tremendous opportunity for social finance to play a role. (Read "A Home for Social Finance in Social Housing for more on why impact investors are interested in affordable housing, as well as several interesting examples.)
Indeed, many social housing initiatives have leveraged social finance over the years. This, however, is a particularly interesting example for a number of reasons.
The bond was set at a 4% fixed interest rate over 10 years, and was purchased by the Muttart Foundation, a private foundation based in Edmonton. This deal presents significant benefits for both the investor and the investee.
The Muttart Foundation is able to support its mission, as well as support significant social and environmental impact, as described above. This is not through a grant, but through an investment that effectively recycles the charitable value of the dollars and provides a real financial return. Perhaps most importantly, this is a good investment to make. The bond offering had all the hallmarks of a solid investment proposition, regardless of the social impact - a strong management team, good financing, and a reasonable offering.
As Bob Wyatt (executive director of the foundation) said, "The Directors believe that this is a prudent investment of its assets. The bond will pay a reasonable rate of interest and our assessment is that it is a relatively low-risk investment."
The YWCA, apart from successfully raising $1 million, is also able to derive significant cost savings of over half a million dollars, as alternative financing presented a higher cost of borrowing. The YWCA has also shown leadership in social finance, and indeed the broader social sector, by tapping into a new source of revenue. It is also interesting to note that many of the economic and community benefits of the project derive directly from designing with a focus on environmental sustainability.
The YWCA Elm Centre bond also demonstrates that it is possible to structure small scale deals for affordable housing providers. Most deals are far larger, such as the $450 million Toronto Community Housing bond issuance for the Regent Park revitalization project. This is often because of the difficulty with achieving cost-efficiency in smaller deals. The MaRS Centre for Impact Investing played a role here, by providing advisory support to the YWCA on structuring the bond offering.
A final point of note is the role of partnerships in this project - multiple levels of government, funding agencies, charitable and nonprofit organizations, independent institutions and private investors came together to successfully complete the development of the YWCA Elm Centre. This is an excellent example of collective impact as a result of broad cross-sector collaboration, more of which is needed in order to tackle complex problems such as homelessness.
For at the end of it all, it's about the little boy who bounced into his family's new apartment, and turned to his mother in surprise and delight: "Mom, I get a bed!"
Photo credits: http://www.flickr.com/photos/adamcnelson/6655498603/