Sacramento Business Journal
Nehemiah
Boosts Development Power
Mike McCarthy
July 29, 2003
Sacramento Business Journal
Nehemiah Corp., a Sacramento nonprofit that helps
people buy houses, is restructuring the way it invests in development
projects to multiply the number of ventures it can help get off
the ground.
Nehemiah thinks its Community Reinvestment Fund
could generate funding for 47 development projects during the
next few years, an 1,100 percent increase over the fund's tally
of four projects over the last four years.
"We're always interested in Nehemiah or others
investing in redevelopment," said Steve Young, the Sacramento
Housing and Redevelopment Agency's director of community redevelopment
in the county. "It takes an understanding of the area, and
that eliminates a category of investors.
"They come out of an ethic of working with
the lower-income community," he said, "so you don't
have to convince them those areas are worth their time."
In its down-payment assistance program, launched
in 1997, Nehemiah gives qualified homebuyers a down payment of
up to 6 percent of a home's sales price. After the sale, the
seller, mortgage broker or real estate agent gives an equal sum
to Nehemiah, plus a fee. In return, the house sells for the full
asking price.
In 1999, the nonprofit set up its Community Reinvestment
Fund to make equity investments, putting up $25 million of its
own cash as the fund's capital. The goal was to invest in socially
valuable projects, often redevelopments in middle-income and
poor neighborhoods. The fund invested in four ventures:
- $1 million to Kevin Johnson's St. Hope Development
Corp. for a mix of retail, housing and offices in Oak Park.
- $6.5 million to redevelop the old Tri Valley
Growers cannery on 7th Street and Richards Boulevard.
- $77,600 to redevelop an old Victorian house on
Broadway in Oak Park.
- About $12 million for a family center connected
to a church in Antioch.
Nehemiah liked the results. But, in retrospect,
the group felt it could do better, thus the new structure for
the fund, said Peggy Jones, the fund's manager.
Nehemiah's plan is to keep the remaining capital,
$5.5 million, in the fund and use it as leverage to solicit banks
for loans. It may seek more capital from various other sources.
The total kitty would become part of Nehemiah's revolving loan
fund.
At the same time, the fund will limit the maximum
loan to around $750,000, so that more loans can be made, boosting
more projects, she said.
The fund's loan terms would be short, five years,
to fund more projects and help repay the banks. The loans would
typically be "gap" financing, or money used to close
the difference between a project's main loan, the investor's
equity and the project's total cost.
Jones estimated that during the next three years,
Nehemiah could make loans on 47 projects with a total development
cost of about $40 million. If the fund went well, it could make
loans on development worth $90 million or more in five years.
To make those marks, she said she aims to raise $13 million from
institutions during the next three years and up to $25 million
in five years.
The fund would make loans to nonprofits for a variety
of projects, including affordable housing and community service
ventures, such as child-care and seniors centers, as well as
medical-dental projects and churches. Lower income areas would
be the prime target.
Jones estimated that about two-thirds of the money
would go toward housing projects, while up to 25 percent would
be for service facilities, and the balance would be for economic
development projects like St. Hope.
The new venture is unrelated to Nehemiah Progressive
Housing Development Corp.'s lawsuit against Don F. Harris, Nehemiah's
founder, alleging fraud and self-dealing. Nor are there new developments
in that lawsuit, said Peter Shack, Nehemiah's attorney. Harris,
who has left Nehemiah, has called the suit baseless and false,
and has said he will fight it vigorously.
Redevelopment official Young added that he will
wait to see what kind of loan terms the Community Reinvestment
Fund offers.
"The devil is in the details," he said. "It
depends on the return they need. There's always a need for development
money. It just depends on the cost to get it."
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