The City of New York Office of the Comptroller Economically Targeted Investments Kathy Martino June...

The City of New York Office of the Comptroller

Economically Targeted

Investments

Kathy Martino

June 10, 2008

Overview

All Five Systems, Comptroller is Advisor

Established in 1982

Characterized by:

Guiding Law – DOL

Achieving Risk Adjusted Market Rates of Return

Filling Capital Gaps

Targeting the Five Boroughs

Creating Partnerships

Strategy for Success

Trustees who champion program key to approval process

Programmatic Structure deflects political pressures

High quality investment vehicles

Transparent and rigorous RFP process

Low asset allocation risk

Utilizes available partners such as HPD, SONYMA etc.

Structure: Comptroller Staff plus consultants

ETI Program 1982 - 2002

Debt Based

Ginnie Mae Red Lined Neighborhood Aid

Public/Private Apartment Rehabilitation Program(PPAR)

SBA 7a Program

Project Home

All 100% guaranteed

2002 - Present

Program Expanded

Permits investments across asset classes

Targets 2% of Assets

Easier access for proposers – rolling non-competitive RFP

Portable track records, custom benchmarks

Current Investments

PPAR – Expanded from 2 – 8 LendersBank and Not-for-Profit

The AFL-CIO Housing Investment Trust

Community Preservation Corporation Revolver

Access Capital Strategies/Voyageur

Erasmus Private Equity Fund

Systems Allocate$$$$$$

Capital isdeployedhousing

units createdor preserved

100% SONYMAGuarantee (P&I)Since 1978 total

claims only $1.7 millionno losses for Systems.

Systems commit to buy loan at

lock-in interest rate

Lendersmake construction loan as permanent

take-outfinancing in place

Community partners have track record know neighbourhoods & developers.

Other partners may include the City with J-15 tax abatements.Gov’t agencies (Dept. of Housing Preservation & Development) may offer low rate second mortgages.

Source: Modified from Hagerman, L.A. originalCompetitive Returns & a Revitalized New York (2007)

Challenges

Perception that below market rates are accepted

Too few consultants

Difficulty of creating customized benchmarks

No reliable method of measuring collateral benefits

Returns (as of March 31, 2008)

3 yr 5yr 10yr Inception (1984)

PPAR – CPC 7.99 7.58 7.61 10.44

Overall Targeted 6.51 5.80 6.48 n/a

Lehman Aggregate 5.48 4.58 6.04 n/a

Collateral Benefits

Affordable Apartments

Jobs

Leverage of City/State/Federal Subsidies

Revitalized Neighborhoods

Safe, non-predatory mortgages for LMI Homeowners

Looking Forward

Continue Existing Programs

Expand Program, Equity and Debt

Focus on development of Workforce Housing