Markets In Your Community

Building Together: Bank Financing Supports Twin Cities Habitat for Humanity Growth

The nonprofit organization Habitat for Humanity is world famous for its volunteer efforts to build affordable housing for low-income families, with the goal of alleviating poverty by promoting home ownership.

In 2012, the Twin Cities Habitat for Humanity was looking to build a new headquarters building to house its staff, coordinate volunteers and provide space for educational and advocacy programs. The new construction would be located in St. Paul, in a central location accessible by the city’s light rail transport system.

The new facility would provide the organization with an enhanced base of operations through which it could offer more support to families in need. But that new capability would come at a cost: a total of $9.5 million would be needed to build the Twin Cities Habitat’s new home. And in making that investment, Habitat leaders were determined not to compromise the organization’s existing programs and services.

The solution: a creative mix of donor funding, debt issuance and tax credits to get the ball rolling.

Minneapolis-headquartered U.S. Bank, the nation’s fifth largest bank, stepped in to assist with financing.

A substantial portion of the needed financing—$5.5 million—was organized through U.S. Bank’s community investment arm U.S. Bancorp Community Development Corporation (USBCDC), in partnership with Sunrise Banks, another local financial institution. The commitment included $2.5 million in debt financing and more than $3 million in New Markets Tax Credit (NMTC) equity. Sunrise Banks also secured an additional $3.7 million in debt financing.

“Habitat for Humanity is an integral piece of the effort to help hard-working families have a permanent, high-quality place to call home. By providing the investment that filled a critical gap in financing for Habitat’s Twin Cities headquarters, U.S. Bank helped ensure that this dynamic agency is better able to serve its clients and make Minneapolis-St. Paul a stronger community,” said Matt Philpott, senior vice president of USBCDC.

The tax credits were integral to the deal, and serve to illustrate how tax policy can be directed to underwrite projects that have a positive impact on local communities—a successful example of public-private partnership that brings real benefits.

Established by Congress in 2000, the NMTC program was designed to encourage investments into businesses and real estate projects located in low-income communities. Individual and corporate investors can receive a tax credit against their federal income tax over seven years in exchange for making equity investments in specialized financial institutions called Community Development Entities (CDEs).

It’s a program that’s successfully steered billions of dollars in new investment to low-income and distressed community, including $1 billion in special funding allocated to recovery and redevelopment of the Gulf Opportunity Zone in the aftermath of Hurricane Katrina, according to the Department of Treasury.

It also meant that, thanks to the support of corporations, foundations and individual donors, the Twin Cities Habitat could pursue funding for the new headquarters project without diverting funding from programs and services provided to low-income families.

Groundbreaking took place in May 2013. The new headquarters facility, consisting of more than 27,000-square-feet of office and meeting space, was completed in early 2014. And true to Habitat for Humanity’s commitment to green building and making the most of recycled materials, it makes generous use of recycled windows, doors, carpets and other components.

“U.S. Bank has been helping families and neighborhoods by partnering with Twin Cities Habitat for more than 25 years,” said Susan Haigh, president and CEO of the organization, in an April 2013 news release. “By being a part of building our new home, U.S. Bank is ensuring we will be able to serve local families for decades to come.”

U.S. Bank has a long history of working with Habitat affiliates in other cities. USBCDC has provided nearly $83 million to build more than 3,300 homes for low-income homeowners through charitable contributions, low-interest loans and tax credit equity investments. For example, in 2008, USBCDC utilized a similar arrangement to finance Habitat’s construction of nearly 300 new homes in Gulf Coast communities that had been devastated by Hurricane Katrina.

The Twin Cities Habitat for Humanity has a notable record of service to the community, and its new headquarters will be valuable asset in building upon that record in the years to come. It’s also a good example of how capital markets and the financial industry can partner with the nonprofit sector on ambitious projects to achieve results that work for everybody.