Greetings!
This is a momentous time for Contact Fund. As a result of several recent developments, we are poised for growth and an increased role in fueling high-impact community development projects in New York City.
First: The economic downturn and resulting funding cuts have created a critical need for private, flexible sources of capital such as we provide. In fact, Federal Reserve Chairman Ben Bernanke recently spoke on the important role of Community Development Financial Institutions (CDFI's), urging CDFI's to "correct weaknesses that have emerged" and stay viable by broadening and diversifying their funding base.
Second: Federal-stimulus dollars from the American Recovery and Reinvestment Act (ARRA), passed into law in February, are now flowing into the community-development sector because it creates jobs and has a strong record of loan repayment. Two programs in particular have direct relevancy to Contact Fund's activities (see Stimulus Programs Create Opportunity for Impact).
Third: Since our last letter, we've welcomed new investors to the Fund. These individuals are committed to using investment strategies that actively place capital in businesses and funds to solve social problems on a scale that goes beyond pure philanthropy and provide nominal financial returns to the investor. Their investments will allow Contact Fund to make additional loans (see Deals in the Pipeline).
Clearly, now is the time when Contact Fund has the potential to do the greatest good. And we are prepared to move forward with an ambitious growth plan, based on a year-long business planning process that many of you participated in (see Primed for Growth).
Our plan focuses on new strategic partnerships building Contact Fund into a valuable resource for social investors. To that end, we'll be providing regular industry updates and investment opportunities at our soon-to-be-redesigned website and via e-mail communications, as well as convening investors and thought leaders around relevant areas of interest.
Help us take advantage of these significant opportunities for high-impact community investing in neighborhoods throughout New York City. For information about becoming a Contact Fund investor, please reach out to me directly at 212-209-3877 or [email protected].
As always, we encourage input and inquiries. Just e-mail us at [email protected]. Thanks for your ongoing interest and support. Sincerely, Mark Reed
Founder, Contact Fund LLC
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Stimulus Programs Create Opportunity for Impact |
 New programs coming out of the American Recovery and Reinvestment Act present Contact Fund with opportunities for collaboration and investments. In particular, we will be able to leverage two new programs that incentivize private investment in the community-development sector:
Tax Credit Assistance Program (TCAP)
Most affordable-housing development is funded by government debt combined with equity capital from private investors, who receive low income housing tax credits. Private investment has plummeted due to the financial crisis, and many projects have stalled.
To address the problem, the Recovery Act provided $2.25 billion for the TCAP program, including $256 million for the State of New York. Often the money is structured as a bridge loan to new low-income housing developments, allowing investors to delay their equity funding until construction is nearing completion. This gap financing is vital to restarting good projects that have been stalled by the roiling financial markets.
However, many projects will not receive TCAP funds or won't be selected by investors because of a slightly higher risk profile. This is where Contact Fund will have an opportunity to place intelligent, high-impact, short-term investments that will make the difference between good projects launching or languishing.
CDFI Fund
Recently, Treasury Secretary Geithner was in the Bronx to announce the award of $90 million to Community Development Financial Intermediaries (CDFIs). Over $12 million of this will come to New York City organizations. Since the early 1990's, New York's CDFIs have proven themselves able to make disciplined, good quality loans in real estate, small business, and homeownership that benefit low-income neighborhoods. Though strained today, they are not as distressed as their for-profit counterparts.
Last week, Contact Fund approved a specialized $50,000 debt investment to a CDFI credit union that will enable them to expand foreclosure prevention lending and access $600,000 in both public and philanthropic capital (see Deals in the Pipeline). |
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Portfolio Update |
 Here's some specific news about the current portfolio:
Women's Housing & Economic Development Corporation (WHEDCO) Completed construction and rent-up of its 128-unit Urban Horizons II development. They have repaid 50% of Contact Fund's loan but are awaiting for funds for the NYC City Council and New York State to make full repayment. Click here to learn more about WHEDCO. Project Enterprise (PE) While micro-loan entrepreneurs are now asking for more forgiving repayment terms, PE continues to pay on time and is not facing distress. However, they are slowing new lending activity while searching for a new Executive Director following the departure of Arva Rice to the New York Urban League. Click here to learn more. BTQ Financial 2008 revenues were slightly higher than expected, and they were able to significantly decrease their deficit to 70% below the projected amount. BTQ balanced out negative economic conditions with expense cuts and net addition of five new clients with annual revenues totaling $950K. Further, BTQ secured two more clients -- Hudson Guild and The Solar Loan Fund -- at the end of first quarter. Click here to learn more.
Local Initiatives Support Corporation (LISC) Predevelopment
During 2008 LISC redeployed Contact Fund's investment from rehabbed duplexes in East New York into multi-family apartment rehab in West Harlem, in concert with Harlem Congregations for Community Improvement. This second project is nearing completion. Click here to learn more.
Below: Contact Fund investment in LISC
Predevelopment in East New York.
 
Above: Funds deployed from the East New York project are now being used for a multi-family rehab in West Harlem.
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Deals in the Pipeline |
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Additional investment coupled with repayment of current loans has allowed us to expand the portfolio. We've been monitoring the landscape along with our network of on-the-ground partners and have approved two new additions:
- Lower East Side People's Federal Credit Union (LESPFCU), a federally regulated credit union for low-income residents and a careful yet caring home finance underwriter (as well as CDFI). Working with technical assistance provider NEDAP, the credit union has begun prudent loan modification lending, enabling distressed homeowners to stay in their homes. Contact Fund's loan will enable LESPFCU to expand this program.
- Fifth Avenue Committee, a strong, dynamic, multi-service non-profit that has developed low-income coops in Red Hook, Brooklyn, and is now planning a large-scale project along the Gowanus Canal.
This week's Loan Committee approval enables Contact Fund to finalize terms and put your capital to work in these two leading organizations. |
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Primed for Growth |
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Contact Fund's business plan provides a blueprint for meaningful growth. Following extensive industry research and strategic conversations with investors, lenders, developers, syndicators, and prospective borrowers, we have developed an ambitious growth plan, based on a financial framework that builds upon the current loan portfolio and expands its offering through strategic partnerships.
In future communications, we look forward to providing more extensive information from the Business Plan. | |
