Denver Transit-Oriented Development Fund

Introduction

The Urban Land Conservancy (ULC), Enterprise Community Partners, the City and County of Denver, and several other investors partnered to establish the first affordable housing Transit Oriented Development (TOD) acquisition fund in the country. The purpose of the Denver TOD Fund is to support the creation and preservation of over 1,000 affordable housing units through strategic property acquisition in current and future transit corridors. The Fund answers a basic real estate conundrum: when the economy is bad, property values are low and ripe for purchase, but access to capital is poor and affordable housing developers are scarce. Now is the opportune time to invest in real estate around proposed transit stations in order to capitalize on current values and preserve affordable housing before RTD’s FasTracks light rail is fully operational.

As of April 2013:

  • 8 properties have been acquired using the $15 million TOD Fund preserving or creating 626 affordable homes, 120,000 sf of commercial space for community assets such as:  new public library, child care program, theater company and affordable space for nonprofits.  
  • The Denver Fund has been drawn down $15,275,650 leveraging almost $200,000,000 from public, private and nonprofits partners in only 3 years!
  • Over 700 jobs have been created from Denver TOD Fund property development and redevelopment.

Benefits of the Fund

The Denver Fund was capitalized at $15 million, but has now evolved to a $24 million in total loan capital. This revolving loan fund will make capital available to purchase and hold sites for up to five years along current and future rails and high frequency bus corridors across the Denver metro region.  The $24 million investment will leverage over $500 million in local economic development activity, serving many economically challenged neighborhoods in Metro Denver with construction and permanent job creation. The Fund will also directly benefit low-income households that on average spend 60% of their gross income on housing and transportation expenses combined. By controlling these expenses and providing access to quality, environmentally-sustainable housing, the TOD Fund will make it possible for families to build wealth and access employment and educational opportunities.  It will also provide employers with access to an expanded workforce.

Critical Partnerships

The partnership of government, quasi-governmental organizations, banks, nonprofits and foundations is a critical component of the Denver TOD Fund. Enterprise Community Partners, a national nonprofit, assembled the initial $15 million in capital that allowed the Fund to begin operations in 2010. City of Denver is the largest single investor, providing $2.5 million in top loss investment. ULC committed the initial $1.5 million equity to the Fund and leads the real estate acquisition, management, and disposition of assets for the Fund. ULC is a nonprofit organization formed by local business leaders who understood the need to permanently secure real estate assets for community benefit in metro Denver’s urban neighborhoods. We partner with other developers to achieve the goals of the TOD Fund to preserve and create affordable housing units.

Regional $24 million Denver TOD Fund Investors/Partners

City of Denver Office of Strategic Partnerships
City of Denver Office of Economic Development
Colorado Division of Housing
Enterprise Community Partners
Colorado Housing and Finance Authority
The Denver Foundation
The Ford Foundation
The Gates Family Foundation
The MacArthur Foundation
The Rose Community Foundation
Mercy Loan Fund
Mile High Community Loan Fund
Enterprise Community Loan Fund

Expanding TOD to Other Municipalities

Metro Denver is undergoing the nation’s largest public transit expansion with the addition of five new light rail lines that compliment the existing three lines already serving Denver and its south suburbs. Each of these new rail lines brings opportunity for transit-oriented development in the Denver Metro area. The structure of the TOD Fund offers a unique opportunity to expand into other municipalities in the metro area in order to complement transit oriented development and other activities around expansion of FasTracks. Our desire is to partner with municipalities to explore how this Fund can help preserve and create affordable housing and stimulate economic development along the rail lines. We welcome an opportunity to answer any questions about how an investment in this fund can help achieve community development goals and strengthen Denver Metro area communities.  In addition to ULC, the regional $24 Fund is now eligible to additional borrowers who can use the Denver TOD Fund to purchase, hold and eventually develop sites in the Denver Metro Area within:

  • One-half mile of fixed-rail transit stations
  • One-quarter mile of high-frequency bus stops

See the Denver Regional TOD Fund Term Sheet for more details.

Why is the Fund Needed?

  • Metro Denver is undergoing the nation’s largest public transit expansion, including the addition of five light rail lines to the existing three lines that already serve Denver and its south suburbs.
  • In most urban areas including Denver, transportation is the second highest household expense after housing.
  • In Denver, working families who earn between $20,000 and $55,000 spend on average of 59 percent of their gross household income on housing and transportation.
  • Locating affordable housing in transit corridors allows households to reduce expenses, while increasing access to employment, educational opportunities and services.
  • It’s essential that affordable housing in Denver be preserved or redeveloped to ensure its long-term affordability.

TOD Fund Structure

  • Borrower Equity: Borrowers contribute at least 10% cash equity for each property acquired utilizing the Fund.
  • Credit Enhancement/Top Loss: Public/Quasi-public dollars leverage private capital by providing credit enhancement via loan-loss absorption and low returns.
  • Grant/PRI Capital: Foundation/philanthropic capital, typically lent via Program Related Investments seeking modest financial return.
  • Senior Debt (Bank/CDFI): More traditional loan capital from banks and CDFI’s.

ULC made the initial equity commitment of $1.5 million to the $15 million Denver Fund and led real estate acquisition, management and disposition of assets.  Enterprise assembled the initial capital and the Fund began operations in early 2010. Investors in the original Denver Fund include:

  • City of Denver
  • MacArthur Foundation
  • Colorado Housing and Finance Authority
  • Rose Community Foundation
  • Mile High Community Loan Fund
  • Wells Fargo
  • U.S. Bank
  • FirstBank
  • Enterprise, both through grant funding and our Enterprise Community Loan Fund

Benefit of Structure:

  • Loan terms up to fiveyears
  • Up to 90% loan to value (LTV)
  • Limited recourse to borrowers
  • Interest-only at low interest rate (3.7% – 4.1%)
  • Delegated and expedited underwriting process allows borrowers to execute quickly

Need More Information?

To learn more about the Denver Regional TOD Fund, contact Brad Weinig at Enterprise Community Partners for more information at 303.376.5412. Future borrowers can learn more about the terms by accessing the Denver TOD Fund term sheet.