NHFIC Chair, Brendan Crotty’s presentation to WA Community Housing Providers

27 August 2018
CHIA WA State Manager, Jennie Vartan’s, key take-outs from the presentation

The Vision
• That Community Housing Providers (CHPs), enabled by NHFIC finance, can generate growth in social/affordable housing supply

• Increasing co-operation between the private sector and CHPs – a catalyst for developers and CHPs to work together

The Intent

• To assist CHPs to expand their portfolios through loans with longer terms and lower interest rates

• To measurably increase social/affordable housing

• To improve the financial strength of the CHP sector

• The infrastructure funding will bring forward greenfield and brownfield residential land by addressing the issue that banks are not keen to lend on infrastructure

The Next Few Months’ Work

• Building relationships with CHPs
• Aim to lend $150-250m over 12 months
• Work with the States and service industries to lend $100-200m in infrastructure loans
• Developing good relationships with the property and banking sectors
• Nathan Del Bon appointed as interim CEO
• Well resourced, staff being appointed, starting to motor

Community Housing Provider Loans

• Initial focus expected to be refinancing existing debt
• All CHP debt considered for refinancing, it does not have to be debt arising from development
• Lowest loan size they will consider is $5m
• Straight forward loans, CHPs do not have to worry about the bond raising side of things, NHFIC will then repackage the loans for bond issues, in tranches of $100m
• Happy to fund multi-tenure development if it is part of a scheme generating significant affordable/social housing
• Thinks the demand will be for ten-year loans, but taking soundings on demand for 10 and 20-year loans
• Pricing will be 90 basis points above relevant Commonwealth bond yields, so a 10-year loan will be 3.5% as at the date of the presentation (27 August 2018)
• Credit assessment criteria will focus on interest rate cover, with loan to value less of an issue for loans secured by rental housing
• Interest rate cover could be as low as 1.25% but likely to be around 1.5% for the average CHP
• Tier 1s realistically have slight in built advantage but NHFIC will lend to Tier 2/Tier CHPs in principle
• Put in an expression of interest first to test whether you’d qualify and whether worth your time and effort to put in a full bloodied application
• NHFIC will also advise on receipt of Expressions of Interest, in terms of pointers as to what you need to do to qualify

Infrastructure loans

• Cost will be higher, probably just under bank loans but without the fees and charges
• No refinancing product
• Available when banks will not/cannot lend
• Deals done 3 months vs 6 months with banks
• With bank lending there is still refinance risk at the end of the construction phase, whereas NHFIC can refinance at that stage