LISC’s pioneering $100 million bond offering paves the way for more flexible investment in low-income places, says an article for the Institute for Sustainable Investing. The new asset class is a game-changer that has the potential to spur broad economic opportunity in under-invested communities, and the finance world is taking note.
The post excerpt was originally published on MorganStanley.com:
A New Asset Class in the Making
Nonprofits tap bonds for the first time to spur economic opportunity in low-income neighborhoods.
Here’s a familiar tale of two developments. In a fast-gentrifying neighborhood of a booming urban center, real-estate moguls quickly stitch together a 10-year syndicated loan valued at several hundred million dollars to build a high-rise condo, complete with mixed-used retail and some office space.
On the other side of town, along a tract of abandoned buildings and vacant lots, local leaders work with a community development financial institution (CDFI) to stitch together a financing package for low-income housing from public sector funding sources, foundation grants, and short-term loans from banks. The former is considered a sure bet, while the latter is perceived as a high-risk investment with small odds of success. They epitomize the uneven playing field in the quest for development dollars.
A recent bond deal that raised $100 million for the Local Initiatives Support Corporation (LISC), a highly regarded CDFI with an equally high S&P ‘AA’ investment-grade credit rating, may change all that. Once relegated to a specialized pool of public sector, bank and philanthropic funding, LISC, a nonprofit with an impressive track record bringing public/private investments to local needs, is the first to prove that CDFIs can tap the ocean of longer-term general investment capital available through the public bond markets.
“This is a complete game-changer for us and for CDFIs more broadly,” says Maurice Jones, CEO of LISC, which has invested more than $17 billion since 1980 to spur economic opportunity and revitalize disinvested communities. “With better access to capital markets, we can assemble flexible financing to fuel new businesses, jobs and large-scale redevelopment efforts.” Continued[+]...