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At NEF, Building On a ‘Legacy of Creativity and Drive’

For more than 30 years, LISC’s National Equity Fund (NEF) affiliate has been developing innovative solutions to affordable housing challenges. In a Q&A conversation with LISC, new CEO Matt Reilein takes a look at NEF’s unique value proposition, as the company looks to build on its record $1.2 billion in investments from 2018.

Q: Why did you decide to come to National Equity Fund?

A: The short answer is that NEF is unique. I think closing on more than $1 billion in housing investments last year says a great deal about the quality of the staff and of the market relationships that they have. There is also something compelling in the way NEF connects the dots from investors to developers to residents and communities. In some organizations, there is a sense that to maximize business success you have to sacrifice some measure of community impact. But NEF takes a different view. Our business model weaves together rigorous financial benchmarks and lasting community impact, without conceding that one is more important than the other. If you look at the results over time, it’s a pretty compelling narrative.

You’re coming from the impact investing sector, having led efforts for JPMorgan Chase, O’Brien-Staley Partners, and Cresset Partners. Does taking the reins at an organization like NEF require a different mindset about this work?

NEF is at the cross roads of the public, private and nonprofit sectors and, while that can sometimes make for a complicated mix of interests, it doesn’t change the fundamentals of what it takes to succeed. It is still about quality real estate investments that are positioned to serve as long-term assets to their residents and their communities. I think what’s different is the range of opportunities for impact, in part because of the close collaboration between LISC and NEF. We have significant local expertise across the country, with people on the ground who understand the local challenges our partners face and can tailor solutions to them.

Matt Reilein, National Equity Fund’s new CEO
Matt Reilein, National Equity Fund’s new CEO

I would say that the view of profitability is different as well. It isn’t that it is less important at NEF than at a traditional financial institution; but, it’s important for different reasons. NEF focuses on earnings because we plow most of that capital back into the places where we work, both through our own direct efforts and through an annual grant to LISC that helps finance comprehensive community investment strategies. NEF has up-streamed more than $168 million to LISC, all focused on advancing efforts around small business development, health, community safety, education and jobs, as well as housing. That’s a pretty remarkable double bottom line.

What attracted you to community development versus other finance fields?

As a college student at Georgetown, three things happened that opened my eyes to the power of community development finance. First, I had the chance to work on Capitol Hill after the Low Income Housing Tax Credit (LIHTC) was made permanent and as it was becoming increasingly mainstream. I was tasked with learning about the program and its impact on affordable housing, especially in communities outside of major metropolitan areas, so I could help educate the senator for whom I worked and his staff. It was my first exposure to the public-private partnership of affordable housing. Second, I had an opportunity between my junior and senior years to travel around the world as part of a research fellowship program. My proposal for the program focused on the economic impact of hosting the Olympic Games, and I looked at the ways that thoughtful investments have a positive material impact on cities...or, on the flip side, the ways that they fail to generate benefits.  And, third, I really took to heart Georgetown’s philosophy of public service. I recognized then, as I do now, that I have had tremendous opportunities to learn. It has always been important to me to give back. So, when I got into banking, I gravitated toward community development finance right away.

There is something compelling in the way NEF connects the dots from investors to developers to residents and communities.

Affordable housing has become a high-profile issue in many communities. What can syndicators like NEF do to more aggressively address the problem?

LIHTC is the linchpin of the production system for affordable rental housing. So, if we want to accelerate production, it makes sense to expand the LIHTC program. Bipartisan legislation in both the House and the Senate could do just that, spurring hundreds of thousands of additional affordable units over the next 10 years.  We have an important role to play both in helping drive those efforts and being creative about how we invest, so we can maximize the impact of our capital. Real progress will require a long-term, multi-faceted commitment by government at all levels, as well as by investors, intermediaries, philanthropic groups and community leaders who are deeply engaged in this work.

What about Opportunity Zones? Can they help address the problem?

I am very hopeful about the potential for Opportunity Zones to attract new investors to affordable housing—individuals, institutions and funds that might not otherwise consider these types of deals or their location to be attractive investment options. The challenge, as Opportunity Zone funds are being formed, is to make sure capital flows to developments that respond to the needs of residents, rather than watching it migrate to upscale housing that just happens to be in low-to moderate-income census tracts. We also want to make sure that these new investors see a wide range of opportunities, so that capital reaches places long overlooked by the conventional market. That’s something that LISC and NEF are working together to advance, both with developers and local policymakers, and through national relationships.

Cedar Crossing, an innovative NEF project in Phoenix, AZ, has 74 apartments for families earning at or below between 40-60 percent of AMI.
Cedar Crossing, an innovative NEF project in Phoenix, AZ, has 74 apartments for families earning at or below between 40-60 percent of AMI.

Joe Hagan, who recently retired, served as NEF CEO for 19 years. Did he give you any advice before he left?

He did more than that. He left an incredible pipeline of deals for this year and next, along with a robust financial infrastructure and a seasoned staff that has built NEF into one of the most dynamic social enterprises in the country. I’m looking forward to expanding on that in the months to come. If you know Joe, you know how much he cares about this work. I’m incredibly grateful for his ongoing support through this transition period and for his legacy of creativity and drive. He will forever be part of the NEF family.

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