Investment Strategy & Criteria
The Catalytic Fund selects projects for investment meeting the following criteria:
- TARGET AREAS/NEIGHBORHOODS – Areas having a high probability of market potential as indicated by the following:
- Are adjacent or connected to areas, projects or facilities where significant public or private investment has already occurred
- Are “anchored” by a significant public/community facility or natural amenity such as the Licking River access, a park, church, emerging retail district, arts center, etc.
- Have high quality, attractive housing or commercial building stock, or have large amounts of underutilized land (vacant lots, blighted properties or non conforming uses) that can be assembled for higher and better use
- FEASIBILITY – Projects demonstrating financial viability given reasonable assumptions regarding market potential. Projects approved for loans or investments must demonstrate the ability to repay the Catalytic Fund capital through vigorous underwriting procedures.
- QUALITY – Projects with quality design and materials that blends with or complements neighborhood character.
- NEED – Projects not able to be financed entirely through conventional lending sources or in which lenders prefer to invest via pooled funds to limit their exposure to a particular location or property.
- DIVERSITY – Projects that provide a mix of housing options to a neighborhood. It has been proven that a key part of revitalizing a distressed neighborhood is restoring a vibrant and diverse housing market that attracts newcomers while preserving affordable housing options for current moderate-income residents.
- LEVERAGE OF CATALYTIC FUND CAPITAL AND RESOURCES – Projects that maximize use of public funds and subsidies available for urban projects such as New Market Tax Credits, CDBG funds, Tax Increment Financing, Neighborhood Stabilization Act funds, HUD 108 loans, etc.
The Catalytic Fund’s general portfolio management and underwriting criteria are as follows:
- TRANSACTION SIZE – Loans and investments range from $100,000 – $500,000 based on initial capitalization of $10,000,000. As the Fund grows, no more than 10% of Fund capital will be invested in any one project.
- BORROWER EXPOSURE – No more than 10% of the Fund is disbursed to any one borrower.
- SECURITY – All Catalytic Fund transactions are secured in some manner, i.e., mortgage, borrower guarantee, pledge of partnership interests, etc.
- EQUITY – Borrower provides at least 10% of verified and certified project costs in demonstrated equity.
- USE OF FUNDS – Funds are used for direct project costs only. The Catalytic Fund does not provide financing for any project that does not have an identified source of funding for all project costs. The Catalytic Fund does not make loans for pre-development costs unless a take out source (construction financing) has been identified and committed.
- LAND BANKING AND PROPERTY ACQUISITION – The Catalytic Fund may acquire and warehouse land for future redevelopment projects only when there is a compelling opportunity to do so and when there is an exit plan based on realistic assumptions. Assuming a $10,000,000 initial investment Fund, no more than 20% of capital will be invested in land/buildings held for future developments. As the Fund grows, this percentage will be adjusted downward to 10%.