Investee: New Market Funds www.newmarketfunds.ca
Location: Vancouver-based fund that invests across Canada
Industry: Real Estate & Rental Housing
Vision: To increase the inventory of affordable housing units in metropolitan markets across Canada.
RBC investment details: $1,000,000 structured equity
Date of initial RBC investment: June 2016
New Market Funds (NMF) takes an integrated investment approach to generate risk-adjusted market-rate returns and long-term community benefit. They work to increase the capacity and impact of investee organizations with the objective of making impact investing a mainstream practice.
Their inaugural fund invests in new purpose-built, stabilized multi-family rental housing. To date, NMF has four investments committed and expects to invest in 4-8 additional partnerships to acquire newly constructed or substantially renovated affordable rental housing developments. The four committed investments amount to $11 million of equity across 358 rental units in Vancouver.
With over $20 million in capital commitments to the first fund, NMF ultimately aims to secure over 600 new rental units across Canada, which will be affordable, on average, to households earning less than 80% of the area median income.
Innovation and Philosophy
One of the primary challenges in developing and investing in affordable housing is balancing market-rate returns with affordability. NMF has combatted this through innovative partnerships and capital stacking, which reduce risk and maintain long-term affordability.
They also assist new projects by providing an investment commitment prior to construction financing and finalize funding upon successful completion and stabilization of the new property. This approach, in addition to working closely with community-based, non-profit and co-operative housing operators during the process, allows access to critical construction financing without exposing investors to development, construction, or occupancy risk.
NMF targets exiting eight years after investing through self-financed structured sales to community-based operators. This is made possible through strategically sized investments, cashflow generation, and amortization of the mortgage. The affordability of each investment is protected after NMF’s exit.
RBC’s investment will enable New Market Funds to: