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Mobilizing Private Investment Capitalfor New York City Community Development

November 2009

“The sum of casual public coNTacT aT a local level is a feeliNg for The public ideNTiTy of people, a web of public respecT aNd TrusT,

aNd a resource iN Time of persoNal or Neighborhood Need. The abseNce of This TrusT is a disasTer To a ciTy sTreeT.”

—Jane Jacobs, The Death and Life of Great American Cities, 1961

coNTacT fuNd | November 2009 | pg 2

The opporTuNiTy

Today There is a uNique opporTuNiTy for The iNdividual iNvesTor To play a criTical role iN commuNiTy developmeNT iN New york ciTy

• The credit crisis has created a need for new capital and products in the Community Investing marketplace

• An emerging class of investors is using private investment alongside traditional philanthropic strategies to address social needs

• Contact Fund has developed an efficient structure to aggregate private investor capital and deploy it in high impact Community Investments in New York City

• Contact Fund provides attractive, risk-adjusted returns to individual noteholders, an under-represented segment of the community development investing marketplace


The opporTuNiTy

iNdividual iNvesTors are curreNTly a small parT of The$26 billioN commuNiTy iNvesTiNg markeTplace

• Prior to the credit crisis, banks and other financial institutions provided easy credit to Community Development Financial Intermediaries (CDFIs)

• CDFIs have developed only limited investment opportunities for individuals

• Despite the economic downturn, New York City maintains a concentration of wealth and a vibrant population of innovative and effective community development organizations

SOURCE OF DEBT BY INSTITUTION TYPE 2000 – 2005

2000 2005 % change

banks, Thrifts, etc. $255,258,256 $385,068,300 51%

foundations $134,056,929 $138,663,142 3%

Non-depository institutions $24,667,287 $102,380,635 315%

federal government $56,386,274 $59,767,849 6%

religious institutions $35,002,180 $47,712,279 36%

Nat’l intermediaries $12,273,544 $44,305,324 261%

individuals $12,916,054 $18,148,729 41%

state and local gov’t $12,971,725 $17,966,236 39%

corportations $24,667,287 $17,530,701 -29%

other $10,364,873 $12,008,927 16%

Source: The Aspen Institute, CDFI Data Project

“ New york is home To more billioNaires ThaN aNy oTher ciTy oN earTh.”

(Forbes.com 3.12.09)

“ The New york meTro had 561,000 millioNaires aT The eNd of 2008.”

(WSJ 7.15.09)


backgrouNd

whaT is coNTacT fuNd?

• A for-profit investment fund founded in 2005 by Mark Reed, that facilitates private investment in high-impact community development projects in New York City

coNTacT fuNd’s commuNiTy iNvesTiNg approach

• Identify unique opportunities to invest in high performing community development organizations

• Raise capital from private investors who value liquidity, expect competitive financial returns from their social investment portfolio

• Collaborate with established CDFIs and foundations for co-investing and resource-sharing

• Place-based investment strategy to “invest where you live”


backgrouNd

liNchpiN commuNiTy fiNaNce examples

whedco

• 128-unit development delayed during site excavation, organization needs liquidity

• Contact Fund loans finance construction delay, later expands loan 100%, subordinates to NFF, takes A/R security

bTq fiNaNcial

• Non-profit owned, profitable financial services start-up needs expansion capital

• Contact Fund supplies medium-term loan, supplanting mainstream bank finance

• Later used to leverage private foundation loan 5x larger

fifTh aveNue commiTTee (proposed)

• Contact Fund is looking to establish a new L3C to facilitate pre-development loans to Fifth Avenue Committee’s Gowanus Green affordable housing development


backgrouNd

coNTacT fuNd performaNce To daTe

• 7 loans with $1.4 million in face value over the last 4 years

• Fund has low overhead and is operating at breakeven

• No defaults and all loans are currently performing

• Co-invested with banks and foundations Ω LISC Ω Chase Ω Nonprofit Finance Fund Ω Large Private Foundation

CURRENT PORTFOLIO STATISTICS

average interest rate: 3.77%

average yield per borrower: $9,926/yr

average maturity: February 2010


The markeTplace

Nyc commuNiTy developmeNT markeTplace

• Contact Fund actively tracks more than 80 prominent New York City based community development organizations with $2.7B in assets

• Community Development Financial Institutions (CDFIs) control 82% of these assets

• CDFIs borrow more than other community development organizations and currently are strained in finding new capital due to the tightening of credit

• There are significant investment opportunities in the affordable housing, microfinance, and social service sectors where organizations have high quality assets and low leverage ratios but are still being turned away by conventional finance institutions

• Contact Fund serves these institutions through direct lending and partnering with larger CDFIs to co-invest


The markeTplace

Nyc commuNiTy developmeNT markeTplace

affordable housing

social service micro finance cdfi community development corporation

Total

Total # of organizations

17 11 6 22 27 83

Total # with financial data

15 10 5 13 24 67

Total revenue 42,759,633 96,404,200 11,288,911 424,889,921 223,335,042 798,677,707

Total assets 90,216,254 87,946,309 36,012,207 2,232,566,648 269,804,901 2,716,546,319

Total Net assets 44,305,679 63,787,243 18,329,336 554,670,116 145,362,950 826,455,324

Net assets / Total assets

49.11% 72.53% 50.90% 24.84% 53.88% 30.42%

revenue / Total assets

47.40% 109.62% 31.35% 19.03% 82.78% 29.40%

liabilities / Total assets

50.89% 27.47% 49.10% 75.16% 46.12% 69.58%

% of Total revenue 5.35% 12.07% 1.41% 53.20% 27.96%

% of Total assets 3.32% 3.24% 1.33% 82.18% 33.78%

% of Total Net assets

5.36% 7.72% 2.22% 67.11% 18.20%

median revenue 2,618,318 7,302,009 1,125,017 11,821,636 6,329,193

median assets 4,881,331 6,518,118 2,966,137 51,862,205 6,068,286

median liabilities 1,160,151 1,905,597 1,032,588 25,646,516 2,501,103

median Net assets 1,739,503 3,490,513 1,697,427 11,597,665 3,406,680


The markeTplace

social iNvesTor markeTplace — a coNTiNuum

impacT iNvesTiNgUsing market-based investment

strategies to place capital in businesses and funds that generate social

and environmental good

TradiTioNal philaNThropySingular focus on social impact

pure capiTalismSingular focus on profit maximization

• Impact Investing engages a new type of social investor and cultivates a new source of capital

coNTacT fuNd


The markeTplace

social iNvesTor markeTplace

• Socially Responsible Investing marketplace is estimated to be $2.7 trillion out of a $25.1 trillion investing market place in the US

• Social Investors engage in a “blended value” proposition where the desire to do good can also be a means to doing well financially

• Social Investing has evolved from “negative screening” and avoiding particular investments to actively placing capital in companies and funds that advance a social and environmental good, known as Impact Investing

• Impact Investing is estimated to grow to $500B or 1% of total managed assets in the US over the next decade

• One of the most visible examples of Impact Investing is Community Investing which is a $26B market that has grown 540% over the last decade

• One measure of the potential of individuals to engage in Community Investing is their level of charitable giving. Of the $300B of philanthropic giving in the US more than 80% is provided by individuals


growTh plaN

coNTacT fuNd growTh plaN

coNTacT fuNd has developed a 10 year busiNess plaN To grow To $25 millioN.

The compoNeNTs of This plaN are:

• Form a joint venture partnership with an existing CDFI and use a New Market Tax Credit (NMTC) structure for an initial $10 million capital raise

• Form partnerships with a select group of strategic institutional investors to provide $5 million in mission related investment

• Raise $2.5 million in additional notes from individual investors

• Continue to use networks of Founder’s contacts, Advisory Committee, and Investors

• Position Contact Fund with aggregators and influencers in the social/community development investing marketplace


growTh plaN

risk waTerfall

loaN fuNd will be capiTalized wiTh $700k (7.2%) iN reserves aNd $9m will be used To fuNd loaNs wiTh losses iN followiNg order:

will secure $1.25mm liNe of crediT (50% of iNdividual iNvesTor NoTes) for liquidiTy Needs relaTed To redempTioNs of iNdividual iNvesTor NoTes

$1m Note funded with NmTc equity

$500k funded with founder equity

$5m in institutional investor Notes

$2.5m in individual investor Notes


maNagemeNT Team

fouNder’s backgrouNd — mark reed

• Former Vice President of Portfolio Management at the Bank of New York

• Co-managed a $500 million bond portfolio and a $300 million credit derivative portfolio

• Expertise in corporate credit default modeling, structured credit products and fundamental corporate credit

• Board of Directors of Simpson Investment Company

• Chair of the Board of the Rudolf Steiner School in Manhattan

• Partner in Alembic Development Company, a developer of affordable and supportive housing in New York City

• Holds a BA in Anthropology from Stanford University and an MBA in Finance from the Stern School of Management at NYU


maNagemeNT Team

maNagemeNT Team

mark reed, fouNder• Social investor with expertise in banking, family office investing and community development• Jennifer Trepinski, Analyst, has expertise in community development finance, management and urban policy

melarbiT parTNers — bruce arbiT, priNcipal• Expertise in strategic philanthropy, financial resource development and organizational capacity building

urbaN oasis — blaise rasTello, priNcipal• Expertise in business planning, organizational management and underwriting in community development sector

esTablished relaTioNship wiTh New school/milaNo aNd Nyu/reyNolds for aNalysT aNd associaTes

collaboraTiNg wiTh calverT fouNdaTioN for iNfrasTrucTure supporT


iNvesTmeNT opporTuNiTies

iNvesTmeNT opporTuNiTies

mezzaNiNe capiTalContact Fund is forming partnerships with a select group of institutional investors to provide a total of $5 million in mission-related capital. This capital structure will be used to facilitate investment by individual note-holders.

iNdividual NoTesFor Qualified Investors, Contact Fund is offering $2.5 million of unsecured Senior Notes for its next round of financing on March 15, 2010. Investors may select maturities of September 15, 2010 or March 15, 2011. The full proceeds from the sale of the Notes will be lent to NYC community development and economic development organizations. The rate offered on the notes will be a 0.25% – 0.75% margin over the U.S. national average for two-year jumbo Certificates of Deposit, as published at www.banx.com. On October 30, 2009, this rate was 1.58%, versus 2.01% one year prior.

co-iNvesTmeNT opporTuNiTiesContact Fund-Gowanus Green is the most recent endeavor established by Contact Fund with the sole purpose to make pre-development loans to Fifth Avenue Committee’s Gowanus Green affordable housing development. Terms include a three year maturity; prime plus 50bps annual interest adjusted quarterly. Contact Fund-Gowanus Green lenders will have annual liquidity guaranteed by Contact Fund, LLC. Additionally, Contact Fund will invest in Contact Fund-Gowanus Green in a position subordinate to external investors.

coNTacT fuNd, llc

For more inFormation about ContaCt Fund investment opportunities or other inquiries, please ContaCt:

mark reed, fouNder

212.209.3877 voiCe212.209.7177 Fax

[email protected]

708 third avenue, 6th Floornew York, nY 10017

ContaCtFund.Com

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