To the greatest extent possible, Hennepin County desires to see properties affected by the civil unrest following the death of George Floyd transferred to existing businesses, residential tenants within the community, and community-based owners to promote wealth-building, prosperity and resilience. This requires a readily available pool of capital to enable a quick response to acquire commercial and residential property identified by our community partners as high priorities
Anecdotal evidence suggests that speculators are already on the move. Cash offers are being made now to owners when they are weary and vulnerable. Private capital investors are determining where to look, what to pay, and how much capital to mobilize, putting further stress on Black, Indigenous, People of Color (BIPOC) businesses in cultural districts that were already at risk of displacement.
Under the Community Asset Transition Fund, staff is recommending a $6 million, zero-interest loan pool to be coupled with approximately $7 million in Local Initiatives Support Corporation (“LISC”) loans to create an initial investment fund of $10 million. Other low-cost capital is also being applied for and could be available. The investment fund would be used to support a buy-and-hold strategy to give communities and local businesses the time and resources to create a transformative rebuild.
The Community Asset Transition Fund would provide capital resources for community-based acquisition partners to get community control over commercial and residential properties along commercial corridors adversely impacted by civil unrest between May 25 and June 5, 2020, and at risk of market conversion or gentrification, leading to local resident or business displacement.
In partnership with community-based organizations, LISC and Hennepin County will identify properties at risk of market conversion and local business displacement, and evaluate the property based on sales price, location, condition, adjacent acquisition opportunities, current affordability and gentrification risk. Through the Community Asset Transition Fund, the County (HCHRA) would participate in LISC Recovery loans made to acquire, rehabilitate (critical repairs), and/or operate acquired properties in amounts determined by LISC; provided, however, that the County’s zero interest portion shall only be used for acquisition. The Community Asset Transition Fund is envisioned to last up to 10-years.
Community Asset Transition Fund details:
Hennepin County funds subordinate, first-loss loan capital
Hennepin County funds would be structured as a Participation with LISC on a project-by-project basis (i.e. individual project loans to community-based acquisition partners on a project-by-project basis).
In some cases, funds may be used to help leverage other bank debt, philanthropic investment and/or public funding.
Creating or preserving an opportunity for long-term community ownership and affordability is critical to the health, stability, and prosperity of community residents and businesses. Funds utilized to purchase properties remain invested during the holding period, which can last for up to five years. Funds would be recaptured upon resale to the designated community partner, or a portion could stay in the resale to ensure long-term community outcomes. These funds would allow community-based acquisition partners to purchase and hold properties, securing an opportunity, so that recovery can begin.
Current Request: Staff requests authorization to establish the Community Asset Transition Fund and enter into a master Participation Agreement with LISC to facilitate implementation.