flexible acquisition, predevelopment, construction, and permanent financing for community and economic development projects.
Genesis LA makes direct loans and investments from its internally managed Genesis Community Investment Fund (GCIF). The GCIF provides flexible acquisition, predevelopment, construction, and permanent financing for community and economic development projects. We work with nonprofits, small businesses, and women and minority owned enterprises. Our loans and investments typically fund real estate projects in underserved communities, however, we also provide working capital and bridge loans that support community and economic development efforts. Each project in which Genesis LA invests must be economically viable and demonstrate how it will deliver economic and social benefits to underserved communities and individuals.
GCIF investments generally have the following terms:
Maximum Loan Amount: $4,000,000 per project or $6,500,000 per borrower
Term: Generally up to 10 years
Loan-to-Value Ratio: Up to 85%, with ability to make unsecured loans
Interest Rate: varies based on market trends and cost of capital
Minimum Debt Service Coverage: 1.20
Genesis LA was established in 1998 out of the office of former Los Angeles Mayor Richard Riordan. Today, Genesis LA is certified by the U.S. Department of the Treasury as a Community Development Financial Institution (CDFI) and a Community Development Entity (CDE). As a CDFI, we make direct loans and investments to community and economic development projects through our internally managed Genesis Community Investment Fund (GCIF) as well as through other special purpose capital pools. As a CDE, we raise and deploy New Markets Tax Credits (NMTC) to invest in community and economic development projects by leveraging public and private investment capital. Additionally, we often combine our GCIF and NMTC financing with development services that include real estate technical assistance, financial structuring, capital raising, designed to build the capacity of borrowers and the financial viability of their projects.
\As a CDFI, we occupy a unique and important role in the financial ecosystem. We have the power and duty to approach lending with far greater flexibility than a traditional bank and we must be willing to take calculated risks in exchange for community impact. But, we also have the responsibility to deploy loans with the confidence that our investments will succeed and our borrowers will repay. This context shapes two countervailing realities that we must balance. First, we must acknowledge that loans cannot go all the way to solve every problem. We are not always able to lend capital to our communities, because debt cannot solve every challenge or injustice in the community development arena. Sometimes, solutions to income and wealth inequality require grants or subsidies rather than loans. Second, we must ask if our loans are going far enough to solve the problem. We are able to lend capital in many cases, because we maximize our flexibility, creativity, and risk tolerance to extend loans to those who cannot access capital from anywhere else. We must continually assess how we can do more to extend our lending even further into the communities that need it most.
At Genesis LA, our investment philosophy is shaped by the following considerations, which have been informed by more than two decades of work in our community.
CO-CREATE: Many community development interventions never get off the ground because community-based organizations lack a long-term partner who is willing to get their hands dirty. That is why we work so intimately with our community partners to help them turn ideas into viable and financeable community development projects. This sometimes requires that we go beyond the role of a traditional lender and embed ourselves into their team and work together to co-create the projects that we all hope to see in our communities. A CDFI leader once noted that when the projects we need in the community don’t exist, we as CDFIs need to go out there and create them ourselves. We subscribe to this belief and this is why we invest so intensively in providing capacity building services to our community partners so that we can bring about the needed interventions that would otherwise not surface without our support.
INNOVATE: We are dissatisfied with the status quo. The challenges facing underserved communities are deeply entrenched and seemingly growing rather than shrinking. We believe that public and private sector partners must do everything possible to diagnose problems, be flexible in designing solutions, and recognize that there is no one-size-fits-all approach to community investment. This is part of Genesis LA’s DNA, but the bureaucratic systems around us are increasingly becoming ossified, inflexible, and resistant to change. Even the roadway to achieving universally desired outcomes, like affordable housing, is lined with red tape as opposed to a red carpet. This is why we invest human and financial resources into fighting for new ways of going about business as usual in the community development field.
NICHE vs. SCALE: CDFIs were created to serve the segments of the market that other lenders would not touch. By definition, this is a niche role. But, like all industries, CDFIs face pressures to scale up. There are obvious benefits of scale, including the ability to serve more people. However, a typical side effect of reaching scale is the need to create greater standardization in your business model as you grow. The drawback of standardization is that many financing needs will fall outside of the “standard box”. On the path to achieving scale, CDFIs must be careful not to mutate into the financial institutions they were set up to transform. This is why we strive to serve the niche roles in community finance and to serve the borrowers that do not fit within “standard boxes”. Genesis LA will scale where appropriate to magnify impact, but we will avoid scaling up in ways that sacrifice our service to the niche needs in our community.
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