NYC MBE Guaranty Facility
The New York City Minority Business Enterprise Guaranty Facility (MBE Guaranty Facility) is a new initiative to support minority-owned business enterprise (MBE) developers seeking to develop critically needed affordable housing across the five boroughs. MBEs have historically faced challenges securing construction loans due to restrictive financial barriers, including lender guaranty and liquidity requirements. This results in many MBEs needing to form partnerships with larger firms that dilute their ownership, reduce their developer fees, and limit their ability to grow and take on more projects independently in the future.
The MBE Guaranty Facility helps to remove those barriers by providing a total of up to $50 million in back-stop guaranties to help MBE developers independently access the capital required to secure construction financing and develop City-financed affordable housing projects in New York City. A partnership of the New York City Department of Housing Preservation and Development (HPD), the NYC Housing Development Corporation (HDC), the Urban Investment Group at Goldman Sachs and CPC, the MBE Guaranty Facility will support as much as $500 million in private construction lending to MBEs, allowing their businesses to grow and take on more, and larger, affordable housing development projects in the future.
Program Overview
The MBE Guaranty Facility consists of up to $25 million from HDC on behalf of the City and up to $25 million from Goldman Sachs and so will provide up to $50 million in Back-Stop Guaranties for MBE developers who have difficulty independently providing the guaranties required to secure construction financing to develop affordable housing projects.
The MBE Guaranty Facility will provide guaranties up to 10 percent of the applicable senior loan value, with individual guaranties not to exceed $5 million. The Backstop Guaranties will apply to the construction or development completion guaranty, the repayment guaranty, and the carry guaranty and will be coterminous with the construction financing.
To be eligible, developers must be a certified MBE with a strong development track record and a demonstrated need for the MBE Guaranty Facility. Joint ventures are allowed if the partner is a non-controlling, not-for-profit entity, such as a faith-based organization. Eligible projects include affordable housing projects in HPD and/or HDC’s pipeline that involve the new construction or rehabilitation of rental housing. Project sponsors need to secure a letter of support from HPD or HDC, which will only be granted if the project is ready and expected to close within six months in order to apply to the MBE Guaranty Facility. The maximum senior loan component of its Construction Financing should be no greater than $50,000,000, although exceptions will be reviewed on a case-by-case basis.
Term Sheet
FAQs
Eligibility at a Glance
Eligible Developers:
- Certified Minority Business Enterprise
- Joint ventures if the partner is a non-controlling not-for-profit entity (e.g., Faith-based Organizations)
- Strong development track record
- Demonstrated need for the MBE Guaranty Facility
Eligible Projects:
- Affordable Housing Development Project in NYC that is in HDC and/or HPD’s project construction financing pipeline
- Project must involve the new construction or rehabilitation of affordable rental housing
- Project must be ready to close on construction financing within six months and project sponsor must secure a letter of support from HPD or HDC indicating the expected closing date in order to apply
- Projects or LIHTC projects with MBE as managing member
- Projects where the senior private construction loan does not exceed $50M (exceptions reviewed on a case-by-case basis)
Application Overview
Application and Approval Process:
- To apply to the MBE Guaranty Facility, the project sponsor must first secure a letter of support from HPD or HDC that will only be granted if the project is ready and expected to close within six months
- The project sponsor’s application will be reviewed by the MBE Guaranty Facility’s Credit Committee, consisting of representatives from Goldman Sachs, HDC, and HPD
- Upon Credit Committee approval, the MBE Guaranty Facility will issue a term sheet to be used by the project sponsor to secure commitment from a senior construction lender
- An executed back-stop guaranty will be provided at construction closing that stipulates the conditions for advances and repayment terms
- Upfront and ongoing fees associated with the Guaranty will be capitalized in the project budget
- CPC and a construction consultant will monitor progress through completion and release of the Guaranty
Application Checklist:
- HPD or HDC Program Letter of support indicating that the project is expected to close within six months
- Pro forma that was submitted to HPD or HDC to secure the support letter
- Demonstration of need for a Back-Stop Guaranty, which should at minimum state the guaranty requirements of the Construction Lender, the net worth, liquidity and contingent liabilities of the borrower, and the amount the borrower is able to post
- Proof of MBE certification
- Project description and financial narrative
- Org chart for proposed project
- Narrative description of company; principals’ experience, and relevant information regarding all key parties (e.g. architect, general contractor, property manager, social services provider, etc.)
- Construction lender term sheet specifying guarantors and required guarantees
- Appraisal or other documentation establishing that the project can meet the required loan to value and projected minimum debt service coverage ratio.
- Documentation that establishes the net worth and liquidity of the Project Sponsor
- Satisfaction of all other term sheet requirements
Applications Now Open
By addressing the barriers that have historically limited minority-owned business enterprises from participating in the development of affordable housing, the MBE Guaranty Facility will promote greater opportunity for MBE firms to scale their businesses while developing more affordable housing across the City’s many neighborhoods. New York City, Goldman Sachs and CPC announced the MBE Guaranty Facility in March 2024, a major step towards the goal of building a fairer, more equitable New York City.
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