Atlanta Neighborhood Development Partnership and the Reinvestment Fund Case Study

I. CDFI Partnership Genesis and Structure

Entry into a new market area can be a challenging and risky prospect for any CDFI. When the Reinvestment Fund decided to expand its operations outside the Mid-Atlantic region of the U.S., its leadership knew that adapting to a new lending environment could be tricky, and sought out a local partner to help them find and capitalize on the right opportunity. This expansion led the Reinvestment Fund to join forces with the Atlanta Neighborhood Development Partnership (ANDP), a relationship that has brought both parties considerable benefits since its inception in 2014. The process by which the Reinvestment Fund came to work in Atlanta offers a number of important insights for other CDFIs looking to broaden their geographic reach.

In early 2014, the Reinvestment Fund was ready to expand to a new market but had reservations about its lack of local experience in any of the candidate areas it was considering. Atlanta, Georgia, was one of the regions under consideration, but it was not until President and CEO Don Hinkle-Brown met with his long-time associate, fellow Housing Partnership Network Board member and ANDP’s President and CEO John O’Callaghan, for a friendly lunch that they identified a mutual prospect for success. ANDP’s loan fund was hit hard by the Great Recession and at that point was valued at approximately $3 million, a third of which was still in question, and the organization was concerned about attracting the talent needed to reopen lending activities, which the financial crisis had largely paused. While ANDP worked hard during the crisis to “work out” all its outstanding loans successfully, the resulting easing of pressure on struggling borrowers sharply restricted ANDP’s other activities, such as resizing loans and acquiring foreclosed single-family homes for rehab and sale to low- and moderate-income homebuyers. This pressure meant that ANDP was interested in the idea of finding a national partner to act as its “back office” to provide the underwriting and lending infrastructure ANDP could not itself scale, but the organizations it had considered up until that point had only offered their assistance out of, as O’Callaghan puts it, “respect for [ANDP’s] reputation” and past work, rather than to create synergy.

Meanwhile, the Reinvestment Fund had been looking for a local partner in one of its potential expansion areas. As Hinkle-Brown describes it, “We flirted with and pitched, repeatedly, for launch capital and got no takers at all.” Instead, they felt that the expansion strategy that would be the most successful while staying true to the Reinvestment Fund’s internal compass and mission was to find a local partner with deep experience and support them first, following the idea that “we had to prove our value, come to town, then earn [additional funding].”¹ ANDP, with its strong reputation, award-winning work around the foreclosure crisis and an aptitude for working with a variety of government, not-for-profit, community and private sector partners, could bring a crucial capacity to the Reinvestment Fund’s market entry.²

In openly discussing the challenges each organization was facing, the two presidents identified a previously unrecognized opportunity for mutual benefit. During the meal, they discussed O’Callaghan’s sense of Atlanta’s opportunity as well as its great need for more investment. Together, they realized that the Reinvestment Fund’s need for market entry and ANDP’s for lending expertise made them perfect potential partners.

The two organizations began negotiations regarding a partnership, and were motivated by their positive tone and smooth progress. Initially, some ANDP board members and community partners were concerned about the risk of a national partner “taking over” the organization, while the Reinvestment Fund staff were uncertain about the unusual model proposed and “what we’re supposed to do for these people,” wondering, “Are we really supposed to act like this is our loan?”³ However, O’Callaghan recounts the partnership formation process as “just the most amazing negotiation.” Both parties felt like equals co-developing the right model and sharing mutual investment in each another’s organizational sustainability and security, which quickly gained buy-in.

Both parties found they had organizational needs for which the other could provide very practical value, making the partnership both a transaction and a relationship. He describes the Reinvestment Fund’s clear and exciting commitment to respecting any partner’s existing work, and that dynamic contributed to a negotiation free of the hat-in-hand or overwhelmed sensations some smaller, local, weaker CDFIs report when negotiating with a national partner. Indeed, the process felt as if “both [parties] were negotiating for the other’s financial benefit” to the point that, when ANDP’s representative indicated that “the price you gave me doesn’t cover your cost; I need to pay you more,” Nancy Wagner-Hislip, the Reinvestment Fund’s chief investment officer and point-person on the partnership, is reported to have replied to the effect of, “No, first, [ANDP] doesn’t have that money, and second, [with] the value of your market knowledge and relationships — it’s worth  it.”⁴ As a result of this negotiation, both parties felt confident in the other’s complete trustworthiness and were pleased with the extent to which their missions, business models and service focus  aligned.

Directly after completing these negotiations, ANDP personnel had an opportunity to visit the Reinvestment Fund in its home base of Philadelphia as part of the Atlanta Regional Commission’s LINK program for mutual learning.⁵ While there, they were impressed by the scale at which the Reinvestment Fund was operating — nearly $1 billion — and struck by the similarities in need and cultural history (such as suburban vs. urban and racial tensions) Philadelphia shared with Atlanta. These similarities confirmed in the minds of both partners that Atlanta’s CDFI lending, then under $10 million across all active organizations, “needed Philly levels of cash,” which the Reinvestment Fund could help ANDP scale up to.⁶ The Reinvestment Fund provided much of the initial funding to get the partnership started, including hiring a shared employee with ANDP and funding the majority of underwriting, loan origination staffing and sourcing, which was supported by modest payments from ANDP. This initial shouldering of burden gave ANDP a crucial opportunity to get back on its feet and restart lending, benefiting both organizations and Atlanta considerably.

II. Goals and Achievements

By all accounts, the presidents’ early predications for the partnership’s success have held true. In the four years since signing the annually updated Memorandum of Understanding (MOU) and service contract that govern ANDP and the Reinvestment Fund’s relationship, ANDP has consistently beaten its growth goals, more than doubling its fund size from barely $3 million to over $7 million, with the fund on track to reach its 2020 goal of $14 million ahead of schedule. Furthermore, the partners have collaborated to attain further funding from outside partners. Most notable was their success in competing for a Chase PRO Neighborhoods grant as two of the three members of the Equity Atlanta Collaborative (with Access to Capital for Entrepreneurs), receiving $4 million to split across the three organizations.⁷

III. Financing and Nonlending Activities

The Reinvestment Fund and ANDP are working closely with other local partners, including Enterprise Community Partners, the Georgia Cities Foundation, Southwest Georgia United and NeighborWorks Columbus, in a unique, state-funded project. Managed by the Georgia Department of Community Affairs, the partners are working to match and direct Tax Credit Assistance Program (TCAP) funds into investments through local CDFIs to better match need with  capacity. O’Callaghan identifies the “strength of a local Atlanta partner with a national partner [as] essential to the formation of both collaboratives,” and indicates that neither collaborative would have happened (nor would the resulting capital have been available) without the Reinvestment Fund’s presence and support.

ANDP’s greater capacity, made possible by the Reinvestment Fund’s investment and technical assistance, has also made it more competitive when independently competing for resources. Historically, ANDP had only received an award from the CDFI Fund on three occasions since its 1991 founding. Since partnering with the Reinvestment Fund, ANDP has received two successive years of funding from that source in the form of Financial Assistance awards, “lifting our game there” and beyond.⁸ Indeed, the partnership has even benefited parts of  ANDP’s organization beyond the fund, such as bringing in Capital Magnet Fund awards (one of 15 such awards per year nationally) in both of the past two years for housing development and NMTCs through the Housing Partnership Network, an award the size of which would not have been possible without the Reinvestment Fund’s support.⁹ The relationship has also improved day-to-day operations, opening ANDP up to deals involving larger, more leveraged and more complicated capital sources and needs, including select projects beyond housing, such as an early childhood education center. The support and security the Reinvestment Fund can provide helps “make ANDP a leader in developing single-family home financial approaches,” and has increased their non-HUD-funded development capacity from near zero to 75 homes per year, a “capital stack [that] wouldn’t be possible with[out] the Reinvestment Fund.”¹⁰

Likewise, the Reinvestment Fund has also enjoyed considerable individual success resulting from its partnership with ANDP. It has successfully entered the Atlanta market and participated in many deals in the region, and still appreciates ANDP’s advice on the context of the Atlanta Metropolitan Statistical Area. In the future, the Reinvestment Fund hopes to expand its operations, with ANDP’s support, to  other parts of the Southeast, including Birmingham, Alabama; Savannah and Augusta, Georgia; to rural areas in the Southeast United States; and to new target organizations such as Historically Black Colleges and Universities, which historically have struggled with being deemed “unbankable” and not being able to attract sufficiently flexible and patient capital. Already, the Reinvestment Fund reports benefiting from ANDP’s insight into local politics and ability to introduce it to influential stakeholders and partner organizations in the region, such as the city of Atlanta, local academic institutions, the Federal Reserve Bank of Atlanta and more.¹¹ Indeed, the Reinvestment Fund credits its recent receipt of a $2 million investment from Regions Bank to ANDP’s ability to “vouch for” and “credential” the Reinvestment Fund to funders that would not otherwise be familiar with the organization or its work.¹² ANDP’s introduction of the Reinvestment Fund to Atlanta has also allowed it to pursue projects of its own in the area, such as the NMTC-funded Glenwood Kroger Marketplace and the ATL ACCESS Map of early childhood education and care dynamics.¹³ They also celebrate their exchange of best practices and increased capacity to provide technical assistance, such as the PolicyMap platform, to work towards improving the operations of the CDFI lending industry as a whole.¹⁴ As Wagner-Hislip put it,  “I think the partnership will continue to open doors  for [the Reinvestment Fund] in terms of raising capital, getting  deals  and  opportunities,  and  influencing policy … sitting at [the right] tables,” furthering both the Reinvestment Fund and ANDP’s missions.

IV. Challenges, Opportunities and Leading Practices

The parties credit the success of their partnership to their shared values, as discussed above, and to the practical execution of their relationship. Each organization has its own internal hierarchy, with the Reinvestment Fund technically acting as a service provider — a vendor under contract — to ANDP, as laid out in their MOU, which also covers overlapping business areas and how to handle them. This explicit, formal relationship is made more dynamic by the closeness with which the two organizations operate, including their shared staffer Yonina Gray and their frequent communication on all levels. The organizations collaborate on deals, meetings, outreach, programs and technical assistance, keeping the relationship — which Hinkle-Brown describes as “safe and nonthreatening … with lots of honesty” — strong. Beyond formal monthly check-in meetings, the organizations also interact daily, sharing an office building in Atlanta and supporting one another’s work constantly, which they identify as a key success factor, especially when beginning the partnership. “Being a partner that is present and known,” Wagner-Hislip observes, “[and] pushing [that connection] down into staff and having relationships through the organization is important to doing this work.” Building staff commitment, buy-in and relationships is crucial to successful partnering, and “getting to know each other as completely as possible makes it a lot easier to course-correct if you hit a bump,” a strategy that  has helped the ANDP/Reinvestment Fund partnership thrive.¹⁵