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OPIC Experience in Construction Finance

OPIC Experience in Construction Finance. Debra L. Erb Director of Housing Programs. World Bank Conference March 15 – 17, 2006. What Is OPIC?. U.S. Government Corporation – self sustaining Mission: support U.S. investment in developing markets, support development

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OPIC Experience in Construction Finance

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  1. OPIC Experience in Construction Finance Debra L. Erb Director of Housing Programs World Bank Conference March 15 – 17, 2006

  2. What Is OPIC? • U.S. Government Corporation – self sustaining • Mission: support U.S. investment in developing markets, support development • Products: Loans, guaranties, political risk insurance and investment funds 2

  3. Housing Initiative • Low and middle income projects, for local families • Objective to deliver quality, fully serviced homes, using best technology, efficient delivery. Affordability is key. • Also support mortgage lending, securitization, credit enhancement/mortgage insurance 3

  4. OPIC Product Overview OPIC Political Risk Insurance OPIC Investment Funds OPIC Finance Providing local firms with access to capital, management guidance, and financial expertise Funds are established according to asset allocation plan, and extensive RFP process Loans from 3-20 years in dollars Funding from U.S. Treasury and Capital Markets Guaranties for up to 75% of U:.S. bank loan Guaranty MBS issuance Terrorism, political violence Expropriation Inconvertibility and transferability Contract Frustration Sovereign Guaranty “wrap” 4

  5. Construction Program – Eligibility and Terms Terms Loan term - Generally 3-5 years Amount - $5 million per project (avg) Leverage - 60% of project cost Land acquisition – not more than 15% Infrastructure – up to 35% of costs Guaranties – completion, performance bonds, credible contractors Contributed Land – ok, subject to valuation House Type – detached, apartments, mid-rise, semi-detached ok Title – must be clear Amenities – can include limited small retail, community center, school, clinic, green areas. Need experienced partners. Eligibility • Commercially viable business plan and successful track record • At least 25% U.S. equity ownership • Projects meet environmental, labor and human rights standards, anti-corruption guidelines • OPIC eligible country • Limited government participation (<50%) • US Dollar lender, can guaranty in local currency * Terms and leverage vary 5

  6. Project Constraints Escalating land prices Long lead time for development, uncertain process for permits, title transfer, etc. Lack of primary infrastructure Limited local contractor capacity Inefficient delivery means that overall costs are high and profitability of affordable housing limited Buyer capacity – lack of long term financing Bank capacity – slow closing on mortgages 6

  7. Brazil - $5 million corporate loan Kenya – construction and lease purchase $7.1m S. Africa – guaranty for social housing Zambia – mortgage take out for $46m Various direct loans: Russia, apartments Ukraine, apartments Afghanistan – houses Cameroon, Uganda, Ghana, Honduras – houses Mexico, manufactured housing OPIC Construction Pipeline/Projects 7

  8. For more information, finance applications and contact information, visit our website: http://www.OPIC.gov Debbie Erb – Director of Housing Programs (202) 336-8472 dlerb@opic.gov

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