Enterprise launched the Frey Fund in 2018 to support the growth of mission-driven affordable housing developers and nonprofit social service organizations in New York State. Named in honor of Bill Frey, founder of Enterprise’s New York office, the fund provides flexible capital to strengthen Community Development Corporations (CDCs), and minority and/or women owned businesses as they seek to accelerate predevelopment and pursue larger development opportunities. While the fund was initially designed to address the acute housing shortage in New York City, the tool is available to developers across New York State.
The fund also supports the growth of programs and services and can fill equity gaps on projects financed by conventional banks and Community Development Financial Institutions. Over the past six years, the Frey Fund has committed more than $7.9 million in loans across the five boroughs of New York City, with 72% committed to BIPOC-led organizations. This has supported the creation and preservation of 4,300 affordable homes, including nearly 1,000 set aside for formerly homeless residents with supportive services.
CDCs and mission-based developers often struggle to secure upfront and capital funding, as they have limited equity and rely on developer fee payments at the time of project completion. In an environment where even the most seasoned affordable housing organizations are facing acute economic pressures, the Frey Fund is a proven source of catalytic and flexible capital for CDCs and mission-based developers. The Fund provides favorable terms and a priced fixed loan interest rate, which can be the difference maker for borrowers exploring new deals, hiring and training additional staff, and building up their balance sheet.
Added Flexibility
The most powerful benefit of the Frey Fund is its inherent flexibility. The capital is explicitly designed to meet our partners’ needs across all market cycles and support developments at all stages, from the earliest partnerships to construction phase gap-filling bridge lending. Loans may be structured on a specific project basis, or, to support several deals across an organization’s development pipeline, thereby allowing our partners to prioritize their working capital needs. Partners often seek out the Frey Fund to cover predevelopment expenses, while others increase their internal capacity and operations by drawing on loan proceeds to hire and train staff.
The Frey Fund also helps CDCs and growing mission-based developers improve their standing in development deals, allowing them to commit financial resources at the earliest stages and strengthen their negotiating position. This support helps the developers shift away from reliance on a joint venture partner’s balance sheet and increase their share of economic benefits. Consequently, Frey Fund borrowers can build up their balance sheet, and negotiate more favorable terms with lenders, investors and larger partners. This allows them to take on more work in the future.
One borrower, the Fortune Society, shared that its Frey Fund loan accelerated its housing development work. Instead of relying on a development partner, the Frey Fund enabled the organization to be sole developer, building their internal capacity, knowledge and in-house expertise. The Frey Fund loan provided The Fortune Society with the means and access to capital to advance permanent supportive and affordable housing and programs in three justice-involved communities. The impact is meaningful and invaluable, with staff members gaining first-hand experience in development, housing finance, and innovating capital structures, while also advancing the creation and preservation of 225 affordable apartments for those with criminal justice history.
Another borrower, Bronx Pro Development Group, experienced remarkable organizational growth. During the term of the Frey Fund loan, Bronx Pro’s development pipeline grew significantly, and access to Enterprise’s capital provided the resources Bronx Pro needed to manage its strategic expansion. Since closing with Enterprise, Bronx Pro has developed over 1,100 affordable multifamily apartments and supportive housing, in part due to the flexible working capital from the Frey Fund. Most recently, Bronx Pro successfully joint ventured with Services for the Underserved to redevelop its Starhill campus, resulting in the new construction of 570 permanent supportive apartments with robust on-site services for its residents. Enterprise and Bronx Pro collaborated over multiple stages of Starhill, from early predevelopment to the $150 million investment of low-income housing tax credit equity. The transformative Starhill project demonstrates the power of catalytic capital, which ultimately resulted in more than $355 million of combined funding sources.
A 'Breath of Fresh Air' in Difficult Credit Climate
The Frey Fund’s newest borrower, Kalel Ventures, an experienced and growing minority- and women-led affordable housing developer, recently closed on a predevelopment loan that will support both the portfolio-level preservation of affordable housing in the Bronx, as well as the new construction of an affordable senior housing development and new four-story faith-based community facility in partnership with a faith-based organization located in the Bedford Stuyvesant neighborhood in Brooklyn.
The Frey Fund loan is providing the early-stage resources needed to engage in the predevelopment activities, particularly architectural design. “{Enterprise} has been flexible, understanding, quick to execute and eager to help - all qualities in high demand, especially for an emerging developer in need of predevelopment funding," said Pierre Downing, Founding Principal at Kalel Ventures. The Frey Fund provided low-cost predevelopment funds, helping Kalel continue work on its development pipeline. "With the Frey Fund’s loan, we were able to move forward with the construction and preservation of more than 400 units of affordable housing," Downing said. "The flexibility and loan terms that Enterprise has provided with the Frey Fund is a breath of fresh air in a difficult credit climate. The ability to use the funds for a variety of purposes has been incredibly helpful.”
The success of the Frey Fund and testimonials from Enterprise’s partners demonstrates there is a great need for high flexibility capital to develop affordable housing. Providing capital to growing mission based and minority and/or women owned businesses development firms and nonprofit organizations lays the foundation for a more equitable development community. Enterprise welcomes the opportunity to discuss the Frey Fund with interested mission-aligned organizations. At the same time, Enterprise calls on traditional capital providers and creative lending institutions to build out further and scale up flexible capital programs. Much more can be done to tackle the housing crisis from every angle with the right kind of capital, strategic partnerships and the commitment to making homes affordable for everyone.
For more information about the Frey Fund, contact Victoria Rowe Barreca, director of capital solutions and partnerships at Enterprise New York.