A proposal to right-size reserves, by Project for Pride in Living and partners and partners.
In lieu of large project reserves, provide the Limited Partner with a guarantee for some portion of the reserve amount. The guarantee could be provided by Minnesota Housing, an insurance company, a foundation, or an investor. The guarantee would likely need to be a cash equivalent in order to be acceptable to the Limited Partner, so the risk would need to be borne by the guarantor. The guarantor could use a portion of the cost savings to collateralize the guarantee across the entire portfolio. Ideally, anything left over could be taken as a cost savings to the project. Alternatively, the remainder could be invested to yield a more robust return than the basic bank rate with some portion of that increased yield returning to the project.
Download the Right Sizing Reserves submission.