Greystone was initiated by a group of jointly-trusted private sector pension funds interested in obtaining financial returns from development, as well as non-financial returns, such as employment for unionized workers (who are also pension plan members) in the province. At present, shareholders in its corporate structure are twenty-four British Columbia and national plans for construction-related trades as well as those from other industries, such as the IWA Forest Industry Pension Plan, the Pulp and Paper Industry Pension Plan, the Teamsters' Canadian Pension Plan and the Telecommunications Workers' Pension Plan.Endnote 125
There has been considerable interest expressed by fiduciaries at similar pension funds across Canada to replicate the Greystone experience in their province or region. Interest has been further prompted by the founding of Mortgage Fund One in 1992, also in British Columbia. Now capitalized by fourteen pension funds at a level of $100 million, this pool provides loans underwritten by mortgages to new construction and up- grading of primarily commercial sites, also using local unionized labour. There are a dozen current portfolio transactions (including several partnerships with Greystone) located in Vancouver, Vancouver Island and other provincial communities.Endnote 126
Canadian vehicles that pool pension assets to back real estate - and particularly those with ancillary development goals - have American counterparts. Indeed, some of the latter are multi-billion dollar syndications leveraged by hundreds of pension funds and often actively supported by government. A long- standing version is the Housing Investment Trust (HIT), sponsored by the AFL-CIO.
Founded in 1964, the AFL-CIO's HIT has a mandate to support development projects that yield new or revitalized, affordable housing stock across the United States, while simultaneously ensuring financial returns that match or surpass market benchmarks. Transactions must also put union members to work. The trust today invests at an average rate of $400 million per year, achieved through mortgage-backed securities, mortgages, construction loans and other financial instruments. Most of these are insured or guaranteed by federal authorities or some public guarantor agencies, known colloquially as Fannie Mae, Ginnie Mae and Freddie Mac.
HIT's focus is new construction or rehabilitation of single and multi-family dwellings for which it offers debt financing (e.g., loans of between $1-35 million) undertaken in partnership with private lending institutions. For instance, bonds are issued to help finance developments favouring low and middle-income families while loans may be geared to building or renovating nursing homes, intermediate care facilities and retirement centres. In most instances, HIT money reaches local developers, public housing agencies, community and non-profit organizations and other parties that share its outlook. The current investment portfolio is valued at $1.9 billion. Over its lifetime, HIT has extended over $2 billion to residential investment activity and reports having facilitated 50,000 units of single and multi-family dwellings across the United States and creating 40,000 jobs in construction and related industries.
In 1987, the HIT was joined by the Building Investment Trust (BIT). With approximately $700 million in total assets in 1998, this second trust engages in direct debt and equity financing of commercial, industrial and retail developments nationwide, as well as apartment projects (currently comprising 35 percent of the portfolio, and growing), in association with several realty companies. In 1993, both trusts joined the National Partnership for Community Investment in collaboration with the federal Department of Housing and Urban Development and others to commit over $500 million to residential and non-residential development in twenty-five American cities.
In 1998, HIT and BIT capitalization was provided by over 400 and 70 institutional investors, respectively, the vast majority of which are jointly-trusted multi-employer and public sector pension plans. These also share in labour-management administration of the trusts. Several other American real estate pools exist with similar mandates and extensive pension participation, including the $1 billion "J for Jobs" program of the Union Labor Life Insurance Company (ULLICO) and the $1.6 billion Multi-Employer Property Trust. ULLICO recently entered a long-term, $600 million co-investment initiative with CalPERS and the New York State Common Retirement Fund for new commercial construction in two states.
Sources: AFL-CIO HIT and BIT, Brochures, 1998 and Annual Reports, 1997; MEPT, Brochures, 1997; ULLICO, Brochures, 1997; CLMPC interviews, 1998