New York Citi today announced the issuance of its first Affordable Housing Bond. The transaction consisted of a $2.5 billion 4-year non-call 3-year fixed to floating rate note issuance, the largest-ever social bond from an issuer in the private sector. The use of proceeds from the bond will finance the construction, rehabilitation and preservation of quality affordable housing for low-and moderate-income populations in the United States, building on Citi’s record as the largest financer of affordable housing in the country.
Citi’s extensive efforts to expand the availability of affordable housing include providing affordable housing developers with a range of financing solutions, such as construction and permanent lending, tax credit equity, and Fannie Mae and Freddie Mac mortgage banking. In 2019, Citi Community Capital—the unit through which the firm finances all types of affordable housing and community development projects—reported over $6 billion in lending for affordable rental housing projects. Partnering with developers, non-profit organizations and local governments, Citi has helped create or preserve nearly 488,000 affordable housing units over the past decade.
“As the largest affordable housing lender in the United States, Citi is a leader in the effort to increase the availability of affordable rental housing for the nation’s workforce and most vulnerable populations,” said Citi CEO Michael Corbat. “This transaction represents an important next step in expanding Citi’s commitment to ensuring that all families have access to safe and affordable housing.”
As part of the transaction, Citi worked exclusively with women, veteran and minority-owned broker-dealers, including active bookrunners Blaylock Van LLC; CastleOak Securities, L.P.; Loop Capital Markets LLC and Samuel A. Ramirez & Co. Inc. Academy Securities, Inc.; Great Pacific Securities; MFR Securities, Inc.; Roberts & Ryan Investments Inc. and Siebert Williams Shank & Co., LLC also served as co-managers on the transaction.
“Citi continues to reaffirm its commitment to diversity and inclusion. The selection of CastleOak Securities, L.P. as joint lead manager on Citi’s $2.5 billion social bond to increase affordable housing in the nation’s most vulnerable populations highlights how Citi continues to be a catalyst for change,” said David R. Jones, Co-Founder, President and Chief Executive Officer, CastleOak Securities, L.P.
The transaction builds on a key objective of Citi’s Action for Racial Equity, a far-reaching effort to provide more than $1 billion in strategic value for communities of color to help close the racial wealth gap. Through Action for Racial Equity, Citi has pledged an additional $550 million to support homeownership for people of color and develop affordable housing with minority developers over the next three years.
“Our Social Bond Framework for Affordable Housing and accompanying inaugural offering strengthens our partnerships with clients around the world and responds to increasing investor interest in social bonds and broader ESG initiatives,” said Michael Verdeschi, Treasurer of Citi.
In conjunction with the bond offering, Citi unveiled a new Social Bond Framework for Affordable Housing to detail how projects and assets will be selected. Citi will publish an Affordable Housing Bond report detailing use of funds and allocation. Sustainalytics has reviewed Citi’s Social Bond Framework for Affordable Housing and confirmed in their Second Party Opinion alignment with the four pillars of the ICMA Social Bond Principles 2020.
“As a responsible investor, APG has encouraged growth in the social bond market and is pleased to see issuers facilitating access to affordable housing in the United States. These social bonds offer an opportunity for attractive risk-adjusted returns, while contributing to the UN Sustainable Development Goals by financing safe, high-quality homes for historically underserved communities and families across the country,” said Scott Cavanagh, Senior Credit Analyst at APG Asset Management US, Inc.
This transaction is consistent with Citi’s pledge to align community engagement with the UN Sustainable Development Goals (SDGs). Affordable Housing Bonds issued under this Framework advance SDG 11.1 (Sustainable Cities and Communities), ensuring universal access to adequate, safe and affordable housing by 2030.
“The pressure on families and individuals to be able to make rent and mortgage payments has increased, with the pandemic exacerbating that stress,” said Richard Gerwitz, Co-Head of Citi Community Capital. “This unique offering will provide funding to help confront the challenges we face as a country in providing safe, affordable housing options for the communities where we work and live.”
Citi, the leading global bank, has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management.
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