IBEW/NECA Employee Benefits Conference
Transcript of IBEW/NECA Employee Benefits Conference
February 1, 2013
AFL- CIO
HOUSING INVESTMENT TRUST
IBEW/NECA Employee
Benefits Conference
Lesyllee White, Esq.
Senior Vice President & Managing Director of Marketing
National Office
2401 Pennsylvania Avenue, NW, Suite 200
Washington, DC 20037 • (202) 331-8055
www.aflcio-hit.com
AFL-CIO Housing Investment Trust 1
About the AFL-CIO Housing Investment Trust
• Open-end institutional mutual fund
• $4.6 billion investment grade fixed-income portfolio
• 368 investors, including 91 IBEW affiliated funds, as of
December 31, 2012
• 100% union construction requirement
AFL-CIO Housing Investment Trust 2
HIT Objective and Strategy
OBJECTIVE:
Generate competitive risk-adjusted fixed-income returns, while
financing housing, including affordable and workforce housing, and
creating good union jobs
STRATEGY:
• Construct and manage a portfolio with superior credit quality, higher
yield and similar interest rate risk relative to the Barclays Aggregate
benchmark
• Specialize and overweight in government/agency multifamily MBS,
with a focus on construction-related investments
AFL-CIO Housing Investment Trust 3
HIT Track Record - Returns
The performance data quoted represents past performance and is no guarantee of future results. Periods over one year are annualized. Investment results and principal value will fluctuate so that units in the HIT, when redeemed, may be worth more or less than the original cost. The HIT’s current performance may be lower or higher than the performance data quoted. Performance data current to the most recent month-end is available from the HIT’s website at www.aflcio-hit.com. Gross performance figures do not reflect the deduction of HIT expenses. Net performance figures reflect the deduction of HIT expenses and are the performance figures investors experience in the HIT. Information about HIT expenses can be found on page 1 of the HIT’s current prospectus.
4.7
1%
6.5
5%
6.4
1%
5.6
0%
4.2
7%
6.0
9%
5.9
6%
5.1
7%
4.2
2%
6.1
9%
5.9
5%
5.1
8%
0%
2%
4%
6%
8%
1-year 3-year 5-year 10-year
HIT Gross HIT Net Barclays Aggregate
Annualized Total Returns vs. Benchmark
As of December 31, 2012
Competitive returns – 20 consecutive calendar years of gross returns exceeding
Barclays Capital Aggregate Bond Index (13 of those years on a net basis)
AFL-CIO Housing Investment Trust 4
HIT Track Record – Returns & Diversification
Since 2000, the HIT has provided a significant positive return, whereas the same investment in major stock and
corporate bond indices, would be worth less than the HIT investment and, in some cases, less than the original value. In
addition, the HIT provides diversification lacking in many other fixed-income funds because it does not hold corporate
bonds.
December 31, 1999 - December 31, 2012 Ending Value
(Millions) % Change
HIT $22.45 125%
Barclays Capital Aggregate $22.12 121%
Dow Investment Grade Corporate Index $12.63 26%
U.S. NYSE $12.28 23%
U.S. Dow Jones $11.40 14%
U.S. S&P $9.71 -3%
United Kingdom FTSE 100 $8.51 -15%
Japan Nikkei 225 $5.49 -45%
Growth of $10 Million Invested
Source: Haver Analytics, Bloomberg and the HIT
AFL-CIO Housing Investment Trust 5
HIT Track Record – Jobs and Housing*
Since Inception
HIT Commitments – Workers’ Capital Invested $6.6 billion
Total Development Value $10.4 billion
Housing & Healthcare Total Units 106,000
Affordable Units 65,900
Union Jobs 73,900
*Includes HIT’s subsidiary Building America
AFL-CIO Housing Investment Trust 6
HIT’s Construction Jobs Initiative
• Launched in 2009 to put union construction workers back on the
job
• New goal is to create 20,000 jobs before the end of 2013
• Large pipeline of projects should add to construction-related
investments going forward
• HIT generated a cumulative 29.1% gross return and a cumulative
26.9% net return from 2009 through 2012
The performance data quoted represents past performance and is no guarantee of future results. Periods over one year are annualized. Investment results and principal value will fluctuate so that units in the HIT, when redeemed, may be worth more or less than the original cost. The HIT’s current performance may be lower or higher than the performance data quoted. Performance data current to the most recent month-end is available from the HIT’s website at www.aflcio-hit.com. Gross performance figures do not reflect the deduction of HIT expenses. Net performance figures reflect the deduction of HIT expenses and are the performance figures investors experience in the HIT. Information about HIT expenses can be found on page 1 of the HIT’s current prospectus.
AFL-CIO Housing Investment Trust 7
HIT’s Achievements Since 2009
• 16,000 union construction jobs created
• $1.3 billion of workers’ pension capital invested
• $2.9 billion of development
• 56 projects
• Projects in 29 cities
• 17,000 housing units
• 80% affordable housing for working men and women
AFL-CIO Housing Investment Trust 8
IBEW Estimated Hours of Work on HIT Projects
2002 to 2012
• Total hours of IBEW work generated: 6.40 million
• Total hours of union work generated: 60.33 million
Under Construction Jobs Initiative (2009 - 2012)
• Total hours of IBEW work generated: 3.54 million
• Total hours of union work generated: 33.42 million
AFL-CIO Housing Investment Trust 9
HIT’s Investments
Electchester Housing Companies
Queens, NY
Substantial Rehabilitation
Electchester Housing Companies
HIT Commitment $49,000,000
Total Development Cost $49,000,000
Total Housing Units 2,399
Estimated Union Jobs 175
AFL-CIO Housing Investment Trust 10
HIT’s Investments
Charlesview Apartments
Boston, MA
Charlesview Apartments
HIT Commitment $58,200,000
Total Development Cost $152,000,000
Total Housing Units 240
Estimated Union Jobs 860
AFL-CIO Housing Investment Trust 11
HIT’s Investments
333 Harrison Apartments
San Francisco, CA
333 Harrison Apartments
HIT Commitment $70,001,400
Total Development Cost $105,000,000
Total Housing Units 326
Estimated Union Jobs 600
AFL-CIO Housing Investment Trust 12
HIT’s Investments
Coquille Valley Hospital
Coquille, OR
Coquille Valley Hospital
HIT Commitment $22,000,000
Total Development Cost $29,705,495
Total Housing Units 16
Estimated Union Jobs 220
AFL-CIO Housing Investment Trust 13
HIT’s Investments
The Moderne
Milwaukee, WI
The Moderne
HIT Commitment $42,357,800
Total Development Cost $56,700,000
Total Housing Units 203
Estimated Union Jobs 350
AFL-CIO Housing Investment Trust 14
HIT’s Internal Management
HIT
Portfolio Management Marketing
• Market to Taft-
Hartley and Public
Funds
• Investor Relations
• Risk Management
• Investment
Pricing/Structuring
• Trading
Multifamily Investments
• Identify and Source
Construction-
Related Projects
• Work with Mortgage
Bankers,
Developers, Housing
Finance Agencies,
Labor/Community
Organizations, etc.
AFL-CIO Housing Investment Trust 15
HIT’s Deal Sourcing & Investment Process
HIT Initial Screening
Proposed
Housing Projects
Referred to HIT
Mortgage Bankers
Developers
• Housing/Healthcare
Development
• 100% Union Labor
• Credit Criteria Met
• Market Interest Rate
on HIT Investment Labor/Community
Organizations
Housing Finance
Agencies
Fails to meet
initial
requirements
AFL-CIO Housing Investment Trust 16
HIT’s Deal Sourcing & Investment Process (continued)
Portfolio
Investment
Pricing &
Structuring
HIT Review & Analysis
• Development Team
• Market & Deal
Analysis
• Property
Characteristics
• Labor Concurrence
• Rate
• Size
• Prepayment
• Maturity
• Credit
Enhancement
• Interest Rate
Risk
Management
• Credit Monitor
• Liquidity
• Relative Value
• Trading
Me
ets
init
ial
req
uir
em
en
ts
AFL-CIO Housing Investment Trust 17
Market Outlook
Source: US Census Bureau
63
64
65
66
67
68
69
70
Pe
rce
nt
Steady Decline in Home Ownership Since 2004
AFL-CIO Housing Investment Trust 18
Market Outlook
Source: US Census Bureau
0
100
200
300
400
500
600
Recent Increase in Demand for Multifamily Housing
(Six-Month Moving Average of Multifamily Starts
at Annual Rate in thousands)
AFL-CIO Housing Investment Trust 19
Multifamily/Rental Housing Demand Facts
• Hard to access mortgage credit for single home buyers
• Americans switching to renting vs. owning
• Household formation of 1.2 million per year in a normal
economy
• Nearly 3 million households have become renters since the
housing meltdown – at least 3 million more expected by 2015
• Aging multifamily projects will need substantial rehab in dense
urban markets
AFL-CIO Housing Investment Trust 20
HIT Positioned Well
• Strong pipeline and robust multifamily/rental development going forward
• FHA and GSEs still the most competitive source for financing multifamily
development projects
• Portfolio has a strong yield advantage versus the benchmark
• Portfolio has high credit quality versus the benchmark, and is 99% liquid
with emphasis on government guaranteed mortgage securities
• Portfolio has strong prepayment protection
• HIT will continue to help create union jobs and stimulate local economies
Investors should consider the HIT’s investment objectives, risks and expenses carefully before investing. A prospectus containing more complete information may be obtained from the HIT by calling the Marketing and Investor Relations Department collect at 202-331-8055 or by viewing the HIT’s website at www.aflcio-hit.com. The prospectus should be read carefully before investing.
This document contains forecasts, estimates, opinions, and/or other information that is subjective. Statements concerning economic, financial, or market trends are based on current conditions, which will fluctuate. There is no guarantee that such statements will be applicable under all market conditions, especially during periods of downturn. It should not be considered as investment advice or as a recommendation of any kind.
AFL-CIO Housing Investment Trust 21
Contact information
2401 Pennsylvania Avenue, NW, Suite 200
Washington, DC 20037
(202) 331-8055
www.aflcio-hit.com
Chang Suh, CFA, Senior Executive Vice President - Chief Portfolio Manager
Lesyllee White, Senior Vice President and Managing Director of Marketing
Paul Sommers, Midwest Regional Marketing Director
Emily Johnstone, Western Regional Marketing Director