Outlook for Banking, Affordable Housing Fund

very well and certainly been recognized by investors. In twenty nineteen, Frank Sorrantino is back with US CEO at Connect One, based in Englewood Cliffs, New Jersey, back in our Bluemberg Interactive Broker studio here in New York. Nice to have you here with us. Great to be here again. So how would you describe the banking environment? It's an interesting environment today, certainly interesting, good, interesting, Well, you know what is that? It's a Chinese curse? Right, have lived an

interesting life? Um, certainly an interesting environment. You know. We we find that the econom of me in general is doing pretty well, and most of our business owners are fairly upbeat. About what's going on. Yet, everything that you see or reading the news, including you know today, depends on what day you wake up and you know what what what Twitter feed you are watching? So um, but in general, I think the economy is pretty good. Banks

are pretty well positioned. They've never had so much capital as they have today. Um, as you saw, you know, earnings were pretty good for banks across the board past quarter. Do you think it's right when they talk about loosening some of the reserves or some of the requirements, you know, rolling back some of the financial crisis and financial crisis era adjustments on banks. I don't think there. I don't really believe there was anything significant there that's contributed to

or added to where the financials are today. Uh. Some of those things were mostly adjustments. There weren't any any really big wholesale Uh. There are things of course that I think, UM, we need to take another look at some of the capital requirements. Some of the complexity that's in that's in the regulation more so than the actual Um. You know, what does the regulation say, it's the complexity around it in the cost of compliance with that complexity, I think is just a drag on the economy, and

it doesn't really benefit anyone. Tell us about what your customers are telling you, because you know, I feel like we have an okay picture of what businesses are saying, whether they're borrowing, whether they're spending, whether they're expanding. If you can generalize sort of how your customers are feeling, what what would you say? So, look, I think um clients in general, and it almost doesn't matter what industry we're talking about. But the labor markets tight, okay, So

that's both a good thing and a bad thing. Interest rates are low on historic by historic standards or any other standard you want to look at, so people feel confident about making certain types of decisions about the future in that In that environment, people feel good that they have jobs. Businesses feel good that their businesses are profitable. Uh, people feel they can expand or you know, make capital improvements to their business because interest rates are really low.

So in general, it's an upbeat. It's an upbeat sense of where we are. So are you seeing more people take out mortgages? Are you seeing you know, businesses that you that are your clients either take out money for capital expenditures or improvements. What what do you are you seeing deposits grow. What are you seeing, Frank in terms of your metrics? So, yes, yes, and yes, I would say the biggest, the biggest holdback in the residential economy right now is the lack of product in brand new housing.

It's just not there. Um. So that's that's so, that's a good sign for that industry. Yes, businesses are borrowing, businesses are expanding, Businesses are uh spending money on a lot of technology, capital improvements, efficiency matters, and you know this whole concept of well, we're going to wipe out an entire um part of the economy because of you know, efficiencies that are coming to the market place. I just I don't see it. I see it going in the

other direction. There are more better quality jobs that are going unfilled today than I think than there ever have been before. So when it comes to your business, more consolidation coming coming. And are you a buyer here? So well yes and yes, um. So you know, the the banking industry has been consolidating somewhere around four to five per year for the last twenty years or so. There were some twenty thousand banks years ago. There are five thousand and a few others right now the rate of

consolidation is about the same. It's still consolidating at about five percent, which would be a two fifty banks a year UM. And yes, Connect one Bank closed on an acquisition earlier in the year uh and we announced another one here in August. So there are opportunities to build scale to create a more efficient banking platform under connect one. Well, what do you get out of consolidation and we just

got about forty seconds here. What do you get? Is it just in case you're able to cut back on people, but because you can kind of integrate operations. Look, I think I think you really look need to look at the bigger economy to understand what's happening right. Um, the community bank model, where geography is so important, has has

slipped away a bit. So efficiency is important, scales important, The ability to market across a much larger platform is important, and you need size uh and revenue in order to be able to do that. And the best and one of the one of the best ways to do that is to merge with your partner or or or acquire or be acquired. All Right, I love talking to you. I really do feel like we get a snapshot of what's going on, because I feel like there's so many

questions out there. So thank you. All right, Frank Sarantino, Chief Executive, I'll sort of connect one bank, publicly traded based in Inglewood Cliffs, New Jersey, here with us and wowspital famous daughter. Yeah, well I know that we'll see world. I'm so delighted to have our next two guests in our studio. We mentioned earlier we would talk about affordable housing. Habitat for Humanity New York City works on that. It also has an initiative to help support more homeowners financially.

And so let's get into it. Karen hay Cocks is back with us full disclosure. She's a neighbor of mine and we run into the dog park occasionally. She's CEO of Habitat for Humanity New York City. Also with us is Chris Ellam. He's executive director of Habitat for Humanity New York City Fund. And so let's get into their news. You said you'd be back when you had some news,

So what's going on. That's great? Well, I think what's going on is most of the time when people think about Habitat for Humanity, they think they know right, yeah, we know what we do. We write, we get a bunch of volunteers together and raise some walls. Visions of Jimmy Carter like you know that fresh out of the hospital where I was a couple of weeks ago. Fortunate, very fortunate to say so um, And then fact, that

is who we are. But in New York City we're also, as you might expect, this much more complex animal um. And so one of our goals really is will never be able to build our way out of an affordable housing crisis in New York City. And so consequently our model is morphed to try and preserve the existing affordable housing that we do have, try and prevent displacement of low income homeowners across New York City and keep them

where they are. So we have this complex preservation model, and part of that is the c d f I or the lending entity. So I want people to know that we are who you think we are, but we're also this other, much more complex, impactful um entity that works in the city of New York. And so Chris Ellum break it down for us, how does this work? Because you know, our audience certainly appreciate sort of the complexity of finance and how it plays through here, how

does it work well? At first, I think it's important to recognize that um c d f I Fund was created as Apartment of the Treasury, so this is something that the federal government also funds through the c d f I Fund, and the c d f I Fund was designed to get capital to underserved communities throughout the country. We are a small fund that focus is solely on affordable housing, building new affordable housing that's long term, affordable, and preserving what we have, particularly in New York City,

the HDFC community. So we take investments mostly from c r A motivated investors, and then we deploy that strategically in the HDFC community to help stabilize those buildings. This is fascinating. Where's this money coming from? So talk about the investors that are actually pulling up some money so they can come and investors can come from multitude of places. Um there are impact investors, there are foundations that do this, family wealth offices. I'm just curious if it's coming from

all these different avenues. Because this is we spend a lot of time talking about public markets versus private markets, and private markets are getting into some very interesting areas and it sounds like you guys are benefiting from it. I think a lot of people talk about impact investing, and I would bet you that almost everybody has a slightly different version of what that means. But that's effectively,

that's what we're looking for. This is a marriage of public and of it moneys towards specifically housing and affordable housing in New York City. And so it's a much more complex funding model, but we are seeing philanthropists or people who have funded us traditionally through annual giving or monthly giving look at more complex giving programs, and we're certainly looking to develop that sector much more prolifically so that we the people that who are philanthropically minded also

can potentially leverage their wealth towards this work. Right well, and Karen, I think you used the word and if you didn't, I will. I mean, there is a crisis of affordable housing here in the New York City area. And so Chris, help us understand maybe some specific projects where you know, people might have might be familiar with,

or at least familiar with the areas that we're talking about. Sure, so I think a great project we were involved in along with Springbank at the City of New York as well as an organization called You Have was a forty some odd unit HDFC cooperative which is a limited empty cooperative in the Hunts Points section of the Bronx. The building had suffered some abandonment. But the other thing, you know, we always talk about is for restrictive housing or affordable

housing us to be restriction and benefit. And in this scenario, this building was paying market rate taxes because there is there was a tax cap they were eligible for. But being that the tax rate in the South Bronx and that area was not nearly as high as sort of the cap, so they weren't benefiting from that. They suffered

from some disinvestments and abandonment. And then through technical assistance and the hard work of the people came before us if you Have and the partnership we have a Spring Bank, we were able to lend to take care of some municipal arrears to stabilize the building and make them eligible

for city funding. So our loan total between Spring and US is about five and fifteen thousand dollars to satisfy municipal arrears that then ended up leveraging about four to four and a half million dollars of public investment, saving those units for for multiple generations to come. Talk to us about scaling upcar and how much of this can you guys do we are? You know, that's part of

the deal. I think you know to who much has given, much is expected, And I think we are leveraging our rand and our balance sheet to do this kind of work in a way that the Habitat is not able or staffed up to do around the nation. So we are what I like to affectionally refer to as an and organization. So Chris has another job in addition to being the executive director of the fund. He works most closely with our homeowner applicants and getting them ready for homeownership.

So there's a lot of uh dual hat wearing going on at um At Habitat New York City. And we like to be efficient and effective with the resources that we have on hand. That said, the art in the art and science of this work is trying to predict the time at which we need to staff up and and be ready to service more and more. But this allows us effectively to touch thousands more families than we would ever be able to do in our traditional model.

And so Karen, as you talk to your colleagues around the country in the broader organization, I mean, what what's the mood right now, because you know, housing is arguably one of the most personal things, and that's at the core. I lived in Orgia for a long time, very familiar um with the organization, Like, how are people feeling about that opportunity to to own a home, to live in

a place that's that's both appropriate and affordable. I think, you know, at first, I thought you're going to ask the question relative to my colleagues, and I think when I think about my colleagues in the housing sector around the nation had attat for humanity specifically. Certainly we're feeling tentative, but we're also really looking to be as creative and as negle as we can and looking at new models

that habitat historically never would have addressed. Um we're looking at rental options and rental own options and different strategies really to engage and serve families because we believe in that role always and forever, the role that housing plays in the overall health and long term wellbelling being of the families that work with us. But I think how our homeowners feeling. I mean, I think our sector. You know,

they are quite honestly doing everything that they could. They're doing everything right, but they're just slightly above being able to receive any real subsidy, and they're slightly below being able to receive a market based deta. There's I think

they're tenacious regardless of the market. I also think they are an incredible credit risk given that they We have a very low default rate nationwide and we ride through many of the market twists and turns, and I believe that's because of the resiliency of the community that we

serve around home Long. I have to tell you, I I moderated panel at Milkon Institute included the CEO Brookfield as It Management Um, Tom Barrack of Colony Capital, the CEO of Discovery Land Company, all these big real estate leaders, and our conversation ultimately turned very quickly to affordable housing like it is on everyone's radar. So it's great to see the work that you guys are doing. All right,

we really appreciate you coming by. Karen Haycocks is CEO of Habitat for Humanity New York City and Chris Sillam is executive director of the Habitat NYC Fund. That's going to do it for us on a Halloween. My daughter has worked for a habitat for him now with their with their colleagues, with their with their friends and and me,

and we're gonna go back and do more. It's great stuff. Um, busy day, jobs tomorrow, jobs tomorrow, everybody looking forward to that's going to give us a key look for Carol Masser. I'm Jason Kelly, and this is Bloomberg Radio. Bloomberg Business Week brought to you by n B A f c P A S and Advisors, dedicated to solving complex tax and accounting challenges, identifying opportunities, and helping businesses maximize profits. Learn more at n B A f CPA dot com. Yeah