Single mothers whose last “address” was a car. Cash-strapped elderly who need meals and medical care, in addition to housing. Young couples priced out of the market for new homes.
These people—and others like them—make up the new constituency for Dick Banks, who served a distinctly different clientele as manager of large multifamily portfolios at Archstone-Smith and Lincoln Residential Services. Last year, at an age when most executives are thinking of retirement, Banks accepted a job as president and COO of Mercy Housing. His charge: Inject a strong dose of for-profit business practices into the Denver-based nonprofit whose mission has always been to build housing where most developers dread to tread.
Why would Banks, whose last job included responsibility for the 70,000-unit portfolio of Germany's GSW development company, take on what could be the biggest challenge of his life? “I'm at a point in my career where I want to use my experience to give something back,” Banks says. “And Mercy is an incredible organization from a mission standpoint.” Plus, Banks hastens to add, “Sister Lillian was very convincing.”
Sister Lillian Murphy, Mercy's CEO for 20 of its 26-year history, is indeed a formidable force when it comes to championing the cause of low-income housing. “She's not afraid to stand toe-to-toe with congressmen,” notes Shekar Narasimhan, managing partner for Beekman Advisors, a Virginia consulting firm. “With its size and breadth of its product, Mercy is one of the nation's most influential organizations focusing on affordable housing.”
Still, the road to Mercy's reinvention is far from over. With its long history of partnerships, residential services, and creative financing, Mercy has a mission that extends beyond placing roofs overhead. And the company's executive team wants to keep it that way. But they also realize that sticking to business as usual will only diminish Mercy's long-term ability to be a major player in the affordable housing arena, particularly at a time of dwindling government support.
Enter Narasimhan. In 2005, he took what Sister Lillian calls a “50,000-foot look” at the organization. His recommendations forced the company to reevaluate its strategies. “We can't earn enough to sustain our growth if we limit ourselves to properties serving people below 50 percent of area median income,” Sister Lillian explains. “We need to develop more products serving families in the 50 percent to 100 percent AMI range so that we can still afford to serve our traditional market.”
IN FOCUS Their first directive? Focus operations. The company has come a long way since the Sisters of Mercy of Omaha invested $500,000 to start a housing program in 1981. Over the last 26 years, 12 other orders of religious women have added their support as co-sponsors, contributing another half million to a million dollars in unrestricted funds.
What's more, Mercy has established relationships with nine “Strategic Healthcare Partners,” mostly large Catholic hospital networks. These healthcare partners participate in Mercy's local boards of directors, help assess local housing needs, provide favorable financing, and frequently provide land and potential rehab properties, often at a steep discount or as an outright gift. “There's a direct correlation between successful health care and having a good home,” says Lloyd Dean, president of Catholic Healthcare West, which runs 42 hospitals and medical centers in the Southwest.
Indeed, since 1998, the Strategic Healthcare Partners have aided development of 188 properties with 8,540 units worth $867 million. Some 3,200 additional units are in the planning and construction stages. Overall, Mercy has developed more than 19,100 units—about 75 percent rentals—for some 59,000 residents.
Yet, the company's commitment to its residents doesn't stop when the painstaking development process is over—and there lies the operational conundrum. The nonprofit spends $6 million annually on a wide array of residential services, from childcare to meal service for seniors. And it leverages millions more in collaborative programs with community agencies such the Boys and Girls Club.