 My name is Neil Skipper. I've been at Havelock Housing Association for six months and you're probably wondering why I'm talking up here now and the answer is prior to that six months I actually spent 28 years in the as well as Mark was referring to the bad end of town. So for the last 12 years I was actually the state manager for ME Bank here and I spent either my time doing as a state credit manager or as a sales manager. So in the credit role we actually assessed many deals. So today what I want to talk about is putting a deal together and in particular preparing your organization to obtain finance. Obviously when you put a deal together there's many different aspects but so I'm going to look at the finance aspect and more specifically in terms of a community housing provider. Okay so the five things that financial typically look for and it's just not a finance it's an investor as well. One is the capacity to pay so they want to make sure that they can get a return on their money. The collateral so what the security is. The capital okay so we're speaking a lot about capital. The character so the skills track record of the staff the board and the organization can actually do what they're setting out to do and conditions is there anything else that could be affecting the security. With capacity if you're going to go out to market the first thing that they're going to ask is that you've actually got the ability to repay the debt. So if you're going to repay a debt they're going to be looking at whether or not your organization has a surplus. Okay so in the past community service organizations have typically worked on the premise that they should not have surpluses and that all resources should be allocated to delivering services and accommodation. That's a pretty good argument I mean how come you've got this surplus money you should be out there providing it. But there's also another argument and I think we need to look at that side as well. So this would be fine if governments had big surpluses and were willing to bankroll community service organizations. Unfortunately this is not the case and with changing demographics and the endless demands on a government budget this is unlikely to change anytime soon. So we need a reality check they're not going to keep funding us. Okay a financier and this is where we now need to look at ourselves in terms of community housing provider. So a financier will look at the last two to three years financial statements to determine an organization's ability to service a credit. So if we've been working on the premise that we don't need to have a surplus and that we're meant to be providing all that money to provide surpluses we're not going to have much of a chance of going out to the market and attracting funding into do developments. Okay so you will find it difficult if you haven't moved past that. Okay community next slide please. Yep community service organizations need to become business savvy and prepare their financial position statements so they can retain finance when they require. Okay we need to move to that type of basis. Even with the requisite skills it'll be a challenge to achieve surpluses as our clients customers are not in a position to where they can pay full market rents for services i.e. income based affordable rents. In other words we can't get the same return as what we might be able to but we'd have other advantages as well. Community service organizations will need to improve operational efficiencies collaborate and even consider joining together to drive down costs and create surpluses that will be required to grow the services that the community requires. So otherwise that's just tying back into what Mark was saying we need to get together if we're going to deliver these things. Okay the second thing is the security or the collateral. So the more saleable a security the more a financial a financial lend against it. Okay if we develop specialised security specialised properties for social disability housing we may be limiting the amount we can borrow and hence increase the amount of capital required. We need to be smart about the design so it does appeal to the wider market. You don't want to get into the situation where we're developing highly specialised securities because if something goes wrong we won't be able to sell them we won't be able to get our money back our investors aren't going to be happy and as a lending proposition they'll be looking to reduce the amount of money that you can actually you know use those securities for. Okay so collateral given the income based affordable rents loan to value ratios must be lower to have a sustainable proposition therefore greater capital will be required. Okay unless community sector organisations have capital retained earnings they'll need to consider other ways of retaining funds such as grants or collaborating with other organisations and all the government so again it's just tying back into what Mark was saying. Okay the third thing that a financial look for is capital. So a financial will always look for ways to mitigate risk and maximise the chance of recovering funds should an organisation get into trouble. So the first thing that they look for is obviously the capacity which I mentioned then the security the salability of it and finally the amount of organisations equity or capital. Organisations that have capital will find it easier to obtain finance than organisations that don't. So again just coming back to where my previous comment if we have community housing providers or organisations that are not creating surpluses and who don't have capital they're going to find it difficult in order to attract finances and get that money in to do these types of developments. All right yeah just on to the next one. The other thing that finances will look for the fourth thing is the character of the organisation. Finances will assess an organisation and its staff capabilities can they actually do what they're setting out to do. Do they have the required skills? In other words it's unlikely that Havelock Housing Association will be successful in attaining finance to build rocket ships okay obviously. But it is likely that we will be able to obtain finance for community housing so you need to really stick to your bread and butter there. Okay the final thing the fifth thing that finances will look for is other market conditions. So is it risky to be building houses when there are already too many houses? Or alternatively they may be looking to enter market because the returns are safe and good. Finances might already nothing is finances might already have too much exposure to a particular market segment or organisation. So one example here was one of the big developments in Canberra we are when I was working for ME Bank we were unable to help people because we had already we'd already reached the maximum amount that we could actually fund within an organisation. So there's all those type of quirky things that financial look at. So in summary community sector organisations need to demonstrate that they have the capacity to service a debt and capital. If we don't have those two components it's unlikely that we're going to be able to attract the financing that we actually need. Okay this is something that I just want to throw in here a definition of a sustainable social housing project. Lots of people talk about what that they want a sustainable project and I'm actually going to throw up a definition. And that is rental income received from the project services the debt maintenance and the management costs of the project. So in other words it's not actually drawing down on the organisation's reserves you can actually sit over to the side and then it frees up the organisation to keep doing these types of developments. Given that income based or affordable rents are received more capital is required for a social housing project to be sustainable. We need you know coming back to what everybody's been talking about we need that capital so that we can actually get these projects up and running and then we can then go out we can actually get the social bonds that Mark was referring to and then with a combination of enough capital the social bonds and then somebody such as Havelock Housing Association or another community housing provider can then actually go out to the market assuming that we've got the surpluses and we've got the capital behind us we can actually go in get the social housing problems the social housing bonds and we can actually have it with a sustainable process where the rents from the from the projects actually service the bonds and then the management is then is then basically done by the community housing providers or other like organisations that those community housing providers need to become very very lean and they need to become very operationally efficient so so that we can actually move towards that type of that type of program. So just to finish up there community sector organisations will need to collaborate with other community organisations and or the government to go and provide the services that the community needs and I think the the final point that I think we're all in agreeance with here and it's coming across is the demand for community services is growing and is greater than we can satisfy. There you go. Thank you. Sorry about the rush.