Wellspring Financing Strategy
Operational model stub — the capital stack for the first Wellspring development
Stub
This note is a placeholder for the financing strategy that will eventually need to exist before any development moves forward. The shape of the problem is clear; the specifics depend on site, scale, and what gap funding is available at the time.
The Problem Structure
Wellspring needs capital at three stages, each with different sources and risk profiles:
Stage 1: Pre-development
- Site control (option or purchase)
- Design development
- Environmental / geotechnical
- Permitting and municipal approvals
- Legal formation (cooperative + CLT ground lease)
- Sources: Pre-development loans (Self-Help Ventures Fund, LISC), small grants, personal/organizational capital
Stage 2: Construction
- Hard construction costs
- Soft costs (architect, engineer, permitting fees)
- Contingency reserves
- Sources: Blanket mortgage (Self-Help, NCHFA), construction loan, gap funding (HOME, CDBG, Durham housing funds, philanthropic)
Stage 3: Permanent financing
- Refinanced blanket mortgage at stabilization
- Reserve fund establishment
- Sources: CDFI permanent loan, NCHFA bond financing if scale warrants
Key Variables
Land cost — If land is donated or acquired at below-market through a CLT or city program, the entire financing stack gets easier. Land is the largest single variable in per-unit cost.
Gap funding — How much of construction cost can be covered by grants (not loans) determines whether the project opens affordable or has to wait for debt payoff.
Scale — Larger projects can access bond financing and tax credit equity (LIHTC) that aren’t available at small scale. But larger projects require more pre-development capital and longer timelines.
The Affordability-at-Opening Question
Without significant grants or land donation, a new non-market cooperative will open with carrying charges comparable to market rents — construction still costs the same regardless of who owns the building. The project becomes deeply affordable over 20–30 years as debt is retired.
With grants covering 30–50% of construction cost (not unusual for mission-driven projects with city support), carrying charges can open at 70–80% AMI affordability and reach 50% AMI within 10–15 years.
This is a strategic choice: who does Wellspring serve at opening, and how does that affect the grant-seeking strategy?