RAFT Social Impact Bond (SIB)

Offering Description

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The Niagara Resource Services for Youth (RAFT) is a registered charity that provides support services, access to resources and preventative programming to at risk and homeless youths in the Greater Niagara Region.

RAFT’s Youth Reconnect program helps youths increase their self-sufficiency by offering assistance in maintaining school attendance, secure stable housing situations and develop a social safety net in their home community. RAFT will scale up this proven program to three new underserved regions in Southern Ontario through a Social Impact Bond - an outcome-based funding instrument, in which investors pay in advance for the program, and the outcomes payer commits to making payments to investors only if the program is successful and pre-agreed outcomes are achieved. The SIB aims to improve housing stability and high school retention / graduation for 910 at-risk youth aged 16-20.

Investment Highlights

Investment:

$3.6 million in outcomes based Social Impact Bonds, with a management case IRR of 3.89% and a maximum of 9.68%

Use of Proceeds:

To fund the expansion of the RAFT Youth Reconnect Program into three new geographic regions in Southern Ontario: Hamilton, West Niagara, and Haldimand-Norfolk. The current program focuses on the prevention of youth homelessness in the Niagara region by focusing on outcome based programming, specifically targeting home security and education participation.

Investment Structure:

The RAFT is raising funds to fund Ontario’s first SIB offering. This offering is an outcome-based funding instrument with a 7 year term, in which investors pay in advance for the program, and the outcomes payer commits to making payments to investors only if the program is successful and pre-agreed outcomes are achieved.

The two outcomes triggering payments to investors relate to education attainment (percentage of enrolled youth remaining in or graduate high school for one-year post-intake; anticipated target of 56.6%) and housing attainment (percentage of enrolled youth that are stably housed for one-year post-intake; anticipated target of 73.8%). If outcomes are attained at or above the anticipated targets by the conclusion of the SIB term (7 years), investors could achieve an IRR range of ~4% to 10%.

For a detailed description of the investment structure of the RAFT SIB, please refer to the investment deck Management Case.

Investment Opportunity:

Supported by advisors such as Deloitte, Malatest and MaRS CII, the RAFT SIB aims to improve housing stability, high school retention, and graduation rates for at-risk youth aged 16-20 by scaling up the proven Youth Reconnect program to three new regions in Southern Ontario. The project have been approved by the Government of Ontario (OTF and the Ministry of Economic Development and Growth), with investment returns released upon reaching baseline values.

Please note that this is not a complete investment summary. Investors should read all associated documentation including the Outcomes Agreement and associated securities agreements before making any investment.

The Benefits of a SIB

Through the SIB, investors will provide the upfront financing for the program, which is primarily staffing cost. This innovative financing strategy allows for RAFT to expand into the aforementioned three regions quickly and effectively, an initiative otherwise impossible at this speed and scale without the combined efforts of private and public capital through the SIB.

The two outcomes triggering payments to investors, relate to education attainment (percentage of enrolled youth remaining in or graduate high school for one-year post-intake) and housing attainment (percentage of enrolled youth that are stably housed for one-year post-intake). If these contracted outcomes are achieved above pre-agreed success thresholds, the Government of Ontario as the outcomes payer (via the Ontario Trillium Foundation) will repay the investors a return proportionate to the level of success. This means that the service delivery risk is transferred to the investors, and the outcomes payers will only repay the investors if the program is successful. Essentially, this links the return on investment with target outcomes.

Product Description

RAFT: Youth Reconnect

The Youth Reconnect community-based prevention program at RAFT aims to decrease youth homelessness by focusing on educational and housing challenges. To prevent at-risk youths from falling into homelessness, this program aims to provide access to advocacy, life skill training, mentorship, emergency hostel access, family reunification and community integration services. Youths suitable for the program are identified through community partners of the RAFT, including from school districts, shelters and Ontario Works. The candidates then undergo a screening a process, with successful individuals assigned a case worker dedicated to supporting them, linking the youth to appropriate resources and agencies. Participants will be evaluated at different points of the program for performance management purposes.

Targeted youths who would be a suitable candidate for this intervention program would have undergone one or more of the following:

  • Experienced an adverse living/housing condition (absolute homelessness, emergency sheltered, provisional accommodation, at risk of homelessness)
  • In danger of dropping out of school if not graduated
  • Without stable family or support
  • Experiencing difficulty accessing community support services
  • Engaged in lifestyle choices including drug abuse, addiction and criminal behavior

Social Impact Bonds (SIB)

The RAFT SIB is targeting a baseline success rate of 46.4% and 28.5% for the housing and education outcomes, respectively, with an anticipated target set at 73.8% and 56.6%. The baseline values are conservatively set and determined from comparable populations with no access to similar types of intervention. Anticipated success rates are based on RAFT’s historical rate of success.

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On an annual basis, the government will release funds to the RAFT SIB SPV vehicle for the initial 5 years of the program, conditional to meeting program baseline performance. The funds are retained and distributed by the SPV, which is used to offset program costs, as well as investment returns assuming performance baselines are met. The payout in the last two years of the program will be a percentage of the maximum annual payout, dependent on the relative success to the anticipated performance. The better the performance results, the more the payout to investors will be in the last two years. The government will calculate an amount to clawback from funds already distributed to the SPV, based on actual performance relative to the maximum success amount.

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Impact Narrative

The Challenge

It is estimated that youth comprise ~30% of the homeless population accessing the shelter system, and youth homelessness is a growing social issue in many regions of Canada – driven in large part by fewer affordable housing initiatives, problematic social assistance programs, and shifting employment opportunities. Youth are particularly vulnerable given they are still developing psychologically and physically, and many have no work experience or have dropped out of school. The majority of at-risk youth face family conflict that force them out of their homes, and many are unable to effectively navigate the separate systems providing welfare support, healthcare, education, and access to justice.

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The RAFT provides a range of wrap-around supports that addresses the issues of homelessness and school retention while helping youth to remain in their home communities. Its methodology of integrated intervention includes:

  • Collaboration with schools to identify at-risk youths
  • Housing-first strategies to prevent and reduce homelessness
  • Promotion of family reunification if possible and ensure youths have a support network of peers, friends, and related family

The Youth Reconnect Program will be aiming to promote the prevention of youth homelessness through:

  • Primary Prevention – Address the root causes of homelessness by focusing on the role of families and schools / communities, collaborating with youths and families well before there is a high risk of becoming homeless.
  • Systems Prevention – Address the inadequate planning for housing and other support services for youths at risk of becoming homeless.
  • Early Intervention – Address the immediate risk of homelessness by providing at-risk youths and their families with the necessary support services to stop the youth from entering a vicious cycle of homelessness.

RAFT aims to prevent homelessness before it occurs through housing and education efforts. By supporting youths in attaining secure housing, they are more likely to remain in school and graduate. In addition, the organization believes that if a youth has a safe place to stay, the youth prefers to remain in their home community. The program encourages youths to continue attending educational institutions or assists youths in returning to high school if they had previously dropped out. The program places emphasis on education attainment over premature workforce participation wherever possible.

Impact Metrics

Successful outcomes that are directly tied to investor repayments for this program are defined as follows:

Housing Outcome

Number / percentage of youths in stable housing conditions must not be unsheltered, emergency sheltered, provisionally accommodated) for one year after program intake.

Education Outcome

Number / percentage of youths enrolled in high school for three consecutive check-in dates (Jan, Jun, Sep), whilst maintaining attendance records (less than 10% absence rate) during the program; or have graduated from high school within one year after project intake.

Risks

All private securities listed through online investment platforms and Exempt Market Dealers (EMDs) like SVX are likely to carry more risk than those available on the public markets. Our goal is to make you aware of those risks before making an investment. For further details on the risks in the private markets, refer to the SVX Risks section. Some of the offering specific risks are identified below:

Liquidity Risks

The RAFT SIB is an illiquid investment, with investors receiving investment payout at the end of the final year of the SIB (year 7).

Performance Risks

Investment return for investors is solely dependent on the performance of the funded RAFT project. Failure to achieve the baseline performance rates in multiple years will result in a loss of capital. Performances between baseline and anticipated outcome rates will result in IRR lower than the anticipated 3.44%. As opposed to an all or none model, maximum returns is only achieved if 100% of total cohort performs to the beneficial outcome. In a scenario where baseline targets aren’t met, investors may be asked to commit further funds to the investment. Failure to meet baseline performance in all 7 years of the SIB will result in complete loss of funds. Mitigation: Investors hold the option to opt out early of the investment by year 4, if the RAFT project has underperformed beneath the baseline performance rates set out in each of the previous three years. The baseline and anticipated outcome target rates are set conservatively relative to industry research and RAFT’s performances historically.

Regulatory Risks

The success of the RAFT project may rely on the existing regulations, specifically in the education and housing sector. Drastic changes in policy in these sectors could materially impact the RAFT project performance, thus affecting the investor return.

Default Risks

This investment is at risk if RAFT is unable to continue organizationally for any reason.

Inflation Risks

The return on investment could be diminished due to severe inflation within the proposed 7 year investment term. Securities cash flow may decline in value over time, with the severity dependent on total amount invested per investor.

Political Risks

Changes in government policy on homelessness intervention may affect investor returns if they were to change in the duration of the investment term.

It is worth noting that a key risk mitigant is that the Ontario Government (via the OTF and the Ministry of Economic Development and Growth) have approved and signed the RAFT SIB Outcomes Agreement between the OTF and RAFT SPV entity in May 2018. This Outcomes Agreement outlines some of the key rights, obligations, and parameters of the RAFT SIB (between OTF and the RAFT SPV), and will be complemented by the pending Investor Agreement (to be negotiated between the RAFT SPV and investors).

Management Team

Michael  Lethby

Michael Lethby

Executive Director, RAFT

A Niagara region native, Mike has been Executive Director of The RAFT since 2006. Mike has overseen the development and implementation of Youth Reconnect and Eternal Routes (kinship finding and connection) programs as well as launching Niagara’s Housing First for Youth Response. He is also a founding member and Chair of Youth Without Secure Housing, a member of the Regional Homelessness Advisory Committee (advises Regional Council), and a Board Member of Niagara Community Foundation.

In recognition of his work thus far in homelessness, Mike is a recipient of the United Way St. Catharine and District Partnership Award (2011) and Eva’s Award for Ending Youth Homelessness (2013).

He holds a Masters Degree in Political Science from the University of Western Ontario and an Honours B.A. in Political Science & History from Brock University.

$360,000.00

Raised Of $3,600,000.00 Goal*

Days Remaining 45
Hours 06
Mins 11
$360,000.00
 
OTHER Offer. Structure
3.89% Valuation
7 Years Term
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*Capital raised figures include amounts raised both on and off platform. Amounts raised off platform or committed have not been independently verified by SVX.