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The Impact of Investing in Puerto Rico

Alongside my Investments team colleagues Caroline Chinhuru and Ivan Savarain, I visited two of our portfolio partners in Puerto Rico – Volunteers of America National Services (VOANS) and Acrecent – to learn about the impact they are having on the ground.

VOANS: Affordable Housing for Low-Income Seniors in Puerto Rico

VOANS is the housing and healthcare affiliate of Volunteers of America, the national nonprofit that, since 1896, has supported and empowered the country’s most vulnerable populations, including veterans, seniors, people with disabilities, at-risk youth, those returning from prison, homeless individuals and families, and those recovering from addictions. As one of the largest nonprofit affordable housing owners/operators in the nation, the VOANS portfolio includes over 240 properties and 12,900 affordable housing units in over 40 states and Puerto Rico and operates over 46 senior healthcare programs serving nearly 2,500 people every day. By providing housing that meets their clients’ individualized needs, VOANS achieves a greater depth of impact and serves groups who are often overlooked by traditional housing developers.

We have been lending to VOANS to support their affordable senior housing portfolio since 2016.In 2021, we renewed and increased our loan to $8 million, in part to support the expansion of their Puerto Rico portfolio. That December, they acquired a portfolio of multifamily housing projects which increased the number of properties they own in Puerto Rico to 14 properties equaling 732 units. At the same time, VOANS acquired a Puerto Rico-based affordable housing management company, GR Management Corp., expanding the number of properties they manages in Puerto Rico to 17 properties totaling 991 units.

We toured Villa Santiago in Fajardo and Villa Providencia in Guaynabo, two affordable housing properties for low-income seniors, with Roberto Ramirez-Morales, development director for VOANS in Puerto Rico, as well as with Carmen Tomei and Efren Serrano, general manager and projects manager, respectively, of GR Management, both of whom have been working for GR Management for more than 20 years and know these properties intimately.

Villa Santiago sign

Both properties qualify under the Section 8 affordable housing program, which means that rent is capped at 30% of each resident’s income, minimizing cost burdens on low-income individuals and families. They are also both independent living facilities; residents have their own kitchens and living areas and live independently, although there are a variety of support and health services provided by VOANS. Each property has an on-site social worker who works with the residents to help them fill out paperwork, make healthcare appointments, arrange grocery shopping and other trips with the property’s wheelchair-accessible van, and arrange other community activities such as music and movie nights and arts and crafts nights.

All the residents we met took pride in their space as we toured their units. One shared that he got up early to sweep and mop the floors in advance of our visit. Another resident proudly showed off photos of her grown children displayed around the room. Throughout the tour, we were touched by the relationship the property management staff have with the residents and how they go above and beyond to provide supportive services based on the residents’ needs and interests.

Each property is also equipped to weather the many storms that hit the Caribbean. Hurricane resilience was a topic we discussed often throughout our tour, as well as Puerto Rico’s lack of a reliable energy grid and traditional lending options on the island.

Villa Santiago apartment pic

Acrecent: Fostering Economic Development and Multi-Sector Impact

Our other portfolio partner in Puerto Rico, Acrecent, has also been working to increase the resilience of the island, specifically the financial resilience of small- and medium-sized enterprises (SMEs). Between 2009 and 2012, nine Puerto Rican banks closed, drastically decreasing availability of capital to local SMEs – which make up 99.7% of all businesses in Puerto Rico. Additionally, Puerto Rico experienced a 6% drop in GDP in 2020 due to the pandemic, bringing a new urgency to investment in local SMEs.

Acrecent has consistently made credit accessible to local SMEs since its founding in 2004, despite a global financial crisis that resulted in a protracted economic recession in Puerto Rico, the ongoing Puerto Rico government debt-restructuring, hurricanes Irma and Maria, and the COVID-19 pandemic. Acrecent’s SME customers provide critical services to the island, including medical services, construction, education, and off-grid energy solutions.

We made our first investment to support Acrecent’s small business lending in 2018 and a year later, made a co-investment alongside Acrecent to support Bayamón Medical Center, a hospital that serves a low-income population outside San Juan. In 2021, we structured a syndicated facility to support the expansion of their SME lending across the island. Our staff has conducted several site visits since our first investment, mostly focusing on the hospital and healthcare businesses Acrecent supports. On this site visit, alongside our syndication co-lender BlueEarth Capital, we were able to see a very different but equally important side of the business – logistics and manufacturing.

Our first stop was to Islandwide, a critical logistics and delivery business in Puerto Rico. Islandwide delivers healthcare, inventory, and retail goods ranging from medical devices and prescription medicine to consumer goods like groceries and electronics.It also provides pickup and logistics services for banks across the island. As one example of their impact on healthcare, Islandwide delivers prescription medicine to most pharmacies across Puerto Rico by 10am every day. They are also the largest company that can offer next-day delivery on the island.

Acrecent, BlueEarth, Calvert Impact, and Islandwide staff

Islandwide has been an Acrecent client since 2012 and approached Acrecent again in 2020 after they reorganized and the only three remaining banks in Puerto Rico declined their financing application. Islandwide CEO Pedro Rosaly, noted during our site visit that “Acrecent was on our side. They believed in us.” Since that loan, Acrecent has approved three additional financing facilities, first to purchase delivery trucks, then to secure better handheld devices to make deliveries more accurate and efficient and, most recently, to purchase a better conveyor system to move packages through the warehouse. Islandwide is a great example of an SME providing essential services, creating local jobs, and fostering economic development in Puerto Rico.

The next day, after celebrating a Thanksgiving lunch with the Acrecent and Sygnus teams, we visited Rortiz, an auto parts and accessories distributor. The owner, José Ortiz, started the company when he was 20 years old and has been in business for more than three decades. As we learned throughout our visit, public transportation in Puerto Rico is woefully insufficient, so most people rely on their cars to get to work. Since cars are very expensive to ship to the island, sales prices are much higher than on the US mainland, so Puerto Ricans tend to maintain their cars well and keep them for longer instead of buying a new car. Rortiz helps their customers, including mechanics and car dealers, to maintain cars in good condition. Rortiz also sells replacement accessories like car mats, steering wheel covers, and windshield wipers.

Rortiz approached Acrecent for a loan two years ago to help increase their inventory and meet customer demand, and was able to increase their fill rate – the percent of inventory being used for customer orders as opposed to sitting in stock – from 70% to 90%. They are now able to focus their efforts on high margin products that improve their financial stability and ability to provide their 15 employees with benefits. They also provide their four sales representatives with a company car, since they often travel to meet with clients. Rortiz has a website where clients can place online orders, but the sales are still counted as being made by their sales rep so they receive their full commission on ongoing sales.

Acrecent, BlueEarth, Calvert Impact staff talking with Rortiz employee

Rortiz took out another loan with Acrecent in 2022 to purchase a 1 MW solar array that was recently installed on the roof of the warehouse. The solar panels will enable Rortiz to save money on electricity bills and have more reliable access to electricity.

Our team was not only impressed with the impact these businesses have on the economy of Puerto Rico, but also the stories of Mr. Ortiz and Mr. Rosaly and their years-long relationships with the Acrecent team.

There is a huge opportunity for investors to have an impact in Puerto Rico and provide affordable housing, healthcare, renewable energy, financial inclusion, and more for the over 3 million people living on the island, 40.5% of whom live in poverty. We look forward to continuing our work with VOANS and Acrecent across the island.