Centene Foundation Announces Partnership with Affordable Housing Leader McCormack Baron Salazar to Increase Access to Affordable Housing

Rhea-AI Summary

The Centene Foundation and McCormack Baron Salazar (MBS) have announced a multiyear partnership to construct affordable housing in eight states.

The Foundation will provide below market-rate loans to MBS, enabling approximately $900 million in construction-related activity. This partnership aims to create thousands of affordable housing units in distressed communities.

Affordable housing is recognized as a key driver of health equity. This initiative will focus on Medicaid-eligible populations, helping to improve health outcomes by integrating health-related services within the housing developments.

MBS estimates that each dollar from the Foundation will enable it to secure $30 or more in permanent financing from various sources. This innovative approach is expected to stabilize households, improve public health, and save public healthcare costs.

The partnership reflects Centene’s and MBS’s longstanding commitment to community health and revitalization.

Positive

• Multiyear partnership between Centene Foundation and McCormack Baron Salazar to construct affordable housing.
• Approximately $900 million in planning and construction activity enabled by below market-rate loans from the Foundation.
• Creation of thousands of affordable housing units in distressed communities.
• Focus on improving health outcomes for Medicaid-eligible populations.
• Each dollar from the Foundation expected to leverage $30 or more in permanent financing.
• Integration of health-related services in housing developments to address social determinants of health.

Negative

• Financial terms of the partnership were not disclosed.
• Possible financial risks associated with the below market-rate loans.

Insights

Financial Analyst

Centene's multiyear partnership with McCormack Baron Salazar signifies an innovative approach to addressing the affordable housing crisis in the United States. This initiative could have long-term financial implications for Centene, particularly in terms of its investment risk and potential returns. The commitment of $900 million in construction activity represents a substantial financial undertaking. However, the strategy of providing below market-rate loans for predevelopment indicates a potentially lower risk profile due to leveraging these initial funds to attract significant external financing. Each dollar from the Foundation is estimated to enable $30 or more in permanent financing, which suggests a high leverage ratio that could optimize resource utilization and return on investment (ROI).

From a cash flow perspective, Centene’s upfront investment might put pressure on its immediate liquidity, but the partnership could lead to improved financial health over time due to enhanced community engagement and expanded health services. This strategic move may also enhance Centene's brand reputation and increase its customer base among Medicaid beneficiaries, which are core to its business model. Investors should weigh the potential short-term liquidity constraints against the long-term community health benefits and associated financial gains.

Healthcare Analyst

The linkage between affordable housing and public health outcomes is well-documented. Affordable housing initiatives, especially those targeting low-income communities, have shown to improve access to healthcare services, reduce chronic disease prevalence and enhance overall health equity. By focusing on Medicaid-eligible populations, Centene's partnership directly addresses social determinants of health, aiming to reduce healthcare disparities.

The inclusion of health-related amenities such as Federally Qualified Health Centers within these housing projects is a strategic move. It not only improves accessibility to care but also integrates health and social services, promoting a holistic approach to community well-being. This could lead to better health outcomes and potentially lower healthcare costs in the long-term, benefiting both the community and Centene’s healthcare service operation.

Multiyear partnership will focus on predevelopment loans to enable approximately $900 million in planning activity and construction

Partnership expected to create thousands of housing units and drive improved health outcomes for Medicaid-eligible populations through increased access to health-related services

ST. LOUIS, May 21, 2024 /PRNewswire/ -- The Centene Foundation ("the Foundation"), the philanthropic arm of Centene Corporation ("Centene") [NYSE: CNC] – a leading healthcare enterprise focused on transforming the health of the communities it serves, and McCormack Baron Salazar ("MBS"), one of the nation's leading developers of affordable housing, announced they have entered into a multiyear partnership to construct new affordable housing communities in eight states. Under the partnership, the Foundation will provide below market-rate loans to support MBS' predevelopment design and planning work, leading to the construction of affordable housing in distressed and underserved communities. The loans are anticipated to enable approximately $900 million of direct construction-related activity, supporting the creation of thousands of affordable housing units in low-income communities across the country. The partnership is intended to address the critical lack of affordable housing – a key driver of health – impacting many economically vulnerable populations for whom Centene provides vital healthcare services.

"Among the challenges facing many low-income Americans is the availability of affordable housing," said Centene Chief Executive Officer (CEO), Sarah M. London. "This innovative partnership promises to accelerate the development of high-quality, affordable housing by providing early-stage funding at rates not available on the open market. Centene and our local health plans will also have the opportunity to participate in community engagement to help ensure that new housing and onsite services have the greatest possible impact on the health of local residents, many of whom Centene serves."

The availability of affordable housing is recognized as a key driver of health equity and positive health outcomes. However, according to the National Low Income Housing Coalition, there was a shortage of 7.3 million affordable homes in the U.S. in 2023. The lack of affordable housing is especially challenging for Medicaid beneficiaries, a key community served by Centene, as the nation's largest provider of Medicaid insurance.

The partnership between the Foundation and MBS builds on Centene's 40-year history of providing whole-health solutions and MBS' 50-year track record of successful community revitalization. The partnership also reflects the Foundation's philanthropic mission to invest in programs that improve the lives and health of members in the communities Centene serves.

Founded in 1973, MBS is a St. Louis-headquartered company that shares the Foundation's commitment to improving the health of communities through local engagement, timely access to healthcare and social services. The opportunity to leverage predevelopment dollars is an innovative and key differentiator for both organizations. MBS estimates that every dollar of support from the Foundation will enable MBS to obtain $30 or more of permanent financing from local, state and federal programs and private sources. Additionally, the partnership will allow the Foundation to expand its efforts to support the whole health of economically vulnerable populations across the country.

"Overcrowding, housing insecurity and substandard housing correlate to a long list of detrimental public health outcomes," said MBS President and CEO, Vince Bennett. "These include chronic disease, exposure to toxins, injuries, and child development losses. Indeed, we learned early in the pandemic the relationship between adequate housing and public health. As early as May 2020, California researchers had found a clear link between Covid-19 deaths and essential workers living in overcrowded homes. The Centene Foundation's investment in this vital preventive step can not only help stabilize households and communities, but it can save public health care funding and lives," said Bennett.

Each development project will be designed with the health of residents in mind. Informed by health and social needs, assessments and community feedback, the projects will include first-floor commercial space for important health-related services such as Federally Qualified Health Centers, grocery stores, community gyms and other beneficial offerings that can be accessed by the local community.

Financial terms of the partnership were not disclosed.    

About Centene Foundation
The Centene Foundation (the "Foundation"), a private nonprofit focused on investing in economically challenged communities, is the philanthropic arm of Centene Corporation (NYSE: CNC) ("Centene"). The Foundation supports projects and initiatives strategically aligned with Centene's mission-driven culture and enhances the work Centene is doing to remove the barriers to wellness underserved and low-income populations face. The Foundation is committed to addressing social determinants of health and improving health equity in three distinct areas of focus: healthcare access, social services and education. To learn more, visit the Centene Foundation's website.

About McCormack Baron Salazar
McCormack Baron Salazar is one of the nation's leading developers, property managers, and asset managers of economically integrated urban neighborhoods. Since 1973, the firm has been an innovator of community development and urban revitalization in 48 cities, having built more than 25,000 high-quality homes with total development costs of over $5 billion.

 

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SOURCE Centene Foundation

FAQ

What is the Centene Foundation's new partnership with McCormack Baron Salazar?

The Centene Foundation has partnered with McCormack Baron Salazar to construct affordable housing in eight states, enabled by below market-rate loans.

How much construction activity is expected from the Centene and MBS partnership?

The partnership is expected to enable approximately $900 million in construction-related activity.

What is the focus of the Centene Foundation and MBS partnership?

The focus is on creating thousands of affordable housing units in distressed communities and integrating health-related services to improve health outcomes for Medicaid-eligible populations.

How much financing can MBS secure with support from the Centene Foundation?

MBS estimates that each dollar from the Foundation will enable it to obtain $30 or more in permanent financing from various sources.

What are the expected benefits of the Centene Foundation and MBS affordable housing initiative?

The initiative is expected to stabilize households, improve public health, and save public healthcare costs by addressing social determinants of health through integrated services.