As filed with the Securities and Exchange Commission on December 21, 1998
Registration No. 2-78066
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of Commission Only
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
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AMERICAN FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS
HOUSING INVESTMENT TRUST
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PAYMENT OF FILING FEE:
[x] No fee required.
[ ] Fee computed on the table below per Exchange Act Rules 14a(6)-(i)(4) and
0-11.
1) Title of Each Class of securities to which transaction applies:
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2) Aggregate Number of Securities to which transaction applies:
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3) Per Unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement Number:
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3) Filing Party:
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4) Date Filed:
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December 21, 1998
TO PARTICIPANTS, AFL-CIO HOUSING INVESTMENT TRUST
Enclosed is the Notice of a Special Meeting of Participants and a Proxy
Statement describing the indicated matters that are expected to come up at the
meeting.
Also enclosed is a Proxy for each Participant noting the number of Units held
by that Participant and the exact name in which those Units are registered. A
Participant that does not wish to send a representative to the Special Meeting
should complete the Proxy and return it to us in the enclosed envelope as soon
as possible. A copy of the Proxy may be faxed to us as long as the originally
executed Proxy is postmarked no later than January 29, 1999, the date of the
Special Meeting.
Sincerely,
Stephen Coyle
Chief Executive Officer
PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY WITHIN FIVE DAYS OF RECEIPT
Enclosures<PAGE>
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AFL-CIO HOUSING INVESTMENT TRUST
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PROXY
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Special Meeting of Participants
The undersigned hereby appoints Michael M. Arnold and ElChino M. Martin
and each of them with power to act without the other and with full power of
substitution, as proxies for and on behalf of the undersigned, to vote all
Units of Participation which the undersigned is entitled to vote at the
Special Meeting of Participants to be held January 29, 1999 and all
adjournments thereof, with all the powers that the undersigned would possess
if personally present and particularly (but without limiting the generality of
the foregoing) to vote and act as follows:
For the approval of amendments to the Trust's Charter to modify certain
of the underwriting criteria for state and local government-supported
projects in which the Trust is authorized to invest:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
and upon such other matters as may properly come before the meeting.
The Trustees recommend a vote FOR the above item. ANY PROXY NOT MARKED
OTHERWISE WILL BE TREATED AS A VOTE FOR THE ITEM.
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AFL-CIO HOUSING INVESTMENT TRUST
Special Meeting of Participants
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To Participants, AFL-CIO Housing Investment Trust:
Notice is hereby given that a Special Meeting of Participants (the
"Meeting") of the American Federation of Labor and Congress of Industrial
Organizations Housing Investment Trust (the "Trust"), a District of Columbia
common law trust, will be held at the offices of the Trust, 1717 K Street,
N.W., Suite 707, Washington, D.C., 20006 on January 29, 1999 at 4:00 pm for
the following purposes:
1. To approve amendments to the Trust's Charter to modify certain of the
underwriting criteria for state and local government-supported projects in
which the Trust is authorized to invest; and
2. To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
The Board of Trustees has fixed the close of business on November 30,
1998 as the record date for the determination of Participants entitled to
notice of and to vote at the Meeting and any adjournment(s) thereof.
Accordingly, only Participants of record as of the close of business on that
date are entitled to notice of and to vote at the Meeting or at any such
adjournment. The transfer books of the Trust will not be closed.
By Order of the Board of Trustees
Stephen Coyle
Chief Executive Officer
Dated: December 21, 1998<PAGE>
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AFL-CIO HOUSING INVESTMENT TRUST
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PROXY STATEMENT
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December 21, 1998
General Matters
This Proxy Statement is furnished in connection with the solicitation of
proxies for use at the special meeting of Participants (the "Meeting") of the
American Federation of Labor and Congress of Industrial Organizations Housing
Investment Trust (the "Trust") to be held at the offices of the Trust, 1717 K
Street, N.W., Suite 707, Washington, D.C. 20006, on Friday, January 29, 1999,
beginning at 4:00 pm and at any adjournment(s) thereof.
If the Proxy that is enclosed with this Proxy Statement is properly
executed and returned, the Units of Participation it represents will be voted
at the Meeting in accordance with the instructions noted thereon. If no
direction is indicated, the Proxy will be voted in accordance with the
Trustees' recommendations set forth thereon. Any Participant giving a Proxy
may revoke it at any time before it is exercised by giving written notice to
the Trust bearing a date later than the date of the Proxy, by submission of a
later dated Proxy, or by voting in person at the Meeting, which any
Participant may do whether or not such Participant has previously submitted a
Proxy.
PERSONS MAKING THE SOLICITATION
The Proxy is being solicited by the Board of Trustees of the Trust
through the mail. The cost of solicitation will be paid by the Trust.
Further solicitation of proxies may be made by telephone or oral communication
with some Participants following the original solicitation. Any such further
solicitation will be made by Trustees or officers of the Trust who will not be
compensated therefor. The date on which proxy materials were first mailed to
Participants was December 21, 1998.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
As of the close of business on November 30, 1998, the date set as the
record date for the determination of Participants entitled to notice of and to
vote at the Meeting and any adjournment(s) thereof (the "Record Date"), there
were 1,775,818.5073 Units of Participation of the Trust outstanding, each Unit
being entitled to one vote. No shares of any other class of securities were
outstanding as of that date.
Only Participants of record as of the close of business on the Record
Date, will be entitled to vote at the Meeting.
The following table sets forth the beneficial ownership information as
of November 30, 1998, with respect to each Labor Organization and Eligible
Pension Plan (as each of those terms is defined in the Trust's Declaration of
Trust) known to the Trust to be the beneficial owner of more than 5 percent
(that is more than 88,790.9254 Units) of the Trust's 1,775,818.5073
outstanding Units of Participation. Because only<PAGE>
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Labor Organizations and Eligible Pension Plans are eligible to own Units of
Participation in the Trust, no Units of Participation are owned by any Trustee
or nominee individually. The Units are the only class of securities or units
of beneficial ownership issued by the Trust.
Name and Address of Number of Percent of
Beneficial Owner Units Total Units
Central Pension Fund of the
International Union of Operating Engineers
415 Chesapeake Street, N.W.
Washington, D.C. 20016 101,415.2630 Units 5.7%
APPROVAL OF AMENDMENTS TO THE CHARTER
PROPOSAL I: TO APPROVE AMENDMENTS TO THE TRUST'S CHARTER TO MODIFY CERTAIN OF
THE UNDERWRITING CRITERIA FOR STATE AND LOCAL GOVERNMENT-
SUPPORTED PROJECTS IN WHICH THE TRUST IS AUTHORIZED TO INVEST.
The Trust is currently permitted to invest in construction and/or
permanent loans, or securities backed by construction and/or permanent loans
or interests in such loans or securities, that have evidence of support by a
state or local government or an agency or instrumentality thereof or a tax-
exempt foundation, provided that certain underwriting criteria are satisfied.
The Board of Trustees has approved, subject to approval by the Participants at
the Meeting, amendments to the Trust's Declaration of Trust which would modify
certain of the underwriting criteria applicable to this type of investment and
limit the aggregate outstanding principal amount of such investments to 4% of
all of the Trust's assets.
These changes are designed to expand the Trust's range of investment
products, thereby increasing the investment opportunities available to the
Trust, and to facilitate the financing of affordable multifamily housing
projects which serve low and moderate income families. Although the Trust
currently has the authority to invest in construction and/or permanent
mortgage loans for this type of project, through the Trust's ability to invest
in state and local government-sponsored projects, the underwriting criteria
currently prescribed by the Declaration of Trust are much more restrictive
than those imposed by other lenders active in this field. The underwriting
criteria in the Declaration of Trust were developed at a time when the Trust
and other lenders had limited experience in investing in affordable housing,
other than FHA-insured loans. The Trust has now gained significant experience
with affordable housing secured by other types of credit enhancement and non-
insured, non-guaranteed lending for affordable family housing has become a
well-established and competitive line of business. The Trust believes that
the changes to the Declaration of Trust described below will permit the Trust
to invest in this type of mortgage loan and increase the Trust's investment
opportunities without materially increasing the risk in the Trust's investment
portfolio.
The Trust proposes to increase the maximum permitted loan-to-value
("LTV") ratios for this type of investment to 60% (from the current limit of
50%) for mortgage loans which do not have credit enhancement or which are not
secured by projects which receive low income housing tax credits and to
increase the maximum permitted LTV ratio to 75% (from 60%) for mortgage loans
which have specified types and levels of credit enhancement or which are
secured by projects which receive low income housing tax credits. The Trust
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believes these changes are necessary because the current maximum LTV ratios
permitted by the Declaration of Trust are lower than those required by other
lenders who are active in making these types of loans for affordable housing
projects and are more conservative than necessary. The Trust believes that
these increases in the maximum permitted LTV ratios will not significantly
increase the risk in the Trust's investment portfolio.
Currently, under the Declaration of Trust the Trust may use a 60% LTV
ratio only in connection with investments which have a mortgage insurance
policy which insures losses down to a 50% LTV level. The current requirement
is that the mortgage insurance provider be rated either at least "A" by
Standard & Poor's, Fitch or Duff & Phelps or at least "A3" by Moody's or
approved and accepted by Fannie Mae or Freddie Mac for insurance of the type
of obligation to be acquired by the Trust. The proposed amendments would
change the rating requirement for the mortgage insurance provider to that of a
rating of "A" or better by Standard & Poor's or a comparable rating by another
nationally recognized statistical rating agency, as determined by the
Executive Committee of the Trust. This change will simplify the rating
requirement and permit additional flexibility.
The proposed amendments would also expand the circumstances under which
the higher maximum LTV ratio, as opposed to the lower maximum LTV ratio, may
be used. Currently, the only circumstance in which the maximum LTV ratio (now
60% and increased to 75% under the proposed amendments) may be used is where
the investment has credit enhancement in the form of a mortgage insurance
policy. In contrast, guarantees and other types of credit support may be used
to provide credit enhancement in connection with other types of privately
collateralized investments in which the Trust may invest. As a result, in
order to make the credit enhancement requirements for this type of investment
more consistent with the Declaration of Trust's requirements for other types
of privately collateralized loans, the proposed amendments would provide that
a maximum LTV of 75% may be used if the Trust receives a guarantee or other
credit support from a guarantor with a rating of "A" or better by Standard &
Poor's or a comparable rating by another nationally recognized statistical
rating agency, as determined by the Executive Committee of the Trust, which
covers losses down to the 60% LTV level.
The proposed amendments would also permit a 75% LTV ratio to be used in
cases where the underlying project has been allocated low income housing tax
credits, even if there is no credit enhancement for the related mortgage
investment. Once an investor purchases the low income housing tax credits
with respect to a project, there is a long period of time during which the
investor faces negative consequences in the event that the project fails and
the mortgage loan is foreclosed. As a result, the Trust believes that the
involvement of such investors reduces the risk to the Trust in connection with
the related mortgage investment.
Under the current requirements set forth in the Declaration of Trust, the
state or local government (or agency or instrumentality thereof) or a tax-
exempt foundation must have a financial participation in the project for a
period at least equal to the outstanding term of the Trust's investment and
the participation must be in the form of subordinate financing, an interest
rate write-down, a donation of land or some other form of insurance or
guarantee or some other contribution within guidelines adopted by the
Executive Committee of the Trust. One of the guidelines adopted by the
Executive Committee required that such financial participation must be in an
amount equal or greater than $15,000 per unit. The Trust believes that
evidence of local or state government or foundation support for this type of
project is important, but that a "financial participation" in the project is
not required for prudent investment decisions, and that an important<PAGE>
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governmental contribution to a project occurs when a project is allocated low
income housing tax credits, since the low income housing tax credits generate
significant funding for the project. As a result, the proposed amendments
would require a state or local government or agency or instrumentality to make
or facilitate a financial contribution to the project, rather than have a
financial participation in the project, delete the requirement that the
financial participation or contribution have a term co-extensive with that of
the Trust investment and add an allocation of low-income housing tax credits
to the acceptable forms of government financial contribution. The Trust has
also found that it is not necessary or feasible to specify a minimum required
contribution from state or local government sources because the funding needs
of different projects vary widely, as do the amounts and sources of funding.
As a result, the Executive Committee has eliminated the guideline which
required a minimum contribution of $15,000.00. Instead, the Trust will
determine the amount of the contribution required for each project based on
that project's overall funding needs.
The Declaration of Trust currently requires that the construction of
these projects be supervised by agents or employees of a state or local
government (or agency or instrumentality thereof). The Trust has found that
few state or local governments (or their agencies or instrumentalities) have
the expertise or resources to provide this supervision. In addition, this
requirement adds an unnecessary level of supervision and complexity for most
projects the Trust seeks to finance. The Trust anticipates that most
construction period investments it will make in affordable housing projects
will have an experienced construction lender which will provide construction
monitoring and review and approve loan advances, making additional
construction supervision redundant. As a result, the proposed amendments
would delete the requirement for state or local government construction
supervision.
Finally, the proposed amendments would limit the outstanding principal
amount of the Trust's investments in this type of project to 4% of the Trust's
assets.
As the Trust's current prospectus indicates, there is no requirement that
an investment of this type be rated or ratable. While a rating on an
obligation does not provide any assurance of repayment and is subject to
revision or withdrawal at any time by the assigning rating agency, such
ratings do provide the prospective investor with some indication that the
proposed structure and revenue analysis for the obligation satisfy the rating
agency's internal criteria for the applicable rating. However, the Trust
intends to undertake transactions under this authority selectively, and only
after having made its own independent evaluation with respect to the
experience, credit history, and management expertise of the project owner and
any credit enhancement provider. Unrated investments may also be less liquid
than rated investments. However, the amount of mortgage investments
outstanding under this authority from time to time would be limited to 4% of
all of the Trust's investments.
Further, as indicated in the Trust's current prospectus, for investments
which involve credit enhancement, there is no assurance that the rating of the
credit enhancement provider will continue for any given period of time or that
it will not be revised downward or withdrawn entirely by the rating agency if,
in the rating agency's judgment, circumstances so warrant. As described in
the Trust's current prospectus, any such downward revision or withdrawal of
such rating would be likely to signify an increase in the risk to the Trust
associated with the related investment and would be likely to result in a
reduction in the value of the related obligation. The Trust is not required
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to dispose of investments if the rating of the credit enhancement provider is
downgraded or withdrawn, except to the extent required by certain investment
restrictions which are described in the Trust's current prospectus.
Notwithstanding any of the above, such a downward revision or withdrawal of a
rating would not have any impact upon the project owner's obligation to repay
the construction and/or permanent loan to the Trust, and, as noted above, the
amount of mortgage investments outstanding under this authority from time to
time would be limited to 4% of all of the Trust's investments.
Finally, investments in this category (particularly to the extent that
the Trust does not receive credit enhancement for the full amount of each
investment or to the extent that any credit enhancement provider is unable or
fails or refuses to honor its obligations) will be subject to the same real
estate-related risks and uncertainties that apply to real estate investments
generally, which could have a material adverse effect on the value and
performance of the investments. Certain of these risks are described in the
Trust's current prospectus under the caption "RISK FACTORS -- Real
Estate-Related Risks."
THE TRUSTEES RECOMMEND VOTING IN FAVOR OF THE PROPOSED
AMENDMENTS TO THE CHARTER.
VOTING PROCEDURES
As to Proposal I, the vote required for approval will be a majority of
the Units represented in person or by proxy at the Meeting. Each Unit is
entitled to one vote. A quorum for the Meeting is the presence in person or
by proxy of Participants holding a majority of Units outstanding at the close
of business on November 30, 1998.
PROPOSALS FOR 1999 ANNUAL MEETING OF PARTICIPANTS
Participants who wish to make a proposal to be included in the Trust's
proxy statement and form of proxy for the Trust's 1999 Annual Meeting of
Participants (expected to be held in April 1999) must cause such proposal to
be received by the Trust at its principal office not later than January 29,
1999.
OTHER MATTERS
Class III Union Trustee A. L. "Mike" Monroe resigned from the Board of
Trustees on November 4, 1998 and Class I Management Trustee H. D. LaVere
resigned from the Board of Trustees on November 10, 1998. Pursuant to the
Declaration of Trust, the Union Trustees appointed Michael E. Monroe, General
President of the International Brotherhood of Painters and Allied Trades, to
fill the Class III Union Trustee vacancy for a term expiring at the Annual
Meeting of Participants in 2001. Pursuant to the Declaration of Trust, the
Management Trustees have decided not to fill the Class I Management Trustee
vacancy; a new Management Trustee will be elected to fill this vacancy at the
Annual Meeting of Participants in 1999.
The Board of Trustees recently approved and adopted a Year 2000 Readiness
Disclosure Statement for distribution to Participants, a Year 2000 Compliance
Policy Statement for distribution to Trust personnel, a Year 2000 Compliance
Plan to assist the Board's Executive Committee in its oversight of the Trust's
Year 2000 project management and implementation processes and revised
disclosure for the Trust's prospectus relating to Year 2000 readiness as<PAGE>
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required by the rules and regulations of the U.S. Securities and Exchange
Commission.
At the date of this Proxy Statement, the Trustees know of no other
matters that may come before the Meeting. If any other matter properly comes
before the Meeting, it is the intention of the persons named in the enclosed
form of Proxy to vote the Units represented by such Proxy in accordance with
their best judgment.
Participants who are unable to attend the Meeting in person are urged to
forward their Proxies without delay. A prompt response will be appreciated.
By Order of the Board of Trustees
STEPHEN COYLE, Chief Executive Officer
