while capital markets continue to expand globally, and clients' challenges become more complex, the number of firms able to address these issues in an integrated way is shrinking. the need for j.p. morgan's brand of sophisticated financial services among corporations and governments is growing rapidly. j.p. morgan is committed to offering advice and execution of the highest quality, conducting business in a principled way and maintaining the global market presence that helps clients succeed while enhancing returns for our stockholders.

the community approach
just as the majority of j.p. morgan's business is with corporations, governments and institutions, the firm takes a wholesale approach in its community development business, providing advisory services, capital and structuring advice to many of new york city's largest nonprofit community development intermediaries. through j.p. morgan community development corporation (mcdc), funds are targeted to affordable housing, commercial revitalization, nonprofit organizations and small businesses. morgan takes leadership roles in identifying community problems, bringing together financial institutions to address them, developing targeted products and, when needed, creating new intermediaries.<>

The key to Morgan's success is its ability to forge strong relationships with community intermediaries aind financial institutions, building partnerships that address community need. The firm leverages talents and expertise throughout the institution so that the highest caliber of advice is provided to clients. MCDC's board consists of 10 senior executives, including the heads of Morgan Capital, Commercial Mortgage Finance and Structured Loans. All provide advice and lend department resources to MCDC. Senior management also provides significant oversight: MCDC's chairman is the firm's senior credit officer.

Morgan justifies its community development business and measures its success by its ability to deliver a reasonable financial return while creating a social return as well. While social return is at the heart of Morgan's efforts, monetary return is critical to the sustainability of community organizations and the willingness of financial institutions to make ongoing commitments. Morgan measures social return not just by the dollars invested in a community, but by the creation of programs and services that meet specific community needs and strengthen community development infrastructure.

Building Local Health Care Capacity
Leveraging its corporate history of leadership in health care finance, J.P. Morgan teamed with the Primary Care Development Corporation. PCDC was created to address a health care crisis in New York City's low-income communities: a crisis marked by high disease rates and lack of capacity needed to prevent, manage or treat it. In the absence of a primary care infrastructure, these communities rely on expensive and inappropriate use of hospital emergency rooms or do not receive care at all, resulting in preventable hospitalization at rates three to four times the city average. In 1993, when PCDC was created, 1.8 million New Yorkers were deemed to be living in "health crisis zones."

PCDC presents an innovative, public-private partnership model for expanding primary care services for medically underserved communities, offering access to low-cost capital and technical assistance to not-for-profit health care providers, like Community Healthcare Network (CHN), that build and operate new or expanded primary care facilities throughout New York City.

With a longstanding commitment to community health, J.P. Morgan assumed leadership from the beginning in crafting the PCDC partnership. Through its community relations and philanthropic serviced department, Morgan provided financial support and galvanized a consortium of local funders to provide $2.5 million for start-up. Morgan also helped to shape the PCDC Board into a powerful mix representing the business and financial sectors, private philanthropy, public sector health and human service organizations, not-for-profit health care institutions and community organizations.

PCDC's Expanding Portfolio of Programs
In 1995, as PCDC successfully implemented its original tax-exempt bond financing program for large-scale projects, J.P. Morgan stepped forward again to help PCDC meet another challenge - how to finance projects too small for economical bond financing (under $3 million). While PCDC started by custom-tailoring selected facility loans, J.P. Morgan convened a consortium of four leading New York City banks (J.P. Morgan, lead permanent lender; Chase Manhattan, lead construction lender; Citibank and Republic National Bank) to create PCDC's Small Project Loan Fund (SPLF). Through the SPLF, which joins a $20 million credit facility from the banks with public and private grant monies used for equity grants and reserves, PCDC can offer direct loans to primary care providers at highly favorable terms: a 15-year loan at an effective interest rate of approximately six percent. CHN, a health care agency that serves 16 low-income neighborhoods in New York City and one of the first beneficiaries of this program, used SPLF financing for two projects that will expand its primary care network in Manhattan and Brooklyn.

The SPLF is PCDC's most popular financing program. Since launching the SPLF in November 1997, PCDC has financed 14 new facilities, providing $19 million in loans. The overall effectiveness of PCDC as a model is shown in Figures 3 and 4.