North Star Group, Inc.
19901 Quail Circle
Fairhope AL 36532
701-770-9118
michaelh@nsgia.com
1
SHIELD – Summary
Settlement-Housing Integration for Enhanced Liquidity & Development
What It Is
SHIELD is a transformative financing structure that provides a new avenue for affordable housing
development by pairing life-settlement yield (or any other uncorrelated income stream) with
project rental income. Unlike traditional mechanisms that primarily benefit wealthy investors
Combined Life Settlement Notes - no external credit warrantor
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seeking tax advantages, SHIELD refocuses the economic benefits to mission-driven owners such
as Public Housing Authorities (PHAs) and community organizations like churches.
Why It Matters
● Traditional affordable housing finance primarily benefits wealthy investors seeking tax
credits, not the communities being served
● Conventional LIHTC/HUD deals force PHAs or churches to give up ownership and live on
thin cash flow
● Traditional financing methods have high transactional costs (≈10-15% for LIHTC, 3-5% for
HUD 221(d)(4)) compared to SHIELD's ≈0.8%
● SHIELD pays the project's interest with life-settlement income, so project NOI is not
swallowed by debt service
● SHIELD redirects economic benefits from wealthy tax credit investors back to
mission-driven owners and the communities they serve
● No reliance on uncertain tax credit allocations or volatile interest rate markets
How Each Party Wins
Owner / PHA – Immediately receives ≈ 2× the surplus it would get under a 221(d)(4) loan, then
escalates to 100% of cash once the LS pool matures.
Investor / Fund – Earns ~13% net IRR from (i) LS yield, (ii) 6% coupon, (iii) a shrinking share of rent;
principal is repaid via refinance or LS proceeds.
Residents / City – More units, lower rent burden, no tax-credit exit drama.
How the Cash Waterfall Works
1. LS Yield (8-12%) → pays note interest (6%)
2. Owner Target (e.g., ≥ 2× HUD surplus) is distributed next
3. Excess rent + LS surplus flows to investor
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© North Star Group, Inc. 2025 All rights reserved.
19901 Quail Circle
Fairhope AL 36532
701-770-9118
michaelh@nsgia.com
Combined Life Settlement Notes - no external credit warrantor
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4. As each policy matures, required interest and investor share drop; owner share climbs
until it reaches 100%
Illustrative $20M Project (120 Units)
Metric
HUD 221(d)(4)
LIHTC
SHIELD
Annual debt service
$1.12M
$0
$0 (covered by LS)
Year-1 cash to owner
$0.18M
$0.08
M
$0.37M
Investor IRR
n/a
6-7%
≈ 13% net
Transaction costs
3-5%
10-15%
≈ 0.8%
Exit Options (When LS Pool ≥ 70% Matured)
● REIT Sale/Recapitalization – Sell to REIT or recapitalize with REIT investment
● Tax-Exempt Bond Takeout – Use private activity bonds to refinance hedge fund capital
● Pre-Arranged Long-Term Debt – Convert to amortizing note with rate buy-down using
reserves
● Staged Exit with Secondary Partners – Phase in institutional investors over 2-3 years
● Asset Sale with Seller Financing – Sell to mission-aligned buyer with seller financing
component
DSCR Enhancement Mechanism
● Years 1-3: 50% of increasing owner distributions go to DSCR Enhancement Reserve
● By Year 7, reserve transforms DSCR from unfundable 0.66 to attractive 2.01
________________________________________________
© North Star Group, Inc. 2025 All rights reserved.
19901 Quail Circle
Fairhope AL 36532
701-770-9118
michaelh@nsgia.com
Combined Life Settlement Notes - no external credit warrantor
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● Reserve can be deployed as supplemental debt service, interest rate buy-down, or capital
improvements
Why It Scales
● Pool size can be < $1M to >$100B – math is linear
● Works with any steady-yield asset (annuities, bond ladders, royalties)
● Any entity—PHA, municipality, church, family office, REIT—can be the owner or the
investor
● Capital stack can accommodate multiple tranches, convertible features, or hybrid
structures
Bottom line: SHIELD fundamentally reorients affordable housing finance away from a tax shelter
for the wealthy toward a sustainable model that builds community wealth and ownership. It
delivers more affordable units with better economics by redirecting benefits to mission-driven
sponsors while still providing institutional capital with attractive, low-volatility returns.
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© North Star Group, Inc. 2025 All rights reserved.
19901 Quail Circle
Fairhope AL 36532
701-770-9118
michaelh@nsgia.com
