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NMTC Users Lobby For Extension
NMTC Users Lobby For Extension
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areas and >> ize downtowncenters. create more walkable and transitfriendly town at least 20% of the revenue from any credit-financed real estate must come from commercial space, so the program is not used for projects that are 100% housing. However, mixeduse real estate has become more prevalent, said Perlow. Cities view mixed use as a good way to redevelop infill sites. Investors like it because rental housing is considered less risky than commercial real estate. NMTC investments may be used to finance a wide variety of activities, including loans to or equity investments in businesses or real estate projects. all NMTC investments must be made in low-income communities, which are generally defined as census tracts with a poverty rate of 20 percent or greater, or with a median family income at or below 80 percent of the area median family income. However, over two-thirds of NMTC investments have been made in census tracts with a poverty rate of 30 percent or greater or with a median family income at or below 60 percent of the area median family income. The program requires that financing be provided on advantageous terms. In the 2010 round, almost all the allocatees indicated that 100 percent of their investment dollars would be made either in the form of equity, equity equivalent financ-
ing, or debt that is at least 50 percent below market and/or is characterized by at least five concessionary features; with all of the remaining allocatees committing to providing debt that is at least 33 percent below market and/or characterized by at least four concessionary features. Such features include, among other things, subordinated debt, reduced origination fees, higher than standard loan-to-value ratios, lower than standard debt service coverage ratios, non-traditional collateral, and longer than standard amortization periods.
Examples of financing
Massachusetts Housing Investment Corporation (MHIC) uses the tax credit throughout that state for construction, acquisition and permanent loans for real estate projects. MHIC was founded in 1990 by a consortium of banks and other corporate investors to fill a critical gap in meeting the credit needs of affordable housing developers and owners who couldnt get financing for certain projects from traditional lenders. It also invests in low-income housing tax credit projects. MHIC received a $63 million NMTC allocation in the recently announced 2010 awards. Over the years, MHIC has used equity attracted by the NMTC to finance 46 projects, totaling $403 million in investment. One of the mixed-used projects is
new markets tax Credits allocated; total allocations reach $29.5 billion
On Feburary 24, 2011, the Community Development Financial Institutions Fund (CDFI Fund) announced that 99 community development entities had been selected to receive allocations of New Markets Tax Credits (NMTCs) through the 2010 round of the NMTC Program. These 99 organizations are authorized to issue to their investors a combined total of $3.5 billion in equity for which NMTCs can be claimed. In the eight rounds to date, the CDFI Fund has made 594 allocation awards totaling $29.5 billion in tax credit authority, including $3 billion in Recovery act awards and $1 billion that was specifically set aside for recovery and redevelopment in the wake of Hurricane Katrina. allocation awards range in size from $10 million to $77 million. Both the average and the median allocation award amounts are about $35 million. The NMTC Program provides tax credits to investors who make qualified equity investments (QEIs) in investment vehicles called community development entities (CDEs). CDEs are required to invest the proceeds of the qualified equity investments in low-income communities. Low-income communities are generally defined as those census tracts with poverty rates of greater than 20 percent and/ or median family incomes that are less than or equal to 80 percent of the area median family income. The credit provided to the investor totals 39 percent of the investment in a CDE and is claimed over a sevenyear credit allowance period. In each of the first three years, the investor receives a credit equal to five percent of the total amount paid for the stock or capital interest at the time of purchase. For the final four years, the value of the credit is six percent annually. Investors may not redeem their investments in CDEs prior to the conclusion of the seven-year period. The program is administered by the CDFI Fund, which is a branch of the U.S. Department of the Treasury.
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the rehabilitation of 470 Main Street, a historic structure in Fitchburg, a town hard hit by the foreclosure crisis. The project sponsor is The Twin Cities Community Development Corporation (TCCDC), which also has its offices in the structure. The project created 31 high-quality, mixed-income apartment units in the upper four levels, of which eight units will be affordable for families earning between $25,100 and $38,700 per year. It maintains the existing 8,000 squarefoot TD Bank branch office; it also created space to enable the CDC to move its offices to the first floor and basement, providing expansion space for its Home Ownership and Small Business Centers. MHIC financed this project in 2007 and 2009 with $11.65 million in New Markets and federal historic tax credits and a bridge loan against the sale of state historic tax credits. Completion of this project adds considerably to the revitalization of downtown Fitchburg by advancing the citys strategy to increase residential uses and accompanying pedestrian traffic. In recent years, an increasing number of city and state government agencies have begun to successfully apply for NMTC authority. In the 2010 round, both Chicago and New Mexico obtained tax credit authority. The Chicago Development Fund, sponsored by the City
of Chicago, has an allocation of $18,000,000. It plans to use the authority to provide capital to industrial, commercial, community facility, and sustainability projects within lowincome communities in the City of Chicago. CDF particularly focuses on industrial retention and expansion within the city, extending retail development into underserved areas of the city, and developing educational, cultural, and social service resources in low-income neighborhoods. Financing products offered by CDF feature such attributes as below-market interest rates, higher than typical loan-to-value ratios, and/or subordinate debt for projects that require such benefits to become feasible. Finance New Mexico, LLC, is a subsidiary of the New Mexico Finance authority based in Santa Fe, N.M. It will use an allocation of $46,000,000 to offer senior debt and subordinated debt with a range of flexible terms and conditions to support the creation of quality jobs through investments in companies located in, or expanding to, the states rural, disadvantaged communities, and to projects located in distressed census tracts in albuquerque, Las Cruces, and Santa Fe, New Mexico. Financing will offer aggressive pricing, longer periods of interest-only, higher loan-to-value ratios, and lower debt service requirements.
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