New Market Tax Credits Introduction

Transcription

1 New Market Tax Credits Introduction

2 Sunflower Development Group Full service real estate developer and consultant Hotel Multi-family Mixed Use Office and commercial Expertise in Historic Tax Credits, Low Income Housing Tax Credits and New Market Tax Credits Closed over $250 million in NMTC transactions

3 Who Has NMTCs CDE s seek eligible projects that have a financing gap A CDE is a mission driven for profit company approved by the Treasury that invests in projects that have a strong community impact CDE s have a specific investment footprint that range from City specific to national CDEs select the type of projects they will specialize in

4 What is the NMTC 39% federal tax credit Realized over a 7-year period (5% for 3 years, 6% for 4 years) Purchased by large institutional investors Credit prices are $.85-$.88

5 Total Project Cost $10,000,000 Tax Credit Percentage Per Regs 39% Gross Tax Credits $3,900,000 Tax Credit Price $.85 Gross Tax Credit Equity to Project $3,315,000 CDE 3% $300,000 Legal/Accounting/Modeling $200,000 Total Equity at Closing $2,815,000 Total Soft Loan $2,815,000 Estimated Cost of Capital Annually = 80 bps $80,000 Total Cost of Capital $560,000 Tax Returns and Audits $70,000 Net Net Benefit $2,105,000

6 Benefit to project NMTCs provide between 20%-22% net equity to a project NMTC equity is in the form of an interest-only loan for 7 years Loan can be converted to equity after compliance period Increases amount of borrower equity

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8 Parameters of projects Projects must be located in distressed or highly distressed census tracts 20% poverty (30% Poverty for Highly Distressed*) Median family income below 80% AMI High migration rural county, median family income below 85% of statewide median income Typical project minimum size is $5 million

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10 Project impacts Creating quality living wage jobs in low-income communities 5-10 jobs per $1mm of allocation Assisting minority, women-owned and low-income community businesses Offering flexible or below market lease rates to tenant businesses Providing goods and services in low-income areas Improving access to healthy and affordable food options Improving environmental sustainability Pioneering developments that will catalyze additional private investments in the community Public/Private partnerships

11 Common NMTC Projects

12 Community Centers: Atchison YMCA Replacement of 102 year old YMCA with a 16,875FT facility Supports 3,000 LIPs access to exercise, gym, pool, teaching kitchen, kids fitness, etc. TPC: $11.4 Million $10,000,000 NMTCs $6,000,000 Capital Campaign

13 Community Center: Salina Fieldhouse 65,000SQFT Basketball, volleyball, indoor turf, soccer, futsal, etc. $11.7 Million TPC $4.5MM City of Salina $4.5MM Private Fundraising $2.7MM NMTC Equity

14 Mixed Use/Education: Pittsburg, KS 100 units student housing, 4 separate historic buildings, 4th and Broadway Ground floor retail, Roots Coffee, Biz Dev Center/Incubator, hacker maker space, community meeting space, health screenings, non-profit programming $18MM TPC $1.5MM Grant Pittsburg State $1.5MM Grant City of Pittsburg $4MM NMTC Equity $6.5MM Historic Tax Credit Equity $4.5MM Loan Enterprise Bank & Trust

15 Industrial: Three Trails 364,000SF Pioneering Industrial Building in KCMO Boulevard Brewery leased 182,000FT to support its finished beer, barrel aging cellar and space for a new bottling line for its smokestack series TPC: $16.5mm $16mm in NMTCs Located in an abandoned quarry with environmental issues/high infrastructure costs Estimated job creation: >300 including benefits Average estimated salary >$15hr Partnered with local WIB to train and hire HS grads

16 Healthcare: Children s Campus KCK 72,000FT facility to provide early childhood education and conduct research to benefit LIPs. Also provided mental health and oral services and family support services. TPC: $18.3mm NMTCs: $14.1 Created 192 jobs

17 Commercial: Westport Commons 160,000SF conversion of abandoned school into largest co-working space in the world. Tenants include for-profit, non-profit, entrepreneurs, tech start up and arts organizations $15mm in NMTCs Historic Tax Credits

18 Other Common NMTC projects Commercial offices and retail Grocery stores in food deserts Healthcare facilities FQHCs, CAHs, Assisted Living Centers

19 Challenges of program Complexity Many banks are unfamiliar with NMTC structure and requirements Must have a strong guarantor or non-profit Highly competitive Timing of allocations Chicken and egg scenario

20 Excluded project types Race tracks or gambling related businesses Business that primarily sell alcohol Tanning salons and massage parlors Golf clubs, country clubs Farming*

21 Challenge to Lenders No direct mortgage Lender has a pledge of the investment fund s interest in the sub-cde 7 year forbearance NMTCs must be continuously investor for 7 years Reinvestment risk 7 year term

22 Sunflower Community Investments CDE Projects between $5 million - $20 million Seeking projects Healthcare expansion Education Community facilities Industrial/manufacturing Grocery stores Timeline: Rural Kansas projects

23 Chris Vukas Director of Economic Development Sunflower Development Group/ Sunflower Community Investments 1520 Grand Boulevard, Floor 2 Kansas City, MO cvukas@sunflowerkc.com Contact information