Transcript New Markets Tax Credits Presentation to National Association of Local Housing Finance Agencies By Tyrone Rachal, Invest Atlanta.

New Markets Tax Credits
Presentation to
National Association of Local Housing Finance Agencies
By Tyrone Rachal, Invest Atlanta
Our Vision is to make Atlanta the most
economically dynamic and competitive city
in the world.
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New Markets Tax Credits
Background
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Enacted by Congress in 2000 to drive private sector
investment to urban and rural communities with high
rates of poverty and unemployment
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NMTC uses the incentive of a federal tax credit equal
to 39% of an investment over a seven year period
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5% tax credit in years 1-3
6% tax credit in years 4-7
NMTC’s are delivered by Treasury-certified
Community Development Entities, who compete for
NMTC Allocation Authority
New Markets Tax Credits
How It Works
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Community Development Entities awarded NMTC
Allocation provide loans to developers and businesses
with non-traditional terms
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Debt with below market interest rates
Longer than standard interest-only loan payments
Longer than standard amortization periods
Higher than standard loan to value ratios
Eligible Uses: Commercial, Industrial, Manufacturing,
For-Sale Housing and Mixed-Use
Not Eligible: 100% Rental Housing, “Sin” Businesses
New Markets Tax Credits
Guidelines for Mixed-Use Projects with Housing
Minimum Requirement
Industry Standard
Housing income restrictions are not required but encouraged for NMTC projects.
Typically at least 20% affordable to persons earning 80% area median income
New Markets Tax Credits
Program Activity
Year
NMTC Allocation
Awards
2009
$5.0 billion
99
2010
$3.5 billion
99
2011
$3.6 billion
70
2012
$3.5 billion
To be determined
2013
$3.5 billion
To be determined
NMTC Investments
($ in billions)
New Markets Tax Credits
Atlanta’s Eligible Areas for NMTC Investments
Atlanta Emerging Markets, Inc.
Invest Atlanta’s Community Development Entity
NMTC Allocations
2007
2008
Total
$60 million
$20 million
$80 million
NMTC Investments
Aerotropolis
$30 million
200 Peachtree $12 million
GA Aquarium
$25 million
Civil Rights Ctr $13 million
$80 million
New Markets Tax Credit Transaction
Aerotropolis Atlanta
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$30 million mezzanine loan for $96 million project in May 2009
Acquisition, demolition and remediation of 122-acre Ford auto plant
Largest Brownfield project in Georgia, paved way for redevelopment
400 annual permanent jobs estimated
Tax Credit Investor: Capmark Finance
New Markets Tax Credit Transaction
200 Peachtree – Macy’s Building Redevelopment
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$12 million mezzanine loan for $45 million project in July 2010
Conversion of historic Macy’s building into special event center
Includes restaurants, banquet hall, meeting rooms, business incubator
623 annual permanent jobs created
Tax Credit Investor: Fifth Third Bank
New Markets Tax Credit Transaction
Georgia Aquarium Expansion
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CDE: Atlanta Emerging Markets, Inc.
$25 million mezzanine loan for $120 million project in December 2010
Expansion and renovation of aquarium exhibits and facility
Includes new dolphin exhibit, space for educational programs
478 annual permanent jobs created
Tax Credit Investor: Wells Fargo Bank
New Markets Tax Credit Transaction
National Center for Civil and Human Rights
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CDE: Atlanta Emerging Markets, Inc.
$13 million NMTC loan for $65 million project in January 2013
New 42,000 square foot facility for exhibit and conference space
Leverages $32 million in fundraising
Creates 300 permanent jobs
Tax Credit Investor: PNC Financial Services
Common NMTC Deal Structure
Combination of Debt and Equity
Debt: Bank Loan or
Charitable Contributions
Equity: Tax Credit Investor
Contribution
CDE and Leverage Investment Fund
Project receives 7-year loan with interest-only payments
Portion of loan converts to a grant at end of loan term.
New Markets Tax Credits
Sample $10 Million NMTC Transaction
$7.2 million loan @ 6% interest
Lender
Collateral: pledge of
99.99% CDE
membership
$2.8 million
Equity
NMTC
Investor (100%)
7 year forbearance
Leverage Fund
LLC
Managing
Member (0.01%)
$500,000
Sponsor Fee
$10 million
Equity
(generates
NMTC)
Tax credit price = 72 cents
99.99% CDE
member
Certification
of CDE
Allocation of
NMTC credits
CDE
$7.2 million
A Loan @
6% interest
NMTC $3.9 million
$2.3 million
B Loan @
1% interest
PROJECT / QALICB
CDFI Fund
(Department of Treasury)
New Markets Tax Credits
Key Considerations
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Ideal Deal Size ($8 million and up)
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Transaction Costs
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Community Impacts (e.g. Job Creation, Services)
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NMTC can Leverage Grants, Donations and Equity
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Federal Program Seeks Reauthorization in Dec 2013
Atlanta Emerging Markets, Inc.
Contacts
• Tyrone Rachal, President
– 404.614.8339
– [email protected]
• Dale Royal, Vice President
– 404.614.8336
– [email protected]
For more information, visit our website:
www.InvestAtlanta.com