April 4 | NH&RA Conference Center | Washington, DC 2013 New Markets Tax Credit Symposium New Markets Transactional Roundtable: Legal, Tax & Structuring Issues Speakers: John Mackey , CohnReznick, Boston, MA, Moderator Bob Poznanski , LISC NMTC Program, Kalamazoo, MI Ben Swartzendruber , Applegate & Thorne ‐ Thomsen, Chicago Laura Vowell , US Bancorp, Arlington, VA
Bob Poznanski LISC NMTC Program Kalamazoo, MI
NMSC Overview Manage the largest cumulative NMTC award in the industry $778 million in LISC allocation Provides compliance and asset management services to other NMTC allocatees: Currently manage $105 million in allocation for four third party allocatees Provide loan servicing for two third party allocatees Provide investor services to four investors Industry ‐ leading NewDL software, available for lease to other CDEs April 4 | NH&RA Conference Center| Washington, DC
NMSC Overview $778 Million in allocations received 79 Projects closed $723 Million in allocation deployed 8.1 Million square feet of commercial or community space East Side Health Clinic 390 housing units St. Paul, MN 8,000+ permanent jobs 36,070 patients served • 34,000 square foot federally 17,376 students served qualified health center 140,569 other clients served • 64 permanent jobs 21 Investors • 10,000 medical patients • 4,000 dental patients April 4 | NH&RA Conference Center| Washington, DC
LISC NMTC Portfolio Overview ASSET TYPE PROJECT SPONSORSHIP Community Facilities: 51% Nonprofit: 64% Commercial, Office, Retail: For ‐ Profit: 36% 27% Mixed Use Residential: 13% Industrial: 5% Hope Street Child Care Other: 4% Providence, RI Shops at Park Village Washington, DC April 4 | NH&RA Conference Center| Washington, DC
Small Business Loan Fund • Goal: Provide low ‐ cost, long ‐ term SBA 504 financing to small businesses that enable job creation in neighborhoods that align with LISC’s Sustainable Communities strategy • LISC Partners: – Morgan Stanley – provide debt and NMTC equity capital for 1 st mortgage loans – CDC Small Business Finance – underwriting and servicing for 1 st mortgage loans – Local Bank Partners – loan referrals and interim 2 nd mortgage loans – Local 504 Companies – underwrite and service 2 nd mortgage loans April 4 | NH&RA Conference Center| Washington, DC
Program Parameters First Mortgage loan amounts from $250,000 to $2,500,000 for for ‐ profit businesses to be used for real estate acquisition and/or capital improvements Premium of 3.0% to selling bank (no mark ‐ up allowed) Morgan Stanley to direct fund all loans EPC must be created for all transactions Properties must be multi ‐ purpose (i.e. not single ‐ purpose/specialized), for which the borrower occupies at least 51% of the space Collateral Coverage – Max 60% LTV Personal Credit – Minimum FICO of 680 Cash Flow Coverage – Generally consistent with CDC global cash flow DSCR Requirement of 1:1 DSC for last fiscal year and interim 7 ‐ year lock out with no prepayment allowed Loan Fee of 0.5% for SBA participation fee April 4 | NH&RA Conference Center| Washington, DC
Rates & Terms 30 ‐ year loan: interest ‐ only for 3 years followed by 27 year amortization Fixed at 5 year LIBOR swap + 275 basis points for 7 years After 7 years adjusted to 90 day Libor Swap + 350 basis points with quarterly resets For current LIBOR swap rates: http://www.federalreserve.gov/releases/h15/update/ April 4 | NH&RA Conference Center| Washington, DC
Healthy Futures Fund PROVIDE NEW CAPITAL to Federally Qualified Health Centers (FQHCs) at a time of significant patient growth PROMOTE COLLABORATION among community development finance leaders & INCORPORATE A “HEALTH” LENS into their activities and enhancing their capacity to support community health initiatives EXPAND HEALTH CARE PROGRAMS & SERVICES available to tenants in projects financed with Low Income Housing Tax Credits ENCOURAGE COMMUNITY DEVELOPMENT ORGANIZATIONS & COMMUNITY HEALTH CARE PROVIDERS to work together on mutually beneficial programs that improve the health of low ‐ income individuals and families ENHANCE CAPACITY of FQHC operators UTILIZE MORE EFFICIENT STRUCTURE for New Markets Tax Credit to finance health centers, in an effort to reduce transaction costs & better leverage capital from investors April 4 | NH&RA Conference Center| Washington, DC
HFF – FQHC Term Sheet Loan amounts from $2.5 million to $10 million Total financing up to 80% LTV w/ 1.20 DSCR 7 ‐ year initial term, with first 30 months interest ‐ only then 19 ‐ year amortization schedule Renewal options for a 2nd 7 ‐ year term Rate fixed at 7 ‐ year LIBOR swap + 200 to 250 basis points for 7 years At least 20% of the total loan to borrowers will have the ability to be cancelled (through a put ‐ call structure) upon successful third ‐ party refinance of the remaining principal balance April 4 | NH&RA Conference Center| Washington, DC
Advantages vs. Standard Model Committed Sources of Capital Financing Product with Pre ‐ Established Terms & Documentation Grant Support toward Cost of Capital Link Technical Assistance Services for Application Development Dramatically Reduce Borrower Need to Retain Other Consultants and / or Develop Internal NMTC Expertise Lower Transaction Costs Shorter Closing Process April 4 | NH&RA Conference Center| Washington, DC
Ben Swartzendruber Applegate & Thorne ‐ Thomsen Chicago, IL
Transaction Costs – Legal Fees • Inefficiency – costs reduced without compromising quality of legal services • Complexity – costs reduced by changing program requirements April 4 | NH&RA Conference Center| Washington, DC
Inefficiency Re ‐ Structuring Over ‐ Staffing All – Hands Calls “Over ‐ Lawyering” Duration to Closing Duplicated Review Delegation False Starts April 4 | NH&RA Conference Center| Washington, DC
Market Incentives Investor NMTC $$ ALLOCATION CDE CDFI Fund STATUTORY IMPACT PURPOSE $ BENEFIT QALICB April 4 | NH&RA Conference Center| Washington, DC
QALICB “Bar” Reduces Inefficiency • QALICB ‐ Non ‐ Repeat Player, Inexperienced, Few Relationship Benefits, “But For” Test and Viable Alternatives • QALICB Counsel – Knowledge of economic and legal market standards, relationships and “portable” agreements, closing procedure April 4 | NH&RA Conference Center| Washington, DC
Costs of Simplification • Regulatory – Are changes consistent with programmatic purpose? (Ex. True Debt) • Structural – Interaction of programs (HTC, State NMTC, HRSA, EB ‐ 5, TIF) and entities (Multiple CDEs, Investors) Cost > Benefit? • Scope – Asset classes, QALICB Types, Location April 4 | NH&RA Conference Center| Washington, DC
Complexity or Uncertainty? • Guidance – CDFI Fund and Service reduce uncertain legal positions • Industry Standard – commonly accepted answers in absence of guidance • Industry Maturity – Fewer novel issues and structures April 4 | NH&RA Conference Center| Washington, DC
Laura Vowell US Bancorp CDC Arlington, VA
NMTC Market Update Waiting for announcement Expected late April More allocatees with smaller allocations Competition for credits Only the best community impact stories Must be ready to close Deals accept less allocation Price/Investor view April 4 | NH&RA Conference Center| Washington, DC
HTC Market Update Limited number of investors Pricing has increased Pricing and pay-in timing vary Different responses to HBH and other recent cases Timing of closing/Pay ‐ in Cash flow/Upside for investor Guarantee limitations Methods for exit Guidance from IRS April 4 | NH&RA Conference Center| Washington, DC
Twinning with NMTCs Types of “Twinned” transactions: REITC/NMTC HTC/NMTC Is the project a good fit for NMTCs? Create or maintain quality jobs? Provide needed goods and services? Provide housing units at below ‐ market rates? Provide demonstrable benefits for residents of a low ‐ income community and/or low ‐ income persons? Provide environmentally sustainable outcomes? How will other credits flow to investor? Are there adequate cash flows to meet all demands, including “true debt” analysis? April 4 | NH&RA Conference Center| Washington, DC
NMTC/HTC Twinned Structure Sources USBCDC (TIF, Grant, Loans) Bridge Loan Equity – NMTC & HTC LEVERAGE LENDER: Loan INVESTMENT FUND Project affiliate, Sponsor, Developer SUB-CDE 1 SUB-CDE 2 SUB-CDE 3 Equity Master Tenant: Loans Operator Equity QALICB: Lease/Equity Property Owner April 4 | NH&RA Conference Center| Washington, DC
Case Study: Howard Theatre Location: Washington, DC Rehabilitation of historic theatre built in 1910. Project cost: $30mm Financing: Commercial debt New Markets Tax Credits Historic Tax Credits TIF Loan Grants (Municipal, Private) Fundraising April 4 | NH&RA Conference Center| Washington, DC
Recommend
More recommend
