Downtown Greenfield Vital Statistics Business center of rural - - PowerPoint PPT Presentation

Downtown Greenfield

Vital Statistics

Business center of rural county; 100 miles west of Boston Town Population: 18,000; County Population: 72,000 59% live in 3 NMTC census tracts; 63% MFI , 17.2% poverty 9 vacant or mostly vacant buildings totaling 175,000 s.f. in

downtown’s center plus historic theatre needing restoration

Decline of tap and die manufacturing; agriculture

Downtown Greenfield Building Renovation Project March 9, 2010 Downtown Greenfield Building Renovation Project March 9, 2010

Barriers to Redevelopment

• Small buildings, multiple owners
• Costly renovation
• Low rents
• Weak market—who would lease the

space?

• I nsufficient return to private investment
• Lack of experience with tax credit finance
• I nefficiency of complex financing for small

buildings

“This is the most exciting thing that’s happened to Greenfield in 35 years!”

Programmatic Solution

• Same financing structure/ docs. for all projects
• NMTC/ HTC/ SHTC
• Single Leveraged Lender: local bank
• Same attorney, accountant, consultants
• Nonprofit special member with tax credit experience--

bookkeeping, SHTC proceeds, additional leveraged lender

• SHTC bridge lender: MHI C

Greenfield Example - New Markets/ Historic Tax Credit Financing Structure

QALICB, LLC (Owns real estate) QALICB, LLC (Owns real estate)

Master Tenant, LLC 100% owned by CDE; Individual non-member manager Master Tenant, LLC 100% owned by CDE; Individual non-member manager Equity: MHIC Investors $1,509,033 (owns 100% of Fund) Equity: MHIC Investors $1,509,033 (owns 100% of Fund) Hard Debt: Local bank $1,584,889 (Senior Debt) Hard Debt: Local bank $1,584,889 (Senior Debt)

MHIC New Markets Fund IV, LLC (owns 99.99% of CDE) MHIC New Markets Fund IV, LLC (owns 99.99% of CDE) MHIC New Markets NE CDE I LLC MHIC New Markets NE CDE I LLC

Note A $1,584,889 Note B $361,250 Note C $851,880; Note D $103,338 $425,210 Equity Investment Qualified Equity Investment (QEI), $3,429,451 NMTCs, HTCs, Cash Distributions (interest) MHIC Managing Member (0.01%) Soft Loan: Local nonprofit $361,250 (Subordinate Debt) Soft Loan: Local nonprofit $361,250 (Subordinate Debt) Subtenant subleases commercial space; residential tenants sublease residential units Subtenant subleases commercial space; residential tenants sublease residential units Interest

Local Nonprofit, Special member 1% owner, contributing $63,750 cash equity

$425,210 MT Loan HTCs, Guaranteed payments

Individual managing member 99% owner, contributing $108,000 cash equity

Debt Service payments

Two Buildings Treated as Single Building

• Factors similar to those set forth in recent Private Letter

Ruling

• Two buildings contiguous; share an elevator/basement
• Buildings financed under a common plan of financing
• Buildings operated/managed as a unified project under a

single set of books and records with shared service contracts

• Buildings share common parking under an agreement

with the City of Greenfield

• The result is that two buildings can be combined for

purposes of determining whether they constitute “residential rental property”

Commercial/ Residential Lease Structure

• Pro forma rents for buildings:

1-3 Bank Row: $79,800 commercial; $27,600 residential 19-23 Bank Row: $24,000 commercial; $48,000 resid. 25-27 Bank Row: $57,327 commercial; $0 residential

• At pro forma rents, one building has 33% commercial and

the other has 75% commercial.

• Master commercial sublease to developer affiliate with a

base rent sufficient to yield 31% commercial rents plus additional rent payable from excess cash flow.

• Treating 19-23 and 25-27 Bank Row as a single building

boosts commercial rents from 33% to 63%.