Metro Atlanta Opportunity Zone Update March 28, 2019 Presented to: - - PowerPoint PPT Presentation

Metro Atlanta Opportunity Zone Update March 28, 2019

Presented to:

Overview

• Urban Key Capital Partners is a mission-driven, specialty financial advisory firm

with expertise in:

– Financial Advisory Services – Private Placement Services – Fund Management Services

• Urban Key Capital Partners provides a range of financial services to highly-

impactful real estate development projects, operating companies and fund managers in distressed communities

• Urban Key Capital Partners' financial services include specialized knowledge of

tax credit based investing, non-conventional debt, public sector financing and public private partnerships

• Our team’s principals has been involved with some of Atlanta's most impactful

public private partnerships

2

Services

3

Financial Advisory Services Private Placement Services Fund Management Services

Financial Advisory Services

• Urban Key Capital Partners provides strategic financial advisory services for

complex catalytic real estate development projects and operating businesses in distressed urban markets

• The Principals of Urban Key Capital Partners have direct experience in

structuring financial solutions for some of the largest public private partnerships in the Atlanta MSA. Financial advisory services currently offered include:

– Tax credit finance structuring – Tax increment finance structuring – Redevelopment finance structuring – Debt and alternative financing structuring

4

Private Placement Services

• Urban Key Capital Partners team members have assisted clients with raising

third-party mezzanine and equity capital to make their projects come true

• The Principals of Urban Key Capital Partners have specific experience with

public sector economic development incentive capital such as tax increment finance, tax-exempt and taxable bonds and new markets tax credit

• transactions. Private placement services currently offered include:

– New markets tax credit finance – Tax increment finance (tax allocation district bond and "pay go" finance options) – Lease purchase bond finance – 501(c)(3) bond finance – Small business revolving loan fund finance​ – Alternative financing solutions

5

Fund Management Services

• The Principals of Urban Key Capital Partners have direct experience with

managing over $300 million of new markets tax credit allocation through direct fund management activities for certified CDEs on a third-party basis

• From securing NMTC allocation to active deployment and responsible program

compliance, this direct fund management activity has provided in-depth experience in managing NMTC investment funds. Fund management services currently offered include:

– New markets tax credit allocation application services – Third-party outsourced fund management services – Risk and asset management services – NMTC program compliance services

• In 2014, Urban Key Capital Partners created Urban Key CDE in order to make

direct investments in highly distressed census tracts

6

Management Team

• Mr. Rachal serves as President of Urban Key and is responsible for

managing all aspects of CDE operations. Mr. Rachal has over 20 years

• f experience in community development finance, private equity

funding and municipal finance. Prior to Urban Key, Mr. Rachal was founder and President of Atlanta Emerging Markets, Inc. (AEMI) which is a four-time allocatee with the NMTC program receiving $148 million of NMTC allocation. In addition, Mr. Rachal was Managing Director of Redevelopment for Invest Atlanta which serves as the redevelopment authority for the City of Atlanta where he managed all tax increment finance (TIF) and NMTC activity for the City. Mr. Rachal has vast experience securing NMTC investors and debt providers, identifying and screening projects, underwriting investments, maintaining compliance and

• rganizing opportunities for community involvement which prompted
• Mr. Rachal to start UK.

Prior to his involvement in NMTC financing, he co-founded Red Rock Global which is a minority-owned real estate advisory services business concentrating its activities in distressed urban communities in Atlanta. Prior to Red Rock Global, Mr. Rachal was an investment banker with Merrill Lynch & Co. in New York within the Private Equity and Mergers & Acquisitions Groups.

7

Tyrone Rachal President

What are Opportunity Zones?

8

• Created by the Tax Cuts and Jobs Act of 2017 to

provide a new incentive to spur private investments in low-income areas

• Opportunity Zones are designated by States

and approved by the Department of Treasury (OZ designations last for a period of 10 years)

• 10-County Atlanta Region has 52 areas

designated as Opportunity Zones

• Taxpayer incentive based on the deferral,

reduction and elimination of capital gains taxes

• Different than Other Tax Credits:
• More market oriented
• Residential, commercial real estate and

business investments

• No benefit cap

Four Parties:

TAXPAYER QUALIFIED ZONES OPPORTUNITY FUND PROJECTS (PROPERTY & BUSINESSES)

What are the Benefits?

9

What are the Benefits?

10

How Does it Work?

11

How Does it Work?

12

2018 2019 2020 2021 2023 2024 2025 2026 2027 2028 2022

SALE INVESTMENT Basis increased by 10% of the deferred gain Up to 90% taxed

HELD FOR 5 YEARS

Basis increased by 5% of the deferred gain Up to 85% taxed

HELD FOR 7 YEARS

Basis is equal to Fair Market Value Forgiveness of gains on appreciation of investment Requires an election

HELD FOR 10 YEARS

Illustrative Example

13

2018 2019 2020 2021 2023 2022

Illustrative Example

14

June 30, 2023 (After 5 years), Taxpayer’s basis in investment in QOF increases from $0 to $100k June 30, 2025 (After 7 years), Taxpayer’s basis in investment in Qualified Opportunity Fund increases from $100k to $150k June 30, 2028 (after 10 years) , Taxpayer sells its investment for $2.0MM. Basis in the investment is deemed to be FMV. The effect is no tax on appreciation in investment.

2023 2024 2025 2026 2028 2027

• Dec. 31, 2026

$850K of the 1MM of deferred capital gains are taxed and the basis in QOF investment increases to $1MM.

What is the Impact?

15

What is the Impact?

16

Key Observations

• The Opportunity Zones are another tool in the P3 toolkit

– OZ Funds are structured as equity with equity-like return expectations – Cost of OZ equity vis-à-vis other redevelopment tools must be considered from the Sponsor perspective (e.g., grants, below-market interest rate debt, tax credit equity, etc.)

• The Power is in the Project Pipeline
• Local leadership can create an environment that is more conducive to

Opportunity Zone investment

– Opportunity Zone Prospectus to highlight project pipeline – Online Portal with resourceful information – Site Tours – Fund Manager LOIs

• Local municipalities and development authorities can leverage P3 resources with

OZ fund management activity

– Pairing investment with other redevelopment tools – Leverage add-on investment – Ease certain development requirements

17

Tyrone Rachal President 404.468.8667 trachal@urbankeycapital.com For more information, visit our website: www.urbankeycapital.com

18