Many names familiar to the affordable housing industry were selected to receive allocations of New Markets Tax Credits (NMTCs) in the program’s fourth round.
The 63 community development entities (CDEs) that were chosen to receive NMTCs are authorized to issue a total of $4.1 billion in equity for which NMTCs can be claimed, including $600 million that was authorized specifically for the recovery and redevelopment of the Gulf Coast.
The NMTC program aims to attract private-sector capital into low-income communities across the nation. In the four rounds to date, the Treasury Department’s Community Development Financial Institutions Fund has made 233 awards totaling $12.1 billion in tax credit authority.
Two housing agencies received NMTC awards through affiliate organizations. The Pennsylvania Housing Finance Agency received a $60 million allocation through its Commonwealth Cornerstone Group, which plans to finance community revitalization projects. It will provide loans and equity investments for business expansion, mixed-use development, for-sale housing, and community facilities.
Seattle Community Investments, which is controlled by the Housing Authority of the city of Seattle, received a $20 million NMTC award, which will be used to provide below-market rate, subordinated debt and equity financing for a mixed-use development in High Point, a low-income neighborhood in Seattle.
The NMTC program permits individuals and corporate taxpayers to receive a credit against federal income taxes for making qualified equity investments into CDEs. The CDEs, in turn, must invest the money into low-income communities.
NMTC investments can be used to finance a wide range of activities, including loans to or equity investments in businesses and real estate deals, including commercial and mixed-use projects. They can also be used to capitalize other CDEs.
Program advocates are seeking to extend the program, which is set to have one more allocation round in 2007 when up to $3.9 billion in authority, including $400 million dedicated to the Gulf Opportunity (GO) Zone, will be allocated. Supporters say the New Markets credit has had the same positive effect on business and community development that the low-income housing tax credit has had on producing affordable housing.
Breakdown of 2006 awards
Competition for the credits is strong. This year’s winners were selected out of 254 applications, requesting $28.3 billion in allocations. The 2006 awards ranged from $2 million to $143 million. The median amount was $60 million.
Enterprise, the Local Initiatives Support Corp. (LISC), Massachusetts Housing Investment Corp., and WNC & Associates, Inc., were among those receiving allocations. These groups or affiliates have been active in syndicating low-income housing tax credits.
Several large banks and financial companies, including Bank of America, Citibank, JPMorgan Chase & Co., Merrill Lynch Bank USA, PNC Bank, U.S. Bank, and Wachovia, also had affiliates receive NMTCs.
Citibank NMTC Corp. was a first-time allocatee, receiving $100 million in NMTC authority. It plans to use the credits to develop new lending and investment programs.
“It presents a tremendous opportunity,” said Kim Latimer-Nelligan, senior vice president and director of national lending and investments for Citibank Community Development. “We view the NMTC program as a critical tool in promoting innovative and alternative forms of financing to low-income communities across the U.S.”
Bank of America and Wachovia each received $143-million awards, the largest of the round. Both had received allocations in earlier rounds.
Bank of America received a $150 million allocation in the second round in 2004. The NMTC loans and investments have been used to preserve notable community buildings, build new urban spaces, and create jobs, said Phyllis Caldwell, president of Bank of America Community Development Banking. One of the bank’s NMTC projects was the restoration of the historic Apollo Theater in Harlem.
The latest award brings Wachovia’s total NMTC allocations to $383 million. Its early projects have included the Association of Black Cardiologists International Library, Research and Conference Center in Atlanta, and the redevelopment of an old Navy base in North Charleston, S.C.
Wachovia said it expects to use a portion of its allocation to support the rebuilding of the Gulf Coast. It has joined other CDEs in advocating for the reauthorization of the program. “The extension of this program would be invaluable to areas such as the Gulf Coast, which is now beginning redevelopment after last year’s devastating hurricanes and could see tremendous benefit from this subsidy,” said Cathy Dolan, Wachovia’s director of Community Development Finance.
Enterprise has received an allocation in all four rounds and received $105 million in 2006, bringing its total to $415 million, said Joseph Wesolowski, senior vice president of structured finance at Enterprise Community Investment, Inc.
One of Enterprise’s early NMTC projects is the Monessen Riverfront Development that is transforming an abandoned steel mill site into a new industrial development. Located near Pittsburgh, the project features a manufacturing facility leased to Maronda Homes, a large homebuilder.
The nonprofit LISC received a $140 million NMTC allocation in the latest round. It has deployed most of the $155 million it has raised from previous NMTC allocations to support the development of more than 1.1 million square feet of commercial space, 130 new homes, and 5,200 jobs, according to Michael Rubinger, LISC president and CEO.
LISC said it has closed on 15 NMTC projects to date, ranging from the redevelopment of a historic Buffalo, N.Y., church into gallery/office/performance space to the financing of a motorcycle part manufacturer in rural Wisconsin to the construction of a seniors community center and commercial space in Seattle’s Pike Place Market.
The 2006 allocations are the first to be made since Hurricane Katrina hit the Gulf Coast in 2005. Thirteen CDEs will receive the $600 million of authority dedicated to the GO Zone.
For a list of allocatees, visit www.cdfifund.gov.