nmtc: preparing for the application process
DESCRIPTION
This is the slide deck from CDBA's webinar on the New Markets Tax Credit (NMTC) program. You can access a recording of the webinar here: http://bit.ly/1KzhlGYTRANSCRIPT
NMTC: Preparing for the Application Process
Presented by
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Sean ZielenbachPresident & NMTC Guru
SZ Consulting, LLC
Tabitha AtkinsVP, Community Development
Kahlil GrossNMTC Program Director
City First Bank of DC
Bill Dana President and CEO
Central Bank of Kansas City
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Should You Pursue a NMTC Allocation?
?
Yes
Maybe
N0
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Why do you want / need an allocation?
1. Do you have a significant number of NMTC-eligible businesses / projects that you currently cannot finance?
2. Could those businesses / projects handle debt with lower interest rates and more flexible terms? Are they financially viable entities
3. Would the availability of affordable, flexible financing make a meaningful difference for the businesses / projects?
4. Is the NMTC subsidy sufficient for you to be able to provide that flexible financing?
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What types of businesses / projects are you trying to finance?
1. Are they eligible for the NMTC program?
1. Operating Businesses
2. Commercial / Mixed-use Real Estate
3. Community Facilities
4. Infrastructure Development
2. Do they need large enough amounts of financing to take advantage of the NMTC program?
3. Do you have a sufficient pipeline of these un-bankable, yet financially viable deals?
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Can you access sufficient amounts of NMTC capital?
1.Equity from taxable investor
2.Leverage debt
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NMTC Leverage Model
CDE
Grants?
Leverage Debt Equity
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What are your sources of leverage debt?
1.Philanthropic grants / PRIs
2.Concessionary public debt
3.Concessionary private debt
4.Grants / sponsor equity
5.Market-rate debt
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Do you have the infrastructure to deal with NMTC?
1.Project sourcing / underwriting
2.Asset management
3.NMTC compliance
4.Community impact data tracking
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Do you have sufficient historical impact data?
1. Employment at financed companies / projects
• Number of Jobs
• Quality of Jobs (Wages paid, benefits offered)
• Availability of Jobs to Local / Low-Income Residents
• Construction & Permanent Positions
2. Effects of human services on clients (not just # of people organizations served)
3. Spillover economic impacts of projects
• To what extent have they stabilized the surrounding area and/or catalyzed further development?
• Have there been measurable changes in the community?
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Thinking through the 2015 NMTC Application
There are 5 sections:
• Business Strategy
• Community Impact
• Management & Financial Background
• Capitalization Strategy & Track Record
• Prior Awardee Performance
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Business Strategy: Financial Products
• What Products will you Offer? (Senior / Subordinated debt, equity, etc.)
• Why are these products necessary / what problem(s) will they solve?
• How are the proposed products different from what the bank currently offers?
Why does the bank need NMTCs to finance these deals?
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Business Strategy: Pipeline
Pipeline of prospective projects
• Should be realistic deals able to be closed within 9-24 months of application
• Need substantial pipeline (at least 2-3 times larger than amount of request)
• Size of deals important to consider
• How do you screen in/out projects?
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Business Strategy: Track Record
What is your Track record financing similar or related projects / companies?
Commercial real estate
Mixed-use real estate
Small business
Nonprofit facilities
Infrastructure
Housing
What is your Track record providing similar types of products?
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Community Impact: Selecting Projects
• Basic thresholds for inclusion in pipeline
• Criteria for selecting among qualified projects
• Social investment criteria
• Ranking projects
• Engaging key stakeholders
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Community Impacts: Direct Effects
Importance of documenting past & projected project impacts, such as
• Number and quality of jobs
• Involvement of local / low-income individuals
• Provision of quality goods & services in under-served markets
• Environmental remediation / improvement
• Increased access to healthy food
• Reduced blight
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Community Impacts: Spillover Effects
Importance of documenting borrowers’ ability to catalyze / augment additional investment
• New business development / expansion
• Improved infrastructure
• Residential development / rehabilitation
• Crime reduction
• Additional retail opportunities
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Best Practices from CDFI Banks
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City First Bank of DC
Assets of $241MM
Loans of $170MM
Deposits of $191MM
Staff of 38 full time employees
Single Branch: 1432 U Street
Wholly-owned by CFBanc Corporation with shareholdersincluding our non-profit holding company, banks, local university, government and socially responsibleinvestors
24.19% total equity, 43.90% Class A voting equity ofCFBanc Corporation, owned by City First Enterprises,
a 501(c)(3)
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City First Bank’s NMTC Track Record
City First has deployed $396MM in NMTC allocation authority over seven highly competitive rounds.
$38.00
$87.00
$51.77
$60.60 , 15%
$48.80
$94.83
$15.00
NMTC Portfolio Concentration
Affordable Housing
Charter Schools
Commercial Real Estate
Health Care Facilities
Performing Arts Centers
Social Service Providers
Grocery Stores
4%9%
6%
8%
1%
2%
70%
Geographic Distribution
Delaware
Maryland
Multi-state
Pennsylvania
South Carolina
Virginia
Washington, DC
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NMTC Best Practices from City First
• Assemble the BEST team possible
• Create a good compliance infrastructure – deals must be asset managed for seven years
• Understand your market and create a strong pipeline
• Create strong relationships with NMTC ecosystem and CDFI Fund and trade groups
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DC Prep Washington, DC
Asset Type: Charter School
Total Development Costs: $28.95MMCity First Bank Participation: $10MM QEI and $2MM leverage loanTotal QEIs Raised: $29MM
NMTC Investor: Bank of AmericaOther CDEs: Low Income Investment Fund (LIIF), Banc of America
CDE, and Telesis CDE Corporation
Direct Impacts:
• 200 new school seats (711 in total) for pre-school thru 8th grade
• 89% free and reduced lunch
• 115 construction jobs and 32 full time jobs
Purpose of NMTCs: Take-out financing for the renovation and expansion of DC Prep’s Benning Campus located in Ward 7 to include a modernized elementary school and a newly constructed middle school.
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Assets of $153 MM
Loans of $108 MM
Deposits of $129 MM
A Certified Community Development
Financial Institution (CDFI)
Staff of 54 full time employees
Single Branch: Kansas City, MO
Central Bank of Kansas City
Photo Credit: Dean Hochman
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CBKC NMTC Track Record
Central Bank of Kansas City has received $271MM in NMTC allocation authority over six highly competitive rounds.
10%
13%
11%
5%
13%3%3%
37%
4%
NMTC Portfolio Concentration
Social Service Providers
Industrial/Manufacturing
Grocery
Charter School
Hotel
Health Care
Small Businesses
Commercial Real-Estate
Mixed-Use
27.37%
57.61%
6.73%
3.65%0.15%
4.49%4.63%
Geographic Distribution
Kansas City, MO
St Louis, MO
Hazelwood, MO
Topeka, KS
Belleville, IL
Muti-Location, MO
Kansas City, KS
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NMTC Best Practices from CBKC
Assemble the BEST team possible• Considerations in deciding to hire
external consultants
Structuring consultant relationships • Outsourcing application writing and
servicing
• CBKC has final review and approval of application
Pipeline development
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Bissinger’s Handcrafted ChocolatierKansas City, MO
Asset Type: Commercial Real Estate
Project Cost: $16,250,000
Total NMTC Allocation $11,000,000
CBKC Allocation: $6,000,000
Partner CDE: City of St. Louis
Distress Criteria:
• 41.6% Poverty
• 34.6% AMI
• 2.11 x natural unemployment rate
Community Impacts:
• 256 sustained/created jobs
• 54 construction jobs
• 205 jobs accessible to LIPs and/or LICs
• $153.3MM direct Annual Economic Output
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Sean Zielenbach
(703) 465-0857
Questions?
Caitlin Krutsinger
(202) 689-8935 ext. 224
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Upcoming Events
FHA Small Building Risk Share Initiative Webinar Series
Part I: The Basics
Tuesday, Oct. 6 - 2:00pm EST
Part II: Deep Dive
Tuesday, Oct. 20 - 2:00pm EST
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