Nmtc, a case study fclf and miracle place

Florida Community Loan Fund, Inc.

And

Metropolitan Ministries

Florida Housing CoalitionAnnual Conference

September 2013

FCLF is a statewide federally certified Community Development Financial Institution (CDFI).

Founded in 1994 to provide a statewide source of flexible financing for non-profits working in community development.

Since it began lending in 1996, FCLF:

has closed 173 loans throughout Florida totaling over $51 million for projects totaling over $250 million.

has financed 93 facilities totaling 1.2 million square feet

projects have created or retained 5,608 jobs

projects have reached over 22,500 recipients of social services

has committed $112 million of its $151 million NMTC allocation in 12 NMTC projects in Florida and the Southeastern U.S. totaling over $358 million.

About FCLF

Florida Housing Coalition – September 2013

Community Development FundCommercial loans to non-profit or mission-focused for-profit

organizations The Transition House. Purchasing and Green standard rehabbing of homes and multi-unit buildings in Central Florida, used for supportive housing primarily to veterans

DuPuis Pointe, Miami. 27 affordable homes built using Green and hurricane-proof standards

Northwest Jacksonville CDC. LEED-certified 10,600-sf commercial building new LEED-certified construction project.


Florida Preservation FundCommercial real estate loans for preservation of multi-family affordable

housing Timber Ridge of Immokalee. 34 rental units of farmworker housing and a community center.

Royal Poinciana, West Palm Beach. 144 unit apartment complex, acquired and renovated.

Oasis of Hope, Miami. 32-unit apartments under renovation.


Florida Community New Markets Fund

Funding for community facilities, Green projects, and economic development

Metropolitan Ministries, Tampa. Human services campus of 93,000 sf, providing 52 apartments for at-risk individuals and family, child care, on-site public school, counseling. Total project $18.9 million. Funders include JPMorgan Chase, Whitney/Hancock Bank.

SolarSink, LLC, Tallahassee. Manufacturing innovative solar “sausages” heatsink energy, 1.0mw solar field and 70 jobs; total project $16.6 million. Funders include U.S. Bancorp CDC, Hunter & Harp Holdings.

KIPP School, Jacksonville. Charter school built from former greyhound racetrack for 170 students; total project $26.2 million. Funders U.S. Bancorp CDC, National Equity Fund.


FCLF New Markets Tax Credits Projects


FCNMF’s NMTC Focus is on Community Facilities, Green Projects, High-Impact Economic Development ProjectsFCNMF will not use NMTC for Museums, Hotels, Fast Food RestaurantsFCNMF NMTC projects total 12 projects, $358 million project cost, receiving $112 million in FCLF tax credit allocation

ASPIRA North Charter School expansion – North Miami

PACE Elder Care Center – Richmond, VA

UM Life Science Research Center – Miami (LEED certified)

KIPP Jacksonville Charter School – Jacksonville (adaptive re-use)

Solar Sink solar cell manufacturing facility and solar field – Tallahassee (Green)

BTH Quitman Torrefied wood manufacturing facility – Quitman, MS (Green)

Lake Point Restoration water treatment facility – Lake Okeechobee (Green)

ASPIRA Mid-Town Charter School purchase and expansion – Miami

New Camillus House Campus – Miami (LEED certified)

Metropolitan Ministries Miracle Place – Tampa (LEED certified)

Green Biofuels bio-diesel manufacturing facility – Miami (Green)

Hometown Markets – Hitchcock’s Grocery Store – Old Town

Uplift U ®

Unique on-site residential program

personalized for each client

to lead them to self-sufficiency

PromiseLand Day CarePartnership School

Outside of School Care On-site GED Program

Teen Program

Partnership School

Employment Lab

17,000+ homeless men, women, and children in Hillsborough County (Highest in Florida)• Only 1,500 emergency and

transitional beds to support them

15 Families coming daily to MM looking For Shelter

Existing Dining Facility at Capacity

Why Expand?

Fragmented and Antiquated Daycare

Near Capacity

Why Expand?

“Where hope grows,miracles blossom.”

Elna Rae

NMTC Program Summary


US Department of the Treasury CDFI Program

Purpose is to spur investments into businesses and real estate projects in low-income communities Pictured: ASPIRA Eugenio Maria de

Hostos School, Miami NMTC investors receive tax credits against their Federal income tax return in exchange for making equity investments in specialized financial institutions called Community Development Entities (CDEs)

Major federal economic development program - larger than CDBG

Construction or major renovation of real estate projects located in qualified low-income census tracts

NMTC Program Demand


$36.5 billion through 749 awards since inception

Competitive: Banks, developers, government, CDFIs

2012: 282 applications requesting $21.9 billion

Awarded 85 allocations totaling $3.5 billion (20 non-profit CDFIs)

FCLF: $151 million cumulative in tax credit allocations

New proposed program funding: 2013 & 2014: $8.5 billion combined

In Florida, over $530 million in projects done through NMTC

Pictured: U of Miami Life Science Research Park

Key NMTC Program Components

Tax credits only-not a grant

Not loan capital-must raise upper tier debt & tax credit equity

Equity investor receives all of return through tax credits

The investment in the CDE cannot be redeemed before the end of the 7-year period

Severe penalties for program & IRS violations – tax credit recapture 39% of investment

Borrower & Allocatee indemnifications


$6 million minimum project size.

Project must be located in a qualified distressed, low-income census tract:

30% poverty, 60% median income, or 1.5x national unemployment

Project must provide clear and substantial benefits to low-income populations.

Project should generate notable construction and permanent jobs.

Works best for near-bankable projects (e.g. strong borrower and project that can pencil out with the extra support of NMTC).

NMTC – Guidelines & Structures


LIHTC vs. NMTC


LIHTC…

Offers tax credits

Provides front-end subsidy for projects

Has significant restrictions on use

Distributed through state housing agencies

Each project competes for tax credits

Has very long compliance periods – longer than the benefit of the credits

NMTC… Offers tax credits

Provides shallow subsidy; additional subsidies may be needed

Provides equity that accrues at the back end of the project

Seldom used for housing, but many economic development uses

CDEs compete for tax credit allocations nationally and distribute as they decide

Compliance period and benefits are over a 7-year period

Typical LIHTC Diagram


Camillus House New Markets Diagram


NMTC Projects in Florida have included:

Shopping Centers

Manufacturing Facilities

Hotels

Museums

Office Complexes

Restaurants

Auto Retail

Boat Manufacturing

Affordable Home Ownership by Habitat for Humanity

There are other types; these are examples.

NMTC – Eligible Project Types


NMTC Projects that FCLF finds desirable:

Community facilities

• Community health centers or health care related projects serving low income clients

• Charter schools serving exclusively low-income students

Green-driven projects

• Solar

• Renewable energy

High impact economic development projects

• Job creation (substantially from within the community)

• Part of community redevelopment master plan

• LEED-certified

• Bringing new services to a low-income community a grocery store in a neighborhood that hasn't seen one in 20 years

a new or renovated building in a high distress CT that brings new business, services and jobs to the neighborhood.

Some of the projects that are qualified but FCLF will not do:

• museums;

• hotels;

• fast food restaurants

NMTC – FCLF Project Types


NMTC – Who is Involved


Above: KIPP School JacksonvilleBelow: Metropolitan Ministries MiraclePlace groundbreaking, Tampa

Borrower (QALICB)Significant benefits. Lower debt service coverage Higher LTVS Potential for equity

Allocatees (one or more Community Development Entities, or CDEs )Benefits: High Mission Impact Fee income

Investors (typically a bank)Benefits: > 39% federal tax credit > $10MM. $2.7MM investment yields

$3.9MM

NMTC – Who is Involved, continued

Upper Tier Lenders (borrower affiliates, banks, Community Development Financial Institutions, foundations, public entities)

Benefits:

most interest income flows to upper tier lenders

stronger LTV ratios

strong borrower repayment incentive

Attorneys (NMTC specialist, RE attorneys)

Accountant (Reznick or Novogradac accounting firms)

NMTC Consultant


Pictured: Camillus House, Miami

Miracle Place, before expansion


Pictured: MiraclePlace site, pre-construction

Housing Units Current Proposed Variance

Emergency 10 20 +10 100%

Transitional 34 79 +45 132%

Total 44 99 +55 125%

Current Proposed0

20

40

60

80

100

120

1020

34

79

44

99

Housing Units

EmergencyTransitionalTotal

MiraclePlace Proposed Expansion, Housing

Current Proposed0

100

200

300

400

500

600

700

800

98

211

26 48

218

467

342

726

Annual Residents

Families Single Women

Children Total

Current Proposed Variance

Families 98 211 +113 115%

Single Women 26 48 +22 85%

Children 218 467 +249 114%

Total Annual Residents 342 726 +384 112%

MiraclePlace Proposed Expansion, Annual Residents

View from Northeast (along N. Florida Avenue)

View from Northwest (E. Frances Avenue)

View from Southwest across campusand Reflection Garden

Before

NMTC

Closing

After

NMTC

Closing

Sources Available from Cash, Pledges, Grants, and Financing

$ 10,000,000 $10,000,000

New Net Equity from NMTC $ 3,600,000

Development Budget $ 13,214,992 $13,214,000

Funding Surplus / (Deficit) ($ 3,214,000) $ 386,000

Financial Impact of NMTC

Other Impacts of NMTC

Reduced construction interest costs due to significant project funding from cash rather than debt

Capital campaign focus shifted to future phases rather than focusing on completion of initial phase, building substantial momentum and community support

Broader exposure for our project

New partners in FCLF, Chase, Hancock Bank, and Enhanced Capital

Advantages of the NMTC Structure


Effective rates are typically below market for commercial loans of this type.

As a result of longer amortization or interest-only payments and typically lower rates, monthly payments are lower than for similar size conventional loans.

The “B” loan is often treated as up-front substitute for a portion of equity required by lenders, resulting in higher LTVs.

The equity conversion of the “B” loan means that most up-front equity becomes true equity at end of 7-year term.

The Good, The Bad, and The Ugly

Extremely valuable funding vehicle

Enormous time investment required to perform necessary due diligence, document production, and evaluation of documents

Very, very, complex process that requires multiple expert consultants to close transaction

Possible to handle in-house, but not recommended!

Challenges using the NMTC Structure


Whether longer amortization or interest-only payments, there is a balloon payment requirement at the end of 7 years; underwriting is for ability to refinance at that time.

Some inflexibility (e.g. project location restrictions, no prepayments, term is always 7 years, certain purposes not allowed, etc).

Program is very complicated and closings are time consuming; and there is a notable learning curve for first-time capital providers and borrowers.

High legal and accounting fees.

Project must be ready to go.

Generally, a new single purpose borrowing entity is required in order to reduce the significant reporting requirements during loan term.

In addition to loan guaranty, a Borrower or guarantor also provides indemnification for tax credit recapture events caused by borrower’s actions.

Is Closing Using NMTC Worth It?

Phase II – Next Steps K-5 Elementary School

Youth Enrichment Center for After-School Programs

Gymnasium and Assembly Hall to Enhance School and After School Programs

Florida Community Loan FundMetropolitan MinistriesContact InformationNelson Black, Director of Lending813.223.7400 Tampa

Cindy Ross, Community Development Loan Officer 813.223.7422 Tampa

Jim Walker, Community Development Loan Officer954.315.1746 Ft. Lauderdale

Valerie Williams, Community Development Loan Officer904.790.2785 Jacksonville

Susan Holtrey, Loan Portfolio Manager407.246.0846 Orlando

MAIN OFFICE: 501 NORTH MAGNOLIA AVENUE, SUITE 100

ORLANDO, FLORIDA 32801-1364PHONE 407.246.0846

www.fclf.org


Brian Evjen, VP, Strategic Planning and Analysis813.209.1227 Tampa

Tim Marks, President and Chief Operating Officer 813.209.1250 Tampa

Madelyn Cloninger, Director of Advancement 813.209.1235 Tampa

2301 NORTH TAMPA STREETTAMPA, FLORIDA 33602PHONE 813.209.1200

www.metromin.org

Nmtc, a case study fclf and miracle place

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