New Markets Tax Credits

Presentation to National Association of Local Housing Finance Agencies

By Tyrone Rachal, Invest Atlanta

Our Vision is to make Atlanta the most economically dynamic and competitive city

in the world.

2

New Markets Tax CreditsBackground

• Enacted by Congress in 2000 to drive private sector investment to urban and rural communities with high rates of poverty and unemployment

• NMTC uses the incentive of a federal tax credit equal to 39% of an investment over a seven year period– 5% tax credit in years 1-3– 6% tax credit in years 4-7

• NMTC’s are delivered by Treasury-certified Community Development Entities, who compete for NMTC Allocation Authority

New Markets Tax CreditsHow It Works

• Community Development Entities awarded NMTC Allocation provide loans to developers and businesses with non-traditional terms– Debt with below market interest rates– Longer than standard interest-only loan payments– Longer than standard amortization periods– Higher than standard loan to value ratios

Eligible Uses: Commercial, Industrial, Manufacturing, For-Sale Housing and Mixed-Use

Not Eligible: 100% Rental Housing, “Sin” Businesses

New Markets Tax CreditsGuidelines for Mixed-Use Projects with Housing

Minimum Requirement Industry Standard

Housing income restrictions are not required but encouraged for NMTC projects.Typically at least 20% affordable to persons earning 80% area median income

New Markets Tax CreditsProgram Activity

Year NMTC Allocation Awards

2009 $5.0 billion 99

2010 $3.5 billion 99

2011 $3.6 billion 70

2012 $3.5 billion To be determined

2013 $3.5 billion To be determined

NMTC Investments($ in billions)

New Markets Tax Credits Atlanta’s Eligible Areas for NMTC Investments

Atlanta Emerging Markets, Inc.Invest Atlanta’s Community Development Entity

NMTC Investments

Aerotropolis $30 million

200 Peachtree $12 million

GA Aquarium $25 million

Civil Rights Ctr $13 million

$80 million

NMTC Allocations

2007 $60 million

2008 $20 million

Total $80 million

New Markets Tax Credit TransactionAerotropolis Atlanta

• $30 million mezzanine loan for $96 million project in May 2009• Acquisition, demolition and remediation of 122-acre Ford auto plant • Largest Brownfield project in Georgia, paved way for redevelopment• 400 annual permanent jobs estimated• Tax Credit Investor: Capmark Finance

New Markets Tax Credit Transaction200 Peachtree – Macy’s Building Redevelopment

• $12 million mezzanine loan for $45 million project in July 2010• Conversion of historic Macy’s building into special event center • Includes restaurants, banquet hall, meeting rooms, business incubator• 623 annual permanent jobs created• Tax Credit Investor: Fifth Third Bank

New Markets Tax Credit TransactionGeorgia Aquarium Expansion

• CDE: Atlanta Emerging Markets, Inc.• $25 million mezzanine loan for $120 million project in December 2010• Expansion and renovation of aquarium exhibits and facility • Includes new dolphin exhibit, space for educational programs• 478 annual permanent jobs created• Tax Credit Investor: Wells Fargo Bank

New Markets Tax Credit Transaction National Center for Civil and Human Rights

• CDE: Atlanta Emerging Markets, Inc.• $13 million NMTC loan for $65 million project in January 2013• New 42,000 square foot facility for exhibit and conference space • Leverages $32 million in fundraising• Creates 300 permanent jobs• Tax Credit Investor: PNC Financial Services

Project receives 7-year loan with interest-only payments

Portion of loan converts to a grant at end of loan term.

Debt: Bank Loan or Charitable Contributions

Equity: Tax Credit Investor Contribution

CDE and Leverage Investment Fund

Common NMTC Deal StructureCombination of Debt and Equity

New Markets Tax CreditsSample $10 Million NMTC Transaction

NMTCInvestor (100%)

Leverage FundLLC

CDE

PROJECT / QALICB

CDFI Fund(Department of Treasury)

$7.2 million loan @ 6% interest

$2.8 million Equity

NMTC $3.9 million

Tax credit price = 72 cents

$10 million Equity (generates NMTC) Certification

of CDE

Allocation of NMTC credits

$7.2 million A Loan @ 6% interest

Lender

ManagingMember (0.01%)

$2.3 million B Loan @ 1% interest

$500,000 Sponsor Fee

99.99% CDE member

Collateral: pledge of 99.99% CDE membership

7 year forbearance

New Markets Tax CreditsKey Considerations

• Ideal Deal Size ($8 million and up)

• Transaction Costs

• Community Impacts (e.g. Job Creation, Services)

• NMTC can Leverage Grants, Donations and Equity

• Federal Program Seeks Reauthorization in Dec 2013

Atlanta Emerging Markets, Inc.Contacts

• Tyrone Rachal, President– 404.614.8339– trachal@investatlanta.com

• Dale Royal, Vice President– 404.614.8336– droyal@investatlanta.com

For more information, visit our website:www.InvestAtlanta.com