New Markets Tax Credit Application, Management and Structuring for Community Facilities
SB Friedman Development Advisors (SB Friedman) assisted the City of Chicago in creating a subsidiary entity, Chicago Development Fund (CDF), and applying for a competitive federal allocation of New Markets Tax Credits from the U.S. Treasury. We served as lead author of CDF’s successful applications during the Fourth, Seventh and Eighth Allocation Rounds, obtaining total allocations of $173 million. SB Friedman has subsequently assisted CDF with the management, deployment and ongoing servicing/asset management of this tax credit pool. Representative projects for community facilities are described in further detail below.
PCC Community Wellness Center
In August 2010, SB Friedman managed CDF’s participation in the provision of $6.5 million in New Markets Tax Credits (NMTC) financing to PCC Wellness Center (PCC), a non-profit organization and operator of multiple federally qualified health centers located in Chicago’s West Side and near western suburbs. PCC had recently completed construction of an 18,300 square foot health clinic in the Austin Community Area, which replaced an outdated facility. CDF was able to provide permanent financing that allowed PCC to take out its existing construction loan.
The new LEED-Silver certified Austin Family Health Center serves approximately 10,000 patients per year, which is 2.5 times as many patients as the previous facility accommodated. The facility is able to provide comprehensive, outpatient primary health care including behavioral health offices and counseling rooms, community meeting rooms, a dental suite, WIC offices, and space for a future pharmacy. SB Friedman led the development of the financing structure, which included NMTC equity provided by JPMorgan Chase. In addition, the City of Chicago provided a land write-down for site acquisition costs.
Homan Powerhouse High School
SB Friedman managed CDF’s participation in the provision of $49 million in financing to the Homan Powerhouse High School, a charter high school in Chicago’s disinvested North Lawndale neighborhood. This facility, operated by the Henry Ford Learning Institute, will enroll roughly 480 students and return an important historic structure to productive use. Its curriculum focuses on science and “green” technology, and the building itself is targeted for LEED-Gold certification.
SB Friedman assisted with deal structuring, negotiation with NMTC investors, review of legal documentation, and closing the transaction. This dual-CDE transaction with U.S. Bank CDE provided a total NMTC allocation of $22 million to the project and leveraged $11.3 million in federal Historic Tax Credit equity. The non-profit Homan Arthington Foundation was also a provider of leverage sources for the deal, allowing the transaction to close entirely with non-traditional leverage sources. The building is currently open.
Gary Comer College Prep High School
SB Friedman managed CDF’s structuring, underwriting and closing of a $24.5 million New Markets Tax Credit-funded charter high school project in Chicago’s disinvested Greater Grand Crossing neighborhood. This facility, which is one of nine campuses comprising the Noble Street Charter School, will have a total enrollment of approximately 600 students. The project will be adjacent to the existing Gary Comer Youth Center, which is owned and operated by the Comer Science and Education Foundation. Students of GCCPHS will have access to the Youth Center’s gymnasium, theater, computer labs, cafeteria, and locker rooms. The building is LEED-Silver certified.
SB Friedman assisted the project sponsors in a multi-bank search for the optimal provider of capital for the project, settling on Northern Trust, a new participant in the NMTC program. SB Friedman subsequently managed the closing process for CDF. The transaction incorporates senior debt and tax credit equity from Northern Trust, and subordinate debt from a foundation. The project financing closed in June 2009, and the school opened in time for the 2010-2011 academic year.
Christ the King College Prep School
SB Friedman managed Chicago Development Fund’s structuring, underwriting and closing of a $35 million New Markets Tax Credit-funded charter high school project in the Austin neighborhood of Chicago. This 100,000 square foot facility will provide a much-needed new education resource to the Austin neighborhood on Chicago’s West Side—the largest and one of the most economically distressed in the City. The 600-student facility will operate on the “Cristo Rey” model, which has already been implemented in another Chicago school. Under this program, every student is matched to an internship, which in turn allows students to earn 75 percent of their tuition while providing them with valuable work experience.
The project financing closed in May 2009, and the building was completed in January 2010.
Greater West Town Community Career Training and Economic Development Center
SB Friedman managed CDF’s structuring, underwriting and closing of a $10 million, 62,000-square-foot New Markets Tax Credit-funded multi-use training center project in the West Town neighborhood of Chicago. This project will allow consolidation and expansion of the Greater West Town Community Development Project’s existing training programs, including a 165-student charter high school that offers vocational career training in the transportation/warehousing/logistics field for students that have previously dropped out of the Chicago Public School system. In addition, the center will include a 75 percent expanded adult vocational training program serving 180 students and teaching skilled carpentry and shipping/receiving skills, a 23,000-square-foot industrial incubator for state-of-the-art woodworking companies, and a 165-student vocational career training program for high school-age students in the transportation/warehousing/ logistics field.
The building, a converted former envelope factory on the West Side of Chicago, is being renovated to a LEED certification standard. SB Friedman led the development of the innovative financing structure, which included Tax Increment Financing (TIF) from the City of Chicago, bank debt from Harris Bank, and both federal and State of Illinois New Markets Tax Credit equity from JPMorgan Chase. SB Friedman also wrote the application to the State of Illinois that secured state NMTC allocation for the project. The transaction closed in September of 2009, and the facility was completed in the October 2010. This project was honored by Treasury Secretary Geithner with a press conference for NMTC award announcements in October 2009.