NMTC - New
Markets Tax Credits...
If you are considering the
NMTC
("New Market Tax Credits")
program as a source of development
financing, there are some caveats and conditions that (all too frequently) make
the NMTC approach problematic, to say the least.
New Markets Tax Credits are authorized pursuant to Section
45 of the IRS Code. The original intent for the NMTC program was to
provide an incentive to developers and commercial real estate
development financiers to develop new commercial real estate projects in
blighted areas (called "qualified census tracts") where the median household income
was less than 50% of the area's
median household income. This means the incorporation of the New
Markets program is predicated not only on the type of project to be
developed (there are restrictions here) and the location of the
project. This means the first thing you need to do is undertake an
entitlement review of all of the local, state and federal investment
incentives the proposed project may be entitled to deploy.
Rainmaker Marketing Corporation is the consulting firm to turn to for completing this
process. The results can be shattering in terms of what may be
available. Sometimes there is nothing, but in many cases there is
the opportunity to utilize a variety of investment incentives to provide
for capital funding expenses at the pre-construction phase, construction
phase and/or permanent financing stage. These incentives can be
assigned so the incentive becomes - for all intents and purposes - an
annuity that can be discounted and sold off to qualified institutional
investors (banks, hedge funds and Fortune 500 companies) in exchange for
capital contributions.
And here's the part where you say
"wow"....
If the transaction is properly structured, you can
obtain the vast majority of the equity financing your project requires
without having to take any substantive equity dilution because these
investors are receiving their economic benefit not from the real estate
or future success of the resulting project operations, but from the
incentive. If you don't understand this, then you should pick up
the phone, call Rainmaker Marketing Corporation and demand this be explained in no uncertain
terms (and we are happy to do so).
