EB-5 AND NMTC ALTERNATIVE FUNDING SOURCES

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					           EB-5 PROGRAM
 PROGRAM WAS CREATED BY CONGRESS IN 1990 – IT IS
  MANAGED BY USCIS
 INTENT IS TO ATTRACT FOREIGN INVESTOR CAPITAL TO
  PROJECTS THAT CREATE JOBS (10 JOBS PER INVESTOR)
 UPON JOBS BEING CREATED, THE INVESTOR RECEIVES
  THEIR CITIZENSHIP – MEASURED AT THE SECOND YEAR
 ATTRACTION TO PROJECT IS TO HAVE LOWER COST OF
  CAPITAL (150-175 BPS)
 GIVEN THE STATE OF CURRENT CAPITAL MARKETS, EB5
  FUNDING HAS EXPERIENCED RENEWED INTEREST
           EB-5 PROGRAM

 THREE COMPONENTS FOR EB-5 FINANCING:


   REGIONAL CENTER

   QUALIFIED PROJECT


   INVESTORS
            EB-5 PROGRAM

• PROS –
  • LOWER COST OF CAPITAL
  • JOB CREATION THROUGH INVESTMENT
  • ATTRACTS CAPITAL TO US WHILE OUR CAPITAL MARKETS ARE
    STILL NOT FUNCTIONING NORMALLY

  • CONS –
  • TIME FRAME FOR FUNDING – 8-12 MONTHS
  • GOVERNMENT PROGRAM
         EB5 PROGRAM
EXAMPLE DEALS
  HOTEL - $6.8M EB5 LOAN – 140 JOBS –
  INTEREST RATE = 4.5% FIXED FOR 5 YEARS
     SAVES OVER $325,000 IN INTEREST *
  TECH COMPANY - $12M EB5 LOAN –
  240 JOBS – INTEREST RATE = 4.5%
  FIXED FOR 5 YEARS
      SAVES OVER $600,000 IN INTEREST *

     * BASED ON A MARKET INTEREST RATE OF 6%
         NMTC PROGRAM

 PURPOSE OF NMTC PROGRAM


   PROGRAM WAS CREATED IN 2000 TO PROMOTE
    COMMERCIAL DEVELOPMENT IN QUALIFIED CENSUS
    TRACTS (QCT) THAT OTHERWISE WOULD NOT HAVE
    HAPPENED

   OVER $29B HAS BEEN ALLOCATED TO CDE’S IN THE FORM
    OF NMTC
         NMTC PROGRAM

 THE COMMUNITY DEVELOPMENT FINANCIAL
  INSTITUTIONS FUND ALLOCATES THE NMTC TO
  COMMUNITY DEVELOPMENT ENTITIES (CDE)


 THE CDE THEN ALLOCATES AN AMOUNT OF NMTC TO A
  QUALIFIED PROJECT


 THE FINANCING IS A 7 YEAR INTEREST ONLY LOAN
       NMTC PROGRAM

 NMTC IS MONETIZED THROUGH SALE TO AN INVESTOR
  (TYPICALLY INSTITUTIONAL) AND THE EQUITY IS
  INVESTED INTO THE PROJECT


 THE NET CASH VALUE OF THE CREDIT IS
  APPROXIMATELY 20% –
   $10M DEAL COULD GENERATE $2M IN EQUITY
   THERE ARE TWO NOTES – “A” AND “B”
           NMTC PROGRAM

 PROS –
  • RAISES ADDITIONAL EQUITY FOR PROJECTS – BETTER
    LTV/LTC
  • ENCOURAGES INVESTMENT IN CHALLENGING AREAS

  • CONS –
   COMPLICATED PROGRAM – MANY STAKEHOLDERS –
    CDE, CREDIT INVESTOR, QALICB, LEVERAGED LENDER,
    SUB-CDE
   TAX CREDIT VALUE IS LOW – SMALL PROJECT SIZE IS
    INEFFICIENT
        NMTC PROGRAM
 EXAMPLE DEAL
  QALICB - $10M QEI
  CDE - $10M NMTC ALLOCATED TO QALICB
  CREDIT INVESTOR – CONTRIBUTES $2M CASH FROM
   PURCHASE OF NMTC ALLOCATED TO QALICB (“B” NOTE)
  LEVERAGED LENDER – MAKES $8M LOAN TO QALICB
   THROUGH SUB-CDE (“A” NOTE)
  SINKING FUND IS APPLIED AGAINS T “A” NOTE
  AT END OF LOAN (YEAR 7), NONE, SOME OR ALL OF “B”
   NOTE IS FORGIVEN BASED ON LOAN DOCS
NMTC PROGRAM




          SOURCE: NOVOGRADAC & CO
FOR MORE INFORMATION
   PLEASE CONTACT:
    EDWARD KILEEN

PEAK DEVELOPMENT PARTNERS

      970-403-5096

				
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posted:11/16/2011
language:English
pages:12