Tax credits play an important role in the financing and development of affordable housing, historic preservation and renewable energy projects, as well as commercial and mixed-use real estate in low income communities. As a result of our extensive experience, GHJ understands how tax credits can be used in conjunction with tax-exempt bond transactions to maximize the subsidies for any given project.
In housing finance, GHJ has assumed a leadership role in a variety of innovative housing structures, involving Section 501(c)(3) transactions for non-profit housing sponsors and governmental housing bonds.
- Leveraging Historic Tax Credits for Economic Development. In January 2015, GHJ represented a major hotel developer who sought to amend Georgia law regarding the value of state Historic Tax Credits for commercial projects. GHJ drafted legislation, worked with the state’s legislative counsel to revise drafts, testified before the Georgia State House of Representatives Ways and Means Committee and ultimately assisted the client in its successful effort to increase the state Historic Tax Credit from $300,000 to $5 million. On November 22, 2016, the developer closed on over $200 million in financing to include equity derived from state and federal Historic Tax Credits, state employment tax credits, owner contributions, conventional debt and a taxable revenue bond for the parking structure (a transaction in which GHJ served as disclosure counsel to the issuer). The project will enable the conversion of a massive abandoned power plant on the Savannah River into a hotel, entertainment, dining and retail venue that will create over 500 jobs in a distressed community.
- Bridge Financing for Tax-Credit Properties. Since its enactment in 1986, the Low Income Housing Tax Credit (LIHTC) has been used in the development of over 90% of the multifamily residential properties placed in service. One persistent problem with use of the LIHTC, however, has been the need to identify “bridge” financing, the up-front construction financing needed to complete the project prior to the time when all the equity payments have been made by the limited partner which is purchasing the tax credits. Working with its clients, GHJ developed a structure to provide bridge financing by introduction of a second series of bonds, the repayment of which is tied directly to the scheduled pay-in of the tax credit equity. The creation of this new tool solved several problems. First, it eliminated the need for a second bridge lender and all the attendant requirements of an additional closing. Second, it lowered the cost of the bridge financing, as interest would be paid at a tax-exempt rate. This tool has now become commonplace in the tax credit market.
- Leveraging New Markets Tax Credits. In December 2015 and January 2016, GHJ served as counsel to a certified Community Development Entity in connection with its qualified low-income community investments (QLICIs) in two Boys and Girls Clubs in distressed communities in New Jersey. In each $10+ million transaction, equity from New Markets Tax Credit (NMTC) investors was leveraged with debt from conventional sources and capital campaign funds from the borrowers to create a special loan fund that offered the borrower below-market financing to rehabilitate and expand community facilities serving at-risk youth.
- Green Energy. In December 2015, GHJ represented a Community Development Entity in connection with a qualified low-income community investment in an innovative “green energy” facility in rural North Carolina. The $15 million facility, connected to a large poultry processing operation, converts poultry waste into energy used to power the processing plant. This innovative project was also made possible using the leverage structure described above, with debt financing from the project sponsor and conventional sources.
- Tax-Exempt Construction Financing for Single Family Homes. Beginning in 1986, Sherman Golden created the Affordable Home Ownership Program (AHOP) for both the City of Atlanta and Fulton County, Georgia. The AHOP program involves the issuance of five-year tax-exempt revenue construction notes, the proceeds of which were used to finance the construction of new single-family homes, at a savings of approximately $3,000 per unit in interest carry during construction. The program also involves the use of single-family mortgage bonds to provide permanent financing to the individual homebuyer. The AHOP program has been used to create mixed-income residential housing subdivisions that have been widely acclaimed.
- Summerhill (Atlanta) Neighborhood Bond Program. More recently, the firm served as bond counsel in connection with a financing plan to build up to 300 units of affordable housing using the AHOP model, Section 108 loan guarantees, tax abatements and down payment assistance.