Friday, October 30, 2009

Forest City gets $55M in federal tax credits (corrected), but they're not for arena bonds

Forest City Community Development Entity, LLC, a Brooklyn-based subsidiary of Cleveland-based Forest City Enterprises, has been awarded $55 million in federal tax credits for "real estate retail development projects located in highly distressed low-income communities." (See pages 7 and 72 of this PDF.)

Do the tax credits "seem to be for Atlantic Yards," as Develop Don't Destroy Brooklyn suggests?

Yes.

Updated: While I initially wrote that I doubted that the credits would be predominantly used for AY, Empire State Development Corporation (ESDC) spokeswoman Elizabeth Mitchell confirms that the description below is "a summary of the State's agreement to allocate $55 million of State bond volume capital to the Atlantic Yards project. It is not the State providing money – rather it is the State allowing some of the capital for this project."

(The state only has a limited amount of "volume cap" for tax-exempt funding. It's unclear whether the bonds would be used for the arena, for housing, or associated retail.)


Updated November 2: Empire State Development Corporation (ESDC) spokeswoman Elizabeth Mitchell offers a correction:
ESDC is making $55M worth of bond volume capital available. It was merely a coincidence that this was the amount allocated to Forest City Community Development Entity, LLC from the federal Community Development Financial Institutions Fund. The $55M of federal New Markets Tax Credit Allocation are entirely unrelated to the Arena bonds.

Other projects eligible?

While Atlantic Yards--as DDDB notes--may be Forest City's only new project, it's not like other projects aren't ongoing, such as East River Plaza. Hence the mention of New Mexico, home of the ongoing Mesa del Sol project, or so I thought.

Then again, wouldn't it be tough to argue that Atlantic Yards--unlike, say, East River Plaza--would be located in a "highly distressed low-income communit[y]"?

I've asked the ESDC how exactly AY qualifies. (Remember, $1217/sf condos in 2015!)

Tax credit program

More than 90 organizations are gaining $5 billion in tax credits, according to a press release from the Treasury Department. The official description:
The New Markets Tax Credit (NMTC) Program is intended to spur the investment of private sector capital into low-income areas by permitting taxpayers to receive a credit against Federal income taxes for making qualified equity investments (QEIs) in designated Community Development Entities (CDEs).
The credit provided to the investor totals 39 percent of the investment in a CDE and is claimed over a seven-year credit allowance period.
The Forest City tax credit
Forest City Community Development Entity, LLC
Controlling Entity Name: Forest City Enterprises, Inc.
Headquarters (city, state): Brooklyn, NY
Allocation Amount: $55,000,000
Principal Financing Activity: Real estate financing: retail
Profile: Forest City Community Development Entity, LLC’s (“Forest City”) business strategy is to provide financing for real estate retail development projects located in highly distressed low-income communities. Forest City will make qualified low-income community investments which will either 1) increase the community impact of new investments by incorporating additional local, social service, and community-specific businesses at below-market rents; or 2) support investments of a scale which will initiate neighborhood revitalization. Forest City intends to offer gap filling equity investments and/or subordinate debt facilities exhibiting favorable characteristics, such as below-market interest rates, greater than market loan-to-cost ratios, and low upfront fees.
Service Area: Multi-State [Connecticut, District of Columbia, New Jersey, New Mexico, New York, Pennsylvania]
Percentage of major urban vs. minor urban vs. rural:
Major Urban: 95%
Minor Urban: 5%
Rural: 0%
Percentage of required activities in non-metropolitan areas: 0%
Contact Person:
Matthew L. Messinger, (718) 923-8404, mmessinger@fcrc.com

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