NMTC: Preparing for the Application Process

Presented by

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Sean ZielenbachPresident & NMTC Guru

sziels@comcast.net

SZ Consulting, LLC

Tabitha AtkinsVP, Community Development

Kahlil GrossNMTC Program Director

City First Bank of DC

Bill Dana President and CEO

Central Bank of Kansas City

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Should You Pursue a NMTC Allocation?

?

Yes

Maybe

N0

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Why do you want / need an allocation?

1. Do you have a significant number of NMTC-eligible businesses / projects that you currently cannot finance?

2. Could those businesses / projects handle debt with lower interest rates and more flexible terms? Are they financially viable entities

3. Would the availability of affordable, flexible financing make a meaningful difference for the businesses / projects?

4. Is the NMTC subsidy sufficient for you to be able to provide that flexible financing?

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What types of businesses / projects are you trying to finance?

1. Are they eligible for the NMTC program?

1. Operating Businesses

2. Commercial / Mixed-use Real Estate

3. Community Facilities

4. Infrastructure Development

2. Do they need large enough amounts of financing to take advantage of the NMTC program?

3. Do you have a sufficient pipeline of these un-bankable, yet financially viable deals?

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Can you access sufficient amounts of NMTC capital?

1.Equity from taxable investor

2.Leverage debt

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NMTC Leverage Model

CDE

Grants?

Leverage Debt Equity

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What are your sources of leverage debt?

1.Philanthropic grants / PRIs

2.Concessionary public debt

3.Concessionary private debt

4.Grants / sponsor equity

5.Market-rate debt

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Do you have the infrastructure to deal with NMTC?

1.Project sourcing / underwriting

2.Asset management

3.NMTC compliance

4.Community impact data tracking

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Do you have sufficient historical impact data?

1. Employment at financed companies / projects

• Number of Jobs

• Quality of Jobs (Wages paid, benefits offered)

• Availability of Jobs to Local / Low-Income Residents

• Construction & Permanent Positions

2. Effects of human services on clients (not just # of people organizations served)

3. Spillover economic impacts of projects

• To what extent have they stabilized the surrounding area and/or catalyzed further development?

• Have there been measurable changes in the community?

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Thinking through the 2015 NMTC Application

There are 5 sections:

• Business Strategy

• Community Impact

• Management & Financial Background

• Capitalization Strategy & Track Record

• Prior Awardee Performance

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Business Strategy: Financial Products

• What Products will you Offer? (Senior / Subordinated debt, equity, etc.)

• Why are these products necessary / what problem(s) will they solve?

• How are the proposed products different from what the bank currently offers?

Why does the bank need NMTCs to finance these deals?

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Business Strategy: Pipeline

Pipeline of prospective projects

• Should be realistic deals able to be closed within 9-24 months of application

• Need substantial pipeline (at least 2-3 times larger than amount of request)

• Size of deals important to consider

• How do you screen in/out projects?

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Business Strategy: Track Record

What is your Track record financing similar or related projects / companies?

Commercial real estate

Mixed-use real estate

Small business

Nonprofit facilities

Infrastructure

Housing

What is your Track record providing similar types of products?

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Community Impact: Selecting Projects

• Basic thresholds for inclusion in pipeline

• Criteria for selecting among qualified projects

• Social investment criteria

• Ranking projects

• Engaging key stakeholders

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Community Impacts: Direct Effects

Importance of documenting past & projected project impacts, such as

• Number and quality of jobs

• Involvement of local / low-income individuals

• Provision of quality goods & services in under-served markets

• Environmental remediation / improvement

• Increased access to healthy food

• Reduced blight

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Community Impacts: Spillover Effects

Importance of documenting borrowers’ ability to catalyze / augment additional investment

• New business development / expansion

• Improved infrastructure

• Residential development / rehabilitation

• Crime reduction

• Additional retail opportunities

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Best Practices from CDFI Banks

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City First Bank of DC

Assets of $241MM

Loans of $170MM

Deposits of $191MM

Staff of 38 full time employees

Single Branch: 1432 U Street

Wholly-owned by CFBanc Corporation with shareholdersincluding our non-profit holding company, banks, local university, government and socially responsibleinvestors

24.19% total equity, 43.90% Class A voting equity ofCFBanc Corporation, owned by City First Enterprises,

a 501(c)(3)

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City First Bank’s NMTC Track Record

City First has deployed $396MM in NMTC allocation authority over seven highly competitive rounds.

$38.00

$87.00

$51.77

$60.60 , 15%

$48.80

$94.83

$15.00

NMTC Portfolio Concentration

Affordable Housing

Charter Schools

Commercial Real Estate

Health Care Facilities

Performing Arts Centers

Social Service Providers

Grocery Stores

4%9%

6%

8%

1%

2%

70%

Geographic Distribution

Delaware

Maryland

Multi-state

Pennsylvania

South Carolina

Virginia

Washington, DC

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NMTC Best Practices from City First

• Assemble the BEST team possible

• Create a good compliance infrastructure – deals must be asset managed for seven years

• Understand your market and create a strong pipeline

• Create strong relationships with NMTC ecosystem and CDFI Fund and trade groups

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DC Prep Washington, DC

Asset Type: Charter School

Total Development Costs: $28.95MMCity First Bank Participation: $10MM QEI and $2MM leverage loanTotal QEIs Raised: $29MM

NMTC Investor: Bank of AmericaOther CDEs: Low Income Investment Fund (LIIF), Banc of America

CDE, and Telesis CDE Corporation

Direct Impacts:

• 200 new school seats (711 in total) for pre-school thru 8th grade

• 89% free and reduced lunch

• 115 construction jobs and 32 full time jobs

Purpose of NMTCs: Take-out financing for the renovation and expansion of DC Prep’s Benning Campus located in Ward 7 to include a modernized elementary school and a newly constructed middle school.

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Assets of $153 MM

Loans of $108 MM

Deposits of $129 MM

A Certified Community Development

Financial Institution (CDFI)

Staff of 54 full time employees

Single Branch: Kansas City, MO

Central Bank of Kansas City

Photo Credit: Dean Hochman

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CBKC NMTC Track Record

Central Bank of Kansas City has received $271MM in NMTC allocation authority over six highly competitive rounds.

10%

13%

11%

5%

13%3%3%

37%

4%

NMTC Portfolio Concentration

Social Service Providers

Industrial/Manufacturing

Grocery

Charter School

Hotel

Health Care

Small Businesses

Commercial Real-Estate

Mixed-Use

27.37%

57.61%

6.73%

3.65%0.15%

4.49%4.63%

Geographic Distribution

Kansas City, MO

St Louis, MO

Hazelwood, MO

Topeka, KS

Belleville, IL

Muti-Location, MO

Kansas City, KS

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NMTC Best Practices from CBKC

Assemble the BEST team possible• Considerations in deciding to hire

external consultants

Structuring consultant relationships • Outsourcing application writing and

servicing

• CBKC has final review and approval of application

Pipeline development

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Bissinger’s Handcrafted ChocolatierKansas City, MO

Asset Type: Commercial Real Estate

Project Cost: $16,250,000

Total NMTC Allocation $11,000,000

CBKC Allocation: $6,000,000

Partner CDE: City of St. Louis

Distress Criteria:

• 41.6% Poverty

• 34.6% AMI

• 2.11 x natural unemployment rate

Community Impacts:

• 256 sustained/created jobs

• 54 construction jobs

• 205 jobs accessible to LIPs and/or LICs

• $153.3MM direct Annual Economic Output

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Sean Zielenbach

(703) 465-0857

sziels@comcast.net

Questions?

Caitlin Krutsinger

(202) 689-8935 ext. 224

krutsingerc@pcgloanfund.org

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