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Turning Your Tax Credits into Cash

Turning Your Tax Credits into Cash. Iped Tax Credits 101, October 16, 2008 Presenter: Gayle Manganello Ellis, PNC MultiFamily Capital. Initial Steps. Receive annual reservation of tax credits from the state, either through 9% or 4% application process

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Turning Your Tax Credits into Cash

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  1. Turning Your Tax Credits into Cash Iped Tax Credits 101, October 16, 2008 Presenter: Gayle Manganello Ellis, PNC MultiFamily Capital

  2. Initial Steps • Receive annual reservation of tax credits from the state, either through 9% or 4% application process • Look to Syndicator/Investor to purchase the credits for cash “Turning your Tax Credits into Cash,” Gayle Manganello Ellis, PNC MultiFamily Capital

  3. Syndicator/Investor Process • Forecast of Yield to investor based on Equity Price and Timing of Equity Pay-Ins • Issuance of Letter of Intent outlining Pricing and Terms • Underwriting of Proposed Investment by Syndicator/Investor • Third party market study, environmental review, expense analysis, insurance coverage and construction analysis • Review of experience, financials and previous performance of development team • Finalization of financing terms • Review of legal documents such as zoning, title, partnership formation, etc. • Execution of Partnership Agreement “Turning your Tax Credits into Cash,” Gayle Manganello Ellis, PNC MultiFamily Capital

  4. Syndicator/Investor Process (cont’d) • Closing/Admission of Syndicator/Investor • Commonly at construction start and simultaneously with construction loan closing “Turning your Tax Credits into Cash,” Gayle Manganello Ellis, PNC MultiFamily Capital

  5. What to Expect From Your Partner The Syndicator/Investor and the Letter of Intent • Assumptions • Assumptions for Timing of Closing, Construction Start, Construction Completion, Lease-up and Delivery of Benefits • Pricing • Will be paid in installments • Each installment will have it’s own conditions • Payment of Developer Fee • When and how much • Distribution of Cash Flow and Sales/Refinance Proceeds • Investor service fees • Deferred development fee • Incentive management fee/partnership management fee • Cash split “Turning your Tax Credits into Cash,” Gayle Manganello Ellis, PNC MultiFamily Capital

  6. What to Expect From Your Partner (cont’d) The Syndicator/Investor and the Letter of Intent • Sale Refinance • After Year 15 Syndicator/Investor will want to have its interest sold or to have the partnership sold • General Obligations • Construction completion/stabilization • Operating deficits • Appropriations/retenanting risk • Tax credit adjusters • Repurchase • Reporting “Turning your Tax Credits into Cash,” Gayle Manganello Ellis, PNC MultiFamily Capital

  7. CONCLUSION • It is never too early to begin discussing intended developments with a Syndicator/Investor • Be sure your assumptions are in line with those of the Syndicator/Investor’s • Be aware of your obligations • Maintain good communication with your Syndicator/Investor “Turning your Tax Credits into Cash,” Gayle Manganello Ellis, PNC MultiFamily Capital

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