Our Process
Many projects qualify for New Markets Tax Credit financing, but – due to the competitive nature of sourcing NMTC allocation – far fewer succeed at incorporating them into a financial closing. Crescent’s principals have spent the last twenty years cultivating relationships with Community Development Entities. CDEs trust us to show them only projects possessing enough of a community benefit to justify an NMTC allocation.
For federal and state historic tax credits, Crescent combines in-house historic preservation consulting undertaken on a contingent fee basis with sophisticated financial modeling capabilities and deep knowledge of the tax credit marketplace. We both qualify a client’s project for historic tax credits and precisely model its capital stack to illustrate the anticipated bottom-line subsidy.
Phase I: Concept Development
The Concept Development phase first requires that the client secure sufficient advance funding commitments for a project such that only a funding gap feasibly plugged by tax credit equity remains. Once sufficient non-tax credit funding sources have been identified, Crescent will model the incorporation of tax credit equity into the project’s financing.
Tax credit equity can fund from 10% of a project’s total cost to almost one-half – depending upon project size and the types of tax credits for which the contemplated project is eligible – but this equity is best viewed as the “last dollar” added to a project’s capital stack. The use of tax credit financing can significantly improve the project’s return and reduce the fundraising requirement, but tax credit equity usually cannot, by itself, transform an unrealistic project into a feasible one – nor can it be definitively locked down until the rest of the capital stack is well baked.
During Concept Development, Crescent Growth Capital assists its clients by determining whether and what kind of tax credits can be employed. Crescent will also model the proposed financing, to demonstrate how the project’s various funding sources will be woven into one capital stack realized upon project financial closing, and to quantify an estimated net benefit that the project may derive through the use of tax credit equity.
Should the project be suited for historic tax credits, Crescent will prepare a nomination to the National Register and/or submit Historic Preservation Certification Applications, to secure a project’s eligibility for historic tax credit equity.
If the contemplated financing will employ New Markets Tax Credits, Crescent will market the transaction to potential Community Development Entities (“CDEs”), help secure tax credit investors and/or buyers and will generate models depicting cash flows to and from all parties to the transaction.
Though the securing of a project’s primary funding sources – as distinct from tax credit equity – is typically not Crescent Growth Capital’s role, Crescent’s principals are willing to assist project sponsors by preparing descriptive documentation for presentation to investors and lenders. CGC also stands ready to accompany project sponsors to underwriting meetings with investors and lenders, to help these parties better comprehend the contemplated tax credit financing, or use of tax credit equity.
Crescent Growth Capital has repeatedly employed federal and state New Markets Tax Credits as well as federal and state historic tax credits, singly or in combination, to help finance projects on behalf of its clients. These projects have often utilized other non-traditional funding sources as well, such as HUD Community Development Block Grants (“CDBG”) and FEMA dollars.
Phase II: Financial Closing
With the completion of Concept Development and the modeling of a fully-funded capital stack, a project can achieve Financial Closing in as little as 60 days, depending upon project preparedness. Once primary funding sources have been identified and parties to the contemplated transaction are broadly comfortable with its proposed structure, Crescent Growth Capital will lead the closing process until financial closing is accomplished.
In the course of the closing process, Crescent Growth Capital will also advise on transaction term sheets and will coordinate and supervise legal documentation via detailed closing checklists and will prepare, if necessary, Flow of Funds memoranda, to instruct the parties to a transaction as to which accounts funds will be directed, and in what sequence, to effect the financial closing of a transaction.
Only upon financial closing/tax credit monetization, and as part of the flow of funds, will Crescent collect payment for its services, in the form of an Arranger Fee.