Crescent Growth Capital, LLC

Structuring project financing to incorporate tax credit equity.

CDEs

Louisiana CDEs predominate in latest NMTC allocation round

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The Times-Picayune, February 25, 2011

Eight Louisiana community development entities — seven headquartered in New Orleans — won nearly 10 percent of all the New Markets Tax Credits allocations announced Thursday by the Treasury Department.

The awards are intended to stimulate economic and community development and job creation in low-income communities by permitting the selected financial institutions to make loans and investment they might not otherwise be able to make.

The $310 million awarded to the eight Louisiana institutions just about equals the $316 million allocated to nine CDEs in New York City, the other biggest beneficiary.

“The New Markets Tax Credit continues to be a tool for job-creation and economic revitalization in areas that struggle to attract investment because of poverty, unemployment and lack of opportunity,” said Donna Gambrell, director of the Treasury’s Community Development Financial Institutions Fund, noting that the 2nd Congressional District’s total of $257 million was more than that being directed to any other district in the nation.

“These organizations have and will continue to demonstrate why this tool has been so effective in making literally thousands of projects possible across Louisiana and the country and give Americans a chance to make a living, to start a business and to build a better future in areas that need it most,” Gambrell said.

The allocations for the seven recipients headquartered in New Orleans are $56 million for Advantage Capital Community Development Fund; $53 million for Whitney New Markets Fund; $42 million for AMCREF Community Capital; $35 million for Liberty Financial Services; $28 million for National Cities Fund; $28 million for First NBC Community Development Fund; and $15 million for Enhanced Community Development. The eighth recipient, of $53 million, is Stonehenge Community Development, based in Baton Rouge.

“The fact that our community has the highest amount of awards in the entire nation illustrates that we’re getting it right,” said Rep. Cedric Richmond, D-New Orleans. “The 2nd Congressional District of Louisiana has the right formula for venture capitalist investment in low-income communities. We’re making great investments to rebuild our city and get our neighbors back on the jobs, and it’s working.”

Sen. Mary Landrieu, D-La., said the “tax credits will have a significant impact in several Louisiana neighborhoods in desperate need of investment.”

The Louisiana community development entities — a legal term describing an institution whose prime mission, and accountability, is to low-income communities — have been helped in their efforts in past years by a companion state version of the credit, the enactment of which was a top achievement of Richmond’s service in the state Legislature.

That state allocation has now been exhausted.

The New Orleans entities, most of which received awards in past rounds, also benefited in the past from the expansion of the program under the Hurricane Katrina Gulf Opportunity Zone Act, which targeted recovery efforts after the storm.

Advantage Capital, which seeks to bring venture capital where it seldom goes, has won awards in seven of the eight rounds. While the use of the tax credits by Advantage, like the others, is not limited to Louisiana, managing director Michael Johnson said that “in the neighborhood of 25 to 30 percent of our allocations have been in Louisiana, focused primarily on south Louisiana.”

Alden McDonald, Liberty’s president and CEO, said that it had received $130 million in previous allocations, which had been used almost exclusively in the New Orleans metro area post-Katrina to help rebuild Holy Cross High School as well as bring back a hotel, a funeral home, an animal hospital and other small businesses. He said the new allocation may also go to spur projects in Kansas City, Mo.; Jackson, Miss.; Baton Rouge; and Detroit, as well as New Orleans, where he said one likely project is the renovation of the Saenger Theater on Canal Street.

AMCREF Community Capital, which has been receiving the credits since 2006, will focus its new allocation on renewable energy and green manufacturing, according to its president, Cliff Kenwood.

Crescent Growth Capital closes books on first calendar year; over $180 million in tax credit financings during the course of 2009

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Capping off its first calendar year of operations, Crescent Growth Capital closed seven transactions in December 2009, representing $95 million of New Markets Tax Credits financings. These end-of-year transactions, executed on behalf of entities in both Texas and Louisiana, brought CGC’s full-year total to over $180 million of tax credit financings.

“We feel fortunate to have had the opportunity to execute tax credit equity transactions on behalf of so many worthy entities this past year,” remarked Managing Director Eric Finley. “That we’ve been able to decisively contribute to helping realize better health outcomes, improved educational opportunities, and more effective social service delivery says a lot for the skills deployed by my colleagues, our consultants and the other parties to these complicated transactions.”

“Closing New Markets financings requires long-term collaboration across disciplines, and the flexibility to bend first one way, then another in the interests of getting across the finish line,” added Director Ryan Kenter. “Make no mistake, it’s a challenging business – but it’s truly fulfilling work.”

For more information, visit www.crescentgrowthcapital.com

A Program that Works: New Markets Tax Credits

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Gambit, February 9, 2009

Of all the government programs helping south Louisiana recover from Hurricane Katrina, one of the most effective has to be New Markets Tax Credits (NMTCs).  Originally designed to spur private investment in economically distressed areas, the NMTC program was expanded under GO Zone legislation to include hurricane-damaged areas.

Since then, dozens of private projects representing more than $1 billion in investments have gone forward in the New Orleans area — thanks to state and federal NMTCs and participation by area banks and qualified nonprofits.  In fact, NMTCs represent one of the few areas in which Louisiana outpaced Mississippi in post-K recovery programs.

The only thing “wrong” with NMTCs is that more state and federal dollars aren’t dedicated to them.  Hopefully, that will change.

Even in these difficult economic times, NMTCs continue to generate private equity investments — more than $1 billion nationally in the past six months alone.  Since the program’s inception, NMTCs have spurred more than $12 billion in equity investments nationally.

The list of local projects made possible by NMTCs is impressive — and this is just a partial list:

– Expansion of the National World War II Museum to include a theater, a $60 million total project.

– Permanent funding for the Convention Center Marriott Hotel, which kept the hotel open after Katrina and saved more than 140 jobs.

– Ochsner/Baptist Medical Center, which reopened after Katrina and brought back more than 1,350 permanent jobs.

NMTCs work and are popular among conservatives because they are not a government giveaway.  Typically, NMTCs represent the “last dollar” in a private deal, not the first.  The tax credits thus help “close” a lot of quality projects that otherwise might not go forward.  In fact, every $1 of federal tax revenue foregone via NMTCs induces, on average, more than $14 in private investment in low-income or storm-damaged communities.

Not all projects qualify, and less than 25 percent of all community development entity (CDE) applicants receive allocations of tax credits. Allocation of NMTCs by CDEs is competitive, and CDEs look for projects with the highest likelihood of success.

Here’s how the program works:

When a for-profit or nonprofit CDE makes an equity investment in a qualified private business endeavor, that equity investment gets favorable tax treatment in the form of tax credits granted over a multi-year “compliance” period.  The credits are then sold to provide “up front” equity in the chosen project.  During the compliance period, the federal and state governments make sure the program’s standards are met, including the mission of serving an economically distressed area.  CDEs that participate in the tax credit program can go back for more credits each year — but only if they can show their past investments are working.  Thus, the program rewards the private sector for doing what it knows best how to do, and it gets government out of the business of trying to do something it knows nothing about (i.e., deciding which businesses are good investments).

When he first came into office last year, Gov. Bobby Jindal recognized the value of state NMTCs and got lawmakers to put $25 million into the program for 2008.  Unfortunately, only $12.5 million was dedicated to state NMTCs in 2009 and again in 2010.  The program is so successful that all $12.5 million of this year’s credits were allocated in less than a week.  Clearly, this program needs more funding — and soon.

On a national level, the post-Katrina template needs to be expanded so that all federal disaster areas qualify for NMTCs for at least six years after disasters are declared.  It often takes that long for good projects to get going after a disaster.

Hopefully, it won’t take that long for the governor and the new president to recognize a government program that works — and to pump more resources into it.

Crescent Growth Capital opens its doors with New Orleans, Dallas locations

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Crescent Growth Capital, LLC is pleased to announce its debut last month as a skilled provider of financial advisory services for tax credit financing. Its four principals, Eric Finley, Ryan Kenter, Ray Rabalais and Troy Villafarra, possess a combined total of more than sixty years of banking experience coupled with a particular expertise in structuring transactions involving the use of New Markets Tax Credits.

“Since 2005, my colleagues and I have collaborated to close over $380 million of New Markets Tax Credit financings. We anticipate our new venture helping to further broaden the successful application of this comparatively recently-established federal government tax credit program, which has already generated several billion dollars of investment in America’s most severely disadvantaged communities,” stated Managing Director Ray Rabalais.

Crescent Growth Capital encourages project sponsors, community development entities, banks, and potential tax credit investors to contact its principals to learn more about the benefit they may derive from tax credit equity.

For more information, visit www.crescentgrowthcapital.com

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