New Markets Tax Credits

St. Margaret’s Daughters Home

September 8, 2011 by

Mercy Hospital New Orleans was founded in 1924 and relocated to the Mid-City neighborhood in 1953 (pictured above is the original main facade of the 1953 hospital building). For over fifty years this facility was a principal institutional actor and employment center within both the Museum-City Park Cultural District and the Mid-City National Register Historic District.

Subsequent to the Katrina-induced levee failures in 2005, Tenet Healthcare – which had been operating the facility as Lindy Boggs Medical Center – opted not to reopen it.

In 2007, a demolition permit was secured by the hospital’s new owners; however, their plans for a mixed-use town center stalled. Three years later, in May of 2010, Crescent Growth Capital arranged an NMTC financing on behalf of St. Margaret’s Daughters Home to purchase the entire blighted, abandoned facility.

The redevelopment of the former Mercy Hospital/Lindy Boggs Medical Center in New Orleans by St. Margaret’s Daughters Home is a multi-phase project whose first manifestation will be the adaptive re-use of the hospital’s medical office buildings to accommodate a new permanent nursing home facility for St. Margaret’s.

Crescent Growth Capital structured and closed a $21.3 million New Markets Tax Credit qualified equity investment to fund both St. Margaret’s acquisition of the entire former hospital and a portion of the construction cost of its new nursing home within the facility. Subsequent phases will rehabilitate the remainder of the former Mercy facility for medical uses.

In addition to structuring the initial financial closing in 2010, Crescent Growth Capital, in conjunction with its consultants, secured Louisiana State Historic Tax Credit eligibility for the entire former Mercy/Lindy Boggs complex, garnering millions in historic tax credit equity for the project. The first state historic tax credit financing for the project was accomplished in September of 2011, generating $4 million for St. Margaret’s and enabling the definitive start of construction on Phase I.

CGC, in conjunction with its consultants, also secured for St. Margaret’s $3 million in CDBG funding, in the wake of a successful application to the State of Louisiana’s Project-Based Recovery Opportunity Program (“PROP”). Financial closing on these funds was achieved in July of 2011.

The Keith Corporation Shopping Centers

May 30, 2011 by

In years past, the fate of many a small town was tied to the factory where seemingly all the town’s inhabitants had worked for generations. When the steel mill closed, or the auto plant, or the tire factory, that town changed overnight from a stable, viable place of opportunity to a depressed also-ran.

Nowadays, it is often the shuttered big box chain store that can single-handedly imperil a town’s fortunes, as the tax revenue and jobs the store supported disappears, leaving behind a festering symbol of disinvestment. These dark big boxes, invariably championed prior to their construction as the guarantors of a community’s future, now resist re-use and end up decaying for years after their closure.

Located in the foothills of the Blue Ridge Mountains, the small towns of Claypool Hill, VA (Pop. 1,719) and Wilkesboro, NC (Pop. 3,159) have struggled in recent decades. Rural in character and located at the western fringes of their states, both towns have suffered the loss of major industrial employers to foreign countries. These reversals were compounded by the later abandonment, in each town, of a big box store that had previously provided badly needed employment, tax revenues and essential retail services to these tiny hamlets.

The Claypool Hill Lowe’s Home Improvement and the Wilkesboro Wal-Mart shut their doors years ago; subsequently, town leaders were frustrated time and again as numerous redevelopment efforts fell flat. Finally, the Charlotte, NC-based Keith Corporation stepped into the breach, initially spending over $6 million to acquire the buildings and convert them into badly-needed community retail. The Keith Corporation attracted numerous tenants to the revitalized, formerly single-tenant big boxes, including a grocery store, pet supply and hardware stores, providing badly-needed employment, tax revenues and retail services for their communities. However, two years later the Claypool Hill building is struggling with 55% occupancy, and the Wilkesboro project cannot secure permanent financing. These two structures, both located within “highly-distressed” rural census tracts, are in need of an NMTC subsidy to gain a sustainable footing and realize their full potential.

The Keith Corporation’s commitment to returning the closed stores to commerce constituted rare good news for these regions, as is always true of a $6 million investment made in two highly-distressed, rural locations. The 225-plus construction jobs and 150 permanent positions resulting from the investment signaled better times to come, it seemed.

Nonetheless, the projects had stalled, unable to secure permanent financing. A $10 million NMTC Qualified Equity Investment was structured and closed by Crescent Growth Capital, generating a meaningful subsidy for the two rural shopping centers that will lower total project debt to sustainable levels and establish a solid foundation for continued operations and future expansion.

Belleville Assisted Living Facility

May 18, 2011 by

Restoring job growth to the nation’s economy is the primary objective of policymakers today, and most economists believe that the most significant opportunities for new employment will be found within the healthcare industry. The boomer generation is aging, and the percentage of the nation’s population that is over age 65 is anticipated to increase appreciably in the coming 50 years, generating steady growth in demand for healthcare. Furthermore, ever-increasing longevity on the part of the nation’s elderly, coupled with the geographical fragmentation of the extended family has meant that demand for assisted living services is growing at an even faster rate than demand for healthcare overall.

Like the nation as a whole, New Orleans is in need of additional assisted living capacity, and, in the wake of Katrina, there is an insufficient supply of entry-level job opportunities available to disadvantaged individuals. Crescent Growth Capital was able to help address both challenges by structuring and closing the financing to fund the construction of the new Belleville Assisted Living Facility. The Belleville ALF will provide 53 badly-needed assisted living units in a 55,000 square-foot facility, while simultaneously creating nearly 50 jobs and returning to commerce a historic but blighted school building in New Orleans’ Algiers Point National Register Historic District.

The Belleville ALF is located on New Orleans’ West Bank, across the Mississippi River from the city’s historic core. Extensive development on the West Bank did not begin until the late 1950s, with the completion of the Greater New Orleans Bridge linking downtown to Algiers. For the next thirty years, the West Bank offered middle-income families new, affordable housing, extensive employment opportunities, and plentiful shopping. Conditions began to sour, however, in the wake of the mid-1980s Oil Bust. In a matter of months, the West Bank suffered tens of thousands of job losses; in the succeeding twenty years, poverty, crime and disinvestment increasingly characterized what had been a stereotypically prosperous American suburb.

Belleville ALF constitutes a significant and visible investment on the West Bank. A former elementary school that had lain dormant for over thirty years will be rehabilitated and restored to commerce. The historic fabric extant on the property will be adaptively re-used, embodying the highest aspirations of the green building movement – as there is no greener building than a re-used building. The region’s shortage of assisted living capacity, acutely felt on the West Bank, will be meaningfully eased by Belleville’s 53-unit facility. Most significantly, nearly fifty new jobs will be created, over half of which will be entry-level positions ideal for the West Bank’s disadvantaged low-income population.

Despite demonstrable demand for additional assisted living units, the New Orleans West Bank is considered a challenging location for market rate investment; conventional lenders had been unwilling to underwrite the entire cost of the Belleville facility. In response, Crescent Growth Capital and the principals of the Belleville ALF project devised a capital stack that took advantage of the location’s existing historic fabric as well as the highly-distressed character of the contemplated investment to integrate federal and state historic tax credit equity with the New Markets Tax Credit financing structure.

The tax credit equity generated by this structure lowered the project’s borrowing requirements and enabled the successful underwriting of a smaller conventional loan. Without the use of tax credit equity, it would have been impossible to secure funding sufficient to complete the project.

Central Louisiana Surgical Hospital

May 12, 2011 by

Alexandria, LA is sited on the banks of the Red River, at the geographic midpoint of Louisiana, where numerous north-south highways and rail lines converge and radiate outward in a classic hub-and-spoke array. Despite its central location, this small city of 50,000 – founded in 1818 – has struggled in recent decades to reposition its economy, as its river commerce dwindled, forestry-sector activities declined and England AFB became a casualty of the federal government’s Base Realignment and Closure process. Most recently, this already medically-underserved region braced itself for further hardships, given the planned closure of the state-run Huey P. Long Charity Hospital for the indigent.

In this context, the recently-completed Central Louisiana Surgical Hospital found itself financially stranded, as Alexandria’s struggling economy seriously challenged this new enterprise. CLASH represented a multi-million dollar investment within a severely disadvantaged census tract buckling under a 50.6% poverty rate. Crescent Growth Capital was enlisted to structure an $18 million NMTC financing to save over 150 badly-needed jobs and, by stabilizing the facility’s operations, lay the groundwork for future growth in services and employment levels. The NMTC subsidy permitted the purchase of the state-of-the-art equipment CLASH had been leasing at great cost, significantly lowering operating expenses and ensuring the future of this important facility. The subsidy also provided permanent takeout financing of CLASH’s short-term construction loan.

The NMTC transaction executed by CGC on behalf of CLASH also decisively advanced a key economic development goal of the city: furthering Alexandria’s emergence as a regional medical hub. However, with Louisiana phasing out its longstanding system of state-run charity hospitals for the poor, Alexandria’s medical sector ambitions are at risk. CLASH’s shuttering would have marked a crippling setback, compounding the after-effects of the Long Hospital closure and further eroding already-slumping business confidence. Conversely, the operational stabilization of CLASH will help counteract failing local business confidence, reinforce regional economic development efforts, and save numerous jobs. On the eve of the NMTC financing, 157 jobs were sited at the CLASH facility, including over 100 physicians. With the facility’s employment profile including both high-paying physician jobs and more entry-level support staff, the mixture afforded real employment opportunity to the surrounding low-income community and generated – by supporting the spending within the Alexandria market of dozens of well-paid medical specialists – a good slice of total aggregate demand for the area, catalyzing appreciable indirect job creation.

The impact of stabilizing the new CLASH facility is not only limited to guaranteeing the continued operation of one of Alexandria’s largest employment centers. From its inception, CLASH has taken particular pride in providing high-quality care to patients from the low-income community in which the facility is located, as well as to the surrounding rural communities in which many of the physicians and staff were raised. Already nearly 1 in 5 of CLASH’s patients were impoverished Medicaid recipients – a remarkable statistic for a specialty surgical hospital – and the provision of world-class surgical care to all of largely-rural central Louisiana continues to be a principal objective of the new facility. Desirous of fulfilling both the spirit and the letter of the NMTC program – and with the Long Charity Hospital threatened – CLASH also committed to using the NMTC funding to support a program of subsidized care for the indigent.

The New Orleans Healing Center

May 2, 2011 by

The New Orleans Healing Center serves to bridge the social divide between the two inner-city, historic neighborhoods it straddles, building inter-community trust while furthering post-Katrina recovery throughout New Orleans by providing a holistic, safe, sustainable facility that heals and empowers the individual and the community.

The Healing Center functions as a community center, offering needed retail services and supporting programs promoting physical, nutritional, emotional, intellectual and spiritual well-being. An adaptive reuse for the circa 1926 55,000-square foot former Universal Furniture Building at the intersection of St Claude and St Roch avenues in the 8th Ward of New Orleans, the center includes, among other amenities, yoga and pilates instruction, a cooperatively-owned organic grocery, a hydroponic rooftop garden, a street university, a health food café, juice bar and coffee shop with a youth training program, alternative healing, and a New Orleans Police Department substation.

Successfully executing a transaction of tremendous complexity, Crescent Growth Capital structured and closed in May of 2010 a $10.4 million New Markets Tax Credit qualified equity investment combining seven discrete funding sources to realize this project’s vision. Federal and state New Markets Tax Credits, federal and state historic tax credits, city and state CDBG dollars and sponsor equity were utilized. Construction was completed in 2011.

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