East St. Louis, Ill.–The East St. Louis Housing Authority has closed a complex and novel New Markets Tax Credit (NMTC) transaction that will fund the mixed-use Jazz @ Walter Circle project, which will include rental housing for low-income seniors. Now that financing is in place, the project will break ground in the spring of 2012.
Jazz @ Walter Circle will create 74 new units of public-housing and housing-choice-voucher rental units for senior citizens in a city where 35 percent of the residents live below the poverty line. The development will also include a community center, several offices, a health-and-wellness facility, a grocery store and other retail space. The development will be LEED Gold certified, with solar panels, a community garden and a rooftop terrace, among other green features.
According to Ballard Spahr L.L.C., the law firm representing the East St. Louis Housing Authority, this is the first NMTC transaction to use public housing development funds in the NMTC-leveraged financing structure. The public-private partnership involved the support of HUD, the City of East St. Louis and the State of Illinois, and also meant the creation of not-for-profit affiliates of the housing authority, both for this project and future development.
In addition to public housing funds, the project will be financed with city tax-increment financing and state energy funds. Because a deal of this structure had never been done, finalization required several rounds of approvals from various federal and state government agencies, thus taking more than a year to close.
The tax credit investor was Valley National Bank, represented by Dudley Ventures L.L.C. The leverage lender was River East Ventures Inc., a not-for-profit affiliate of the East St. Louis Housing Authority. The ultimate borrower was Eco Jazz Inc., another such affiliate as well as project developer and owner.
“This funding strategy offers new opportunities for public housing authorities and other government agencies to expand their participation in the New Markets Tax Credit program and to use the credits–and other federal, state or local governmental grants and loans–to close project funding gaps caused by the challenging economic climate,” Stephanie L. Franklin-Suber, contact partner for the law firm Ballard Spahr’s NMTC practice, tells MHN. “There’s been an increase in the number of New Markets Tax Credit projects that use various sources of public money. Hopefully, this transaction will provide an incentive to other public housing authorities and government agencies to take advantage of the program.”
Franklin-Suber adds that public housing authorities and other government agencies can act not only as lenders or developers, but also can form affiliates to act as community-development entities. “By forming affiliated community-development entities, a public housing authority, redevelopment authority or economic-development agency can apply for its own allocation of New Markets Tax Credits and launch its own New Markets Tax Credit program consistent with its mission,” she says.