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Projects Selected by MMF
1.Clearwater. Grand Rapids = $6,600,000
2. ICCF, Grand Rapids =
$5,800,000
3. 500
Block Flint = $6,400,000
4.
Pere
Marquette, Bay City = $4,000,000
5.Book Cadillac = $10,000,000
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6. East Forest Art Project Detroit
= $3,600,000
7. Harbor Shores, Benton Harbor=$8,600,000
8. Bicycle Factory = $4,000,000
9.
10.
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The Full Application
Process
A copy of the full application is attached. Please do not complete the
application unless
you have been invited by MMF to do so
after submitting a Preapplications. This can
save you a lot of time,
energy, and costs.
New Market Tax Credit Underwriting Criteria
MMF must make its investment in Real Estate Projects. A new
building
for a business
is not considered a real estate project, i.e., factory for a manufacturer, building for
nonprofit to conduct its own business.
MMF must make its investment in Michigan.
At no time can the aggregate investment be made to related entities
The CDE must receive at least 60% of its Qualified Equity Investment
by 9/30/07
95% of all MMF investment shall be flexible, non conventional, or
nonconforming to
the MMF’s underwriting guidelines or standard practice in the marketplace.
90% of the MMF investments must be made in targeted distressed
areas which have
more than just 20% poverty or 80% median family
income, i.e., Brownfield,
Redevelopment Area, 30% poverty, 70% median family income, HOPE VI area,
Empowerment Zone, etc.
An
business must pass the following tests to be eligible to receive a NMTC
allocation.
- Separate Business Test
The ownership entity must maintain a complete set of books and
records for the
eligible site?
- Ongoing Business Test
The ownership entity must have revenue within three years of
closing on the
allocation, submit letter.
- Gross Income Test
At least 50% of the total gross income of the ownership entity will be derived
from the
active conduct of a qualified business within the low income area
- Tangible Property Test
40% of the use of tangible property of the ownership entity be
within the low
income community described herein
- Low Income Community Test
At least 40% of the services performed for the ownership entity by its employees
are performed in a low-income community. (% is determined based on a fraction
the numerator of which is the total amount paid by the entity for employee
services performed in the low income community and the denominator of
which is
paid by the entity for employee services
- 5% Asset Test
Less than 5% of the average of the aggregate unadjusted basis of the property
of
such can be entity attributable to nonqualified financial property such as debt,
stock, partnership interest, options, futures, forward contracts, warrants, annuities,
etc.
- Related Party Test
In order to assure that MMF is not a related party, the Capital Contribution by
the MMF must always be less than 50% including the reduction of its partner's
Capital Account due to the depreciation of the property.(during 7 year holding
period).
- Profit Motivation Test
The business must
be profit
motivated. The financial projections must indicate
that the total equity (including HTC + NMTC) can be repaid over the duration of
the debt financing plus a 3% IRR to the Investment Fund and at least 0% to
the Owner. We need to check with the investor to determine what they find
acceptable. In some cases, the Investor may find a 2% return acceptable.
These
projections can exceed the 7 year holding period and are normally for the
term of the financing.
- Real Loan Test
This test is primarily needed when financing nonprofit organizations. The Project
Financial Analysis must indicate that the loan can be paid off over the term of the
loan or that the property will have a value in excess of the loan thereby indicating
the ability to refinance or to sell the property to repay the loan. The repayment of
the loan can be proven by showing that the property value will increase and then
can be sold to satisfy the debt while at the same time making principal payments to
reduce the debt after the 7 year holding period. The CAP rate used to project
value should be the same one used in the appraisal unless a different one can be
clearly justified. MMF requires an appraisal that indicates that the after
construction value of the property be equal to or greater than the QLICI loan.
The following are the criteria used to determine the selection
and size of the
Qualified Equity Investment to be Offered each Qualified Low Income
Community Business (QLICB)
1. Diversification - the projects financed by MMF should represent the
different
geographic areas of the state allocation with a limit of 40% allocated to any one city.
2. The project must meet MMF's "but for" test which is defined as
costs exceeding
value of the project as determined by appraisal. The new market tax credit portion of
the investment will cover the deficit between total cost (after deducting other tax credit
investment and grants) and value as determined by appraisal. In these cases, the
portion of the NMTC needed to cover the gap will be putted to the QLICB
3. If the shortfall is due to lack of equity, the MMF will receive a return
of its
investment using an equity investment or a subordinated low interest loan, interest only for 7 years and with a
no more than a 15 year amortization, thereafter
4. The Developer shall make a minimum equity investment that meets
the
following
criteria, whichever is larger.
......a. As a rule, the NMTC portion must be equal to the Developer's Equity
......b. The Owner Equity must be at least 5% of Total Source of Funds, or
......c. In all cases, the Owners' Equity Investment must be equal or greater
than the
Developers’ Fee, and/or
.....d. If the Owner invests equity larger than any of the above, it will be accepted.
5. For nonprofits, the Developer Fee is included as an Equity Investment in the
Sources of funds to calculate NMTC needed to balance out the Sources of Funds.
6. Smallest NMTC Investment Allocation = $2 million
7. Largest NMTC Investment Allocation = $10 million |
Magnet Fund Page 2