Historic Mill Financing In the South.

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2 Historic Mill Financing In the South

3 Presented By

4 Urban Trust Capital Services Tax Credit Transaction Advisory Firm Representing Owners, Developers and Nonprofits. Services Include Advice on Structuring, Originating and Closing Tax Credit Transactions for Non-profit Owned Properties Including Historic, Low Income and New Markets Tax Credits. Since 1994, Urban Trust, LLC has facilitated the placement of over $50 million dollars of tax credit equity.

5 Recent Urban Trust Tax Credit Projects Riverside Theatre Building, Jacksonville, FL * Phoenix Hotel, Waycross, GA * Georgia Children s Museum, Macon, GA Sanctuary Lofts, Tampa, FL West Lofts, Rome, GA * Eastside High School Phase II, Little Rock, AR Fitzgerald Hotel, Washington, GA * Jackie Robinson Ballpark, Daytona Beach, FL * Quapaw Bathhouse, Hot Springs, AR 20 West Adams Street, Jacksonville, FL Carnegie-Hotel Indigo, Atlanta, GA (State Credit) * Majestic Apartments, Hot Springs, AR (State Credit) Old Town Bank Holiday Inn and Suites, Baltimore, MD Swift Mill Complex, Columbus, GA Watermark Tower, Anniston, AL *Nonprofit Property

6 Topics Covered

7 Mills Buffalo Plant of the Union-Buffalo Mills Company at Buffalo, SC Textile mills built between 1880 and 1945 were multistoried, brick buildings (Change in the Textile Mill Villages of South Carolina's Upstate During the Modern South Era, Claire E. Jamieson The University of Tennessee)

8 Mills Piedmont Manufacturing Company mill and mill pond, 1895 on the Saluda River near Greenville, SC (Claire E. Jamieson The University of Tennessee)

9 COTTON MILLS IN CHARLOTTE AND MECKLENBURG COUNTY, NC

10 Decline of the Mill Industry Textile mills have been closing since the 1970s, and since the late 1990s, the mill shave closed at an astounding rate. Many have relocated production facilities to less developed nations which offer some economic advantage over the American South. In South Carolina, forty-seven mills closed between 1997 and August of 2001 which amounted to the loss of at least 12,220 jobs. (Claire E. Jamieson The University of Tennessee)

11 Mill Redevelopment Projects Mebane Mill Lofts: The Former R.L. Stowe Mills, Greensboro, NC by the Landmark Group $13M rehab of former textile mill 75 affordable units Rents from $246 to $675 $4.4 million in federal historic tax credits $5.9 million in federal low income tax credits $1 million from Community Investment Corp. of the Carolinas (Bank Consortium) $230,000 CDBG (Triad Business Journal )

12 Porterdale Mill, Newton County, GA In loft apartments by Walter Davis in a 300,000 square foot Mill. Georgia Trust Award winner. Planned condo conversion in 2012.

13 Johnson Mill Lofts, Columbus, GA $20 million investment 600,000 square feet 336 loft apartments

14 Swift Mill, Columbus, GA

15 Monaghan Mill, Greenville, SC 2008 $21, 048, 910 Project Budget Federal Historic Credit $3.7 Million State Historic Credit $1.8 Million State Mill Credit $4.7 million

16 Mayfair Lofts of Spartanburg, SC 2007 $11,581,477 million Project Budget Federal Historic Tax Credit $2,022,998 State Historic Credit $1,011,398 State Mill Credit $2,590,982

17 Mill Financing Incentives South Carolina: 10% State Rehab Credit offsets income tax 25% State Mill Tax Credit offsets income and property taxes

18 Mill Financing Incentives North Carolina: In development tier one or two counties (most distressed), a 40% state tax credit for the certified rehabilitation of income-producing historic structures that also qualify for the 20% federal investment tax credit. In effect, the combined federal-state credits reduce the cost of a certified rehabilitation of an income-producing historic structure by 60%. In development tier three counties, a 30% state tax credit for the certified rehabilitation of income-producing historic structures that also qualify for the 20% federal investment tax credit. In effect, the combined federal-state credits reduce the cost of a certified rehabilitation of an income-producing historic structure by 50%. In development tier* one or two counties, a 40% state tax credit for the certified rehabilitation of non income-producing historic structures. There is no equivalent federal credit for such rehabilitations. In development tier* three counties, a state mill tax credit for the rehabilitation of non incomeproducing historic structures is not available. However the 30% state historic rehabilitation tax credit is still available. The state mill rehabilitation tax credit is available in lieu of (as opposed to in addition to) the state historic rehabilitation tax credit.

19 Georgia: Mill Financing Incentives 25% State Rehab Credit against personal and corporate income taxes for commercial properties capped at $300,000. Georgia Cities Foundation 3% 15 year term low interest perm loan program capped at $250,000 Georgia Cities Foundation Green Communities Fund 2% 15 year term low interest Loan program for energy saving features in a rehab. DCA Downtown Development Revolving Loan Fund 2% 15 year term low interest perm loan program capped at $250,000. DCA Revolving 2% 15 year term Loan Fund (CDBG eligible communities) capped at $500,000.

20 The federal Historic Tax Credit The federal historic tax credit has been quietly and effectively transforming historic buildings into new uses for more than 30 years. These projects create more and better paying jobs than new construction, because historic preservation is more labor-intensive than new construction. Save places that give communities character and that residents, businesses and tourists flock to. Fuel local economies because developers tend to source their material and labor locally, instead of from faraway factories. Are green. Historic rehabilitation projects essentially recycle existing buildings in existing communities. This keeps development away from farmland and green space, and close to public transportation and other services. Make good economic sense. The historic tax credit program has cost the U.S. Treasury $17.5 billion in its 32-year history, which is more than offset by the $22.3 billion in federal taxes these projects have generated.

21 What is Tax Credit Equity Financing Applies to rehabilitation of privately and publicly owned income-producing certified historic properties The federal investment credit is 20 percent of eligible hard and soft costs of rehab The Georgia rehab credit is 25% of the federal eligible costs and a maximum for commercial projects of $300,000 Investors make an economic investment in the property equal to the credit amount generated by Rehab minus discount factors and investor s return requirements Property owner receives investor cash to use for the Rehab Investor claims tax credit on federal and State tax liability at certificate of occupancy

22 Governing federal Regulations State Historic Preservation Office and National Park Service for rehab design approval Tax Code, Sections 47 and 48 Tax Reform Act of dollar for dollar 20% investment tax credit against federal income tax liability and a 10% tax credit for pre-1936 buildings

23 Historic Tax Credit Market at a Glance * Created by Congress in 1976 $58 billion in historic preservation activity as of 2010 Over 37,000 projects approved by National Park Service (NPS) * Data provided by the National Park Service, 2008 Annual Report

24 Historic Tax Credit Investor Market About half a dozen Fortune 500 investors make up the bulk of the investors Remainder of deals are typically purchased by local banks Many community banks are motivated by Community Reinvestment Act requirements

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26 Georgia State Credit Syndication Georgia Income Tax Incentive Georgia Code Section is Ten Year Carry-Forward Offsets Personal or Corporate Income Tax No Tax Credit Recapture Risk for Commercial Rehabs

27 Steps to a Tax Credit Rehabilitation: Qualify the building as contributing to a local certified ordinance district or National Register certified historic property Engage Urban Trust Capital as DDA Tax Credit Advisor Have rehab design approved by State and National Park Service Develop project budget, eligible expenditures and operating statement Do ten year forecast of real estate operations

28 Nonprofit Historic Property Partnership Examples

29 How Transactions Work

30 Phoenix Hotel, Waycross DDA

31 Phoenix Hotel Before After

32 Phoenix Hotel Before After

33 Macon Children s Museum, Nonprofit Owner

34 Hacienda Hotel, New Port Richey, Florida Historic rehab, hotel, spa and conference center venue City long-term lease of property Historic Tax Credits New Market Tax Credits Recovery Zone Stimulus Bonds

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36 Quapaw Bathhouse Hot Springs, AR A National Landmark One of seven on Bathhouse Row Owner National Park Service (NPS) Leased to Private Company/LLC for 50 Years Captured previous NPS expenditures as part of tax credit basis Renovated for SPA

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38 Quapaw Bathhouse

39 Cox Capitol Theater, Macon Project Owner/Lessee: Capitol Theater Inc. Project Manager: Capitol Theater Inc., General Partner of Capitol Theater Fund, LP (new private entity) Additional Funding: GA Cities Foundation Loan of $250,000 Cox Communications Naming Rights Deal for $150,000 Historic Tax Credit Investor Local Community Bank for $110,000

40 Cox Capitol Theater, Macon Nonprofit

41 West/Curry Lofts, Rome Assisted by Rome Downtown Development Authority Georgia Cities Foundation Loan $250,000 DCA DDRLF Loan $250,000 DCA Redevelopment Fund Loan $250,000

42 West/Curry Lofts

43 West Lofts, Curry Building

44 West/Curry Lofts

45 Fort Valley DDA, University, City & School Board Partnership Fort Valley DDA negotiates deed for downtown Historic Fort Valley High School from School Board FVDDA contracts with CDP, Inc. to renovate School into College of Business DDA leases School for 50 years FVDDA finances $5.2 million rehab with tax-exempt revenue bonds through BB&T Capital

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47 Fort Valley DDA Role Acting as facilitator to preserve historic downtown building Assumed ownership from School Board to allow a less expensive alternative to building College of Business on campus The DDA can finance the rehab utilizing DDA s statutory powers DDA initiative brings 1350 students to downtown campus

48 Powers of DDA s For Preservation DDA s can preserve the character of their downtowns by taking a proactive role DDA s can apply for DCA, DDRLF, Georgia Cities Foundation and Energy Loans on behalf of property owners DDA s can negotiate and finance property transactions to reuse historic buildings DDA s can use the federal and Georgia tax incentives to catalyze downtown development

49 Mill Revitalization Opportunities Redeveloping mill buildings accomplishes multiple smart growth goals at once: Reuse of existing structures Compact, infill development Environmental restoration Increase in housing and job opportunities

50 Actions That Support Mill Revitalization Explore innovative permitting processes, zoning regulations and building codes to encourage redevelopment. Include revitalization goals in the master plan and zoning ordinance. Encourage flexible site plan approvals. Create streamlined special permit process.

51 Actions That Support Mill Revitalization Elicit community input and support. Build public-private partnerships. Conduct environmental assessments (Greensboro) Prevent further potential structural and environmental degradation.

52 Building Community and Financial Support Show renderings. Prepare Pro Forma Studies. Tax Increment/Allocation District. Brownfield Incentives/City Grants.

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54 Urban Trust Capital Financial Structuring of Tax Credit Investments for Historic Properties