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2022 Edition: Get it! HCC’s top five tips for projects seeking NMTC

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On Friday, October 28, 2022, the CDFI Fund announced $5 billion in New Markets Tax Credit allocation awards. For many of Hope Community Capital’s clients, this is the announcement that we’ve speculated about for months, argued about, bet on, and even caused some to lose sleep! For months (and months), we’ve been closely listening to the rumors about this award announcement, starting calls with “have you heard anything about when the award will be announced?” and attending conferences with the hope that CDFI Fund staff would offer us one. tiny. clue.

Now that the announcements are finally here, what should projects in need of NMTC-facilitated financing do? Below is a list of five items we suggest as immediate next steps for project sponsors looking to secure allocation from this latest announcement round.

In our experience, a lot of the allocation is already spoken for, even before announcements are made! If an Allocatee puts your project in their pipeline for their application, you should start by following up with them to see what additional information they request and what are the next steps prior to securing a formal reservation letter. For those projects that are not already known to Allocatees, do not worry! Pipeline projects shift and ‘fall out’ all the time, leaving the opportunity for other projects to pick up the needed allocation.

Here is HCC’s 2022 “Post-Announcement To Do List” for Projects Seeking NMTC:

  1. Carefully review the award book. Pay attention to the geography served by the CDE and their stated intention for their NMTC award. Do a quick web search to check whether your project fits within their target for business strategy and community impact. For example, if you are a real estate project in Wisconsin, you are not a good fit for a CDE that exclusively uses its NMTC allocation for operating business projects in the New England region. Get as precise as possible in your analysis of which CDEs are interested in your project, and be diligent in not wasting their time or yours with a project that isn’t a good fit. The award book is a great resource as you build up your outreach strategy to CDEs.
  2. Update your project summary. You want to be able to send a current project summary with a click of a button ahead of a conversation with a CDE. And yes – we always start with a phone call in my post-award announcement communication with CDEs. Always. The project summary should include, at a minimum: a project overview, capital stack, timeline, community impacts, and expressed need for NMTC (aka the “but for” statement). Tell your project story and back it up with reasonable numbers. Clearly articulate your closing timeline and your assumptions in generating this timeline. CDEs are most interested in projects that can close in Q4 ’22 or Q1/Q2 ’23.
  3. Call or email your CDE contact and request their intake form/mission fit questionnaire. Fill it out – immediately! HCC aims to turn these forms around within 48 hours if at all possible.
  4. While you are talking with a potential CDE, ask these three questions: Do you have any feedback and/or questions about my project?
  5. Is this a good fit for your CDE?
  6. Why or why not?

If it IS a potential fit for the CDE’s allocation, ask: What is the process and timeline for securing a reservation letter?

If it is NOT a good fit? Swiftly and politely thank them and move on to the next CDE on your list. CDEs and projects, like the stock market, sometimes shift their priorities based on allocation available, projects falling through, application strategy, and more. Always keep your CDE relationships informed of your project, even if their first reaction is that it is not a fit. Sometimes we hear, “Not a good fit at this time.

  1. Continue working through the pre-closing checklist, clearing “lead time items” such as environmental assessment, permitting schedules, zoning confirmations, and more. The most important lead time item is that you have the rest of your capital stack  If you are interested in seeing HCC’s pre-closing checklist format, please email us at checklist@hopecommunitycapital.com.

The few weeks following the NMTC award announcement are crucial for projects that plan to break ground in Q4 of 2022 or Q1/Q2 of 2023. The good news is that CDEs are eager to move allocation so that they can show closings prior to the cut-off date for the 2022 NMTC allocation application (and who knows when that will be announced!).

For projects that do not anticipate a Q4 of 2022 or Q1/Q2 of 2023 closing, now is a good time to be submitting your project for CDE pipeline for the next allocation application. Start building those strong relationships now so that when next year’s announcements are made, you will be ready to accept a reservation letter.

Congratulations to the CY 2021 Round Allocatees!

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