By David Curtis

As the American election cycle comes into full swing, the Opportunity Zone program has become a focal point of discussions for both sides of the aisle.  The national program, passed as part of the Tax Cuts and Jobs Act of 2017, provides a structure for using deferred capital gains to facilitate investment in economically disadvantaged areas of each state.  The investment can be in either operating businesses or tangible assets, with real estate being one of the largest beneficiaries of the program, including investments in low-income housing and historic building rehabilitation.

President Trump has lauded the program since its inception, claiming in the most recent State of the Union address, “Wealthy people and companies are pouring money into poor neighborhoods or areas that haven’t seen investment in many decades.”

Opponents of the Opportunity Zone program claim that it has enhanced luxury real estate projects for developers already generating large windfalls, and the Treasury Department’s internal watchdog group is investigating the selection of some census tracts for being improperly allocated the tax benefit.  However, Presidential election opponent Joe Biden has not specifically mentioned the program, instead pushing a repeal of “most all” of the Tax Cuts and Jobs Act.  How he will address the Opportunity Zones themselves, however, remains a topic that will emerge as the election campaign continues.

The Opportunity Zone program will continue to be a point of contention between both sides as tax benefits become a key debated issue before November.  As the program and other tax incentives’ outlooks change as the election cycle comes to a head, Clocktower Tax Credits continues to be focused on providing up-to-date analysis for our clients, along with outlook on future tax programs and their impact on tax credit markets.  For any questions on the Opportunity Zone program and its intersection with the tax credit marketplace, please contact Jeff Jacobson at (978) 823-0200 or JJacobson@ClocktowerTC.com.

In my last article for this website in February, I wrote about the completion of our project in Kelley Square, Worcester, MA, where the Triple-A Affiliate of the Boston Red Sox is building their new stadium called Polar Park.

One month later, the country was hit by the pandemic, Covid-19, and the world was suddenly upside down.  Construction on the park stopped on April 1 and on a positive note, resumed the third week of May, as it did in most cities in Massachusetts and around the country.  Clocktower is currently involved in real estate development projects all over the US, in various stages of development.  We are finding that although each state is operating on its own back-to-work schedule, construction either never stopped or if halted temporarily, is now back in force under new health and safety guidelines.

Developers have had to adapt to the new normal during this crisis.  When a client was due for an in-person inspection of their building and the inspector couldn’t be there, a virtual inspection was arranged using an iPhone.  When an in-person notarization couldn’t happen, our client used video conferencing with the notary to oversee the signing and recording of the session.  When our client’s attorney hand-delivered documents to a State Credit agency for signature, they expected to have it hand stamped on the spot but had to wait a week to obtain the stamped document.  To facilitate a closing, our client’s attorney drove around the city, donned with mask and gloves to obtain signatures from housing authority executives at their homes.  It goes to show that people can be creative and adapt to get things done when faced with a crisis.

Clocktower Tax Credits has been fully operational throughout the stay-at-home period and has remained in touch with our developers and our investor base.  We have been busy placing and closing transactions.  If you have a project that needs investor tax credit equity, don’t hesitate to call us.  We work with developers with prospective Historic rehabilitation or Low-Income Housing tax credit projects seeking Federal and/or State tax credit equity, and unique state incentives such as the Massachusetts HDIP or Pennsylvania REAP credits.  For inquiries, please contact Sue Ellyn Idelson at (978) 793-9574 or SIdelson@ClocktowerTC.com.

The tax credit marketplace is beginning to feel the impact of COVID-19 and the resultant business slowdowns.  While several credit investors and syndicators are slowing down or limiting their purchases, a good number of them are conducting “business as usual”.  We want to stress that most tax credits can still be sold into this marketplace.

Here are a number of quotes from our investor clients whose tax credit activity may be slowed:

“Better that we cut our credit amount in half.  Our income is dropping like a stone”

“indefinite pause on hospitality investments”

“give me about a month to see if our projections will be ok”

“All the banks are closing what’s in the pipeline, but putting the brakes on all new business”

“The market was overheated prior to COVID.  Every 10 years or so the market resets.”

“We’re still moving forward.  We’ve received no direction to slow down our acquisitions.”

“Until we get a handle on revised [tax] projections we’re taking a pause on new purchases. I think we’ll be able to resume in the June/July time-frame.”

“Can’t issue a term sheet on hospitality now”

“We have developers pulling out of deals.  Residential projects trying to get a loan right now – forget about it!”

“The pandemic has definitely impacted our business a bit. We are currently treading lightly in the area of credits due to the fact that our liabilities may be decreasing some this year in light of the pandemic.

“Currently, we are not entering into any new credit deals until we know how our premium volumes are going to shake out with the pandemic going on.”

However, as noted earlier, Clocktower Tax Credits works with dozens of Fortune 1000 Corporations, Banks, and Insurance Companies.  The advantage of using a tax credit broker to sell a credit is the wide array of buyers in the broker’s contact base.  Clocktower closed 10 separate tax credit sales in April 2020, to a range of buyers including three different insurance companies, two Fortune 500 corporations, and a medium-sized private company.  We are working to fulfill the “buy” orders of many clients still seeking to reduce their projected tax liabilities now, and for up to five years in the future.

We hope this has provided a sample of tax credit buyer responses – which vary from “out of the market” to “full steam ahead”.  Clocktower remains at full capacity, with our staff working remotely to complete tax credit transactions.  For further information on the current marketplace, call President Jeff Jacobson at (978) 823-0200, or email him at JJacobson@ClocktowerTC.com.

In January, Clocktower attended the groundbreaking ceremony for the rehabilitation of the former Ravenswood Hospital in Chicago.  The project entails the adaptive reuse of the abandoned hospital to create 193 units of affordable housing for senior tenants.  The site will have apartments focused on independent living and assisted living under the Illinois Supportive Housing program, which will each have their own entrances and communal spaces.

“This important project is a rare opportunity to bring much-needed affordable senior housing to Chicago’s North Side while establishing a viable financing model that can be applied to future senior developments across the country, especially as the population continues to age,” Jeff Rappin, the chairman of Evergreen, said at the ceremony.  Clocktower Tax Credits facilitated the sale of the project’s state Donation Tax Credit through our buyer at the financial closing, providing a key source of financing available for the upcoming construction phase.

Clocktower is busy in Illinois with the Donation Tax Credit program, having facilitating dozens of transfers for the Illinois affordable housing community.  Clocktower’s expertise in the quirks of the program and closing/transfer process has allowed us to serve Donation Tax Credits of any size and availability, along with the new Historic and River’s Edge programs.  For developers with any prospective opportunities seeking Illinois tax credit equity of any kind, please contact David Curtis at (978) 440-0742 or DCurtis@ClocktowerTC.com.

Worcester, Massachusetts – Housing Development Incentive Program (HDIP)

Who knew when I contacted the principals of Kelley Square Lofts and the Worcester Public Market in 2017 to help them with their Housing Development Incentive Program (HDIP) tax credit financing, that this project would be neighbors with the new Worcester Red Sox “WooSox” Minor League headquarters and stadium dubbed Polar Park?  The location in famous Kelley Square, for people familiar with Worcester, is known for the City’s most dangerous intersections.  The visionaries of Kelley Square Lofts and Worcester Public Market knew there was much to be done to improve the area, called the Canal District, before Polar Park was even imagined.  The idea that they could create 48 market-rate apartments above a 20,000 square foot European-style multi-vendor marketplace has created a destination, right in Kelley Square, and fits right in with the resurgence of enthusiasm for urban living.  So what will happen to this infamous intersection?  The city has embarked on the Kelley Square Improvement Project that will address the safety and operational deficiencies currently faced by all users, expected to be substantially completed by November 2020.  Just in time for the WooSox to open their doors and for WooSox fans to stop by the Worcester Public Market to visit Wachusett Brewing Co., the anchor tenant, on their way to the ballgame – along with 30+ other local vendors and food purveyors!

Clocktower Tax Credits, LLC has a deep base of national Tax Credit investors who desire to reduce their tax payments to government while providing funds instead to economic development projects like the Worcester Public Market.  With Clocktower’s expertise in HDIP credits, we understand the necessary steps for a successful financial closing, and we have the ability to help any economic development incentivized tax credit project.  For developers with prospective HDIP, Historic rehab or Low-Income Housing tax credit projects seeking Federal and/or State Historic tax credit equity, please contact Sue Ellyn Idelson at (978) 793-9574 or SIdelson@ClocktowerTC.com.