Merrill Hoopengardner became the second president of the National Trust Community Investment Corporation (NTCIC) in 2016, bringing 19 years of experience in community development finance. Before joining NTCIC, Ms. Hoopengardner was a principal at Advantage Capital Partners, a finance company that specializes in using public-private partnerships to raise venture and small business capital for investments and loans in underserved areas.
NTCIC has become a leader in tax credit syndication and redevelopment in the preservation community. Where do you see NTCIC going in its next phase?
Yes, NTCIC has become a powerhouse in tax credit syndication and redevelopment! This week we closed on a New Markets Tax Credit (NMTC) transaction that took us over the $1 billion mark in tax credit equity invested through our various syndication programs. This includes not only our flagship historic tax credit (HTC) investments but also the federal NMTC, which targets our investments in low-income communities; the solar tax credit; and low-income housing tax credits.
Looking forward, I see tremendous opportunity for us to build on our great track record and become the “go-to” syndicator for investors and developers seeking a mission-oriented partner who can help them meet their investment and redevelopment goals. One of my priorities is to offer a wider range of products so we can invest in multiple types and sizes of projects and in different places in the capital stack. We are rolling out several new products to that end right now, including a small-deal fund that will combine HTCs with NMTCs and a private equity fund that will provide equity or mezzanine debt to sponsors of HTC projects.
I also want to use our role on the investment side as a platform for better educating the preservation community about the tools that are available for increasing the economic vitality of their communities. Our culture often finds it difficult to talk about money, but it takes money to make investments, spur development, rehabilitate historic buildings, and generate renewable energy!
How is NTCIC expanding on its existing portfolio of work? Are there areas that the organization hopes to become more involved in?
NTCIC has expanded quite a bit in the last several years, especially with the rollout of our solar investment program. We recently hired Karin Berry as the vice president and manager of our renewable energy program, and she has hit the ground running. After only six months on the job, she has already recruited potential developer partners who have pipeline opportunities of over $500 million in projects that range from $1.5 million to $50 million in tax credit equity needs.
She is also helping grow our investor base with several banks and insurance companies that will be investing in solar credits for the first time through our partnership. With Congress’s unexpected extension of the solar tax credit at the end of 2015, I see a lot of growth opportunity in this part of the business over the next several years. In particular, I’m hopeful that we’ll continue building our expertise in identifying solar transactions that meet our banking partners’ goals for investments eligible under the Community Reinvestment Act (i.e., qualifying as public welfare investments) that benefit low- to moderate-income communities.
With respect to historic rehabilitation, one of my strategies for expanding our portfolio is to broaden and deepen our relationship with existing and potential investors. Because of the cutting-edge work we do on the policy and regulatory fronts, we are uniquely situated to help investors navigate some of the uncertainty in the current marketplace. By stabilizing and growing our investor base, we can invest more of our energy into sourcing and underwriting high-quality projects—a true win-win!
Is there a specific effort that NTCIC is currently working on that you are particularly excited about?
We have been active participants in the NMTC program for over 10 years and have continually innovated to most effectively meet the needs of low-income communities nationwide. NTCIC pioneered the “twinning” of HTCs and NMTCs in 2003 and has now invested over $431 million in 67 NMTC transactions. By using these tax credits in tandem, we can bring low-cost, flexible capital to the most severely distressed communities, rehabilitating vacant buildings and returning them to use as community-enhancing assets.
One challenge we continually face is that tax credit transactions by their nature can be quite complicated, and combining credits together can increase that complexity exponentially. This leads to greater transaction costs and thereby reduces the amount of subsidy that is actually generated. With our most recent NMTC allocation, we are creating a smaller-deal fund for which we are lowering our standard fees and developing a product that is more streamlined and accessible for smaller projects in Main Street communities. This should result in a simple and straightforward source of funds for projects that need $1–2 million in historic investment. We anticipate doing at least three transactions with our current allocation and intend to close the fund and our first investment in the next two months. Assuming we receive additional NMTC allocation in the pending round—with announcements anticipated this fall—we will continue to set aside at least 10 percent of our allocation for this new product.
What are the biggest challenges in the field right now? What is it like working in legacy cities versus in hot market cities facing development pressures?
We continually operate in a challenging regulatory environment where uncertainty can both affect the pricing of transactions and dampen investor credit appetite. We are encouraged that the IRS is expected to be putting out new guidance shortly regarding how to structure the so-called “credit pass-through” transactions, and this will provide some much-anticipated clarity. While this may initially result in tax credit pricing going down, we believe that many potential investors who have been on the sidelines will finally enter the market, which should mitigate some of the negative effects.
From the perspective of our investors, there is increasingly less of a dividing line between legacy cities and hot market cities. We take time to educate investors on the specifics of every deal and make sure each deal is matched with their needs. As so many legacy cities are beginning to thrive again with historic buildings at the heart of those revitalizations, NTCIC is just as excited to work in cities like Baltimore and Cleveland as in St. Louis and New Orleans.
How does NTCIC plan to be involved in advocacy for tax credits? Are there any particularly significant changes or improvements that the organization is pushing for?
NTCIC is well recognized as the industry leader on public policy and the thought leader on the HTC. We solidified this position by organizing the Historic Tax Credit Coalition (HTCC) in 2009 and have chaired it ever since. As a mission-oriented syndicator, one of NTCIC’s highest priorities is to designate resources and expertise to the Prosperity through Preservation Campaign. This is a joint effort among NTCIC, the National Trust, and the HTCC to organize outreach in support of the federal HTC through uniting our marketing, legal, and government relations capabilities.
At its core, the Prosperity through Preservation Campaign is congressional lobbying; grass-tops and grass-roots advocacy; and the development of briefing materials, national studies, and GIS-based mapping of HTC projects. Four years after its inception, the campaign has become a sophisticated advocacy framework capable of coordinating state and local advocacy efforts and responding quickly to the changing dynamics on Capitol Hill.
As Congress considers ways to improve our nation’s tax code, there is a crucial opportunity to modernize the HTC so that it functions more efficiently in a dynamic economy and better serves the needs of large and small communities.
In anticipation of tax reform, the campaign helped develop legislation that would update the program and improve access to HTCs for smaller and more rural communities. The Historic Tax Credit Improvement Act, H.R.3846/S.2655, provides several reform options and serves as an indicator of support for the HTC. The bill is enjoying strong bipartisan support on the Ways and Means Committee, and presently 29 members of Congress are backing the bill, thus demonstrating support for the HTC. There is also a strong focus on gathering cosponsors for the Senate version that was just introduced on March 9.
How will your community development background and knowledge of underserved communities inform your work at NTCIC? How do you see the work of NTCIC addressing concerns of social and environmental justice through redevelopment?
I have worked in the community and economic development field for over 20 years and am excited to bring the skills and connections I’ve developed to my new role at NTCIC. My past experiences include home mortgage lending for low-income families; providing financial counseling to military service members; providing legal representation for investors, lenders, developers, and community development entities in a variety of tax credit transactions; and small business finance.
One thing I have learned through my work supporting low-income individuals and communities is that the needs are as varied as the people and the places. Likewise, the needs don’t stand in isolation but come with assets and opportunities that can be built upon or leveraged to achieve greater economic stability and prosperity.
With an extensive track record of finance in four different but complementary tax credit programs and the support of the National Trust, NTCIC is uniquely positioned to combine our collective expertise in public policy, capital-raising, and investing to generate and implement financing products that facilitate economic development in communities with the least access to capital. It’s a privilege for me to lead NTCIC in these efforts.#Announcements #taxincentives #NTCIC #Economics