Latest / ChangeMakers with Katie Goar / Episode 150: Marie Cervay Hickle, HTC & NMTC Relationship Manager , PNC

Transcript

Episode 150: Marie Cervay Hickle, HTC & NMTC Relationship Manager , PNC · ChangeMakers with Katie Goar

0:05
Speaker 1: This is change Makers with Katie Gore finding the right
0:09
Speaker 1: solutions for the affordable housing community.
0:13
Speaker 2: Historic buildings can plan an important part in the future
0:15
Speaker 2: of our communities. With the right investment and aging mill,
0:20
Speaker 2: an empty.
0:20
Speaker 3: Office tower, a restored school, or an overlooked main street
0:24
Speaker 3: property can actually become housing, retail space, or a new
0:28
Speaker 3: center for neighborhood activity. Today's change Maker, Marie Hikel is
0:33
Speaker 3: the vice president at PNC. Marie has more than fifteen
0:37
Speaker 3: years of experience with newmarket tax credits and historic tax credits.
0:42
Speaker 2: She has helped.
0:43
Speaker 3: Originate and close more than four hundred and fifty million
0:47
Speaker 3: dollars in tax credit equity across the country. What makes
0:51
Speaker 3: Marie's work so compelling is that she sees possibility where
0:54
Speaker 3: others see obstacles, and throughout her career, she has helped
0:59
Speaker 3: transform vacant buildings, underutilized property, and forgotten landmarks into places
1:05
Speaker 3: that create opportunity, strengthen neighborhoods, and preserve community identity.
1:12
Speaker 2: Marie, Welcome to change Makers. Hello Katie, thank you for
1:15
Speaker 2: having me.
1:16
Speaker 3: This is a great inclusion because we don't often cover
1:18
Speaker 3: the nuances of all of these tax credits, so I'm
1:21
Speaker 3: thrilled to have you here as an expert, and I
1:24
Speaker 3: want to go through several of the projects that I
1:27
Speaker 3: mentioned in the intro. But first, why don't you give
1:30
Speaker 3: us the lay of the land, how you came into
1:34
Speaker 3: this housing capital and why I would even say community development.
1:40
Speaker 3: Can you give us your on ramp into this industry?
1:44
Speaker 4: Yes? So I was always interested in finance, and I
1:49
Speaker 4: actually started my career in engineering, but then quickly decided
1:53
Speaker 4: that I wanted to switch over to something more practical
1:57
Speaker 4: for me.
1:57
Speaker 2: And buildings and old build things and community development I
2:01
Speaker 2: have always been a passion and growing up I was
2:04
Speaker 2: exposed to a lot of those. Also, when I finished
2:09
Speaker 2: my undergrad in finance, I decided to get my MBA
2:13
Speaker 2: and I concentrated that in finance and real estate, and
2:16
Speaker 2: I graduated December of two thousand and eight when the
2:18
Speaker 2: economy had officially tanked, and those were the two worst
2:21
Speaker 2: industries to be a But I continued networking and I
2:25
Speaker 2: found Nova Grandecing Company, which a lot of people are
2:28
Speaker 2: familiar with in this space, and I was given the
2:30
Speaker 2: opportunity as an intern to work pretty much exclusively on
2:33
Speaker 2: new market tax credit and historic tax credit transactions through
2:37
Speaker 2: the forecasting. So that's why I got my start, and
2:40
Speaker 2: I spent about seven years there. Through that time, I
2:43
Speaker 2: went back and got my classes for my CPA, I
2:46
Speaker 2: became a Certified Public Accountant, and then I decided to
2:49
Speaker 2: change over to banking. So I was at Bank of
2:51
Speaker 2: America for a time in a similar position doing both
2:55
Speaker 2: new markets and historic tax credit originations. And I've been
2:58
Speaker 2: with PANC for over eight years in the role. What
3:01
Speaker 2: a great journey.
3:03
Speaker 3: Novogratic is an amazing way to onboard where there's such
3:06
Speaker 3: an icon and a past podcast guest actually, so shout
3:10
Speaker 3: out to the Nova Gradic team, and you've really had
3:14
Speaker 3: some great unique paths to come into this.
3:18
Speaker 2: Let's start from scratch here.
3:20
Speaker 3: Community development finance it's a world that not many of
3:24
Speaker 3: us dabble in.
3:26
Speaker 2: But you also hear it's so crucial to so.
3:29
Speaker 3: Many development deals and so crucial to the affordable housing space.
3:35
Speaker 2: Just kind of.
3:36
Speaker 3: Thinking about that community development finance, lens, Was there a
3:41
Speaker 3: particular project, is like, as you were progressing through your
3:45
Speaker 3: journey that really stood out to you that made you say, Aha,
3:51
Speaker 3: this is what I want to do or was it
3:54
Speaker 3: just more you know, a step by step progression for you.
3:57
Speaker 2: So I would say working at Novogratic, the first projects
4:01
Speaker 2: that I worked on was the historic renovation of a
4:04
Speaker 2: of the Tutor Arms Hotel, which is on the east
4:06
Speaker 2: side of Cleveland, near where a lot of our institutions are,
4:10
Speaker 2: and I had moved over. There's a big east and
4:12
Speaker 2: west side divide in Cleveland, and I had actually moved
4:15
Speaker 2: from the west side to the east side for time
4:19
Speaker 2: and I would drive past it every day traveling downtown.
4:23
Speaker 2: So it was early in my career I was learning
4:26
Speaker 2: it was a lot to get the deal to closing,
4:30
Speaker 2: but then I got to see the transformation of the
4:33
Speaker 2: old building turn into an elegant hotel and be the
4:38
Speaker 2: staple of my early morning commute headed downtown. So that
4:42
Speaker 2: was one of the pivotal moments in my career that
4:46
Speaker 2: I was able to say, Wow, that's really rewarding to
4:50
Speaker 2: be able to put, you know, the blood, sweat and
4:51
Speaker 2: tears in and then see how it impacts my everyday commute.
4:57
Speaker 2: In addition to historic renovations, I also can new market
5:00
Speaker 2: tax credits and sometimes I like to say that's kind
5:03
Speaker 2: of the warm and fuzzy part of my job, where
5:07
Speaker 2: we're funding projects in low income communities that are directly
5:11
Speaker 2: bringing intepacts to low income people. So it's going to
5:15
Speaker 2: be healthcare, education, social services jobs. So that's also being
5:21
Speaker 2: very impactful in my career being born and raised in Cleveland,
5:25
Speaker 2: financing nonprofits that are bringing much needed services to the
5:29
Speaker 2: people that don't necessarily get as much as many services
5:34
Speaker 2: as they deserve. And these are not just providing the services.
5:37
Speaker 2: These are beautiful buildings that the people get to go
5:41
Speaker 2: into and say, I deserve to get healthcare services, I
5:44
Speaker 2: deserve to get food that will nourish my family. So
5:48
Speaker 2: that's the other part of the passion that I have
5:52
Speaker 2: with the New Market tax credit.
5:54
Speaker 3: And both of these financing tools actually are helping aspects
5:59
Speaker 3: of what I say affordable housing because you're improving a neighborhood.
6:02
Speaker 3: So whether there are units in the hotel or whether
6:06
Speaker 3: there are units in that community center, I think is
6:09
Speaker 3: irrelevant in most cases because it's still changing a neighborhood.
6:15
Speaker 3: It's making a neighborhood better through a variety of offerings,
6:19
Speaker 3: not just an affordable apartment. So I love how this
6:23
Speaker 3: is a more comprehensive neighborhood improvement strategy that P and
6:28
Speaker 3: C and that you're working on, just for the sake
6:32
Speaker 3: of people who are not maybe as familiar with the
6:35
Speaker 3: packaging of how the deals get done. Just walk us
6:40
Speaker 3: through the two mechanisms we've talked about, the historic tax
6:43
Speaker 3: credit and then wanting to tell us about the New
6:45
Speaker 3: Market tax credit, what they do, what they are, how
6:49
Speaker 3: they work of if you can just give us a
6:52
Speaker 3: primer on some of those mechanisms.
6:55
Speaker 2: Absolutely so. The historic tax credit is a tax credit
7:00
Speaker 2: that could be generated from a project, and the tax
7:03
Speaker 2: credit is calculated as twenty percent of qualified rehabilitation expenditures
7:09
Speaker 2: or qres. And there's a lot of acronyms in the
7:13
Speaker 2: industries that I work in, so please bear with me.
7:16
Speaker 2: But these tax credits can be claimed over a five
7:20
Speaker 2: year period, and that is the five year tax credit
7:24
Speaker 2: compliance period. So the projects could be renovations of historic buildings.
7:31
Speaker 2: These buildings would be either part of a historic district
7:35
Speaker 2: and deemed significant to the district, or they can be
7:38
Speaker 2: individually listed on the National Register of Historic Places. So
7:43
Speaker 2: when the project generates the historic tax credit, some developers
7:46
Speaker 2: are able to take those tax credits, but a lot
7:49
Speaker 2: of the time they can't take the tax credits on
7:53
Speaker 2: their personal returns, so then they would syndicate the tax
7:56
Speaker 2: credits to investor like P and Z for example. So
8:02
Speaker 2: P and C we do look to projects to be
8:05
Speaker 2: I would say, generating at least three million of historic
8:09
Speaker 2: tax credits, and then there's a syndication rate since that
8:13
Speaker 2: credit is earned over a five year period. So let's say,
8:17
Speaker 2: for example, a project might be a they might purchase
8:23
Speaker 2: a building for two million dollars and then renovate the
8:26
Speaker 2: building for ten million dollars. That would generate a two
8:33
Speaker 2: million dollar or twenty percent historic tax credit. If we're
8:38
Speaker 2: paying eighty cents on the dollar of historic tax credits,
8:43
Speaker 2: that would bring roughly one point six million in equity
8:48
Speaker 2: to one of these historic tax credit developments. So that's
8:52
Speaker 2: therefore the subsidy that the historic tax credit would bring
8:56
Speaker 2: to a capital staff. So there are some complex cities
9:00
Speaker 2: bringing in a institutional partner like P and C. For example,
9:05
Speaker 2: there's a lot of documentation that goes in with it,
9:09
Speaker 2: and the documentation is done by the attorneys, so there
9:12
Speaker 2: is a closing process. But again when thinking about what
9:15
Speaker 2: the subsidy is and the brain damage, uh, there's there's
9:19
Speaker 2: a lot of direct benefit that goes to the projects
9:23
Speaker 2: to the developer to fill some gaps in the capital stack.
9:27
Speaker 3: And is this historic tax credit tool? You know, I
9:31
Speaker 3: think of people who are working through a process. Are
9:34
Speaker 3: is it a decision criteria whether they go in or
9:38
Speaker 3: they don't go in to do a renovation.
9:40
Speaker 2: Having the ability to use this is that?
9:44
Speaker 3: Is that like turning and making it more advantageous, reducing
9:49
Speaker 3: the risk or something.
9:51
Speaker 2: Is this that big of a decision criteria? It can be.
9:55
Speaker 2: So with the historic tax credit, as I mentioned, the
9:58
Speaker 2: building has to be listed on the National Register or
10:00
Speaker 2: deemed significant to its historic district. There that's the first
10:04
Speaker 2: part of the National Park Service application. Part two is
10:08
Speaker 2: working with the architect to tell the National Park Service
10:12
Speaker 2: about the renovation that's going to be done so they
10:15
Speaker 2: can approve it so it falls within their standards. So
10:19
Speaker 2: one of the big general expenses is going to be windows.
10:23
Speaker 2: So windows have changed a lot over decades and centuries,
10:28
Speaker 2: so that is one renovation that can cost a lot
10:33
Speaker 2: of money to maintain the existing windows or find new
10:38
Speaker 2: windows that meet those historic standards. So that would be
10:42
Speaker 2: one way where a developer might say, I don't know
10:46
Speaker 2: if I necessarily want to pursue these historic tax credits
10:50
Speaker 2: because of the additional complexity and the additional costs that
10:54
Speaker 2: might be incurred for someone looking to say, you know,
10:58
Speaker 2: I want to do a historic renovation on a building,
11:00
Speaker 2: it's going to be a little bit more expensive. We
11:03
Speaker 2: need to find a historic investor to syndicate syndicate these
11:06
Speaker 2: credits to. It does financially strengthen a project. So from
11:10
Speaker 2: a lender looking at the project, they would say, you know,
11:14
Speaker 2: if this is going to be a ten million dollar project,
11:17
Speaker 2: we might loan eighty percent loan to value. Well, there's
11:20
Speaker 2: going to be some developer equity. Well, that loan to
11:23
Speaker 2: value might go down or the loan to cost I
11:25
Speaker 2: should say, might go down to seventy percent for the lender.
11:29
Speaker 2: So therefore they have it's it's an easier underwriting process
11:34
Speaker 2: because they're they're covering less of what the value of
11:38
Speaker 2: the building would be. So it definitely strengthens the capital
11:43
Speaker 2: stack when a lender would be evaluating it, and then
11:46
Speaker 2: that can be looked at as equity from the developer,
11:50
Speaker 2: so they would say, you know, we're going to have
11:52
Speaker 2: this building, We're going to put this much equity in.
11:54
Speaker 2: But at the end of the five year compliance period
11:56
Speaker 2: the investor will be out and that's basically sweat equity
12:00
Speaker 2: they put into the building that they gained through the
12:03
Speaker 2: investor equity.
12:05
Speaker 3: So, before we go on to the new market tax
12:07
Speaker 3: credit piece of this, is there a particular project that
12:11
Speaker 3: you really really like for whatever reason, design or placement
12:19
Speaker 3: or contribution to the community that used this particular historic
12:23
Speaker 3: tax credit model. I mentioned in the intro and aging mill,
12:28
Speaker 3: and I'm not sure if that one was actually had
12:31
Speaker 3: historic tax credit, But is there one that you would
12:34
Speaker 3: like to describe to us how it evolved and how
12:37
Speaker 3: it looked that really hit home for you.
12:41
Speaker 2: So back to my Cleveland roots, there's the West Side
12:44
Speaker 2: Market which is on the near west side of Cleveland,
12:47
Speaker 2: and we were the new market's investor. There were also
12:50
Speaker 2: historic tax credits and that closed a little over a
12:53
Speaker 2: year ago, and that is a historic market that I
12:56
Speaker 2: visited as a child when I lived in the city.
12:59
Speaker 2: I would put my children in the trailer on my
13:02
Speaker 2: bike and bike there and take my children there. So
13:05
Speaker 2: when the opportunity came up for P and C to
13:08
Speaker 2: be a partner in the transaction, I really had to
13:11
Speaker 2: advocate for being a part and I gathered my local
13:16
Speaker 2: P and C folks to help garner support for our
13:20
Speaker 2: credit officers and our leadership team, and we were able
13:23
Speaker 2: to be part of the renovation. So this was a
13:25
Speaker 2: historic market that had a lot of deferred maintenance. There
13:30
Speaker 2: were a lot of improvements that could happen. And with
13:35
Speaker 2: the complexity being publicly owned, having a newly foreign not
13:40
Speaker 2: formed nonprofit as the operator, having the port involved, there
13:44
Speaker 2: were a lot of players of very complicated capital stack.
13:48
Speaker 2: But it was something that P and C and myself
13:50
Speaker 2: wanted to be involved in because it is so there's
13:54
Speaker 2: so much history and it's such an important piece of
13:57
Speaker 2: the Cleveland landscape. So we were able to be involved
14:00
Speaker 2: in that. We helped, you know, find solutions to the
14:03
Speaker 2: problems that came up during the closing process, successfully closed
14:07
Speaker 2: the project and the first part of the renovation has
14:10
Speaker 2: been completed. So we're very excited about being able to
14:13
Speaker 2: be part of continuing the legacy that the West Side
14:17
Speaker 2: Market can give to families in the future.
14:20
Speaker 3: You know, when people think of historic buildings, there's always
14:23
Speaker 3: the word complex when it comes to renovation, but there's
14:28
Speaker 3: also the absolute beauty of the restoration itself. It generates
14:34
Speaker 3: a lot of this attachment in nostalgia and just truly.
14:37
Speaker 2: Craftsmanship of the architecture.
14:39
Speaker 3: So I like how you mentioned your own example of
14:43
Speaker 3: what that area meant to you as you were in it,
14:47
Speaker 3: and it's I mean, it really does it. It preserves
14:50
Speaker 3: something for a piece of time that did mean things
14:54
Speaker 3: for people in the community. So it's great to have
14:58
Speaker 3: a tool like that to be able to use for
15:01
Speaker 3: people who aren't familiar with the historic tax credits. Explain
15:07
Speaker 3: the process for somebody who wants to go down the
15:13
Speaker 3: redevelopment path you mentioned. You know that it has to
15:17
Speaker 3: fall within the certain guidelines and you know the architecture
15:21
Speaker 3: specs have to match.
15:23
Speaker 2: But what would be the original entrance door to be
15:27
Speaker 2: able to go after these tax credits? So it would
15:31
Speaker 2: be owning or purchasing a historic building that either lies
15:37
Speaker 2: within a district or is individually listed on the National Register.
15:42
Speaker 2: We also see buildings that are not in a district
15:45
Speaker 2: and do have significant value to the community that can
15:49
Speaker 2: be listed on the National Register, and that would be
15:52
Speaker 2: what we call the Part one National Park Service process
15:56
Speaker 2: and working with a historic consultant of course, so that
16:00
Speaker 2: would be kind of the first step though. So if
16:02
Speaker 2: you have a building that's historic, if it's qualified, if
16:06
Speaker 2: it's individually listed, or if you want to get it listed.
16:09
Speaker 2: And then as I mentioned, the next step would be
16:11
Speaker 2: the Part two working with the architects. Even if the
16:16
Speaker 2: Part two is not approved or not submitted, the capital
16:20
Speaker 2: stack process could be good. When I think about two
16:24
Speaker 2: types of readiness for projects, it's the capital stack readiness
16:28
Speaker 2: and it's the real estate readiness. So for example, the
16:31
Speaker 2: Part two would be part of the real estate readiness.
16:34
Speaker 2: It would be the title and survey, the drawings, having
16:39
Speaker 2: a general contractor and a GMP in place. That's part
16:43
Speaker 2: of the real estate readiness. The capital stack readiness is
16:47
Speaker 2: going to be having your historic investor. Those conversations can
16:51
Speaker 2: start early on PNC as an investor. There are also
16:54
Speaker 2: a lot of syndicators out there. In addition to the
16:58
Speaker 2: federal historic tax credit, some states also have state historic
17:02
Speaker 2: tax credits that bring an additional benefit. So that might
17:06
Speaker 2: be even more compelling for a developer that lives in
17:09
Speaker 2: a state that has a state historic tax credit. That
17:13
Speaker 2: is generally a competitive process. We see in Ohio that
17:17
Speaker 2: it's getting more competitive, so that's another subsidy that could
17:20
Speaker 2: be coupled within the capital stack. In addition to equity
17:24
Speaker 2: historic tax, federal historic equity, and then the debt. Another
17:29
Speaker 2: component of the capital stack readiness is having a debt
17:32
Speaker 2: partner or a lender that you know, could be a
17:36
Speaker 2: community bank that might be familiar with historic tax credits,
17:40
Speaker 2: or it could be another type of maybe national lender
17:45
Speaker 2: that specializes in historic tax credits. But with again the
17:49
Speaker 2: complexity that comes along with the financing, it's always important
17:53
Speaker 2: to have experts that are partners for your closing, whether
17:59
Speaker 2: that's an attorney, an accountant, and a lender, because if
18:03
Speaker 2: you have parties that might not be experienced in it,
18:07
Speaker 2: you're going to pay for it somehow because it'll be
18:10
Speaker 2: the education of let's say the investor, educating your local
18:13
Speaker 2: council on closing a historic tax but a transaction. So
18:18
Speaker 2: ensuring that you have partners that have experience and the
18:21
Speaker 2: expertise in the area is very important.
18:24
Speaker 3: I drive by a particular older all brick school building
18:29
Speaker 3: that used historic tax credits and I'm not sure if
18:34
Speaker 3: they used any other I'm sure they I think they
18:38
Speaker 3: used CDBGNAIL that I think about it too, But you know,
18:41
Speaker 3: the school building was going to be demolished and it's
18:45
Speaker 3: a beautiful structure with large glass arched.
18:48
Speaker 2: Windows and all brick, and nobody wanted to touch it.
18:52
Speaker 3: And so the city in this particular instance went in
18:57
Speaker 3: and was willing to accept the risk and redevelop it
19:02
Speaker 3: but using these historic tax credits, and they turned it
19:05
Speaker 3: into senior housing and it was a beautiful conversion and
19:10
Speaker 3: way to save the property. And they even kept a
19:13
Speaker 3: lot of the old features of the wood floor of
19:16
Speaker 3: the gymnasium and certain pieces like this. But what I
19:21
Speaker 3: see is that so many times that there's a nice
19:24
Speaker 3: creative blend of reuse that can happen if you don't
19:29
Speaker 3: just look at the problems associated with the building. And
19:33
Speaker 3: so this is a great tool to be able to
19:35
Speaker 3: allow some of those creative conversations and conversions to start happening. Now,
19:42
Speaker 3: let's switch to the newmarket tax credit piece of this,
19:45
Speaker 3: because that was another component that you're really really active
19:48
Speaker 3: in on what you're doing and helping originate and close some.
19:53
Speaker 2: Of those deals.
19:54
Speaker 3: At talk a little bit about the mechanism of that,
19:57
Speaker 3: and feel free to share of any of the projects
20:00
Speaker 3: that have used that particular financing tool.
20:04
Speaker 2: Sure, so the new market tax credit has been around
20:07
Speaker 2: since the early two thousands, and with the passage of
20:09
Speaker 2: the Big Beautiful Bill, was actually made permanent for the
20:12
Speaker 2: first time. It was always a temporary program, so we
20:16
Speaker 2: are really proud of that in this industry that we
20:19
Speaker 2: can see the future and it won't just be a
20:22
Speaker 2: temporary future. So the New Markets Program is administered by
20:26
Speaker 2: the CDFI Fund, which is a division of the US Treasury.
20:30
Speaker 2: It is a bipartisan supported program and that's why it
20:33
Speaker 2: was made permanent in last summer. The program is an
20:40
Speaker 2: applied for a program, so it's a competitive program where
20:43
Speaker 2: CDEs or community development entities apply to the CDFI Fund annually,
20:50
Speaker 2: So annually there is a five billion allocation that can
20:55
Speaker 2: be awarded to CDs. The CDEs apply based on what
21:00
Speaker 2: their mission is, their track record, and what future impacts
21:05
Speaker 2: they want to give to low income communities. They also
21:08
Speaker 2: include a pipeline of projects, so those are specific projects
21:11
Speaker 2: that they would be interested in funding, and the awards
21:15
Speaker 2: can come out typically annually. The most recent award was
21:19
Speaker 2: a double award for calendar year twenty twenty four and
21:22
Speaker 2: twenty twenty five, which came out in December, so that
21:25
Speaker 2: was a ten billion dollar award and we're getting ready
21:28
Speaker 2: for the next twenty twenty six application to be released.
21:32
Speaker 2: So when allocations come out projects in low income communities
21:38
Speaker 2: and that's deemed through unemployment rate, poverty rate, and area
21:43
Speaker 2: median income, the projects can either just be qualified, can
21:48
Speaker 2: be qualified as higher distressed, or with the most recent award,
21:52
Speaker 2: there's a new category of deep distressed. There are also
21:56
Speaker 2: CDEs that can apply to fund non metro product and
22:01
Speaker 2: projects in underserved states. So there's various different categories that
22:05
Speaker 2: CDEs can apply and need to fulfill those those promises
22:10
Speaker 2: within their allocation agreement. So when projects are competing for
22:14
Speaker 2: new market tax to allocation that's been granted to CDEs
22:18
Speaker 2: or community development entities, they will complete an intake form
22:22
Speaker 2: that talks about what their project is, how it qualifies,
22:26
Speaker 2: and what impacts it's bringing to the low income people.
22:30
Speaker 2: So these projects typically fall in two categories. It's going
22:33
Speaker 2: to be job creation projects, which are a lot of
22:36
Speaker 2: times for profit companies that might be bringing manufacturing jobs
22:41
Speaker 2: or technical jobs. And then there's also going to be
22:45
Speaker 2: community facilities and those fall within three buckets, which is
22:48
Speaker 2: going to be healthcare, education and that can be everything
22:51
Speaker 2: from cradle to college. We see a lot of workforce
22:57
Speaker 2: training there and then the other bucket. It is kind
23:00
Speaker 2: of let's say social services, food bank. It's kind of
23:05
Speaker 2: a wide category. Okay, So when CDEs are looking at projects,
23:09
Speaker 2: they're going to look at either the job creation, so
23:12
Speaker 2: that would be the jobs created per million dollars of
23:15
Speaker 2: new markets allocation is the metric that CDEs would look for,
23:19
Speaker 2: or would be with a community facility, the low income
23:23
Speaker 2: people served per million of new markets allocation. And these
23:27
Speaker 2: allocations are granted typically and let's say the fifty to
23:31
Speaker 2: ninety million dollar range, So CDEs are typically going to
23:35
Speaker 2: deploy maybe ten to fifteen million per project, and so
23:41
Speaker 2: we can see projects as small as maybe seven million
23:45
Speaker 2: up to let's say forty million dollars plus. So CDEs
23:49
Speaker 2: can partner together to fund a larger size project that
23:52
Speaker 2: are bringing these community impacts. So if a project is
23:57
Speaker 2: located in a low income community, they can start talking
24:01
Speaker 2: with CDEs early on about this is what our project is,
24:04
Speaker 2: this is the impacts we're bringing to low income communities,
24:07
Speaker 2: and then go through their application process for them to
24:12
Speaker 2: be awarded the new market's allocation from a CD. And
24:16
Speaker 2: then once the CDEs have awarded allocation to the project.
24:21
Speaker 2: Then the next piece of the puzzle is bringing in
24:24
Speaker 2: a new markets investor like P and C to start
24:27
Speaker 2: the closing process.
24:29
Speaker 3: So when P and C comes into the process, I
24:33
Speaker 3: know you probably have a whole vetting criterion, a decision
24:37
Speaker 3: making criteria, but just a general if you can say,
24:42
Speaker 3: you know, are you getting one hundred applications but can
24:45
Speaker 3: only approve ten? Or you know, is there some sort
24:49
Speaker 3: of a floodgate there's so many more that come in
24:53
Speaker 3: than you're able to go through. You know, I think
24:56
Speaker 3: in terms of how many what the demand is for
24:59
Speaker 3: affordable housing units versus what the supply is right like,
25:03
Speaker 3: is that the same kind of thing that's happening in
25:05
Speaker 3: the financing realm where there's so many more applications coming
25:08
Speaker 3: in then you can do the deal or or what
25:11
Speaker 3: does it look like in terms of applications or people
25:16
Speaker 3: coming to the table.
25:17
Speaker 2: So when we look at investments, yes, there are many
25:20
Speaker 2: many more projects that we see that we invest in
25:25
Speaker 2: P and C. When we prioritize projects, we do focus
25:28
Speaker 2: on our CRA markets and the priority markets. We also
25:32
Speaker 2: focus on if there's a broader P and C relationship
25:35
Speaker 2: or a debt opportunity, but generally investors will prioritize transactions
25:40
Speaker 2: based on that CRA and just based on the value
25:44
Speaker 2: of that the project is bringing to the investment. So
25:47
Speaker 2: from a risk profile perspective, they'd be looking at the
25:51
Speaker 2: strength of the gear and tour, whether that's a for
25:54
Speaker 2: profit or nonprofit. Also, the cd partners that are involved,
26:00
Speaker 2: there's a vast amount of CDEs and that have many,
26:04
Speaker 2: many relationships with investors, so we like to focus on
26:07
Speaker 2: partnering with our CDE partners that have been good partners.
26:11
Speaker 2: So there's a lot of options when it comes to investors,
26:15
Speaker 2: and investors will compete based on two factors the pricing
26:18
Speaker 2: per credit and then also investors can also be community
26:23
Speaker 2: development energies and have allocation. So if an investor can
26:27
Speaker 2: also bring additional allocation that's needed, that's another way to
26:31
Speaker 2: increase the amount of tax credits generated to a project
26:36
Speaker 2: and to an investor. So those are the two way
26:39
Speaker 2: to kind of quantitative ways that investors compete. From a
26:44
Speaker 2: qualitative standpoint, there's just ease of execution where investors can
26:49
Speaker 2: that investors can bring to the table working with attorneys
26:53
Speaker 2: and throughout the process of opening bank accounts, and reviewing
26:56
Speaker 2: insurance and construction due diligence. So there's the kind of
27:00
Speaker 2: qualitative aspect and the quantitative aspect that investors can compete on.
27:05
Speaker 3: You've mentioned Cleveland a couple of times, and you know,
27:09
Speaker 3: the book of business that you're doing is really bringing
27:12
Speaker 3: new life to communities and places that maybe people have
27:15
Speaker 3: written off, people haven't invested in in such a dramatic way.
27:22
Speaker 2: Has there been a.
27:23
Speaker 3: Particular momentum that you've seen when a community is able
27:29
Speaker 3: to reinvent itself, Like have you seen particular districts or
27:34
Speaker 3: neighborhoods have these types of financing tools go in and
27:39
Speaker 3: make these types of changes to an office or a building,
27:43
Speaker 3: and then you know, the theory is the streets that
27:47
Speaker 3: are parallel start improving and the neighborhood starts to improve.
27:51
Speaker 3: And I think, you know, people see that over time,
27:54
Speaker 3: and there's been studies that back that up too, that
27:57
Speaker 3: it really does happen.
27:59
Speaker 2: But is there a particular.
28:01
Speaker 3: Thing that you've seen in a community as it's reinvented
28:05
Speaker 3: itself that you've noticed over time of doing these types
28:09
Speaker 3: of deals.
28:10
Speaker 2: Yes. So there's a specific school in Cleveland that was
28:14
Speaker 2: religious based and they have closed three phases of new
28:17
Speaker 2: market tax credits. I worked on the first phase when
28:20
Speaker 2: I was at Novagradic and the second two when I
28:22
Speaker 2: was at PNC, and the final third phase was had
28:28
Speaker 2: to close by August thirty first of twenty twenty four
28:32
Speaker 2: because the census track that it was in became unqualified
28:36
Speaker 2: after that thing. Oh wow, Okay, So part of it
28:40
Speaker 2: is due to the development that was happening in the
28:42
Speaker 2: area that the school was anchoring with their campus. Unfortunately,
28:47
Speaker 2: part of it was gentrification also, So that's where sometimes
28:52
Speaker 2: the benefits that this program is bringing is to low
28:56
Speaker 2: income people, but in some ways you can see that
28:59
Speaker 2: gentrification and can also come with that. So though they
29:02
Speaker 2: improved the area, they improved it so much that it
29:05
Speaker 2: became safe, and unfortunately it did start to force I
29:09
Speaker 2: think some of the families out. But so that's an
29:13
Speaker 2: example of the work that can be done over time,
29:16
Speaker 2: over let's say ten years, that organizations can have a
29:21
Speaker 2: catalytic impact on their neighborhood.
29:24
Speaker 3: And in that particular instance, you know, they've built so
29:27
Speaker 3: much capacity, they're familiar with the areas, so they've they've
29:31
Speaker 3: been able to help encourage all of those infrastructure improvements
29:34
Speaker 3: and truly reinvent itself. You know, there's all I think
29:39
Speaker 3: we can have a whole nother conversation on the gentrification.
29:42
Speaker 2: There's been so much that.
29:46
Speaker 3: Happens as we're learning this, because you do want to
29:49
Speaker 3: have infrastructure improvements, you do want to have resources, you
29:53
Speaker 3: do want to have community amenities, but you also have
29:56
Speaker 3: to try to keep the original community and to be
29:59
Speaker 3: able to allow them to be able to still afford
30:01
Speaker 3: and stay in that area. So it's it's a very
30:04
Speaker 3: tricky balance that so many of investors and community leaders
30:09
Speaker 3: are trying to to navigate there. I'm thinking of P
30:14
Speaker 3: and c's role here because you know, you guys, people
30:16
Speaker 3: don't often think about how influential the bank is when
30:20
Speaker 3: it comes to community development. And you mentioned being in
30:24
Speaker 3: a particular area. I think you mentioned and that's how
30:28
Speaker 3: part of the decision criteria. But specifically P and C.
30:33
Speaker 3: You guys are headquarters. You know, you're all over the place.
30:38
Speaker 3: Are there particular regions that you know you're seeing a
30:41
Speaker 3: lot of traction these days that aligns with where you
30:45
Speaker 3: guys are physically.
30:46
Speaker 2: Or market wise. Is there a couple of cities that
30:51
Speaker 2: you want to highlight or mention as part of P
30:54
Speaker 2: and c's footprint. Yes, so P and C, as I mentioned,
30:57
Speaker 2: when we're looking at projects, we do prioritize projects that
31:01
Speaker 2: are in CRA markets. So Pittsburgh, where we're headquartered is
31:05
Speaker 2: a primary CRA market. Along the East coast, Philadelphia and
31:10
Speaker 2: Baltimore Cleveland, where National City used to be headquartered where
31:15
Speaker 2: I sit, is a primary market. Cincinnati, with through some acquisitions, Birmingham,
31:21
Speaker 2: Alabama has been become a larger market. We also have
31:24
Speaker 2: footprint now in the west coast in California, the southwest Colorado,
31:30
Speaker 2: so we are definitely expanding our national footprint. And those
31:36
Speaker 2: are just some examples of the markets that we really
31:38
Speaker 2: prioritize to do projects in. Well, this has been very helpful.
31:43
Speaker 3: I think it is always good when we can talk
31:45
Speaker 3: about redevelopment together and bring our banking partners and hear
31:51
Speaker 3: the philosophy and just hear some of the projects. I
31:55
Speaker 3: want to loop back to one more before we close
31:57
Speaker 3: out here. I mentioned this ag mill that I talked
32:02
Speaker 3: about in the intro, but we haven't really gone through.
32:05
Speaker 2: And discussed some of that. Can you give us some
32:08
Speaker 2: what happened, what did it do?
32:10
Speaker 3: Where is it uh, because that's a very very unique
32:14
Speaker 3: type of a project.
32:15
Speaker 2: So the South Carolina Mill won the twenty twenty six
32:20
Speaker 2: Post Star Impact Award. It was one hundred and twenty
32:23
Speaker 2: five year old denim mill on an eleven acre site.
32:27
Speaker 2: It was converted into one hundred and thirty nine loss
32:29
Speaker 2: that were retrofitted and restored From the one hundred and
32:33
Speaker 2: ninety square foot mill. There were another sixty six units
32:36
Speaker 2: added in a new structure, which can happen with historic
32:39
Speaker 2: tax credits, so there were. It ended up being a
32:42
Speaker 2: two hundred and five unit complex with modern amenities including
32:46
Speaker 2: a pool for South Carolina Fitness Center and then coworking
32:50
Speaker 2: space for the residents too. This was about a sixty
32:53
Speaker 2: million dollar project that generated about five million in federal
32:57
Speaker 2: historics and then about eleven million in state historics in
33:02
Speaker 2: addition to a textile credit equity that came in. So
33:06
Speaker 2: that's just an example of one project that P and
33:08
Speaker 2: C has been involved in, UH that has been able
33:12
Speaker 2: to convert a former mill into a space that is
33:15
Speaker 2: desired for people to live in. Yeah.
33:18
Speaker 3: Beautiful, And you said denim as in like they were
33:21
Speaker 3: making denim deans and that kind of a textile Okay,
33:26
Speaker 3: So you know what a reuse of what probably was
33:30
Speaker 3: a major manufacturer of product, but then a job market,
33:35
Speaker 3: like a lot of people had jobs there, and so
33:38
Speaker 3: I talk about a community attachment to something that really
33:41
Speaker 3: helped the economy.
33:43
Speaker 2: But you know, as trends change.
33:46
Speaker 3: You know, the buildings still hanging on, but it's great
33:49
Speaker 3: to hear that it it took on a new, uh,
33:52
Speaker 3: a new chapter of its own life. So and then
33:55
Speaker 3: you know, like there are pieces of this that you know,
33:57
Speaker 3: you talk about sustainability of the community, just the nostalgia
34:01
Speaker 3: and the building itself, but you know, actually reuse of materials,
34:05
Speaker 3: like you're getting the longer life of what was intended.
34:08
Speaker 2: You know to be there.
34:09
Speaker 3: So what a great win and what a great way
34:12
Speaker 3: to strengthen a neighborhood. Right, absolutely, well, it has been
34:16
Speaker 3: great to have you here again. I've been talking with
34:19
Speaker 3: Marie Hickel, the vice president of the Historic text Credit
34:23
Speaker 3: and New Market tax Credit Relationships at p n C
34:27
Speaker 3: Multifamily Capital and p and C real Estate. Marie, thank
34:31
Speaker 3: you so much for taking the time and sharing all
34:33
Speaker 3: your wisdom with us.
34:35
Speaker 2: Thank you, Katie for the opportunity, Thanks.
34:38
Speaker 1: For listening to change Makers with Katie Gore. To find
34:41
Speaker 1: out more about Katie, go to quad L dot com.
34:44
Speaker 1: That's quad e L dot com. This has been a
34:49
Speaker 1: production of Forbes Books Radio