New Markets Tax Credit Application, Allocation Management and Industrial Lending

City of Chicago / Chicago Development Fund

SB Friedman assisted the City of Chicago in creating a subsidiary entity, Chicago Development Fund (CDF), and applying for a competitive federal allocation of New Markets Tax Credits from the U.S. Treasury. We served as lead author of CDF’s successful applications during the Fourth, Seventh, Eighth and Ninth Allocation Rounds, obtaining total allocations of $238 million.  We have subsequently assisted CDF with the management, deployment and ongoing servicing/asset management of this tax credit pool.

CDF seeks to promote industrial organizations interested in relocating or expanding, while creating job opportunities in low-income communities, within the City of Chicago. SB Friedman hasassisted them in developing programmatic initiatives to target industrial business expansion projects. This has included product structuring, targeted marketing and outreach, and extensive efforts to limit transaction costs for small deals. Representative transactions include the following:

radio flyerRadio Flyer

SB Friedman managed CDF’s provision of $11.2 million in New Markets Tax Credits financing to Radio Flyer, Inc., a manufacturer of children’s toys and the world’s largest manufacturer of wagons.  Radio Flyer is renovating a 68,000 square foot portion of its more than 100 year old headquarters building on W. Grand Ave. 

The $14.3 million project will include the interior renovation of former production space into office and R&D/Model Shop space.  In addition, Radio Flyer will construct a one acre outdoor “Playlab” for product testing.  The entire project is designed to achieve LEED Silver certification.  The project will retain 58 jobs and create 30 new full-time jobs, primarily relating to R&D functions.  Construction began in November of 2010 and is expected to finish in August of 2011.

Testa Produce

SB Friedman managed CDF’s participation in the provision of $7.1 million in New Markets Tax Credits financing to Testa Produce, a family-owned wholesale distributor of fresh produce as well as frozen, canned and specialty items.  CDF provided subordinate financing for the construction of a 91,300 square foot distribution center in the Stockyards Industrial Corridor. 

The $23 million facility is designed to achieve LEED-platinum certification, and will include a large wind turbine to generate electricity, a grey water system to reuse wastewater on-site, hot water solar panels, PV solar panels, an extensive green roof, rainwater harvesting and daylight harvesting. Construction is anticipated to be completed in April 2011.

NMTC equity for Testa Produce was provided by JPMorgan Chase.  MB Financial provided $15 million in senior debt through Recovery Zone Facility Revenue Bonds in partnership with the City of Chicago.  The City also provided a land write-down for property acquisition.  

Imperial Zinc Corporation

SB Friedman assisted a zinc anode/alloy processing company on Chicago’s Far South Side in financing a new, 80,000 square-foot replacement facility for their prior building, which was lost to a fire in the summer of 2008. Weaided the firm in evaluating the potential for New Markets Tax Credits (NMTC) to provide approximately $1.4 million in subsidy towards a $6 million reinvestment, effectively offsetting higher operating costs in the City of Chicago. NMTC financing allowed the company to build a larger, higher-tech facility that will preserve 40 jobs and add 45 to 55 new positions to a disinvested area of Chicago. Our firm assisted in structuring and closing the transaction in May of 2009.

With the assistance of NMTCs, Imperial Zinc was able to maintain its production in Chicago and increase its current employment to pre-fire levels. The new facility will also be utilized to add new product lines, which will further increase employment. The facility was completed in May 2010. 

Charter Steel Trading Company

SB Friedman assisted Charter Steel in evaluating the potential for TIF and/or New Markets Tax Credit financing to assist in acquisition, rehab and equipment financing for an expanded facility. The firm wanted to substantially expand production to add new steel-related product lines for existing clients. The total estimated project cost is approximately $4.9 million. SB Friedman aided the firm in evaluating the relative timing, structuring and compliance issues associated with TIF and NMTC, and ultimately facilitated their choice of NMTC financing.

The firm closed on an NMTC transaction that was made possible through a partnership with JPMorgan Chase, which provided approximately $1.375 million in NMTC equity towards the new expansion. This expansion is projected to result in the creation of 30 jobs over time, including leveling line, fork lift and crane operators, shipping and receiving inspectors, and packagers.