WASHINGTON, DC - The AFL-CIO Housing Investment Trust (HIT) announced today that its subsidiary, Building America CDE, Inc. (BACDE), has been awarded a $35 million allocation under the federal New Markets Tax Credit program. BACDE will use the tax credits to attract capital for high-impact projects in under-served communities, creating needed housing, jobs and economic development.
Source: AFL-CIO Housing Investment Trust
BACDE is one of 99 organizations awarded a total of $3.5 billion in New Markets Tax Credits (NMTCs), according to a statement by Donna Gambrell, Director of the U.S. Treasury Department's Community Development Financial Institutions (CDFI) Fund. Two hundred and fifty organizations had competed for NMTC allocations under the 2010 program round.
"We are pleased to be chosen to participate in this effort to meet the needs of communities that are often overlooked by traditional investors," said Eric W. Price, CEO of BACDE and Executive Vice President of the HIT. "The tax credits will help fill gaps in financing to make innovative development projects possible."
Mr. Price explained that BACDE will offer the federal tax credits to private investors to encourage them to bring needed capital to low-income communities. "This is an exciting opportunity for BACDE to attract private investment capital to distressed neighborhoods and provide much-needed construction and permanent jobs," Mr. Price said.
BACDE has identified prospective projects that include mixed-use housing and commercial developments, as well as health care facilities. The organization is currently evaluating prospective projects with the goal of making financing decisions by late spring.
"We expect many of these projects could offer sound investment opportunities for the HIT as a debt lender," said HIT Executive Vice President and Chief Portfolio Manager Chang Suh. "BACDE's allocation of tax credits should serve as a catalyst for the kinds of community development projects in which the HIT specializes." The HIT has a 45-year history of investing union pension capital in mortgage securities for projects that generate competitive returns while achieving other goals important to working people, including support of union job creation, affordable housing, and community revitalization.
This is the first NMTC allocation for BACDE, which was established as a subsidiary of the HIT in 2010. BACDE's mission of financing projects in disadvantaged communities fits closely with long-held labor investment goals. "BACDE brings us closer to the vision of the 'auxiliary housing corporation' first voiced nearly 50 years ago by the AFL-CIO's founding president, George Meany," observed Mr. Price. "The projects financed through BACDE should help transform neglected communities by meeting their urgent needs for housing, business development, and good union jobs."
The New Markets Tax Credit program, administered by the Treasury Department's Community Development Financial Institutions Fund, was established by Congress in 2000 to encourage investments in businesses and real estate projects located in low-income communities. It has been a catalyst for over $20 billion of private investments in urban and rural communities throughout the country. Companies or individuals can make these investments through a financial intermediary – such as BACDE – that has been certified by the Treasury Department as a community development entity (CDE).
The AFL-CIO Housing Investment Trust is a fixed-income investment company registered with the Securities and Exchange Commission. It manages $3.9 billion in assets for approximately 350 investors, which include union and public employee pension plans. The HIT invests primarily in government and agency insured and guaranteed multifamily and single family mortgage-backed securities. The HIT is one of the earliest and most successful practitioners of socially responsible, economically targeted investing, with a 45-year track record that demonstrates the added value derived from union-friendly investments. The investment objective of the HIT is to provide competitive returns for its investors and to promote the collateral objectives of constructing affordable housing and generating employment for union members in the construction trades and related industries. Since its inception, the HIT has invested $6 billion to help finance nearly 98,000 units of housing nationwide, generating more than 66,000 union jobs.