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V O L . X X V N O. V I I I A P R I L 1 5 , 2 0 1 9 22 R E A L E S TAT E / C O N S T R U C T I O N / D E S I G N F O C U S e Lamb Block had an overall price tag of $2.3 million. With the help of CEI Capital Management, the project received a New Markets credit that allowed it to receive a subsidized loan. Developers Collaborative gave the credit to its lender, Bangor Savings Bank, in exchange for a $960,000 loan at a low interest rate of 2%, versus what would have been a 4% interest rate. At the higher rate, Developers Collaborative wouldn't have been able to borrow what it needed for the project; its borrowing capacity was limited by the projected rental income. e project also received a federal his- toric tax credit of $410,000, state historic credit of $442,000, $400,000 from the now-defunct Communities for Maine's Future bond program, and Bunker's own deferred developer's fee of $154,000. "If I didn't have all those things, I'd have no project," Bunker says. "We got the tenant. We got them to a rate they could afford. We couldn't push the rent any higher. So we wouldn't have been able to get any more debt." U.S. Treasury Department's New Markets Tax Credit program and Maine's New Markets Capital Investment program, administered by Finance Authority of Maine, target low- income communities. e programs have been used exten- sively in Maine, says Charles Spies, CEO of CEI Capital Management, which helps deploy the credits. e net effect is a return of more than $3 in economic activity — spending on things like construction, plus increased property taxes — for every $1 in tax credit, he says. ere are a variety of other finance tools. A commonly used program is the low-income housing credit, issued by the U.S. Treasury and allocated by the Maine State Housing Authority. "It's very successful and has been transformational in many communities," CEI's John Egan says. Tax Increment Financing, admin- istered by municipalities, subsidizes redevelopment, infrastructure and other community-improvement projects. It's proven a powerful tool for attracting development, Egan says. For example, a developer turning an old school into apartments in a TIF district might be able to negotiate a $12,000 property tax bill instead of $24,000. "at extra $12,000 allows the developer to negotiate more easily the amount of debt he has to seek, or to turn that tax savings into another capital source," Egan explains. Opportunity Zones Still untested is the Opportunity Zone program: "the new kid on the block," says Spies. "at's still maturing in terms of how it will be used," Spies says. Designed to drive capital into eco- nomically distressed areas, the program allows individuals to invest capital gains in opportunity zone projects, thus defer- ring the gain and a portion of associated capital gains taxation. Any gain made on an Opportunity Zone investment that remains in the project for a decade or longer will see no capital gains tax. Mattson views the program with optimism. "ere's trillions of dollars of money that has accumulated over the last 10 years in the incredible run of the stock market," says Mattson. "An inves- tor looking to sell a stock, that maybe increased 400% in the last 10 years, might look at Opportunity Zones as a place to put the money to shelter it. It's a very creative idea." In the end, says Mattson, the devel- oper pieces together programs as a func- tion of the economics of the project. "at's different in Portland versus Caribou," he says. "If you're doing a proj- ect in Caribou, you might have lower income yield, but everything else is the same as Portland — taxes, insurance, construction costs. In Caribou, you might only be able to generate $750,000 of bank debt, because you have less income. So you have to think of ways to make up your capital stack. ese incentives are really important. If I were in Millinocket and I saw an Opportunity Zone, I would think, 'Wow, this changes everything.'" Laurie Schreiber, Mainebiz senior writer, can be reached at lschreiber @ mainebiz.biz Securities and Advisor y Ser vices offered through Commonwealth Financial Network. Member, FINRA/SIPC, a Registered Investment Adviser "Best in State" CHRISTINE BYRNE MBA , CRPS ® PARTNER & FOUNDER WE'RE PROUD THAT CHRISTINE HAS BEEN NAMED TO FORBES MAGAZINE'S "BEST-IN-STATE WEALTH ADVISORS" LIST FOR 2019. ONE MEETING, AND YOU'LL UNDERSTAND WHY. 56 DEPOT ROAD FALMOUTH, ME 04105 (207) 541-9500 BACKCOVEFINANCIAL.COM * The 2019 ranking of the Forbes' Best-in-State Wealth Advisors 1 list was developed by SHOOK Research and is based on in-person and telephone due-diligence meetings to evaluate each advisor qualitatively and on a ranking algorithm that includes client retention, industry experience, review of compliance records, firm nominations, and quantitative criteria (including assets under management and revenue generated for their firms). Overall, 30,000 advisors were considered, and 3,500 (11.6 percent of candidates) were recognized. The full methodology 2 that Forbes developed in partnership with SHOOK Research is available at https://www.shookresearch.com/a-methodology.html. 1 This recognition and the due-diligence process conducted are not indicative of the advisor's future performance. Your experience may vary. Winners are organized by state. Some states may have more advisors than others. You are encouraged to conduct your own research to determine if the advisor is right for you. 2 SHOOK does not receive a fee in exchange for rankings. » C O N T I N U E D F RO M P R E V I O U S PA G E If you ask the top 10 housing developers in Maine if they could have redeveloped a mill, say, in Biddeford or Lewiston without the Maine historic tax credit, they would say 'No.' It's a game-changer. — Kevin Mattson, Dirigo Capital Advisors

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