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Video related to this article is available below.Issue date: 2/11/08 Section: News
Tax credit assists area developers
Daniel Zinshteyn
A bill passed by the U.S. Congress eight years ago is slowly beginning to change the face of urban development in West Philadelphia.
The Hub, an apartment and retail building located at 40th and Chestnut streets, was the first project in Pennsylvania to take advantage of the New Markets Tax Credit program, created as part of the Community Renewal Tax Relief Act of 2000.
The act was passed by Congress to provide incentives for businesses to move into low-income neighborhoods. Other area developments, including the Hub II - a companion to the first building that will be located across the street - are also slated to benefit from the NMTC.
NMTC functions on a federal level as a $15 billion grant from the U.S. Department of the Treasury to various community development entities around the country. The Reinvestment Fund - through which the Hub received investments - is one such entity in Philadelphia.
The main point of NMTC is to "help make deals work that otherwise wouldn't work," said Paul Sehnert, Penn's director of real estate development.
In 2004, Teres Holdings, the developer behind the Hub received about $4.8 million from investors toward the construction project. The investors, in return, received income tax shields in the form of tax credits.
Another benefit of the program is that it enables developers to offer lower rents to tenants.
Buildings such as the Radian, which is being funded by the national developer Inland Group and receives most of its revenue from its residential tenants, are not eligible for NMTC.
In addition to apartments, the Hub houses a beauty school and salon and will be the site of a Mexican restaurant from Jose Garces.
"These are not credits generally meant to support residential development," Sehnert said. "There are already low-income tax credits that support this. NMTC is meant to encourage commercial development in low-income areas."
The Hub, an apartment and retail building located at 40th and Chestnut streets, was the first project in Pennsylvania to take advantage of the New Markets Tax Credit program, created as part of the Community Renewal Tax Relief Act of 2000.
The act was passed by Congress to provide incentives for businesses to move into low-income neighborhoods. Other area developments, including the Hub II - a companion to the first building that will be located across the street - are also slated to benefit from the NMTC.
NMTC functions on a federal level as a $15 billion grant from the U.S. Department of the Treasury to various community development entities around the country. The Reinvestment Fund - through which the Hub received investments - is one such entity in Philadelphia.
The main point of NMTC is to "help make deals work that otherwise wouldn't work," said Paul Sehnert, Penn's director of real estate development.
In 2004, Teres Holdings, the developer behind the Hub received about $4.8 million from investors toward the construction project. The investors, in return, received income tax shields in the form of tax credits.
Another benefit of the program is that it enables developers to offer lower rents to tenants.
Buildings such as the Radian, which is being funded by the national developer Inland Group and receives most of its revenue from its residential tenants, are not eligible for NMTC.
In addition to apartments, the Hub houses a beauty school and salon and will be the site of a Mexican restaurant from Jose Garces.
"These are not credits generally meant to support residential development," Sehnert said. "There are already low-income tax credits that support this. NMTC is meant to encourage commercial development in low-income areas."
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