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NEWPORT BEACH, CA-CT/KDF Community Development Partners, a new entity formed by locally based Ct Realty Corp. and KDF Communities, received a $90-million allocation from the US Treasury Department’s New Markets Tax Credits (NMTC) Program. The partners will principally use the funds to provide discounted equity to create infill mixed-use communities near transit-oriented sites in distressed areas.

“Because Southern California remains the nation’s least affordable area, it is becoming increasingly difficult for hardworking families and residents to find affordable housing options,” says Bob Campbell, managing member of CT/KDF. “By offering inexpensive equity, we can lower the developer’s risk thus encouraging the development of affordable for-sale housing in low income communities that are closer to where people work or near public transportation.”

The new entity’s business strategy in disbursing their allocation is to primarily provide equity at a discount of up to 50% of the market rate for developments that combine affordable for-sale workplace condominium with retail and offices. CT/KDF believes that equity and mezzanine debt are the highest risk components of a project’s financial structure, which is why equity is nearly non-existent for projects in distressed and low income areas.

When equity is available, Campbell tells GlobeSt.com, it is extremely expensive and can be risky, noting that “first trust deed holders can foreclose on mezzanine and equity and [those who aren't first trust deed holders] can lose out.”

CT/KDF is hoping that private-sector investors will see their federal tax credit as an incentive to increase the investment capital flow in these underserved Southern California areas, which would then stimulate economic growth and create jobs. Therefore, Campbell notes that CT/KDF will be financing projects that are large enough to serve as catalysts for other redevelopments in the surrounding area.

Under the federal program, CT/KDF will receive a credit against federal income taxes for making qualified equity investments. The credit will provide 39% of the investment’s cost and will be claimed over a seven-year period. Since the NMTC Program was created, about $12.1 billion in tax credits have been awarded to various community development entities.

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