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[IMGCAP(1)]NEWPORT BEACH, CA-CT/KDF Community Development Partners has closed a $15.5 million financing of a 172,000-square-foot retail center in Azusa and has named former Fremont Investment & Loan VP and regional manager Sarah Woodward as a partner. The financing is for the repositioning of the Azusa center, which is called Citrus Crossing and is at the southwest corner of Citrus and Alosta avenues in that L.A. County city.

The repositioning includes and overhaul and re-tenanting of the property to include Regency Theaters, a Fresh & Easy market, an array of restaurants and new service retailers for the underserved neighborhood, according to the partnership. CT/KDF says that the repositioning also served as a catalyst for the development of an adjacent new housing community. Together with CT/KDF’s initial investment in the project to facilitate the renovation, the funding represents a financing commitment to the project of nearly seven years.

[IMGCAP(2)]According to CT/KDF principal Robert M. Campbell, president of Newport Beach-based CT Realty Corp., the funding was provided through New Markets Tax Credits (NMTC) from the CDFI Fund of the US Treasury Department. CT/KDF, which received $90 million from the government for investment in areas of distress in Southern California in late 2006, has been using its allocation primarily in the form of below-market mezzanine debt to act as a catalyst to the development and redevelopment of commercial and for-sale housing projects.

Campbell comments that, in addition to major rehab projects such as Citrus Crossing, “We are now using the NMTC funds as a mechanism for the workout of non-performing, overleveraged real estate projects which have hit maturity on the original construction loan.” Using the New Markets Tax Credits, he adds, “We are able to stabilize the projects and complete the necessary improvements for these properties, which will help revitalize their neighborhoods.”

Campbell and partner Paul Fruchbom of KDF Communities LLC in Newport Beach note that new partner Woodward is a 25-year veteran of real estate finance with particular expertise in property valuation, debt restructuring and structured finance. According to Woodward, an additional $10 million of funds are set for a closing next week to restructure the matured construction loan on a historic downtown San Diego office building and to complete the renovation and re-tenanting of the building. This financing also prevents foreclosure by the construction lender who has reached loan maturity.

Woodward explains that the NMTC investment provides the construction lender with the opportunity to reduce its leverage position and to extend the loan rather than foreclose on the property. “In this case, the loan was extended for seven years,” Woodward says. She adds, “Use of the NMTC funds enables financial institutions to do exactly what the FDIC has been seeking―get back into the lending business.”

CT/KDF is working on several other NMTC transactions as well. Current projects include an expansion program by a Hispanic grocery store chain to buy, reposition and re-tenant failing neighborhood shopping centers in distressed market areas. Other projects include the financing of ground-up construction of a city public works complex in a distressed transit-oriented location, and funding of an adaptive re-use housing project in an urban redevelopment area.

Woodward says that, with the closing next week, CT/KDF will have invested $28 million of its allocation, and that the partnership was prudent in its lending efforts in 2007 and 2008 due to overheated real estate market conditions. “We wanted to preserve our NMTC funds in order to accommodate the right investments at the right time,” she says. The new CT/KDF partner says the partnership is “now in prime position to make strategic investments with these funds.” CT/KDF is currently working on approximately $200 million of new investments with only $62 million of allocation remaining, she adds.

Woodward is hopeful that CT/KDF will be awarded the additional $125 million of NMTC allocation it has applied for in the current round. Awards are expected to be announced later this month.

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