Kakaako developer's tax credits await clearance
It is not clear how much Hawaii will receive from tax credits awarded to Townsend
An executive with a Maryland firm that is developing the University of Hawaii's Cancer Research Center said it is not clear how much Hawaii will receive from a $19.5 million pool of federal tax credits awarded to his firm.
Rick Cundiff, a vice president and director of investment banking for Townsend Capital LLC, said that how much of the tax credits Townsend invests in Kakaako will depend on requirements imposed by the U.S. Treasury Department's Community Development Financial Institutions Fund.
Earlier this month, the fund announced that it had awarded Townsend the federal credits under the New Markets Tax Credit program, which is designed to spur investment in economically distressed areas. Kakaako qualifies as such an area under the program's rules.
Although Townsend is leading the development of the cancer center, the firm does business in several other states. And it remains to be seen precisely how and where the Treasury Department will require Townsend to invest, Cundiff said.
"Right now, we're kind of in a state of waiting for an allocation agreement from the CDFI," Cundiff said.
Until such an agreement is executed, Cundiff said, he does not know what requirements the agency might impose.
"I believe that the CDFI fund -- that their goal could be to have as many properties benefiting from the credits as possible," he said.
A Townsend affiliate designated to administer the credits, Urban Research Park CDE LLC, is a community development firm established to develop high-tech research centers in Illinois, Kentucky, Maryland, New York and Pennsylvania, as well as Hawaii.
Townsend must invest a total of $50 million to reap the $19.5 million in credits, which means that the Kakaako research center could receive a substantial boost even if Townsend is required to divide the investment equally among all of the locations that Urban Research Park serves.
Cundiff said the tax credits are an incentive that can be used to leverage debt or equity investment by enhancing yields for investors without increasing costs for the developer. The credits will not, however, enable the development of a project that simply makes no economic sense, Cundiff said.
"This is absolutely not a program that will take a bad deal and make it a good deal," he said. "But what it will do is help a deal that needs that little extra push."
