|
|
|
Sequence of events, using the Housing
And Regeneration Tax Credit (HART)
| |
What happens
|
Sponsor
|
Investor
|
Financiers
|
Home buyers
|
RDA
|
Inland Rev
|
|
Beginning: what we have now
|
Sponsor wants to develop
property, has financing gap
|
£2,000,000
Total Dev Cost
|
£750,000
Potential
equity from HART
|
£1,000,000
Construct loan
£250,000
Sponsor equity
|
£1,250,000
To buy homes
|
|
|
|
1: Allocation
|
RDA announces HART's to
fund
|
|
|
|
|
£1,000,000
HART chit
|
|
|
2: Award
|
RDA awards HART's to sponsor
|
£1,000,000
HART chit
|
|
|
|
|
|
|
3: Financing
|
Sponsor obtains construction
loan, plus sponsor equity
|
£1,000,000
Construct
loan
£250,000
Sponsor equity
|
|
£1,000,000
owed
£250,000
advance
|
|
|
|
|
4: Equity raise
|
Sponsor raises equity from
HART investor
|
£750,000
Equity from
HART
|
£1,000,000
HART chit
|
|
|
|
|
|
5: Construction
|
Sponsor builds property
using £2,000,000
|
£2,000,000
Sources pay
Total Dev Cost
|
|
|
|
|
|
|
6: Completion
|
Sponsor sells homes to
market buyers
|
£1,250,000
Repay const
loan, sponsor equity
|
|
|
£1,250,000
Market value
of homes owned
|
|
|
|
7: Placed in service; HART's
|
RDA approves completion
|
|
£1,000,000
HART chit
|
|
|
£1,000,000
HART's earned
|
|
|
8: Cash HART's
|
Investor sends tax return
to IR
|
|
£1,000,000
HART earned
|
|
|
|
£1,000,000
tax foregone
|
|
Ending: after deal is done
|
Each party is satisfied
|
Equity recouped
|
Return achieved
|
Loans repaid
|
Homes bought
|
Area regenerated
|
Tax cost capped
|
Black = Cost of development
Blue = Ready cash that is invested or lent
Light blue = tax foregone
Green = Buyer or investor willingness to pay
Orange = Allocation chit of HART Credits
Red = Purchase price from market value of renovated homes
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