On December 21, 2000, the Community Renewal Tax Relief Act of 2000 was signed into law. This landmark legislation included the New Markets Tax Credit, which will spur the investment of $15 billion in new private capital into a range of privately managed investment vehicles that make loans and equity investments in New Markets businesses. By making an equity investment in an eligible “community development entity” (CDE), individual and corporate investors can receive a New Markets Tax Credit worth 39 percent of the amount invested over the life of the credit. By increasing their capital base, this tax credit enables CDEs to lend and invest more, to attract additional outside capital, and to bring even more private sector engagement to their market-priming activities.
Urban Development Fund (UDF), an affiliate of Aries Capital Incorporated was formed in 2002 with the primary mission of serving low-income persons and low-income communities by utilizing the New Markets Tax Credit to spur private investment in underserved neighborhoods around the country. In that same year, UDF was certified as a Community Development Entity by the CDFI Fund, a department of the U. S. Treasury Dept.
To date, UDF has received allocations of New Markets Tax Credits totaling over $620 million. UDF’s focus is on developing retail development, office space, industrial facilities, and community facilities in particularly economically distressed areas.
UDF utilizes the subsidy afforded by the New Market Tax Credit to offer more favorable rates and terms than would have been available to these projects in the marketplace. All of the UDF’s loans are flexible or non-traditional in some form including: below market interest rates, non-traditional forms of collateral, longer than typical amortization periods, or more flexible borrower credit standards.
This flexibility allows UDF to focus its community building activity where it is needed most. In fact, 100% of our project investments to date are in areas designated as areas of higher distress by the CDFI Fund. These areas include: areas where the poverty rate is greater than 30%, areas where the median family income is less than 60% of the area median family income, SBA Hubzones, Brownfields Redevelopment Sites, and other areas designated for redevelopment by local or state authorities.
UDF has been extremely successful in fulfilling its mission of improving the economic conditions and social support structures in low-income neighborhoods. In fulfilling this mission, UDF has been successful in creating stable employment opportunities and construction jobs for low-income persons and residents of low-income communities, renovating decaying or dilapidated structures, providing much needed goods and services, providing educational and cultural opportunities, and spurring economic development in low-income neighborhoods. The philosophy of understanding projects not as just real estate investments but as engines of economic growth and social support for local communities is at the heart of UDF’s mission.