WEBVTT
00:00:00.160 --> 00:00:03.600
Welcome and thanks for tuning in to our podcast today.
00:00:03.680 --> 00:00:05.360
My name is Blair Williams.
00:00:05.599 --> 00:00:09.919
I am director of historic tax credits for Monarch Private Capital.
00:00:10.080 --> 00:00:19.519
We are a national fund manager specializing in various federal and state tax credit programs across the country.
00:00:19.760 --> 00:00:22.239
We've been around since 2005.
00:00:22.480 --> 00:00:28.719
We're headquartered in Atlanta with several satellite offices around the country.
00:00:28.960 --> 00:00:36.960
And I'm pleased to have with me today George Strobel, co-founder of Monarch Private Capital.
00:00:37.359 --> 00:00:42.240
George, welcome and again, thank you for joining the podcast.
00:00:42.799 --> 00:00:43.359
Thank you.
00:00:43.920 --> 00:00:45.119
Happy to be here.
00:00:46.479 --> 00:00:59.439
George had an article published earlier this year in Forbes, where he described the various tax credit offerings within Monarch.
00:00:59.759 --> 00:01:08.719
And for purposes of today's podcast, we are going to focus specifically on federal historic tax credits.
00:01:09.040 --> 00:01:11.840
So why don't we go ahead and get started, George?
00:01:12.319 --> 00:01:18.319
The first question for you is what types of investors do we represent?
00:01:19.280 --> 00:01:19.599
Sure.
00:01:19.840 --> 00:01:27.359
Monarch represents three types institutional investors, family offices, and high net worth individuals.
00:01:28.000 --> 00:01:33.120
And what type of fund offerings are available for those investors?
00:01:34.239 --> 00:01:37.359
So once more, it's a threefold answer.
00:01:37.599 --> 00:01:39.840
Typically, we have multi-investors.
00:01:40.079 --> 00:01:42.239
Most of our funds are structured that way.
00:01:42.400 --> 00:01:48.319
We do have some investors that prefer in a specific footprint or geographic area.
00:01:48.480 --> 00:01:55.680
And so we'll create what's called a proprietary fund for those investors that may just have just a very specialized need or desire.
00:01:55.840 --> 00:02:16.080
And then finally, we have impact funds, which are a combination of two or more different types of investments, one of which would be a federal historic investment, could be a low-income housing with it, or it could be renewable energy with it, but it's a combination of investments to create a greater impact in a community.
00:02:16.960 --> 00:02:17.360
Great.
00:02:17.599 --> 00:02:22.000
And as a fund manager, what's our role and responsibilities?
00:02:23.199 --> 00:02:23.520
Sure.
00:02:23.680 --> 00:02:40.319
So as a fund manager, Monarch basically sources the projects, underwrites them, closes, and then asset manages the projects through their five-year recapture period and then beyond until the project is fully exited.
00:02:40.560 --> 00:02:48.719
We keep investors updated with fund performance reporting, which is done both quarterly and then annually.
00:02:49.120 --> 00:03:13.120
So because of our asset management underwriting and fund reporting uh capabilities, we've had a long nine-year relationship with Old National Bank, and we've had five separate funds with them, which we have co-sponsored, but Monarch has basically done all the sourcing, underwriting, and asset management and reporting.
00:03:13.280 --> 00:03:16.719
So we're very proud of that long-term relationship.
00:03:17.039 --> 00:03:20.479
And I believe we're getting ready to launch our fifth multi-investor fund.
00:03:20.719 --> 00:03:21.919
Is that correct, George?
00:03:22.240 --> 00:03:23.120
Yes, that's right.
00:03:23.280 --> 00:03:23.759
That's right.
00:03:23.919 --> 00:03:25.439
It's in the process.
00:03:25.919 --> 00:03:38.639
So again, your point being that really the bank doesn't need to have internal tax credit expertise to execute these transactions.
00:03:38.879 --> 00:03:45.039
If you can find a partner or a fund manager like Monarch to help with the execution.
00:03:45.520 --> 00:03:47.599
That's the whole point of our firm.
00:03:47.759 --> 00:03:58.879
We have multiple parties that are tax experts in historic credit area, as well as industry experts, real estate industry experts that handled this for our clients.
00:03:58.960 --> 00:04:02.719
And we have world-class asset management and reporting personnel.
00:04:03.039 --> 00:04:12.960
And at the end of the day, the question we often get from the investor and their accounting folks is what is the accounting treatment for the historic tax credit investment?
00:04:13.199 --> 00:04:15.439
Can you just briefly describe that?
00:04:16.319 --> 00:04:16.480
Sure.
00:04:16.639 --> 00:04:16.879
Sure.
00:04:17.040 --> 00:04:24.399
All of our investments are structured to qualify for proportional amortization method of accounting, referred to as PAM.
00:04:25.040 --> 00:04:41.600
And basically all the cash benefits during from operational distributions that are received by an investor are under PAM, are reported above the line as earnings, and the balance of the benefits are reported below the line in your tax provision.
00:04:41.759 --> 00:04:50.959
So it's a very attractive and predictable accounting method for these kinds of investments, particularly because it does improve above the line earnings.
00:04:52.319 --> 00:04:53.040
Thank you.
00:04:53.199 --> 00:05:04.560
And before we get into returns on these investments, it's important to note that there are two types of investment structures with historic tax spread.
00:05:04.639 --> 00:05:08.720
It's the direct structure and the lease pass-through structure.
00:05:08.959 --> 00:05:12.480
Is there one structure preferred over another?
00:05:13.360 --> 00:05:25.759
It depends, not necessarily, but banks tend to prefer the direct investment structure because they don't have a lot of capital gains, or they typically don't generate capital gains.
00:05:25.920 --> 00:05:33.120
And the lease pass-through structure generates a capital loss, which can't be used unless you have a capital gain.
00:05:33.279 --> 00:05:40.959
So they prefer the direct structure, although the returns are somewhat higher with the lease pass-through structure.
00:05:41.120 --> 00:05:44.079
Non-banks prefer that structure.
00:05:44.720 --> 00:05:52.639
So in terms of returns on a direct structure versus a lease pass-through, what do you typically see?
00:05:53.600 --> 00:06:01.120
Yeah, with a with a direct investment, you may only have 8% plus after-tax IRR, which is still attractive.
00:06:01.360 --> 00:06:04.079
And you could have as much as 13 or so.
00:06:04.240 --> 00:06:16.879
And then you could have a higher return on a lease pass-through structure, could be around 16% or more IRR, and you could have a 23% after-tax cash on cash return on investment.
00:06:18.240 --> 00:06:23.839
So you would consider these low-risk investments with predictable returns.
00:06:25.600 --> 00:06:26.000
Yes.
00:06:26.240 --> 00:06:40.000
Our structures are very carefully calibrated so that the vast majority of the return the investor receives is from the tax attributes, and they're pretty much locked in at closing of these transactions.
00:06:40.079 --> 00:06:41.199
They're very predictable.
00:06:41.360 --> 00:06:47.040
Sometimes it can be even greater than anticipated, but it's a very predictable structure.
00:06:47.360 --> 00:06:55.680
And there is some economic variation, but that's fairly muted in terms of what an investor would expect to receive.
00:06:56.319 --> 00:06:58.000
That's very helpful.
00:06:58.319 --> 00:07:18.639
And we just have wanted to keep this brief, but if someone's looking to invest in historic tax credits, obviously we're happy to explore their tax needs and develop a program that best suits again their tax situation.
00:07:18.879 --> 00:07:28.319
What are some of the other key takeaways that you would like listeners to know about making investments in historic tax credit?
00:07:29.279 --> 00:07:29.519
Sure.
00:07:29.839 --> 00:07:35.600
Historic tax credit investing is not just about managing your company's tax liability.
00:07:35.759 --> 00:07:40.319
It's about putting their tax dollars to work, getting a return on their investment.
00:07:40.480 --> 00:07:53.360
It's about putting private capital to work in a way that preserves important buildings while revitalizing communities, supporting jobs, and creating measurable impact in a specific community.
00:07:53.519 --> 00:07:58.639
These are often transformational investments for the surrounding areas.
00:07:58.879 --> 00:08:12.079
When structured and underwritten properly, these investments offer investors really predictable tax-driven economics while also helping meaningful real estate projects come back to life.
00:08:12.720 --> 00:08:14.800
George, I couldn't have said it better.
00:08:15.439 --> 00:08:18.160
I want to thank you for joining us today.
00:08:18.480 --> 00:08:21.439
I want to thank the listeners for tuning in.
00:08:21.680 --> 00:08:27.279
Please don't hesitate to reach out if we can assist with any of your tax credit needs.
00:08:27.519 --> 00:08:28.319
Thank you.
00:08:28.720 --> 00:08:29.680
Thank you, Blair.
00:00:00.160 --> 00:00:03.600
Welcome and thanks for tuning in to our podcast today.
00:00:03.680 --> 00:00:05.360
My name is Blair Williams.
00:00:05.599 --> 00:00:09.919
I am director of historic tax credits for Monarch Private Capital.
00:00:10.080 --> 00:00:19.519
We are a national fund manager specializing in various federal and state tax credit programs across the country.
00:00:19.760 --> 00:00:22.239
We've been around since 2005.
00:00:22.480 --> 00:00:28.719
We're headquartered in Atlanta with several satellite offices around the country.
00:00:28.960 --> 00:00:36.960
And I'm pleased to have with me today George Strobel, co-founder of Monarch Private Capital.
00:00:37.359 --> 00:00:42.240
George, welcome and again, thank you for joining the podcast.
00:00:42.799 --> 00:00:43.359
Thank you.
00:00:43.920 --> 00:00:45.119
Happy to be here.
00:00:46.479 --> 00:00:59.439
George had an article published earlier this year in Forbes, where he described the various tax credit offerings within Monarch.
00:00:59.759 --> 00:01:08.719
And for purposes of today's podcast, we are going to focus specifically on federal historic tax credits.
00:01:09.040 --> 00:01:11.840
So why don't we go ahead and get started, George?
00:01:12.319 --> 00:01:18.319
The first question for you is what types of investors do we represent?
00:01:19.280 --> 00:01:19.599
Sure.
00:01:19.840 --> 00:01:27.359
Monarch represents three types institutional investors, family offices, and high net worth individuals.
00:01:28.000 --> 00:01:33.120
And what type of fund offerings are available for those investors?
00:01:34.239 --> 00:01:37.359
So once more, it's a threefold answer.
00:01:37.599 --> 00:01:39.840
Typically, we have multi-investors.
00:01:40.079 --> 00:01:42.239
Most of our funds are structured that way.
00:01:42.400 --> 00:01:48.319
We do have some investors that prefer in a specific footprint or geographic area.
00:01:48.480 --> 00:01:55.680
And so we'll create what's called a proprietary fund for those investors that may just have just a very specialized need or desire.
00:01:55.840 --> 00:02:16.080
And then finally, we have impact funds, which are a combination of two or more different types of investments, one of which would be a federal historic investment, could be a low-income housing with it, or it could be renewable energy with it, but it's a combination of investments to create a greater impact in a community.
00:02:16.960 --> 00:02:17.360
Great.
00:02:17.599 --> 00:02:22.000
And as a fund manager, what's our role and responsibilities?
00:02:23.199 --> 00:02:23.520
Sure.
00:02:23.680 --> 00:02:40.319
So as a fund manager, Monarch basically sources the projects, underwrites them, closes, and then asset manages the projects through their five-year recapture period and then beyond until the project is fully exited.
00:02:40.560 --> 00:02:48.719
We keep investors updated with fund performance reporting, which is done both quarterly and then annually.
00:02:49.120 --> 00:03:13.120
So because of our asset management underwriting and fund reporting uh capabilities, we've had a long nine-year relationship with Old National Bank, and we've had five separate funds with them, which we have co-sponsored, but Monarch has basically done all the sourcing, underwriting, and asset management and reporting.
00:03:13.280 --> 00:03:16.719
So we're very proud of that long-term relationship.
00:03:17.039 --> 00:03:20.479
And I believe we're getting ready to launch our fifth multi-investor fund.
00:03:20.719 --> 00:03:21.919
Is that correct, George?
00:03:22.240 --> 00:03:23.120
Yes, that's right.
00:03:23.280 --> 00:03:23.759
That's right.
00:03:23.919 --> 00:03:25.439
It's in the process.
00:03:25.919 --> 00:03:38.639
So again, your point being that really the bank doesn't need to have internal tax credit expertise to execute these transactions.
00:03:38.879 --> 00:03:45.039
If you can find a partner or a fund manager like Monarch to help with the execution.
00:03:45.520 --> 00:03:47.599
That's the whole point of our firm.
00:03:47.759 --> 00:03:58.879
We have multiple parties that are tax experts in historic credit area, as well as industry experts, real estate industry experts that handled this for our clients.
00:03:58.960 --> 00:04:02.719
And we have world-class asset management and reporting personnel.
00:04:03.039 --> 00:04:12.960
And at the end of the day, the question we often get from the investor and their accounting folks is what is the accounting treatment for the historic tax credit investment?
00:04:13.199 --> 00:04:15.439
Can you just briefly describe that?
00:04:16.319 --> 00:04:16.480
Sure.
00:04:16.639 --> 00:04:16.879
Sure.
00:04:17.040 --> 00:04:24.399
All of our investments are structured to qualify for proportional amortization method of accounting, referred to as PAM.
00:04:25.040 --> 00:04:41.600
And basically all the cash benefits during from operational distributions that are received by an investor are under PAM, are reported above the line as earnings, and the balance of the benefits are reported below the line in your tax provision.
00:04:41.759 --> 00:04:50.959
So it's a very attractive and predictable accounting method for these kinds of investments, particularly because it does improve above the line earnings.
00:04:52.319 --> 00:04:53.040
Thank you.
00:04:53.199 --> 00:05:04.560
And before we get into returns on these investments, it's important to note that there are two types of investment structures with historic tax spread.
00:05:04.639 --> 00:05:08.720
It's the direct structure and the lease pass-through structure.
00:05:08.959 --> 00:05:12.480
Is there one structure preferred over another?
00:05:13.360 --> 00:05:25.759
It depends, not necessarily, but banks tend to prefer the direct investment structure because they don't have a lot of capital gains, or they typically don't generate capital gains.
00:05:25.920 --> 00:05:33.120
And the lease pass-through structure generates a capital loss, which can't be used unless you have a capital gain.
00:05:33.279 --> 00:05:40.959
So they prefer the direct structure, although the returns are somewhat higher with the lease pass-through structure.
00:05:41.120 --> 00:05:44.079
Non-banks prefer that structure.
00:05:44.720 --> 00:05:52.639
So in terms of returns on a direct structure versus a lease pass-through, what do you typically see?
00:05:53.600 --> 00:06:01.120
Yeah, with a with a direct investment, you may only have 8% plus after-tax IRR, which is still attractive.
00:06:01.360 --> 00:06:04.079
And you could have as much as 13 or so.
00:06:04.240 --> 00:06:16.879
And then you could have a higher return on a lease pass-through structure, could be around 16% or more IRR, and you could have a 23% after-tax cash on cash return on investment.
00:06:18.240 --> 00:06:23.839
So you would consider these low-risk investments with predictable returns.
00:06:25.600 --> 00:06:26.000
Yes.
00:06:26.240 --> 00:06:40.000
Our structures are very carefully calibrated so that the vast majority of the return the investor receives is from the tax attributes, and they're pretty much locked in at closing of these transactions.
00:06:40.079 --> 00:06:41.199
They're very predictable.
00:06:41.360 --> 00:06:47.040
Sometimes it can be even greater than anticipated, but it's a very predictable structure.
00:06:47.360 --> 00:06:55.680
And there is some economic variation, but that's fairly muted in terms of what an investor would expect to receive.
00:06:56.319 --> 00:06:58.000
That's very helpful.
00:06:58.319 --> 00:07:18.639
And we just have wanted to keep this brief, but if someone's looking to invest in historic tax credits, obviously we're happy to explore their tax needs and develop a program that best suits again their tax situation.
00:07:18.879 --> 00:07:28.319
What are some of the other key takeaways that you would like listeners to know about making investments in historic tax credit?
00:07:29.279 --> 00:07:29.519
Sure.
00:07:29.839 --> 00:07:35.600
Historic tax credit investing is not just about managing your company's tax liability.
00:07:35.759 --> 00:07:40.319
It's about putting their tax dollars to work, getting a return on their investment.
00:07:40.480 --> 00:07:53.360
It's about putting private capital to work in a way that preserves important buildings while revitalizing communities, supporting jobs, and creating measurable impact in a specific community.
00:07:53.519 --> 00:07:58.639
These are often transformational investments for the surrounding areas.
00:07:58.879 --> 00:08:12.079
When structured and underwritten properly, these investments offer investors really predictable tax-driven economics while also helping meaningful real estate projects come back to life.
00:08:12.720 --> 00:08:14.800
George, I couldn't have said it better.
00:08:15.439 --> 00:08:18.160
I want to thank you for joining us today.
00:08:18.480 --> 00:08:21.439
I want to thank the listeners for tuning in.
00:08:21.680 --> 00:08:27.279
Please don't hesitate to reach out if we can assist with any of your tax credit needs.
00:08:27.519 --> 00:08:28.319
Thank you.
00:08:28.720 --> 00:08:29.680
Thank you, Blair.
