Architectural rendering of the ArtsQuest Center at SteelStacks, set to open in Bethlehem in May 2011.
BETHLEHEM, PA–ArtsQuest, the nonprofit organization that presents Musikfest, Christkindlmarkt Bethlehem, First Night® Bethlehem and the arts and education programs at the Banana Factory, has announced that it has completed its complex financing for the new ArtsQuest Center at SteelStacks.
The $26-million, 65,000-square-foot building, set to open in Bethlehem in May 2011, is the first project in the region to be financed under the New Markets Tax Credit Program (NMTC) created by Congress in 2000. The program’s goal is to encourage private investment in low-income census tracts, which will in turn lead to jobs for residents in these areas.
“We have many people to thank for pulling this amazing financing structure together. Local, regional and national development organizations and banks have demonstrated their confidence in the project through the numerous commitments that have been made to the ArtsQuest Center,” said ArtsQuest President Jeff Parks. “We could not have moved forward on this important community revitalization project without the help of New Markets Tax Credit financing.”
NMTC allocation authority is awarded by the U.S. Department of the Treasury annually to certified Community Development Entities (CDEs). The developer, in this case ArtsQuest, must put most of the project funding together. That funding is then combined with equity from a private investor and invested in a CDE. The CDE, in turn, must use substantially all of the qualified investment to provide investments in low-income communities. The credit provided to the investor totals 39 percent of the cost of the investment and is claimed over seven years.
With closing on the NMTC project in December 2009, the ArtsQuest Center project netted $5 million to apply to the construction of the building and related costs. The ArtsQuest Center and ArtsQuest’s related programs on the SteelStacks campus will generate 168 construction jobs during construction this year and 100 full-time equivalent jobs when the center opens in 2011.
“The most complicated part of this project was that we needed to get allocations from three Community Development Entities. Usually CDEs will not exceed a $10 million allocation per project. We needed $26 million,” Parks said.
With the assistance of Darlene Smolik of Plymouth Soundings LLC, a consultant from Loudon, Tenn., three CDEs are participating in the ArtsQuest Center project. They are the Nonprofit Finance Fund, New York, an organization that provides lending and financial consulting services to nonprofits nationwide to improve their stability and capacity to serve their communities; Commonwealth Cornerstone Group of Harrisburg, an organization created by the Pennsylvania Housing Finance Agency to support and enhance neighborhood and community revitalization efforts throughout the Commonwealth of Pennsylvania; and USBCDE, a subsidiary of U.S. Bank, Minneapolis, Minn., an organization dedicated to community development in low-income areas throughout the United States. The investor for the ArtsQuest Center NMTC project is U.S. Bankcorp Community Development Corporation (USBCDC), a subsidiary of U.S. Bank.
“USBCDC is delighted to participate, as both an investor and CDE, in such a critical redevelopment in Bethlehem. It is our hope and expectation that ArtsQuest will create significant job opportunities, provide beneficial cultural entertainment and be a catalyst for future development for the surrounding community,” said Jennifer Westerbeck, Assistant Vice President at USBCDC.
In order to close on the NMTC project, ArtsQuest had to finance certain commitments that will not mature until after construction commences. The organization will receive $7.625 million in Pennsylvania Redevelopment Assistance Capital Program funds as reimbursement for some of its construction costs. These funds had to be paid in advance to qualify for NMTC.
A participation loan was financed through Lafayette Ambassador Bank; KNBT, a Division of National Penn Bank; and Team Capital Bank. The loan will be repaid from the Pennsylvania funds as they are reimbursed during the construction of the project.
“Lafayette Ambassador Bank and its participants are extremely proud to have been involved with the first New Markets Tax Credit project in the Lehigh Valley,” said Lafayette Ambassador Bank Vice President Mark Jobes. “While the complexity of this deal was high and involved numerous parties, the benefits of this structure kept us all motivated to overcome many obstacles. We are now looking forward to the successful completion of the ArtsQuest Center and helping to deliver a great asset to our community.”
A portion of the funds needed to complete the project are being financed through a $4 million loan from the Lehigh Valley Economic Development Loan Pool. The loan is partially guaranteed through Pennsylvania’s First Industries Fund, which is designed to support tourism development projects and is administered by the Pennsylvania Department of Community and Economic Development. The lead bank on the project is TD Bank, with the following banks also participating in the pool: Wachovia Bank; KNBT, a Division of National Penn Bank; PNC Bank; Lafayette Ambassador Bank; M&T Bank; Sovereign Bank; Embassy Bank; First Star Bank; Merchants Bank of Bangor and NOVA Bank. Because the project is based in Bethlehem, Lehigh University is also a loan participant.
Stephen C. Kalamar III, Vice President of TD Bank, said, “This was an ideal use of loan pool funds to help revitalize an area that was so important in Bethlehem’s history. TD Bank is proud to be able to have taken a leadership role in this project.”
ArtsQuest has also entered into a permanent financing for its Banana Factory. A long-term, $3.5-million loan was secured through PNC Bank’s Community Development Office.
“As a supporter of ArtsQuest for many years, PNC is pleased to provide financing for this unique cultural endeavor that will transform the arts experience and positively impact the quality of life of Lehigh Valley residents,” said Peter J. Danchak, President of PNC Bank, Northeast PA.
“We deeply appreciate the confidence that all of these financial institutions have expressed in the ArtsQuest SteelStacks project and in the future of the Lehigh Valley,” Parks said. “Going from a status of no debt to developing this major cultural project for the region is both intimidating and exciting for ArtsQuest. As we reach out to the community for support this year, we believe there will be great response to the project. We will need the community’s support to complete this project.”
The ArtsQuest Center will include The Musikfest Café concert venue for year-round live music, a two-screen cinema for independent films, the “Pod Zone” media lounge, the Blast Furnace Room for receptions, exhibitions and intimate concerts and the Creativity Commons, a contemporary gathering space for the community. For more information on the ArtsQuest
Center and SteelStacks, including a map of the SteelStacks campus, visit http://www.steelstacks.org.