How It Works

The nation's supply of affordable housing is under siege. Threatened by the reality of an accumulated tax liability, many investors in affordable housing are converting their properties into market-rate housing. Despite these devastating losses, the investment options available to owners are limited: continue to own a non-performing asset or sell to relieve the liability. With cap rates at historical lows, many are choosing to "opt out" of the various subsidy programs that originally helped to build this housing. This is especially true in many of our major metropolitan areas, where the sale and conversion to a market-rate property can often generate a significant cash windfall.

In part, CDT was created to provide an innovative alternative to relieve the pressures of exit taxes. As an UPREIT, CDT can offer to buy these investments with cash (which is a taxable event) or with shares in CDT's Operating Partnership (OP Units). If an investor chooses the latter, the transaction is considered an exchange of partnership interests and the "sale" is tax-deferred. This has great appeal to many investors, for in addition to tax deferral, OP Units have the potential to appreciate in value while also generating a cash dividend. Although redemption triggers payment of the deferred tax due on the percentage of OP Units converted, the timing of this event is completely under the control of the investor. As an estate-planning tool, OP Units hold an even greater attraction, as once the estate is activated the value of the OP Units steps up in basis and the deferred tax liability is eliminated completely.

CDT relies upon development and operating partners to carry out its mission of affordable housing preservation. Working with local nonprofit and for-profit organizations, as well as local, state and federal housing agencies, CDT may acquire properties directly or invest in recapitalized properties where the general partner or limited partner remains in place. CDT's equity can be combined with tax-exempt financing and tax credits to provide capital for rehabilitation and to improve the financial viability of the project. By using a variety of preservation resources, CDT is able to structure equity investments that benefit all parties. The most important beneficiaries, however, are the families who are able to remain in their affordable homes.

For further information, please contact:

Joseph F. Reilly, President & Chief Executive Officer
212-271-5019 or jreilly@cdt.biz

Brian Dowling, Vice President - Underwriting
212-271-5083 or bdowling@cdt.biz

    
     
the community development trust