Last fall, in the heart of Memphis, Tenn., workers swarmed over a gothic revival skyscraper that had stood vacant and crumbling for more than 10 years.

“It was like a black hole just sucking the life out of downtown,” said Bill Whitman, president of Telesis CDE Corp., a developer based in Washington, D.C. Telesis planned to open the first new apartments in December 2007 in the redeveloped 22-story Columbian Mutual Tower and the five-story Lowenstein Building next door. The combined project, known as the Court Square Center, will eventually include 59 residential units and 27,675 square feet of retail and office space.

A government program made the deal work. Telesis’ $51 million project received $11.7 million in equity from the sale of New Markets Tax Credits (NMTCs).

NMTCs can help developers break into new markets just as those markets are ready to break out. Several developers have used the complicated federal program to pioneer projects that mix new apartments and commercial space in old downtowns that were ready for revival.

For example, the number of housing units in downtown Lansing, Mich., has increased tenfold since local developer Buildtech, Ltd., opened a NMTC-funded project there just two years ago.

The old Arbaugh Department Store opened the first of 48 apartments and 20,000 square feet of office space in December 2005.

Since then, the number of housing units downtown has grown from less than 50 to about 500, according to Rich Karp, president of the for-profit developer.

Buildtech also benefited from the boom downtown. Both the Arbaugh’s office space and apartments are fully occupied. And that’s not all. The economic growth the project helped to spur has circled back to boost profit margins for Buildtech. “We’ve been raising the rents steadily,” Karp said.

View original article…