Related Capital
Today's (8/22/2006) Wall Street Journal has a profile of Stephen Ross and his Related Companies. Related was, and still is, a big player in the low income housing tax credit business. (My former company, largely on my recommendation, approved one of Related's public tax credit programs in the late 1990s.) I won't go into the economics of the tax credit programs from an investor standpoint, but basically an investor put up a certain dollar amount and received tax credits over a number of years. An investor would receive approximately $1.30 to $1.70 in tax credits per dollar invested over a ten to twelve year period, with an overall hold period that will likely be twenty years. It is very rare for investors to receive any cash return other than the tax credits during the hold period and I imagine that cash from property liquidations will be minimal. According to the article, the tax credit properties are a cash machine to Related, and have served as the financing source for Related's push into conventional real estate. It is not surprising that the sponsor of the tax credit deals can generate so much recurring cash while the tax credit investors are left with only the tax credits.