More Than a Hotel

6 min read

NMTCs support training institute for disabled

A new Courtyard Marriott Hotel in Muncie, Indiana offers more than a comfortable room and a good meal. Within its walls, people with disabilities are being trained for careers in hospitality.

“I’m very excited about the independence we’ll get here,” says Brendan, one of the seven students enrolled at the new Erskine Green Training Institute & Teaching Hotel, which launched in January.

The unemployment rate for people with disabilities, like Brendan, is 82%. However about 85% of people with disabilities are able to work, according to The Arc, “the largest national community-based organization advocating for and serving people with intellectual and developmental disabilities and their families.”

The Arc of Indiana Foundation, one of the Arc’s 100 local chapters around the U.S., created the Erskine Green Institute & Teaching Hotel to help people, like Brendan, get the skills they need to find employment.

The Institute will train an estimated 200 people with disabilities every year from around the state of Indiana in any aspect of hotel and restaurant operations they are interested in, plus six areas of healthcare.

The new Courtyard by Marriott in downtown Muncie, Ind., looks like a regular hotel, just up the street from the city’s convention center. In the hometown to Ball State University and Jim Davies’ Garfield comic strip, the hotel provides a home to the Institute, where seven students, including Brendan, are already enrolled in the Institute’s nine-to-13 week project.

“We make sure that they leave the program with everything that they need to be successful,” says Jill Vaught, executive director of The Arc of Indiana Foundation.

The Erskine Green Training Institute shares space in its building with the Courtyard hotel and a new Thr3e Wise Men restaurant, with room to seat 120. It’s the latest restaurant created by Scott Wiess, the creator of the “Scotty’s Brew House” restaurant chain. The two businesses employ 129 people, from managers to busboys. Both have committed that at least 20%of their employees will be people with disabilities qualified to do the work.

The students attend classes at the Institute and gain work experience through an internship at the hotel arranged by the Institute and graduate with a certificate recognized by the Indiana Hotel & Lodging Association.

“We will be training people with a variety of disabilities,” say Vaught. Their disabilities range from cognitive disabilities to blindness.

The first class of seven disabled people came from across Indiana and even further away. They stay at the hotel and can eat their meals with fellow students in the dining halls of Ball State University, a mile and a half from the Institute.

The hotel and restaurant are already doing better than expected. The restaurant is expected to start earning a profit in just six to nine months — fast for a new restaurant. “We are well ahead of schedule,” says Vaught.

The hotel is also performing better than the expectations on its pro-forma. “It should be profitable next year,” says Vaught. “The hotel has already had its first sold-out night.”

The Arc leaps into development

The Arc developed the new building using an innovative finance plan that combined charitable donations with federal New Markets Tax Credits (NMTCs).

“They are gutsy – they jumped right into this,” says Peter Giles, vice president of business development for Cinnaire, the leading tax credit syndicator formerly known as Great Lakes Capital Fund.

The developer had to overcome several barriers before it could start construction.

It cost $31.9 million to build Erskine. That’s more than any one of the local banks the developer worked with could provide efficiently. So three local banks partnered to provide the loan, led by First Merchants Bank, based in Muncie.

Normally, construction lenders won’t lend until the borrower has finalized its plan to eventually permanently finance the project. The Arc’s $31.9 million permanent financing plan for the Institute includes an $11 million package of equity investments that generate NMTCs that closed in December 2015, plus another $20 million in charitable contributions that will be made by 2019. But only a few of those donations had come in when the Arc of Indiana planned to start construction in 2014.

If the developer had to wait for those donations before starting construction, it would still be waiting today.

The City of Muncie gave the project its first big break. It provided an “anticipation note” to the development. The note promises that the city will provide the development with a permanent loan, if needed, to cover any shortfall when the construction loan comes to the end of its term in 2019.

“That promise was the security needed for construction financing,” says Giles.

The Arc is still busy raising money from its wide network of philanthropists to help pay down its construction loan before the loan comes due.

“We have raised almost $15 million,” says Vaught. Those millions include many pledges by donors to contribute over the next few years. The donors include the Muncie-based Ball Brothers Foundation, The Community Foundation of Muncie and Delaware County, Inc., Shafer Foundation and many others.

The developer plans to avoid having to take out a permanent loan, even though the hotel and restaurant are now on track to generate enough income to support permanent financing.

“That would mean less money that can go back to the mission,” says Vaught. The Arc expects more fund raising to provide the remainder of the permanent financing.

NMTCs build on generosity

The developer finished an $11 million piece of its permanent financing puzzle in December 2015, when it closed a package of equity investments in the Institute that generated NMTCs.

By December, donors had written the checks to contribute $2.5 million. The project had also received a $5 million grant from Indiana’s Economic Development Corp.

The project leveraged these donations with NMTCs that were brought to the property by Cinnaire, which had an allocation of NMTCs from the U.S. Treasury’s Community Development Financial Institution Fund. Chase committed to invest in the project, paying $3.5 million for its NMTCs.

The investment from Chase finished off the $11 million package of qualified equity investments, which also includes the $5 million grant and $2.5 million in contributions.

If more donations had come in by the time the NMTCs closed, the property could have counted them as qualified equity investments to generate even more NMTCs. Cinnaire had access to millions of dollars more in NMTC authority. However, many donors have pledged to make donations in the future, too late to generate NMTCs.

The $11 million New Markets financing has already helped pay down a significant piece of Erskine’s $31.9 million in construction financing.

The Arc of Indiana is now planning to develop three more businesses that could provide jobs to its graduates and other disabled people in a variety of professions.

“We would probably do NMTCs again,” says Vaught.