When the Homewood Suites University City broke ground in December, it was a first to many people for many reasons. For the developer, Campus Apartments, it marks the company’s first hotel project. For the City of Philadelphia, it is the first recipient of an EnergyWorks loan for a green building. For University City, it will be the neighborhood’s first extended-stay hotel. For the University of Pennsylvania, it’s the first university-affiliated development project west of 41st Street, which was formerly the school’s unofficial line of demarcation.

For Klehr Harrison, it was familiar territory. The situation was complex, but the fundamentals were basic: combine public and private investment to secure the necessary financing to break ground before 2010 year-end, while achieving positive tax results and protecting the investors. The catch? It would take seven separate and distinct deals with five different investing bodies to make it happen. By listening to the clients’ needs, leveraging the firm’s deep tax and real estate finance expertise and remaining flexible, Klehr found solutions to keep the project moving forward.

A rendering of the Homewood Suites University City in Philadelphia, that broke ground in December and is slated for completion in spring 2012.

The project itself is impressive: The upscale 136-suite extended-stay hotel in Philadelphia’s University Center is slated for completion in spring 2012 and will cater to the needs of the many professionals, patients, families and other out-of-town visitors who require longer-term accommodations in close proximity to the University of Pennsylvania, Penn Medicine, The Children’s Hospital of Philadelphia and other academic and medical facilities in the area.

The approximately $50-million project is jointly financed through the Commonwealth of Pennsylvania, the Philadelphia Industrial Development Corp. (PIDC), The Reinvestment Fund (TRF), U.S. Bank Community Development Corp. and Beneficial Bank. Designed to meet LEED certification, the hotel is also the flagship commercial project for the City of Philadelphia’s new EnergyWorks program, which provides low-interest loans to help finance sustainable building and redevelopment.

Financial market conditions during the time were less than favorable, and capital for a hotel project of this nature was not readily accessible. As a result of the economic climate, the project’s primary lender only provided 50 % of the project cost as opposed to the normal 70% to 80%. In order to proceed, the gap had to be closed, and tax credits were the answer. Klehr’s experience with the New Markets Tax Credit (NMTC) program was integral to the project’s viability.

Klehr worked closely with Campus Apartments, U.S. Bancorp Community Development Corp., Beneficial Bank, The Reinvestment Fund (TRF), Philadelphia Industrial Development Corp. (PIDC), a private investor and the Commonwealth of Pennsylvania to create unique lending and equity structures appropriate to the project’s needs, and by integrating these programs into the deal structure in a creative manner, the necessary financing was secured and closed on time.

“While this transaction was challenging, leading it to market shows that with technical knowledge, patience and creativity, great things can be achieved,” said Larry Arem, chair of the tax practice group for Klehr.

To be successful, Klehr had to ensure favorable tax outcomes for the developer and the investors, given the particular requirements of the transaction. The key was listening to all parties and molding compromises when competing demands were made, while also protecting the tax benefits necessary to fund the project.

“With so many parties involved, closing this deal was one of the most complicated processes we’ve ever been through,” said David Adelman, president and CEO of Campus Apartments.

While the New Markets Tax Credit program was the key to success for the Homewood Suites University City, Klehr’s tax and real estate practices have helped other high-profile development and adaptive reuse projects across the Philadelphia skyline through its work with another tax incentive program, the long-standing Historic Tax Credit (HTC).

“Philadelphia’s ongoing renaissance in both hospitality and residential living can largely be attributed to the use of historic tax credits and collaboration between the public and private sector,” said Carl Primavera, a partner with Klehr.