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All Information Contained in the Document is intended for the purpose of education and may not

be reproduced without prior consent. ©Copyright 2008 Reznick Group, P.C.

Saving The Tax Credits in a Failed Transaction

• Historic Tax Credit Developer’s Conference

• February 6, 2009

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All Information Contained in the Document is intended for the purpose of education and may not

be reproduced without prior consent. ©Copyright 2008 Reznick Group, P.C.

LeverageLender #1

InvestmentCo.

NMTC Investor #1

LeverageLender #1

Investment Co.

NMTC Investor #2

Investment Co.

HTC/NMTC Investor #2

CDE #1

CDE #2 CDE #3

Master TenantLandlord

LeverageLender #2

State Credit

Investor

Mortgage Loans to Landlord

Capital

CapitalCapital

Capital

Capital

Capital

CapitalCapital

Capital

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All Information Contained in the Document is intended for the purpose of education and may not

be reproduced without prior consent. ©Copyright 2008 Reznick Group, P.C.

Sources: Existing Adjustments Revised

Federal & State HTC Equity (a) 200,000 200,000

Additional NMTC Equity (b) 1,500,000 1,500,000

Subordinated Loan 4,304,000 4,304,000

Total Sources: 200,000 5,804,000 6,004,000

Uses:

Accounts Payable 2,841,000 2,841,000

Costs to Complete 3,140,000 3,140,000

Cash Deficits to End of NMTC Period 1,838,000 (1,815,000) 23,000

7,819,000 (1,815,000) 6,004,000

Shortfall (7,619,000) 7,619,000 -

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All Information Contained in the Document is intended for the purpose of education and may not

be reproduced without prior consent. ©Copyright 2008 Reznick Group, P.C.

Debt Structure:

1st Lender - A Loan - Must Pay 16,000,000 (5,000,000) 11,000,000 1st Lender - A Loan - Accruing 5,000,000 5,000,000 NMTC - B Loan - Must Pay 1,930,000 (1,930,000) - NMTC - B Loan - Accruing 1,930,000 1,930,000 Subordinated Debt 4,304,000 4,304,000

Total 17,930,000 4,304,000 22,234,000

Interest Rate - A Loan - Must Pay 8.07% -3.07% 5.00% Interest Rate - A Loan - Accruing - 7.00% 7.00% Interest Rate - B Loan - Must Pay 1.57% -1.57% - Interest Rate - B - Accruing - 1.57% 1.57% Subordinated Loan - Accruing - 6.00% 6.00%

Interest Rate - A Loan - Must Pay 1,291,200 (741,200) 550,000 Interest Rate - A Loan - Accruing - - - Interest Rate - B Loan - Must Pay 30,301 (30,301) - Interest Rate - B - Accruing - - - Subordinated Loan - Accruing - - -

Total Debt Service 1,321,501 (771,501) 550,000

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All Information Contained in the Document is intended for the purpose of education and may not

be reproduced without prior consent. ©Copyright 2008 Reznick Group, P.C.

Stakeholders

• Developer• 1st Lender• 2nd Lender• NMTC Investor (3)• HTC Investor• CDE (3)• Sub Contractor’s

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All Information Contained in the Document is intended for the purpose of education and may not

be reproduced without prior consent. ©Copyright 2008 Reznick Group, P.C.

Developer

• Reduce cost to complete funding• Receive sufficient fee to carry overhead

and maybe some profit• Reduce operating carry• Retain management• Reduces guarantees• Maintain any possible residual

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All Information Contained in the Document is intended for the purpose of education and may not

be reproduced without prior consent. ©Copyright 2008 Reznick Group, P.C.

Tax Credit Investor

• Protect against recapture of HTC - Federal & State

• Protect against recapture of NMTC• Generally requires an infusion of capital• Changes in economic interest in real

estate

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All Information Contained in the Document is intended for the purpose of education and may not

be reproduced without prior consent. ©Copyright 2008 Reznick Group, P.C.

Lender

• If also a credit user – protect the credit• Analysis of ways to record the least

amount of loss recapture of principal– Foreclose now– Will economic correction will significantly

reduce loss – Infusion of capital from other stakeholders may

allow benefit of completion and stabilization

• Loan interest rate & term restatements

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All Information Contained in the Document is intended for the purpose of education and may not

be reproduced without prior consent. ©Copyright 2008 Reznick Group, P.C.

CDE’s

• How do fees get paid?• Affect on future NMTC allocations• Recapture events

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All Information Contained in the Document is intended for the purpose of education and may not

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Sub Contractor’s

• Accounts Payable• How do we get them back on the job?

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All Information Contained in the Document is intended for the purpose of education and may not

be reproduced without prior consent. ©Copyright 2008 Reznick Group, P.C.

Negotiated Issues

• Non-disturbance Agreement (Is there one?)• Length of forbearance by lender• New investor capital generally needs credit

protection for life of credit• New investor capital may increase credit period• Legal/tax opinions – updated?• Priority of new equity - priority in respect to

restructured 1st mortgage• Yield on new equity• Fee structure - CDE Fees; Asset Management

Fees • Preferred returns Put/Call • Deferred development fee