Learn the Basics Housing Tax Credits 101 Edward S. Ryan, CPA Reznick Group

Learn the BasicsHousing Tax Credits “101”

Edward S. Ryan, CPAReznick Group

Reznick Group Building Business Value

General Information

# Revenue Producing Units 49# Buildings 1

Projections Start Date:1st Year 20071st Month 10

# of Months in 1st year 3# of Months in full year 12

Sales Date 31-Dec-22

Tax Credit Begins 2008Year Last Unit Occupied 2008

LIHTC% (April 2007) - Acquisition 3.47%LIHTC% (April 2007) - Rehabilitation 8.10%Maximum Credit 435,000Federal Historic Credit 0%

State Historic Credit 0%


General Information (continued)

Low Income Percentage 100.00%QCT/DDA Adjustment 130.00%

Tax Rate-Federal 35.00%Tax Rate - Sale 35.00%

Depreciation- Real Ppty 27.5Pers Ppty 5

Sitework 15

Depreciation Start:Avg Placed in Service-Rehab 0.0% May-08Avg Placed in Service-Rehab 100.0% May-08Placed in Service-Acquisition Oct-07

Construction Start 01-Oct-07Construction Completion 01-Oct-08Number of Months 12


Development Costs

Acquisition - Building 90% 3,780,000Acquisition - Land 10% 420,000Acquired Reserves 0

Construction Loan Interest 280,756Construction Cost 1,053,500General Requirements 6.00% 73,500Builder's Overhead 2.00% 24,500Builder's Profit 6.00% 73,500Architect & Engineering 225,000Survey & Permits 15,000Legal Fees 150,000Permanent Financing Fees 2.50% 46,900Organization Costs 15,000Title & Recording 20,000Accounting & Cost Cert 45,000


Development Costs (continued)

Tax Credit Fees 143,000Relocation 0Construction Contingency 105,350Operating Reserves 135,000Soft Cost Contingency 50,000Development Fee 773,366

7,429,372

Personal Property Included Above 3,000 147,000Site Work Included Above 100,000

Acquired Reserves 0


Financing Assumptions

Permanent Loan 1,875,000Interest Rate 6.500%MIP 0.500%Term - Month 360Amortization 360Start Date 01-Nov-08

Second Loan 1,400,000Interest Rate 3.000%Term - Month 480Amortization 480Start Date 01-Nov-08

Other Loan 0Interest Rate 4.810%Term - Month 360Amortization 360Start Date 01-Oct-07

Developer Note 466,226Interest Rate 5.000%Start Date 01-Oct-07


Syndication Information

General Partner's Capital ContributionEntry Date: Year 2007

Month 10Day 1

Investor Entry 01-Oct-07

Investor's Initial Capital ContributionYear 2007Month 10Day 1

# of Mths. 1st Year 3

Pct. of Ownership:General Partner 0.01%State Investor 0.00%Investor 99.99%

100.00%

through

Cash Flow Distribution: 2013General Partner 0.01%State Investor 0.00%Investor 99.99%

Income, Loss & Credits Allocation:General Partner 0.01%State Investor 0.00%Investor 99.99%

Sales Proceeds Distribution: Pcts. After Return of Positive CapitalGeneral Partner 0.01%State Investor 0.00%Investor 99.99%


Capital Contributions

Federal TotalDate of Investor Investor

Payment Capital Capital GPContribution Contribution Equity

Oct-07 1,850,121 1,850,121 0Jul-08 1,295,085 1,295,085 0

Nov-08 0 0 0Nov-08 555,036 555,036 0

3,700,242 3,700,242 0

Price per credit $0.910Total Credits 4,066,200Total Credit Equity 3,700,242


Rental Income & Expenses

Operations CommenceYear 2007Month 10# Months Yr 1 3

Base Rental Income 541,4642008 Rental Income 555,0012009 Rental Income 568,8762010 Rental Income 583,098

Other Income 3,0002008 Other Income 3,0752009 Other Income 3,1522010 Other Income 3,231

Annual Increase - through 2015 102.50%Thereafter 102.50%


Rental Income & Expenses (continued)

Vacancy - Year 1 and 2 10.00%Vacancy Thereafter 3.00%

Base Operating Expenses 266,7502008 Operating Expenses 274,7532009 Operating Expenses 282,9962010 Operating Expenses 291,485

Annual Increase - through 2015 103.00%Thereafter 103.00%

Base Replacement Reserves 14,700

Asset Management Fee 5,000Annual Increase 102.00%


Rental Income - 2007

Total Gross Net Total TotalType of No. of Square Square Rent per Utility Rent per Rent per AnnualUnit Units Footage Footage Month Allowance Month Month Rent

Section 8 0 BR 7 0 834 64 770 5,390 64,680 1 BR 42 0 1,017 71 946 39,732 476,784

Total Low Income 49 0 45,122 541,464

Market Rate

Total Market Rate 0 0 0 0

Total 49 0 45,122 541,464


Operating Expenses - 2007

Administrative 58,800$ Utilities 39,500$ Maintenance 85,750$ Taxes and Insurance 82,700$

266,750

Property Management Fee 4.5% 23,766Replacement Reserves 14,700

Total 305,216

Per Unit $6,229

Cash Waterfall

1 Operating Expense Loans2 Asset Management Fee 5,0003 Second Loan 54,5044 PMN 0%

Deferred Devloper Fee 100%5 Incentive Management Fee 80%

LP Cash Flow 20%


Projected Value of Tax Credits,Cash Flow, and Tax Loss Amounts perInvestor LP, assuming a 35% tax rate

AnnualTaxable Federal Total Tax Investor AnnualIncome Tax Savings Low Income Savings Cash Benefit Cum Cum Net

Year Amount (Loss) (Expense) Tax Credit (Expense) Flow Fr P/ship Benefit Investment

2007 1,850,121 (16,711) 5,849 0 5,849 0 5,849 5,849 1,844,2722008 1,850,121 (231,659) 81,081 386,289 467,370 0 467,370 473,219 3,227,0232009 (234,197) 81,969 406,620 488,589 0 488,589 961,808 2,738,4342010 (213,458) 74,710 406,620 481,330 0 481,330 1,443,138 2,257,1042011 (197,932) 69,276 406,620 475,896 0 475,896 1,919,034 1,781,2082012 (185,741) 65,009 406,620 471,629 0 471,629 2,390,663 1,309,5792013 (166,003) 58,101 406,620 464,721 0 464,721 2,855,384 844,8582014 (154,603) 54,111 406,620 460,731 0 460,731 3,316,115 384,1272015 (148,226) 51,879 406,620 458,499 0 458,499 3,774,614 (74,372)2016 (133,551) 46,743 406,620 453,363 0 453,363 4,227,977 (527,735)2017 (120,985) 42,345 406,620 448,965 0 448,965 4,676,942 (976,700)2018 (116,951) 40,933 20,331 61,264 0 61,264 4,738,206 (1,037,964)2019 (108,900) 38,115 0 38,115 0 38,115 4,776,321 (1,076,079)2020 (125,367) 43,878 0 43,878 8,477 52,355 4,828,676 (1,128,434)2021 (134,574) 47,101 0 47,101 14,120 61,221 4,889,897 (1,189,655)2022 (129,357) 45,275 0 45,275 15,149 60,424 4,950,321 (1,250,079)

3,700,242 (2,418,215) 846,375 4,066,200 4,912,575 37,746 4,950,321


Sources and Applications of FundsFunded Non-

Total Capitalize Expenses Amortize

Federal Investor Capital 3,700,242Permanent Loan 1,875,000Second Loan 1,400,000Other Loan 0Developer Note 466,226Acquired Reserves 0

TOTAL SOURCES: 7,441,468

Acquisition - Building 3,780,000 3,780,000

Acquisition - Land 420,000 0 420,000

Acquired Reserves 0 0 0Construction Loan Interest 292,852 127,567 165,285 0

Construction Cost 1,053,500 1,053,500 0

General Requirements 73,500 73,500 0

Builder's Overhead 24,500 24,500 0

Builder's Profit 73,500 73,500 0

Architect & Engineering 225,000 225,000 0

Survey & Permits 15,000 15,000

Legal Fees 150,000 55,000 70,000 25,000

Permanent Financing Fees 46,900 0 46,900 0

Organization Costs 15,000 0 15,000

Title & Recording 20,000 20,000

Accounting & Cost Cert 45,000 20,000 25,000

Tax Credit Fees 143,000 0 143,000 0Relocation 0 0Construction Contingency 105,350 105,350 0Operating Reserves 135,000 0 135,000Soft Cost Contingency 50,000 50,000 0Development Fee 773,366 773,366

TOTAL USES: 7,441,468 6,396,283 440,185 605,000


Funded Expenses

Amortizable Costs 2007 2008 2009 2010 2011 2012

Construction Loan Interest 27,670 137,615Legal Fees 360 0 583 2,333 2,333 2,333 2,333Permanent Financing Fees 360 0 391 1,563 1,563 1,563 1,563Organization Costs 0 15,000 0 0 0 0Tax Credit Fees 180 0 2,383 9,533 9,533 9,533 9,533

27,670 155,972 13,429 13,429 13,429 13,429

Amortizable Costs 2013 2014 2015 2016 2017 2018 Thereafter Total

Construction Loan Interest 0 165,285Legal Fees 2,333 2,333 2,333 2,333 2,333 2,333 46,087 70,000Permanent Financing Fees 1,563 1,563 1,563 1,563 1,563 1,563 30,879 46,900Organization Costs 0 0 0 0 0 0 0 15,000Tax Credit Fees 9,533 9,533 9,533 9,533 9,533 9,533 45,287 143,000

13,429 13,429 13,429 13,429 13,429 13,429 122,253 440,185


Low Income Tax Credit Calculation

Low-IncomeAcquisition Rehabilitation

Credit Credit

Qualified Basis 3,780,000 2,616,283Less - Historic Credit 0Capitalized Interest 0Less - FF&E and Site Work

3,780,000 2,616,283

Low Income Percentage 100.00% 100.00%

3,780,000 2,616,283

DDA/QCT 100% 130%

3,780,000 3,401,168

Credit Calculated 3.47% 131,166 8.10% 275,495Allocation 131,166 303,834

Minimum of Calculated or Allocation 131,166 275,495

Percentage of Credit to Investors 99.9900% 131,153 275,467

406,620


Sales Appreciation

$1Over

MortgageBalance

Sales Price 12/31/22 2,484,252

LESS:Permanent Loan 1,403,964Second Loan 1,080,287Other Loan 0Developer Note 0

1

Balance to Investors 99.9900% 1


Projection of Investment Results uponSale or Disposition of Project on 12/31/22

$1 OverMortgage

Balance

Original Investment (3,700,242)Cumulative Tax Losses (Income) 2,418,215Cumulative Cash Flow 37,746

Capital Account Prior to Sale (1,244,281)Sales Proceeds 1

(Gain) Loss on Sale 1,244,282

(Gain) Loss on Sale 1,244,282

Tax (Savings) Expense 35.00% (435,499)

(435,499)


Net after Tax Benefit IncludingSale or Disposition of Project on 12/31/22

$1 OverMortgage

Balance

Cumulative Benefits 4,950,321Sales Proceeds 1

4,950,322Total Tax Savings/(Expense) on Sale 435,499

5,385,821Original Investment (3,700,242)

Net After Tax Benefit 1,685,579

Internal Rate of Return 7.11%


Amortization Schedule – Permanent Loan

Permanent Loan

Principal 1,875,000Interest Rate 6.500%MIP 0.500%Months 360Beginning Month 11Beginning Year 2008

Monthly Payment 11,851


Amortization Schedule –Permanent Loan (continued)

Ending Balance ServicingMonth Year Payment Principal Interest Balance at Sale Fee

1,875,0001 2008 23,702 3,443 20,259 1,871,557 0 1,5633 2009 142,212 21,184 121,028 1,850,373 0 9,35815 2010 142,212 22,604 119,608 1,827,769 0 9,25227 2011 142,212 24,117 118,095 1,803,652 0 9,13939 2012 142,212 25,732 116,480 1,777,920 0 9,01851 2013 142,212 27,455 114,757 1,750,465 0 8,89063 2014 142,212 29,295 112,917 1,721,170 0 8,75275 2015 142,212 31,256 110,956 1,689,914 0 8,60687 2016 142,212 33,349 108,863 1,656,565 0 8,45099 2017 142,212 35,583 106,629 1,620,982 0 8,283

111 2018 142,212 37,966 104,246 1,583,016 0 8,105123 2019 142,212 40,509 101,703 1,542,507 0 7,915135 2020 142,212 43,222 98,990 1,499,285 0 7,713147 2021 142,212 46,116 96,096 1,453,169 0 7,496159 2022 142,212 49,205 93,007 1,403,964 1,403,964 7,266

2,014,670 471,036 1,543,634 1,403,964 119,806


Amortization Schedule – Second Loan

Second Loan

Principal 1,400,000Interest Rate 3.000%Months 480Beginning Month 11Beginning Year 2008

Monthly Payment 5,012


Amortization Schedule –Second Loan (continued)

Ending BalanceMonth Year Payment Principal Interest Balance at Sale

1,400,0001 2008 10,024 2,967 7,057 1,397,033 03 2009 60,144 18,485 41,659 1,378,548 015 2010 60,144 19,048 41,096 1,359,500 027 2011 60,144 19,628 40,516 1,339,872 039 2012 60,144 20,224 39,920 1,319,648 051 2013 60,144 20,840 39,304 1,298,808 063 2014 60,144 21,473 38,671 1,277,335 075 2015 60,144 22,127 38,017 1,255,208 087 2016 60,144 22,799 37,345 1,232,409 099 2017 60,144 23,493 36,651 1,208,916 0

111 2018 60,144 24,208 35,936 1,184,708 0123 2019 60,144 24,944 35,200 1,159,764 0135 2020 60,144 25,702 34,442 1,134,062 0147 2021 60,144 26,485 33,659 1,107,577 0159 2022 60,144 27,290 32,854 1,080,287 1,080,287

852,040 319,713 532,327 1,080,287


Amortization Schedule – Other Loan

Other Loan

Principal 0Interest Rate 4.810%Months 360Beginning Month 10Beginning Year 2007

Monthly Payment 0


Amortization Schedule –Other Loan (continued)

Ending BalanceMonth Year Payment Principal Interest Balance at Sale

01 2007 0 0 0 0 04 2008 0 0 0 0 016 2009 0 0 0 0 028 2010 0 0 0 0 040 2011 0 0 0 0 052 2012 0 0 0 0 064 2013 0 0 0 0 076 2014 0 0 0 0 088 2015 0 0 0 0 0

100 2016 0 0 0 0 0112 2017 0 0 0 0 0124 2018 0 0 0 0 0136 2019 0 0 0 0 0148 2020 0 0 0 0 0160 2021 0 0 0 0 0172 2022 0 0 0 0 0

0 0 0 0


Amortization Schedule – Developer Note

Developer Note

Principal 466,226Interest Rate 5.000%

Beginning Month 10Beginning Year 2007


Amortization Schedule –Developer Note (continued)

Available Ending BalanceMonth Year Cash Flow Payment Interest Balance at Sale

466,2261 2007 41,700 41,700 5,828 430,354 04 2008 149,677 149,677 21,518 302,195 016 2009 14,482 14,482 15,110 302,823 028 2010 18,776 18,776 15,141 299,188 040 2011 23,137 23,137 14,959 291,010 052 2012 27,568 27,568 14,551 277,993 064 2013 32,066 32,066 13,900 259,827 076 2014 36,634 36,634 12,991 236,184 088 2015 41,272 41,272 11,809 206,721 0

100 2016 45,981 45,981 10,336 171,076 0112 2017 50,761 50,761 8,554 128,869 0124 2018 55,613 55,613 6,443 79,699 0136 2019 60,538 60,538 3,985 23,146 0148 2020 65,535 24,303 1,157 0 0160 2021 70,607 0 0 0 0172 2022 75,753 0 0 0 0

810,100 622,508 156,282 0


Projected Replacement Reserve

Interest Rate 2.50%

Required Reserve Outstanding InterestYear Amount Funded Withdraws Balance Income

2007 3,675 3,675 3,721 462008 15,141 15,141 19,144 2822009 15,595 15,595 35,413 6742010 16,063 16,063 51,913 0 4372011 16,545 16,545 16,752 2072012 17,041 17,041 34,425 6322013 17,552 17,552 53,057 1,0802014 18,079 18,079 71,791 0 6552015 18,621 18,621 18,854 2332016 19,180 19,180 38,745 7112017 19,755 19,755 59,716 1,2162018 20,348 20,348 80,801 0 7372019 20,958 20,958 21,220 2622020 21,587 21,587 43,607 8002021 22,235 22,235 67,210 1,3682022 22,902 22,902 90,942 0 830

Total 285,277 285,277 295,447 10,170


Projected Operating Reserve

Interest Rate 3.00%

Reserve Outstanding Interest TotalYear Funded Withdraws Balance Income Income

2007 0 0 0 0 462008 135,000 0 135,000 0 2822009 0 139,050 4,050 4,7242010 0 143,222 4,172 4,6092011 0 147,519 4,297 4,5042012 0 151,945 4,426 5,0582013 0 156,503 4,558 5,6382014 0 161,198 4,695 5,3502015 0 166,034 4,836 5,0692016 0 171,015 4,981 5,6922017 0 176,145 5,130 6,3462018 0 181,429 5,284 6,0212019 0 186,872 5,443 5,7052020 0 192,478 5,606 6,4062021 0 198,252 5,774 7,1422022 0 204,200 5,948 6,778

Total 135,000 0 69,200 79,370


Minimum Gain Calculation

Cumulative AccumulatedOriginal Asset Replacement Accumulated

Net Assets Additions Reserves Depreciation Net Assets

2007 6,816,283 0 3,721 28,636 6,791,3682008 6,816,283 0 154,144 254,338 6,716,0892009 6,816,283 0 174,463 534,489 6,456,2572010 6,816,283 51,913 143,222 800,498 6,210,9202011 6,816,283 51,913 164,271 1,057,993 5,974,4742012 6,816,283 51,913 186,370 1,311,396 5,743,1702013 6,816,283 51,913 209,560 1,553,638 5,524,1182014 6,816,283 123,704 161,198 1,792,667 5,308,5182015 6,816,283 123,704 184,888 2,034,015 5,090,8602016 6,816,283 123,704 209,760 2,270,815 4,878,9322017 6,816,283 123,704 235,861 2,505,767 4,670,0812018 6,816,283 204,505 181,429 2,747,014 4,455,2032019 6,816,283 204,505 208,092 2,991,165 4,237,7152020 6,816,283 204,505 236,085 3,230,500 4,026,3732021 6,816,283 204,505 265,462 3,467,757 3,818,4932022 6,816,283 295,447 204,200 3,705,024 3,610,906


Minimum Gain Calculation - Summary

Non-Recourse Minimum Change inLiabilities Gain Min. Gain

3,272,033 0 03,250,105 0 03,209,873 0 03,167,641 0 03,123,300 0 03,076,728 0 03,027,800 0 02,976,378 0 02,922,323 0 02,865,481 0 02,805,690 0 02,742,780 0 02,676,569 0 02,606,862 0 02,533,456 0 02,484,251 0 0


Potential Loss Reallocation due to 704(b)

Limited Ptr Capital Initial Alloc. PotentialCapital Historic Synd Cash Account Allocation due to L.P.

Contrib. Credits Costs Distrib End of Yr to L.P. Ptr. NR Losses

2007 1,850,121 0 50,000 0 1,783,410 (16,711) 0 (16,711)2008 1,850,121 0 0 0 3,401,872 (231,659) 0 (231,659)2009 0 0 0 0 3,167,675 (234,197) 0 (234,197)2010 0 0 0 0 2,954,217 (213,458) 0 (213,458)2011 0 0 0 0 2,756,285 (197,932) 0 (197,932)2012 0 0 0 0 2,570,544 (185,741) 0 (185,741)2013 0 0 0 0 2,404,541 (166,003) 0 (166,003)2014 0 0 0 0 2,249,938 (154,603) 0 (154,603)2015 0 0 0 0 2,101,712 (148,226) 0 (148,226)2016 0 0 0 0 1,968,161 (133,551) 0 (133,551)2017 0 0 0 0 1,847,176 (120,985) 0 (120,985)2018 0 0 0 0 1,730,225 (116,951) 0 (116,951)2019 0 0 0 0 1,621,325 (108,900) 0 (108,900)2020 0 0 0 8,477 1,487,481 (125,367) 0 (125,367)2021 0 0 0 14,120 1,338,787 (134,574) 0 (134,574)2022 0 0 0 15,149 1,194,281 (129,357) 0 (129,357)

3,700,242 0 50,000 22,597 (2,288,858) 0 (2,288,858)


Potential Loss ReallocationDue to 704(b) (continued)

Carryover Change in Maximum Losses Potential Deficit ActualMinimum Minimum Loss Allocated Realloc Restoration Realloc

Gain Gain Allocation to L.P. to G.P. Obligation to G.P.

2007 0 0 1,800,121 (16,711) 0 0 02008 1,783,410 0 3,633,531 (231,659) 0 0 02009 3,401,872 0 3,401,872 (234,197) 0 0 02010 3,167,675 0 3,167,675 (213,458) 0 0 02011 2,954,217 0 2,954,217 (197,932) 0 0 02012 2,756,285 0 2,756,285 (185,741) 0 0 02013 2,570,544 0 2,570,544 (166,003) 0 0 02014 2,404,541 0 2,404,541 (154,603) 0 0 02015 2,249,938 0 2,249,938 (148,226) 0 0 02016 2,101,712 0 2,101,712 (133,551) 0 0 02017 1,968,161 0 1,968,161 (120,985) 0 0 02018 1,847,176 0 1,847,176 (116,951) 0 0 02019 1,730,225 0 1,730,225 (108,900) 0 0 02020 1,621,325 0 1,612,848 (125,367) 0 0 02021 1,487,481 0 1,473,361 (134,574) 0 0 02022 1,338,787 0 1,323,638 (129,357) 0 0 0

0 (2,288,858) 0 0 0

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Learn the Basics Housing Tax Credits 101 Edward S. Ryan, CPA Reznick Group