BROWNFIELDS 2011 Tax Increment Financing, Tax Credits & Creative Financing April 4, 2011 Cam Turner Principal, United Fund Advisors

UFA – Background Fund manager and financial services company that provides tax-advantaged investment capital and advisory services for community development and renewable energy projects throughout the country 3BL Mission: “To create opportunities for profitable investments which enhance social and environmental yields” >$400mm of assets under management

UFA – NMTC Experience Manage two affiliate CDEs: $352mm of NMTCs Advise/manage third-parties: >$700mm of NMTCs Closed >50 NMTC investments Closed multiple renewable energy and historic investments

UFA – NMTC Clients Financial Institutions: Prudential, American Savings Bank Agencies: New York City, Los Angeles, Portland, Honolulu, San Francisco Nonprofits: Raza Development Fund, Montana Community Development Corporation, Ecotrust, Launchpad Development Company Developers: Gerding/Edlen Development Company, Sage Hospitality, Urban Holdings

NMTC BASICS – History Created in 2000 (Community Renewal Tax Relief Act) 594 awards totaling $29.5B of NMTC allocation (based upon 2074 requests for $202B) $20.6B deployed through March 2011 $3.5B authorized for 2011 Short-term program extensions generally included in omnibus tax bill

NMTC BASICS – Program Goals Increase flow of patient, low-cost capital to low-income communities through investment intermediaries called Community Development Entities (CDEs) Community Benefits ― Create jobs ― Generate goods & services (education, healthcare, daycare) ― Finance minority businesses ― Generate environmentally sustainable outcomes (brownfield redevelopment, LEED, renewable energy) ― Promote affordable housing ― Catalyze development in underserved communities

Borrower must qualify by location in a LIC based on 2000 Census results for threshold levels of: ― Poverty Rate ― Median Family Income (MFI) Other tests Higher distress generally required (including brownfield status) NMTC BASICS – General Guidelines

NMTC BASICS – How It Works CDFI Fund awards allocation of NMTCs to Community Development Entities (CDEs) Investor makes Qualified Equity Investment (QEI) into CDE, in exchange for tax credit of 39% of QEI over 7 years CDE makes a Qualified Low Income Community Investment (QLICI) in a Qualified Active Low Income Community Business (QALICB) CDFI Fund NMTC Allocation - QEI- Tax Credits - Cash Flow - Income and Losses - QLICI- Cash Flow Investor/Fund Lender CDE QALICB

NMTC Investor Lender Investment Fund CDFI Fund - Leverage Loan - Interest - Principal - Equity - NMTCs - Income and Losses - QEI NMTC Allocation - NMTCs - Cash Flow - Income and Losses - QLICI - Cash Flow QALICB NMTC BASICS – Structure Leverage Structure Investment Fund is the intermediary for the debt and equity contributions QLICI is typically separated into “A” and “B” notes, corresponding to debt and equity portions of QEI Fund Lender receives interest and principal (limited) paid to the Sub-CDE, which flows up through the Investment Fund NMTC investor receives tax credits CDE Sub Allocation Sub- CDE Sub- CDE

CHARACTERISTICS OF STRONG PROJECTS Demonstrable and compelling low-income community benefits Consistent with local planning and goals Shovel-ready Identifiable gap in financing (10-20%) Non-NMTC capital is committed and can be combined with NMTC program

BROWNFIELD REDEVELOPMENT CHALLENGES QALICB/Borrower must generate revenue within 3 years QLICIs must be respected as debt/equity, so QALICB needs to have ability to repay CDEs & investors want assurances that project will become operational Enormous demand and “investment season” Few CDEs focusing on brownfields

NMTC BENEFITS More favorable deal than traditional loan (i.e., rates, terms, covenants, debt “forgiveness”) Land acquisition, environmental remediation, demolition, site preparation, construction, renovation and infrastructure improvements Combined with state & federal financing programs (i.e., EPA Brownfield Grants, TIF, CDBG, tax incentives)

K-5 school serving disadvantaged youth (87% low-income, minority) Financing used for new facility on former blighted Pitney-Bowes site, including costs for environmental remediation School is part of $200mm, 80-acre smart-growth redevelopment receiving LEED-ND certification $20mm NMTC financing leveraging capital campaign CASE STUDY – Waterside School (Stamford, CT)

PBS at SteelStacks is constructing a new public television station on abandoned plant of the Bethlehem Steel Corporation (nation’s largest brownsfield) Financing used to cover acquisition, pre-development, and property maintenance expenses Developed in conjunction with the City of Bethlehem, with TIF resources committed to improving surrounding infrastructure and public space $12mm NMTC financing leveraged commercial loan CASE STUDY – PBS at SteelStacks (Bethlehem, PA)

Mixed-use LEED project with artist- focused studios, galleries, office/retail space & affordable housing Extensive environmental contamination due to brick manufacturing, phosphate mixing, metal scrapping and rail spur Financing used for construction, including environmental clean up for metals and PCB contamination under Utah’s Voluntary Environmental Cleanup Program $27mm NMTC financing leveraged commercial loan CASE STUDY – Artspace (SLC, UT)