AHIC The Low Income Housing Tax Credit Program – A Performance Update Cindy Fang Senior Manager Tax Credit Investment Services Cindy.Fang@cohnreznick.com October 7, 2014

Background Over 18,000 properties surveyed; representing approximately 70% of “actively managed” LIHTC properties and 90% of those placed in service in the last five years Data contributed by 35 participants, including 32 syndicators and 3 direct investors Focused on the 2011-2012 operating performance of nearly 16,000 stabilized properties October 7, 2014

Portfolio Composition On a median basis, placed in service in 2005 27% of equity invested in properties placed in service in 2009 or later 74% of equity invested in properties placed in service in 2004 or later On average, comprised of 76.5 apartment units/property 9% credit properties averaged 58.8 units/property 4% credit properties averaged 111.3 units/property October 7, 2014

Portfolio Performance High occupancy continued Occupancy levels in LIHTC properties have been remarkable consistent from one year to the next State level median occupancy ranged from 94% to nearly 100% Occupancy issues were often NOT due to a lack of demand October 7, 2014

Portfolio Performance Improved financial performance sustained DCR hovered between 1.13 and 1.15 for a significant portion of the last decade, before rising to 1.21 in 2009 2010 marked the first year when none of the states operated below 1.00 DCR Strong financial performance was observed across every segment and nearly every participant’s portfolio October 7, 2014

Portfolio Performance Incidence of underperformance declined The number of chronically underperforming properties decreased by a significant level Only 4% properties were less than 90% occupied in 2011/2012 Only 12% properties operated below breakeven in 2011/2012 The distribution of underperforming properties suggested an even lower incidence of “severe” underperformance Only 4% properties had occupancy less than 85% in 2012 Just over 10% properties incurred deficits of $400 per unit or greater in 2012 A cumulative foreclosure rate of 0.63% reported October 7, 2014

Segmented Portfolio Performance Do properties exhibiting certain characteristics tend to outperform others? Strong occupancy observed over the years and across segments Financial performance most influenced by geographic location Besides location factors: Newly constructed or rehabbed properties tend to have above average occupancy levels; Pre-2000 properties reported DCRs as strong as that reported by newer projects; 4% properties performed on par with 9% properties; Larger properties (101-200 units/property) had the lowest incidence of underperformance; smaller properties (<50 units/property) had a disproportionately larger share of underperformance but improved significantly as a whole; Historic properties still struggled with the least favorable metrics. October 7, 2014

Segmented Portfolio Performance October 7, 2014

A Look Back and Forward on Property Performance What made the improved performance possible? Out of many possible explanations, key contributing factors included: More favorable debt to equity mix Refinancing at lower interest rates Reduced economic vacancy losses More sophisticated expense underwriting Whether improved operating performance can sustain in the future? October 7, 2014

Fund Yield Performance 893 post-1999 funds analyzed Fund yield variance by age of the funds On a weighted average basis, a positive 6.45% yield variance was reported 16.1% of the funds reported negative yield variances October 7, 2014

Fund Credit Delivery Performance October 7, 2014

Conclusion The national inventory of housing credit properties continued to perform well While the housing credit has become the most successful housing program in United States history it does not produce enough rental units to make a serious dent in the national shortfall of affordable housing As good as the performance metrics are, it is still the case that one in five properties operates below breakeven, complicated by various industry wide challenges Collaboration is the key to the continued success of the program October 7, 2014