1. Y15 Values: Your Market, Your Partners and YOU ANNUAL CONFERENCE KANSAS CITY, MO MAY 4, 2015

2. INTRODUCTIONS / AGENDA Jeff Reed, Community Housing Partners David Fournier, ARA a Newmark Company Tony DiBlasi, Ohio Capital Corporation for Housing Agenda The LP Perspective on Y15 | what’s your investor thinking? The GP Perspective on Y15 | from the not-for-profit perspective The Marriage Counselor / Divorce Attorney | a broker’s experience and case studies Lessons learned? | What to look for / wish we had done differently 2

3. Tony DiBlasi OHIO CAPITAL CORPORATION FOR HOUSING

4. WHAT DID THE CRA-MOTIVATED INVESTOR BUY? 1.Low Income Housing Tax Credits (LIHTC) 2.Losses 3.Improved CRA score with Regulators 4 WHAT DID THE NON CRA-MOTIVATED INVESTOR BUY? 1.Low Income Housing Tax Credits (LIHTC) 2.Losses

5. THE INVESTOR PERSPECTIVE MANY great people working at bank CDCs / insurance companies that take great interest in the good work being performed across the affordable housing industry. BUT… At the end of the day, these LIHTC expenditures are characterized as ‘tax advantaged investments’ Significant focus on quarterly profit earnings Methodology for investor ‘return on investment’ varies 5

6. GENERAL Y15 CONSIDERATIONS What do the documents say? What happens at Y15 is probably fairly well defined in the LPA (like it or not) Is there value in the real estate that exceeds the debt? Answer is probably ‘no’ in lots of places (when considering the accrued soft debt) Potentially LOTS OF VALUE in certain locations (especially the coasts) 6

7. THE REALITY IS…. Some LPs/Investor Members will be very accommodating and sympathetic to the greater public purpose… While others… …may be considerably more aggressive in seeking adherence to the documents and a return of capital that may be permitted in the docs 7

8. WHAT IF THERE IS VALUE? If there IS value in the real estate, your syndicator likely has a fiduciary responsibility to seek value during the disposition process! (today, GSEs insist!) OR If deal involves a ‘direct’ investor, they may be motivated to seek value during disposition process to bolster quarterly profits. But if organization has a strong and long-standing banking relationship with investor, this relationship could be leveraged. 8

9. WAIT! BE FAIR! Y15 HOT BUTTONS Disposition fee for syndicator? Cash to cover exit taxes for the investor? Bringing outstanding AM fees current? What about Replacement Reserves? What about Operating Reserves? What about the long-term capital needs? What about the extended use period? 9

10. Jeff Reed COMMUNITY HOUSING PARTNERS

11. FROM THE NON-PROFITS PERSPECTIVE Does your property cash flow? What is your property worth on the open market Is the cash flow sustainable with the property “as is”? Or… Does the property need rehab to be sustainable? Do you want this property to stay in your portfolio? Why? 11 Know Your Property!

12. FROM THE NON-PROFITS PERSPECTIVE Do you control the disposition? Do you have a right of first refusal? Or… Do you have a purchase option? Or… Do you have both? Is the purchase option for the greater of market value or debt plus taxes? Or… Is it for debt plus taxes? 12 Know Your Deal Book!

13. FROM THE NON-PROFITS PERSPECTIVE Is you equity partner mission driven or dollar driven? Are you still using this equity partner for new deals? Do they want out of this deal? What do their capital accounts look like? Do they want your first born? 13 Know Your Partners! Vs.

14. FROM THE NON-PROFITS PERSPECTIVE Before you enter negotiations, know how far you are willing (and able) to go. Does your required purchase price exceed market value? If so, are you willing to walk away? If not, do you have the resources to execute the purchase (and possible later rehab)? If you buyout the equity partner, will the cash flow change? What is the property worth with you as the owner? Ie Will you pick up additional equity? Be sure not to “pay” for the equity you create! 14 Know Your Limits!

15. David Fournier ARA a Newmark Company

16. COMPETING INTERESTS / POINTS OF VIEW GP VIEW LP VIEW HOW DO YOU GET TO…. REALITY 16

17. COMPETING INTERESTS / POINTS OF VIEW GP VIEW 17

18. COMPETING INTERESTS / POINTS OF VIEW GP VIEW 18

19. COMPETING INTERESTS / POINTS OF VIEW LP VIEW 19

20. COMPETING INTERESTS / POINTS OF VIEW LP VIEW 20

21. COMPETING INTERESTS / POINTS OF VIEW CHALLENGES 21

22. COMPETING INTERESTS / POINTS OF VIEW BOTH GP AND LP VIEW OF BROKER 22

23. COMPETING INTERESTS / POINTS OF VIEW REALITY Market has remained hot! More equity looking for deals than there are deals More buyers in the market Debt is readily available (Agency Cap) and cheap Property performance is generally up 23

24. CASE STUDY - 200+ UNITS DALLAS, TX Great location Had a ROFR to Non Profit at debt plus taxes ($6M+) LP wanted mission driven Non Profit to purchase – could have purchased at $9.5M but could not get there as a resyndication ARA Marketed 20 offers from non profits backed by profit motivated equity Sold for $11.5 M Cap Rate was 5.8% 24

25. CASE STUDY - 200+ UNITS DALLAS, TX Average location / 1970’s vintage LP was willing to let GP buy out at a value of $7M GP wanted to buy out at a value of $6M Counselor: ARA Valued at $9.5 to $10.0 M GP thought we were crazy so we structured incentive fee Multiple offers at $10.0 M Cap Rate of 6.0% 25

26. HOW DO YOU APPROACH? Know: LP Partners are sophisticated Many LP Partners have experienced the prior example Investment Partners are more focused on exit (return driven) Follow the documents Generally willing to negotiate (ease, cost savings, compliance) But will have a good handle on value. 26

27. HOW DO YOU APPROACH? Process: Valuation (broker BOV or appraisal) Review waterfall (capital accounts, 704b issues) Who has leverage? Time? Capital events? Love it or List it Know that a sale may not be a bad event 27

28. LESSONS LEARNED? When doing new deals, give more consideration UP FRONT to those sections of the LPA/Operating Agreement that govern the LP/Investor Member ‘exit’ Start the conversations in Y10! If parties are willing, capital accounts can be managed to minimize and/or eliminate exit taxes Get your Board engaged early and define the strategy – don’t wait until Y14.75 to start thinking about exit! Engage your investor early – gauge their position 28

29. OPEN DISCUSSION Questions or comments on your experience? 29

30. THANK YOU! Jeff Reed CFO & Executive Vice President Community Housing Partners jreed@chpc2.org David M. Fournier, MAI Executive Managing Director ARA Newmark – Affordable Housing Group dfournier@arausa.com Tony DiBlasi Chief of Asset Management Ohio Capital Corporation for Housing tdiblasi@occh.org