1. Balanced deal Rehab cost ($20K) Seller payment ($20K)
PITFALLS AND ROADBLOCKS – A key issue with transfers – How does the resource pie get divided?
Balanced deal
$60 K per unit
Rehab cost ($20K)
Seller payment ($20K)
Soft costs ($20K)
CRCU ($600)

2. Good market – How does the pie get divided?
High sales price
$80 K per unit
Rehab cost ($20K)
Seller payment ($40K)
Soft costs ($20K)
CRCU ($800)

3. Poor market – How does the pie get divided?
Low sales price
$40 K per unit
Rehab cost ($20K)
Seller payment ($0?)
Soft costs ($20K)
CRCU ($400)

4. Revitalization Battleground – Sizing the split: between rehab, seller and soft costs
Sustainable rents
What is CRCU and what does CRCU support?
Rehab
Total requirements/upfront/spread out
Seller payment
Loan/cash/tax liability/donation
Soft costs
loan/cash/grant
upfront/deferred

5. Many times the MPR can help - Key concepts with the “pie split” and the MPR
Stay in owners – It’s a two way split - It’s all about rehab
Full use of MPR tools to fund rehab
Some soft costs may be included.
Transfer – It’s a three way split
seller payment and soft costs must make economic sense
RD funds can be included if “in hand”
If not in hand - use 538 at AFR to size the transaction
Deferral used to keep rents affordable
MPR tools not used for seller payment

6. Why is the MPR a good idea for Preservation?
Cheapest way to revitalize a project
Deferral, soft money, grants and zero percent loans are cost effective tools
Initial average MPR rents went down by 2% or $17 PUPM
May be the only feasible way to address existing capital needs
Typical year – rehab plus 20-years CNA needs over $30K per unit
Typical project could not afford rehab or higher reserves within CRCU without MPR
Without MPR tools the cost is carried by RA
Without MPR tool rehab is limited and may leave the job half done

7. Why is the MPR a good idea for Preservation?
Many owners have no ability to sell or pay off
The gap between current rents and CRCU is a pivotal feasibility measure
Many projects don’t have the market position to satisfy all expectations
Bringing in third party funds through a transfer not an option – project starts a death spiral
Mechanism for stay in owner to recapitalize
Initially over 50% of MPR transactions “stay in owners”
Government funds not used for equity payout or huge developer fees
Magnet for third party funding
On average $100 Million leveraged by $30 Million in MPR Budget Authority (BA)
Provides additional funds to the transaction.

8. Advice from the school of hard knocks: Communicate!
What’s the plan?
Who are the key players?
Developer, seller, buyer, lender, LIHTC Agency, other financing, mortgage broker, syndicator, credit enhancer, bond issuer
What are the deadlines?
Important goal – one CNA and one appraisal
How will capital needs be determined?
Full CNA, 3rd party requirements, scope of work, post rehab CNA

9. Advice from the school of hard knocks: Communicate!
When and what appraised values?
What is the impact of key RD underwriting issues?
CRCU/equity/reserves/RA/Tenant impact
What are the limitations of specific loans?
Pre-92/post-89/RUPS
What are subordination expectations?
For portfolio transactions – Run a trial one through first

10. Successful strategies to coordinate and cooperate
Agree to a Scope of Work
First CNA – full review of needs
Add third party requirements – to get tax credits what must you do
Revised CNA to reflect post rehab per Scope of Work
Expect and schedule a series of meetings with all parties
Issues will rise throughout the process
Establish a positive effective working relationship

11. Successful strategies to coordinate and cooperate
Establish realistic underwriting expectations
Equity and RTO increase must fit within CRCU
The gap between current rents and CRCU is a pivotal feasibility measure
Some projects may not have the market position to satisfy all expectations
Is the MPR Team Leader available for fast tracked help advice and solutions?
Big Deals need big time team work
Coordinate developer, financial and RD resources (loan/servicing and technical)
Focus on critical times – application, underwriting, obligation, closing, and construction

12. Some basic advice on large scale preservation transactions:
Working with Multi-Funder MFH Transfers
Extremely tight or conflicting funding deadlines require significant coordination among funding partners.
The traditional developer led models where the transaction is independently presented to various funding entities at different times in different formats is difficult to pull off.
RD as the holder of the original note and mortgage and provider of RA and setter of rents can not be the last one in the mix.

13. What’s missing from the new transfer handbook that might help when the ”pie split” doesn’t work?
Policies to provide preservation to projects that have no “equity” or “IE,” but are still desperately needed in the community they serve.
New tools could include the following that allow for:
GP purchase
LP purchase
Split (tiered) rents
Servicing RA units
Targeted MPR funding tools
Gifting process
Turning in failing properties without penalties
Allowing above CRCU rents to continue