1. Low Income Investment Fund Brian Prater, Director, California Lending and Strategic Opportunities June 28, 2010 Charter School Facilities Institute National Charter School Conference

2. 2 Who We Are National CDFI headquartered in San Francisco with offices in Los Angeles, New York and Washington D.C. Has participated in projects in 26 states, but primarily focuses on West and East coasts. Makes loans to build affordable housing, charter schools, childcare facilities, and other community facilities Business lines include direct lending, structuring loan participations, capital raising, fund creation/management and loan servicing Has been allocated $139 million in New Market Tax Credits since 2007

3. 3 What We’ve Done $740 million deployed since inception (1984) $5.1 million of additional investments leveraged Created and supported: –54,000 units of housing –123,000 spaces for child care –2.5 million square feet of commercial or facility space –44,000 spaces for school students

4. 4 General Underwriting Guidelines 5 C’s of Credit –Character –Capacity –Capital –Collateral –Conditions

5. 5 General Underwriting Guidelines Analyze the Following: –Borrower/Tenant –Project Financials –Real Estate –State and Local Climate –Other External Conditions

6. 6 Borrower Characteristics: Management Management analysis is a critical underwriting area for charter school loans Important factor in borrower’s ability to maintain and increase cash flow (primary source of repayment) Look for experience: –Management capacity –Board capacity –School principals –Teachers Understand the growth plan

7. 7 Borrower Characteristics: Management What to look out for: –Hostile relationship with local District/Authorizer –Key person/founder risk –Tension between board & management –Insufficient resources to handle growth

8. 8 Borrower Characteristics: Program Quality What to evaluate: –Performance (Academic) –Strength of Parent Organization –Mission –Curriculum –Teacher/Staff Quality –Educational Resources –Assessment –Target Population

9. 9 Borrower Characteristics: Program Quality What to look out for: –Difficulty of retaining quality staff –High student turnover –Program experience/knowledge may be centralized –Low probability of charter renewal/revocation –Insufficient community and/or political support for expansion

10. 10 Borrower Characteristics: Financial Capacity Balance Sheet –Examine ratio of Debt to Equity –Look at trends in Unrestricted Net Assets –Analyze liquidity Contingent liabilities –How many other guaranties is the Guarantor providing? –Is the guaranty meaningful?

11. 11 Borrower Characteristics: Development Capacity Key questions: –Has the Borrower ever purchased a property? –Has the Borrower ever developed a building? –Is the Borrower retaining a development consultant? –Check references

12. 12 The Project: Assessing the Real Estate Location Value – Loan to Value Lien Position Zoning and Entitlements Highest and Best Use/Other Uses Environmental Issues Local Charter School Market

13. 13 The Project: School Operating Pro Forma Revenues: Public, Private, Philanthropy Expenses: Personnel, Operating, Facilities Enrollment and Average Daily Attendance (ADA) Projections vs. Historical Operating Expenses Debt Service Coverage Ratio and Other Measures Trends and Growth Patterns Turnover and Waiting Lists Sensitivity/Refinance Analysis

14. 14 Contact Us Low Income Investment Fund www.liifund.org Judith KendeBrian PraterDirector New York RegionCalifornia (212) 509-5509 x.11(415) 489-6157 jkende@liifund.orgbprater@liifund.org