1. Update on LIHTC Programs and RAD Midwest Lenders Conference Chicago, IL Wednesday, October 14, 2015 10:15 – 12:00 noon Presented by: Rebecca Arthur, MAI Partner Novogradac & Company LLP Rebecca.arthur@novoco.com (913) 677-4600 ext. 1515 www.novoco.com

2. NUANCES OF APPRAISING LIHTC TRANSACTIONS RENT: Achievable Market Rent The rent that a particular unit, considering its condition, location, features, unit size and amenities, would command in a market assuming no rent or income restrictions or rent subsidies. Based upon analysis of comparable market rate properties. Achievable LIHTC Rent The rent that a LIHTC unit can achieve taking into account comparable LIHTC competition, AMI level restrictions, market conditions, and features. May be less than Maximum allowable LIHTC rent for that unit. Maximum Allowable LIHTC Rent* Maximum allowed by Federal Program (based on Area Median Income) Gross LIHTC Rent (tenant paid utilities have not yet been deducted) Net LIHTC Rent (tenant paid utilities have been deducted) *Even though its allowable to charge this rent, the rent may not be achievable in the market Novogradac’s Rent & Income Calculator: http://www.novoco.com/products/rentincome.php

3. Example #1: Aurora, Kane County, Illinois – 2015 Maximum Allowable LIHTC rents are achievable Achievable LIHTC rents are more than 10% below Achievable Market Rents (rent advantage more than 10%)

4. Example #1: Aurora, Kane County, Illinois – 2015

5. Example #2 : Collinsville, Madison County, IL Maximum Allowable LIHTC rents are NOT achievable Achievable LIHTC rents are greater than 10% below Achievable Market Rents Even though Maximum Allowable LIHTC rents are Less than Achievable Market Rents, Maximum Allowable LIHTC Rents are still not achievable

6. Example #3 : Des Moines, Polk County, IA Maximum Allowable LIHTC rents are NOT achievable Achievable LIHTC rents are less than 10% below Achievable Market Rents (rent advantage less than 10%)

7. NUANCES OF APPRAISING LIHTC TRANSACTIONS Expenses: Admin Fees –higher Mgmt Fees – higher Taxes – may have PILOT, abatements, valuation of LIHTC heavily contested/debated in certain areas Utilities Maintenance – generally similar Capitalization Rates: LIHTC Sales Comps? USING MAP APPRAISALS FOR DETERMINATION OF LIHTC ELIGIBLE BASIS (Save the borrower some cash)???

8. RAD/ LIHTC Transactions VALUING PUBLIC HOUSING DEVELOPMENTS As Is Value - Very Important for LIHTC Eligible Basis Determination Highest & Best Use of the Property As Is? Two Scenarios to Test As Is Achievable Market Rents utilizing unrestricted – market oriented operating expense and capitalization rate CHAP Rents utilizing market-oriented Restricted operating expenses and capitalization rate

9. VALUING SECTION 8 DEVELOPMENTS