“DEALS THAT HAVE WORKED” RD-11

1. “DEALS THAT HAVE WORKED”RD-11

2. What it takes to make it work? • Thinking Outside of the Box • Utilize All Agencies • Recruit the Best Team • Flexibility • Patience • Cooperation • Experience

3. Common Denominators(11 Properties) • 10 year holding period intact • RD 515 financing • HUD Section 8 HAP contracts • Same Owner/Management Agent

4. Participating Agencies • Rural Development • Debt write-down (3 of 11 properties) • Restructured RD debt at new rates and terms • Subordinated RD debt to MHDC • Missouri Housing Development Commission • AHAP credits, Bonds, LIHTC, HOME Grant • Housing and Urban Development • HUD Project Based Rental Assistance • MHDC/HUD Risk-Sharing Agreement

5. AHAP Tax Credits • AHAP Credits • One-time state tax credit allocated to eligible Donor (additional information and application located at www.mhdc.com) • Benefits to Previous Owner • Tax Credits equal to 55% of appraised value in excess of outstanding RD loans • Fully transferrable and may be carried forward for a period of 10 years • Sale/Use of AHAP credits • Receive charitable contribution deduction • Offset negative capital accounts/depreciation • Benefits to Buyer • Only assume existing debt leaving room for more rehab funding

6. Non-Profit Participation • AHAP credits requires 501(c)3 non-profit • Need experienced non-profit or need experienced developer/co-general partner/management agent as a counterpart • Does not affect the 10 year holding requirement to receive LIHTC for acquisition

7. Planning Involved • Develop Strategy • Review commonalities • Utilize all funding sources/agencies • Overcome hurdles • Smaller projects (12 to 48 units) • Debt service 2 mortgages • Funding/Approval of all 11 properties • Initial Planning Meeting • Attendees: • Transferor • Rural Development • MHDC • Non-Profit Intermediary • Transferee (newly created entity) • Attorney • Consultant • Accountant

8. Planning Involved • Coordination • Appraisals • Current owner must obtain on each property • Subordination • Coordination between agencies • Document Preparation • Various application processes and closing documents required • Title Work and Recording • 11 properties; 9 counties • Application Process • 11 separate Transfer of Physical Assets Application submitted to MHDC • 11 separate Transfer Applications submitted to RD • HUD 2530 Approval • Non-profit entity • Management Agent • Developer • Newly created entity and its partners

9. 2-Step Transfer • Step 1 - Transferor to Non-Profit Intermediary • All 11 properties had to be transferred from previous owner to non-profit • RD debt was transferred (assigned and assumed) to non-profit • AHAP Tax Credits transferred to Transferor (previous owner) • Step 2 - Non-Profit Intermediary to Transferee • All 11 properties transferred from Non-Profit to Transferee (newly created single asset entity) • Prior to actual transfer: • Financing in place • Federal and State investors admitted into newly created entity • RD Debt transferred and subordinated

10. Funding Sources • Existing RD Debt • $6,532,594 • $6,268,589 transferred & subordinated • Tax Exempt Bonds • $8,450,000 (construction) • $3,485,000 (permanent) • Low Income Housing Tax Credits (federal & state) • $5,045,000 • HOME Grant • $393,595

11. Closings • Transferor to Non-Profit and Non-Profit to Transferee Closing • Refer to Closing Attorney (Deed, Assignments, Affidavits, etc.) • RD Closing • Refer to local/state RD for Transfer Checklist • MHDC and Bond Closing • Refer to Transfer of Physical Assets Checklist • Syndication/Investor Closing • Due diligence requirements

12. Accomplishments • 328 Units Improved • Substantial Rehabilitation • $26,006 Construction Costs per Unit • $33,841 as improved value • Innovative Use of Resources • Preservation of Affordable Housing

13. Holden Law Office, P.C.Natalie D. Riley 718 W. Business Highway 60 P.O. Box 633 Dexter, Missouri 63841 (573) 624-8901 (573) 624-8188 facsimile natalie@holdenlawoffices.com