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HTC Deal Structures—Step by Step

HTC Deal Structures—Step by Step. IPED HTC Developer’s Conference February 8, 2008 Mark Einstein. Engage historic consultant & submit Parts I & II Develop equity package for HTC investor Negotiate Letter of Intent with investor Prepare documents Close equity deal.

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HTC Deal Structures—Step by Step

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  1. HTC Deal Structures—Step by Step IPED HTC Developer’s Conference February 8, 2008 Mark Einstein

  2. Engage historic consultant & submit Parts I & II Develop equity package for HTC investor Negotiate Letter of Intent with investor Prepare documents Close equity deal Process to Close HTC Deal Deal should close within 75 – 90 days of receiving Part II approval, depending on deal complexity and negotiation timing Reznick Group Building Business Value

  3. HTC Lease Pass-Through HTC Deal Structures—Step by Step

  4. For $10MM in tax credits $1.15 equity per credit $ 2.5% preferred return on tax credit equity 15% put five years after placed in service Pricing in This Example Actual pricing will vary depending on… • Deal size and complexity • Market conditions • Needs of developer • Speed • Equity up front versus over time • Developer reputation and credit risk • Investor experience Reznick Group Building Business Value

  5. Project Inception—A New Project Developer Member Managing Member 0.01% 99.99% Project Reznick Group Building Business Value

  6. Adding Debt Capital Developer Member Managing Member Lender Project Mortgage Loan Reznick Group Building Business Value

  7. Closing—Step 1, Create Master Tenant Developer Member Managing Member Tax Credit Investor 99.99% 0.01% Project Master Tenant Reznick Group Building Business Value

  8. Closing—Step 2, MT Invests in Project Developer Member Managing Member Tax Credit Investor 79.99% * Project Master Tenant 20% * Ownership split of Project between Developer and Master Tenant may vary Reznick Group Building Business Value

  9. Before Placed in Service Developer Member Managing Member Tax Credit Investor Project Master Tenant Long-term Lease of Building (typically 32 years) Reznick Group Building Business Value

  10. Placed in Service Developer Member Managing Member Tax Credit Investor Project Master Tenant $10 MM Tax Credit Reznick Group Building Business Value

  11. Tax Credit Distribution Developer Member Managing Member Tax Credit Investor $10 MM Tax Credit Project Master Tenant $10 MM Tax Credit Reznick Group Building Business Value

  12. Operations—Step 1, MT Operates Building Developer Member Managing Member Tax Credit Investor Rent Space Tenant Project Master Tenant Reznick Group Building Business Value

  13. Operations—Step 2, MT Pays Lease Developer Member Managing Member Tax Credit Investor Rent Lease Payment Space Tenant Project Master Tenant Note: Lease Payment generally NOI less preferred return Reznick Group Building Business Value

  14. Operations—Step 3, Debt Service Developer Member Managing Member Tax Credit Investor Debt Service Rent Lease Payment Space Tenant Lender Project Master Tenant Reznick Group Building Business Value

  15. Operations—Step 4, Project Distribution Developer Member Managing Member Tax Credit Investor Rent Lease Payment Space Tenant Project Master Tenant 80% Profits & Losses Less Special Allocations 20% Profits & Losses + Special Allocations Reznick Group Building Business Value

  16. Operations—Step 5, MT Distribution Developer Member Managing Member Tax Credit Investor Preferred Return + 20% Project Profits & Losses + Special Allocations Rent Lease Payment Space Tenant Project Master Tenant 80% Profits & Losses Less Special Allocations 20% Profits & Losses + Special Allocations Note: Preferred Return to Investor taken from difference between Rent and Lease Payments Reznick Group Building Business Value

  17. Exercise of Put—Sixth Year After Placed In Service Date $1.7 MM Developer Member Managing Member Tax Credit Investor Interest in MT Rent Lease Payment Space Tenant Project Master Tenant 80% Profits & Losses Less Special Allocations 20% Profits & Losses + Special Allocations Reznick Group Building Business Value

  18. After Exercise of Put Developer Member Managing Member Preferred Return + 20% Project Profits & Losses + Special Allocations Rent Lease Payment Space Tenant Project Master Tenant 80% Profits & Losses Less Special Allocations 20% Profits & Losses + Special Allocations Reznick Group Building Business Value

  19. HTC Sandwich Lease HTC Deal Structures—Step by Step

  20. Operations—New Step, MT II Distribution Rent Less Sub-lease Payment Developer Member Managing Member Tax Credit Investor Developer Entity Sub-lease Payment Rent Space Tenant Project Master Tenant Master Tenant II Lease Payment 80% Profits & Losses; Less Special Allocations $10 MM Tax Credits + 20% Profits & Losses + Special Allocations Note: Master Tenant “sandwiched” between Project & MT II; upside rents trapped at MT II Reznick Group Building Business Value

  21. Reznick Group Building Business Value

  22. Golden Belt- May 2007 Reznick Group Building Business Value

  23. Golden Belt- December 2007 Reznick Group Building Business Value

  24. Golden Belt- July 2008 Reznick Group Building Business Value

  25. Golden Belt- July 2008 Reznick Group Building Business Value

  26. Golden Belt- What it Takes Reznick Group Building Business Value

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