1. Never Say Never Again – Bonds are Back Current Market Update and Financing Observations Texas Housing Conference Tuesday, July 29, 2014 Hilton Hotel Austin, TX

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3. Table of Contents  Section AInterest Rate Overview  Section BMultifamily Housing – 10 year comparison  Section CCase Studies

4. Section A Interest Rate Overview

5. 1 10-Year US Treasury/10-year AAA MMD Comparison (2004 to Present) Source: Bloomberg

6. 2 30-Year US Treasury/30-year AAA MMD Comparison (2004 to Present) Source: Bloomberg

7. 3 Down 95.47% to 90.59% on 7/16/2014 Peaked at 186.06% on 12/18/2008 10-year AAA MMD as a % of 10-year US Treasury (2004 to present) Source: Bloomberg

8. 4 Down 109.50% to 100.30% on 7/16/2014 Peaked at 209.88% on 12/18/2008 30-year AAA MMD as a % of 30-year US Treasury (2004 to present) Source: Bloomberg

9. 5 MMD Yield Curves (7/15/2004 and 7/15/2014) Down 141 bps Down 143 bps Down 165 bps Down 157 bps Down 145 bps Down 155 bps Source: Bloomberg

10. US Treasury Yield Curve (7/15/2004 and 7/15/2014) 6 Down 215 bps Down 194 bps Down 201 bps Down 214 bps Down 185 bps Down 200 bps Source: Bloomberg

11. Housing Bonds: Spreads to MMD (2004 to present) 7 Source: RBCCM Indicative Housing Rates and Bloomberg AMT Non-AMT 7/30/2008 HERA Legislation enacted. PAB Housing Bonds become Non-AMT

12. Housing Bonds: Spreads to MMD (2004 to present) 8 Source: RBCCM Indicative Housing Rates and Bloomberg AMT Non-AMT 7/30/2008 HERA Legislation enacted. PAB Housing Bonds become Non-AMT

13. Section B Multifamily Housing Finance – 10 year Comparison

14. 9 2004  Public offerings (AAA rated) – Fannie/Freddie/FHA enhanced – long term bonds (15 to 40 years)  Variable rate executions with Fannie Mae and Freddie Mac – Swapped to Fixed  Private Placements with large institutional investors (Charter Mac and MuniMae)-High LTVs, low DSCR, 40 year amortization (45 year amortization in some cases)  S&P Affordable Housing Program, publicly rated sub debt.  Few CRA bank placements 2014 Long-term (Fannie/Freddie/FHA enhanced) publicly offered bonds are rare Long –term variable rate executions from Fannie/Freddie no longer exist Private Placements with institutional investors are back after a large dip following the Charter Mac/MuniMae disappearance in 2008/2009. Stricter underwriting. S&P Affordable Housing Program remains, sub debt is less prevalent. New criteria released. CRA bank placements are very prevalent in large CRA markets (FL, DC metro, NY, CA) Multifamily Housing Finance - 10 year comparison

15. 10 Multifamily Housing Financing Options Multifamily Rated Conduit Executions Agency (Fannie Mae and Freddie Mac) and FHA tax-exempt bond structures including 221(d)(4) and 223(f). Private Placements Sale of unrated bonds directly to institutional investors, and both local and national banks as CRA motivated investors. Freddie Mac has a new direct placement program Tax-Exempt Bonds/ Conventional Loan Hybrid This hybrid structure requires the sale of short-term cash collateralized bonds (collateralized with FHA, Fannie/Freddie or conventional loan proceeds). FHA Risk Share Sale of tax-exempt bonds enhanced by FHA under the Risk Share Program. Many State HFAs and a few local issuers have FHA risk share programs. Typically requires LOC during construction/substantial rehab phase S&P Affordable Housing Program Unenhanced debt supported by the Real Estate. A- ratings. New criteria recently released by S&P Public Housing Authorities S&P Issuer Ratings. Typically A rating category

16. Section C Multifamily Case Studies

17. 11 Other Facts  Bonds were issued for permanent financing only. Conventional construction loan from Bank of America was used for the 2-year rehab. Rehab was completed in November 2012.  Use of a conventional construction loan provided lower rate and construction interest than could be realized in a construction/perm tax-exempt bond.  All NJ HMFA bond transactions are required by state statute to pay NJ Prevailing Wages which would add approximately 25% to 30% to rehab costs. Conventional construction loan eliminated the Prevailing Wage requirement.  2012F-2 Cash Collateral invested in 1 year Treasury maturing 12/31/13 with an interest rate of.125% reducing negative arbitrage on 2012F-2 bonds to.375% Multifamily Case Study: New Jersey HFMA – Washington Dodd Apartments $19,755,000 New Jersey Housing and Mortgage Finance Agency Multifamily Conduit Revenue Bonds (Washington Dodd Apartments Project), Series 2012F-1 & 2012F-2 Pricing Date:December 13, 2012 Delivery Date:December 20, 2012 Bond Ratings:Moody’s: Aaa RBC Role:Sole Manager  Private Activity Bonds with 4% LIHTC issued through NJ HFMA as a conduit issuer. Two Series: 2012F-1: $18,540,00, 2012F-2: $1,215,000  Aaa rated Freddie Mac credit enhanced bonds. 2012F-1 structured with 35-year amortization, 15 year term. All-in-rate was 4.84%  2012F-2 bonds required to satisfy 50% aggregate basis test for 4% LITHC. Bonds have 1 year maturity (1/1/14) and interest rate of.50%. Bonds were fully cash collateralized  Capital Stack included LIHTC equity, deferred developer fee, existing project reserves, and a Seller Note. Transaction Summary

18. 12 Other Facts  Bonds were issued for the acquisition and moderate rehabilitation of 116 apartments located in East Orange, NJ. Rehabilitation will be tenant-in-place.  Project receives rental subsidy for 115 of the units from a project-based Section 8 Housing Assistance Payments contract which has an expiration date of September 29, 2029.  Project is entitled to PILOT Agreement which permits the Borrower to make payments in lieu of taxes in an amount that is anticipated to be less than the amount of real estate taxes that otherwise would be due for a period of 25 years. Multifamily Case Study: New Jersey HFMA – Hampshire House Apartments $6,400,000 New Jersey Housing and Mortgage Finance Agency Multifamily Conduit Revenue Bonds (Hampshire House Apartments Project), Series 2012D Pricing Date:January 9, 2013 Delivery Date:January 11, 2013 Bond Ratings:Moody’s: Aaa RBC Role:Sole Manager  Private Activity Bonds with 4% LIHTC issued through NJ HFMA as a conduit issuer.  Aaa rated Fannie Mae credit enhanced bonds structured with 35-year amortization, 18-year term. All-in-rate was 5.30%  Utilized two term bond structure with term bonds maturing on January 15, 2023 (2.375%) and January 15, 2031 (3.35%) to take advantage of steep yield curve  Capital stack included LIHTC equity and deferred developer fee Transaction Summary

19. 13 Other Facts  Bonds were issued for the acquisition and rehabilitation of 125 apartments located in Maplewood, MN. Rehabilitation will be tenant-in-place.  Project will receive the benefit of a Section 8 Housing Assistance Payments Contract covering all of the units. Contract expires December 31, 2032.  The mortgage supporting the Series A-1 Bonds will be insured upon completion under the HUD Risk-Sharing Program  Project also received a $4.172M forgivable loan funded from the proceeds of the Agency’s Housing Infrastructure Bonds. Multifamily Case Study: Minnesota Housing Finance Agency Concordia Arms Apartments $5,065,000 Minnesota Housing Finance Agency Rental Housing Bonds, 2013 Series A-1 & A-2 Pricing Date:August 6, 2013 Delivery Date:August 14, 2013 Bond Ratings:Moody’s: Aa1; S&P: AA+ RBC Role:Sole Manager  Private Activity Bonds with 4% LIHTC issued by Minnesota Housing Finance Agency.  Aa1/AA+ ratings reflect the Agency’s general obligation pledge to pay debt service if necessary.  Structured as two series. A-2 bonds are short-term bonds maturing in 18 months issued to satisfy the 50% aggregate basis test for 4% LIHTC.  A-1 Bonds utilized a four term bond structure with term bonds maturing on August 1, 2023 (3.50%), August 1, 2033 (4.875%), August 1, 2043 (5.20%) and August 1, 2049 (5.30%) to take advantage of steep yield curve. Transaction Summary

20. 14 Transaction Highlights  Seattle Housing Authority was upgraded to AA from A+ prior to the issuance of the Bonds  Two series of tax-exempt bonds were currently refunded and one series of bonds was advance refunded with RBC performing the defeasance calculation. Multifamily Case Study: Housing Authority of the City of Seattle Pooled Housing Bonds $13,855,000 Housing Authority of the City of Seattle Pooled Housing Revenue and Refunding Revenue Bonds, 2014 Pricing Date:March 11, 2014 Delivery Date:March 26, 2014 Bond Ratings:S&P: AA RBC CM Role:Sole Managing Underwriter  Governmental Bonds issued directly by the Housing Authority  30-year bonds with optional prepayment on or after December 1, 2023  Bonds refunded the existing tax-exempt bonds and lines of credit for 11 housing authority properties.  Bond structure mixing serials and term bonds achieved a project DCR of 1.63x and a TIC of 4.660382%  AA rating supported by general revenue pledge of the Housing Authority  Reserve Fund equal to 1 year MADS was funded at closing Transaction Summary