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NATIONAL HISTORIC TAX CREDIT CONFERENCE 2008 JOEL COHN REZNICK GROUP How Credits Become Capital: When and How to Syndicate 410-783-4900.

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Presentation on theme: "NATIONAL HISTORIC TAX CREDIT CONFERENCE 2008 JOEL COHN REZNICK GROUP How Credits Become Capital: When and How to Syndicate 410-783-4900."— Presentation transcript:

1 NATIONAL HISTORIC TAX CREDIT CONFERENCE 2008 JOEL COHN REZNICK GROUP How Credits Become Capital: When and How to Syndicate 410-783-4900

2 Important Elements of a Syndication Experience Team Financing Financial Capacity of Guarantors Project Risks - Leasing, Market Etc. The Sum of These Analyses Results in 'Pricing' Pricing Can Mean: Gross Price Timing When the Developer Receives Funds Preference Payments Put Price Guarantees

3 Purpose of a Good Set of Projections Control Cash Flow Control Depreciation Allocation Used for Pricing by Credit Buyer Used by Working Group to Refine Structure Used as a Blueprint for Preparation of Documents Attached to the Partnership Agreement as an Exhibit Role of the Projection Preparer Develop A Quality Set of Projections Understand Developer's Goals and Limitations Understand The Property and the Project Structure the Deal to Maximize Value of Credits Minimize Exit Tax Consequences Structure the Deal to Comply With Laws and Regulations Respond to Issues and Propose Solutions That Meet the Objectives of the Various Parties

4 Major Elements of Pricing Price Per Dollar of Credit Preferred Return Tax Priority Payment Asset Management Fee Exit Fee/Put & Call

5 GENERAL INFORMATION Capital Contributions Allocation Percentages GP/Project Sponsor Date Amount Through 12/31/2016 As Needed 1,879,000 To Investor Profits/Losses99.99% Total 1,879,000 Cash Flow 99.99% Residual 99.99% To GP/Manager Profits/Losses0.01% Tax Credit Equity Pay-in Schedule to Investor Cash Flow 0.01% Residual 0.01% Closing 30%10/01/08958,200 100% Complete 50%09/01/081,597,000 After 1/1/2017 Part III, Stabilization, Conversion to Perm20%01/01/09638,800 To Investor Profits/Losses75.00% Cash Flow 75.00% Total 100% 3,194,000 Residual 75.00% To GP/Manager Profits/Losses25.00% Cash Flow 25.00% Residual 25.00%

6 FINANCING ASSUMPTIONS 1st Mortgage 11,000,000 Interest Rate6.00% Amortize Yes Amortization Term300 Deferred Developer Fee2,850,000 Interest Rate0.00% Amortize yes Amortization Term13 Year Maturity Payable out of cash flow100.00%

7 SOURCES AND APPLICATION OF FUNDS QualifiedDepreciable RehabilitationNon-QREFunded Total ExpendituresBasisExpenseOther Tax Credit Equity from Investor 3,194,000 1st Mortgage 14,500,000 Deferred Developer Fee 2,850,000 Developer Equity1,076,000 TOTAL SOURCES:21,620,000 Acquisition Costs-Land 600,000# - - - Acquisition Costs- Building 1,700,000# - - - Construction Period Carrying Costs 970,000 284,000 686,000 - Permanent/Construction Loan Fees & Costs 350,000 66,250 - 283,750 - Achitectural, Engineering 800,000 270,000 30,000 - - Construction Contract 12,000,000 11,000,000 1,000,000 - - Site Improvements 300,000 - - - Contingency 1,100,000# - - - Appliances 350,000 - 130,000 - - Historic Tax Credit Application Fee 10,000# - - - Professional Fees 115,000 80,000 25,000 10,000 - Marketing & Leasing Reserves 400,000# - - 150,000 250,000 Syndication Costs-Fees & Other 75,000# - - - Development Fee 2,850,000# 2,400,000 450,000 - - TOTAL APPLICATIONS:21,620,000 15,210,2504,321,000443,750925,000

8 CALCULATION OF FEDERAL TAX CREDITS Federal Rehabilitation Credit Qualified Rehab Expenditures 15,210,250 Credit Rate 20.00% Total Calculated Credit 3,042,050 Tax Credit Investor Ownership 99.99% Total Credit to Investor 3,041,746 Price Per $1.00 of Credit 1.05 Total Equity Contributed 3,194,000

9 PROJECTED CASH FLOW Net PriorityAssetTaxTo GP: GP/ Operating 1st MortgageReplacementReturn toMgt Fee toPriority toDeferredIncentiveCashManagerInvestor YearIncome RepaymentReservesInvestor Dev FeeFeeFlowDistribution 2008 1,200,000 (850,478) (40,000) (91,029) (7,500) - (168,794) (42,199) - - - 2009 1,230,000 (850,478) (40,800) (95,820) (7,725) - (188,142) (47,035) - - - 2010 1,260,750 (850,478) (41,616) (95,820) (7,957) - (211,903) (52,976) - - - 2011 1,292,269 (850,478) (42,448) (95,820) (8,195) - (236,262) (59,065) - - - 2012 1,324,575 (850,478) (43,297) (95,820) (8,441) - (261,231) (65,308) - - - 2013 1,357,690 (850,478) (44,163) (95,820) (8,695) (32,146) (261,110) (65,277) - - - 2014 1,391,632 (850,478) (45,046) (95,820) (8,955) (53,591) (270,193) (67,548) - - - 2015 1,426,423 (850,478) (45,947) (95,820) (9,224) (72,244) (282,167) (70,542) - - - 2016 1,462,083 (850,478) (46,866) (95,820) (9,501) (91,612) (294,246) (73,561) - - - 2017 1,498,636 (850,478) (47,804) (95,820) (9,786) (53,649) (352,879) (88,220) - - - 2018 1,536,101 (850,478) (48,760) (95,820) (10,079) (52,301) (323,073) (153,610) 1,981 495 1,486# 2019 1,574,504 (850,478) (49,735) (95,820) (10,382) (63,017) - (157,450) 347,622 86,905 260,717# 2020 1,613,867 (850,478) (50,730) (95,820) (10,693) (74,205) - (161,387) 370,554 92,638 277,916# 2021 1,654,213 (850,478) (51,744) (95,820) (11,014) (85,786) - (165,421) 393,950 98,487 295,463# 2022 1,695,569 (850,478) (52,779) (95,820) (11,344) (97,878) - (169,557) 417,712 104,428 313,284# 2023 1,737,958 (850,478) (53,835) (95,820) (11,685) (112,087) - (173,796) 440,257 110,064 330,193# 2024 1,781,407 (850,478) (54,911) (95,820) (12,035) (127,457) - (175,000) 465,705 116,426 349,279# 2025 1,825,942 (850,478) (56,010) (95,820) (12,396) (141,876) - (175,000) 494,362 123,591 370,771# 2026 1,871,590 (850,478) (57,130) (95,820) (12,768) (156,917) - (175,000) 523,477 130,869 392,608# 2027 1,918,380 (850,478) (58,272) (95,820) (13,151) (172,516) - (175,000) 553,143 138,286 414,857# 2028 1,966,340 (850,478) (59,438) (95,820) (13,546) (188,813) - (175,000) 583,245 145,811 437,434# 2029 2,015,498 (850,478) (60,627) (95,820) (13,952) (205,718) - (175,000) 613,903 153,476 460,427# 2030 2,065,886 (850,478) (61,839) (95,820) (14,371) (223,386) - (175,000) 644,992 161,248 483,744# 2031 2,117,533 (850,478) (63,076) (95,820) (14,802) (241,730) - (175,000) 676,627 169,157 507,470# Total 38,818,846# (20,411,472) (1,216,874) (2,294,889) (258,199) (2,246,928) (2,850,000) (3,012,953) 6,527,530 1,631,881 4,895,649

10 PROJECTED TAXABLE INCOME (LOSS) REAL ESTATE OWNER Net Taxable InvestorGP/Mgr OperatingInterest FundedIncentiveIncome YearIncomeExpenseDepreciationExpensesFee(Loss) 2008 1,200,000 (654,674) (600,663) (43,350) (42,199) (140,885) (140,871)(14) 2009 1,230,000 (642,597) (654,013) (43,350) (47,035) (156,995) (156,980)(15) 2010 1,260,750 (629,775) (634,523) (43,350) (52,976) (99,874) (99,864)(10) 2011 1,292,269 (616,163) (621,989) (43,350) (59,065) (48,298) (48,294)(4) 2012 1,324,575 (601,711) (619,679) (43,350) (65,308) (5,472) (5,471)(1) 2013 1,357,690 (586,367) (610,091) (11,350) (65,277) 84,604 84,5968 2014 1,391,632 (570,078) (601,613) (11,350) (67,548) 141,043 141,02914 2015 1,426,423 (552,783) (601,613) (11,350) (70,542) 190,135 190,11619 2016 1,462,083 (534,422) (601,643) (11,350) (73,561) 241,107 241,08324 2017 1,498,636 (514,928) (601,773) (11,350) (88,220) 282,365 211,77370,592 2018 1,536,101 (494,232) (601,643) (11,350) (153,610) 275,266 206,44968,817 2019 1,574,504 (472,260) (601,773) (11,350) (157,450) 331,671 248,75382,918 2020 1,613,867 (448,932) (601,643) (11,350) (161,387) 390,555 292,91697,639 2021 1,654,213 (424,166) (601,773) (11,350) (165,421) 451,503 338,627112,876 2022 1,695,569 (397,872) (601,643) (11,350) (169,557) 515,147 386,360128,787 2023 1,737,958 (369,956) (592,923) (11,350) (173,796) 589,933 442,450147,483 2024 1,781,407 (340,318) (583,913) (11,350) (175,000) 670,825 503,119167,706 2025 1,825,942 (308,853) (584,025) (11,350) (175,000) 746,714 560,036186,678 2026 1,871,590 (275,447) (583,913) (11,350) (175,000) 825,881 619,411206,470 2027 1,918,380 (239,980) (584,073) (11,350) (175,000) 907,977 680,983226,994 2028 1,966,340 (202,326) (583,913) (11,350) (175,000) 993,751 745,313248,438 2029 2,015,498 (162,349) (584,073) (11,350) (175,000) 1,082,726 812,045270,681 2030 2,065,886 (119,907) (583,913) (11,350) (175,000) 1,175,716 881,787293,929 2031 2,117,533 (74,847) (584,073) (11,350) (175,000) 1,272,263 954,197318,066 Total 38,818,846 (10,234,942) (14,420,894) (432,400) (3,012,953)13,730,609 8,089,5632,628,093

11 PROJECTED CONSEQUENCES OF BUYOUT OF INVESTOR PUT OPTION Original Capital Contribution 3,194,000 Buyout - Percentage of Original Capital15.00% Put Price 479,100


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