1. Historic Tax Credit Equity Syndication Basics Historic Tax Credit Developers Conference Thursday, February 5, 2009 Miami Beach, Florida

2. What is Syndication? Syndication is the process by which the owner of a building brings an investor into the ownership structure of the building so that the investor can claim the credits (and other economic and tax benefits), typically in exchange for providing equity to the project.

3. What is Syndication? Federal Historic Tax Credits are not sold directly to an investor. Investors become owners of the property as limited partners in a limited partnership or as members in a limited liability company. Some State Historic Tax Credits can be certificated and sold to investors.

4. Common Investment Structures Single Entity Structure. Master Lease/Credit Pass-Through Structure.

5. Single Entity Structure End User Owner (LP or LLC) Owner (LP or LLC) Investor GP/Manager Developer Property 0.1% Management Fees, etc. Development Fee 99.9% Tax Credits Lease Fee Ownership

6. Master Lease/Credit Pass-Through Lessee Claims Credit Developer Master Lessee (LP or LLC) Master Lessee (LP or LLC) Investor GP/Manager Property End User 0.1% Development Fee 99.9% Tax Credits Lease Owner/Lessor (Affiliate of GP/Manager) Owner/Lessor (Affiliate of GP/Manager) Master Lease

7. Should the Owner/Developer Syndicate? Factors to Consider: – Does the Developer have limitations on claiming the credit for itself? Is the Developer a tax exempt entity or have insufficient taxable income to be able to use tax credits? Business Tax Credit Limitations ($25K +75%) Passive Activity Rules Apply Can now offset AMT for QREs incurred after 2007

8. Should the Owner/ Developer Syndicate? Contd Factors to Consider: – Net Economic Benefits Equity raise versus lost cash and (sometimes) lost depreciation. Transaction Costs (both closing and on-going).

9. Should the Owner/ Developer Syndicate? Contd Factors to Consider: – Is additional equity needed during construction (i.e. prior to completion of the rehabilitation)?

10. Should the Owner/ Developer Syndicate? Contd Factors to Consider: – Control: Are you willing to have a partner? Loss of control issues. Disclosure and Reporting. Unwind concerns.

11. Finding Investors Does your bank or its CDC make HTC investments? Referral sources: – State Historic Preservation Office (SHPO) – State and local preservation organizations – Other developers – Experienced accountants and lawyers

12. Soliciting Investment Proposals Things Investors Want to Know Proposed Budget and Timing Financing Commitments Property Acquisition Status Real Estate issues including title and environmental issues, zoning, parking and other permitting

13. Soliciting Investment Proposals Things Investors Want to Know contd Leasing Commitments/Market Study Part 1 and Part 2 Status Development Teamwho they are, their experience and financial capacity

14. Key Syndication Business Issues Picking The Best Offer Pricing Equity Pay-In Schedule Reserves Cash Flow, Fees, Tax Priority Payments and other items that reduce the net economics to the developer

15. Key Syndication Business Issues Picking The Best Offer contd Exit Strategy (Put and Call Options) Guarantees Structure Due Diligence Requirements Experience/Reputation and Closing Process

16. More Information? John H. Cornell III, Esq. Nixon Peabody LLP 100 Summer Street Boston, MA 02110 (617) 345-1127 jcornell@nixonpeabody.com