1. 2015 Spring Developer Forum Untangling Property Dispositions @dozcpa

2. The Market for Existing Affordable Housing Assets Tax Credit Housing Disposition 1 st Quarter 2015 The Q1 2015 survey continues to track six key attributes  Main value components  Targeted yield  Respondent characteristics  Terminal or residual capitalization rate  Basis point spread between conventional apartment and Y15+ terminal capitalization rates  Income and expense trending

3. Main Value Components & Targeted Yield Cash flow remains the top “considered” component with 91% of the respondents stating cash flow is a main element of consideration. Subsidy availability also has a 91% consideration rate as a primary component, but cash flow has significantly more respondents placing it in the top 50% of importance relative to factors. (Remaining or potentially new Tax Credits, Other Subsidy, Reversion/Residual or Business Interests. Remaining or potential new tax credits has a lower consideration rate relative to residual (72% vs. 67%), a reversal of a trend we’ve been seeing where residual was declining in importance relative to seeking tax credits.

4. Main Value Components & Targeted Yield Historically, the yield expectations or discount rates used in modeling ranged from 5% to 11% for Class A to C apartment products. The current survey is showing a mean required yield of 12.3% and a median required yield of 11%, a significant reduction from 14% in 2009 The spread between conventional and affordable properties is most likely attributable to the restrictions placed on the Y15+ properties. However, this spread is getting smaller, from about 63 basis points pre-2014 to 47 in Q1 2015.

5. Interesting Trends Variety of Respondents: 27% Non-Profit, 42% Buyers, 42% Buyers/Sellers or Intermediaries, 36% syndicator, 30% developer, 12% Investor Since 2009, there has been a reduction in the both the mean and median terminal capitalization rate.  From 8.5% in 2011 to 7.5% in Q1 2015, with a mean at 7.2% in Q1 2015

6. Interesting Trends The market continues to evolve and new trends are presenting themselves.  There is an increased willingness to consider year 11 to year 14 LIHTC properties.  Pricing properties based upon Market rents up to 18% consider in their valuation  Past 3 surveys show increasing demand and marketability of Fee Simple & LP interests

7. Interesting Trends Five issues to always consider in Y15/Dispositions and Acquisitions  Document Review  QCP & Agency review  Accounting & Property performance data  Market & Valuation  Partners Each issue/Topic requires research, study and communication.

8. Questions? Nancy M. Morton nmorton@doz.net 317-819-6141 nmorton@doz.net