Getting the Most Out of Alternative Financing Sources Moderator: Tom Dixon, Boston Capital Panelists: Raquel Favela, City of Dallas Steve LeClere, Monarch Private Capital Ray Miller, City of Houston

Tax Increment Reinvestment Zone (TIRZ) Tax Increment Financing (TIF) TIRZs/TIFs are specified areas created by a municipality to attract new investment in an area. TIRZs/TIFs help finance costs of redevelopment and encourage development in areas that would otherwise not attract sufficient market development Taxes attributable to new improvements are set-aside in a fund to finance public improvements within the boundaries of the zone.

TIRZ Case Study In Houston, a local TRIZ was used to finance $2M of public infrastructure that included sidewalks and other public improvements for a mixed use affordable housing development The TIRZ will entered into a reimbursement at completion of the improvements ( at certificate of occupancy) and will provide increment reimbursements over a period of five years No out of pocket expense incurred by the developer. Construction costs were bridged by the construction lender and the increment is bridged with a five year loan provided by the local housing finance agency.

Texas State Historic Credit ((§171.901, et. Seq)

Tax Credit and Equity Calculation Texas State Historic Credit ((§171.901, et. Seq) Tax Credit and Equity Calculation   Federal Historic State Historic Qualified Rehabilitation Expenditures 14,941,945 Applicable % 20% 25% Calculated Annual Tax Credits 2,988,389 3,735,486 Investor / Special Member % 99.00% 100.00% Fund Tax Credit Allocation 2,958,505 Tax Credit Price 0.85 Tax Credit Equity 2,489,582 3,200,311

B-Bonds What are they? Secondary (or tertiary) tranche of tax-exempt bonds. Purchasers are private individuals or entities – private equity. How does it work? Size A Bond Tranche to a 1.35 DSCR. B Bond Debt Service is residual receipt, cash flow dependent debt. Any interest not paid currently accrues. B Bonds are secured by a subordinate mortgage and are nonrecourse to the developer, general partner, and guarantor. Rates vary but are typically 100-300 basis points higher than agency permanent debt typical on 4% transactions. Pros Reduces dependence on public funds Allows developers to fill gaps in sources & uses with subordinate debt. Cons Ability to Raise Funds Exit Taxes – Limited Partners will have large negative capital accounts at end of Compliance Period.

B-Bonds Permanent Uses Land/ Acquisition 900,000 Construction Costs   900,000 Construction Costs 12,943,600 Construction Contingency 612,180 Construction Lender Costs 218,000 Construction Interest 395,345 Permanent Financing 180,000 Other Soft Costs 1,154,576 Lease-up Reserves 100,000 Operating Reserves 515,474 Developer Fee 2,341,305 Total Uses 19,360,480 Permanent Sources   A Bonds 8,000,000 B Bonds 4,500,000 Tax Credit Equity 6,735,971 Deferred Development Fee 124,509 Total Sources 19,360,480

B-Bonds Year   2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Net Operating Income 776,215 785,368 794,513 803,644 812,754 821,838 830,889 839,899 848,861 857,767 866,609 875,379 Cash Avail for Debt Service Debt Service Coverage Ratio 1.42 1.43 1.45 1.47 1.48 1.50 1.52 1.53 1.55 1.57 1.58 1.60 Debt Service (547,382) Available Cash Flow for Fees 228,833 237,986 247,131 256,262 265,372 274,456 283,507 292,517 301,479 310,385 319,227 327,997 Subordinate Property Management Fee - Asset Man. Fee LP 5,305 5,464 5,628 5,796 5,970 6,149 6,334 6,524 6,720 6,921 7,129 7,343 Remaining Cash Flow 223,528 232,522 241,503 250,465 259,402 268,307 277,173 285,993 294,759 303,464 312,098 320,654 B Bonds 315,000 Accrued Interest 5,654

Operating Partnership Level B-Bonds Operating Partnership Level   Capital Income LP Loss Share Cash Syndication Ending Theoretical Minimum Year Contribution (loss) Distribution Costs Gain 2018 1,010,396 - (35,000) 975,396 2019 4,041,583 (2,599,191) 2,417,788 2020 1,683,993 (541,882) 16,653 3,543,245 2021 (406,530) 3,136,716 2022 (401,243) 2,735,472 2023 (399,063) 2,336,410 2024 (415,604) 1,920,805 110,086 2025 (399,054) 1,521,752 507,709 2026 (386,288) 1,135,463 899,901 2027 (377,492) 757,971 1,286,298 2028 (414,418) 343,553 1,666,546 2029 (388,554) (45,001) 2,040,267 2030 (366,959) (411,960) 2,407,061 2031 (352,401) (764,362) 2,766,504 2032 (342,713) (1,107,075) 3,118,144 2033 (380,962) (1,488,037) 3,461,505 2034 (352,427) (1,840,464) 3,796,078 2035 (299,820) (2,140,284) 4,121,324 2036 (279,600) (2,419,884) 4,436,673

Tax Exemptions and Other Public Financing Lever additional permanent financing with full or partial property tax exemption though joint venture partnerships with certain entities CHDO – Eligible up to a 50% tax exemption applicable in certain counties Housing Agency or Housing Authority Loan and grants provided with other federal programs administered by state or local municipalities Section 8 HOME CDBG (eligible for acquisition costs) Other local funding grants