#MAMConf14 Alternative Debt Financing Options October 14, 2014 Philip S. Rachels – Senior Vice President, Debt & Structured Finance CBRE | Capital Markets Todd Trehubenko – Senior Vice President, Multifamily Finance Walker & Dunlop Chris Tokarski – Principal & Managing Director Coastal Capital Partners

#MAMConf14 TOPICS 1)Non-recourse high leverage bridge based on total capitalization. We are seeing 80-85% for multi-family at competitive rates 2)Higher leverage senior CMBS Blended mezz into the senior trust Structured mezz above same senior lender 3)FHA Structure Timing to close

#MAMConf14 Alternative Debt Financing Options Case Studies 1)Bridge, Conduit, and Mezzanine – Todd Trehubenko 2)Acquisition, Reposition, Earn Out – Chris Tokarski 3)FHA for Acquisition and Conversion – Todd Trehubenko 4)Broken Condo Sell Down – Chris Tokarski

#MAMConf14 New Products in an Evolving Market Interim Loan Program (bridge financing) created in 2013 CMBS program created 2014 Continuing to diversify – mezzanine, preferred equity, etc. Can evaluate all opportunities across all channels

#MAMConf14 Bridge, Conduit and Mezzanine Gulf Coast portfolio acquisition 6 Properties in TX and LA 1,032 apartments Strong competition for portfolio $72.2 million in new financing: o $35.4 million bridge loan over three properties, crossed o $31.4 million CMBS loan, 10-year term (4 years IO) o $5.4 million mezzanine loan Executed as a single transaction, one underwriting and one closing Case Study 1

#MAMConf14 Acquisition, Reposition, Earn Out $32,400,000 ($178,000/unit, $240/SF) for the acquisition of a 10 property portfolio consisting of 173 multifamily units (6 to 60 units per property). Funded $30,400,000 at closing $2MM of future funding for unit renovations and capital improvements. Earn-out of $15MM of additional proceeds upon achieving annually increasing DY hurdles: (6.25%, then 6.5%, then 6.75%) minimum DSCR (1.47x through month 12, increasing 6 bps every 12 months thereafter) maximum LTV of 75% In-place rents across the portfolio are 38.0% below market on average (subject to rent control). First Mortgage / Mezz Combination PurposeAcquisition Loan-to-Cost Initial 65% Loan-to-Cost w/ Earnout 95% Term AmortIO RateL+4% Fee1% in Call Protection18 months Starting DY5.8% Stabailzed DY7.0% Case Study 2

#MAMConf14 Other Deal Terms Release Provisions: Properties can be released at the greater of 1.110% of the allocated Loan Amount; or 2.a post-release debt yield on the remaining portfolio equal to the greater of: a.7.00%; or b.debt yield immediately prior to release Cash Management: Event of Default BK proceeding of Borrower, Guarantor or property manager DSCR less than 1.35x during the Initial Loan Term DSCR less than 1.55x during any Extension Term Debt Yield less than 6.0% during Initial Loan Term Debt Yield less than 6.75% during any Extension Term Case Study 2

#MAMConf14 FHA for Acquisition and Conversion-Hartford Acquisition and conversion of vacant office tower o 286 apartments, targeted LEED Platinum o $90 million TDC including commercial and garage Located in CBD, few comps but strategic, emerging area Developer seeking high leverage, long-term financing Case Study 3

#MAMConf14 FHA for Acquisition and Conversion (cont’d) Arranged new $37.2 million 1 st mortgage through FHA Section 221(d)(4) o IO during construction period o Base permanent loan with 40-year term o Tranches for tax exemption and LRECs (15 years) Subordinated new state debt and equity of $21 million Tradeoffs for affordability set-aside, commercial/garage Case Study 3

#MAMConf14 Broken Condo Sell Down Loan $17,400,000 for the acquisition of a 25 out of 86 condominium units Funded $16,000,000 at closing $1.4 MM of future funding for unit renovations SourcesUses Initial Funding $ 16,000,00071%Acquistion Price $ 21,000,000 Future Funding $ 1,400,0006%Cap Ex $ 1,400,000 Total Funding $ 17,400,00078% Sponsor Equity $ 5,000,00022% Total $ 22,400,000100% $ 22,400,000 PurposeAcquisition Loan-to-Cost Initial 78% Loan-to-Sell Out62% Term3+1+1 AmortIO RateL+4.75% Fee1% in/1% out Call Protection18 months DY4.75% Case Study 4

#MAMConf14 Broken Condo Sell Down Loan Cap Stack Amount%LTC Rate (L+) DYDSCR First Mortgage $ 12,180,00070%54%2.50%6.79% 2.71 Mezz $ 5,220,00030%23%9.25%4.75% 1.05 Total $ 17,400,00078%4.53%4.75% 1.05 Cheaper First Mortgage Money is L – 3.00%, maybe tighter if you can keep the LTV / DY / DSCR at attractive levels (in 1-1.5% over last 12 months) Mezz L+8-10% going up to 75-85% with low DY / DSCR Avoid “Dealer” Status for tax purposes by renting units for some period of time and only selectively selling units Case Study 4

#MAMConf14 Broken Condo Sell Down Loan Unique Deal Terms Release Provisions: 120% of allocated loan amount pay down until $500 psf is reached, after which 100% of allocated loan amount (leaks equity to Borrower to equity). 100% of sales proceeds pay down loan on last 5 units to protect against adverse selection. Interest Rate Step Up: Increase in rate equal to.35% if Debt Yield Drops below 4.5% Case Study 4

#MAMConf14 Thank You! Philip S. Rachels Todd Trehubenko Chris Tokarski