2008 Real Estate Update Affordable Housing in Todays

2008 Real Estate Update: Affordable Housing in Today’s Market December 10– 12 San Juan, Puerto Rico Financing Your Project In Puerto Rico Presented by Brian M. Hogan Prime Consulting Services Sponsored by Reznick Group, Nixon Peabody LLP and IPED, Inc.

Financing Your Project In Puerto Rico Discussion Outline • What Syndicators Are Looking For In Project Structuring and Why Puerto Rico Poses Special Challenges ü Section 42 Rent Issues, Subsidy Availability and Why Critical ü Reserve and Debt Requirements ü Pricing Disparity ü Potential Depreciable Life Issues ü Notarial Fees (Legal Fees and Basis Issues) ü High Financing Costs and Why “One-Stop Shopping” May Cause Potential Tax Issues ü Extreme Increases In Development Costs and Why Per Unit Limits For Both HOME and LITHC May Constrain Development in Puerto Rico • Case Study On How A Puerto Rico Project was Financially Structured “Pre-Act” and How It Might Look “Post-Act” Assuming Pricing Drops to $0. 64

Pre-Housing and Economic Recovery Act of 2008 Analysis Calculation of Maximum Tax Credit Availability: Total Eligible Basis 130% High Cost Area Adjustment Adjusted Eligible Basis Tax Credit Rate Maximum Tax Credit Available on Basis $11, 252, 924 3, 375, 877 $14, 628, 801 X 8. 07% $ 1, 180, 544 Equity Gap Calculation: Total Project Costs $13, 098, 181 Less: Permanent Loan $ 750, 000 HOME Funds/Sponsor Loan 3, 915, 000 ( 4, 665, 000) Equity Gap $ 8, 433, 181 Tax Credit Price Per Dollar Maximum Amount of Tax Credit Available Multiply by 10 Years Result Value of the Credits Proceeds From Tax Credits Equity Needed Excess (Shortfall) Equity 72% $ 1, 180, 544 X 10 $11, 805, 440 X 72% $ 8, 499, 917 8, 433, 181 $ 66, 736 Total Credit Actually Requested $ 1, 171, 275

Post-Housing and Economic Recovery Act of 2008 An Analysis For 2009 Syndication Calculation of Maximum Tax Credit Availability: Total Eligible Basis $11, 252, 924 130% High Cost Area Adjustment 3, 375, 877 Adjusted Eligible Basis $14, 628, 801 Tax Credit Rate X 9% Maximum Tax Credit Available on Basis $ 1, 316, 592 Equity Gap Calculation: Total Project Costs $13, 098, 181 Less: Permanent Loan $ 750, 000 HOME Funds/Sponsor Loan 3, 915, 000 ( 4, 665, 000) Equity Gap $ 8, 433, 181 Tax Credit Price Per Dollar 64% Maximum Amount of Tax Credit Available Multiply by 10 Years Result Value of the Credits Proceeds From Tax Credits Equity Needed Excess (Shortfall) Equity $ 1, 316, 592 X 10 $13, 165, 920 X 64% $ 8, 426, 189 8, 433, 181 ($ 6, 992) Total Annual Credits Needed Now Total Annual Credits Applied For Increase in Annual Credits Needed $ 1, 316, 592 ( 1, 171, 275) $ 145, 317

2008 Real Estate Update: Affordable Housing in Today’s Market December 10– 12 San Juan, Puerto Rico Financing Your Project In Puerto Rico Presented by Brian M. Hogan Prime Consulting Services Sponsored by Reznick Group, Nixon Peabody LLP and IPED, Inc.