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A LIHTC UPDATE

2013. A Market Re-defined LIHTC Since 2007. 2007. A LIHTC UPDATE. Noel Henderson-James Richman Housing Resources LLC April 2013. Overview. We’ll look back, review some trends, & then gaze, however obscurely through our crystal ball, at what’s ahead.

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A LIHTC UPDATE

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  1. 2013 A Market Re-defined LIHTC Since 2007 2007 A LIHTC UPDATE Noel Henderson-James Richman Housing Resources LLC April 2013

  2. Overview • We’ll look back, review some trends, & then gaze, however obscurely through our crystal ball, at what’s ahead. • What we’ll see is that the LIHTC market has become defined – is now redefined – by two interconnected characteristics: • Pricing variability, sometimes dramatic; and, • Market segmentation, somewhat defined by geography, and further sub-market segmentation. • Both these characteristics are (or should be) expected & are natural to a rationale, functional market. • They certainly make the world a more interesting place.

  3. Trends: Investment Volume Fannie & Freddie, we missed you!

  4. Trends: Pricing Variability Fannie & Freddie, we still miss you! Source: Novogradic

  5. Trends: Yields, 1991 to 2012 Source: Ernst & Young

  6. Trends: Yields, 1991 to 2012 Source: Ernst & Young

  7. Trends: Yields, 2008 to 2012(for indicative purposes only) Non-CRA Spread to Tax-Adjusted 10-Yr Treasuries

  8. Trends: Yields, 2008 to 2012(for indicative purposes only) Moderate premium subtracts 50-100bps; Heavy premium subtracts another 100bps. Feb-12 May-12 Red = Heavily-banked

  9. Trends: What Yield Data Reveals • Among investors, there is clear segmentation within the market, often along geographic lines. • Roughly, very roughly, there appear to be three separate markets: heavily-banked, moderately-banked and otherwise. • Most times, but not necessarily always, these markets will function in parallel to one another. • Sometimes one submarket might disconnect from the broader markets but eventually in back in-line.

  10. Emerging Trends: Early 2013 • National market is stabilizing at the yield requirements of economic investors, somewhere likely just north of 7.25%; • Expect moderately- and heavily-banked markets to follow suit, although this may take time. • Prediction #1: National market will lead in defining pricing trends. • Prediction #2: Heavily-banked markets will become more defined around regulatory cycles. • Prediction #3: Pricing variance will be greatest in heavily-banked markets.

  11. Summary • The market has repaired itself; and, it is probably healthier than it was prior to the financial crisis. • Capital levels have rebounded and stabilized. • More investors and substantially more “economic” investors… LIHTC is a money making business opportunity. • Average pricing has improved and also stabilized. • Yields have retreated from recession highs and also seem to have stabilized. • But the market is radically different from the pre-financial crisis market. • More pricing variability around averages and means. • Greater segmentation among markets and within markets.

  12. Summary • Deals in different geographies may see radically different pricing. • Deals in the same market may see radically different pricing, especially true of heavily-banked markets. • Characteristics that now matter much more are: • Geography, first and foremost; then, • Deal size and opportunities; • Developer: track record, financials and relationship; and, • Novelty.

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