2008 Real Estate Update Affordable Housing in Today’s Market

1. 2008 Real Estate UpdateAffordable Housing in Today’s Market Mark To Market Restructuring Program

2. Mark to Market Restructuring Program • Created by the MF Assisted Housing Reform and Affordability Act of 1997 (“MAHRA”) • Under HUD’s Office of Affordable Housing Preservation (“OAHP”) • It’s goal is to ensure the availability of affordable housing at the least cost to the government provided that there is long-term economic and physical well-being of the property

3. Mark to Market Restructuring Program • Parties to the Transaction • Office of Affordable Housing Preservation (OAHP/HUD) • Participating Administrative Entity (PAE) – First Housing Development Corporation of Florida, Tampa, Florida • PAE Counsel • Owner • Owner’s Counsel

4. Mark to Market Restructuring Program • Parties to the Transaction – cont. • New Mortgagee • Existing Mortgagee • Title Insurer/Escrow Agent

5. Mark to Market Restructuring Program • When the Section 8 HAP Contract is going to expire, the Owner can elect to participate in M2M Program. • Owner Notifies local HUD Office • Elect option to reduce rents to market and restructure debt. • HUD Office notifies and forwards project to OAHP • OAHP assigns the project a Participating Administrative Entity (PAE); PAE notifies the Owner.

6. Mark to Market Restructuring Program • PAE coordinates and discusses with Owner the process overview, required documentation and the nine (9) month time frame in order to reach closing. • Owner starts submitting documentation and certifications to PAE in order to develop the Restructuring Plan for the project within the time frame requested (9 months). • The Restructuring Commitment is prepared by OAHP/PAE and sent to Owner for signature in order to close the transaction within sixty (60) days.

7. Mark to Market Restructuring Program • Owner must notify parties with ownership interest (General Partner and Limited Partners) and the existing lender of the debt restructuring. • Owner notifies tenants and other interested parties, holds tenant meetings. • PAE obtains a Physical Condition Assessment (PCA) and approval before the Restructuring Commitment in order to establish rents, critical repairs, reserves.

8. Achievements of a Full Debt Restructuring • Retire the existing debt with a restructured debt underwritten to a level that can be serviced by the property’s lower income once rents are reduced. • Renew HAP Contract for 20 years at market rent levels; can go to exception rents < 120% of FMR’s. • Fund replacement reserve.

9. Achievements of a Full Debt Restructuring • Fund insurance reserve. • Pay transactional costs. • Fund escrow for rehabilitation costs. • The restructuring will allow adequate cash flow to cover expenses, the debt service on the restructured debt, monthly deposits for future capital needs and a return to Owner.

10. Source and Use of Funds • Case Study • 152 units multifamily walk-up • Fund Sources:

11. Fund Uses

12. Transaction Costs • Owner’s share of Transaction Costs was 20%. • Owner’s Cash Requirement $266,286

13. Transaction Cost – cont. • Owner is entitled to a Capital Recovery Payment (CRP) through payment or accrual of 180 monthly CRP’s, each in amount of $2,393. Annual CRP payment $28,721. • Owner may realize annual Incentive Performance Fees (IPF’s) in the amount of 3% of the Project’s Effective Gross Income. (2008 - $24,407)

14. Mortgage Restructure

15. Mark to Market Restructuring Program • Ana C. Pages, President Executive Homesearch and Realty Services, Inc. P.O. Box 19528 San Juan, PR 00919-5288 Tel. (787) 783-7122 Fax. (787) 783-0739 e-mail: apages@executivehomesearch.com