MMA Financial, LLCA MuniMae Company

Workouts

Presented By Michael H. Gladstone, Esq.

IPED – San Diego, CA.

April 27, 2007

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(I) MMA’s Experience: We have not had much trouble as a matter of our total portfolio• Approximately 2,000 LIHTC properties (+400

GPs) in our Asset Management Portfolio• Began with LIHTC in 1987• 3-5% of portfolio in some level of work-out at

any point in time• Approximately 10% of properties go through

work-out at some point in their life

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(II) Causes of Problems• Primary Causes

– Issues with Developer/GP 91%– Property Management 61%

• Secondary Causes– Deal Structure 39%– Market Issues 25%– Design/Construction 23%

• A very small number of Developers have caused the bulk of our problems

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(III) Red Flags• Questions concerning integrity and

reputation• Fixing a bad deal with a new deal• Liquidity issues• Risky business Plan (Growing too fast?

Geographic concentration? OPM?)• Inexperienced Developers and Property

Managers• Soft Market

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(IV) Primary Focus• Asset Preservation and Risk Mitigation

– Tax Credits– Physical Asset

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(V) What Do We Do?• Assess Situation• Stabilize• Design and Implement Strategy

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(VI) Assess situation by considering the following factors:

• Local General Partner financial strength, reputation and our other investments, loans or experience with them

• Condition and age of property• Market• Year in Tax Credit cycle• Importance of property to fund yield (percentage

and amount of fund’s investment), amount of Fund’s reserves vs. objective, overall health of Fund

• Financial analysis of property

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(VI) Assess situation by considering the following factors (continued):

• Legal structure and our rights, withheld capital, General Partner’s funding and other obligations

• Valuation – possibly obtain appraisal or other 3rd party report

• Review debt• Review property management• Is property a market conversion candidate?• Consult with stakeholders, including Asset

Management, Fund Management (and/or investors), General Partner, Lenders, Regulators, Property Manager

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(VI) Assess situation by considering the following factors (continued):

• Consult with advisors, including legal, tax, market valuation, physical conditions

• Special fund considerations, including guaranteed funds and special needs

• Special debt considerations-is MMA debt involved?

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(VII) Stabilize – Stop the Bleeding

• Replace Property Manager• Replace General Partner• More hands on role in day-to-day management

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(VIII) Design and Implement Workout PlanGiven the different types of issues that we confront, this

could mean many things, including:• Refinancing/Restructuring• Enforce Investor Rights• Motivate GP to contribute/do more• Replace Management Agent• Raise/Contribute Capital• Remove and Replace GP• Resolve Compliance Issues• Resolve Tax Issues• Sell Property

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