Post on 01-Jan-2016
description
Tax Credit Portfolio Exit Strategies
IPEDNovember 20, 2008
Kevin W. Day
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It’s Year 15!
– so what does that mean?
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We’re all in this together….
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Let Them Eat Cat Food
live area(click “control+g” to view live area guides)
all text, images, or artwork must appear within these guidesalways view guides when aligning elements
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Investor/Syndicator Goals
Close Funds soon after year 15
Maximize residual value…can exit after credit stream ends in Year 11
Responsible transition to new ownership
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Who’s driving this thing?
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Let’s look under the hood…
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LAND, STICKS & BRICKS
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OTHER “STUFF”
What’ve we got to sell?
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What can we do with this thing?
Operate “as is”
Convert to market or other use (pre 90 ..or QC)
Convert to affordable condominium
Déjà vu all over again (new tax credits)
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Let me off this ride….
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Qualified Contract
QC Formula =
Outstanding debt + initial capital contribution + return on capital (CPI) - distributions
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….not so fast
50 flavors
Show me the paper!
Expensive process
Did we start yet?
Fuzzy math
What does qualified mean?
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QC Success Stories
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Early Exit
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Options before Y15
• Sale of Partnership vs. Property
• 10 year rule/Acquisition Basis
• Investor – Avoiding Recapture Exposure
• Cash Now vs. Losses/Future Value
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Resyndicate with 4% Credits
Cutler Vista
– Miami FL
– 216 Units
– PIS 1990 as 9%
– New construction
– Original Equity 5.1M
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Resyndicate with 4% Credits
Sources Uses
New Bonds: 7,120 Retire 1st 3,440
SAIL: 2,500 SAIL 2,500
TC Equity: 4,800 LPs 1,800
Total: 14,420 SAIL Int. 760
Rehab 3,600
Soft/DF/Reserves 2,320
Total 14,420
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Resyndication Issues
– Public benefit – cost of preservation vs. build new
– Sentiment against extended use properties
– Untangling restrictions and Rights of First Refusal
– Qualified households Vs tenants in possession
– Anti-churning rule (affiliated buyer) 10% 50% rule
– 10 year hold rule
– Aggressive buyers vs. Preservation resources
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Helpful hints for Year 15
Start early…Analyze in Y13, prepare in Y14, execute Y15
Analyze all possible strategies in light of the local market and capital markets
Many new financing programs available for preservation, but take time to implement
Know your regulatory agreements, partnership and loan agreements.. and approvals needed.
Pick the right local partner to help you execute your strategy
Patience Perseverance and Prozac