John Leith-Tetrault November 8, 2007 Washington, DC Five Years of Twinning NMTC and HTC.

John Leith-TetraultNovember 8, 2007

Washington, DC

Five Years of Twinning NMTC and HTC

CDE Survey • Results • NTCIC Portfolio • Recommendations

NTCIC

• For-profit subsidiary of NTHP established in 2000

• 46 projects over six years

• 32 HTC / NMTC projects (97% additionally distressed)

• Over $210 million in gross equity

• Almost $ 900 million in total development costs


History of Twinning

•Strong geographic and programmatic nexus between HTC and NMTC

•IRS rules on twinning December 2002

•Concept was first introduced in NTCIC’s Round 1 NMTC application

•As one of several products to be offered by NTCIC in Round 1, it was anticipated that twinned equity might exceed 15% of the allocation

•In fact, due to demand, NTCIC used nearly 100% of its allocation for this product

•The first QEIs of the NMTC program in October 2003 were NTCIC’s for twinned equity to several small HTC projects


•Brief survey of 154 allocatees

•39 CDEs were targeted with a more in-depth survey

•Questions focused on number of projects invested in by CDE that also received the HTC and the impacts of those projects

•Includes both debt and equity QLICIs

•Covers Rounds 1-4

Survey Overview


•34% response rate

•14% of all CDEs surveyed have invested in projects receiving the HTC – with about 10% regularly doing so

•More than 1 in 10 NMTC projects to-date has received HTCs (130 out of 1176)

•QLICIs to HTC projects make up almost 20% of all QLICIs to date, by dollar amount, or $1,083,215,307

•Of respondents, average QLICI size to a HTC project was $8,462,620 – almost 2.5x the average size for the program overall

Results


Of respondents:

•Over 90% of projects located in “additionally distressed” census tracts

•32,553 jobs created* -- or about 1 job for every $29,000 invested

•$2.92 leveraged for every “QLICI dollar” – close to the program average

Community Impact

*does not include all survey respondents


NTCIC Portfolio

16%

24%

35%

25%

Community Facilities Office

Retail Residential


•All projects must demonstrate financial need for the subsidy

•Project sources must include at least 5% developer equity

•NMTC subsidy must be used to: a) Cover a funding gap;

b) Provide reserves to meet investor requirements or stabilize project;

c) Help project meet conventional DCR standards (not less than 1.20);

d) Reduce the private fundraising burden or need for grants;

e) Reduce commercial or residential rents for locally-owned businesses, low-income residents, and social service agencies, or to attract a key tenant to a low- income community;

f) Take out developer equity contributed early to a project when return on equity is below what would be normally expected for the risks of the deal; or

g) Be used as a fund to provide additional community benefits

“But for” Analysis


Community Benefits• Projects must demonstrate a high standard of community

impact

• Proposed programs and commitments that have community impact are outlined in a Community Benefits Agreement signed by NTCIC and the project at closing

• Quantified performance on each element of the CBA is monitored through required reports during the compliance period

• CBAs may include the following impacts: (1)create or retain jobs for Low-Income Persons (LIPs) or

residents of LICs; (2)increase wages or incomes for LIPs; (3)finance or assist businesses owned by residents of LICs; (4)finance or assist minority- or women-owned businesses or

businesses owned by LIPs; (5)finance or assist nonprofit organizations that provide

childcare, health care, educational or other benefits to LIPs; (6)facilitate wealth-creation or asset accumulation (such as

home ownership) by LIPs; and (7)provide essential goods and services to LIPs or residents of

LICs.


AVANCE

San Antonio, TX

Non-profit office space

Net equity: $824,974


Dia: Beacon

Beacon, NY

Museum and education center

Net equity: $5,963,226


Emmaus

Washington, DC

Headquarters for non-profit

providing services to the local senior

citizen community

Net equity: $577,565


Fox Oakland

Oakland, CA

Charter school, community theatre

Net equity: $11,856,300


•Equity investments in QALICBs are critically needed to keep debt to feasible levels.

•Equity investments in QALICBs are what the NMTC program was designed to do.

•HTC/NMTC equity investments are the most frequently used equity product in the NMTC program.

•Twinned deals are self-targeted to the poorest communities because that is where historic buildings are located.

•Inadvertent biases against the use of equity products have crept into the NMTC program over the years.

•Survey respondents identified the related party rule as the biggest obstacle.

Conclusions and Recommendations

Conclusions


Conclusions and Recommendations

Recommendations

•The CDFI Fund should undertake a review of its regulations related to the general use of equity products and the specific use of twinned HTC/NMTC transactions to identify and eliminate obstacles that discourage these deals and drive up transaction costs.

•CDFI fund should add a data field to its CIIS reporting to keep better track of and to better regulate the use of twinned equity transactions.

John Leith-Tetrault

President

[email protected]

(202) 588-6064

Corinne Ingrassia

Director of Marketing

[email protected]

(202) 588-6279

Contact Information

John Leith-Tetrault November 8, 2007 Washington, DC Five Years of Twinning NMTC and HTC.

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