Our Sponsors: Freddie Mac Bridge-to-TEL Resyndication Structure - PowerPoint PPT Presentation

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Freddie Mac Bridge-to-TEL Resyndication Structure The Property: • 200 Units in San Jose, CA; existing LIHTC property for family tenancy • Constructed in 1972 / Moderately Rehabilitated in 2003 with 4% LIHTC and tax exempt bonds • Generally well-maintained but in need of substantial rehab to facilitate long term preservation • ~ $50,000 in immediate repairs needed • $325 pupy in ongoing replacement reserves • Encumbered by CSCDA Bond Regulatory Agreement and a TCAC LIHTC Regulatory Agreement • Acquired by the Borrower in February 2017

Freddie Mac Bridge-to-TEL Resyndication Structure Financing Challenges: • Seller in need of quick close • Property highly sought after by conventional (cash-on- cash) buyers • CSCDA and TCAC regulatory agreements all required modification/subordination • Resyndication transaction not possible until January 2019 when the current 15-year LIHTC compliance period ends, thus exposing buyer to interest rate risk • In order to compete with conventional buyers the Buyer had to value the Property assuming a successful resyndication

Freddie Mac Bridge-to-TEL Resyndication Structure Financing Structure: • Freddie Mac Bridge Loan • High leverage (85% LTV) • Low cost (2.60% spread over 30-day LIBOR) • Full term interest only • Quick close – 60 days from execution of PSA • Freddie Mac Tax Exempt Loan • 30-month forward rate lock on a permanent Tax Exempt Loan (“TEL”) • 5.00% interest rate • 17-year term, 35-year amortization • Two (2) years Interest Only

Freddie Mac Bridge-to-TEL Resyndication Structure Financing Sources and Uses:

Freddie Mac Bridge-to-TEL Resyndication Structure Unique Aspects of Financing: • The Bridge Loan allowed a quick close (60 days) to compete with conventional buyers while the forward rate lock TEL eliminated interest rate risk for the Buyer who could not resyndicate until January 2019 • Freddie Mac allowed reduction or expansion of the permanent TEL based on final LIHTC rents TBD in 2019 (10% reduction and 5% expansion at locked interest rate) • Expansion could eliminate Seller Note and lower Deferred Dev Fee • Reduction could increase Seller Note • Freddie Mac approved any shortfall in resyndication sources to be structured as a Seller Note