This workshop helped nonprofit affordable housing developers understand commercial and retail development.

1. Financing
Commercial
Development
Commercial Development
Advanced Seminars

2. Agenda
• Underwriting a
Commercial Project
• Constructing a
Commercial Pro Forma
• Financing Sources
• New Markets Tax
Credits

3. Underwriting a
Commercial Loan
Exercise:
1. Would you recommend funding this loan?
2. What additional information do you need?
3. Do you seen the need to change any
aspects of the project before the bank
approves financing?

4. Financing Sources

5. Types of Financing
DEBT
• Senior Debt
– Bank Loan
– Bond Financing
• Subordinate Debt
– Community Development
Lenders
– Public Sector Lenders
“EQUITY”
• Traditional Equity
• Tax Credit Equity
• Deferred Developer Fees
• Grants
– Foundation Grants
– Economic Development
Grants (Federal or local)
SOFT DEBT
–Deferred Payment Loans
–Residual Receipts Loans

6. Federal Economic
Development Funds
HUD
• Community Development
Block Grants
• Section 108 Loans
• Economic Development
Initiative/BEDI
• Enterprise Zone, etc.
Department of Health and
Human Services
• Office of Community
Services
Department of Commerce
– Economic Development
Administration

7. State and Local
Government Sources
• Local Government
– Community
Development Block
Grants
– Tax Increment
Financing
(Redevelopment)
– Community Facilities
Districts
– Tax Exempt Bonds
– Business Improvement
Districts
• State Government
– Tax Exempt Bonds
– State Grant Programs
– State Tax Credits
• Enterprise Zones, etc.

8. Other Sources
• Private Banks
• Private Foundations
– Program Related Investments
• Capital Campaigns
• Community Development Financial
Institutions
– Community Loan Funds
– Community Development Banks
– National Intermediaries

9. • 47 units of housing over 10,000 feet of retail
• Total Development Cost: $11,011,844
• Cost attributed to commercial space: $757,917 (6 %)
Excluded from Tax Credit Basis
• Tenant Improvements for Commercial: $390,000
Financing Sources – Permanent
• California Community Reinvestment Corporation (CCRC)
• Daly City Redevelopment Agency
• City of Daly City
• Edison Capital (9% tax credits)
Financing Sources
School House Station

10. Swans Marketplace
Sponsor: EBALDC
Location: Old Oakland
Uses:
• Office Space 17,000 sf
• Retail 25,000 sf + 18 pkg
including Housewives
Market
• Live/work rental 1,000 sf
• 20 Cohousing condos
• 18 1- and 2-bdrm
apts (50-60% AMI)

11. Financing Sources
Swans Marketplace
• Wells Fargo Bank ($3,350,000)
• Standard Insurance ($3,300,000)
• California Equity Fund-Historic Credits ($2,100,000)
• Economic Development Administration ($1,700,000)
• Commercial Tenant Prepaid Rent (1,700,000)
• Oakland Redevelopment Agency ($1,150,000)
• Capital Campaign/Kresge Found. ($1,150,000)
• Office of Community Services ($500,000)
• Heron Foundation PRI ($300,000)
• Total:$12,100,000

12. New Horizons Center
MBD Development Corporation – The Bronx
134,000 square foot shopping center
• Pathmark Supermarket
• Athlete's Foot
• Blockbuster Video
• Paramount Home Decorators
• Petland Discount Stores
• Radio Shack
• Rent-A-Center

13. Financing Sources
New Horizons Center
Debt:
1st Mortgage (8.75% 25 year amortization)
2nd ESDC (5% 25 years)
2nd LISC (6%, 10 years w/25 yr amortization)
Developer Equity:
Office of Community Services (OCS) ($500,000)
HUD Special Purposes Grant (Congressman Serrano) ($350,000)
Comprehensive Community Revitalization Program ($150,000)
MBD Contribution from Retained Earnings
Private Equity:
The Retail Initiative, Inc. ($3,500,000)

14. Distribution of Cash Flows
New Horizons Center
Hypothetical Projection
Net Operating Income: $2,515,872
Debt Service $2,115872
Net Cash Flow $400,000
TRI Preferred Return – 10% $350,000
Remaining Cash Flow $50,000
NETS – 50% $25,000
MBD – 50% $25,000

15. Fruitvale Transit Village
Sponsor: The Unity
Council
Location: Oakland, CA
Uses:
• 68,000 s.f. community
resources
• 47,000 s.f. La Clinica
• 52,000 s.f. housing (47)
• 38,000 s.f. retail
• 50,000 s.f. parking

16. Financing Sources
Fruitvale Transit Village
• Citibank
• Local Initiatives Support
Corporation
• National Cooperative
Bank
• City of Oakland
• Dept. of Commerce, EDA
• US. Dept. of Housing and
Urban Development
• Environmental Protection
Agency
• BART
• Federal Transit
Administration
• Federal Emergency
Management Agency
• U.S. Department of Health
and Human Services
• California Health Facilities
Financing Authority
• Alameda County
Transportation Improvement
Agency

17. Grant Sources
Fruitvale Transit Village
• Evelyn & Walter Haas
Foundation
• Richard & Rhoda
Goldman Fund
• Levi-Strauss Foundation
• The Ford Foundation
• Neighborhood
Reinvestment Corporation
• James Irvine Foundation
• National Council of La
Raza
• PG&E Corporation

18. Elmwood Theater
Business Improvement District
• 5 Cents per square foot
additional property tax
• Extra fee for
businesses open
in evenings
• Annual revenue
repays City loan

19. New Markets Tax
Credits

20. Intent
• Make lower cost capital
available to viable
businesses in low-income
areas
• Generate
jobs, services, and
physical revitalization
• Encourage partnerships
between private investors
and community
organizations
New Markets Tax Credits are intended
to:

21. Investments
• Investors receive credits for equity investments
in Community Development Entities (CDEs)
which in turn make equity or debt investments in
qualified businesses including:
• For Profit Businesses
• Non Profit Businesses
• Commercial Real
Estate Projects

22. CDEs
• Have a primary mission of
community development
• Maintain accountability to
residents of low-income
communities through a
governing board or advisory
board
• Are certified by Treasury

23. Qualified Investments
• Any capital or equity investment in, or loan
to, any Qualified Business in a Low-Income
Community:
• Note: “Capital investment” means that a CDE
can directly own and conduct a business.
• The purchase from another CDE of any loan made
by the CDE
• Any equity investment in, or loan to, any CDE

24. Eligible Uses of NMTCs
• Applies to a wide range of economic development
and business activities
– Commercial real estate
– Community facilities
– Business financing
• Rental housing is specifically excluded
– Mixed-use projects are permissible if less than 80% of
gross revenue is from dwelling units (or if the project is
separated into residential & nonresidential components)

25. Qualified Businesses
• A corporations (including non-profits) or
partnerships that derives more than 50% of its
income from business in a low-income area.
• The rental to others of real property qualifies
only if it is not residential rental property.
• A proprietorship will qualify if it would meet the
test were it incorporated.
• Any trade or business will qualify if it would meet
the test were it separately incorporated.

26. Geographic Targets
• Census tracts where:
• The poverty rate exceeds 20% or
• The median income is below 80% of the
greater of:
• The statewide median income or
• The metropolitan area median
income (for metro areas tracts only)
– Eligible census tracts can be found at:
http://www.qsgconsulting.net*

27. Value of Credits
• The NMTC is based on the amount of equity
invested in a CDE - not the cost of the project or
business
• The NMTC is claimed over seven years:
5% in years 1-3;
6% in years 4 - 7 (39% aggregate)
Present value of about 30%
Note: the Housing Credit’s present value is 70%- 95%
Result: Activities will need substantial cash flow and capital
recovery/appreciation to attract investors.

28. How it Works

29. Recapture
• NMTCs are subject to recapture for seven years
after an equity investment is made in a CDE.
• Recapture is triggered if either:
– A CDE ceases to be a certified CDE, or
– The equity investment proceeds are no longer
“substantially all” used for eligible purposes or
– The CDE redeems the equity investment.
• The amount subject to recapture is the sum of the
NMTCs claimed, plus nondeductible interest.

30. “Substantially All”
• 85% of investment proceeds must be in
QALICBs during the first 6 years
• 75% during year 7
• This restriction makes shorter term
amortizing loans difficult
• Also makes revolving loans very difficult

31. Distribution of NMTC
Benefits
• NMTC benefits shared by investor, CDE
and Project
– Investor returns enhanced to cover additional
risk
– CDE fees cover costs of obtaining NMTCs &
implementing its program
– Project (QALICB) receives more favorable
financing terms

32. Accessing Credits
• There is more than one way to
access credit enhanced
investment funds
– Form your own CDE, apply for
credits and find an investor
– Form your own CDE, apply for
credits and use a syndicator
– Apply for funds from someone
else’s CDE

33. NMTC Allocations
• Round I: 2002-2003 Allocation
– $2.5 billion
– 66 Awardees – March 14, 2003
• Round II: 2003-2004 Allocation
– $3.5 billion
– 63 awardees – May 6, 2004
• Round III: 2005 Allocation
– $2.0 billion
– 41 awardees – May 11, 2005
• Round IV: 2006 Allocation
– $3.5 billion
– $600,000 Gulf Opportunity Zone supplement
• Round V: 2007 Allocation
– $3.5 billion
– $500,000 Gulf Opportunity Zone supplement

34. Patchwork of NMTC
Availability
• In addition to the NMTC program requirements, the use of
NMTCs is governed by the limits established by the terms
of the successful application. They include:
– Geography
• State
• Region
• Nation (identified states)
– Financing Activity
• Real Estate vs. Business
• Debt vs. Equity
– Fund Structure
• Single- vs. Multiple-QALICBs

35. 2005 NMTC Program –
Allocation Amounts
• Distribution of 2005 Round Allocations:
– 208 CDEs applied, requesting $22.9 billion
– 41 CDEs (or 20% of total applicant pool) received $2
billion
– Average allocation award of approximately
$48,780,000
– Allocation award range from $5 million to $100 million

36. 2005 NMTC Program –
Allocatee Characteristics
• Characteristics of the 41 Allocatees:
– Non-profit organizations (or subsidiaries):
• 17 of the allocatees (or 41%)
• Allocations totaling $891 million
– Certified CDFIs (or subsidiaries):
• 11 of the allocatees (or 27%)
• Allocations totaling $494 million
– Non-CDFI banks or bank holding companies and
publicly traded institutions (or subsidiaries:
• 7 of the allocatees (or 17%)
• Allocations totaling $381 million
– Governmentally controlled entities:
• 4 of the allocatees (or 10%)
• Allocations totaling $160 million

37. 2005 NMTC Program –
Investment Locations
• Investment locations:
– The 41 allocatees are
• headquartered in 20 different states and DC
• anticipate making investments in at least 33 different states, as well as
D.C.
– Service areas
• 20 of the allocatees (or 48%) will serve a national or multi-state
service area
• 8 of the allocatees (or 20%) will serve a statewide service area
• 13 of the allocatees (or 32%) will serve local markets (e.g., a citywide
or countywide area).
– Allocatees indicate that they will invest
• ~$1.18 billion (or 59%) in major urban areas
• ~$494 million (or 25%) in minor urban areas
• ~$326 million (or 16%) in rural areas.

38. 2005 NMTC Program –
Additional Distress Criteria
• Commitment to Invest in Areas of More Severe
Economic Distress:
– CDFI Fund has established areas of more severe economic distress
• Project must located in an area that meets (see next slide):
– One of three demographic criteria or
– Two of ten programmatic criteria
– Most applicants committed to invest in areas of more severe
economic distress
– 37 of 41 allocatees indicated that at least 75% of their activities
will be in areas of more severe economic distress
– 21 of 41 allocatees indicated that 100% of their activities will be in
such areas of more severe economic distress

39. Demographic Distress Criteria
• Poverty rate (greater than 30%)
• Median Income (no greater than 60%)
– if located within a non-Metropolitan
Area, median family income does not exceed
60% of statewide median family income or
– if located within a Metropolitan Area, median
family income does not exceed 60% of the
greater of statewide median family income or
Metropolitan median family income
• Unemployment rate (at least 1.5 times the
national average)

40. Programmatic Distress Criteria
• Federally designated Empowerment Zones, Enterprise Communities or
Renewal communities
• SBA-designated HUB Zones, to the extent that QLICIs will support businesses
that obtain HUB Zone certification
• Federally designated Brownfields redevelopment areas
• Encompassed by a HOPE VI redevelopment plan
• Federally designated as Native American or Alaskan Native areas, Hawaiian
Homelands, or redevelopment areas by Tribal or other authority
• Areas designated as distressed by the Appalachian Regional Commission or
Delta Regional Authority
• Colonias areas as designated by HUD
• Federally designated medically underserved areas, to the extent that QLICI
activities will support health related services
• Located in a Hot Zone designated by the CDFI Fund
• State or local tax-increment financing districts, enterprise zones programs, or
other similar state / local programs targeted towards particularly economically
distressed communities

41. 2005 Planned
Investment Types
– Loans to or equity investments in businesses
• ~$486 million (24%) of NMTC proceeds
• Allocatees strategies range from microenterprise lending to
multi-million dollar venture capital investments
– Loans to or equity investments in real estate projects
• ~$1.21 billion (61%) of NMTC proceeds
• Allocatees intend to make investments in
commercial, retail, industrial, mixed-use and homeownership
projects, as well as in community facilities such as daycare
centers, healthcare centers, and charter schools
– Capitalization of other CDEs.
• ~$292 million (15%) of NTMC proceeds

42. NMTC Financing
Activities
• Most Common
– Commercial Real Estate, including
• Community facilities
• Mixed-use residential / commercial
• Historic tax credit equity
– Business Financing Secured by Real Estate
• Less Common
– Venture Capital
– Small Business Financing
– Homeownership
– Working Capital

43. NMTC Product Types
• Clearly Defined Products
– Most Common
• First mortgage loans with below-market rate
– Often with a 7-year term
• Enhanced historic tax credit equity
• Subordinate Loans with terms less than 7 years
– Less Common
• “Cash-on-cash” equity

44. NMTC Product Types
• Customized Products
– A / B Loans, in which the “A” loan mimics a
conventional loan and the “B” loan mimics a historic
tax credit equity contribution that may be cancelled
after seven-years
– Enhanced historic tax credit equity with / or without an
accompanying “A” loan that mimics a conventional
loan
– Estimated to represent two-thirds of transactions

45. What to Expect from
Different NMTC Allocatees
• Clearly Defined Products
– Allocatee characteristics
• Somewhat more likely to be a financial institution or
• Nonprofit loan fund
– Often this takes the form of
• Interest rate reductions of 200 – 300 BP below market
• historic tax credit equity contributions increased by 20%
– May not require the QALICB to understand the financial interplay
between NMTC investors, CDEs, and QALICB
• QALICB knowledge of NMTC Program may be limited to issues
relating to satisfying & maintaining QALICB requirements

46. What to Expect from
Different NMTC Allocatees
• Customized Products - Leveraging
– Generally employ a “leveraged” structure in which loans are made
to an Investment Fund
• Loans may include financing that would have been provided directly
to the project, including:
– Commercial financing
– Concessionary loans from governmental or philanthropic sources
– Developer equity or grants loaned to the investment fund
– Loans to the Investment Fund “generate” NMTC equity
• NMTC equity can equal up to 1/3 of the amount of the loans to the
Investment Fund
• NMTC equity can be provided as a “B Loan” that:
– Bears a low rate of interest and can be cancelled after 7 years

47. What to Expect from
Different NMTC Allocatees
• Customized Products – QALICB
Involvement
– QALICB may be more likely to have some level of
involvement in structuring the “leveraged” financing
where:
• Sponsor / developer are making loans to the Investment Fund
• Some portion of the “B Loan” will be cancelled

48. What NMTC Allocatees
Want to Know
• Business & Programmatic Information:
– Venture type
• Business
• Real Estate
– Venture location
• NMTC eligible
• Meets distress criteria
– Anticipated community impact
• Square footage of commercial real estate
• Housing units
• Jobs
• Number of people receiving community services

49. What NMTC Allocatees
Want to Know
• Financial & Timing Information:
– Type of advantageous NMTC financing sought
• Construction v. permanent
• Lower interest rate v. additional capital
– Impact of advantageous NMTC financing on venture
• Need for advantageous NMTC Financing
• Financial feasiblity of venture with advantageous NMTC
financing
– Financing timeline
• Real estate issues (e.g., site control, permits, environmental
review)
• Status of non-NMTC financing

50. 2005 NMTC Award
Information
• Finding NMTC Allocations
– CDFI Fund website
• 2005 NMTC Program – Allocations Highlights
http://cdfifund.gov/awardees/2005/2005NMTC-FAQs.pdf
• 2005 NMTC Program – Allocation List
– Name of Allocatee
– Headquarters
– Service Area
– Predominant Market
– Allocated Amount
– Predominant Financing Activity
http://cdfifund.gov/awardees/2005/2005NMTCallocatees.pdf

51. Obtaining Assistance
• Allocatees
– May provide information on transaction parameters
– Limited ability to structure transactions
• Brokers
– Receive a fee if they obtain NMTC financing
• Financial Modelers
– Will structure a transaction to generate NMTC returns for an
investor
• Attorneys
– Can answer eligibility and technical structuring questions

52. LISC’s NMTC Program
• LISC was awarded $65 million in investment authority in
March of 2003 & $90 million May of 2005
• LISC conducts its NMTC activities through an affiliate, the
New Markets Support Company, LLC (NMSC)
• LISC’s NMTC activities build on its core competency in real
estate financing for commercial space and community
facilities
• NMSC finances ventures that advance the community
development strategies of LISC’s local programs, National
Rural Program, & other national programs and affiliates
• Generally using $4-$15 million in NMTC financing per
transaction

53. Economic Development
Activity
• NMSC is using NMTCs to support real estate
development, such as:
– Office space
– Supermarkets or other retail projects
– Industrial facilities
– Community facilities, including
• Childcare facilities
• Charter schools
• Health-care facilities
• NMSC may also use NMTCs to support:
– Business Financing
– Home ownership real estate developments
– Working capital financings

54. Local Initiatives Support
Corporation
Albers Mill
LaSalle
Sheraton Grand
Plaza Verde
Global Market
Summit Place
S&S Cycle
Martineau
Mexicantown
Odd Fellows
Asbury Church
Shops at Park Village
Bridgeport Mixed-Use
The Plant
Tangerine Plaza

55. Local Initiatives Support
Corporation
USE OF LISC NMTC AWARDS
Project Description Amount LISC Program
Albers Mill Residential & Commercial Historic Rehabilitation $10,855,085 WA State
Plaza Verde Office & Retail Historic Rehabilitation 4,236,753 Twin Cities, MN
S&S Cycle Business Expansion 5,500,000 Rural
Martineau Division Oakes Residential & Commercial Historic Rehabilitation 7,774,000 MI Statewide
Summit Place Industrial to Office Space Adaptive Reuse 7,500,000 Milwaukee, WI
Asbury Delaware Church Office & Art Space Historic Rehabilitation 9,403,921 Buffalo, NY
Mexicantown Welcome Center, Mercado & Public Plaza 5,000,000 Detroit, MI
Midtown Global Market Historic Rehabilitation 8,900,000 Twin Cities, MN
Bridgeport Residential & Commercial Historic Rehabilitation 4,942,906 CT Statewide
Odd Fellows Hall Commercial Historic Rehabilitation 5,245,680 Detroit, MI
La Salle Senior Community Center & Commercial Space Development 4,067,026 WA State
Sheraton Grand Hotel 16,500,000 Duluth, MN
Tangerine Plaza Shopping Center Development 9,150,484 Tampa Bay, FL
Shops at Park Village Shopping Center Development 18,500,000 Washington, D.C.
The Plant Historic Mixed-Use Rehabilitation (Olneyville) 9,500,000 Rhode Island
TOTAL $127,075,855

56. • Bob’s Advanced

57. NMTC Financing
Example #1
• Project Objective:Develop a facility to provide:
• community to space to non-profit service providers and
• office space to other non-profit tenants
• Total Project Costs: $10.5 million
• Net Operating Income:
– Projected at $885,000 per year
• Financing Sources:
– $500,000 in owner equity from grants
– Conventional loan of $8.0 million at 7.0% amortizing over 25 years based
on:
• Debt coverage ratio of 1.2 to 1
• Loan to value of 80%
• Financing Gap of $2.0 million
• Can the use of NMTCs fill this gap?

58. Customized Products
A / B Example
Commercial Lender Equity Investor
100% Owner
Loan Proceeds Loan Payments Equity Capital Tax Credits
8,020,707$ ??
99.99% Owner
?? ??
QEI NMTCs
Fees
0.01% Owner Sub-Allocate
NMTC Investment Authority
Loan A Proceeds Loan Payments Loan B Proceeds Loan Payments
8,020,707$ ??
Fund Manager NMSC CDE
QALICB
INVESTMENT FUND
NMSC

59. Rough Calculation of
NMTC Equity
• Total NMTC Financing Sought: $10 million
• Investor Pricing: $0.70 per $1.00 of NMTC
• Gross NMTC Equity comfortably exceeds Financing Gap
• Fees & expenses must be included in order to calculate:
– Net NMTC equity (i.e. “B” Loan)
– Interest rate on “B” Loan
Gross NMTC Equity = Total NMTC x NMTC x Investor
Financing Value Pricing
Gross NMTC Equity = $10 million x 0.39 x $0.70
Gross NMTC Equity = $2.73 million

60. NMTC Fees & Expenses
• Upfront Fees
– May range from 3.0% to 10.0% of QEI
• Syndication fees (at investment level)
• Origination fees (at project level)
• Transaction Expenses
– May range from $40,000 to $300,000
– Professional Fees
• Financial Modeling, Legal Work. Etc.
• Ongoing Asset Management Fees & Expenses
– Fee may range from 0.0% to 1.0% of QEI per year
– Expenses may range from $5,000 to $30,000

61. NMTC Calculation
Assumptions
• Upfront Fees
– 5.0% of QEI as syndication fee (at investment level)
– 2.0% of QEI as origination fees (at project level)
• Loan Loss Reserve
– 1.0% of QEI
• Transaction Expenses
– $150,000
• Ongoing Asset Management Fees & Expenses
– 0.35% of QEI as asset management fee
– $20,000 annual CDE expenses

62. QEI Calculation
Project (QALICB) Level
Total Total Owner NMTC NMTC
NMTC = Development – Equity + Origination + Transaction
Financing Costs Fee Expenses
Total
NMTC = $10.5 million – .5 million + (0.02 x QEI) + $150,000
Financing
Total
NMTC = $10.15 million + (0.02 x QEI)
Financing

63. QEI Calculation
Investment Fund Level
Total Syndication Loan
QEI = NMTC + Fee + Loss
Financing Reserve
QEI = ($10.15 million + (0.02 x QEI)) + (0.05 x QEI) + (0.01 x QEI)
QEI = $10.15 million + (0.08 x QEI)
(0.92 x QEI) = $10.15 million
QEI = $11,032,609
Syndication = $551,630
Fee
Loan Loss
Reserve = $110,326

64. Total NMTC Financing
CalculationTotal Total Owner NMTC NMTC
NMTC = Development – Equity + Origination + Transaction
Financing Costs Fee Expenses
Total
NMTC = $10.5 million – 0.5 million + (0.02 x QEI) + $150,000
Financing
Total
NMTC = $10.15 million + (0.02 x QEI)
Financing
QEI = $11,032,609
Total
NMTC = $10.15 million + (0.02 x $11.03 million)
Financing
Total
NMTC = $10.15 million + $220,652
Financing
Total
NMTC = $10,370,652
Financing

65. Net NMTC Equity
Calculation
Net Gross Syndication Loan
Loan B = NMTC = NMTC – Fee – Loss
Equity Equity Reserve
Gross NMTC Investor
NMTC Equity = QEI x Value x Pricing
(from previous slide 27)
Gross
NMTC Equity = $11,032,609 x 0.39 x $0.70
Gross NMTC Equity = $3,011,902

66. Net NMTC Equity
Calculation (Cont’d)
Net
Loan B = NMTC = 3,011,902$ – $551,630 – $110,326
Equity
Loan B = Net NMTC Equity = $2,349,946
Loan A = Total NMTC Financing – Loan B
Loan A = $10,370,652 – $2,349,946
Loan A = $8,020,706

67. Loan B Interest Rate
Calculation
Ongoing Asset
Loan B Interest Rate = (Management Fees + Expenses) ÷ Loan B
Loan B Interest Rate = ($38,614 + $20,000) ÷ $2,349,946
Loan B Interest Rate = 2.49%

68. Customized Products
A / B Example
• Structure DiagramCommercial Lender Equity Investor
100% Owner
Loan Proceeds Loan Payments Equity Capital Tax Credits
8,020,707$ 3,011,902$
99.99% Owner
11,032,609$ 4,302,717$
QEI NMTCs
Fees
0.01% Owner Sub-Allocate
NMTC Investment Authority
Loan A Proceeds Loan Payments Loan B Proceeds Loan Payments
8,020,707$ 2,349,946$
Fund Manager NMSC CDE
QALICB
INVESTMENT FUND
NMSC

69. Customized Products
A / B Example
Equity Qualified Equity Investment (QEI) 11,032,609$
Investor Equity 3,011,902$
Loan(s)
Commercial Loan 8,020,707$
TOTAL SOURCES 11,032,609$ TOTAL USES 11,032,609$
Qualified Equity Investment (QEI) 11,032,609$ NMTC Loan #1 8,020,707$
NMTC Loan #2 (Soft Loan) 2,349,946
Syndication Fees & Expenses 551,630
Reserves 110,326
TOTAL SOURCES 11,032,609$ TOTAL USES 11,032,609$
NMTC Loan #1 8,020,707$ Total Project Cost 10,000,000$
NMTC Loan #2 (Soft Loan) 2,349,946 Developer/Owner Equity 500,000
Developer/Owner Equity 500,000 NMTC Origination Fees 220,652
NMTC Professional Fees 150,000
TOTAL SOURCES 10,870,652$ TOTAL USES 10,870,652$
SOURCES USES
QALICB
SOURCES USES
INVESTMENT FUND
SOURCES USES
NMSC CDE

70. Customized Products – A
/ B Example
• Key Terms for the QALICB/Borrower
– Loan A: $8,020,707
• Interest-only for 7 years
• 7.0% interest rate (current market rate)
• Sinking fund payments (calculated on a 30-year schedule)
• Full principal repayment
– Loan B: $ 2,349,946
• Interest-only for 7 years
• 2.49% interest rate
• Amount of debt cancellation to be negotiated

71. NMTC Financing
Example #2
• Project Objective:
– Historic rehabilitation of a facility to provide:
• community to space to non-profit service providers and
• office space to other non-profit tenants
• Total Project Costs: $10.0 million
• Net Operating Income: ~ $610,000 per year
• Financing Sources:
– $2.7 million in grants and public sources of financing
– $1.2 million in historic tax credit equity
– Conventional loan of $4.1 million at 7.0% amortizing over 25
years
– Financing Gap of $2.0 million
• Can the use of NMTCs fill this gap?

72. Historic Tax Credit
Calculation
• The following example assumes that:
– Two-thirds of the total development cost are
Qualified Rehabilitation Expenses
– Historic Tax Credits are purchased at a price of
$0.90
Qualified HTC Investor
HTC Equity = Rehabilitation x Value x Pricing
Expenses
HTC Equity = $6.67 million x 0.2 x $0.90
HTC Equity = $1.2 million

73. Customized Products – A
/ B Historic Example
• Structure DiagramEquity Investor Concessionary Lender Commercial Lender
100% Owner
Equity Capital Tax Credits Loan Proceeds Loan Payments Loan Proceeds Loan Payments
4,211,902$ 2,728,283$ 4,092,424$
99.99% Owner
11,032,609$ 4,302,717$
QEI NMTCs plus HTCs
Fees
0.01% Owner Sub-Allocate
NMTC Investment Authority
Equity Proceeds Preferred
3,549,946$ HTC Return
Master Tenant
0.00% Owner 49.00% Owner
Loan Proceeds Loan Payments
Master Equity Proceeds Preferred 4,092,424$
Lease 3,549,946$ HTC Return 2,728,283$
Payments
51.00% Owner
QALICB
INVESTMENT FUND
NMSC
TBD
Non-Member Manager
TBD
Member Manager
Project Tenants
Fund Manager NMSC CDE

74. Customized Products – A
/ B Historic Example
Equity Qualified Equity Investment (QEI) 11,032,609$
HTC Equity 1,200,000$
NMTC Equity 3,011,902
Loan(s)
Commercial Loan 4,092,424$
Concessionary Loan 2,728,283
TOTAL SOURCES 11,032,609$ TOTAL USES 11,032,609$
Qualified Equity Investment (QEI) 11,032,609$ NMTC Loan #1 4,092,424$
NMTC Loan #2 2,728,283
HTC/NMTC Equity 3,549,946
Syndication Fees & Expenses 551,630
Reserves 110,326
TOTAL SOURCES 11,032,609$ TOTAL USES 11,032,609$
NMTC Loan #1 4,092,424$ Total Project Cost 10,000,000$
NMTC Loan #2 2,728,283 NMTC Origination Fees 220,652
HTC/NMTC Equity 3,549,946 NMTC Professional Fees 150,000
TOTAL SOURCES 10,370,652$ TOTAL USES 10,370,652$
INVESTMENT FUND
SOURCES USES
NMSC CDE
SOURCES USES
QALICB
SOURCES USES

75. Customized Products – A
/ B Historic Example
• Key Terms for the QALICB/Borrower
– Loan A: $4,092,424
• Interest-only for 7 years
• 7.0% interest rate (current market rate)
• Sinking fund payments (calculated on a 30-year schedule)
• Full principal repayment
– Loan B: $ 2,728,283
• Interest-only for 7 years
• 3.15% interest rate
• Amount of debt cancellation to be negotiated

76. PricingHistorical Institutional Tax Credit Fund Yields
vs. Ten Year US Treasuries
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
May-90 Sep-91 Jan-93 Jun-94 Oct-95 Mar-97 Jul-98 Dec-99 Apr-01
Date
Yield
Low Income Housing
Tax Credit Yields
Treasury Yields

77. NMTC Resources
• CDFI Fund website:
www.cdfifund.gov/programs/nmtc/index.asp
• NMTC Coalition website:
www.newmarketstaxcreditcoalition.org/