Understanding the Dynamics IV Housing Tax Credit Investment Performance Roshni Patel, Ernst

1
Understandingthe Dynamics IV Housing Tax
CreditInvestment PerformanceRoshni Patel,
Ernst Young IPED After the
ClosingMaximizing Value and Avoiding
PitfallsSan Diego, CA
2
Overview

• Study will be sent to data providers and
  financial contributors also available at
  www.ey.com/us/taxcreditadvisory
• Includes two-thirds of all housing credit
  properties produced - nearly 14,000 properties,
  over one million units, and 34.6 billion of
  equity investment
• Many new data points and analyses
• This presentation includes additional data and
  analysis not found in the study

3
31 Data Providers
2 direct investors 13 non-profit affiliated 16
for-profit

• Alliant
• Boston Capital
• CapMark
• Chartermac
• Column
• CAHEC
• Delaware Community Investment
• Great Lakes Capital
• Hawaii Community Reinvestment
• Homestead Capital
• Housing Vermont
• Hudson Housing
• John Hancock Realty
• KeyBank
• Massachusetts Housing
• Merritt

• Michel
• Midwest Housing
• MMA
• National Equity Fund
• Northern New England Housing
• Ohio Capital
• PNC MultiFamily
• Raymond James
• Richman
• Apollo / RBC
• Red Capital
• Simpson
• SunTrust
• Virginia Community Development
• WNC

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Performance Overview
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Construction Duration

• Average - 1.2 months behind schedule

31
44
6
Lease-up Duration

• Average 0.3 months behind schedule

36
37
7
Overall Property Averages
Median
Occupancy 96
Hard Debt Coverage Ratio 1.15
Operating Expenses Per Unit 3,319
Cash Flow 8,711
Cash Flow Per Unit 240

Repl. Reserve Contribution Per Unit 250
Repl. Reserve Balance Per Unit 1,011
Balance to Contribution Ratio 4.0 years
8
Occupancy Trends Median
9
Occupancy Trends Below 90
18
10
Cash Flow Trends Median
11
Cash Flow Trends Below 0
12
Hard Debt Coverage Ratio Trends Median
13
Hard Debt Coverage Ratio Trends below 1.0
14
Annualized Foreclosure Rate
1.24
0.96
0.86
0.83
0.62
0.32
Tax Credit
Other Commercial
0.28
0.29
Mixed Use
Hotel / Motel
Industrial
1-4 Fam.
Apart.
Retail
Office
0.03
Source ACLI Mortgage Loan Portfolio Profile 1993
- 2005 except tax credit data.
15
Magnitude of Deficits
45
16
Multiple Year Deficits
30
25
27.2
20
15
HDCR Chronic Underperformance
10
16.5
16
5
4.1
0
0203
0304
0405
All Years
17
Deficit Funding Sources Each 1 of deficit
funded by
10 upper tier/investor sources 90 lower tier
sources
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Deficit Funding By Size of Deficit
19
Deficit Funding By Age of Property
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Geography
WA
WA
ME
MT
MT
ND
VT
VT
MN
OR
NH
ID
ID
WI
NY
MA
SD
SD
CT
WY
WY
MI
RI
NJ
PA
PA
IA
NE
NV
NV
OH
MD
DE
IL
IN
IL
UT
UT
CO
WV
CO
WV
VA
VA
KS
MO
MO
CA
CA
KY
KY
NC
NC
TN
TN
AZ
AZ
OK
AR
SC
NM
GA
AL
AL
MS
MS
TX
TX
AK
AK
LA
LA
FL
HI
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Geography
Michigan Occ 93 DCR 0.98 CF 10
Iowa Occ 93 DCR 1.03 CF 64
North Dakota Occ 95 DCR 0.97 CF 30
Rhode Island Occ 97 DCR 1.01 CF 40
ND
MI
RI
Nebraska Occ 94 DCR 1.04 CF 39
Ohio Occ 95 DCR 1.04 CF 67
IA
NE
OH
IN
KS
South Carolina Occ 95 DCR 1.08 CF 73
Kansas Occ 94 DCR 1.04 CF 51
AR
SC
GA
Arkansas Occ 95 DCR 1.05 CF (73)
Indiana Occ 92 DCR 0.76 CF (398)
Georgia Occ 95 DCR 1.03 CF 81
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Median DCR by Region
23
Median Operating Expenses by Region
24
Construction Type 2005 Performance
25
Construction Type 2005 OpExp Per Unit by Age
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Deal Size Cash Flow Trends
Fewer than 61 Units 61-112 Units More than 112
Units
Largest Third
27
Deal Size Occupancy Underperformance
28
Deal Size DCR Underperformance
29
Tenancy 2005 Performance
30
Tenancy Cash Flow Trends
31
Tenancy Occupancy Trends
32
Tenancy DCR Underperformance
33
Location Underperformance
34
Location 2005 Median
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Year 15 Property Disposition Strategy
25 Maintained as Affordable w/o Tax Credits
6 Converted to Market Rate
27 Other
42 Resyndicated with Tax Credits
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Overall Property Averages
National Median

Replacement Reserve Contribution Per Unit 250
Replacement Reserve Balance Per Unit 1,011
Balance to Contribution Ratio 4.04 years
37
Q A

• www.ey.com/us/taxcreditadvisory
• Roshni Patel [phone]
• roshni.patel_at_ey.com