Asset%20Management%20of%20Debt%20and%20Equity%20Investments

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Asset Management ofDebt and Equity Investments

• Presented by
• Armando Pérez
• Principal, Director of Asset Management

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Headlines

• More similarities than differences between debt
  and equity investments and how they are managed
• The objectives and incentives of debt providers
  are determined by the structure of their
  investments
• Understanding debt drivers is key to effective
  asset management and issue resolution whether
  you are the asset manager or the developer.

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MMA Provides Equity and Debt

• LIHTC Corporate Tax Credit Funds
• Multi-investor, Private, Guaranteed
• Debt Products
• Construction loans
• Permanent financing
• Tax exempt bonds
• One-Stop Shop for Affordable Debt Equity
• Combined debt and equity teams
• Unified application, underwriting closing
  process

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So We Manage Debt Equity Products

• MMA Equity Portfolio 1,950 properties
• Tax Credits
• Low Income Housing
• Historic Rehabilitation
• MMA Debt Portfolio 625 properties
• Construction Loans
• Bonds
• Permanent Loans
• Fannie Mae, Freddie Mac, HUD

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Debt and Equity Have Similarities

• Capital investments
• In affordable multifamily property
• Specified yield requirement
• Long term
• Impacted by asset performance
• Dependent on developer strength

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but Different Structures

• LIHTC Investment
• Ownership Interest
• Pass-through entity
• LP or LLC
• Limited control limited liability
• Tax-advantaged return
• Tax credits and losses

• Debt Capital
• Mortgage loan
• Secured
• First lien position
• Cash return
• Debt service

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So Focus and Aims Are Not The Same

• Debt
• Payment of debt service
• Property performance
• Liens
• T I escrows
• Default losses
• Value of collateral

• Equity
• Yield
• Credits and losses
• Loss of ownership (recapture)
• Long term viability
• Property performance

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MMA Asset Management

• Oversees debt and equity investments under a
  single organizational structure
• Teams are organized around property lifecycle and
  geography, not debt or equity products
• Debt expertise is provided through specialization
  and processes

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Asset Management Structure
Capital Transactions Team
Asset Management Team
Development Management Team
Stabilized Portfolio Team
Northeast
Southeast

• Risk Management
• Investment Performance

• Workouts
• Dispositions
• Refinancings

Central
West
Admin. and Technical Support
Operations Team
Analyst Pool
Compliance Team
Tax Team
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MMA Asset Management

• Assigns one AM per property, regardless debt or
  equity product
• Property monitoring activities are similar for
  debt and equity
• Physical, management, financial reviews
• Focus is on asset performance, which impacts both
  debt and equity

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MMA Asset Management

• Manages the portfolio from an investment
  perspective
• AMs understand debt and equity and can translate
  how a given issue affects each of these different
  investments
• Debt portfolio managers support this investment
  perspective

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MMAs Investment Perspective
Property Life-Cycle Phases
First 18 to 24 mos. Next 6 to 12
mos. Remaining holding
period

• Development
• Due diligence
• Construction
• lease-up
• Yield delivery
• Loan conversion
• Initial tax credit
• compliance

• Initial Operations
• Capital and operating
• escrow releases
• Final tax credits (8609s)
• Permanent loan sizing closing
• Stabilization (DSC)
• On-going monitoring

• Stabilized Phase
• Financial budget review
• Tax return review
• Physical inspection
• Management evaluation
• Compliance monitoring
• Partnership loan agreement
  administration

Risk Management
Tax Credit and Debt Portfolio Managers
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to Maximize Performance Mitigate Risk
RISK MANAGEMENT
PORTFOLIO MANAGER
ASSET MANAGER

• Monitoring
• Analysis
• Performance
• Tracking
• GP/Borrower
• Relationship

• Problem Deals
• Deal Strategies
• Issue Resolution

• Products
• Capital
• Relationships
• Business Focus
• Risk
• Profitability

Leverage expertise Investment perspective Effectiv
e strategies
Investment performance Profitability
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Final Words A Debt Perspective

• Lenders make capital investments, but they are
  different than LP equity interests in a property
• As capital providers, lenders have clear
  objectives and motivations
• When there is a problem, understanding debt
  drivers is key to effective issue resolution
  whether you are the asset manager or the
  developer

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Asset Management ofDebt and Equity Investments

• Presented by
• Armando Pérez
• Principal, Director of Asset Management