Ownership Changes During the Compliance Period:

1
Ownership Changes During the Compliance Period
structuring general partner transfers and
secondary market sales
A Sellers Perspective
Tom MangumVice PresidentNational Tax Credit
Advisory GroupT 614.430.5042tom.mangum_at_cbre.co
m
2
A Sellers Perspective

• About CB Richard Ellis The National Tax Credit
  Advisory Group

• CB Richard Ellis
• Nations Largest Real Estate Services Company
• 52.7 Billion in Investment Property Sales in
  2006
• 22.5 Billion in Multi-Housing Sales in 2006
• 150 Offices in 37 States
• National Tax Credit Advisory Group
• Specializes in the Sale of LIHTC Properties
  Throughout the Country
• Sold over 60 LIHTC Properties (About Half GP
  Interest Sales)
• Current Listings Include 2,348 Units.

3
A Sellers Perspective
Types of Ownership Transfers
Fee Simple (Asset Sale)
GP Interest
LP Interest
GP LP Interests
4
A Sellers Perspective

• Realize Upside
• Recycle Capital
• Underperforming Property
• Manage / Diversify Risk
• Change of Business Plan
• Administrative
• Because You Can

GP Motivations
Whatever your motivation it must be aligned with
your partners
5
A Sellers Perspective
Determining the Appropriate Type of Ownership
Transfer

• Restrictive Covenants, Partnership Other
  Agreements
• Bonds
• LIHTC
• HUD
• Right of First Refusal / Puts / Calls
• Property Performance
• Ongoing Liability / Guarantees
• Risk
• Upside

6
A Sellers Perspective

• LP (Whats In It For Me?)
• Value of Remaining Tax Benefits and Cash Flow and
  Likelihood of Receiving Them VS.
• Value Realized from Fee Simple Sale or LP Sale
  (Net of Costs Such As Recapture Bonds, Legal
  Fees, Etc...)
• Quality of New / Replacement GP
• Re-Syndication Value
• At What Point in Initial 15 Year Compliance
  Period

Determining the Appropriate Type of Ownership
Transfer
continued from previous page
7
A Sellers Perspective
Generally Speaking
Performing Properties
GP GP LP Fee Simple
Years 1-5 X
Years 5-10 X X
Years 10-15 X X
Underperforming Properties Could Be Candidates
For All Options Depending on Circumstances
8
A Sellers Perspective
Specific Considerations for GP Interest Sales

• Preparation
• Communicate With Your Constituents/Partners
• Know Your Position
• What Benefits Are You Entitled To?
• What Can and Cant You Do?
• Documentation
• Financial Statements / Audits / Tax Returns
• Compliance
• Loan Documents
• Partnership Related Documents
• Restrictive Covenants / LURAs
• Schedule of LIHTCs By Year
• Key Dates

Know Your Position_____
9
A Sellers Perspective
Specific Considerations for GP Interest Sales
Know Your Position_____

• Preparation (Continued)
• Packaging (Individual VS. Portfolio)
• Good With the Bad
• Geography
• Syndicators, Lenders, Partners
• Closings
• Pool of Buyers
• Complexity
• Valuation
• Marketing

10
A Sellers Perspective
Specific Considerations for GP Interest Sales

• Buyer Evaluation
• Financial Strength Experience of New GP
• Existing Relationships
• Lender(s)
• State Agency
• Syndicator / Tax Credit Investors
• Ability to Close on Time and as Agreed
• Consents, Consents, Consents
• LP / Tax Credit Investor(s)
• State Housing Agency
• Non-profit Partner
• Lender(s) / Servicer(s)
• HUD
• Process / Documentation
• LOI Contract to Acquire or Amend?

continued from previous page
Ability to Close_______ Likelihood Speed of
Approvals
11
A Sellers Perspective
Specific Considerations for GP Interest Sales

• Deal Terms Structure
• Fees Costs
• Guarantees
• Indemnifications (Pre/Post Closing)
• Assignment of GP Assets / LiabilitiesOutstanding
  Equity from LP
• Capital Improvements
• Loan Conversions
• Underperforming Properties
• Operating Reserves
• Administrative Sale or True Sale (GAAP)
• Timing
• Process Can Be Long and Slow (Consents)
• Transition / Closing

continued from previous page
12
Questions
Tom MangumVice PresidentCB Richard
Ellis National Tax Credit Advisory GroupT
614.430.5042tom.mangum_at_cbre.com