Innovative Financing Strategies. Introduction by: Mark Cooter, Managing Partner, Cherry Bekaert, LLP

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$Authority Nancy Whitworth, Deputy City Manager, City of Greenville William Turner, New Market Tax Credit East Coast Team Leader, Wells Fargo\ Moderated by: Toby Rittner, Executive$

1 Innovative Financing Strategies Introduction by: Mark Cooter, Managing Partner, Cherry Bekaert, LLP Panelists: Harry Huntley, Executive Director, SC Jobs & Economic Development Authority Nancy Whitworth, Deputy City Manager, City of Greenville William Turner, New Market Tax Credit East Coast Team Leader, Wells Fargo\ Moderated by: Toby Rittner, Executive Director, CFDA

3 Discussion Topics What are NMTCs How/When We Use Them To Benefit Borrowers Basic Deal Structures Cost of a NMTC Deal Representative Deals NMTC Resources & Contacts 2

The New Markets Tax Credit (NMTC) Program was established with support from a

of capitalism to improve areas experiencing economic distress Program enacted

st allocations made 2003 Supported in proposed budget Signed into law special

budget Signed into law special allocation for economic recovery Renewed 2009

revitalization and community development through investment in and assistance

4 The New Markets Tax Credit (NMTC) Program was established with support from a bi-partisan Congress in 2000 Program based on his vision of using the power of capitalism to improve areas experiencing economic distress Program enacted through legislation sponsored by Republican leaders Signed in to law st allocations made 2003 Supported in proposed budget Signed into law special allocation for the Go Zone Renewed 2007 Renewed 2008 Supported in proposed budget Signed into law special allocation for economic recovery Renewed 2009 Renewed 2010 Renewed 2013 The NMTC Program is administered by the CDFI Fund, a department of the U.S. Treasury. The CDFI Fund was created in 1994 for the purpose of promoting economic revitalization and community development through investment in and assistance to community development financial institutions (CDFIs) The NMTC Program is authorized by section 45D of the Internal Revenue Code.

5 New Markets Tax Credits (NMTCs) Federal Stimulus Program to Attract Private Capital to LICs Primarily used for commercial real estate or operating businesses in qualified low-income communities (LICs) Investors receive a 39% tax credit of invested capital over seven years ~ approximate NPV of 20%+ Tax credits awarded annually subject to Congressional approval typically $3 to $5 billion per year in allocation (tax credits = allocation * 39%) Investor market driven primarily by CRA-motivated banks $33 billion in tax credit authority issued (~ $12.9 billion in actual tax credits) since program inception ~ WF/Wachovia has received $775MM in allocation Well-structured deals result in lower cost of capital on more favorable terms than conventional financing Finite resource ~ tax credits allocated to qualified projects on a competitive basis 4

6 What Can NMTCs Be Used For? Typical Uses: Com l RE, Community Facilities & CDFI Lending Qualified Investments Eligible: For-profit and non-profits Commercial real estate Operating businesses Mixed-use rental housing where com l NOI > 20% of the total NOI Non Eligible: Golf courses Gaming facilities Race tracks Location Eligibility Highly Distressed Test: (must satisfy at least one criteria) Median income < 60% of AMI Poverty rate > 30% of the national average Unemployment rate > 1.5 times national average Liquor stores Some farming businesses 5

Capital that Complements Real Estate Real Estate Investments are eligible under both the Federal NMTC program regulations NMTC investments can be used to finance

than 20% of the gross income is generated from the rental of commercial space, then the building is not residential rental property QLICI proceeds are typically

7 Capital that Complements Real Estate Real Estate Investments are eligible under both the Federal NMTC program regulations NMTC investments can be used to finance commercial, retail, industrial, mixed-use and community facilities NMTCs are excluded from being used in financing residential rental housing; however, if more than 20% of the gross income is generated from the rental of commercial space, then the building is not residential rental property QLICI proceeds are typically required to be spent by the QALICB within 12 months of the investment Construction timeline should be discussed in detail with CDE representatives and legal counsel

Capital that Compliments Operating Businesses Investments in or loans to Operating Businesses are eligible under

limited to the following: Plant expansion Capital Equipment purchase (any tangible assets parts, inventory, FF&E)

$20.9B in QEI proceeds to 3,060 QALICBs Real estate QALICBs received $12.

8 Capital that Compliments Operating Businesses Investments in or loans to Operating Businesses are eligible under the Federal NMTC program regulations Investments in or loans to Operating Businesses can be used for but are not limited to the following: Plant expansion Capital Equipment purchase (any tangible assets parts, inventory, FF&E) Satisfy short term working capital needs Solar components Wood pellets Plywood Through 2010, CDEs have disbursed $20.9B in QEI proceeds to 3,060 QALICBs Real estate QALICBs received $12.5B in NTMC financing (60%) Principal activity is the development or leasing of real estate Operating Business QALICBs received $7.6B in NMTC financing (37%)

9 Typical NMTC Financing Uses NMTCs support a wide variety of financing activities Commercial Real Estate Redevelopment projects ~ public/private partnerships Transit-oriented development(tod) Mixed-use and/or adaptive re-use developments including residential < 20% of NOI Neighborhood serving retail Community Facilities Charter schools Medical clinics Museums and public venues Homeless and domestic violence shelters and other community assets Other Operating businesses ~ widget makers and sellers Solar and other alternative energy 8

10 YE Qualified low income community Investment by state Source: CDFI Fund QALICBs financed by CDEs through 2010 $20.9 billion $257MM in South Carolina

Bank loan Cash Leverage Lender $7,270,000 non-recourse loan with market or below

70 per credit Receives - $3,900,000 in tax credits Provides - $2,730,000 in TC equity

on behalf of transaction) Total fund = $10,000,000 Tax Credit Equity = $2,730,000

9 million NMTC Annual interest payments (or cash flow) QEI - $10 million equity

$7,270,000 QLICI B = $2,730,000 QALICB A Loan Reflection of leveraged loan $7,270,000

11 Bank loan Cash Leverage Lender $7,270,000 non-recourse loan with market or below market rates Debt service Tax Credit Investor Assume $0.70 per credit Receives - $3,900,000 in tax credits Provides - $2,730,000 in TC equity $3,900,000 in tax credits $7,270,000 leverage loan Investment Fund, LLC (SPE created on behalf of transaction) Total fund = $10,000,000 Tax Credit Equity = $2,730,000 Leverage loan = $7,270,000 $2,730,000 NMTC equity $3.9 million NMTC Annual interest payments (or cash flow) QEI - $10 million equity Community Development Entity, LLC Annual interest payments (or cash flow) QLICI A = $7,270,000 QLICI B = $2,730,000 QALICB A Loan Reflection of leveraged loan $7,270,000 with market or below market rates 1 st Mortgage B Loan Reflects monetization of TC equity $2,730,000 with a below market rate (typically 1-2%) Subordinate debt or equity

12 No Free Lunch Technical, Regulatory & Tax Restrictions Dictate Structures Complicated deal structures Extended closing periods of days High transaction costs ~ typical minimum deal size of $7.5+ million Credit risks ~ typical RE credit risks for hard debt transactions Shallow tax credit subsidy ~ project must be economically feasible Program compliance risks ~ non-compliance can jeopardize ability to apply for future credits Tax/IRS risks ~ Substantially-all test requires 85% of invested capital remain continuously invested for 7-years otherwise onerous recapture of tax credits 11

13 Questions? Wells Fargo NMTC & Other Industry Resources William Turner East Coast Team Manager (804) Industry Resources

14 Greenville, SC

15 Build Partnerships

16 Focus on mixed-use development: RiverPlace

Public Participation Principles Consistent with Strategic Plan Potential to Serve as Catalyst Economic Feasibility of the Private Project Adds to

17 Public Participation Principles Consistent with Strategic Plan Potential to Serve as Catalyst Economic Feasibility of the Private Project Adds to the Vibrancy of Downtown Addresses an Underutilized Asset High Quality of Design and Construction Authentic to Greenville Prefer Mixed-Use in Downtown

23 Project ONE

Project ONE Private Development: Tower One: 179,000 SF of office/retail/restaurants Certus Bank Headquarters Clemson University Anthropologie,

24 Project ONE Private Development: Tower One: 179,000 SF of office/retail/restaurants Certus Bank Headquarters Clemson University Anthropologie, Brooks Brothers, Tupelo Honey Café Tower Two: 200,000 SF of office Tower Three: Aloft Hotel and mixed-use Other: Renovation of existing office building

25 Project ONE Plan

26 Public Participation Property Acquisition Building Demolition Public Plaza Renovation

27 Public Participation Streetscape Improvements Utility Upgrades New Parking Garage Parking Agreements for New and Existing Garages

41 FIFTH ANNUAL URBAN LAND INSTITUTE CAPITAL MARKETS PROGRAM Innovative Public/Private Partnerships & Capital Markets September 30, 2013 Kiawah Island, South Carolina Harry A. Huntley, CPA Executive Director SC Jobs-Economic Development Authority

42 SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY 1983 JEDA was created by Act of the General Assembly (Act 145 of 1983) SC Code Sec Purpose Retain & expand job opportunities Meet the financial & capital needs of the small & middle market business community Target areas of SC that have the greatest need for private & public investment Focus on projects which offer the most economic growth & diversity for SC and its citizens Statewide conduit issuer of tax-exempt bonds

43 SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY JEDA as a Conduit Issuer JEDA acts as a conduit by passing payments from the borrower to the bondholder to reduce the borrower s financing costs JEDA issues bonds on behalf of the borrower, allowing the borrower to benefit from a tax-exempt borrowing Bonds issued by JEDA are payable solely by the underlying borrower from the funds and assets pledged for each individual bond issue. JEDA does not enhance the credit for the underlying borrower

44 Under State Constitution, revenue bonds are payable solely from a revenue producing project or special source No pledge of revenues from tax or license JEDA does not assume the responsibility of determining the creditworthiness of a project or borrower, nor does it assume the resulting legal liability from making such a determination SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY

SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY Industrial

- Healthcare Facilities Supermetal Plant Eight-Torch Laser

Solid Waste Disposal Facilities Viva Recycling of S.C.

45 SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY Industrial Revenue Bonds Qualifying Enterprises - Manufacturing Facilities - Healthcare Facilities Supermetal Plant Eight-Torch Laser Cutter Rock Hill, SC - Educational Facilities - Non-Profits - Solid Waste Disposal Facilities Viva Recycling of S.C. Moncks Corner, SC CareAlliance Health Services Roper St. Francis Charleston, SC

46 JEDA Then and Now Prior to recession Primarily a conduit issuer for stand alone tax-exempt projects Partner on projects Now State Small Business Credit Initiative Financial Advisory Services Energy Efficiency Revolving Loan Fund ARRA Recovery Zone Bonds Qualified Energy Conservation Bonds SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY

47 State Small Credit Business Initiative SSBCI supports state-level, small business lending programs and is a vital component of the Small Business Jobs Act of 2010 South Carolina was awarded $18M and JEDA was designated as implementing agency for the SSBCI program JEDA partnered with Business Development Corporation (BDC) to serve as program administrator South Carolina was the first state in the Nation to commit its full allocation for its loan participation program and is often cited by the Department of Treasury as example of the succcess of the SSBCI program SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY

48 Lander University- $15.5 million Revenue Bond Creative public-private collaboration between Lander University City and County of Greenwood, South Carolina The Lander Foundation-Non-Profit organization operating solely to support Lander University The Lander Bearcat Club-promotes intercollegiate athletics at Lander University The Burton Center-Non-Profit agency serving individuals with disabilities & special needs Self Regional Healthcare Greenwood Community Model for Public-Private Partnership Creates: 10 new jobs Retains: 349 existing jobs SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY

49 Lander University- $15.5 million Revenue Bond Construction of two off campus development projects 25-acre Jeff May Complex for Recreation, Wells and Sports providing soccer, baseball, softball and tennis facilities, and recreational space for the school and general community. SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY

50 Lander University- $15.5 million Revenue Bond 37-acre Lander Equestrian Center at Burton Center, is the first university-based equestrian center in South Carolina to offer academic, therapeutic and sporting opportunities for students and community members. The Equestrian Center is a unique partnership between the University, The Lander Foundation and Burton Center, a non-profit, governmental agency providing services for people with disabilities and special needs SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY

51 SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY Harry A. Huntley, CPA Executive Director 1201 Main Street, Suite 1600 Columbia, SC (803)

Tools of the Trade: Tax Credits 101

Tools of the Trade: Tax Credits 101 What is tax credit financing and how does it work? HOST: LAURA BURNS COMMUNITY IMPACT COMPLIANCE MANAGER Q&A: WILLIAM FIEDERLEIN PROJECT MANAGER INTRO: MERRILL HOOPENGARDNER