Opportunity Zones Investment in Commercial Development

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2 Opportunity Zones Investment in Commercial Development PANELISTS Renee Beaver Novogradac & Company LLP Kevin Boes LISC s New Markets Support Company Korb Maxwell Polsinelli Gary Hobbs BWI Clayton Wyatt Alliant Asset Management Co., LLC Michael Graham Sebastian Partners, LLC

3 Agenda Early Legislation Quick Overview of Program Case Study Technical Issues Commercial Development Risk Profile

4 Early Legislation

5 Risk / Return O-Zone Portfolio Financial Return Market Rate Housing Affordable Housing IT Business Health Strip Center Business Incubator Social Return Low Medium High Risk

6 Quick Overview of Program

7 Tax Incentives Timeline Maximum benefit is achieved by holding the QOZ investment for 10 years years 10% Step up in basis of deferred gain 7 years Taxes paid on deferred gain Additional 5% Step up in basis of deferred gain 10 years Investment and deferral of Capital Gain (up to 180 days after event triggering the gain) Permanent Exclusion of gains accrued in the Opportunity Fund

8 Tax Benefits Drive Increase in IRR of ~300bps Capital gains invested in QOZ Funds have potential to drive an additional 300+ bps IRR increase compared to a typical real estate fund $200 Qualified Opportunity Fund - Net Asset Value Comparison $175 $ ~300 bps gain on IRR $150 $125 $ $99.57 $ $ $ $100 $ Holding Period (Years) Source: EIG

9 Case Study

10 Commercial Development Examples 1 Business infrastructure real estate funds: Industrial Retail Office Mixed Use 2 Community facilities: Charter schools Health clinics Recreation facilities 3 Housing: Multi-family workforce housing Mixed use 4 Enhancement for other federal tax credit transactions: NMTCs Historic Tax Credits Low Income Housing Tax Credits

11 287-acre master planned community in Aurora, CO 1000+/- residential homes 60 acres of commercial 11 acres of multi-family In a Qualified Opportunity Zone PHASE 1 The 135-acres at the southeast corner of Piccadilly and 64th Ave, and was purchased by the Sponsor in early PHASE 2 The 152-acres directly to the south. The property is in escrow and is expected to close in 2019.

12 Qualified Opportunity Fund Retail Office Hotels Restaurant Multi-family Single Family Rental (from new construction within Avelon)

13 Commercial Development Technical Issues

14 Commercial Development: Technical Issues 90% invested rule 180 days to invest 90% of fund capital in QOZBP per statute Regulations expected to provide a 30 month timeline The substantial rehabilitation rule OZ investments to double the basis of the property that the QOF invests in within 30 months of investment Substantially all rule QOZ business is one in which substantially all of the tangible property owned or leased is a QOZ business property. Active conduct of business rule Do the businesses of developing and leasing real estate qualify as the active conduct of a business per the definition of a QOZ business?

15 Risk Profile Discussion

16 OZ Incentive Strengths Local Flexible New Investor Class Potential Straightforward Designations are made by states and localities, rather than Federal agencies, ensuring more local buy in and coordination The flexibility of the investment tool can support investments in any type of asset class The incentive has the ability to attract new corporate and individual investors to community development finance The incentive could attract hundreds of billions of private sector capital into low-income communities The tool is relatively straightforward from an investment and compliance standpoint, in comparison to LIHTC and NMTC

17 Growth Oriented, Distressed Communities ~52 million Americans (1 in 6) live in economically distressed communities Source: Economic Innovation Group

18 OZ Incentive Concerns Lack of Oversight Lack of Impact Incentives Gentrification and Displacement Future of Other Tax Incentives Lack of oversight from government entities could lead to program abuses. Incentives focus on back-end returns, rather than investments that will result in community impacts. The tool might aid in the gentrification and displacement of residents and businesses in Opportunity Zone communities. The new incentive might be used as an excuse to diminish or eliminate other community development tax incentives, such as the NMTC program.

19 Commercial Development: Market Issues Investors: Risk/return and timing issues Twinning with LIHTC and HTC 10 year hold issues Indemnity/guarantee requirements Impact investors vs. financial investors Deal structures / capitalization: Warehouse financing Straight equity vs. leverage structures JV equity vs. preferred equity Investments in NMTC deals Project debt to be structured as non-recourse to provide QOF investors with tax basis Structuring projects for 2026 tax payment and sale or refinancing after 10 years

20 Key Points Investors Funds Eligible Investments Tax incentive is most valuable for 10 year investments in appreciating assets Six months to invest after realizing a capital gain Another 6-30 months to deploy 90% of capital in Zones Capital is required to be an equity investment loans from investors are not eligible for the tax incentive All capital must flow through an Opportunity Fund to be eligible for the tax incentive Funds are self-certified via an IRS tax form Fund must be established for the purpose of investing in Opportunity Zones 90% of fund assets must be invested in Zones to maximize the tax incentive Must be equity investments Real estate investments must include substantial rehabilitation doubling basis within 30 months Sin businesses are not eligible Other requirements include property use in active conduct of business and limits on assets held in cash

21 Projects in QOZ Areas El Rancho Mesa, AZ $13.6mm / 66 Units 1 st and Rosemary Family San Jose, CA $57.8mm / 184 Units Arbor on Date Lancaster, CA $10.4mm / 40 Units Amazon Muskegon, MI $15.7mm / 126 Units Concord Huntington Huntington Park, CA $6.5mm / 160 Units Arcadia Detroit, MI $12.9mm / 248 Units Brewers Hill Milwaukee, WI $2.2mm / 19 Units Casgrain Hall Detroit, MI $3.9mm / 82 Units Crenshaw Family Los Angeles, CA $10.1mm / 32 Units Don Ver Phillipsburg, NJ $1.9mm / 10 Units Exchange at Fond du Lac Fond du Lac, WI $11.1mm / 48 Units Emory Senior Lubbock, TX $9.4mm / 102 Units Tynan Village Salinas, CA $50.8mm / 171Units Fox Courts Oakland, CA $33.7mm / 80 Units Ice House Springfield, OH $5.8mm / 40 Units Island Village San Diego, CA $21.9mm / 281 Units King Plaza Perth Amboy, NJ $75.5mm / 249 Units Kunzelmann Building Milwaukee, WI $8.2mm / 67 Units

22 Opportunity Zones Investment in Commercial Development PANELISTS Renee Beaver Novogradac & Company LLP Kevin Boes LISC s New Markets Support Company Korb Maxwell Polsinelli Gary Hobbs BWI Clayton Wyatt Alliant Asset Management Co., LLC Michael Graham Sebastian Partners, LLC