PNC Affordable Rental Housing Preservation Funds. John Nunnery SVP, Manager of Preservation Investments PNC Bank, NA

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2 PNC Affordable Rental Housing Preservation Funds John Nunnery SVP, Manager of Preservation Investments PNC Bank, NA

3 PNC Real Estate, Tax Credit Capital National purchaser of federal and state low income, historic, and new market tax credits Distribution platform includes syndicated funds, separate accounts and direct purchases (PNC account) $9B in equity under management, 130,000+ units Balance sheet and Agency lending, predevelopment equity, and acquisition loans on a select basis Formed Preservation Investments in 2013 as a way to provide capital (debt and equity) into the Year 15 space through our existing platform Completed 3 fund investments, started marketing our next fund earlier this year

4 PNC Preservation Investments Opportunity: provide debt and equity financing that can compete with non- LIHTC/affordable buyers to slow the loss of affordable units Natural extension of the tax credit platform Underwriters, closers, fund managers, lending capability, LIHTC knowledge base, LIHTC developer and investor base First 3 rd party fund investments in 2012 New line of business started in Internal approvals 2014 SEC approvals 2015 First PNC- sponsored fund closing 2016 Additional investors, acquisitions 2017 Launched PNC Fund 2

5 PNC Preservation Investments NHP- Urban Atlantic Fund ($50M) Closed in August 2012 Acquired 9 properties, sold 1 1,319 units CT, MD, OH PNC Preservation Fund 1 ($100M) First closing December 2015 Final closing September 2016 Fully invested by January 2017 Acquired 13 properties, sold 1, started LIHTC on 2 1,960 units MA, IL, FL, AL, UT, VA, CT, MS PNC Preservation Fund 2 ($ M est.)

6 What Is Preservation? Acquisition of at- risk properties Expiring LIHTC, Section 8 Properties with contractual restrictions Intended disposition into LIHTC or affordable transaction Extension, i.e., Preservation of affordability What is NOT Preservation. Ownership of affordable housing without the intent to preserve affordability Renovation or historic preservation Renewal of a Section 8 contract Workforce housing Naturally occurring affordable housing

7 Multi-Investor LIHTC vs PNC Preservation Funds LIHTC Preservation Credits and Losses Form of Return Cash Yes Construction Risk No Yes Leasing Risk Yes, but Limited (Stabilized) Yes Developer Risk No Yes, but limited Operating Risk Yes Yes Compliance Risk Yes, sometimes Yes CRA Eligible Yes 7-8% Net Pre-Tax 1 (Tax Reform?) Returns 11%-12% Net Pre- Tax 1 Under 10% PNC Co-Investment Up to 25% 15 Years or longer Fund Life Approximately 10 Years ±15 Years Asset Hold Period 3-5 Years National, CRA, Secondary, Tertiary Markets National, CRA, Secondary

8 Acquisitions LIHTC or Subsidized, less than 20% market rate Contractual affordability restrictions no naturally affordable Expiring affordability within 15 years, prefer after year 15 but have completed year 11 deals GP and LP interests, 100% ownership Stable/predictable performers, no retenanting, no significant deferred maintenance Acquisition of partnership interests or fee simple New PNC balance sheet debt structured to match the asset strategy (assumptions are possible) Generally 11%- 13% net IRR s Not a Value- Add Fund Not looking to do significant immediate repairs and push rents charged to low income residents, interim hold to get to a LIHTC transaction in order to renovate Can work as either a 9% or 4% transaction at exit

9 Developer Role Developers are a source of opportunities for fund investment Off market deals some are from the management portfolio Existing portfolio looking to cash out but retain some control (sell but retain the option to repurchase) For deals that are developer sourced: PNC executes the PSA, funds all costs Developer provides 3 rd party management for the fund Developer gets an option to purchase the property at FMV No equity required from the developer and no guarantees Developer applies/reapplies for credits/bond cap, solicits offers for LIHTC equity and debt, sources soft financing (if required), and closes Developer becomes the GP and the fund exits the transaction

Island Terrace Apartments Chicago 240 units including 1/3 HAP, 1/3 vouchers, Chicago Housing Trust subsidies Acquired in April 2015 for $19M Brought in new 3rd party mgmt Reduced expenses

10 Island Terrace Apartments Chicago 240 units including 1/3 HAP, 1/3 vouchers, Chicago Housing Trust subsidies Acquired in April 2015 for $19M Brought in new 3rd party mgmt Reduced expenses significantly (payroll and utilities) Improvements to security and hot water system Recently appraised for $24.9M LIHTC (4%) process started Syndication in early block south of the Obama Presidential Library site Across the street from a proposed Tiger Woods PGA course

New Port Antonio Apartments Boston 227 units, 100% HAP 3 property portfolio ($104M) Acquired in Dec 2015 for $47M Retained existing management No major capital improvements

11 New Port Antonio Apartments Boston 227 units, 100% HAP 3 property portfolio ($104M) Acquired in Dec 2015 for $47M Retained existing management No major capital improvements LIHTC (4%) process started LIHTC syndication in mid 2018 Current HAP rents $400 below comparables (RCS) RCS adjustment in early 2018 GPR increase of approx. $1M is possible

12 Bolton North Apartments Baltimore 209 units Long term Section 8 contract Acquired by NHP- UA Fund in August 2013 for $22.5M Uniquely structured to avoid tax complications Negotiated a real estate tax reduction Received a bond allocation from the state of MD Received an allocation of 4% tax credits Closing August 2017

13 Contact Information John N. Nunnery Senior Vice President PNC Real Estate 23B 1 Market Beaufort, SC Tel: (843) John.Nunnery@PNC.com

Profits in LIHTC Sales

Profits in LIHTC Sales Case Study By Stasiu Geleszinski, CCIM Stasiu Geleszinski, CCIM Managing Director 513.417.5588 stash@capstoneapts.com Stasiu Geleszinski, or Stash as those in the industry know him,