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USBancorp Community Development Corporation

New Markets Tax Credits:

Creating Economic Opportunities in the Gulf Opportunity Zone

IPEDMarch 30, 2007Jennifer Westerbeck

NMTC and HTC Investments703.740.5600

Jennifer.westerbeck@usbank.com

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About US Bancorp

• USB CDC is a wholly owned subsidiary of USBank;

• USB CDC makes equity investments in low-income housing, historic and new markets tax credit projects;

• USB CDC is a business unit headquartered in St. Louis; and

• USB CDC has offices in DC, Los Angeles, Kansas City, Minneapolis, Denver.

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USB CDC’s Experience

• USB CDC has worked with over 55 CDEs.

• USB CDC’s investments have resulted in over $2.15 billion in QEIs in over 150 transactions.

• Projects have been in more than 25 cities, 18 states and the District.

• Portfolio of over $4.2 billion in LIHTC, HTC & NMTC investments.

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Real Estate Transaction Types

Leased and Owner-Occupied Facilities

• Office• Retail/Office• Mixed-use with

Housing – 20/80 Requirement

• Entertainment/Theater• Hotel• Non-Profit• Industrial• Manufacturing

For-Sale Housing• Single Family Homes• Condos

Redeployment Issues• Recapture if capital not

deployed

Operating Businesses

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USB CDC’s Experience – Structures

• Leveraged model with third party debt (hard or soft or developer equity as a loan)

• Leveraged model with both USB CDC and USBNA as equity & debt

• Loan Pools• NMTC/HTC twinned• HUD, SBA• Multiple or Single QEIs

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GO Zone Transactions

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Case Study: St. Charles Hilton

Project Info:• Developer: Dimension

Development Company– For-profit developer

• Location: New Orleans, LA• TDC: $35 mm• Redevelopment of

existing hotel damaged by Katrina– An historic Masonic

building built in 1926– 250-room hotel – 500-seat theater– 100 parking spaces

Investment:• $6.1 mm in NMTC equity• New Markets Tax Credits

– $30.5 mm allocation– GO Zone allocation from Urban

Development Fund/Aries Capital

• Loan terms to QALICB– 7 year term, Interest rate only– Higher than standard LTV,

below market interest rate, debt with equity features, subordinated debt, lower than standard origination fees, and loan loss reserve requirements that are less than standard

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Case Study: St. Charles Hilton

Community Impact Info:• GO Zone, a HUB Zone, an area with unemployment greater

than 1.5 times the national average, has a 43% poverty rate and a MFI is 84.2% of area median income

• Expected to create over 100 new full-time jobs• Stimulate further development by creating jobs and

temporary housing for workers, as well as bringing vital tourism revenue back to the area

• Building was closed in the 1960s & remained vacant for over 30 years until it was acquired & converted into a hotel in 2002

• Closed again following Hurricane Katrina when the first floor and basement were flooded destroying the principal operating equipment and causing the upper floors of the building to sustain damage from the damp conditions

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Case Study: St. Charles Hilton

NMTC Need:• Faced a number of hardships, including: the high

cost of rehabilitation, the unwillingness of most institutional investors to lend or invest in the New Orleans hotel market since Katrina, scarcity of labor and materials, decreased local capacity for building permits and approvals, and a general apprehension about the future of New Orleans and its tourism industry.

• Most lenders and investors are concerned about the hotel market in New Orleans, and are unwilling to lend or invest at any rate. The higher loan-to-value and lower interest rate required by the St. Charles Hilton would not have been available from conventional lenders.

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Challenges

• Need to focus—too many potential deals that might not be viable

• The basics are still required for closing, but are missing in many deals

• Lots of eager investors and CDEs, but need to push projects over the finish line

• Lenders still not fully comfortable taking long term risk in the region

• NMTCs are needed just to cover increased costs—overall 25% more for construction, insurance, etc.

• Lack of housing a problem for attracting workers

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Moving Forward

• Pipeline is focused on strengths and anchors in the market– Tourism, Hospitality, Hospitals,

Universities, Film, Manufacturing• Trying to build up commercial and

housing• Building partnerships with local CDEs,

developers, attorneys, consultants• Many state resources, but need to

figure out how to utilize them– GO Zone bonds, state credits, greater

HTCs and depreciation