National New Markets Fund, CDE

Deborah La Franchi, CEOStrategic Development Solutions

Monica Edwards, Managing DirectorStrategic Development Solutions

Belden Hull Daniels, CEOEconomic Innovation International, Inc.

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National New Markets FundControlling and Managing Firms

Strategic Development Solutions Economic development and fund building consulting firm Deborah La Franchi, Founder and CEO

Genesis LA: first CEO; created six Genesis LA Funds ($400m/$1.2b) Former Assistant Deputy Mayor for Economic Development (LA/Mayor

Riordan) $2.5b in funds created or under development

Monica Edwards, Managing Director, Real Estate Invested $100m in urban-targeted real estate private equity for Citigroup Managed $200m private equity portfolio

Economic Innovation International, Inc. Belden Hull Daniels, Founder and CEO

$100b of development funds globally over 40 years Partner to SDS in Fund Development

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II. National New Markets Fund (NNMF): Investment Strategy

NNMF: 2006 $25 million GO Zone Allocation

Catalytic real estate projects Located in low-income census tracts Mixed-use, commercial, light industrial or for-sale

housing. 100% multi-family projects are not eligible Focus on long-term job creation

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III. National New Markets Fund: Mezzanine Debt Terms

$25 million Allocation creates $5 million in subsidy Creative structuring to meet each project’s unique needs Debt can be converted to equity to remain in project at exit NNMF hopes to deploy in 1 or more deals within 90 days

Typical terms: Below-market rate (< 3.00%) Interest only 7-year terms Loan-to-value up to 100%

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IV. National New Markets Fund: Deals

NNMF has screened 20-30 deals

Many are still in the pipeline, but not one has closed yet. Why?

Risk: Lack of infrastructure Uncertain ultimate population figures Cost escalation Insufficient subsidy Complexity

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V. Risk: Infrastructure

Basic services: water, power, sewer, hospitals, schools, etc.

Rebuilding efforts will then follow infrastructure.

Will all communities be rebuilt?

If so, when? Federal money has been allocated to these efforts, it has not reached the ground.

Time is the enemy: as time goes by fewer to return if progress is stalled.

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VI. Risk: Ultimate Population?

Orleans and St. Bernard Parishes, those hardest hit, are still below 50% their pre-Katrina levels:

July 2005 August 2006

Orleans & St. Bernard 501,762 216,435

Sources: 2005 American Community Survey, 2006 LA Health & Population Survey.

How many people will eventually return? Many have returned to metro region, but may not return

to New Orleans. Where will they live—Downtown, New Orleans East,

Gentilly, Lakeview ?

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VII. Risk: Cost Escalation

Construction labor cost: 43% increase since Q2/2005 ( Source: Louisiana Dept of Labor)

Materials cost: 20% increase

Insurance premiums: 70-100% increase due to Katrina, Wilma, and Rita

Decreased population impacts:• Labor shortage: a six-month wait in New Orleans for a

construction permit• Energy costs: 216,000 vs. 501,000

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VIII. Risk: Insufficient Subsidy

NMTC subsidy alone is not enough to overcome this heightened risk profile—too many unknowns.

Housing is clearly one of the most critical needs, but mixed-use structures can be challenging given the existing population demographics.

Combining NMTCs with other subsidies, such as GO Zone Benefits, and/or State NMTCs has proven to be structurally challenging.

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IX. Risk: Complexity

Combining benefits to create more subsidy has proven to be a long and arduous process:

Uncertainty: parking in mixed-use structures with GO Zone Bonds

GO Zone Bond structure is not understood by many Louisiana State NMTCs only transferable on a case-

by-case basis The NMTC structure not understood by many

developers

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X. Example: Downtown New Orleans Office Tower

A developer began due diligence to purchase an office tower for conversion to apartments.

$100 million project had a $17 million gap that could be bridged with NMTCs.

Upon more serious due diligence, the developer found: Significant delays in construction permitting No clear estimate of population post-construction Huge construction labor shortages Lack of coordinated support

Project did not pencil at market rents, even with NMTC subsidy.

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XI. Solutions

Increase awareness through: Education, e.g. conferences, technical seminars, etc. Forums linking developers with NMTC Allocatees: The

Consortium in New Orleans is one example Industry best-practices newsletters including case-

studies of real deals Reduce risk by collaborating on deals to:

Create greater subsidy Facilitate greater impact on projects Stay informed regarding local issues

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Economic Innovation International, Inc

Belden Hull DanielsPresident and CEO5 Sentry Hill PlaceBoston, MA 02114-3505Tel: 617-523-1490Fax: 617-507-8450belden@economic-innovation.com

Strategic Development Solutions

Deborah La FranchiPresident and CEO

Monica EdwardsManaging Director, Real Estate

11150 Olympic Blvd. Suite 910Los Angeles, CA 90064Tel: 310-914-5333 Fax: 310-914-5337dl@strategicds.comme@strategicds.com

NNMF Contact Information