Community Reinvestment Fund, USA

Community Reinvestment Fund, USA

New Markets Tax Credits Are Not Just For Big Deals

Presented by:Frank Altman, President and CEO

Community Reinvestment Fund, USA

A national non-profit financial services organization based in MinnesotaProvides capital to communities by purchasing loans from community development lendersTypes of loans:

Business LoansAffordable Housing Community Facilities

Our Mission

To transform the community development finance systemby accessing capital markets on behalf of local development lendersto enable them to increase their impact on the lives of people and their communities

National Accomplishments

$984 million provided to 153 lending partners.2,200 loans in 47 states.36,000 total jobs created/retained, 4,500 of those to minorities or women600 minority and women-owned businesses supported16,500 affordable housing units2,100 childcare slots2,800 slots at educational facilities104,400 served at community facilities States in which CRF has purchased loans

Investing in Communities across the United States

Greater Brunswick Charter School New Jersey

Problem: School was forced to find a new location.

Solution: CRF and NJCC provided a $1.4 million NMTC loan.

Outcome: School used loan to purchase a renovated facility – adding 100 students.

Problem: Jackie Hamilton needed financing to expand her wig-making business.

Solution: CRF and Minneapolis CPED provided an $82,000 NMTC loan.

Outcome: Jackie purchased a new commercial property for her business.

Jackie Blu Wigs Minnesota

New Markets Tax Credits – How do they work?

Makes a Qualified Equity Investment in…

Provides counseling or services to…

Invests capital inor makes loans to… Buys loans from…

Invests capital inor makes loans to… Makes loans to…

Makes loans to orinvests capital in…

Advantages of CRF’s NMTC Program

No need to obtain an allocation National distribution Developed infrastructure to comply with investor & compliance reporting requirementsProvide standardized documentation for loan transactionsOriginate & service loans, maintaining relationship with customers while generating fee incomeIf loan doesn’t qualify, can use CRF Business Loan Product

New Markets Tax Credits Can Work for Small Businesses

278 Loans totaling $200.9 million, average size $723,000More than 90% of loans in areas of greater economic distress100% of loans with more favorable termsLoans from national distribution platform Total Dollars Leveraged – $501 million 2nd lien financing - 70%90% Loan To ValueCRF Loss Ratio – 47 bps (as of 3/30/08)

Value of Partnering with CRF

CRF Provides Value to Community Lenders and Funders:Leverage of grant dollars:

$1 grant leverages $31 in direct investment

Collaboration among community partners

Alternative to public funding for community development

National community impact—currently in 47 states

GrantCRF

Funding Additional Investment

1 31 62

How CRF Leverages Funds

Purely Charitable Purely Market

Market-Rate Investments

80%Charitable

Contributions 2%

PRIs and Social Investments

18%

2% charitable contributions 18% social-rate investments80% market-rate investments

Building a Brighter Future

Impact of Partnering with CRF:

Deliver billions of dollars in capital to low and moderate income communities

Improve the lives of millions of people in low income communities

Bring securitization model to scale for the community development finance industry

Thank You

Frank AltmanPresident and CEO

Community Reinvestment Fund, USA801 Nicollet Mall, Suite 1700W

Minneapolis, MN 55402frank@crfusa.com

612-338-3050 phone

For additional information contact:

Or visit www.crfusa.com

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Smaller NMTC Deals Funded By Individual Investors

Eclypse provides non-traditional financing to companies with primary operations in distressed, rural communities.

We make equity and debt investments in a broad array of unique, smaller manufacturing, assembly and distribution companies.

Each of our transactions features a unique set of investors alongside which our firm commits our own capital.

We target companies which offer products that are well suited to systematic processes and uniquely address small to mid-sized niche markets.

We emphasize granular financial analyses to identify, implement and monitor opportunities to increase value.

We seek special situations, including capacity expansions, acquisitions and turnarounds, which feature a compelling near-term need for non- traditional financing.

About Eclypse Investment Group

Eclypse channels capital and advice to promising, often underserved companies with primary operations in less-populated areas

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Smaller NMTC Deals Funded By Individual Investors

Eclypse partnered with an experienced manager to purchase a bathware manufacturing facility located in Union Point, Georgia.

In addition to approximately $2.0 million of secured bank debt, $1.0 million of equity or other patient capital was required to fund the purchase.

Eclypse elected to structure the patient capital piece as an unsecured, 7-year, 9% interest-only subordinated note.

An unleveraged NMTC structure was utilized to raise capital to purchase the subordinated note.

QEIs were sold in $100,000 and $150,000 units to 8 individual investors.

Georgia Bathware Transaction

Eclypse received a modest warrant position (<2%) at closing and is paid a 1% annual fee to manage the sub CDE

I

I

I

I

I

I

I I

EclypseSubsidiary

CDE$1.0 millionCash

$1.0 millionCash

GBQEIs

SubordinatedNote

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Smaller NMTC Deals Funded By Individual Investors

Speed and Efficiency

Capital formation process is expeditious, with an emphasis on simplicity and transparency.

Relatively Attractive Cost of Capital

Individuals often have lower return expectations vis-a-vis institutional private equity and mezzanine funds.

Flexibility

For smaller transactions, individuals often are more receptive to innovative structures customized to meet a company’s unique requirements.

Patience

Today’s environment, characterized by low interest rates and choppy equity markets, bodes particularly well for 7-year structures which feature attractive cash yields and NMTCs.

Eclypse Securities LLC, an Eclypse affiliate and FINRA member firm, handles securities sales to individuals

Why Solicit Individual Investors for Smaller NMTC Deals?

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Smaller NMTC Deals Funded By Individual InvestorsProfile of NMTC Individual Investor

Eclypse is experiencing increasing individual investor demand for NMTC investment opportunities

Entrepreneurs and Professionals

Eclypse’s individual investors typically are current or former advisory clients of our firm. From time to time, friends and business associates of our portfolio company managers are invited to participate.

Liquid Assets > $2.0 million

Eclypse works to limit each individual investor’s commitment to a deal to $200,000 or <10% of their liquid assets.

No AMT or Passive Income Limitation

Eclypse screens prospective individual NMTC investors to ensure they can efficiently utilize the credit.

Investment Objectives

We seek individuals who instinctively understand and appreciate the company-specific risks they are assuming.

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Smaller NMTC Deals Funded By Individual Investors

Probability Of Success

Low

Small Large

Attracting large auto plantto your community

Technology Startup

Grocery store

Day care center

Expansion of localManufacturer/distributor

High

Near Term Impact on the Local Economy

Manufacturing Startup

Small Companies Can Significantly Impact Local Economies !

2008 National Housing & Rehabilitation Association Summer InstituteJuly 23, 2008

Structuring Smaller NMTC Transactions Funded By Individual Investors

Presentation To

SMALL NMTC INVESTMENTS

NHRA SPRING CONFERENCE(Santa Fe ,NM)

July 23, 2008

Capital Needs Spectrum

96% to 100%

76% to 95%

0% to 75%

• Sponsor or outside investor equity• High yield requirements

• Subordinate or “Mezzanine” Debt• Gap financing• More narrow range of debt providers• Higher risk – Contains the majority of risk for outside

fund providers

• Senior or first mortgage debt• Low cost – low risk• Wide range of debt providers• Tight underwriting standards

Home Loan Structure-Yesterday

BankInvestor

Homeowner

Home Loan Structure-Today

Servicing Bank GSEs

Originating Bank

Homeowner

Lots of Investors

NMTC Structure - Today

Investment FundTax Credit Investor Fund Lender

CDE

Qualifying Project(s)

U.S. Treasury Dept.

$25,000,000

Tax Credit Equity

$75,000,000

Fund Loan

$100,000,000 QEI

$100,000,000 QLICIs (Debt and/or Equity)

NMTC Allocation

NMTC Structure - Today

• Fund Lender is most challenging player – “Upper-tier” debt is indirect lien– Unable to get funds if CDE forecloses on

asset– Capital requirements most likely higher in

NMTC structures (seven-year hold)– Limited staff and legal capacity– Legal lending limits– Difficult to implement principal amortization– Investor debt capacity limits

NMTC Structure - Tomorrow

Investment FundTax Credit Investor Fund Lender

CDE

Qualifying Project(s)

U.S. Treasury Dept.

$25,000,000

Tax Credit Equity

$75,000,000

Fund Loan

$100,000,000 QEI

$100,000,000 QLICIs (Debt and/or Equity)

NMTC Allocation

Capmark3rd party liquidity pledge and

indemnifications

Lots of Investors

NMTC Structure - Tomorrow

• Fund Lender (Capmark Structure) – Analysis & Structure to make lien as comparable to direct first

lien as possible– Liquidity facility to allow Fund Lender to get funds if CDE

forecloses on asset– No pre-determined term requirements to decrease likely capital

requirements– Education and depth of Infrastructure to supplement staffing

requirements and legal capacity needs– Simplified documentation to allow enable smaller transactions– Resources and structures to assist with implementation of

principal amortization– Make “upper-tier” debt more liquid to help Fund Lender manage

debt capacity limits

THANK YOU!

Randall W. KahnManaging Director

Capmark Finance Inc.New Market Tax Credits Program

rkahn@capmark.com(202) 467-0032