Market For Property Disposition at Year 15 and Earlier

November 20, 2007

Robert L. SheppardSenior Vice President of Investments

Tax Credit Group of Marcus & Millichap

State of Today’s Sales Market

• Deals Are Getting Done

– Yield buyers carry the day.

– Resyndications are exceptions.

– 100% partnership purchases account for “resyndication” pipeline.

• LIHTC property prices have decreased but not as much as the media is

conveying about market rate values.

– What you see is what you get UW, no Proforma.

• Surety bond is gone, but is it?

– Sellers still want / need protection.

• “Run & Gun” is over, now it is “Grind it Out”.

What is the Size of the Market?

Huge opportunity within existing portfolio for both sellers and

buyers.

2009: 652,000 Units Out of the 15th Year. (447,000 w/

Extended Use)

What Deals Are Getting Done?

• 80/20 Rule – there are exceptions

• GP sales years 7-10 .

• Fee simple cash flow sales years 10+.

• 100% partnership sales years 10-14.

– Preserve 10 year ownership.

– Wait for credit market to return or 9% execution.

– Keeps options open.

What Are Prices?

Tax Credit Group Assignment National Cap Rate Averages for “Current Income”

2008 2007 2006

Exit / Terminal 7.75% 7.93% 8.07%

Closed 6.99% 6.95% 5.46%

Escrow 7.73% - -

Listed 7.77% - -

Represents only Tax Credit Group of Marcus & Millichap activity:•50,000 units over 220 transactions•Almost $2 billion in LIHTC sales

Crystal Ball

• Believe pricing has stabilized, assuming some other shoe doesn’t drop.

• Price is debt dependant – negative change will move prices up but not down.

• Need Credit Price to increase for resyndication to be competitive with yield

buyers in markets without prevalent soft money.

• LIHTC product makes up approximately 22% of the multi-family rental stock

in the United States.

– Approximately 50% of rental production in the last 4 years.

• Institutional equity will start to focus on this market segment for yield

purchases.

• Secondary property sales market will be forced to become more efficient

over time.

– LIHTC will become a “traded deal type.

Market For Property Disposition at Year 15 and Earlier

Robert L. SheppardSenior Vice President of Investments

Tax Credit Group of Marcus & Millichap

Additional information available at: www.tcg-mm.com