FHA Road Show and Broker Package

SokH.CordellSr.ManagingDirector 5036405200
sok@ch-capital.com

TABLE OF CONTENTS

FHA Cheat Sheet Permanent Loans Spacer Apartments / 223(f) Term Sheet Healthcare / 232/223(f) Term Sheet Pros, Cons & Other Points of Permanent FHA loans Permanent Loan Flow Chart New Construction to Permanent Spacer Healthcare / 232 Term Sheet Apartments / 221d4 Term Sheet Pros, Cons & Other Points of Permanent FHA loans New Construction Timeline Rate Lock Options Supplemental Informative Spacer Supplemental I Healthcare Supplemental II BSPRA, SPRA & Identity of Interest To Run Numbers

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FHA CHEAT SHEET

MARKET RATE OR AFFORDABLE: Program

New Construction Apartment Substantial Rehabilitation 221(d)(4) Acquisition/Refinance Apartment 1) Acquisition / Refinance 2) Cash Out Refinance

DSC
1.11 1.11

LTC/LTV
90% 90%

TERM
40/40 40/40 221(d)4

1.18 1.18

85% 80%

35/35 35/35

223(f) 223(f)

HEALTHCARE (Nursing, Skilled, Assisted Living):

New Construction Healthcare 1) For profit 2) Not For Profit Acquisition / Refinance (Never Cash Out) 232/223(f) 1.11 1.05 1.18 90% 95% 85% 40/40 40/40 35/35 232 232

EXISITING FHA PROJECTS (Except 202s):

1.11 see note* see note** 223(a)(7) Note * Never Cash Out Note** With HUD approval, remaining term plus 12 years not to exceed original term.

EXISTING SECTION 202 PROJECTS:

Refinance Substantial Rehabilitation 221(d)(4) 1.11 1.11 90% 90% 35/35 40/40 223(f)

Contact Sok Cordell 503 640 5200

Permanent

ACQUISITION OR REFINANCE

Multifamily Rental Housing

FHA 223(f) ELIGIBLE PROPERTY TYPES Multifamily rental properties three years or older ELIGIBLE BORROWERS Single asset entity MAXIMUM LOAN AMOUNT Acquisition The lesser of: 1.18 debt service coverage, 85% of loan-to-value, 85% of acquisition costs plus transaction costs, including repairs or FHAs per unit mortgage limits Refinance The lesser of: 1.18 debt service coverage, 85% of loan-to-value (80% if equity takeout is desired), 100% of existing debt plus transaction costs, including repairs, or FHAs per unit mortgage limits RATES Fixed rate for the length of the mortgage TERMS Up to 35 years PROGRAM FEATURES Non-recourse Fully assumable Program can be used as credit enhancement for bond financing PREPAYMENT CONDITIONS Typically 5-year lockout with a declining penalty for years six through 10 No yield maintenance SECONDARY FINANCING Limited secondary financing is permitted Some conditions may apply

ACQUISITION OR REFINANCE

Senior Housing / Healthcare

FHA 232/223(f) ELIGIBLE PROPERTY TYPES Nursing Homes (skilled and intermediate care) Assisted Living Facilities Board and Care Facilities Special-use facilities such as alcohol and drug treatment facilities, Alzheimers facilities and mental retardation centers may qualify PROGRAM FEATURES Non-recourse Fully assumable Program can be used as credit enhancement for bond financing ELIGIBLE BORROWERS Single asset entity RATES Fixed rate for the length of the mortgage TERMS Up to 35 years SECONDARY FINANCING Limited secondary financing is permitted Some conditions may apply MAXIMUM LOAN AMOUNT Acquisition The lesser of: 1.18 debt service coverage, 85% of loan-to-value,or 85% of acquisition costs including transaction costs and repairs Refinance The lesser of: 1.18 debt service coverage, 85% of loan-to-value 100% of existing debt plus transaction costs, including repairs, or No equity takeout PREPAYMENT CONDITIONS Typically 5-year lockout with a declining penalty for years six through 10 No yield maintenance

FHA Acquisition or Refinance Financing PROS, CONS & OTHER POINTS: RE: PROJECT TYPES:

Multifamily: Market Apartments, Senior Apartments & Affordable Apartments Healthcare: Nursing, Assisted, Independent (Incidental Assisted)

PROS:
Assumable financing (HUD approval) Non-recourse Terms: 85% Value (80% with cash out), 1.175 DSC, 35/35 Underwriting to stabilized value as if repaired AAA, Government guaranteed pricing

CONS:
Time (4 months) Annual audit required, cash flow distributions are limited to only semi-annual distribution Underwriting subject to HUD review HUD property condition inspection approximately every 3 years

OTHER POINTS:
Call protection: Typical call protection is a 2 year lock out with a 8% prepayment penalty in year 3 declining by 1% each year thereafter until 0 after year 10. Call protection can be altered /negotiated up front.

PERMANENT LOAN FLOW CHART REFINANCE PROCESS

Client engages PHP

PHP request bids for 3rd party Firm-App. reports

Client executes Firm-App documents & provides required info

PHP engages and receives 3rd party reports*

PHP underwrites, compiles and submits Firm-App

HUD processes Firm-App and issues Firm Commitment

Client/PHP locks interest rate

Client submits legal/closing documents

HUD approval of closing package

Loan closes & funds dispersed

* Phase I ESA/Environmental Reports * Full appraisal, property inspection reports

New Construction To Permanent

ACQUISITION OR REFINANCE

Senior Housing / Healthcare

FHA 232/223(f) ELIGIBLE PROPERTY TYPES New Construction or Substantial Rehabilitation of: Nursing Homes (skilled and intermediate care) Assisted Living Facilities Board and Care Facilities Special-use facilities such as alcohol and drug treatment facilities, Alzheimers facilities and mental retardation centers may qualify Substantial Rehabilitation is based on FHAs Rehabilitation Standards ELIGIBLE BORROWERS Single asset entity PROGRAM FEATURES Non-recourse, including the construction period Fully assumable Program can be used as credit enhancement for bond financing Limited secondary financing is permitted RATES Fixed rate for the length of the mortgage TERMS Up to 40 years MAXIMUM LOAN AMOUNT New Construction The lesser of: 1.11 debt service coverage after deducting allowance for proprietary income or 90% of loan-to-value, including major movable equipment Rehabilitation The lesser of: 1.11 debt service coverage or 90% of eligible rehabilitation and transaction costs, plus the lesser of: o 90% of the propertys as is value prior to rehabilitation or o 100% of purchase price for acquisition or existing debt for refinance PREPAYMENT CONDITIONS Typically 5-year lockout with a declining penalty for years six through 10 No yield maintenance

ACQUISITION OR REFINANCE

Multifamily Rental Housing

FHA 221(d) ELIGIBLE PROPERTY TYPES New Construction of Multifamily rental properties Substantial Rehabilitation of Multifamily rental properties based of FHAs Rehabilitation Standards ELIGIBLE BORROWERS Single asset entity MAXIMUM LOAN AMOUNT New Construction The lesser of: 1.11 debt service coverage 90% of replacement costs or FHAs per unit mortgage limits Refinance The lesser of: 1.11 debt service coverage 90% of eligible rehabilitation costs, including transaction costs, plus the lesser of: o 90% of the propertys as is value prior to rehabilitation, or o 100% of the purchase price for acquisition or existing debt for refinance FHAs per unit mortgage limits RATES Fixed rate for the length of the mortgage TERMS Up to 40 years PROGRAM FEATURES Non-recourse, including the construction period Fully assumable Program can be used as credit enhancement for bond financing PREPAYMENT CONDITIONS Typically 5-year lockout with a declining penalty for years six through 10 No yield maintenance

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FHA Construction-Perm Financing PROS, CONS & OTHER POINTS: RE: PROJECT TYPES:

Multifamily: Market Apartments, Senior Apartments & Affordable Apartments Healthcare: Nursing, Assisted, Independent (Incidental Assisted)

PROS:
Assumable financing (HUD approval) Non-recourse for both construction and permanent Perm rate locked at construction start Stabilization milestones not required to convert from construction to permanent Terms: 90% Cost, 1.11 DSC, 40/40 AAA, Government guaranteed pricing

CONS:
Time (190 days for new construction) Annual audit required, cash flow distributions are limited to only semi-annual distribution HUD property condition inspection approximately every 3 years Underwriting subject to HUD review Davis-Bacon prevailing wage standards apply. Davis-Bacon wages impact caries state to state. However, generally, true high-rises do not incur any cost premium, while midrise (5 story or structure parking for instance) almost everywhere do incur the 15-20% premium, and low rise, 1-4 story residential premium is state specific (i.e. none in WA, definitely in CA.)

OTHER POINTS:
Call protection: Typical call protection is a 2 year lock out with a 8% prepayment penalty in year 3 declining by 1% each year thereafter until 0 after year 10. Call protection can be altered /negotiated up front.

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Two Stage Processing Timeline

5 30 days 40 days 40 days 15 days Up to 50 days

Day Stage One (S1) / Pre-App Phase I Environmental Market Study Limited Appraisal Stage 1 Underwriting S1 FHA/HUD Review
15 30 35 45 60 70 75 80 95 110 125 140

155

160

175

190

45 days 15 days 15 days 40 days 15 days Up to 50 days 30 days

Stage Two (S2) / Firm-App Plans (100%) Plan Review Contrator Bids Cost Review Full Appraisal Stage 2 Underwriting S2 FHA/HUD Review

Construction Closing

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Rate Lock Options

Lock Before Firm Commitment

Lock After Firm Commitment

1 to 3% Good Faith Deposit (Refunded at Closing) No interest Rate Risk Margin Call Risk (+1% for each 13bps dip in 10 yea US treasury yield) Interest rate will increase about 3 bp for each month of forward rate lock beyond 3 months

0.5 to 1% Good Faith Deposit (Refunded at Closing) Interest Rate Lock No Margin Call risk

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Supplemental

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Schneider FHA Healthcare Financing Supplement I

I. COMMONLY USED AND FUNDAMENTAL TERMS

ACTIVITIES OF DAILY LIVING (ADLs) A persons daily routine of basic functions, for example, bathing, eating, dressing, eating, walking and other personal care activities. Services HUD acknowledges as activities of daily living include: bathing, dressing, eating, getting in or out of beds and chairs, walking, going outdoors, using the toilet, preparing meals, shopping for personal items, obtaining and taking medications, managing money, using the telephone or performing light housework. INTERMEDIATE CARE FACILITY (ICF) A proprietary residential facility or facility of a private non profit corporation or association which consists of at least 20 beds and is licensed or regulated by the State, the municipality or other political subdivision in which the facility is located which provides for the accommodation of persons who require minimum but continuous care (24 hour staffing / supervision) but are not in need of continuous medical or nursing services and corresponds to the Department of Health and Human Services. ASSISTED LIVING FACILITY (ALF) This lifestyle is a state licensed community offering assistance with daily living activities. These facilities have medical personnel assisting with medication, administration, dressing, bathing and social activities. They normally have Levels of Care that offer a variety of extra services. The Levels of Care indicate an additional monthly fee from the base price. INCIDENTAL ASSISTED LIVING FACILITY (IALF) Also known as assisted living light. An Assisted Living use where the tenants require lower levels of personal care such as: meals, van services, and maid services. Although this is a licensed level of care; this is usually marketed publicly as independent living. SKILLED NURSING FACILITY (SNF) These state licensed long-term care facilities offer 24-hour medical care provided by registered nurses (RN), licensed practical nurses (LPN) and certified nurse assistant (CAN). They also are required to have a house physician. This facility cares for the very frail residents who are totally dependant on nursing care. This facility typically has a short-term rehabilitation unit for residents needing rehab between hospital and home. INSTRUMENTAL ACTIVITIES OF DAILY LIVING (IADLs) Describes more complex combines mental/physical functions. IADL limitations usually describe some level of cognitive impairment. The major areas of IADL assistance include meal preparation, shopping, telephone use, and housework and money management. INDEPENDENT LIVING (I/L) Housing offering either incidental activities of daily living to no activities of daily living, I/L projects may or may not have meal services, may or may not be licensed. This is considered Senior Housing (if no license and no meals), congregate care (if no license but meals) or IALF (if licensed and meals). HUD can do Senior and IALF but not congregate care. Please see the following table for additional clarification. Types of projects commonly referred to as I/L that HUD allows: Meals (+2 ADLS) No Meals Licensed Incidental Assisted Living NA (yes) Not Licensed Congregate Care (no) Senior Housing (yes)

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CONTINUING CARE RETIREMENT COMMUNITY (CCRC) This community is commonly called Life Care. This lifestyle has a campus consisting of Independent Living (I/L), Assisted Living (ALF), and Skilled Nursing (S/N). They typically offer the full selection of amenities associated with retirement living. A large endowment fee in addition to a monthly maintenance fee can be expected. (HUD does do this but the I/L needs to be licensed and effectively IADL.) CONGREGATE CARE (CCF) Non-licensed senior facility with meal services. (HUD does not do this.) SENIOR HOUSING None licensed, age restricted apartment. No meal services. (HUD does do this) CENSUS Similar to a rent roll but used in the health care industry to reflect per bed occupancy with each beds reimbursement type (Private Pay, Medicaid, Medicare) PROPRIETARY EARNINGS The percentage of operating income as a resulting from non-shelter products, services or offerings MEDICAID The health insurance program financed by Federal and State Governments for qualifying low income persons age 65 and over. Eligible individuals can receive payment of their Medicaid deductibles, co-payments and nursing home care. Medicaid waiver allows for an individual to remain in an assisted living facility, who would otherwise require a nursing home setting. The program provides Medicaid reimbursement to the assisted living facility. MEDICARE This is a national healthcare insurance program for eligible people 65 and older and in some cases disabled individuals. Medicare Part a covers hospital costs while Part B covers physicians bills and other medical expenses. PRIVATE PAY Private funds used to pay for housing and services in the healthcare and assisted living industry. FHA 232 PROGRAM The program administered by HUD to insure the construction and permanent financing of New qualifying health care facilities or for the permanent financing of existing to be substantially rehabilitated qualifying health care facilities. FHA 231 PROGRAM The program administered by HUD to insure the construction and permanent financing of New qualifying age restricted, non licensed care senior facilities. FHA 232/223f PROGRAM The program administered by HUD to ensure the permanent financing of existing qualifying health care facilities. II. HEALTHCARE FUNDAMENTASL UNDERWRITING CONCEPTS

FHA VALUATION: The primary difference is determining market value for a healthcare facility as compared to an apartment complex is the net income of a Section 232 proposal includes a return to the realty, non-ralty and to the business operation of the proposal. This return to the business operation (proprietary earnings) must be deducted from the net income, since only net income from the realty and major movable equipment may be used to support a Section 232 mortgage. a. Skilled nursing beds - 15 to 25 percent b. Intermediate care beds - 10 to 20 percent c. Board and care beds - 5 to 10 percent d. Living units in an assisted living facility - 10 to 15 percent

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For example: Using an income approach in determining the value of an Assisted Living Facility the proprietary earnings discount (PED) would have to be applied to the NOI prior to capitalizing the NOI. Please note, however also, when determining the NOI management fees should be excluded as an operating expense., If the ALF has a before PED NOI of $111,000, a cap rate of 10%, and a PED of 10%, the following would be the value calculation: NOI before PED PED PEDNOI CAP Rate Capitalized value III. = $1,111,111,12 = 10% = $1,111,111,12 * (100%-10%) = $1,000,000 = 10% = PEDNOI/CAP Rate = $10,000,000

HUD DEFINITIONS OF ELIGIBLE NURSING HOME AND ALFS:

Nursing Home: A public facility, proprietary facility, or facility of a private nonprofit corporation or association, which consists of at least 20 beds and is licensed or regulated by the State municipality or other political subdivision in which the facility is located. Provides for the accommodation of convalescents or other persons who are not acutely ill and not in need of hospital care, but who require skilled nursing care and related medical services including past hospital care (sub-acute). Corresponds to the Department of Health and Human Services Skilled Nursing Facility (SNF). Assisted Living Facility: a. A proprietary, public or nonprofit facility of at least 5 residential units (not to exceed 4 persons per unit or per bathroom) which is designed foe frail elderly (62 years or older) persons who need assistance with at least 3 activities of daily living. Activities of daily living include such things as bathing, dressing, eating, getting in or out of beds and chairs, walking, going outdoors, using the toilet, preparing meals, shopping for personal items, obtaining and taking medications, managing money, using telephone or performing light housework. Residents may make their own arrangements for support services, such as physical therapy, nursing care, podiatry, etc. Residents may employ their own private staff to provide assistance with activities of daily living or other household/personal needs. However, the facility is still responsible for the residents continuous protective oversight. A resident may have a contract with a home health agency for nursing and personal care services. b. Must provide areas for central dining, kitchen (or preparation area where food is supplied from an offsite location), lounges, recreation, and other multi-purpose rooms. Where food is provided from an offsite location, the preparation areas in the facility must be of sufficient size to allow for the installation of a full kitchen if it becomes necessary, or additional land must be available to add kitchen space. c. Must provide room, board, and continuous protective oversight. This involves a range of activities and services that may include such things as awareness by managements and staff of the occupants condition and location as well as the ability to intervene in a crisis for dependant and relatively independent occupants on a 24 hour bases. (1) For the independent occupants: awareness by managements and staff of the occupants condition and whereabouts as well as the availability of assistance for the occupants as need; or (2) For dependent occupants: supervision of nutrition, assistance with medication, and continuous responsibility for the occupants welfare

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d. Assisted living facilities must offer three meals per day to each resident (1) Residents in accommodations without kitchens must make three meals a day provided by the facility (2) Residents whose accommodations have a kitchen must take at least one meal a day provided by the facility e. Assisted living facilities may need to cater to the special needs of residents depending on their condition or diagnosis such as Alzheimers disease. If serving those needs, the design/environment of such facilities must accommodate those requirements in, for example, dementia special care units. f. The assisted living facilitys admission agreement must state that no dwelling unit in the facility will be occupied by more than one person without the consent of the other residents of that unit. The resident who signs the admission agreement will be the occupant of that dwelling unit and must meet the definition of frail elderly. The resident who signed the admission agreement must consent before another person(s) may occupy the unit.

For more information, questions or comments contact: Biren Sheth , Managing Partner NE Director

Toll free 1.888.552.5630 or Mobile 973.819.8199 biren@ch-capital.com

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BSPRA, SPRA & CREATING AN IDENTITY OF INTEREST Supplement II

BSPRA (Builder and Sponsors Profit and Risk Allowance): The BSPRA allowance is used as a credit against the mortgagors required equity contribution. To use BSPRA there must be an identity of interest between the mortgagor and general contractor. There is no builder profit contained in the mortgage calculation. For new construction, BSPRA is 10% of the estimated cost of on sure improvements, structures, general requirements, general overhead, architects fees, carrying charges and financing, legal, organizational and audit expenses, exclusive of land. For substantial rehabilitation BSPRA is no more than 10% of the above costs exclusive of the as-is value of the existing structure. SPRA (Sponsors Profit and Risk Allowance): An amount included in replacement cost where no identity of interest exists between the general contractor and mortgagor. SPRA is no more than 10% of the total estimated cost of architects fees, carrying and financing charges, legal, organizational, and audit expenses. Notes: BSPRA is limited to Section 220 and Section 221(d)(4) projects with such an identity of interest Identity of Interest is a relationship that exists giving the mortgagor or general contractor apparent control or influence over a subcontractor, equipment lessor, material supplier, or manufacturer of industrialized housing

CREATING AND IDENTITY OF INTEREST An identity of interest is construed if exist when: a. There is any financial interest of the mortgagor in the general contractor or any financial interest of the general contractor in the mortgagor b. Any officer, director, or stockholder or partner of the mortgagor is also an officer, director, or stockholder or partner of the general contractor. c. Any officer, director, or stockholder or partner of the mortgagor has any financial interest in the general contractor; or any officer, director, or stockholder or partner of the general contractor has any financial interest in the mortgagor d. The general contractor advances any funds to the mortgagor e. The general contractor supplies and pays, on behalf of the mortgagor, the cost of any architectural services or engineering services other than those of a surveyor, general superintendent, or engineer employed by a general contractor in connection with its obligations under the construction contract f. The general contractor takes stock or any interest in the mortgagor corporation as consideration of payment g. There exists or comes into being any side deals agreements, contracts, or undertakings entered into or contemplated, thereby altering, amending, or canceling any of the required closing documents, except as approved by the Secretary. h. Any relationship (e.g. family) existing which would give the mortgagor or general contractor control or influence over the price of the content or the price paid to the subcontractor, material supplier or lessor equipment.

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To Run Numbers
For Permanent Loans: Market Rate or Seniors Apartments: Project description & goals of financing Past 12 months rents and expenses Proform rents and expenses (stabilized in current dollars) If repairs or repositioning, Proforma rents and expenses as if the project repositioned today (no trending) Existing debts and escrows For Licensed Healthcare (SNF, ALF, IALF/L-Independent): Project description (including bed/unit mix, reimbursement mix, service description) Current census/rent roll Past 12 months rents and expenses Proforma rents and expenses (stabilized in current dollars) If repairs or repositioning, Proforma rents and expenses as if the project repositioned today (no trending) Existing debts and escrows For Affordable: Project Description Proforma rents and expenses (stabilized in current dollars) Existing debts and escrows Copy of tax credit application (if available) Income restrictions on a per unit basis Tax credit development budget Purchase price and date of existing project Bio on developer Bio on management agent For New Construction to Permanent Loans Market Rate or Seniors Apartments: Project description Bed and reimbursement mix Proforma rents and expenses (stabilized in current dollars) Construction costs Anticipated lease up schedule Bio on developer Bio on operator For Licensed Healthcare (SNF, ALF, IALF/L-Independent): Project description Bed and reimbursement mix Proforma rents and expenses (stabilized in current dollars) Construction costs Anticipated lease up schedule Bio on developer

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Bio on operator

For Affordable (tax credit) Housing: Project Description Proforma rents and expenses (stabilized in current dollars) Existing debts and escrows Copy of tax credit application (if available) Income restrictions on a per unit basis Tax credit development budget Purchase price and date of existing project Bio on developer (2) Bio on management agent For 242 Hospital If it is a replacement hospital: Project description (location, debt, size, costs) Project historical audited financial statements Description of the team Proforma / Financial Forecast Feasibility study, if available Existing credit (i.e. BB, BBB?) If it is a start-up new construction: Project description (location, debt, size, costs) Description of the team Proforma / Financial Forecast Feasibility study, if available Existing credit (i.e. BB, BBB?)

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