USDA & NMTCs: An Uneasy Alliance. Nicolo Pinoli. John Berdes. Jordan Monsour. Novogradac & Company LLP. Craft3. Butler Snow

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1 USDA & NMTCs: An Uneasy Alliance Nicolo Pinoli Novogradac & Company LLP John Berdes Craft3 Jordan Monsour Butler Snow

2 Business & Industry Guaranteed Loan Program Biorefinery Assistance Program USDA RD Loan Programs Rural Energy for America Program

3 Business & Industry Program Provides a guarantee for the principal 80% for loans of $5M or less 70% for loans from $5M - $10M 60% for loans over $10M Some (very limited) availability for 90% guarantees of loans of $10M or less for high priority projects

$10M 60% for loans over $10M Some (very limited) availability

4 Business & Industry Program Salient Terms Real estate loans at 30 year term LTV at 80% of appraised value for real estate Requires 10% tangible balance sheet equity Loan must amortize completely Amortization rate flexible No balloon payments

estate Requires 10% tangible balance sheet equity Loan must

5 Business & Industry Program Other requirements Rural locations only Corporations or partnerships and their ilk Business must do one of the following: Provide employment Improve the economic or environmental climate Promote the conservation, development, and use of water for aquaculture Reduce reliance on nonrenewable energy resources by development or constructing renewable energy systems

environmental climate Promote the conservation, development, and use of water for aquaculture

6 Business & Industry Program Prohibitions Relocating jobs Pay distributions to owners who will continue to own the business Transfer the ownership of a business (unless necessary to keep the business from closing Finance charitable, religious, or fraternal orgs Finance agricultural production Finance golf courses, racetracks and gambling facilities Line of credit or revolving loan

business from closing Finance charitable, religious, or fraternal orgs Finance agricultural

7 LET S LOOK AT SOME SAMPLE DEALS SPGF! Solar Power Generation Facility Jordan B. Monsour, Esq.

8 SPGF - Project Overview Project: Community Served: Census Tract/Site: Community Benefits: Jobs: 2 MW Photovoltaic (PV) solar panel power generation facility Small rural community of 18,000 residents Targeted High Distress Community Rural (non-metropolitan) Median Family Income of 55% of the state Green Energy Constructed on capped landfill 50 local construction jobs Budget: $10,800,000

residents Targeted High Distress Community Rural (non-metropolitan) Median Family Income of 55%

9 NMTC Allocation: $10,800,000 SPGF - Financing NMTC Equity: $3,300,000 USDA Loan (B&I): $3,000,000 Sponsor Equity: $1,600,000 ITC 1603 Grant: $2,800,000* *ITC 1603 Grant not available until project completion, so a bridge loan was required is not longer a grant, but only a tax credit.

$2,800,000* *ITC 1603 Grant not available until project completion, so a

10 SPGF - Obstacles Challenges USDA Loan Requirements: USDA B&I loan guarantees cannot be applied NMTC leverage loans because, as a matter of law, USDA guaranteed loans are required to: Be made directly to the project; Have as collateral a perfected first lien on project assets; and Amortize over the useful life of the assets being financed (does not fit year structure) Without Solutions Without resolving the first glance hurdles: Project would lose leverage on $3MM of investment/$600,000 Net Benefit USDA Loan would not have sufficient collateral

assets; and Amortize over the useful life of the assets being financed (does not fit year structure) Without Solutions Without resolving

11 SPGF - Solutions Formation of Affiliate of QALICB as borrower of USDA Loan, purchaser of equipment and facility Developer and Owner. Capital Lease of Facility from Affiliate to QALICB, to act as the master tenant and facility Operator. Turnkey Facility Development Agreement. NMTC Investor Bridge Equity. Up-Front Payments and large construction period payments under Capital Lease. Capital Lease Payments used to construct facility and return NMTC Investor bridge equity. Affiliate receives 1063 Solar Investment Grant bridge loan. Affiliate acts as leverage lender.

NMTC Investor Bridge Equity. Up-Front Payments and large construction period payments under Capital Lease.

12 SPGF Collateral Package USDA guarantee (80% of loan). First priority security interest in all assets of Affiliate (facility/equipment), subject to Capital Lease of equipment to QALICB/Solar Operator. First priority mortgage in land and fixtures. Assignment of Capital Lease, subject to non-disturbance agreement for 7-year NMTC forbearance period. Assignment of contracts, including turnkey agreement with QALICB. Assignment of income stream under leverage loans from Solar Owner/Landlord to Investment Fund. Pledge of all cash received by Solar Owner/Landlord, including payments under Capital Lease and Turnkey Contract and distributions from QALICB to Solar Owner/Landlord as its member.

First priority mortgage in land and fixtures. Assignment of Capital Lease, subject to non-disturbance agreement for 7-year NMTC forbearance period.

13 SPGF Construction Period Additional Collateral Construction Completion Guaranty Assignment of Construction and Design Contracts Permanent Loan Repayment Guaranty Until Project Placed in Service Pledge by Sponsor LLC of Membership Interest in Solar Owner/Landlord USDA Lender Disbursement of All QLICI Proceeds Payment and Performance Bonds Solar Panel Manufacturer Warranties Guarantee of Lease Payments Special Servicer - USDA Lender required to special servicer of Sub-CDE/QLICI Loans

in Solar Owner/Landlord USDA Lender Disbursement of All QLICI Proceeds Payment and Performance Bonds Solar Panel

14 USDA Lender Sponsor LLC Senior Loan: $3MM Solar Bridge Loan: $2.7 MM $2.2M Equity Solar Owner Leverage Loan $7.9 MM SPGF - Solar NMTC Structure Chart Fund $10.8MM QEI Sub-CDE Solar ITC Grant/USDA Loan/NMTC Tax Credit Equity: $2.9MM Bridge Equity: $3.3MM NMTC Investor Purchase Panels $3MM Construction Expenditures $5.8MM Capital Lease QLICI Loans A: $7.9MM B: $2.9 MM $4.6MM Initial Turn-Key Lease Payment $3.7MM Secondary Lease Payment QALICB

8MM QEI Sub-CDE Solar ITC Grant/USDA Loan/NMTC Tax Credit Equity: $2.9MM Bridge Equity: $3.

15 SPGF - Solar NMTC Structure Chart Solar ITC Grant/USDA Loan/NMTC

16 SPGF - Solar NMTC Structure Chart Solar ITC Grant/USDA Loan/NMTC Collateral Package First priority security interest in all assets of Affiliate First priority mortgage in land and fixtures Assignment of Capital Lease Assignment of contracts & turnkey agreement Assignment of leverage loan interest Pledge of all cash received by Landlord (payments under Capital Lease & Turnkey Contract & distributions from QALICB)

Capital Lease Assignment of contracts & turnkey agreement Assignment of leverage loan interest Pledge

17 Memphis, Tennessee Nashville, Tennessee Birmingham, Alabama Montgomery, Alabama Ft. Washington, Pennsylvania Jordan B. Monsour, Esq. Baton Rouge, Louisiana 445 N. Boulevard, Ste 810 Baton Rouge, LA (direct) New Orleans, Louisiana Oxford, Mississippi Jackson, Mississippi Gulfport, Mississippi Bay St. Louis, Mississippi Atlanta, Georgia Bethlehem, Pennsylvania

Boulevard, Ste 810 Baton Rouge, LA 70802 225.325.8703 (direct) www.butlersnow.com New Orleans, Louisiana 504.299.7700 Oxford, Mississippi 662.513.

18 Another Sample Transaction ORCCA! (Oregon Coast Community Action)

19 ORCCA Child and Family Resources

20 Oregon Coast Community Action (ORCCA) Coos Bay, OR (Rural High Distress) Community Action Program 14,000 low income people serviced/year Nutrition, Housing, Head Start, Health Consolidate multiple facilities into single campus 31,500 SF Child and Family Resources 12,000 SF Food Resource Center $10.8MM QEI (Development Cost) Craft3: Allocation ($4.6M) and Construction Loan ($3M) Community Funding Group (CFG): Allocation ($6.2M) Wells Fargo: Equity and Leverage Loan ($3.3M) with USDA Guarantee

Family Resources 12,000 SF Food Resource Center $10.8MM QEI (Development Cost) Craft3: Allocation ($4.

21 USDA B&I Guarantee of Leverage USDA Requirement Approved non-traditional lender Amortization of guaranteed loan; no balloon payments 10% Balance Sheet Equity in borrowing entity (RE holding company) Required Exit Strategy Structuring Solution Craft3 approved infected sub-cde due to control Generated taxable income with no cash flow via accruing interest on a QLICI note Additional QLICI from Carrol Development delivered equity to QALICB Craft3 advance commitment to purchase B&I loan after 7 years with additional 23 year term (secondary sale by Craft3)

22 Structure Chart ORCCA Wells Fargo CFG Sub-CDE, LLC Senior Leverage Loan Junior Leverage Loan ORCCA Investment Fund, LLC QEIs Tax Credit Equity Wells Fargo Community Investment Holdings, LLC Enterprise Cascadia Coast Sub-CDE, LLC QLICI Loan D ORCCA Campus I, LLC QLICI Loan C Equity 100% Owner (Using QLICI D Loan) ORCCA Campus II, LLC (Property Owner) QLICI Loan A QLICI Loan B Note: ORCCA Campus II, LLC is a disregarded entity for federal income tax purposes. Therefore, ORCCA Campus I, LLC is technically the QALICB, and it consolidates the activity and balances of ORCCA Campus II, LLC.

23 John Berdes (mobile) Website Social Media Facebook.com/craft3org Twitter.com/craft3org Telephone General Assistance: Extension 152 (office)

24 USDA & NMTCs: An Uneasy Alliance Nicolo Pinoli Novogradac & Company LLP John Berdes Craft3 Jordan Monsour Butler Snow

USDA Guarantee + NMTC Equity = Facility Financing for a Start Up Charter School

USDA Guarantee + NMTC Equity = Facility Financing for a Start Up Charter School Berkshire Arts & Technology Public Charter School Adams, MA The BArT Charter School opened its doors in the fall of 2004