From Acquisition to Tax Credit Delivery

AEP’s ability to offer experience throughout the entire tax credit process enables you to invest with confidence.

Acquisition and Underwriting

The Acquisition Team is typically the initial point of contact for a new developer. Working through the AEP’s Underwriting Department, the Acquisition Team negotiates basic terms and conditions of a new investment with our development partners. The Acquisition Team then works closely with AEP’s Transactions Group and maintains communication with the developer to bring the transaction to completion. The acquisition area is also actively involved in providing assistance to developers completing and submitting new applications for tax credits to the respective state housing agencies.

It is the primary responsibility of the Underwriting Team to analyze each potential investment and recommend structures that best fit the overall needs of the company in considering investment decisions. This analysis and review includes:

• Input of financial data into the AEP financial models to consider all appropriate scenarios and identify the best financial structure for the deal.



• Market reviews and site visits of the subject property, as well as comparable/competitive properties. Other available resources are also considered to gain an understanding of market conditions, for example local Chamber of Commerce offices and state and local government agencies. Demographic and market analysis data is provided utilizing Claritas® technology.



• In addition, a thorough evaluation is given to each developer’s financial condition and current portfolio standards to assure that each investment benefits from the strongest partners in the industry.

Trusted third party consultants will complete essential third-party reports including market studies, environmental site assessments and engineering inspections. A market analysis will show rental, capture and absorption rates, as well as demand assumptions. Environmental site assessments will outline risk and remediation and be assisted by AEP’s legal counsel. Engineering reviews will conform to pre-established AEP criteria based on development best practices.

When all analysis and review work is completed, an investment package covering all aspects of the proposed development is produced for internal consideration. Because of its comprehensive nature and usefulness, this prospective property report is shared with potential investors.

Along with our CEO and upper management team, our investment committee consists of representatives from the Acquisition Team, Closing Group, Asset Management Team, Accounting Department, Leasing Team and Construction and Development Team. Once this committee approves an investment, our Closing Group moves the transaction to the final steps. Extensive due diligence is marshaled and reviewed to assure that every facet of the development – including all appropriate tax credit, construction, real estate and loan documentation – meets our exacting expectations down to the smallest detail.

All of our acquisitions culminate in the issuance of a Circular 230 “covered” tax opinion by our nationally recognized outside counsel. Counsel will identify all relevant tax issues including construction and leasing schedule acceptability, time duration of tax credits delivered, and securing an acceptable tax opinion outlining soundness of investment.

Such tax opinions tend to be the focus of the due diligence review by investors, but we always make each item from our extensive due diligence checklist available for review and consideration.

Transactions

After the approved properties are bundled together in a fund to present to investors, our Transactions Group is able to offer a variety of investment structures, allowing the investor to easily identify an option that satisfies the unique investment requirements of that particular institution.

In addition to the proprietary and multi-investor funds, AEP can arrange financing which allows investors the option of contributing their capital over a period of years. AEP prides itself on its flexibility in structuring investment vehicles because this has allowed us to develop sophisticated understanding of, and the ability to meet complex and varying needs of our investor partners.

Asset Management

In order to safeguard the investment, AEP’s Asset Management team steps in after the closing. The Asset Management team plays an important role during the life of each asset within the AEP portfolio and is responsible for monitoring each asset from the time of closing through its disposition following the expiration of the tax credit compliance period. Some of the Asset Management team’s key duties in chronological order from closing through disposition include:

• Construction Monitoring: Construction progress is monitored by visiting the site during construction and maintaining communication with the general contractor, developer, and third party construction consultants. Construction draws are also monitored to assure the project is completed in a cost-efficient manner.



• Lease-Up Monitoring: AEP minimizes risk and improves investor returns by facilitating aggressive lease-up efforts that begin up to 120-days prior to construction completion. Our lease-up team acts as an auxiliary partner to the existing management company to help secure residents, ensure lease-up compliance and complete all paperwork associated with the application. Because investors are not able to claim credits until a building is fully occupied, AEP’s lease-up efforts protect investors by ensuring a faster realization of tax credit delivery.
  
  To ensure timely progress, we receive weekly leasing updates from the management company. In addition, asset management coordinates a third-party compliance specialist review of each asset’s initial resident files to ensure compliance with Section 42. Asset management will then perform a 20% annual file review on each property after tax credit qualification.



• Reporting: Once an asset’s operations have stabilized, monthly financial and occupancy reports from the third-party management companies are reviewed by the asset management team. Financial analysis is performed and annual visits are conducted for each asset to provide insight into the performance of both the entire portfolio as well as each investor’s fund.Click for a sample K-1 report.
  
  

Tax Credit Delivery

The last component of the process is actual delivery of the tax credits through the compilation of investor K-1 tax forms supported by Form 8609 and State Eligibility Statements, evidencing the issuance of the credits. Our accounting department delivers all of this throughout the term of the investment. Our experienced accounting professionals also remain available to our investors during the entire course of the investment and have frequently assisted investors in streamlining the delivery of knowledge of the investment and establishing investment monitoring processes resulting from investor personnel changes or corporate restructuring.