November 2001 Affordable Housing Transaction

Impact purchased $124 million in affordable multi-family mortgages consisting of 7,108 units of affordable rental housing in 95 separate properties primarily in California. This transaction is the largest COIN-approved multi-family housing initiative to date. As with Impact’s July 2000 transaction, this investment contained many properties with unique characteristics, including the Lyric Hotel in San Francisco, which has a clientele that includes emotionally disturbed adults capable of independent living; Las Casitas Apartments in Hayward, a 61-unit townhouse-style development that features solar-powered water heating; Parkside Apartments in downtown Los Angeles features 79 units in a five-story building within walking distance of the Staples Center and downtown shops and businesses; University Cooperative Housing for students in the Westwood area of Los Angeles; Casa Heiwa in the Little Tokyo area of downtown Los Angeles; and Harbor View Apartments in the Wilmington area of Los Angeles.

This portfolio was combined with Impact’s existing $40 million portfolio (see July 2000 Affordable Housing Transaction), resulting in a $164 million combined portfolio with (weighted average):

• $1.5 million average loan balance (range $55 thousand to $9.8 million)

• 260 months remaining term

• 1.4 debt coverage ratio

• 34.7% fixed rate portion

• 51 months seasoning

• 62.3% current loan-to-value

This transaction maintained the “prototype” features from the July 2000 Affordable Housing Transaction, and added these transaction features:

• Additional investment grade tranches were added to improve overall liquidity and provide an increased yield on the unrated portion for Impact investors

• 30 b.p. interest-only strip was created to provide a management fee to Impact

• Greater economies allowed for a significant reduction in third-party servicing, trustee and rating agency surveillance expenses

The resulting portfolio offers significant community impact:

– All rental properties targeted to tenants earning 80% or less of area median income
– Properties either located in low-moderate income census tracts, or eligible for low income housing tax credit

– Properties serve a diverse population including families, seniors, and developmentally disabled persons

– Impact’s purchase of the portfolios provides liquidity to sellers/originators and enables funds to be recycled into financing additional affordable housing