2012 Annual Report

A YEAR IN REVIEW MHEG 2012 ANNUAL REPORT

MIDWEST HOUSING EQUITY GROUP Our Mission: to change lives for a better tomorrow by promoting the development and sustainability of quality affordable housing.

Our Vision: to be the leading regional syndicator of low-income housing tax credits, recognized for its excellent track record of selecting, investing in and protecting quality real estate projects that revitalize the communities in which they are built.

Our Values: 1. Integrity: as fiduciaries, we are honest and up front in all of our transactions, avoiding even the appearance of impropriety or conflict of interest transactions.

2. Stewardship: we are excellent stewards of our investments (and thus the tenants), honoring our written and implicit commitments to our investors, developers, tenants and communities.

3. Excellence: we strive to be the best in the business, employing the best individuals, utilizing up-todate processes and infrastructure, and conservative underwriting parameters.

4. Local Presence: we are and will remain local, believing that a “boots on the ground� approach is the best way to understand and protect the projects.

5. Employee-Focused: our employees are our strength. Recognizing that, we endeavor to provide ongoing development, training and advancement opportunities, to respect a work/life balance and to recognize and reward personal, department and company achievements.

Editor, Concept & Design: Keely McAleer

TABLE OF CONTENTS 2 4 6 8 14 16 18 20 22 24

Message from the President 2012 Yearend Review 2012 Investor Summary 2012 Developments Iowa Kansas Nebraska Oklahoma Board of Directors & Committees Staff

MESSAGE FROM THE PRESIDENT 2012: A Year of Change.

Midwest Housing Equity Group, Inc.’s (MHEG) mission is to change lives for a better tomorrow by promoting the development and sustainability of quality affordable housing. Occasionally, we shorthand the mission to “changing lives” and as we look back on 2012, we probably could have shortened the mission to just “changing!” Change can be scary - change can bring uncertainty and humans generally do not like uncertainty. But change, especially well-executed change, does not have to be scary. Rather, it can be exciting and invigorating! More on that in a bit.

Back to 2012. Midwest Housing underwent a fundamental change in March of 2012. Jim Rieker, one of MHEG’s original founders, its first employee and its President and CEO for the past nineteen years, moved on to pursue other opportunities in affordable housing. Jim built MHEG from the ground up and was actively involved in every facet of the organization. His passion for the industry and his compassion for people led MHEG to fantastic success. He created the very solid foundation upon which we are now positioned to grow. Personally, I am grateful to Jim for introducing me into the world of affordable housing and for being one of my great mentors. Professionally, I am proud to follow in Jim’s footsteps and excited to have the opportunity to lead such an excellent organization.

On the concept of well-executed change: Following Jim’s departure, our Board of Directors selected Becky Christoffersen to serve as interim president. Becky has been with Midwest Housing since 1996 and was a natural fit for the role. She was exactly the right person to lead during this time of change.

Jason Main, our Chief Financial Officer and Ann Burge, our Chief Operating Officer, also provided excellent leadership and stability during the transition (candidly, I believe we have the best c-suite in the industry). All of our partners can take comfort in seeing Becky, Jason and Ann leading their respective departments to excellence on a daily basis. But it wasn’t just the C-Suite. Our Executive Vice Presidents each continued to work with investors and developers. Our Asset Management and Compliance Team continued to monitor and protect the financial and physical health of the portfolio.

Our Acquisitions Team continued to work toward closing investments. Our Accounting Team kept the finances in order and prudently managed our resources. IT kept the shop operational and Keely McAleer, our PR and HR specialist did everything else! Meanwhile, the Board conducted a thorough, orderly and timely search for a new president and CEO. And on June 1, I was honored to join Midwest Housing in that role. In sum, the change in leadership at Midwest Housing was very well executed, resulting in an exciting and invigorating transition. I sincerely thank our Board and the whole MHEG team for providing a textbook lesson on how to approach and address organizational change.

During this year of change, and following my onboarding as the new president and CEO, the Midwest Housing team identified our primary goal for the remainder of 2012: stick to our knitting, honoring our commitments to our developer and investor partners. I am proud to report that Midwest Housing did just that - deploying $142 million into 28 developments and helping finance over 1,000 units of safe and decent affordable housing. Let me put those numbers in perspective - MHEG was without a long-term president for almost three months yet still had one of its best years ever. That is a real testament to the breadth and depth of experienced employees that Midwest Housing already had in place. Each member of the Midwest Housing team stepped up to the plate and hit a home run in 2012! It was exciting and invigorating!

Of course, it takes more than just internal expertise to be successful. None of these achievements would have been possible without the trust and support of our investors and developer partners. I’ve heard it said that a friend in need is a friend indeed. Well, we were in need and every one of our long 2

term friends and partners stepped up to the plate. Our success in 2012 had very little to do with me and a whole lot to do with our partners. To all of our partners, we at Midwest Housing are proud to call you friends and we will always remember your commitment to our mission!

Looking ahead to 2013, more exciting and invigorating changes are on our horizon, as we move forward with our plan to “grow what we know.” Most noticeably, we will launch our first regional fund and expand our geographic footprint, looking to help create affordable housing in South Dakota, Colorado, Minnesota, Missouri, Arkansas, and northern Texas. For the most part, we’re following existing developer and investor relationships into these new, yet similar, territories, providing the organization with a sound platform to develop new relationships.

But we must also be wary of not-so-welcome changes. Specifically, legislative threats to the Low Income Housing Tax Credit (the “Housing Credit”) and affordable housing programs are front and center on many minds. We must unite and work together to communicate the importance of the Housing Credit to our public servants. I encourage all of our stakeholder partners to join the ACTION Coalition if you haven’t already done so. Their website www.rentalhousingaction.org is an excellent source of advocacy information and includes an “advocacy toolkit” and State-specific fact sheets, all of which are very helpful when contacting your elected officials. Since President Reagan signed it into law in 1986, the Housing Credit has been incredibly successful, financing more than 2.6 million affordable apartments nationwide and creating approximately 95,000 jobs each year, mostly in the small business sector. It represents the best of what public-private partnerships can do to help revitalize distressed neighborhoods, leveraging nearly $100 billion in private capital over the past quarter century for the development of affordable housing. Working together, we can ensure that this vital development tool is preserved for further affordable housing development.

In closing, I want to return again to our mission - changing lives for a better tomorrow. In just seven short months, Midwest Housing, our team and our partners have changed my life for a better tomorrow and for that I am truly grateful! 2012 was an exciting and fulfilling year. Here’s to an exciting and fulfilling 2013! We look forward to working together with you to change all lives for a better tomorrow!

John Wiechmann President/CEO

3

Multifa mily Senior

Historic Rehab b ha Re

New Construction

Suburban

Single Family

Urban

HOUSING TYPE

LOCATION

CONSTRUCTION

S NIT 2U 1-1 ITS UN -24 13

/ ds l ee ona N i l ia nsit ec ra Sp T

Rural

25+ UN ITS

SIZE

PORTFOLIO GROWTH

10,000

8,000 units

6,000 units

347 133 164 9,660

NUMBER OF PROPERTIES

4,000 units

COUNTIES REPRESENTED

CITIES/TOWNS REPRESENTED

AFFORDABLE HOUSING UNITS

CREATED SINCE INCEPTION

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

4

2,000 units

28

N U M BE R O F ACQUISITIONS

$142MM EQUITY

TAX CREDIT

OVER

CLOSED

2012 YEAREND REVIEW

125 9th Street, LLLP Autumn Creek Villas, LP Baker Creek Senior Living I LLLP City Impact Homes, LLC Coffeyville Garden Apartments, LLC Corridor Woods Limited Partnership Cypress Pointe, LLC Des Moines Greystone Homes, LP FB Harlan, LP Fair Deal, L.P. Frontier Housing, LLC Heritage Estates, LLC Heritage Townhomes of Smith Center, LLC HRM III, LP

Hugo Affordable Housing, LLC Jackson Meadows, L.P. Linden Woods II, LP Madill Affordable Housing, LLC Mannford Senior, Limited Partnership McKinley Crest, LLLP Paola Seniors, L.P. Riverview Senior Developers, LP $1B South Rock Creek Estates, LLC Southern Meadows Homes, LP Southgate Apartments Bellevue, LP St. Margaret’s LIHTC, LP Stonewood Townhomes II, LLC West Heights Townhomes, LLLP

243 302 PERFORMED MILES 193,276 DRIVEN

$800M

SITE INSPECTIONS

CONSTRUCTION

INSPECTIONS COMPLETED

$600M

TOTAL EQUITY RAISED

Other 12 NE Funds $382M 10 KS Funds 4 OK Funds $188M $127M 7 IA Funds $170M

EQUITY RAISED

Insurance Banks

$400M

INVESTOR TYPE

24 IN 2012 105 SINCE 1993 $867.3MM SINCE 1993 $92.75MM IN 2012 INVESTORS

INVESTORS TOTAL RAISED

$200M

RAISED

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

5

2012 INVESTOR SUMMARY Investors Listed are Current as of 12/31/2012 NAHF 93

NAHF 94

NAHF 95

NAHF 96

NAHF 97

EFN VI

EFN VII

EFN VIII

EFN IX

EFN IX-B

EFN X

EFN XI

EFN XII

NF XIII

NF XIV

NF XV

NF XVI

NF XVII

NAHF 93

NAHF 94

NAHF 95

NAHF 96

NAHF 97

EFN VI

EFN VII

EFN VIII

EFN IX

EFN IX-B

EFN X

EFN XI

EFN XII

NF XIII

NF XIV

NF XV

NF XVI

NF XVII

Adams Bank & Trust Company Adams County Bank Bank of America CDC Bank of Bennington Bank of the West Behlen Mfg. Company Berkshire Hathaway, Inc. Capitol Federal Savings Bank Cargill Financial Service Corporation Central States Health & Life Company of Omaha Commerce Bank, N.A. Consolidated Companies Country Bank Shares Countryside Bank Equitable Federal Savings Bank Fannie Mae Farm & Home Insurance Agency, Inc. Farmers and Merchants Bank Farmers and Merchants Investment, Inc. First Community Bank of Beemer First National Bank of Omaha First State Bank First State Bancshares Five Points Bank Freddie Mac Geneva State Bank Henderson State Bank Home Federal Savings & Loan of Grand Island Horizon Bank Info USA Jefferson Pilot Level 3 Communications Marine Bank Mutual of Omaha Insurance Company National Education Loan Network, Inc. North Central Bancorp, Inc. (Bank First) Northwestern Mutual Life Insurance Pinnacle Bank Platte Valley Bank Principal Financial Services Qwest Communications, Inc. Reinke Mfg. Company RiverHills Bank Seaboard Corporation South Central State Bank Summit Investments The State National Bank & Trust Company TierOne Bank United Nebraska Bank US Bancorp Community Development Corp.

Valley Bank and Trust Company Wells Fargo CDC West Gate Bank Windstream Communications World’s Foremost Bank

6

KEF I

KEF II

KEF III

KEF IV

KEF V

KF VI

KF VII

KF VIII

KF IX

KF X

IEF I

IEF II

IEF III

IEF IV

IF V

IF VI

IF VII

OEF I

OEF II

OF III

OF IV Aegon American Fidelity Assurance Company Arvest BancFirst Bank of Hays Bank of Oklahoma Bank of the West Bankers Trust Bankers Trust Company - Cedar Rapids Capital City Bank Capitol Federal Savings Bank Carroll County State Bank Cedar Rapids Bank and Trust Central Bank Central National Bank Central State Bank Citizens Savings & Loan Association, FSB Citizens State Bank of Moundridge Commerce Bank, N.A. Community State Bank - Ankeny, Iowa Community State Bank - Tipton, Iowa Dubuque Bank & Trust CDC ESIC on behalf of Fannie Mae Equity Bank, A National Association Fannie Mae Farm Bureau Life Insurance Company Farmers and Merchants Investment, Inc. Fidelity Bank & Trust First Federal Savings & Loan Association of Independence First Federal Savings Bank of Iowa First National Bank of Hutchinson First National Bank of Olathe First National Bank of Omaha First National Bank of Waverly Freddie Mac Girard National Bank The Grundy National Bank of Grundy Center Industrial State Bank INTRUST Bank, N.A. JP Morgan Chase Kaw Valley Bank Labette Bank Landmark National Bank Lifeshield National Insurance Company Maquoketa State Bank McElroy’s Inc. Midwest Heritage Bank MidwestOne Bank The Mission Bank Morgan Federal Bank Northwestern Mutual Life Insurance Principal Financial Services, Inc. Seaboard Corporation Security State Bank TierOne Bank Treynor State Bank Two Rivers Bank & Trust UMB Bank, n.a.

United Bank & Trust Valley View Bank Wells Fargo CDC West Bank

KEF I

KEF II

KEF III

KEF IV

KEF V

KF VI

KF VII

KF VIII

KF IX

KF X

IEF I

IEF II

IEF III

IEF IV

IF V

IF VI

IF VII

OEF I

OEF II

OF III

OF IV

7

MULTIFAMILY HOUSING

125 9th Street, LLLP

McKinley Crest, LLLP

Coffeyville Garden Apartments, LLC

Southern Meadows Homes, LP

Corridor Woods Limited Partnership

Southgate Apartments Bellevue, LP

Heritage Estates, LLC West Heights Townhomes, LLLP

Frontier Housing, LLC

MHEG was proud to again partner with Vintage Construction on three multifamily properties in 2012. MHEG has worked with Vintage Construction on five other developments throughout Kansas and we anticipate having similar success with these three developments.

Often times the communities that are in need of housing the most, are those that are located in rural areas where availability and variety are limited. Heritage Estates hopes to meet that need in Neodesha, Kansas. Located in southeast Kansas, Neodesha was also affected by floods in 2007 and the city is still attempting to replace almost 200 housing units that were either destroyed or damaged.

Heritage Estates will offer this rural community with 12 new three-bedroom units. Each unit will average 1,250 square feet and provide residents with kitchen appliances, washer/dryer, garages, patios and storage.

Frontier Housing will also provide 12 new three-bedroom units, but for the community of Parsons, Kansas. Parsons has seen a steady growth in population and employment over the past several years and Frontier Housing will help meet some of the city’s housing needs. Each unit will average 1,283 square feet and provide residents with kitchen appliances, washer/dryer, garages, patios and storage.

8

Frontier Housing

Heritage Estates

9

Kitchen

Handicapped Accessible

Mannford Senior

Baker Creek Senior Living

Cypress Pointe

Kitchen: Before & After

10

SENIOR HOUSING

Autumn Creek Villas, LP Mannford Senior, Limited Partnership

Baker Creek Senior Living I LLLP Paola Seniors, L.P.

Cypress Pointe, LLLP Riverview Senior Developers, LP Fair Deal, L.P. St. Margaret’s LIHTC, LP

Heritage Townhomes of Smith Center, LLC Stonewood Townhomes Phase II, LLC

Jackson Meadows, L.P.

Cypress Pointe development will provide much needed new housing opportunities for 24 residents (ages 55+) in the north Omaha community. The property will consist of two-bedroom units with an average of 1,064 square feet. Each unit will come with appliances, washer/dryer, storage space and a garage. All units will be fully handicapped accessible. MHEG worked with long-time partner Excel Development Group and Midwest Housing Initiatives on this development.

MHEG was pleased to team up with new partners Baker Group and Nelson Construction on their first LIHTC development. Baker Creek Senior Living, located in east Des Moines, will offer 33 units for those ages 55+. Each two-bedroom unit, with an average of 970 square feet, will offer the essential household amenities. In addition, the property will have an on-site office, an elevator, security, and residents will have access to a community room, library and fitness center. Baker Creek Senior also offers easy access to public transportation and will have activities to promote health and wellness.

Anawim Housing will be providing property management services.

Mannford Senior was one of the few rehabilitation developments done in 2012. The property will undergo a massive transformation inside and out; including new appliances, cabinets, HVAC systems, new roofing, windows and new landscaping. Once renovations are complete, Mannford Senior will provide much needed housing for residents (ages 55+) for the community of Mannford, Oklahoma.

The four-plexes (and one eight-plex) offer both one and two-bedroom units for a total of 28 units, and will average between 688 square feet to 784 square feet. The development also has a community clubhouse and community laundry for residents to use. MHEG partnered with Chameleon Development on this development.

11

SINGLE FAMILY HOUSING

Des Moines Greystone Homes, LP Hugo Affordable Housing, LLC

City Impact Homes, LLC Linden Woods II, LP FB Harlan, LP Madill Affordable Housing, LLC HRM III, LP South Rock Creek Estates, LLC Located at 12 scattered sites in downtown Des Moines, the Greystone Homes consist of 26

new construction single-family homes. This development is modeled after Chicago’s Greystone Homes, which were constructed after the Great Fire of 1871 destroyed over 17,000 buildings, including one-third of the city’s wood-frame housing stock. The project’s goal was to replace the traditional “cookie-cutter” style of infill housing, with a more unique design that would complement the existing neighborhoods and offer a more durable building material. Each of the two-story units will consist of four bedrooms, the essential household amenities and offer 2,010 square feet. In addition, each unit will include a geothermal heating and cooling system, a garden-level basement and cast-in-place insulated concrete walls. MHEG was excited to partner again with Hatch Development Group, Koester Construction and Perennial Property Management Services for this development.

Madill Affordable Housing in Madill, Oklahoma will be the only single family affordable housing development in the community. This much needed development will offer 25 single family rent-to-own homes. The homes will be a mix of three-bedroom and four-bedroom units averaging between 1,400 square feet to 1,520 square feet. Amenities for these homes will include brick façade, ceiling fans in all bedrooms and living rooms, energy star appliances, washer/dryer and energy efficient hot water heaters. Partners included LW Development, Lance Windel Construction and Express Management.

MHEG is excited to team up with Excel Development Group and new partner City Impact to develop City Impact Homes. This property will provide 14 families in the Lincoln community a safe, quality home. The townhomes offer three-bedroom, four-bedroom and five-bedroom units and will include appliances, washer/dryer, two car garages and partially finished basements in addition to supportive services such as Strengths for Life Mentoring for Youth, Impact Leadership Academy for teens, Impact Reading Center, RentWise Tenant Education and financial counseling. City Impact Homes will also utilize the CROWN, rent-to-own, program allowing residents the option to become homeowners at the end of the 15-year compliance period.

Many employers report that a lack of affordable housing makes it difficult to recruit and retain employees. Harlan, Iowa knows this problem well. FB Harlan another rent-to-own development addresses this issue by providing 27 units for the Harlan community. The property which consists of both single family homes and duplex units offers two-bedroom, three-bedroom and four-bedroom units ranging from 1,044 square feet to 1,568 square feet. These spacious homes will include many key household amenities such as kitchen appliances, wash/dryer, ceiling fans, garages and storage. In addition there will be a clubhouse providing residents with a community room, fitness center, computer center and playground area. MHEG partnered with Foutch Brothers, LLC on this development.

12

FB Harlan

Groundbreaking

Madill Affordable Housing

Groundbreaking

During Construction

City Impact Homes

13

Des Moines Greystone Homes

Plymouth

27

Mitchell

Howard

Hancock

Cerro Gordo

Floyd

Chickasaw

Buena Vista

Pocahontas

46

Woodbury

Humboldt

Fayette

Franklin

Wright

Webster

Sac

10

Ida

138

Monona

Crawford

Harrison

21

Audubon

27

Pottawattamie

Guthrie

11

Cass

172

Adair

Hamilton

Butler

Black Hawk

Grundy

Hardin

24 Dallas

Polk

24

Marion

Warren

Iowa

Mahaska

30

Keokuk

Union

Clarke

Lucas

Monroe

Wapello

Fremont

Page

Taylor

Ringgold

Decatur

Wayne

Appanoose

Davis

Sin gle Fa mil y

Se nio r

Rural

Urban

LOCATION

/ ds l ee ona N i l ia nsit ec ra Sp T

HOUSING TYPE

8

Suburban

Co nst ruc tio n

STATUS

ab Reh p se-u Lea

CONSTRUCTION

Adams

Multifamily

Dubuque

Delaware

Linn

79

Jackson

Jones

59

Clinton

Johnson

58

49

Cedar

Scott

Muscatine

196

72

Washington Louisa

Montgomery

ehab Historic R

Buchanan

Benton

Poweshiek

Jasper

832

Madison

Tama

Marshall

Story

Mills

New Construction

Allamakee

Clayton

42 Boone

Greene

Carroll

Shelby

55

Calhoun

Winneshiek

Bremer

24

Woodbury 120 units

Operational/ Stabilized

Worth

Palo Alto

16

Cherokee

Winnebago

Kossuth

Clay

O’Brien

Sioux

Emmet

14

Jefferson

Van Buren

Henry

Des Moines

Lee

OF 61 NUMBER PROPERTIES 25 COUNTIES 29

REPRESENTED CITIES/TOWNS REPRESENTED

25+ UNITS

13-24 UNITS

SIZE

Dickinson

Osceola

1-1 2U NIT S

Lyon

A REVIEW OF IOWA 14

I have always thought of our industry as win, win, win; building stronger communities, reinvigorating neighborhoods and economic development; leveraging public-private partnerships that benefit our investors for a stronger economy and most importantly improving the lives of our residents with quality stable homes. 2012 was a definite win for the MHEG Iowa Operations with a very productive year.

We closed the following eight developments in 2012 for a total of $40 million in equity and 260 units: 125 9th Street, LLLP (Columbus Junction); Baker Creek Senior Living I LLLP (Des Moines); Corridor Woods Limited Partnership (Iowa City); Des Moines Greystone Homes, LP (Des Moines); FB Harlan, LP (Harlan); McKinley Crest, LLLP (Des Moines); Southern Meadows Homes, LP (Des Moines); and West Heights Townhomes, LLLP (Clinton). Those closings include the last two projects in Iowa Fund VI, as well as the first six projects in Iowa Fund VII. These developments will provide much needed affordable housing throughout the state of Iowa for a variety of residents. Developments in 2012 included an innovative project modeled after the Greystone homes of Chicago that will consist of infill duplexes and single family homes in the Des Moines area, rent-to-own single family homes for Harlan and fully handicapped accessible housing for families in Clinton.

We welcomed new developers: Nelson Construction and the Baker Group. And renewed partnerships with previous developers: Anawim Housing, Community Housing Initiatives, Foutch Brothers, LLC, Hatch Development Group and The Housing Fellowship.

We weclomed new investors: First National Bank of Omaha and Two Rivers Bank & Trust. And renewed partnerships with previous investors: Community State Bank of Ankeny, Northwestern Mutual Life Insurance, Wells Fargo and West Bank.

Thank you to all of our investor, developer and state agency partners for their continued excellence in the creation and operation of affordable housing for Iowans.

As some of you know I started my career in Iowa. It has been great to come home again and have the opportunity to be a part of the outstanding MHEG team. I have enjoyed re-connecting with previous relationships and building new ones.

We look forward to another exciting year in 2013. As with any year there will be obstacles to overcome. Tax reform and the expiration of the fixed 9% credit rate are challenges we will face, but with persistence, maintaining our fundamentals, continuing strong relationships and not losing sight of our common goal to provide affordable housing our industry will see another successful year.

Scott Fitzpatrick Acquisitions Manager

15

22

18

Logan

Wallace

Graham

Sheridan

Trego

Ellis

Russell

16

73

6

Grove

8

Clay

42

12

Lincoln

Ness Wichita

Scott

Lane

10

Barton

Rush

78

Pawnee Finney

Hodgeman

32

Historic Rehab b ha Re

Operational/ Stabilized

Haskell

Seward

104

Meade

New Construction

Lease-up

Co nst ruc tio n

CONSTRUCTION

Stevens

32

Clark

Kiowa

16

Comanche

Barber

Reno

30

Kingman

Harper

Multifa mily / ds l ee ona N i l ia nsit ec ra Sp T

Senior

Rural

Urban

Jefferson

12

344

Douglas

20

Osage

Franklin

Lyon Marion

Chase

60

Coffey

Anderson

Allen

Harvey

Butler Sedgwick

12

8

Morris

192 Pratt

Wabaunsee

McPherson

Ford

STATUS

Morton

Grant

Stafford

Edwards Gray

Stanton

40

14

Shawnee

Dickinson

32

10

Single Family

Kearny

Suburban

Hamilton

Rice

Riley

Geary

Saline

Jackson

Pottawatomie

126

Ottawa

Ellsworth

Greeley

8

Atchinson

Osborne

Rooks

Brown Doniphan

Nemaha

158

Sumner

Woodson

Greenwood

24

Wilson

30

Elk

Cowley

12

14

24 Wyandotte

267

Johnson

144

Miami

30

Linn

Bourbon

Neosho Crawford

24

4

Labette Cherokee Montgomery

Chautauqua

88

60

20

88 COUNTIES 51 44

NUMBER OF PROPERTIES REPRESENTED CITIES/TOWNS REPRESENTED

25+ UN ITS

S NIT 2U 1-1

SIZE

Thomas

24

Cloud

Mitchell Sherman

Washington

Jewell

Marshall

Leavenworth

14

Republic

1324 UN ITS

Norton

Smith

HOUSING TYPE

Rawlins

Phillips

LOCATION

Cheyenne

Decatur

A REVIEW OF KANSAS 16

Whether you run or limp to the finish line, no one will remember how you got there, just that you crossed.

The quote above implies the importance of persistence. Getting across the finish line in life takes persistence. And often closing developments takes persistent. On Friday, July 27, 2012, Midwest Housing took part in the Grand Opening of Murray Hill Senior Apartments in Chanute, Kansas.

Persistence was especially true with Murray Hill.

My first exposure to the Murray Hill project was in 2008. After many starts and stops, the project was re-awarded tax credits in June 2011 with construction completed in July of 2012, by developer Foutch Brothers, LLC. It is a valuable community asset providing quality affordable housing for 24 seniors. Murray Hill Senior offers a community room, library, internet cafĂŠ, walking trail, laundry facilities and on-site management. The residents enjoy and take pride in their new homes. It serves the community in two important ways. The project moves a vacant historic school building back into community service in addition to providing quality, affordable and energy efficient homes for senior residential living. The project was recently awarded the Preservation Stewardship Award for Excellence by the Kansas Preservation Alliance, Inc., proving again the importance of persistence.

Murray Hill is a valuable lesson for us all. Persist, stay the course and get the job done. Congratulations to all who were a part of getting Murray Hill Senior Apartments across the finish line.

We finished the year 2012 with several other accomplishments as well. We welcomed new investors: The Girard National Bank, Morgan Federal Bank, and Garmin International. And renewed partnerships with previous investors: Wells Fargo, Capitol Federal Bank, Bank of the West, Commerce Bank, INTRUST Bank, Capital City Bank, Farmers and Merchants Investment, UMB Bank, and United Bank & Trust. Thank you to all of our investors.

We welcomed new developers: Kelly Hrabe and Rudy Manes of Prairie Fire Development Group; Michael Snodgrass of Builders Development Corp.; and Ron Dean and David Dean of Dean Development. And renewed partnerships with previous developers: Foutch Brothers, Manske & Associates, Mennonite Housing, Overland Property Group and Vintage Construction.

We closed the following developments in 2012: Coffeyville Garden Apartments, LLC (Coffeyville); Frontier Housing, LLC (Parsons); Heritage Estates, LLC (Neodesha); Heritage Townhomes of Smith Center, LLC (Smith Center); Paola Seniors, L.P. (Paola); Riverview Senior Developers, LP (South Hutchinson); St. Margaret’s LIHTC, LP (Kansas City) All are quality developments that add value to their communities and truly change the lives of those who reside in them. Thanks to all investors, developers and partners who helped them become a reality.

As I look forward to 2013, it is an exciting time for MHEG and our partners. I am very pleased with the new MHEG business plan and it positions us to keep crossing the finish line well into the future.

Have a great year in 2013. It is a pleasure working with all of you.

Pat Michaelis Executive Vice President

17

Boyd

Dawes

Knox Sheridan

Sioux

Brown

Box Butte

DixonDakota

11

Rock

18

Grant

Hooker

Thomas

Loup

Blaine

Garfield

Morrill

6

Banner

Garden

Arthur

Logan

Mc Pherson

9

Wheeler

Valley

Greeley

80

6

Chase

b ha Re

Operational/ Stabilized

New Construction

Hitchcock

48

Gosper

Frontier

Furnas

Red Willow

Multifa mily

16

Phelps

34

Harlan

6

Senior

/ ds l ee ona N i l ia nsit ec ra Sp T

Rural

Urban

Kearney

Franklin

Hall

261 Adams

59

Webster

32

8

Platte

22

Polk

Merrick

12

28

Hamilton

10

York

60

8

Butler

Seward

32

40

5

10

Nuckolls

Thayer

8

12

Colfax Dodge

Fillmore Saline

Clay

8

Jefferson

72

Wa

shin

gto

n

Douglas Saunders 2044

24

Sarpy

200 Cass

Lancaster

318

Otoe

16

JohnsonNemaha Gage

84

6

41

Pawnee Richardson

4

16

161 COUNTIES 45 58

NUMBER OF PROPERTIES REPRESENTED CITIES/TOWNS REPRESENTED

25+ UN ITS

S NIT 2U 1-1 ITS UN -24 13

Lease-u p Co nst ruc tio n

STATUS

Historic Rehab

CONSTRUCTION

Dundy

Hayes

Buffalo

Dawson

Single Family

Perkins

12

HOUSING TYPE

32

Lincoln

Howard

LOCATION

Sherman

Suburban

Deuel

20

8

Nance

Keith

Cheyenne

26

Stanton Cuming Burt Madison Boone

Custer Kimball

36

Wayne Thurston

Pierce

Antelope

Scotts Bluff

134

Cedar

Holt

Cherry

SIZE

Keya Paha

A REVIEW OF NEBRASKA 18

“Jim” I’m assuming when you read the title to this message you figured my focus for this year would be Jim Rieker, former CEO/President of MHEG. Well, you are exactly right - half right.

One of the most significant events of 2012 for me was the resignation of Jim Rieker from MHEG. I’ve had the honor and privilege to work with Jim for approximately eleven years. During this time we established a very close and trusted friendship. An example of just how close we were was reflected in an introduction Tim Kenny, Executive Director of NIFA, made at a housing summit where Jim and I were serving as panelists. Tim referred to us as “the equity twins.” The remark drew lighthearted laughter from the audience, but truth be known, I am still humbled to this day for the association Tim illustrated between Jim and me. I will be forever grateful for the confidence Jim placed in me, as well as the opportunities he provided me at MHEG. Since his departure, I’ve had a number of people comment about my slimmer build. The reason for that is simple – I haven’t had a malt since then. You see, JR and I have been known to occasionally stop for a malt break while traveling together and sometimes, even a cookie from the Cookie Company when business took us to Lincoln. These are just a few of the many great memories I have from the good ole days.

Ok, you are probably now wondering about this “half” right comment? Interesting enough, this past summer while having lunch; I met a homeless man named Jim. Little did I realize this visit would actually be the first of several stops I would make in the weeks ahead. A simple hello transformed my heart to a much deeper level of compassion. Over time, Jim shared his life story with me. It became evident I could not change his perspective of life and the only “real” thing I could offer him was my time, respect and friendship. I owe my daughter, Emily, a shout out for inspiring me to step out of my comfort zone through her own example of befriending a homeless person and extending grace. I occasionally drive by the park where Jim and I would visit; however, he no longer hangs out there. I wonder where he is and how he’s doing and continue to pray for him.

Although the title to this message is “Jim” the underlying theme is encouragement. When others believe in you the results can be life changing. It offers hope, direction and empowerment; from as simple as someone lacking self-confidence to someone who has lost their way in life. Encouragement is powerful – as long as one is willing to receive it. On a personal note, I want to express a heartfelt thanks to all who reached out to me this past year and offered kind words of encouragement.

Words alone cannot describe how much it has meant to me. It is my wish that your 2013 be about something more!

Respectfully, Thomas Judds Executive Vice President

19

Ottawa Beaver

Woods

Harper

Alfalfa

Osage

48 Woodward

Noble

Garfield

Pawnee

Major

Ellis

Payne Dewey

Blaine

Kingfisher

40

Roger Mills

Custer

Caddo Kiowa

Hannon

Cleveland

20

Grady

48

McClain

Stephens Tillman

Jefferson

Const ructio n

Rural

Ur ba n

HOUSING TYPE

CONSTRUCTION

e gl y Sin mil Fa

LOCATION

Operational/ Stabilized

Senior

Suburban

p se-u Lea

STATUS

b ha Re

Multifa mily

Delaware

Charokee

Adair

Muskogee Sequoyah

McIntosh

64

Seminole Hughes

104

22

Haskell

Pittsburg

98

Latimer

24

Le Flore

Coal

Coal

45

Love

New Construction

Mayes

Okmulgee

Murray

Carter

Cotton

28

Pontotoc

Garvin

Comanche Jackson

Rogers

Wagoner

Okfuskee

Pottawatomie

Washita

Greer

48

446

52

Beckham

Creek

Lincoln Canadian Oklahoma

Craig

Tulsa

60

Logan

Nowata

Pushmataha Johnston

Marshall

25

Atoka

Bryan

73

Choctaw

25

McCurtain

96

37 COUNTIES 19 26

NUMBER OF PROPERTIES REPRESENTED CITIES/TOWNS REPRESENTED

25+ UNITS

13-24 UNITS

SIZE

Texas

Washington

Cimarron

Kay

Grant

A REVIEW OF OKLAHOMA 20

If you think you are too small to make a difference, you have never gone to bed with a mosquito. ~ Robert Collier 2012 was a transitional year for our organization, although it barely seemed that way since we were so busy. Between Jim, Becky and John’s leadership, we forged ahead with our mission and our successes. Oklahoma has expanded into several new counties and established many new relationships. We are excited to be continuing our mission for the residents of our state.

While the New Year tends to bring moments of reflection on the year past and goal setting for the coming year, springtime leads us to think of fresh starts and growth. I typically spend my early spring working on vines in two areas of my yard that I refer to as Jungle 1 and Jungle 2. I’ve been unable to decide over the years if these vines are something beautiful or just weeds sent to torment the world.

The first few years in our home, I thought these areas were wonderful. They were so green and lush.

The ivy blended so well with the trees, I didn’t notice a problem. It takes a few years before you realize they are killing your trees through a hostile takeover. So a few years ago, my war to reclaim the backyard began. I’ve lost some battles to thorns and poison ivy. I’ve also had moments where I can’t see that I’ve made a difference at all. The key is you can’t give up. To do so, would admit defeat and lead to the ruin of all the great trees.

In my latest foray into the jungles to continue my battle with the vines, I realized that many of the ones I cut last year had died. However, if I hadn’t managed to pull them from the tree branches, they were just a highway for the up and comers. I learned three important lessons: Vines grow on previous infrastructure to move more quickly to the top. Past successes of those that go before help lead the way. Cutting a vine doesn’t necessarily kill it.

With another successful year in Oklahoma, we continue to grow and touch more lives. We use our existing infrastructure and past successes as a foundation for continued growth. We have the resilience and determination to move forward, regardless of the thorns in our sides. Hopefully, we are all mosquitos making a difference in affordable housing one unit and one resident at a time.

Andrea Frymire Executive Vice President

21

MHEG Board of Directors

Back Row (L to R): Steve Bodner, Dick Schenck, Dennis Brand, Rick Jackson Front Row (L to R): John Wiechmann, Barry Sandstrom, David Fisher, Dick Hoiekvam Not pictured: Chris Hensley

MHEG Executive Committee

Back Row (L to R): John Wiechmann, Pat Michaelis, Tom Stratman, Thomas Judds Front Row (L to R): Jason Main, Andrea Frymire, Becky Christoffersen, Ann Burge

22

BOARD OF DIRECTORS & COMMITTEES Midwest Housing Equity Group, Inc. is a privately owned non-profit corporation with an eight-member Board of Directors. The Board of Directors presides over MHEG with the President/CEO overseeing the daily activities of each state.

Board of Directors

Dick Schenck - Wells Fargo Chairman of the Board

David Fisher - FHLBank Topeka Vice Chairman of the Board

Steve Bodner - U.S. Bank Secretary Dennis Brand - BancFirst Chris Hensley - retired Dick Hoiekvam - retired Rick Jackson - Capitol Federal Savings Bank Barry Sandstrom - Home Federal Savings & Loan

Audit Committee

Steve Bodner - U.S. Bank David Fisher - FHLBank Topeka Dick Hoiekvam - retired Dick Schenck - Wells Fargo

Budget & Compensation Committee

Dennis Brand - BancFirst Chris Hensley - retired Rick Jackson - Capitol Federal Savings Bank Barry Sandstrom - Home Federal Savings & Loan Dick Schenck - Wells Fargo

The Operations and Investment Committees are appointed by the MHEG Board of Directors. Members of these committees advise MHEG’s executive staff with respect to investing in affordable housing developments within the states of their region.

The Committee’s primary duties and responsibilities are to review and recommend opportunities for LIHTC Investments, advise MHEG’s executive staff on operations and asset management of existing LIHTC Investments.

Iowa Operations & Investment Committee Ed Benjamin - MidwestOne Bank Jennifer Cooper - Bankers Trust Mayor Tom Hanafan - Mayor of Council Bluffs, Iowa Chris Hensley - retired Kristi Knous - Community Foundation of Greater Des Moines David Nelson - West Bank Dick Schenck - Wells Fargo Susan Whitson - First National Bank of Waverly Nebraska Operations & Investment Committee Steve Bodner - U.S. Bank David Fisher - FHLBank Topeka Tim Hart - First National Bank of Omaha Dick Hoiekvam - retired Justin Horst - Pinnacle Bank Dick Schenck - Wells Fargo

Kansas Operations & Investment Committee Bob Arthur - Commerce Bank, N.A. Mark Dennett - INTRUST Bank David Fisher - FHLBank Topeka Bob Kobbeman - Capital City Bank Lloyd Rainge - Capitol Federal Savings Bank Dick Schenck - Wells Fargo Michael Scheopner - Landmark National Bank Chuck Stones - Kansas Bankers Association

Oklahoma Operations & Investment Committee Roger Beverage - Oklahoma Bankers Association Dennis Brand - BancFirst Carl Hudgins - Commerce Bank David King - BancFirst Brad Krieger - Arvest Bank Kenyon Morgan - Prime Time Environments, LLC Bob Spinks - Oklahoma City University

23

STAFF

John Wiechmann

Jason Main

Ann Burge

Becky Christoffersen

Tom Stratman

Shannon Foster

President / Chief Executive Officer

Chief Financial Officer

Chief Operating Officer

Chief Investment Officer

Vice President of Acquisitions

Accounting Manager

Andrea Frymire

Chris Pangkerego

Cindy Koster

Jake Jacobsen

Director of Information

Senior Acquisitions

Construction Manager

Technology

Manager

Traci Collins

Deb Swanson

Pat Michaelis Executive Vice President

Scott Fitzpatrick

Acquisitions Manager

Thomas Judds

Executive Vice President

Chris Imming Acquisitions Manager

Executive Vice President

Sammy Ehtisham Acquisitions Manager

Acquisitions Manager

Paralegal & Due

Shannon Powers Real Estate Coordinator

Diligence Administrator

24

Laurie Stephenson

Shellie Vandeman

Dustin Daugherty

Keely McAleer

Compliance Specialist

Construction Manager

Jennie Lattimer

Rachel Wiesner

Compliance Manager

Accounting Coordinator

Asset Analyst

Public Relations Specialist

Shannon Johnson

Ryan Harris

Kristina Tolander

Jordan Bottorff

Steve Gross

Nicole Koster

Asset Manager

Asset Manager

Asset Manager

Asset Manager

Asset Manager

Asset Manager

Cecelia Grossman

Lisa Bryan

Kathi Mueller

Accounting Assistant

Administrative Assistant

Administrative Assistant

Corporate Headquarters/ Nebraska Office

13520 California Street, Suite 250 Omaha, NE 68154 Phone: 402.334.8899

www.mheginc.com

Iowa Office

1312 Locust Street, Suite 300B Des Moines, IA 50309 Phone: 515.280.6000

Kansas Office

701 S. Kansas Avenue Topeka, KS 66603 Phone: 785.267.1901

Oklahoma Office

500 N. Broadway Avenue, Suite 150 Oklahoma City, OK 73102 Phone: 405.278.7909