REQUEST FOR COUNCIL/ HOUSING AUTHORITY pal

REQUEST FOR COUNCIL/

HOUSING AUTHORITY

ACTION

CITY COUNCIL MEETING DATE:

MARCH 5, 2019

TITLE:

pal

APPROVE A PRE -LOAN COMMITMENT OF

1, 687, 047 OF AFFORDABLE HOUSING

FUNDS AND EIGHTY-NINE PROJECT -BASEDVOUCHERS TO JAMBOREE HOUSING FOR

THE BUDGET INN PROJECT

STRATEGIC PLAN NO. 5, 3C)

CITY MANAGER EXECUTIVE DIRECTOR

RECOMMENDED ACTION

CITY COUNCIL

CLERK OF COUNCIL USE ONLY:

As Recommended

As Amended

Ordinance on V ReadingOrdinance on 2nd ReadingImplementing ResolutionSet Public Hearing For

CONTINUED TO

FILE NUMBER

Authorize the City Manager and the Clerk of the Council to execute a pre -loan commitment letterwith Jamboree Housing (" Jamboree") for $ 1, 687,047 in Community Development Block GrantCDBG) Funds for the development of the Budget Inn affordable housing project located at 1108

N Harbor Blvd, Santa Ana, CA 92703, subject to non -substantive changes approved by the CityManager and City Attorney.

HOUSING AUTHORITY

Approve an award of eighty-nine ( 89) project -based vouchers and authorize the ExecutiveDirector of the Housing Authority and the Recording Secretary to execute an Agreement to Enterinto a Project -Based Vouchers Housing Assistance Payments Contract with Jamboree for thedevelopment of the Budget Inn affordable housing project located at 1108 N Harbor Blvd, SantaAna, CA 92703, subject to non -substantive changes approved by the Executive Director of theHousing Authority and Authority General Counsel.

COMMUNITY REDEVELOPMENT AND HOUSING COMMISSION RECOMMENDATION

At its special meeting on December 19, 2018, the Community Redevelopment and HousingCommission ( CRHC) by a vote of 5:0 ( Ramos and Urzua abstained):

1) Recommended that the City Council authorize the City Manager to execute a pre -loancommitment letter with Jamboree Housing (" Jamboree") for $ 1, 687,047 in CommunityDevelopment Block Grant Funds for the development of the Budget Inn affordable housingproject located at 1108 N Harbor Blvd, Santa Ana, CA 92703, subject to non -substantive

changes approved by the City Manager and City Attorney.

Commitment of Affordable Housing Funds and Project -Based Vouchers to Jamboree HousingMarch 5, 2019

Page 2

2) Recommended that the Housing Authority approve an award of eighty-nine ( 89) project - based vouchers and authorize the Executive Director of the Housing Authority to executean Agreement to Enter into a Project -Based Vouchers Housing Assistance PaymentsContract ( for Existing or Rehabilitation) with Jamboree for the development of the BudgetInn affordable housing project located at 1108 N Harbor Blvd, Santa Ana, CA 92703.

DISCUSSION

On June 19, 2018, the City Council authorized the Community Development Agency ( CDA) torelease a Fiscal Year ( FY) 2019 Request for Proposals ( RFP # 18- 056) to develop affordablerental and ownership project(s) in the City of Santa Ana with available funds from the HOMEInvestment Partnerships Program ( HOME), Community Development Block Grant ProgramCDBG), Project Based Voucher Program ( PBV), Inclusionary Housing Fund, and Housing

Successor Agency Fund. The RFP also included land assets currently owned by the HousingAuthority of the City of Santa Ana. The RFP was drafted in compliance with the City's AffordableHousing Funds Policies and Procedures adopted by City Council on March 20, 2018.

On July 2, 2018, CDA issued RFP # 18- 056 for Affordable Housing Development. The RFP waspublished on both the City and Housing Authority's websites; a public notice was published in theOC Register on July 2, 2018; an e- mail was sent out by Orange County' s largest affordablehousing membership associations including the Kennedy Commission, 2- 1- 1 Orange County, and Southern California Association of Nonprofit Housing; and an electronic letter was e- mailedto interested developers and nonprofit organizations who had previously requested to beinformed of development opportunities on CDA' s RFP Process Database.

The first -annual deadline for the City' s RFP # 18- 056 for Affordable Housing Development closedon Wednesday, August 15, 2018 at 5: 00 p. m. The City received thirteen ( 13) proposals prior tothe deadline. The affordable housing developers that submitted proposals include:

Affordable Housing DeveloperCesar Chavez Foundation

Chelsea Investment Corporation

Community Development Partners — 2 Proposals

Community HousingWorks

Habitat for Humanity of Orange County

HomeAid Orange County

Jamboree Housing — 2 Proposals

National Community Renaissance & Mercy House Living Centers

Orange Housing Development Corporation & C& C Development, LLCRelated California

LINC Housing Corporation

After the deadline, staff conducted a minimum threshold review of each proposal to ensure the

proposal complied with all of the minimum requirements in the RFP. Following the minimumthreshold review, staff formed a Review Panel that consisted of the Executive Director of the

City's Public Works Agency with his designee, the Executive Director of the Planning andBuilding Agency with his designee, the Executive Director of the Community Development


Page 3

Agency, and the Housing Division Manager. The Veterans Affairs Medical Center of LongBeach, the County of Orange, Keyser Marston Associates, and MDG Associates served asadvisors to the Review Panel.

In compliance with the City's Affordable Housing Funds Policies and Procedures, the ReviewPanel used the proposal Scoring and Selection Criteria from the RFP to conduct their review andanalysis of each proposal. In addition to the Scoring and Selection Criteria from the RFP, theReview Panel also reviewed the proposed project design for appropriateness for the proposed

target group, compatibility with surrounding uses, cost effectiveness of construction, andappropriateness of the design and construction for low maintenance and long term durability.

On October 30, 2018, the Review Panel met and interviewed all of the developers who submitted

a proposal. LINC Housing requested to be removed from consideration prior to their scheduledinterview and therefore their proposal was removed from consideration. On November 14, 2018,

the Review Panel met a second time to discuss and deliberate upon the scoring and selection ofthe proposals. Following this deliberative selection process, the Review Panel agreed upon thefinal scores below based on an average of the Individual Reviewer Scores:


Page 4

Housing Authority Land Asset Requested / HUD-VASH Vouch ars y Non+ fousing

Authority Land Asset

Developer Name Project NameORE (Average fIFINAL SCORE ( Average of Individual

112681146 E. Washington Avenue

Orange Hosing Devebpmem Corporation andCSC Development LLC

1126- 1146 E. Washington Site 92

Related California The Crossroads stWashingbn 91

Jamboree Hosing REVOAparanents 87

CesarClavea FOVdatlon Sarna Ara Place 84

Commnaity HosingWaft Transformer 80

Commuity Devebpment Padners Washington Pian, GRFLD, Lacy WaN n

Chelsea hNesiment Corporation Clelo 76

826 N. LacyMW N. Lacy

Habitatfor Hurnady ofCrange County LacySbeelPmiect 82

Comrmaity Development PaNers Washington Pian, GRFLD, lacy WaN n

801, 809 8 809 112 E SantaAra BNd.

HomeAid Orange County Frances XaNer ResIdence 90

Commurity Devebpmern Pareers WasHrgton Plaza, GRFLD, Lacy Walk 71

HILOWASH Vouchers (As the Primary SauceofFinancing)

Jamboree Housing Budget lm Site 86

Commuity Oevebpment Partners WesMew House 81

Non -Housing Amhody Und AssetNational Commmy Renaissance and Mem,

Home UvIng CentersSarna Am UNted Metiodlst Chmoth Site 93

Based on the scores above and the relative scoring of proposals competing for the same landasset(s) or source of affordable housing funds ( e.g. HUD-VASH PBVs), the Review Panelrecommends the following award for this project:

Developer: Jamboree HousingProject Name: Budget Inn

Developer Request:

2 million

89 HUD-VASH PBVs

Award Recommendation:

Project -Based Voucher Program ( PBV): Eighty -Nine (89) HUD-VASH PBVsCommunity Development Block Grant Program ( CDBG): $ 1, 687,047

80B-4


Page 5

On December 4, 2018, staff notified Jamboree in writing of the award recommendation by theReview Panel, contingent on final approval by the Community Redevelopment and HousingCommission (CRHC) and City Council / Housing Authority ( Exhibit 1). The pre -loan commitment

letter with Jamboree for $ 1, 687,047 in CDBG funds provides the official award from the CityExhibit 2). In compliance the City's Affordable Housing Funds Policies and Procedures, the

City's real estate advisor, Keyser Marston Associates ( KMA), has confirmed the underwriting forthe Project, the financial gap, and other programmatic requirements related to the fundingsources. KMA has reviewed the developer' s estimates and projections of rents, expenses,

reserves and development costs in accordance with industry -standard underwriting guidelinesand recommends the full amount of the award based on their underwriting and subsidy layeringanalysis ( Exhibit 3).

Project Description

Jamboree proposes to acquire the current Budget Inn and Suites, and rehabilitate the

development, adding a community clinic of approximately 4,000 square feet. Jamboree currentlyhas site control through March 2019 via an executed purchase and sale agreement.

The award recommendation for 89 HUD-VASH project -based vouchers and $ 1, 687,047 in CDBG

Program funds will create permanent supportive housing for 89 homeless veterans with wraparound supportive services. Jamboree has adopted a " whatever it takes" model of supporting theneeds of chronically homeless residents, with high success rates at their projects like theRockwood Apartments and Diamond Apartments in Anaheim, and Doria Apartments in Irvine. All

89 units would be targeted to individuals earning no more than 30% of the area median income

that are based on 30% of monthly Supplemental Security Income payments for an individual andassuming the zero -bedroom contract rents based on the 2017 rent schedule. Per the HUD-VASHregulations, this project would be serving individuals that qualify under the McKinney-Ventodefinition of homelessness.

Unit Size No. Units AMI Proposed Rent

Studio 89 30% $ 1, 387

Unit Size No. Units AMI Proposed Rent

Studio 89 30% 1, 387

SOURCES

Tax Credit Equity 15, 934,856

Permanent Loan 6,379,792

Orange County Community Foundation 1, 500,000

Veterans Housing and Homelessness Prevention 3, 560,000

Federal Home Loan Bank Affordable Housing Program 500,000

City of Santa Ana 1, 687,047

Deferred Developer Fee 136, 157

TOTAL SOURCES 29, 697, 852


Page 6

USES

Acquisition 15, 088,888

Hard Costs 6, 700,000

Indirect Costs 2,831, 028

Contingency 1, 149,953

Financing 2,527,983

Developer Fee 1, 400,000

TOTAL USES 29,697,852

The site is located within the Harbor Mixed Use Transit Corridor Specific Plan Area ("HMUTC").

Jamboree has met with staff from the Planning and Building Agency ( PBA) to determine theviability of the proposed use at this location and the associated development constraints. Furthermore, PBA staff have also presented the preliminary design concept to others in theirdepartment who have indicated conceptual support for the design aesthetic and site plan. This issubject to review of a full submittal, such as was completed for the Santa Ana Veterans Village

SAW') project, similarly located in the HMUTC. From a zoning perspective, the proposed useis allowed under the existing overlay. As plans are developed fully, Jamboree may approach theCity about development incentives; however, discretionary land use approvals should not beneeded.

The current building is about 31, 000 square feet and would include 89 studio units ( estimatedabout 325 square feettunit) to house eligible homeless veteran households referred by theVeterans Affairs Medical Center of Long Beach to the Housing Authority. There would be oneon-site employee unit. The parking count would be 107 spaces. The proposed ingress andegress would be achieved via the current driveway onto Harbor Blvd.

The rehabilitation would include adding kitchenettes in 53 units, full size refrigerators in all units, new flooring and window coverings, repainting interiors, refinishing the existing tub / showers, replacing all angle stops, swapping out all existing fixtures for low flow fixtures, replacing existinglight fixtures with LED fixtures, new dual pane windows, and a host of other items. The existingwater boilers will be swapped out with high efficiency boilers utilizing solar thermal to preheat thewater. As a part of the rehabilitation, Jamboree will undertake a comprehensive analysis to

improve energy efficiency onsite and increase energy efficiency by at least 15% over existing

conditions. All units will be fully furnished, providing a turnkey solution for future residents.

The lynch pin for the service model onsite is the construction of a new clinical space where there

is currently a small pool / spa. Having clinical support in close proximity ensures delivery ofneeded services to the veterans. Much like SAW, Jamboree will have space for a number of

agencies to provide services, such as legal services, job training, and family counseling. Thisproject will also share a similar service model as the SAW, where the Veterans Affairs staff will

provide case management services, but greatly enhanced by staff from Jamboree's CommunityImpact team.

As is essential with any permanent supportive housing project, the wrap-around supportiveservices must integrate effectively with the property management. Jamboree will employ theJohn Stewart Company as the property: manager, as they are one of the largest and mostexperienced operators of special needs housing in the state. It will also allow Jamboree to moreeffectively leverage the relationships they have with various stakeholders at the Veterans Village

80B-6


Page 7

project, located about a mile away. The proposed development will be leasing after the SAWproject, so Jamboree will have relevant experience in working with both the VA and County toensure they can lease units quickly.

Jamboree will finance this development using competitive 9% low- income housing tax credits. The 89 VASH vouchers and $ 1, 687,047 in CDBG Program Funds significantly support thecompetitiveness of this project in securing this source of project financing. The project will

require the award of Veterans Housing and Homelessness Prevention funds from State ofCalifornia Department of Housing and Community Development, which has only one round offunding annually. This will push Jamboree' s 9% tax credit application out to the first round of

2020. At the moment, the capital structure has a 69.62% second tiebreaker score for the

competitive 9% tax credits. This score would be very competitive in the Nonprofit — Homeless

apportionment, as the range of scores for this past round is between 49%- 73%. In this pastround, a 69.62% tiebreaker would have been the second highest tiebreaker in the set-aside; a

70% tiebreaker would have allocated in both the first round of 2018 as well as the second round

of 2017. Similar to SAW, Jamboree will also secure private community foundation loan fromOrange County Community Foundation as well as funding from AHP.

For the development of this project by Jamboree Housing, the Review Panel is recommending anaward of $1, 687,047 in Community Development Block Grant Funds and eighty-nine ( 89) HUD- VASH PBVs following a competitive selection process through RFP # 18-056 in compliance with

the City's Affordable Housing Funds Policies and Procedures. After Jamboree receives an

allocation of low-income housing tax credits for the development of the project, staff will return toCity Council with the loan agreement for an amount not to exceed the funds committed in the pre - loan commitment letter. Please note CDBG program expenditures for FY 2017-18 totaled

approximately $5. 7 million.

STRATEGIC PLAN ALIGNMENT

Approval of this item supports the City's efforts to meet Goal # 5 - Community Health, Livability, Engagement & Sustainability, Objective # 3 ( Facilitate diverse housing opportunities and supportefforts to preserve and improve the livability of Santa Ana neighborhoods), and Strategy CProvide that Santa Ana residents, employees, artists and veterans receive priority for affordable

housing created under the City's Housing Opportunity Ordinance or with City funding to theextent allowed under state law).

FISCAL IMPACT

Upon future approval of the loan agreement, funds in the amount of $1, 687,047 will be available

in the Community Development Block Grant, Loans and Grants account (no. 13518782-69152).

Each project -based voucher is estimated to be valued at $ 10, 550 annually, based on HUD'sinitial award of the vouchers from April 2018. The value of the vouchers on an annual basis

totals $ 938,950. The actual annual expenditure for the eighty-nine vouchers may be differentbased on when the development of the project is completed and the units are leased. Funds will

be budgeted in future fiscal years in the Housing Choice Voucher Program, Housing AssistancePayment account (no. 13618760- 69158).

Foerlliffi


Page 8

Steven A. Mendoza

Executive Director

Community Development Agency

APPROVED AS TO FUNDS AND ACCOUNTS:

14 //;, Katlilyn Do s, CPA p

Executive Director G4YF 13s)

Finance and Management Services Agency

Exhibits: 1. Award Announcement to Jamboree Housing2. Pre -Loan Commitment Letter for Jamboree Housing3. Underwriting and Subsidy Layering Analysis by Keyser Marston Associates

FOONW46

MAYOR

Miguel A. PulidoMAYOR PRO TEM

Michele Martinez

COUNCILMEMBERS

P. David Benavides

Vicente Sarmiento

Jose SolorioSal TinajeroJuan Villegas

December 4, 2018

CITE( OF SANTA ANA20 Civic Center Plaza . P. O. Box 1988

Santa Ana, California 92702

www.santa-ana. org

EXHIBIT 1CITY MANAGER

Raul Godinez IICITY ATTORNEYSonia R. Carvalho

CLERK OF THE COUNCIL

Made D. Huizar

Laura Archuleta, President Sent via E-mail

Jamboree Housing17701 Cowan Avenue, Suite 200

Irvine, CA 92614

Subject: Award Recommendations by Review Panel for RFP # 18- 056

Dear Ms. Archuleta,

Thank you very much for your proposal submitted in response to our RFP for AffordableHousing Development ( RFP # 18- 056). The City of Santa Ana received a total of thirteen13) proposals requesting over $52 million and 304 Project -Based Vouchers. We thank

you for your proposal and your commitment to develop affordable housing for theresidents of the City of Santa Ana.

In compliance with the City's Affordable Housing Funds Policies and Procedures adoptedby City Council on March 20, 2018, staff formed a Review Panel that consisted of theExecutive Director of the City' s Public Works Agency with his designee, the ExecutiveDirector of the Planning and Building Agency with his designee, the Executive Director ofthe Community Development Agency, and the Housing Division Manager. The VAMC ofLong Beach, the County of Orange, Keyser Marston Associates, and MDG Associatesserved as advisors to the Review Panel. The Review Panel used the proposal Scoringand Selection Criteria from the RFP to conduct their review. In addition to the Scoring andSelection Criteria from the RFP, the Review Panel also reviewed the proposed project

design for appropriateness for the proposed target group, compatibility with surroundinguses, cost effectiveness of construction, and appropriateness of the design and

construction for low maintenance and long term durability.

On October 30, 2018, the Review Panel met and interviewed all of the developers who

submitted a proposal. LINC Housing requested to be removed from consideration prior totheir scheduled interview and therefore their proposal was removed from consideration.

On November 14, 2018, the Review Panel met a second time to discuss and deliberate

upon the final scoring and selection of the proposals. Following this process, the ReviewSANTA ANA CITY COUNCIL

Miguel A Pulido Michele Martinez Vicente Sarmiento(] onq/ P. David Benavides Juan Villages Sal TinajeroMayor Mayor Pro Tem, Ward 2 Ward fS y Ward Ward Ward

dmoulldoaanta-ana.oro mlmanin( ae¢, mntaa. onam vsarmiento(dsanlaana. oro a a -a dbenavides(dsantaana.om Ivllleaasesanlaana.om stmalemAeanta- anaoro

EXHIBIT 1

Panel agreed upon the final scores below based on an average of the scores from eachmember of the Panel:

Housing Authority Land Asset Requested /

HUD•VASH Vouchers l No n4tousin9Authority Land Asset

Developer Name Prolect NameFINAL SCORE (Average o/ IntlWitlual

ReviewerScores)

1126& 1146 E. WasNngton Avenue

Orange Housing Development Coryomtion andC& C DesebpmenL LLC

1126- 1146 E. Washington Site 92

Related California The Crossroads at Washington 91

Jamboree Housing REVOApantrnehis 87

Cesar Chavez Foundation Santa Ana Place 84

Commuity HousingWoft Tmrefomar 80

Conradi Devebpment Partners Washington Plain, GRFLD. Lacy Walk 77

Chelsea kwesMent Comoration Cleb 76

826 N. LacyMO N. Lacy

Habitat for Hwnanity of Orange County Lacy Street Project 82

CommunityDeeelopment Partiars Washington Piam, GRFLD, LacyWalk 77

801. 809 & 80912 E. Saha Are Md.

HomeNd Orange County Frances XaNer Residence 90

CommurityDevebpmeMPartres Washington Plans, GRFLD. LaryWa4t 77

HUD- VASH Vouchers (As the Primary SomeofFiiancing)

Jamboree Housing Budget Inn Site 86

Community Development Partners We. mew House 81

Non -Housing Autlnny, Land Asset National Community Renaissance am MerryHouse IJvifg Centers

Santa Ara Unitas! MetintlistChioch Site 93

Supporting documentation for the scores above may be provided upon request.

FOODIME1

EXHIBIT 1

Based on the scores above and the relative scoring of proposals competing for the sameland asset or source of affordable housing funds, the Review Panel is recommending thefollowing award for your organization to our Community Redevelopment and HousingCommission and to the City Council / Housing Authority for final approval:

Developer: Jamboree HousingProject Name: **" Budget Inn**"

Developer Request:

2 million

89 HUD-VASH PBVs

Award Recommendation:

Project -Based Voucher Program ( PBV): Eighty -Nine (89) HUD-VASH PBVsCommunity Development Block Grant Program ( CDBG): $ 1, 687,047.00

This recommendation is contingent upon final approval by the Community

For the next steps:

1) Please acknowledge your willingness to accept this award recommendation and

develop your project ( by responding to this e- mail) including the additionalrequirements listed below that will be incorporated into your final commitment

from the City / Housing Authority among various other terms: a. Efforts must be exhausted to award the eighty-nine ( 89) HUD-VASH

Project -Based Vouchers to your project as an Existing Housing site incompliance with the federal regulations for the Project -Based VoucherProgram at 24 CFR 983. Please coordinate with staff to schedule an

inspection of the units and the requirements to certify as an ExistingHousing site.

b. No less than 100% of the units in the project must be permanent

supportive housing for homeless veterans in compliance with the HUD- VASH Program. If less Project -Based Vouchers are accepted for the

project, the remaining permanent supportive housing units must be forhomeless individuals and families referred from the Coordinated EntrySystem who are residing in the City of Santa Ana based upon:

L Proof of strong ties to the community, to include current residencyof an immediate family member — mother, father, sibling, orgrandparent in the City of Santa Ana;

ii. Proof that the individual attended a K- 12 school in Santa Ana;

iii. Proof that the individual resided on property zoned for residentialuse in Santa Ana and the individual was on the lease and/or paid

utilities necessary for legal use of the property for residentialpurposes; or

FOOTITME

EXHIBIT 1

iv. Knowledge — either first-hand or recorded — by the Santa AnaPolice Department that the individual has been a member of theSanta Ana homeless community.

2) Please acknowledge ( by responding to this e- mail) your willingness to reimbursethe City for the cost of an underwriting and subsidy layering review to beconducted by Keyser Marston Associates ( KMA).

3) Staff will coordinate with you a first look of your project in coordination with theCity's Planning and Building Agency to verify that the project design complieswith the City's requirements.

4) Staff will complete a National Environmental Policy Act review in compliance withyour award of federal funds.

5) Please draft a presentation that you will provide with staff to the CommunityRedevelopment and Housing Commission ( CRHC) on December 19th at 4: 30PMin the City Council Chambers. This presentation must be provided to staff beforeCOB on Tuesday, December 11 th. Staff will also coordinate with you on the StaffReport that will be presented to the Commission and then to City Council / Housing Authority.

6) Staff will be recommending your award to the CRHC on December 19, 2018 andto City Council and the Housing Authority in January or February 2019. Youmust be present and ready to present your project at both meetings as well asrespond to any questions or concerns.

From all of us here at the City, thank you again for your proposal and congratulations onyour award recommendation. We look forward to working with you to develop affordablehousing for the residents of the City of Santa Ana.

Sincerely,

Judson Brown

Housing Division Manager

Community Development AgencyHousing and Neighborhood Development Division20 Civic Center Plaza ( M- 26) Santa Ana, CA 92701

T: ( 714) 667-2241

F: ( 714) 647-6549

www.santa- ana. or-q/cda

D-

MAYOR

Miguel A. Pulido

MAYOR PRO TEMJuan Villegas

COUNCILMEMBERS

Cecilia Iglesias

David Penaloza

Roman Reyna

Vicente Sarmiento

Jose Solorio

March 5, 2019

Laura Archuleta

President

CITY OF SANTA ANASANTA ANA HOUSING AUTHORITY

20 Civic Center Plaza • P.O. Box 22030

Santa Ana, California 92702

714) 667- 2200

www.santa-ana.om

Jamboree Housing Corporation17701 Cowan Avenue, Suite 200

Irvine, California 92614

Re: Budget Inn

1108 N. Harbor Boulevard, Santa Ana, CA 92703

EXHIBIT 2ACTING CITY MANAGER

Steven A. Mendoza

CITY ATTORNEY

Sonia R. Carvalho

ACTING CLERK OF THE COUNCIL

Norma Mitre -Ramirez

Pre -Commitment Letter for CDBG Loan and Project Based Vouchers

Dear Ms. Archuleta:

Jamboree Housing Corporation (" Developer") requested financial assistance in connectionwith the proposed development of an eighty-nine (89) unit affordable housing complex to belocated at 1108 N. Harbor Boulevard, Santa Ana, CA 92703 (" Project").

The City of Santa Ana ("City") and the Housing Authority of the City of Santa Ana ("HousingAuthority") have reviewed the Developer's request for assistance, and at the City Council / Housing Authority meeting on February 5, 2019, the City Council and Housing AuthorityBoard authorized and approved issuance of this pre -commitment letter evidencing thepreliminary award of (collectively, the "City Assistance"):

A loan in the maximum amount of $1, 687,047 funded from the U. S. Department

of Housing and Urban Development ( HUD) Community Development BlockGrant funds ("CDBG") held by the City of Santa Ana ("City Loan"); and,

Eighty-nine (89) U.S. Department of Housing and Urban Development -VeteransAffairs Supportive Housing (" HUD-VASH") Project -Based Vouchers (" PBV") forPermanent Supportive Housing for the Project.

This letter shall evidence the City's pre -commitment of the City Assistance to the Developerfor the Project subject to the conditions described below.

SANTA ANA CITY COUNCIL

Miguel A Pugdo Juan Villegas Vicente Sarmiento/ Pe Jose S. I. H. Roman Reyna Cecilia Iglesias

Mayor Mayor Pm Tem, Wards Wad , 1 artl Ward3 Ward4 Ward6mougdoRsantaana.aro M1Isaasnosantaana. oro vsarmiento/olsanta-ana.om I san . o IsolorioRsanta- ana.orn rreynaissanta-ana.org aglesiasAsanta-ana.am

EXHIBIT 2Page 12

City Loan:

The amount of the proposed City Loan has been determined based upon the City's reviewof the Developer's request for the receipt of the City Assistance and the developmentproforma and projected cash flows for the Project submitted by the Developer to the City

Proforma"). The City Manager and Housing Authority Executive Director has authority toapprove revised development proformas and projected cash flows for the Project; provided,

however, that the City Assistance is not increased or extended.

The City Loan shall include the following terms:

1, 687,047 maximum principal amount, acquisition costs to construct the Project,

the City of Santa Ana.

3% simple interest per annum.

or as much thereof as is disbursed for

funded from the HUD CDBG funds held by

Repayment from 50% of Residual Receipts ( pro -rata with payments due in

connection with other financing provided by other public agencies) (after payment ofoperating expenses, debt service, any deferred developer fee, and partnership feesto be described in the Agreement) with the remaining 50% to be disbursed to theDeveloper.

Remaining principal and accrued interest due upon the 55th anniversary of theissuance of Certificate of Occupancy and/orfinal building permits or earlier upon sale, refinancing or default. On that date, the City agrees to review the performance of theproperty and consider in good faith any reasonable request by Developer to modifythe terms or extend the term of the City Promissory Notes. Additionally, the City willreceive a pro rata share of 50% of the net proceeds received from any sale orrefinancing of the Project, after payment of outstanding debt and payment in full ofany deferred developer fee and establishment of any reserves and transaction costs.

Cost savings from the Project, if any, will be applied first to pay down the City Loan, subject to compliance with the Tax Credit Allocation Committee (" ICAC")

Regulations.

HUD-VASH PBV's:

The Project consists of eighty-nine ( 89) permanent supportive housing units to be madeavailable at affordable rents to HUD-VASH eligible homeless veterans for a term of fifty- five (55) years. All homeless veterans shall be referred from the Veterans Affairs Medical

Center of Long Beach through the Orange County Coordinated Entry System, and areresiding or working in the City of Santa Ana as defined under the City's criteria.

FOODIMEA

EXHIBIT 2Page 13

The HUD-VASH PBV's shall include the following terms:

Voucher Source: The eighty-nine (89) HUD-VASH PBVs will be funded exclusivelyout of the tenant -based voucher program annual budget authority received by theHousing Authority from the U. S. Department of Housing and Urban DevelopmentHUD).

Rents: The PBV Housing Assistance Payments (" HAP") Contract rents below arepreliminary and contingent upon a reasonable rent determination to be conductedat the time of execution of the HAP Contract:

o 0 Bedroom - $ 1, 387

In accordance with HUD regulations and the Housing Authority's Housing ChoiceVoucher Program Administrative Plan, these rents are subject to review prior tothe execution of a HAP Contract.

Rents and income requirements for the remaining affordable units shall be basedon the requirements of the federal Low Income Housing Tax Credit Program asadministered by TCAC.

Annual Amount: The Project will receive PBVs for eighty-nine (89) units:

Unit SizeIncome

No. Units Proposed RentTotal Annual

Target Revenue

0 -Br 30% AMI 89 1, 387 1, 481, 316

The estimated maximum annual amount received under this award is $ 1, 481, 316.

These estimates assume 100% occupancy of the assisted units over the twelve- month period.

Term: The HAP Contract will have a term of twenty ( 20) years. Any time beforethe expiration of the HAP Contract, the Developer may request an additionaltwenty ( 20) years, subject to a determination by the Housing Authority that it isappropriate to continue providing affordable housing for homeless veterans or toexpand housing opportunities and HUD funding. Subsequent extensions are

subject to the same requirements.

Units Receiving PBV Assistance: The maximum number of units receiving PBVassistance will be eighty-nine (89).

EXHIBIT 2Paqe 14

General Provisions:

The City's obligation to provide the City Assistance to the Project is subject to each of thefollowing conditions:

Developer must provide proof that it has secured all of its remaining financing forthe development of the Project before staff will return to the City Council forconsideration of the Loan Agreement.

All provided funding and project requirements shall conform to the City's adoptedAffordable Housing Funds Policies and Procedures, unless alternative

requirements are expressly provided in the executed Loan Agreement or any otherdocuments related to the development of the Project.

Approval of all required entitlements and discretionary actions, to allow theconstruction of a 89 -unit affordable housing complex to be located at 1108 N. HarborBoulevard, Santa Ana, CA 92703.

The City's obligation to provide the Loan is and shall remain subject to all covenants, conditions, and restrictions set forth in the Loan Agreement, and in particular City'sanalysis of the available funding sources and development and operating costs ofthe Project and the overall economic feasibility of the Project.

Review and approval of the documents evidencing the City Loan by the City Council, as applicable.

Execution of HAP Contracts and all necessary documents for the PBV's.

Compliance with applicable federal regulations set forth in 24 Code of FederalRegulations (CFR) Part 570 and 24 CFR Part 983.

Developer, at its sole cost and expense, will be responsible for securing any and allpermits and discretionary approvals that may be required for the Project by the City, Housing Authority, or any other federal, state, or local governmental entity having orclaiming jurisdiction over the Property or Project. Notably, this pre -commitment lettershall not obligate the City or any department thereof to approve any application or requestfor or take any other action in connection with any planning approval, permit or otheraction necessary for the construction, rehabilitation, installation or operation of theProject.

This pre -commitment letter for the Project will expire on January 15, 2021.

EXHIBIT 2Page 15

If you have any questions or require any additional information regarding this award letter, please contact Judson Brown, Housing Division Manager, by telephone at ( 714) 667- 2241 or by e- mail at Ibrownna Santa- ana. org.

Sincerely,

Steven A. Mendoza

Acting City Manager

Attest:

Norma Mitre -Ramirez

Acting Clerk of Council

D-

ADviso RS IN:

Real Estate

Affordable HousingEconomic Development

BERKELEY

A. Jerry KeyserTimothy C. KellyDebbie M. Kern

David Doezema

Kevin Feeney

Los ANGELES

Kathleen H. Head

James A. Rabe

Gregory D. Soo -HooKevin E. Engstrom

Julie L. RomeyTim R. Bretz

SAN DIEGO

Paul C. Marra

KEYSER MARSTON ASSOCIATESADVISORS IN PUBLIC/ PRIVATE REAL ESTATE DEVELOPMENT

MEMORANDUM

To: Judson Brown, Housing Division Manager

City of Santa Ana

From: Tim Bretz

Date: February 21, 2019

Subject: Budget Inn: Preliminary Financial Gap Analysis

EXHIBIT 3

At your request, Keyser Marston Associates, Inc. ( KMA) prepared a financial gap analysis

for the project proposed to be developed at 1108 North Harbor Boulevard (Site) by

Jamboree Housing Corporation ( Developer). The Site contains an existing motel whichthe Developer proposes to acquire and convert into a 91 -unit permanent supportive

housing (PSH) apartment project (Project). Eight -nine (89) apartment units will be

restricted to extremely -low households and two units will be unrestricted and reservedfor onsite managers.

The Developer is requesting financial assistance from the City of Santa Ana (City). The

City proposes to utilize Community Development Block Grant Program ( CDBG) funds

which are allocated to the City by the United States Department of Housing and Urban

Development (HUD). In addition, the Santa Ana Housing Authority (Authority) proposes

to provide 89 HUD- VASH Project -Based Vouchers ( PBVs) allocated to the Authority by

HUD. The purpose of the KMA analysis is to evaluate the Developer's financial

assistance request.

500 SOUTH GRAND AVENUE, SUITE 1480 > LOS ANGELES, CALIFORNIA 90071> PHONE 213. 622.8095

wWW.KEYSERMARSTON. COM

LFoolimpo1902016.SA. TRB

19090.017.009

Judson Brown, City of Santa Ana February 21, 2019

Budget Inn: Preliminary Financial Gap Analysis Page 2

EXECUTIVE SUMMARY

Estimated Financial Gap

The results of the KMA financial gap analysis are compared to the Developer' s financial

proposal in the following table:

KMA Developer Difference

Total Development Costs $ 29,745, 000 29, 761, 000 16, 000)

Outside Funding Sources ( 28, 075,000) 28, 074,000) 1, 000

Financial Gap $ 1, 670,000 1, 687,000 17,000)

As shown in the preceding table, KMA estimates the Project' s financial gap at $1. 67million. Comparatively, the Developer is requesting $ 1. 69 million in financial assistance

from the City. This differential can be considered inconsequential. However, it is

important to note that the KMA and Developer estimates differ on a line item by lineitem basis. In addition, KMA has concerns regarding the proposed social servicesbudget.

Proposed Funding Sources

The following summarizes the proposed funding sources for the Project:

1.

2.

3.

4.

KMA estimates that the Project' s net operating income (NOI) can support a

6.40 million permanent loan.

The Developer is proposing to apply for 9% Federal Low Income Housing Tax

Credits (Tax Credits) that are competitively awarded by the California Tax Credit

Allocation Committee (TCAC). The net Tax Credit proceeds are estimated at

15.59 million.

The Developer is proposing to apply for a $ 1. 50 million loan from the Orange

County Community Foundation (OCCF).

The Developer is proposing to apply for a loan of $3. 56 million from the Veterans

Housing and Homelessness Prevention Program (VHHP).

1902016.SA.TRB

80B-20 19090.017.009



5. The Developer is proposing to apply for a loan of $890,000 in Affordable Housing

Program (AHP) funds awarded by the Federal Home Loan Bank of San Francisco.

6. The Developer is proposing to defer $139, 000 of the Developer Fee that is

included in the Project' s development costs. The deferred amount will be repaid

from the cash flow generated from the Project over time.

PROJECT DESCRIPTION

The proposed scope of development can be described as follows:

1. The Site is comprised of 1. 79 acres, or 77, 972 square feet of land area.

2. The 91 -unit Project represents a density of 50 units per acre.

3. The Project will include 89 studio units, one (1) one -bedroom unit, and one (1)

two-bedroom unit.

4. The Project will include 89 PSH units which will be restricted to households

earning no more than 30% of the Tax Credit Median.

5. The Project will include two unrestricted units reserved for onsite managers.

6. The Project will include a 4,000 square foot medical clinic.

7. The Project will include 107 surface parking spaces.

FINANCIAL GAP ANALYSIS

KMA prepared a pro forma analysis to estimate the Project' s financial gap. The analysis

is located at the end of this memorandum, and is organized as follows:

Table 1: Estimated Development Costs

Table 2: Stabilized Net Operating Income

Table 3: Financial Gap Calculation

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80B-21 119090. 17.00919090.017. 009



Estimated Development Costs (Table 1)

KMA reviewed the Developer' s February 14, 2019 pro forma and then independentlyprepared a pro forma analysis of the Project. The resulting development costs areestimated as follows:

Property Assemblage Costs

The following summarizes the property assemblage costs:

1. The Developer proposes to purchase the property for $15. 09 million, or

165, 800 per unit. The Developer did not provide an appraisal for review. The

KMA analysis will need to be revised if the appraised value differs from the

proposed purchase price.

2. It should be noted that the Developer does not anticipate any relocation costsfor the Project, and a relocation plan was not provided for review. This analysis

will need to be revised if the Project is ultimately subject to any relocationexpenses.

3. The closing costs are estimated at $25, 000, or less than 1% of the proposed

purchase price.

The total property assemblage costs are estimated at $15. 11 million.

Direct Costs

The direct cost estimates assume that the Project will be subject to Federal Davis Bacon

and/ or State of California prevailing wage requirements. The direct costs applied in this

analysis can be summarized as follows:

The Developer assumes that the Project will not be required to complete any off-

site improvements. City staff should verify the accuracy of this assumption.

2. The Developer estimates the residential rehabilitation costs at approximately5. 20 million, or $57, 100 per unit. The Developer has not completed a physical

needs assessment nor finalized the scope of rehabilitation. The KMA analysis

will need to be revised if the residential rehabilitation costs differ than the

estimates provided by the Developer for this analysis.

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80B-22 119090. 17. 00919090.017. 009



3. The Developer estimates the costs to build out the clinic space at $1. 20 million,

or $300 per square foot of clinic GBA. This estimate assumes a full build -out of

the clinic space including both shell costs and tenant improvement costs.

4. The Developer included a $ 512,000 allowance for furnishings, fixtures and

equipment, which assumes that all of the affordable units are fully furnished.

5. The contractor costs are estimated as follows:

a. An 11% allowance for contractor fees and general requirements is

provided.

b. An allowance for construction bonds/ general liability insurance at 2% of

construction costs is provided.

6. A direct cost contingency allowance equal to 10% of other direct costs is

provided.

KMA estimates the total direct costs at $8.48 million. This equates to $93, 200 per unit.

Indirect Costs

KMA utilized the following assumptions in estimating the indirect costs:

1. The architecture, engineering and consulting costs are estimated at 8% of direct

costs.

2. The construction management fee is estimated at $100,000.

3. The Developer estimated the public permits and fees costs at $570, 000, or

6, 300 per unit. City staff should verify the accuracy of this estimate.

4. The taxes, insurance, legal and accounting costs are estimated at 3% of direct

costs.

An approximately $1, 200 per unit allowance for marketing and leasing costs isprovided.

6. The Developer set the Developer Fee at $ 1. 71 million, which is equal to the

maximum amount allowed by TCAC.

80B-23 119090. 17. 00919090.017. 009



7. An indirect cost contingency equal to 10% of other indirect costs is provided.

KMA estimates the total indirect costs at $3. 77 million.

Financing Costs

The financing costs for the Project are estimated as follows:

1. The construction period and absorption period interest costs are estimated at

1. 64 million. These costs are based on the following assumptions:

a. The construction period interest costs are based on a 5. 0% interest rate,

a 13 -month construction period, and a 65% average outstanding balance.

The absorption period interest costs are based on a seven- month

absorption period with a 100% average outstanding balance.

2. The construction loan and permanent loan financing fees are estimated as at 1. 0point.

3. A $ 320,000 capitalized operating reserve is provided. This equates to three

months of operating expenses and debt service payments.

4. The Tax Credit fees are estimated at $104,000 based on the followingassumptions:

a. A $ 2,000 application fee;

b. A $410 per unit monitoring fee; and

C. Four percent (4%) of gross Tax Credit proceeds for one year.

KMA estimates the total financing costs at $2. 38 million.

Total Development Costs

As shown in Table 1, KMA estimates the total development costs at $29. 75 million, or

326,900 per unit. This is approximately $16,000 less than the Developer' s estimate,

which can be considered an insignificant difference.

1902016.SA.TRB

80B-24 19090.017.009



Stabilized Net Operating Income (Table 2)

The Project' s funding sources include Tax Credits, VHHP funds, and CDBG funds. Theseprograms all publish the applicable income limits for households that are qualified to

reside in the development.

TCAC publishes rent standards for projects that receive Tax Credits. HCD publishes

regulations regarding the applicable rents for projects with VHHP funds, and HUD defersto HOME Program rents for projects with CDBG funds. The Developer will be required

to adhere to the strictest of the standards imposed by the funding sources contributed

to the Project.

Tenant -Paid Rents

The rents used in this analysis are based on 2018 income and rent information published

by TCAC and the HOME Program. The maximum allowable rents, net of the appropriate

utility allowances, are estimated as follows:

Rent Restriction) Studio

Tax Credit @ 30% Median $ 574

VHHP @ 30% Median $ 574

CDBG @ Low HOME $ 913

30% SSI $ 273

Applicable Rent $ 273

The Authority will provide HUD-VASH PBVs for the 89 income -restricted units. The PBV

payments are based on the difference between the rent paid by the tenant and the fair

market rent (FMR) approved by HUD. The 2019 FMR for a studio unit is set at $ 1, 387per unit per month.

For the purposes of underwriting, the rents for the PSH units are set at the lesser of 30% of SSI and therent restrictions imposed by the funding sources.

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Estimated Effective Gross Income

KMA estimates the Project' s effective gross income at $ 1. 34 million based on the

following:

1. The gross tenant -paid rents are estimated to total $291,600.

2. The gross HUD- VASH PBV subsidy is estimated to total $1. 19 million.

3. Laundry and miscellaneous income is estimated to average $ 9 per unit per

month, or $9, 800 per year.

4. A 10% vacancy and collection allowance is provided.

Estimated Operating Expenses

The operating expenses are estimated at $853,400 based on the following:

The general operating expenses are estimated at $5, 200 per unit per year.

KMA assumes that the Developer will apply for the property tax abatement that

is accorded to nonprofit housing organizations that own and operate apartment

units restricted to households earning less than .80% of the area median income.

The property tax assessment overrides are estimated at $7,000 per year.

3. The social service expenses are estimated at $311,500, which equates to $3, 500

per unit. KMA has concerns with the proposed social services budget, which is

discussed in further detail at the end of this memorandum.

4. The VHHP Loan has a required debt service payment equal to 0.42% of the VHHP

Loan amount, which equals $ 15, 000 per year.

5. The replacement reserve deposits are set at $500 per unit per year, which is

required by the VHHP Program.

Estimated Stabilized Net Operating Income

The Project' s EGI is estimated at $1. 34 million, and the operating expense are estimated

at $853,400. This results in estimated stabilized net operating income of $488,700.

80B-26 190

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19090.017.009009



Financial Gap Calculation

The financial gap is estimated by deducting the available outside funding sources fromthe Project' s total development costs. The outside funding sources anticipated to be

received by the Project are described in the following sections of this memorandum.

Available Outside Funding Sources

Permanent Loan

To estimate the maximum permanent loan that can be supported by the Project' s NO],

KMA assumed that the loan would underwritten be based on the following

requirements:

1. A 115% debt service coverage ratio;

2. A 5.75% interest rate; and

3. A 35 -year amortization period.

KMA estimates that the Project' s stabilized NOI can support a $ 6. 40 million permanent

loan.

Tax Credit Proceeds

KMA estimates the net Federal Tax Credit proceeds at $15. 59 million. This estimate is

calculated based on the following assumptions:

1. The Project' s eligible Tax Credit basis is equal to the lesser of the depreciable

costs for the 91 Tax Credit units, or the threshold basis limits established by

TCAC. In this case, the depreciable costs are less than the threshold basis limits

as follows:

a. The Project' s acquisition basis is estimated at $ 12.10 million; and

The Project' s construction cost basis is estimated at $12.82 million.

2. To increase the competitiveness of the Project' s Tax Credit application in the

TCAC tiebreaker process, the Developer is proposing to voluntarily exclude $2. 49

million from the Project' s eligible construction cost Tax Credit basis.

TRB

80B_27 199090. 0 7. 00919090. 017. 009



The Project is a special needs project, and per TCAC regulations, is allowed to

increase the eligible construction cost Tax Credit basis by 30%.

4. The annual Federal Tax Credit rate is set at 9. 0%. This rate is applied over the

10 -year Federal Tax Credit period.

5. 100% of the Project' s building area that is included in eligible basis is located in

units that qualify for Federal Tax Credits.

6. The net syndication value supported by the Tax Credit is ultimately determined

based on competitive market conditions and on the timing of disbursements.

Based on currently available information, the Developer estimates the proceeds

at $0. 97 per gross Tax Credit dollar.

OCCF Loan

The Developer is proposing to apply for a loan of $1. 50 million from OCCF.

VHHP Loan

The Developer is proposing to apply for a loan of $3. 56 million from the VHHP Program.

AHP Loan

The Developer is proposing to apply for a loan of $890,000 in AHP funds.

Deferred Developer Fee

The Developer is proposing to defer $139, 000, or 8% of the Developer Fee that is

included in the Project' s development costs. The deferred amount will be repaid from

the cash flow generated by the Project overtime.

Total Available Outside Funding Sources

As shown in Table 3, the outside funding sources available to the Project are estimatedat $28.08 million.

Financial Gap Calculation

Based on the preceding analysis, KMA estimates the Project' s financial gap as follows:

1902016.SA.TRB

80B-28 19090.017.009

Judson Brown, City of Santa Ana

Budget Inn: Preliminary Financial Gap Analysis

Total Development Costs

Less) Total Available Funding Sources

Financial Gap

Per Unit

February 21, 2019Page 11

29, 745,000

28, 075,000)

1, 670,000

18,400

As shown in the preceding analysis, KMA estimates that the Project exhibits a $ 1. 67

million financial gap. In contrast, the Developer is requesting $ 1. 69 million in financial

assistance from the City. This represents a $ 17,000 differential, which is an

approximately 1% difference. It is the KMA opinion that a difference of this magnitudecan be considered insignificant.

SOCIAL SERVICE EXPENSE DISCUSSION

The Developer is currently estimating the social service expenses at $311, 500 per year,

which equates to $3, 500 per affordable unit. This budget assumes one full-time

program manager, two full- time service coordinators, and one part-time peer counselor.

The Developer is proposing to be the social service provider for the Project, and to pay

for 100% of the social service expenses through the Project' s operating income.

In contrast to the Developer' s proposal, other developers typically partner with non-

profit social service providers that obtain funding from other county and state entities

to pay for a portion of the social service costs. Thus, in most instances, the project itself

is not paying for a significant portion of the social service expenses directly out ofproject operations.

As a result, the Developer's proposed social services budget is significantly higher than

the budgets included in recent similar projects that KMA has reviewed in the Southern

California region. For reference purposes, similar projects in Orange County have socialservice budgets that range from $1, 500 to $2, 000 per affordable unit per year.

The inclusion of 100% of the social service expenses in the Project' s operating budget,

reduces the NO[ available to obtain permanent loan proceeds, which in turn increases

the Project' s financial gap. For example, if the social services budget were reduced to178, 000 ($2, 000 per affordable unit per year), the Project' s NO[ could support an

additional $ 1. 75 million in permanent loan proceeds, which would reduce the Project' s

1902016.SA.TRB

80B-29 19090.017. 009

Judson Brown, City of Santa Ana

Budget Inn: Preliminary Financial Gap Analysis

February 21, 2019

Page 12

financial gap on a dollar -for -dollar basis. In addition, these expenses decrease the

annual cash flow available to repay the City's loan.

KMA and the Developer had lengthy discussions regarding the proposed social services

budget, but were not able come to an agreement. During these discussions, KMAproposed the following structure:

1. The permanent loan may be underwritten based on the Developer' s proposed

social services budget of $3, 500 per affordable unit, or $331,500.

2. However, the automatically approved social services budget will be limited to

2, 000 per affordable unit, or $178, 000.

The remaining $133,500 of the budget ($311,500 - $ 178, 000 = $ 133,500), will be

subject to review and approval by the City each year.

This structure would allow the City to evaluate the level of social services and

corresponding budget on an annual basis. This structure would also allow the City toencourage the Developer to seek out additional social service funds from other entities.

If in any year the City determines that the additional $ 133, 000 is not warranted, it

would result in additional cash flow to the Project that would work its way through the

Project' s cash flow waterfall and ultimately repay the City' s loan sooner thananticipated.

As noted above, KMA discussed this concept with the Developer; however, the

Developer was not amenable to accepting any annual caps on the social services budget

that were less than the proposed $311,500 budget.

CONCLUSIONS/ RECOMMENDATIONS

The following summarizes the conclusions of the KMA analysis:

1. Based on the currently available information, and if it is assumed that the Cityapproves a $ 311,500 per year social services budget, it is KMA' s conclusion that

the Developer' s request for $1. 69 million in City assistance and 89 HUD-VASH

PBVs is supported by the Project economics.

1902016.SA.TRB

80B-30 19090.017.009



2. However, KMA does not recommend that the City approve the social services

budget as proposed. Instead, KMA recommends the following structure:

The permanent loan may be underwritten based on the Developer' s

proposed social services budget of $3, 500 per affordable unit, or

311,500 per year.

b. The Developer will be entitled to expend $ 2, 000 per affordable unit, or

178,000 without a requirement to receive City approval for the

expenditures.

C. Any proposed additional social services expenditures, up to a maximum

of $133,500 ($ 311,500 - $ 178,000 = $133,500), must be submitted to the

City for review and approval each year.

3. Typically, soft lenders of affordable housing projects will split 50% of a project' s

residual receipts based on a pro rata distribution determined by their respective

loan balances. However, based on discussions with the Developer, it is likely that

OCCF will request 75% of the Project' s residual receipts, which is much higher

than OCCF' s pro rata share. As such, KMA recommends that the City work with

the Developer to negotiate a more equitable residual receipts distribution

among the soft lenders.

4. The City should require the Developer to obtain three general contractor bids

prior to selecting a general contractor. The three bids should be provided to the

City for review and approval.

1902016.SA.TRB

80B-31 19090.017.009

TABLE 1

ESTIMATED DEVELOPMENT COSTS

BUDGET INN

SANTA ANA. CALIFORNIA

I. Property Assemblage Costs

Property Acquisition Costs

Closing Costs

Total Land Assemblage Costs

II. Direct Costs

Off-site Improvements

Residential Rehabilitation Costs

Clinic Space Building CostsFurnishings, Fixtures & Equipment

Contractor Fees / General Requirements

Construction Bonds / General Liability Insurance

Contingency Allowance

Total Direct Costs

III. Indirect Costs

Arch, Eng, & ConsultingConstruction Management

Public Permits & Fees

Taxes, Insurance, Legal & Accounting

Marketing & Leasing

Developer Fee

Contingency Allowance

Total Indirect Costs

IV. Financing Costs

Interest During Construction

Financing FeesConstruction Loan

Permanent Loan

Operating ReserveTCAC Fees

Total Financing Costs

IM

191 Units 165,800 Unit 15,089,000

0. 17% Acq Costs 25, 000

15, 114,000

2

3 04 91 Units 57,100 Unit 5, 196, 0004 4,000 Sf GBA 300 Sf GBA 1, 200,0004 91 Units 5, 621 Unit 512, 000

11% Construction Costs 704, 000

2% Construction Costs 96,000

10% Other Direct Costs 771, 000

91 Units 93, 200 Unit 8,479,000

8% Direct Costs 678, 000

100,000

91 Units 6, 263 Unit 570,000

3% Direct Costs 254,000

91 Units 1, 220 Unit 111,0006 15% Eligible Basis 1,714,000

30% Other Indirect Costs 343, 000

3, 770,000

6 $25,461, 000 Loan Amount 5. 00% Interest 1,639,000

25, 461, 000 Loan Amount 1. 00 Points

6,399, 000 Loan Amount 1. 00 Points

3 Months Operating Expenses/ Debt Service7

255, 000

64,000

320,000

104,000

2,382, 000

Total Construction Costs 91 Units $ 160,800 / Unit $ 14,631, 000

Total Development Costs 91 Units $ 326,90D / Unit $ 29, 745,000

2 Based on Developer estimate. An appraisal was not provided for review.

2 Estimates assume prevailing wage requirements will be imposed on the Project. 3 Based on Developer estimate. The estimate should be verified by City staff. 4 Based on Developer estimates. A detailed scope of work or physical needs assessment was not provided for review. s This is the maximum amount allowed to be included in the Project' s eligible Tax Credit basis.

6 Includes debt on the 90% of the Tax Credit Equity which will not be funded during construction. Assumes a 13 -month construction period with a 65% average outstanding balance and a 7 -month absorption period with a 100% average outstanding balance.

r Includes a $ 2, 000 application fee; $ 410/ unit monitoring fee; and 4% of the gross Tax Credit proceeds for one year.

Prepared by: Keyser Marston Associates, Inc. 80B-32Filename: Jamboree Budget Inn -2 19 19; PF - 9%; trb

TABLE 2

STABILIZED NET OPERATING INCOME

BUDGET INN

SANTA ANA, CALIFORNIA

I. Gross Residential Income1

Manager' s Unit 2 Units 0 Unit/ Month 0

A. Base Rental Income

Low HOME/ TC @ 30% Median

Studio Units @ ( 306-Sf) 89 Units 273 Unit/ Month 291,600

B. HUD-VASH PBV Income

Studio Units @ ( 306-Sf)

Low HOME/ TC @ 30% Median 89 Units 1, 114 Unit/ Month 1, 189,800

Laundry/ Miscellaneous Income 91 Units 9 Unit/ Month 9, 800

Gross Income 1,491, 200

Less) Vacancy & Collection Allowance 10% Gross Income 149, 100)

Effective Gross Base Rent Income 1,342, 100

II. Operatine Expenses

General Operating Expenses 91 Units 5, 213 Unit 474,400

Property Taxes1 91 Units 77 Unit 7,000

Social Services 3 89 Affordable Units 3, 500 Unit 311, 500

VHHP Mandatory Debt Service4 $ 3, 560, 000 VHHP Loan 0.42% VHHP Loan 15,000

Replacement Reserve 4 91 Units 500 Unit 45, 500

Total Operating Expenses $ 853,400

III. I Net Operating Income $ 488,700

1 Based on OC Incomes distributed by HUD. As pertinent, the rents are based on those published in 2018 by TCAC, the HOME Program, and 30% of SSI. The project will pay for all utilities and no utility allowances are deducted from the gross rents.

z Based on Developer estimate. Assumes that the Developer will receive the property tax abatement accorded to nonprofit housing organizations that

develop income -restricted apartments. 3 Based on Developer estimate.

4 Based on the requirements imposed by the VHHP Program.

Prepared by: Keyser Marston Associates, Inc. 80B-33Filename: Jamboree Budget Inn -2 19 19; PF -9%; trb

TABLE 3

FINANCIAL GAP CALCULATION

BUDGETINN

SANTA ANA, CALIFORNIA

I. Available Funding Sources

Permanent Loan

Net Operating IncomeIncome Available for Mortgage

Interest Rate

Permanent Loan

Federal Tax Credit Equiri

Gross Tax Credit Value

Syndication Rate

Net Federal Tax Credit Equity

OCCF

VHHP

AHP

Deferred Developer Fee

Total Available Funding Sources

II. Unfunded Financial Gap Calculation

Total Available Funding SourcesLess) Total Development Costs

488,700 NOI ( See Table 2)

1. 15 DCR

5. 75% Interest Rate

16,071,000

97% / Tax Credit Dollar

425,000 Debt Service

6. 64% Mortgage Constant

6, 399,000

15, 587,000

3 $1, 500, 000

3 $3, 560,000

890, 000

3 8% Total Developer Fee $ 139,000

28, 075, 000

28,075, 000

29,745, 000)

Unfunded Financial Gap 91 Units $ 18,400 / Unit $ 1, 670,000

1 Assumes a 35 -year amortization period.

Assumes a $ 10.3 million requested unadjusted eligible basis, which includes a $ 2. 49 million voluntary basis reduction, a 130% difficult-to-developpremium, a 9.0% Tax Credit rate and an applicable fraction of 100%.

3 Based on Developer estimate.

Prepared by: Keyser Marston Associates, Inc. 80B-34Filename: Jamboree Budget Inn -2 19 19; PF -9%; trb

Documents

REQUEST FOR COUNCIL/ HOUSING AUTHORITY pal