Welcome to Shark Tank. A TALHFA Not-So-Exclusive Interactive Session September 8, 2016

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1 Welcome to Shark Tank A TALHFA Not-So-Exclusive Interactive Session September 8, 2016

2 Introducing the Sharks!

3 Gary Rob inson Vice President of Acquisitions, Mid-South Region Raymond James Tax Credit Funds Raymond James is an active tax credit investor, having raised more than $6 billion in investment capital. Gary has 15 years of experience with the tax credit program, having joined Raymond James in 2001 where he has held both underwriting and development positions Oversees newly-opened Houston office BA in Finance from the University of South Florida MBA from University of Florida When Rob is a prominent feature of one s Surname, buyer beware!

4 Randy Handy Mason President/Co-Owner Mason Joseph Company Randy co-founded Mason Joseph in 2011 with David Joseph. While the firm is well known in the affordable housing network for its expertise in HUD and FHA mortgage financing, it also utilizes various commercial lending tools, such as Freddie Mac and FNMA. Randy has 45 year of financing experience and spent ten years as the financial officer for a real estate development company. Graduate, School of Mortgage Banking, Northwestern University Finance Degree, University of North Texas Handy Mason deals in Historically Underutilized Dough (aka HUD) will he convince our developers to bite?

5 Mahesh Aiyer Director Citi Community Capital Joined Citi in Previously EVP with CommunityBank of Texas. Originated more than $2 Billion of affordable housing debt in the past 10 years BBA & MBA from University of Houston Immediate Past President of TAAHP Mahesh (when pronounced correctly) rhymes with Cash... He s a walking ATM.

6 Gilbert Gerst Senior Vice President Manager of Community Development Banking BOK Financial Joined BOKF in June 2011 after 25+ years with JPMorgan Chase BOKF is a $32 billion regional financial services company with banking divisions in 7 states, including Texas. They provide construction and permanent financing, as well as directly investing in tax credit funds. BS/Accounting from University of North Texas Masters, UT Arlington Board Chairman, Dallas Black Dance Theater Gerst rhymes with both First and Worst where will he be on today s deals? Will he be waltzing around a commitment, doing the old soft shoe or turning cartwheels because he is head over heels in love with a development?

7 Darren (Darin ) Swanson Senior Vice President/Acquisition Red Stone Equity Partners Darren joined Red Stone earlier this year after 6 years in community banking with Bank of America based in Charlotte. Red Stone Equity Partners was formed in 2007 and has raised more than $2.7 billion in equity for tax credit developments since its inception. BS/Biology from Appalachian State University Today we will see how daring Darren is and will he be serving up a hearty Swanson s Beef Pot Pie for our developers or Swanson s Chicken Stew leftovers?

8 Meet Our Developers!

9 Janine Sisak Senior Vice President/General Counsel DMA Development Company 15 years experience affordable housing, primarily developing and financing tax credit projects Joined DMA in 2001 DMA has developed 28 tax credit properties, predominately in the State of Texas Previously an attorney with a NYC law firm specializing in employment law TAAHP Board since 2014, currently Chair of QAP Committee BA/Economics, Tufts University J.D./Fordham University School of Law

10 Jean Marie Latsha Land Acquisitions Manager Pedcor Investments, LLC Pedcor is one of the nation s larger owner/developers of tax credit developments. Founded in 1987 in Indiana, Pedcor has developed 13,500 affordable units in 17 states. In addition to development, Pedcor also has design, construction, and management divisions. Jean has 11 years of affordable housing experience and joined Pedcor as Land Acquisitions Manager in June 2015, based in Austin. Previously, worked 3+ years with TDHCA as HTC Administrator and Director of MF Finance 6 years as Project Manager for Cesar Chavez Foundation, a nonprofit developer BA, Philosophy, University of Texas

11 The RBJ Campus Redevelopment Austin, Texas

12 RBJ Redevelopment - Highlights Senior Housing: 238 units in existing 45 year old, 16 story Tower in need of renovation. 253 newly constructed units in a four story building wrapped around parking garage that serves both buildings. High Density/Mixed Income: 17-acre site located on Lady Bird Lake, a stone s throw from downtown Austin. Excess land to be sold to market rate developers who will develop a mixed of for sale and rental housing at this location. Transit Oriented: Served by popular existing bus line. Occupancy: 245 residents live in the Tower now. Very low income; very frail. Affordability: 100 units are covered by project-based Section 8 contract which expires 8/17. HUD indicates that a long-term contract will be considered since the Tower was initially a HUD 236 project.

13 Site Map

14

15 Rendering of Master Development

16 Rendering New Construction

17 Unit Mix Proposed Rents 80 unit Section 8 $ units 30% $ unit 60% $762 7 unit Market $1, units 30% $ units 50% $ units Section 8 $ units 60% $811 8 units Market $1,200 3 units 30% $ units 50% $ units 60% $ units Market $1,400

18 1 st Year Income/Expenses Potential Gross Income: $4,500,876 Vacancy Rate (.075%): ($337,572) Eff Gross Annual Income: $4,163,304 Expenses: $2,334,804 Net Operating Income: $1,828,500 Debt Service: $1,528,041 Net Cash Flow: $300,459

19 Sources Permanent Debt (6.5%, 40 yr am/18 term) $21,750,000 City of Austin GO Bond Funds $7,000,000 Equity Proceeds ($.98 on $2,753,768 HTC) $26,984,232 Equity from the sale of market rate land $11,768,000 Deferred Developer Fee $1,209,663 Seller Financed Note $10,000,000 Contribution from non-profit sponsor $890,000 Total $79,601,895

20 Uses Land $10,000,000 Soft Costs $4,030,000 Off-site Costs $2,500,000 Construction Costs $48,122,499 Developer Fee $8,154,375 Financing Fees/Costs $3,968,881 Tenant Rent Reserve $890,000 Operating Reserve $1,936,140 Total $79,601,895

21 Other Notable Aspects One transaction or two? Currently structured as two transactions, but developer is contemplating one transaction to save on bond financing costs and to allow the Section 8 voucher holders to have choice on living in Tower or in new construction wrap. Long road to placing in service. New construction wrap product will start construction in September 2017 and will last for 21 months. Tower renovation will take 18 months after 3 month relocation period, for a total construction period of 3.5 years. Quick Lease Up. We expect 200 qualifying households to move from the Tower into the new construction and qualify most of those units in the first three months. Expect full lease up in January Tower lease up, on the other hand, won t be complete until six months after renovation completion, which would be September Equity from Sale of Market Rate Land. Timing of this will be driven by market rate market demand, meaning equity from sale of excess land may not be available at the construction loan/partnership closing of this deal. Could investors and lenders get comfortable with that equity coming in at conversion instead?

22 West Gate Ridge Apartments 8700 West Gate Boulevard Austin, Texas rd Ave. SW, Carmel, IN Jean Marie Latsha Land Acquisition Manager

23 West Gate Ridge Site Selection South Austin, just 7 miles from downtown Had permitted plans for 146 units 96 one-bedroom and 50 twobedroom Purchase contract executed in June 2015

24 West Gate Site South Austin

25 West Gate Site

26 Financing Options 9% credits/conventional debt Good size for a 9% deal maybe even elderly with unit mix Relatively high scoring site in a high income tract with good schools Timing of purchase contract is not great unless willing to close before award It s super fun to get a 9% award! 4% credits/bonds/hud 221(d)(4) Little small for a 4% deal Don t have to worry about outscoring the competition Timing of purchase contract is better since we have permitted plans and can close quickly It s super fun to complicate things with partners and tax exemptions and HUD closings!

27 146 units 96 1 BR/50 2BR Austin Energy Green Building Commitment Swimming pool Furnished fitness center Business center Playground Individual Patio/Balconies 9 Ceilings Microwave Ovens Storage Closet Ceiling Fans Entitlements Site plan approved Building permits approved and issued Represents a 12+month savings in time and removal of risk West Gate Ridge

28 So much for permitted plans Plans did not include the accessibility requirements Site is only a little over 5 acres, so plan was already tight Only way to meet accessibility requirements was to reduce the number of units to 140 Plan revisions in City of Austin took several months

29 Development Costs $2,820,000 land costs (actual land cost $2,320,000 plus $500k for plans) $17,441,211 construction costs $3,230,000 developer fee $466,787 soft costs $924,987 financing and issuer fees $2,404,975 financing and construction period costs $1,502,150 professional fees $635,000 lease-up reserves $29,425,110 Total Development Costs $24,841,840 in Eligible Basis

30 Sources $8,940,405 Limited Partner Equity (assuming HTC award of $782,518 annually) $18,903,400 mortgage (HUD 221(d)(4)) $1,581,305 Deferred Developer Fee $29,425,110 Total Sources

31 Annual Income/Expenses $1,451,832 Gross Potential Rents $1,378,193 Effective Income (assuming 7% vacancy and $27,989 other annual income) Expenses $125,186 Salaries $41,346 Management Fee & Pedcor Accounting Fee $26,320 Administrative $6,860 Leasing Expense $84,554 Utilities $37,656 Site Services $22,680 Cleaning and Decorating $43,120 Repairs and Maintenance $36,980 Insurance $424,702 Total Expenses $49,000 Reserve for Replacement $904,491 Net Operating Income

32 NEW PLAN 140 units 90 1 BR/50 2BR Swimming pool Furnished fitness center Business center Controlled Access Gates Children s Playground City of Austin S.M.A.R.T. Housing

33 Typical Apartment Building Similar Design

34 Typical Apartment Building Similar Design

35 Clubhouse Similar Design

36 THAT S ALL FOLKS!