Agenda. District of Columbia Housing Finance Agency Before Stimulus and Current Market Conditions. DCHFA Deal Types DCHFA Team

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1 Doing Business with the NEW DCHFA Harry D. Sewell, Executive Director May 25, 2010

2 Agenda Before Stimulus and Current Market Conditions New Issue Bond Program DCHFA Deal Types DCHFA Team Getting Started Keys to Meeting Threshold Sources and Uses 15 Year Operating Proforma Rent Schedule Operating Expenses Third Party Reports Other Local Compliance 2011 and Beyond Successful Developments Contact Us 2

3 District of Columbia Housing Finance Agency Created in 1979 Instrumentality of the District Governed by a Board of Directors Invested over $2.6 Billion Over 27,000 rental housing units Over 6,000 homeownership opportunities Issuer Credit Rating Standard and Poor s A- (recent upgrade) Moody s Investors Services A3 3

4 Before Stimulus...National Housing Bond Sales Single-Family Multifamily *In billions *Source: Thomson Reuters 4

5 Before Stimulus In the District 1 st Quarter FY deals closed Remainder of FY 2009 thru 1 st Quarter of FY NO deals closed President Obama Initiatives HERA 2008 Housing and Economic Recovery Act and ARRA 2009 American Recovery and Reinvestment Act Brought TCAP, Tax Credit Exchange, Additional volume cap, Ability to finance SRO s, Green development funds, and the New Issue Bond Program This year closed this past April Working to close 11 deals by December 30,

6 Nationally New Issue Bond Purchase Program One time program U.S. Treasury $2.8 Billion Nationally Issued $15.3 Billion 90 Local and State Issuers $12.5 Estimated to finance over 200,000 affordable housing opportunities Billion Single Family Multifamily 6

7 District of Columbia New Issue Bond Purchase Program Awarded $193 million Bonds issued on December 30, 2009 and placed into escrow on January 12, 2010 $25 Million 3 escrow breaks for each $168 issuance during 2010 million After December 30, 2010, remaining proceeds within each escrow will retire bonds Single Family Multifamily 7

8 District of Columbia Multifamily NIBP Program Amount Available: $168 million in bonds issued General Guidelines Typical Tax-exempt bond and 4% LIHTC transaction Must meets one of two tests: 40% at 60% of Area Median Income OR 20% at 50% of Area Median Income All mortgages must be insured by Fannie Mae, Freddie Mac or FHA Underwriting terms will vary Estimated Rate 5.25% (subject to change) Reservation Fee 35 bps 8

9 Tax-exempt Interest Rates are Far Below Long Term Averages Source: Municipal Market Update, Goldman Sachs & Co. May 14,

10 DCHFA Available Resources Multifamily il Volume Cap $560,235,000 Single Family Volume Cap $100,000,000 Notes: $ 96,550,479 HERA Additional Cap $235,000, Volume Cap Allocated to DCHFA 10

11 DCHFA Deal types GSE Enhanced Freddie/Fannie Private Placement HUD/FHA Risk Share FHA 221(d)4 11

12 FHA 221(d)(4) / GNMA Changes Before x DSCR 90% LTC 2% working capital 3 months of reserves Straight to firm Now x x DSCR LIHTC minimum 1.15x 83.3% 3% - 90% LTC LIHTC minimum 87% 4% working capital 4 months of reserves NO straight to firm 12

13 HUD/FHA Risk Share Program Provides FHA insurance to qualified projects. Enhances bonds to highest investment grade. Only fixed rate financing. 1.20x Debt Service Coverage Ratio Projects can include new construction or substantial rehabilitation. DCHFA is a participant since Co-insured over $140 million in loans for 23 projects. 13

14 DCHFA Team Board of Directors Executive Director Harry D. Sewell Deputy Executive Director Fran D. Makle Associate Executive Director Allison Ladd Director, Public Finance Anthony Waddell General Counsel Maria K. Day-Marshall Chief Financial Officer Sergei V. Kuzmenchuk Director Compliance & Asset Mgmt David Jefferson Director Home Resource Center 14

15 Lifecycle of a Deal Public Finance Construction Monitoring Compliance and Asset Management 15

16 Financing Market Rate & Affordable Housing Tax-exempt bonds, 4% LIHTC, Mortgage Insurance (Risk Share Program) Deputy Mayor for Planning and Economic Development Land, Development Funds, Tax Abatements, PILOTs, TIFs Investors Bond purchasers and tax credit equity Private Lenders Construction financing and Letters of Credit Department of Housing and Community Development 9% LIHTC, Gap funding (HPTF, HOME, CDBG, DMH. TCAP, Exchange) Grants Green building, resident services, AHP, etc. District of Columbia Housing Authority Operating Subsidy (HAP, LRSP, ACC) & Construction Financing 16

17 Keys To Meeting DCHFA Threshold 1. Site Control AMUST! 2. Create Borrower Entity Incorporate entity with DCRA 3. Quality and Completeness 4. Team Developer/Borrower, property management company, general contractor 5. Credit enhancement 17

18 Keys to Meeting DCHFA Threshold 6. LIHTC Syndicator/Investor 7. Leveraging of funds 8. Reserve levels 9. Developer fee Equity investor, federal funds, local funds Operating Reserve, Debt Service Reserve, Replacement Reserve, Local Rent Supplement Program Reserve Investors prefer that no more than 50% is deferred 10. Resident services Is there line item in the operating budget? 18

19 Sources and Uses Land Hard Costs Debt: Short and Long Term Soft Costs Gap Funds: TCAP, HPTF, LRSP Capital funds, grants Working capital and Deferred Fee LIHTC Equity Financin g Develope rfee Reserves / Escrows 19

20 Rent Schedule Are the rents reasonable? Below the LIHTC rents? Operating Subsidy? (LRSP or HAP) Other revenue? 20

21 Operating Expenses Include Resident Services PILOT or Tax abatement Evaluated by building type and style 21

22 15 Year Operating Proforma Rent escalator is flat or 2% Vacancy 7% DSCR 1.20x 22

23 Third Party Reports Appraisal 3 approaches Cost approach Sales comparison approach Income approach 23

24 Third Party Reports Market Study Primary market area Surrounding neighborhood Transportation Schools Retail Neighborhood Services Demographics Rent Comparison Penetration Achieved for Comparable Buildings Absorption rate 24

25 Third Party Reports Environmental Analysis Phase I Clean site? If not, what is the remediation plan? Are the costs included in Sources and Uses? 25

26 Other Local Compliance Green Building Act Mandatory Inclusionary Zoning Tenant Opportunity to Purchase District Opportunity to Purchase Small and Local Businesses Compliance (DSLBD) CBE Compliance First Source Agreement 26

27 2011 and beyond Utilize a Parity Indenture Partner with the Federal Home Loan Bank of Atlanta Utilize an Interim Credit Facility Monitor Federal Actions Extend and expand the stimulus benefits TCAP, Exchange (extend and expand to 4% LIHTC), Carry back provision for 5 years Revise DCHFA Scoring of Applications 27

28 Successful Developments Carver Senior Mansion (7) The Bozzuto Group Residences at Georgia Avenue (4) Neighborhood Development Company (NDC) Hubbard Place (1) Somerset Development The Overlook at Oxon Run (8) Community Preservation and Development Corporation (CPDC) 28

29 Carver 2000 Senior Mansion 104 Senior Apartments (1 BR and 2 BR) Development Team The Bozzuto Group Crawford Edgewood-Managers New Market Investors, LLC Carver 2000 Tenants Association, Inc. Financing $18 million - Total Development Costs $7.9 million - Tax exempt bonds $7.0 million - 4% LIHTC $2.35 million - DHCD Loan Deferred Fee 100% HAP Dining Room Fitness Center Library 29

30 Residences at Georgia Avenue 72 Unit (1 BR and 2 BR), Ground Floor Retail, Parking Developer: Neighborhood Development Company Financing $25.6 million - Total Development Cost $13 million - Tax exempt bonds $10.1 million - 4% LIHTC equity retired $5.6 million of tax exempt bonds $6.7 million DHCD loan (HPTF) Deferred Developer Fee 40 year tax abatement McKinney Act Predevelopment Loan Accessible ramp Roof View Yes! Organic Market 30

31 Hubbard Place (230 units (Eff, 1BR, 2 BR) w/ground floor retail) Developer: Somerset Development Company Financing $42 million Total Development Cost $25.0 million Tax-exempt bonds $14.8 million 4% LIHTC (equity retired $10 million of bonds $8.5 million DHCD loan (HPTF) Deferred developer s fee Courtyard Laundry Black Lion 31

32 The Overlook at Oxon Run 316 units (1 BR and 2 BR) Development Team: Community Financing: Preservation Development Company $73.5 million Total Development Cost $36.8 million tax-exempt bonds (CPDC) and Crawford Edgewood $26.6 million 4% LIHTC equity Managers, Inc. (CEMI) retired $13 million of bonds $21 million DHCD loan (HPTF) Deferred developer fee Computer room 32

33 Accessing Capital

34 Accessing Capital - Slate of Professionals Application & Underwritin g Guidelines Find new legislation, regulations, income & rents limits 34

35 Contact Information Harry D. Sewell, Executive Director Allison Ladd, Associate Executive Director Anthony L. Waddell, Director, Public Finance Ed Pauls, Senior Development Officer Denise Nelson, Development Associate