REPORT. Chair and Members of the San Diego Housing Commission For the Agenda of June 20, Final Bond Authorization for Westminster Manor

Transcription

1 REPORT DATE ISSUED: May 23, 2014 REPORT NO: HCR ATTENTION: SUBJECT: Chair and Members of the San Diego Housing Commission For the Agenda of June 20, 2014 Final Bond Authorization for Westminster Manor COUNCIL DISTRICT: 3 REQUESTED ACTION Authorize the issuance of Housing Authority of the City of San Diego multifamily housing revenue bonds to fund the acquisition and rehabilitation of Westminster Manor. STAFF RECOMMENDATION That the San Diego Housing Commission (Housing Commission) recommend the Housing Authority of the City of San Diego (Housing Authority) authorize the issuance of up to 28.5 million in multifamily housing revenue bonds to fund the acquisition and rehabilitation of Westminster Manor. SUMMARY The Project Westminster Manor is an existing 155-unit senior housing apartment located at 1730 Third Avenue in the Park West/Bankers Hill neighborhood of the Uptown Community Plan Area (Attachment 1). The 16-story building was built in 1972 and consists of 93 studio units, 62 one-bedroom units, lobby, manager s office, community room and outdoor patio, resident storage locker room, and laundry room. Surrounding neighborhood uses include multifamily, office, retail and commercial. The project is within one quarter of a mile of a bus stop, pharmacy and Balboa Park. The current owner, Westminster Manor of San Diego Incorporated (WMSD), originally financed the project with a U.S. Department of Housing and Urban Development (HUD) Section 202 direct mortgage loan. The project currently receives Housing Assistance Payments (HAP) from HUD for 121 units. Under this project-based program, tenants pay a maximum of 30 percent of their income toward rent, with the remainder federally subsidized up to a contract level approved by HUD. The HAP units are governed under two separate agreements, which are set to expire in June WMSD has applied to HUD for a new 20-year HAP agreement for the 121 units and will execute a new agreement prior to closing. Development Team During the 15-year tax credit compliance period, the project will be developed and owned by a California limited partnership (a single-asset limited partnership) consisting of: 1) WMSD and Senior Housing Corporation (Serving Seniors) as Co-Managing General Partner; 2) CIC Westminster Manor, LLC, as the Administrative General Partner; and 3) The Richmond Group as tax credit limited partner. It is anticipated that at closing and during the construction period Serving Seniors will serve as the sole Managing General Partner to allow the partnership to qualify for a property tax exemption.

2 May 23, 2014 Final Bond Authorization for Westminster Manor Page 2 WMSD is a nonprofit 501(c)(4) organization with a mission to provide housing to low-income and disabled senior citizens. WMSD selected Chelsea Investment Corporation (CIC) as their development partner for the recapitalization and rehabilitation of the project. Serving Seniors, formerly Senior Community Centers, provides housing, health services, supportive services, education programs, and meals to enhance the health and well-being of low income seniors. Serving Seniors owns Potiker Senior Residence and Potiker City Heights Residence in the City of San Diego (City) and owns and operates the Gary and Mary West Senior Wellness Center located downtown. Since forming in 1984, CIC has financed and developed more than 6,582 affordable housing units and also has developed more than 2,100 inclusionary housing units in San Diego, Chula Vista and Carlsbad. CIC provides financial, engineering, development, asset management and property management services. CIC will be responsible for development of the project. Emmerson Construction, an affiliate of CIC, will rehabilitate the project. Statements for public disclosure for WMSD, Serving Seniors and CIC are included as Attachment 2. Development Team Owner Developer Architect General Contractor Lender Property Manager Westminster Manor Limited Partnership Administrative General Partner: CIC Westminster Manor, LLC Co-Managing General Partner: Westminster Manor of San Diego, Inc. and Serving Seniors Limited Partner: The Richmond Group Chelsea Investment Corporation Basis Architecture & Consulting Emmerson Construction Union Bank ConAm Management Building Condition/Proposed Rehabilitation Work Westminster Manor has not been substantially renovated since it was built, and many of the major building systems are more than 35 years old. The construction budget totals 13,285,062 (87,402 per unit), including a 10 percent construction contingency. A detailed construction cost breakdown is included in Attachment 3, and the project pro forma is included in Attachment 4. Major rehabilitation items include: Installation of fire sprinklers throughout the building Boiler replacement New roof Exterior paint Corridor ventilation upgrades New balcony railing systems Replacement of windows and sliding glass doors Kitchen replacement Shower replacement Upgraded flooring

3 May 23, 2014 Final Bond Authorization for Westminster Manor Page 3 New heating systems Security surveillance and key FOB access system Expanded community space including a library and computer room To accommodate the proposed expansion of the community room, the project unit count will be reduced from 155 units to 152 units. Relocation The relocation consultant, Overland, Pacific & Cutler, has determined that five tenants will be permanently relocated. Tenants eligible to remain at the property will be temporarily relocated for a five- to six-week period while improvements are made to their units. An on-site concierge will be hired to assist tenants with issues related to the rehab including scheduling, moving, packing, and coordination with the general contractor. WMSD and CIC will comply with all applicable federal and state relocation requirements. Financing Structure The estimated total development cost of the apartment complex is approximately 55.3 million. Financing sources include tax exempt multifamily housing revenue notes, 4 percent low income housing tax credit equity, a seller note, loan interest during construction, developer equity contribution, soft loan interest and existing reserves. The seller note will be used to finance the acquisition of the project and is subordinate to the multifamily housing revenue notes. The seller note will be paid back from cash flow generated by the project. Estimated permanent sources of funding are summarized in the table below. Proposed Permanent Financing Sources Multifamily Housing Revenue Note A Note 6,327,224 Multifamily Housing Revenue Note B Note 6,654,267 Low Income Housing Tax Credits 17,100,462 Seller Note 22,455,688 Loan Interest (Bonds) 1,189,125 Developer Equity Contribution 750,000 Existing Reserves 786,748 Total 55,263,514 Estimated Development Schedule May 2014: Apply for multifamily housing revenue bonds June 2014: Housing Commission Meeting July 2014: Housing Authority Final Authorization July 2014: California Debt Limit Allocation Committee (CDLAC) Allocation September 2014: Construction Start October 2015: Construction Completion

4 May 23, 2014 Final Bond Authorization for Westminster Manor Page 4 Proposed Tax-Exempt Housing Note The Housing Commission utilizes the Housing Authority s tax-exempt borrowing status to pass on lower interest rate financing (and make federal 4 percent tax credits available) to developers of affordable rental housing. The Housing Authority s ability to issue tax-exempt debt is limited under the U.S. Internal Revenue Code. To issue tax-exempt debt for a development, the Housing Authority must first submit an application to CDLAC for a bond allocation. Prior to submitting applications to CDLAC, projects are brought before the Housing Commission, Housing Authority and San Diego City Council (City Council). Housing Authority inducement resolutions must be obtained prior to application submittal, and City Council Tax Equity and Fiscal Responsibility Act (TEFRA) resolutions must be secured no later than 30 days after application submittal. These actions do not obligate the Housing Authority to issue a Note or any other tax-exempt obligation. It is anticipated that the development will receive a bond allocation at CDLAC s July 16, 2014 meeting; however, if necessary, additional applications to CDLAC will be submitted to secure an allocation for the project. A general description of the Multifamily Bond Program and the actions that must be taken by the Housing Authority and by the City Council to initiate and finalize proposed financings are described in Attachment 5. Public Disclosure and Authorization for Issuance of Tax-Exempt Debt The tax-exempt debt, in the form of two series of Notes, a construction to permanent Note (the A Note) and a permanent Note (the B Note and collectively with the A Note, the Funding Loan Notes ) will be sold through a private placement, purchased directly by Union Bank (Union). Union is a qualified institutional buyer within the meaning of the U.S. securities laws. At closing, Union will sign an Investor s Letter certifying, among other things, that it is buying the Notes for its own account and not for public distribution. Because the Notes are being sold through a private placement, an Official Statement will not be used. In addition, the Notes will not be subject to continuing disclosure requirements nor will they be credit enhanced or rated. Under the private placement structure for this transaction, Union Bank (Union), by purchasing the Funding Loan Notes, will make a loan to the Housing Authority pursuant to the terms of a Funding Loan Agreement between the Lender, a bank or trust company acting as fiscal agent (the Fiscal Agent ) and the Housing Authority. The loan made by Union to the Housing Authority (the Funding Loan ) will be evidenced by the Funding Loan Notes, which will obligate the Housing Authority to pay to Union the amounts the Housing Authority receives from the Borrower, as described below. The Housing Authority, Union and the Borrower will enter into a Borrower Loan Agreement pursuant to which the Housing Authority advances the proceeds of the Funding Loan to the Borrower, which Loan will be evidenced by two Borrower Loan Notes, a construction to permanent Note (the A Note), and a permanent Note (corresponding to the revenues attributable to the HAP contract) (the B Note and collectively with the A Note, the Borrower Loan Notes ). The Housing Authority s obligation to make payments on the Funding Loan Notes are limited solely to amounts received from the Borrower under the Borrower Loan Notes and the Borrower Loan Agreement, and no other funds of the Housing Authority are pledged to make payments on the Funding Loan Notes. Both the Funding Loan and the Borrower Loan will be made on a draw-down basis. The transfer of the Funding Loan Notes to any subsequent purchaser will comply with Housing Commission policy number PO Moreover, any subsequent note holder would be required to

5 May 23, 2014 Final Bond Authorization for Westminster Manor Page 5 represent to the Housing Authority that they are a qualified institutional buyer or accredited investor who is buying the Funding Loan Notes for investment purposes and not for resale, and that they have made due investigation of any material information necessary in connection with the purchase of the Funding Loan Notes. The following documents will be executed on behalf of the Housing Authority: Funding Loan Agreement, Borrower Loan Agreement, Assignment of Deed of Trust, Regulatory Agreement, and other ancillary loan documents. At the time of docketing, documents in substantially final form will be presented to members of the Housing Authority. Any changes to the documents following Housing Authority approval require the consent of the City Attorney s Office and bond counsel. The Funding Loan Notes will be issued pursuant to the Funding Loan Agreement between the Housing Authority, Fiscal Agent and Union. Based upon instructions contained in the Funding Loan Agreement and the Borrower Loan Agreement, the fiscal agent will disburse Note proceeds for eligible costs, collect loan payments and make payments to the Funding Loan Note holder. The Borrower Loan Agreement sets out the terms of repayment and the security for the loan made by the Housing Authority to the Borrower, and the Housing Authority assigns its rights to receive repayments under the loan to Union. An Assignment of Deed of Trust and other Loan Documents, which assigns the Housing Authority s rights and responsibilities as the issuer to Union, is signed by the Housing Authority for the benefit of Union. Rights and responsibilities that are assigned to Union include the right to collect and enforce the collection of loan payments, monitor project construction and related budgets, and enforce insurance and other requirements. These rights will be used by Union to protect its financial interests as the holder of the Funding Loan Notes. The Regulatory Agreement will be recorded against the property in order to ensure the long-term use of the project as affordable housing. The Regulatory Agreement will also ensure that the project complies with all applicable federal and state laws. Since the Funding Loan Notes will not be repaid using any City or Housing Authority revenues, it is not appropriate to provide any information about the City s or Housing Authority s finances. Staff has been working with CSG Advisors, the Housing Commission s Financial Advisor, to perform due diligence concerning the proposed financing and to formulate a recommendation for the Housing Authority. After evaluating the terms of the proposed financing and the public benefits to be achieved, it is the Financial Advisor s recommendation that the issuance for the project be authorized. The Financial Advisor s analysis and recommendation to proceed is included as Attachment 6. Staff also is working with the City Attorney s Office to assure that the issuance of the Funding Loan Notes by the Housing Authority is in conformance with the City s disclosure requirements as necessary. AFFORDABLE HOUSING IMPACT Under the proposed bond financing, Westminster Manor would restrict 10 percent of its units at 50 percent of San Diego Area Median Income (AMI) and 90 percent of the units at 60 percent AMI.

6 May 23, 2014 Final Bond Authorization for Westminster Manor Page 6 CDLAC is currently accepting bond applications under an open application process which requires rents to be restricted for55 years. The following are the proposed rents: Unit Type AMI Number of Units TCAC Gross Rents Proposed Tenant Rent* Estimated Market Rents** Rent Savings per Unit Studio 50% AMI * 1, Studio-HAP 60% AMI , BR 50% AMI * 1, BR 60% AMI * 1, BR-HAP 60% AMI , Manager n/a 2-1,425 - Total 152 *The current owner has been charging below market rents to some of the tenants. To avoid large rent increases to these tenants, rent increases will be phased in and/or increased through attrition. **Market Study completed by Lea & Company on 5/6/14 FISCAL CONSIDERATIONS The proposed funding sources and uses approved by this action are included in the proposed Fiscal Year 2015 Housing Commission Budget, which is scheduled to be considered by the Housing Authority in June Approving this action will have no impact on the Fiscal Year 2015 total budget. The developer is responsible for the payment of all costs under the financing, including the bond counsel, financial advisor, Housing Commission s bond issuance fee and the Housing Commission s annual administrative fee. Fiscal Year 2015 funding sources approved by this action will be: Bond Issuance Fees - 71, Fiscal Year 2015 funding uses approved by this action will be: Rental Housing Finance Program Administration Costs - 71, Approval of the bond inducement and TEFRA resolutions does not commit the Housing Authority to issue any obligations for the benefit of the project. The Funding Loan Notes would not constitute a debt of the City. If the Funding Loan Notes ultimately are issued for the project, the Notes will not financially obligate the City, the Housing Authority or the Housing Commission because security for the repayment of the Notes will be limited to specific private revenue sources of the project. Neither the faith and credit nor the taxing power of the City or the Housing Authority would be pledged to the payment of the Notes. The developer is responsible for the payment of all costs under the financing, including the Housing Commission's annual administrative fee, as well as Housing Commission bond counsel and financial advisor fees. PREVIOUS COUNCIL and/or COMMITTEE ACTION Preliminary items pursuant to issuing multifamily housing revenue bonds were approved by the Housing Commission Board on February 14, 2014, and the Housing Authority on February 25, 2014.

7 May 23, 2014 Final Bond Authorization for Westminster Manor Page 7 COMMUNITY PARTICIPATION and PUBLIC OUTREACH EFFORTS The affordable housing development is located within the Uptown Community Plan Area and within the Park West/Bankers Hill neighborhood. WMSD and CIC presented the project as an informational item to the Uptown Community Planning Group on May 6, KEY STAKEHOLDERS and PROJECTED IMPACTS Stakeholders include WMSD, CIC, Uptown Community Planning Group, Park West and Bankers Hill residents. Rehabilitation of the property is expected to have a positive impact on the community because it will improve the quality of housing in the neighborhood and preserve affordable rental units, serving low- and very low-income seniors. ENVIRONMENTAL REVIEW The proposed rehabilitation is categorically exempt from the requirements of the California Environmental Quality Act (CEQA) pursuant to Section because Westminster Manor is an existing facility and the project does not involve expansion of the existing use. The project meets the criteria set forth in CEQA Section 15301(a), which allows for exterior and interior alterations of existing facilities, and the criteria set forth in CEQA Section relating to the development of in-fill projects. In addition, the exceptions listed under CEQA Section do not apply. Processing under the National Environmental Policy Act (NEPA) is not required as no federal funds are involved in this action. Respectfully submitted, Ted Miyahara Ted Miyahara Real Estate Manager Real Estate Division Approved by, Deborah N. Ruane Deborah N. Ruane Senior Vice President Real Estate Division Attachments: 1) Site Map 2) Developer Disclosure a. Westminster Manor San Diego Incorporated b. Serving Seniors c. Chelsea Investment Corporation 3) Construction Cost Detail 4) Project Pro forma 5) Multifamily Bond Program Summary 6) Financial Advisor Feasibility Letter Hard copies are available for review during business hours in the main lobby of the San Diego Housing Commission offices at 1122 Broadway, San Diego, CA and at the Office of the San Diego City Clerk, 202 C Street, San Diego, CA You may also review complete docket materials on the San Diego Housing Commission website at

8 Attachment 1

9 DISCLOSURE STATEMENT: PAGE 1 DEVELOPER'S STATEMENT FOR PUBLIC DISCLOSURE (add extra sheets if you need more space) 1. Name of developer: Westminster Manor of San Diego, Inc. 2. Address, phone number and ZIP Code: 1730 Third Street San Diego, CA Telephone: (619) Postal Mailing Address: Ronald Wagar 5672 Marne Avenue San Diego, CA IRS Number of Developer: EIN No If the developer is not an individual doing business under his own name, the developer has the status indicated below and is organized or operating under the laws of California as: A corporation A nonprofit or charitable institution or corporation S partnership known as: A business association or a joint venture known as A Federal, State or local government or instrumentality thereof. Other (explain) 5. If the developer is not an individual or a government agency or instrumentality, give date of organization: Original formation date: 10/5/ Names, addresses, phone numbers, title of position (if any) and nature and extent of the interest of the officers and principal members, shareholders, and investors of the developer, other than a government agency or instrumentality, are set forth as follows: a. If the developer is a corporation, the officers, directors or trustees, and each stockholder owning more than 10% of any class of stock. N/A

10 DISCLOSURE STATEMENT: PAGE 2 b. If the developer is a nonprofit or charitable institution or corporation, the members who constitute the board of trustees or board of directors or similar governing body. Ronald Wagar, President Laurie Roeder, Vice President Norm Root, Treasurer Karen Maczka, Secretary Frank Young Glenn Carson Kevin defreitas Russ vantassel Tim Winder c. If the developer is a partnership, each partner, whether a general or limited partner, and either the percent of interest or a description of the character and extent of interest. N/A d. If the developer is a business association or a joint venture, each participant and either the percent of interest or a description of the character and extent of interest. N/A e. If the developer is some other entity, the officers, the members of the governing body, and each person who has an interest of more than 10%. N/A Name, Address & Zip Code Phone Number Position Title (if any) and percent of interest or description of character and extent of interest 7. Name, address and nature and extent of interest of each person or entity (not named in response to Item 6) who has a beneficial interest in any of the shareholders or investors named in response to Item 6 which gives such person or entity more than a computed 10% interest in the developer (for example, more than 20% of the stock in a corporation which holds 50% of the stock of the developer; or more than 50% of the stock in a corporation which holds 20% of the stock of the developer): N/A

11 DISCLOSURE STATEMENT: PAGE 3 Name, Address and Zip Code Description of character and extent of interest 8. Names (if not given above) of officers and directors or trustees of any corporation or firm listed under Item 6 or Item 7 above: N/A 9. Is the developer a subsidiary of or affiliated with any other corporation or corporations or any other firm or firms? If yes, list each such corporation or firm by name and address, specify its relationship to the developer, and identify the officers and directors or trustees common to the developer and such other corporation or firm. N/A 10. The financial condition of the developer, as of December 31, 2012 is reflected in the attached financial statement. 11. If funds for the development are to be obtained from sources other than the developer's own funds, a statement of the developer's plan for financing the development: Westminster Manor will be financed from the following sources: Federal LIHTC Equity 16,119,000 Permanent Loan 17,042,828 Developer Equity Contribution 750,000 Seller Note 18,080,365 Existing Reserves 498,652 Soft Loan Interest 1,041,094 53,531, Sources and amount of cash available to developer to meet equity requirements of the proposed undertaking: a. In banks: Equity will be funded by tax credit investor Name, Address and ZIP Code of Bank Amount b. By loans from affiliated or associated corporations or firms: N/A Name, Address and ZIP Code of Source Amount

12 DISCLOSURE STATEMENT: PAGE 4 c. By sale of readily salable assets: Description Market Value Mortgages or Liens 1730 Third Avenue San Diego, CA Name and addresses of bank references: Union Bank Christopher Crafton 5664 Mission Center Rd, Ste 403, SD (619) Has the developer or any of the developer's officers or principal members, shareholders or investors, or other interested parties been adjudged bankrupt, either voluntary or involuntary, within the past 10 years? Yes No If yes, give date, place, and under what name. 15. Has the developer or anyone referred to above as principals of the developer been indicted for or convicted of any felony within the past 20 years? Yes No If yes, give for each case (1) date, (2) charge, (3) place, (4) Court, and (5) action taken. Attach any explanation deemed necessary. 16. Undertakings, comparable to the proposed project, which have been completed by the developer including identification and brief description of each project and date of completion: Westminster Manor of San Diego, Inc. developed and currently owns Westminster Manor. 17. If the developer or a parent corporation, a subsidiary, an affiliate, or a principal of the developer is to participate in the development as a construction contractor or builder: a. Name and address of such contractor or builder: N/A b. Has such contractor or builder within the last 10 years ever failed to qualify as a responsible bidder, refused to enter into a contract after an award has been made, or failed to complete a construction or development contract? Yes No If yes, explain: c. Total amount of construction or development work performed by such contractor or builder during the last three years: General description of such work: N/A d. Construction contracts or developments now being performed by such contractor or builder:

13 DISCLOSURE STATEMENT: PAGE 5 Identification of Date to be Contract or Development Location Amount Completed N/A e. Outstanding construction-contract bids of such contractor or builder: Awarding Agency Amount Date Opened N/A 18. Brief statement respecting equipment, experience, financial capacity, and other resources available to such contractor or builder for the performance of the work involved in the proposed project, specifying particularly the qualifications of the personnel, the nature of the equipment, and the general experience of the contractor: N/A 19. Does any member of the governing body of the San Diego Housing Commission, to which the accompanying proposal is being made, or any officer or employee of the San Diego Housing Commission who exercises any functions or responsibilities in connection with the carrying out of the project covered by the developer's proposal, have any direct or indirect personal financial interest in the developer or in the proposed contractor? Yes No If yes, explain. 20. Statements and other evidence of the developer's qualifications and financial responsibility (other than the financial statement referred to in Item 10) are attached hereto and hereby made a part hereof as follows: N/A

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

32

33

34 DISCLOSURE STATEMENT: PAGE 1 DEVELOPER'S STATEMENT FOR PUBLIC DISCLOSURE (add extra sheets if you need more space) 1. Name of developer: Chelsea Investment Corporation 2. Address, phone number and ZIP Code: 5993 Avenida Encinas, Suite 101 Carlsbad, CA Telephone: (760) IRS Number of Developer: EIN No If the developer is not an individual doing business under his own name, the developer has the status indicated below and is organized or operating under the laws of California as: A corporation A nonprofit or charitable institution or corporation S partnership known as: A business association or a joint venture known as A Federal, State or local government or instrumentality thereof. Other (explain) 5. If the developer is not an individual or a government agency or instrumentality, give date of organization: Original formation date: July 30, 1986 Restructured: February 23, Names, addresses, phone numbers, title of position (if any) and nature and extent of the interest of the officers and principal members, shareholders, and investors of the developer, other than a government agency or instrumentality, are set forth as follows:

35 DISCLOSURE STATEMENT: PAGE 2 a. If the developer is a corporation, the officers, directors or trustees, and each stockholder owning more than 10% of any class of stock. Name, Address & Zip Code Phone Number Title and Percentage of Interest The Schmid Family Trust 100% interest dated as of July 22, 1996 James J. Schmid (760) x104 Co-Trustee 5993 Avenida Encinas, Suite 101 Carlsbad, CA Lynn Harrington Schmid (760) x133 Co-Trustee 5993 Avenida Encinas, Suite 101 Carlsbad, CA b. If the developer is a nonprofit or charitable institution or corporation, the members who constitute the board of trustees or board of directors or similar governing body. N/A c. If the developer is a partnership, each partner, whether a general or limited partner, and either the percent of interest or a description of the character and extent of interest. N/A d. If the developer is a business association or a joint venture, each participant and either the percent of interest or a description of the character and extent of interest. N/A e. If the developer is some other entity, the officers, the members of the governing body, and each person who has an interest of more than 10%. N/A

36 DISCLOSURE STATEMENT: PAGE 3 Name, Address & Zip Code Phone Number Position Title (if any) and percent of interest or description of character and extent of interest 7. Name, address and nature and extent of interest of each person or entity (not named in response to Item 6) who has a beneficial interest in any of the shareholders or investors named in response to Item 6 which gives such person or entity more than a computed 10% interest in the developer (for example, more than 20% of the stock in a corporation which holds 50% of the stock of the developer; or more than 50% of the stock in a corporation which holds 20% of the stock of the developer): N/A Name, Address and Zip Code Description of character and extent of interest 8. Names (if not given above) of officers and directors or trustees of any corporation or firm listed under Item 6 or Item 7 above: N/A 9. Is the developer a subsidiary of or affiliated with any other corporation or corporations or any other firm or firms? If yes, list each such corporation or firm by name and address, specify its relationship to the developer, and identify the officers and directors or trustees common to the developer and such other corporation or firm. None by exclusion of affiliations of less than 1% 10. The financial condition of the developer, as of December 31, 2012 is reflected in the attached financial statement. 11. If funds for the development are to be obtained from sources other than the developer's own funds, a statement of the developer's plan for financing the development: Westminster Manor will be financed from the following sources: Federal LIHTC Equity Permanent Loan Developer Equity Contribution Seller Note Existing Reserves Soft Loan Interest 28,131,289

37 DISCLOSURE STATEMENT: PAGE Sources and amount of cash available to developer to meet equity requirements of the proposed undertaking: a. In banks: Equity will be funded by tax credit investor Name, Address and ZIP Code of Bank Amount b. By loans from affiliated or associated corporations or firms: N/A Name, Address and ZIP Code of Source Amount c. By sale of readily salable assets: Description Market Value Mortgages or Liens None proposed 13. Name and addresses of bank references: Mr. Paul Shipstead Ms. Catherine M. Niemann Vice President Senior Vice President U.S. Bank Security Business Bank 4330 La Jolla Village Drive 2701 Loker Avenue West, Suite 150 Suite 200 Carlsbad, California San Diego, California Phone: (760) Phone: (858) Fax: (760) Fax: (619) cniemann@securitybusinessbank.com paul.shipstead@usbank.com 14. Has the developer or any of the developer's officers or principal members, shareholders or investors, or other interested parties been adjudged bankrupt, either voluntary or involuntary, within the past 10 years? Yes No If yes, give date, place, and under what name. 15. Has the developer or anyone referred to above as principals of the developer been indicted for or convicted of any felony within the past 20 years? Yes No If yes, give for each case (1) date, (2) charge, (3) place, (4) Court, and (5) action taken. Attach any explanation deemed necessary.

38 DISCLOSURE STATEMENT: PAGE Undertakings, comparable to the proposed project, which have been completed by the developer including identification and brief description of each project and date of completion: Please refer to Project Sponsor Experience report. 17. If the developer or a parent corporation, a subsidiary, an affiliate, or a principal of the developer is to participate in the development as a construction contractor or builder: a. Name and address of such contractor or builder: Emmerson Construction, Inc Avenida Encinas, Suite 101 Carlsbad, CA b. Has such contractor or builder within the last 10 years ever failed to qualify as a responsible bidder, refused to enter into a contract after an award has been made, or failed to complete a construction or development contract? Yes No If yes, explain: c. Total amount of construction or development work performed by such contractor or builder during the last three years: General description of such work: Construction of affordable multifamily and seniors housing projects. d. Construction contracts or developments now being performed by such contractor or builder: Identification of Date to be Contract or Development Location Amount Completed Fairbanks Commons Rancho Carmel 20,432,000 03/01/14 San Diego, CA e. Outstanding construction-contract bids of such contractor or builder: Awarding Agency Amount Date Opened N/A

39 DISCLOSURE STATEMENT: PAGE Brief statement respecting equipment, experience, financial capacity, and other resources available to such contractor or builder for the performance of the work involved in the proposed project, specifying particularly the qualifications of the personnel, the nature of the equipment, and the general experience of the contractor: Please see attached resume. Emmerson Construction, Inc. (ECI) is an affiliate of Chelsea Investment Corporation (CIC). ECI serves as general contractor and/or construction manager only on projects where CIC is an owner. ECI employs a full-time Construction Project Manager and an Office Manager/Contract Administrator, each of whom have several years and many millions of dollars worth of experience. All work is sub-contracted, enabling ECI staff to effectively manage multiple jobs. Depending on workload, some management and administrative functions are occasionally out-sourced to construction management firms. ECI has served as construction manager on 4 rehabilitation projects and 26 new construction projects that were completed on time and under budget. ECI is currently constructing one new project. Fairbanks Commons is approximately 70% complete and is on schedule and under budget. The contract value of this project is 20,432,000. ECI also benefits from the experience of CIC, which has overseen the construction on most projects listed in the Project Sponsor Experience summary. 19. Does any member of the governing body of the San Diego Housing Commission, to which the accompanying proposal is being made, or any officer or employee of the San Diego Housing Commission who exercises any functions or responsibilities in connection with the carrying out of the project covered by the developer's proposal, have any direct or indirect personal financial interest in the developer or in the proposed contractor? Yes No If yes, explain. 20. Statements and other evidence of the developer's qualifications and financial responsibility (other than the financial statement referred to in Item 10) are attached hereto and hereby made a part hereof as follows: N/A

40

41 ATTACHMENT 3 Development Summary Westminster Manor Summary Details Location rd Avenue, Council District 3 Community Planning Area Uptown Developer Chelsea Investment Corporation Westminster Manor San Diego Inc. Project Type Acquisition Rehabilitation Housing Type Senior Year Built 1972 Number of Units 152 Affordable Units 150 Lot Size/Density 0.31 acres/500 dwelling units per acre Gross Residential Square Footage 89,661 Net Rentable Square Footage 68,970 Retail Space Construction Type Prevailing Wages Financing Structure Affordability Term n/a Type I No 4 Percent Tax Credits/ Bonds 55 years Unit Affordability Unit Type Unit Size AMI Units Restricted Rent Utility Allowance Proposed Rent Market Rent* % Below Market Studio % , % Studio-HAP % , % 1 BR % , % 1-BR % , % 1 BR-HAP % , % Manager 530 Manager Construction Sources and Uses of Funds Sources of Funds Amount Uses of Funds Amount Senior Housing Bonds 26,447,979 Acquisition Cost 30,216,748 Tax Credits 1,710,043 Hard Costs 12,077,329 Seller Note 22,650,000 Hard Cost Contingency 1,207,733 Soft Loan Interest 1,189,125 Soft Costs 6,730,532 Existing Operating Reserves 786,748 Financing Costs 2,551,556 Developer Fee 1,000,000 Total 52,783,898 Total 52,783,

42 Attachment 3: Development Summary Westminster Manor Permanent Sources and Uses of Funds Sources of Funds Amount Uses of Funds Amount Housing A Bonds 6,327,224 Acquisition Cost 30,216,748 Housing B Bonds 6,654,267 Hard Costs 12,077,329 Tax Credits 17,100,462 Hard Cost Contingency 1,207,733 Seller Note 22,455,688 Soft Cost 5,789,438 Soft Loan Interest 1,189,125 Financing Costs 2,561,556 Existing Operating Reserves 786,748 Operating Reserve 910,710 Developer Fee Equity Contribution 750,000 Developer Fee 2,500,000 Total 55,263,514 Total 55,263,514 Cost Analysis Amount Per Unit Comments Acquisition Costs 30,216, ,795 Seller Note 22,455,688, 148k/unit Hard Costs 13,285,062 87,402 - Soft Costs 5,789,438 38,088 - Financing Costs 2,561,556 16,852 - Operating Reserve 910,710 5,992 - Developer Fee 2,500,000 16,447 Developer Fee Contribution 750,000 Total Development Cost 55,263, ,

43 PROJECT SUMMARY Westminster Manor 4%Tax Credits 152 Units PROJECT DEAL STRUCTURE FINANCING ASSUMPTIONS PROJECT UNIT & INCOME MIX Development Costs 4% Tax Rate 3.26% AMI Studio 1BR 2BR 3BR Totals Annual Federal Tax Credits 1,800,229 Eligible Costs 48,934,030 Federal Tax Credit Price % Ineligible Costs 6,329,485 State Tax Credit Price - 50% Total Development Costs 55,263,514 Syndicator Pre-tax Equivalent IRR - 11 yr 40% Opr. Exp./Unit/Year 5,333 30% Sources Replacement Reserves/Unit/Year 350 Mgr Federal LIHTC Equity 17,100,462 Vacancy Rate 5.00% Totals Permanent Loan - A 6,327,224 Permanent Loan - B 6,654,267 DCR 1.15 Developer Equity Contribution 750,000 Perm Loan Amort - Term 15 Seller Note 22,455,688 Interest Rate - Permanent Loan 5.05% Existing Reserves 786,748 Interest Rate - Const A (Union rate: 65% of 30-day LIBOR %) 3.00% Cash Flow from Ops 0 Soft Loan Interest 1,189,125 Bonds - Perm A 6,327,224 Westminster Contributed Value 0 Bonds - Perm B 6,654,267 Total Sources 55,263,514 Bonds - Construction 13,466,487 Total Bonds 26,447,979 Prevailing Wage (Y/N): No Developer Fee 100% 2,500,000 Developer Equity Contribution 30% 750,000 50% Test 53.20% Housing Set-A-Side "Senior" Distributable Cash to Westminster Seller Side of Transaction Prepaid Ground Lease 675,000 Acquisition Price (less reserves) 27,975,000 Cash to Seller at Closing 5,325,000 Less: Seller Note (22,455,688) Cash to Seller at Conversion 194,312 Less: Other 0 Service Fee (15 year) 929,946 Less: Other 0 Payments on Seller Note (15 year) 1,367,456 Less: Other 0 Total 8,491,714 Cash Distributed to Seller 5,519,312

44 6,750,000 6,075,000 PROJECTED SOURCES AND USES OF FUNDS 675, ,500 6,136,364 Westminster Manor 152 units 486, ,636 6,750, ,499 (150,499) 13,285,062 Cash to Seller 6,981, Construction Period 15 months Construction Stabilization Conversion 8609 Total Pre-Dev Close Quarter 1 Quarter 2 Quarter 3 Quarter 4 Quarter 5 Subtotal Quarter 6/7 15% 15% 20% 25% 25% SOURCES OF FUNDS 1 Federal LIHTC Equity 2,565, ,565,069-14,107, ,512 17,100,462 2 State LIHTC Equity Construction Loan and Gap 8,326,343 2,637,469 2,655,286 3,489,039 4,329,375 4,433,167 25,870, ,298 (26,447,979) - 4 Permanent Loan - A ,327,224-6,327,224 5 Permanent Loan - B ,654,267-6,654,267 6 Developer Equity Contribution , ,000 7 Seller Note 147,735/unit 22,650,000 22,650,000 (194,312) 22,455,688 8 Existing Reserves 786, , ,748 9 Westminster Contributed Value Soft Loan Interest 169, , , , , , ,750 1,189, Net Income From Operations During Stabilization Total Sources of Funds - 34,328,160 2,807,344 2,825,161 3,658,914 4,499,250 4,603,042 52,721, ,048 1,197, ,512 55,263, USES OF FUNDS 13 ACQUISITION 14 Adjacent Land Cost 5,132/unit 780, , , Land Lease Rent Prepayment 675, , , Verifiable Carrying Costs Existing Improvement Costs 28,761, ,761, ,761, Total Land / Acquisition 198,794/unit 30,216, ,216, ,216, REHABILITATION 22 Site Work - lot 13,325 sf 46.01/sq ft - 91,966 91, , , , , , Structures 65,665/unit - 1,497,156 1,497,156 1,996,208 2,495,260 2,495,260 9,981, ,981, General Requirements 6% - 95,347 95, , , , , , Contractor Overhead 2% - 31,782 31,782 42,377 52,971 52, , , Contractor Profit 6% - 95,347 95, , , , , , Total Rehabilitation 79,456/unit - - 1,811,599 1,811,599 2,415,466 3,019,332 3,019,332 12,077, ,077, RELOCATION 32 Temp Relocation ( /day) + 238K Consultant Fee 331, , , , ,500 2,210,000 2,210, Concierge 30,000 27,125 27,125 36,167 45,208 45, , , Moving Costs 33,000 33,000 44,000 55,000 55, , , Permanent Relocation: 5 households - 500/month for 42 months - 7,650 7,650 10,200 12,750 12,750 51, , Relocation Contingency - 42,928 39,928 53,237 66,546 66, , , Total Relocation - 30, , , , , ,004 2,961, ,961, ARCHITECTURAL/ DESIGN 29 Design 302, , , Supervision - 10,000 10,000 10,000 10,000 10,000 50, , Total Architectural - 302,865 10,000 10,000 10,000 10,000 10, , , ENGINEERING & SURVEY 34 Engineering 11, , , ALTA Land Survey 12, ,500 5,000-17, Total Survey & Engineering - 24, ,041 5, , CONTINGENCY COSTS 39 Hard Cost Contingency 10% 181, , , , ,933 1,207, ,207, Soft Cost Contingency 5% 106,019 17,733 18,724 19,824 21,237 26, , , Total Contingency - 106, , , , , ,113 1,417, ,417, CONSTRUCTION PERIOD EXPENSES 44 Construction (A and Soft) Loan Interest 238, , , , ,739 1,429, ,048-2,291, Origination Fee 0.75% 198, , , Application Fee Bonding and Insurance 80, , , Lender Inspection Fees - 2,400 2,400 2,400 2,400 2,400 12, , Taxes During Construction 10, , , Safety Inspections - 6,000 6,000 6,000 6,000 6,000 30, , Liability and Property Insurance During Construction 120, , , Title and Recording Fees 25, , , Construction Testing (asbestos/mold during/post) - 6,000 6,000 6,000 6,000 6,000 30, , Predevelopment Loan Interest 25, , ,000 Westminster Manor - all funders proforma

45 6,750,000 6,075,000 PROJECTED SOURCES AND USES OF FUNDS 675, ,500 6,136,364 Westminster Manor 152 units 486, ,636 6,750, ,499 (150,499) 13,285,062 Cash to Seller 6,981, Construction Period 15 months Construction Stabilization Conversion 8609 Total Pre-Dev Close Quarter 1 Quarter 2 Quarter 3 Quarter 4 Quarter 5 Subtotal Quarter 6/7 15% 15% 20% 25% 25% 51 Other: WMSD const rep/additional Parking Costs during Construction 62,224 32,334 32,334 32,334 32,334 32, , , Other: Lender Due Diligence 25, , , Total Construction Period Expense - 546, , , , , ,473 2,209, , ,071, PERMANENT FINANCING EXPENSES 58 Title and Recording Fees ,000-5, Property Taxes ,000-5, Total Permanent Financing ,000-10, LEGAL FEES 65 Construction Lender Legal 50, ,000-15,000-65, Sponsor Legal 90, , , Organizational Legal 15, , , Syndication Legal 40, , , CPA, Opinion 10, , , Other: GP Legal 75, , , Total Legal Fees - 280, ,000-15, , CAPITALIZED RESERVES 72 Operating Reserve , , Total Reserves , , REPORTS & STUDIES 76 Appraisal 7, , , Market Study / Rent Comp Study 10, , , PCNA / Initial and Follow-Up PML 12, , , Environments (Phase 1, 2 / Asbestos Lead) & Geotechnical 61, , , Other: Misc. Third Party Reports 5, , , Total Reports & Studies - 97, , , OTHER 82 TCAC App./Alloc/Monitoring Fees 38, ,005 43,908-81, CDLAC/CDIAC Fees 0.05% 13, , , Building Permit/Plan Check Fees 1,280/unit 194, , , Local Development Impact Fees 658/unit 100, , , Other Costs of Bond Issuance (Issuer Fee/Bond Counsel) 116, , , , Syndicator/Investor Fees & Expenses FFE - 40,000 40,000 40,000 40,000 40, , , Final Cost Audit Expense ,000-15, Marketing and GP Fee 100,000 5,000 5,000 5,000 5,000 5, ,000 15, , HUD Financial Consulting 52,500 1,500 1,500 1,500 1,500 1,500 60, , WMSD Financial Consultant 60, ,000 20, , Other: Accounting/Finance/Admin 10,000 12,500 12,500 12,500 12,500 12,500 72, , Other: SDHC Financial Advisor 35, , , Other: Unrelated Party Brokerage Fee 150, , , Total Other Costs - 869,413 59,000 59,000 59,000 59, ,120 1,230,532 50,000 43,908-1,324, DEVELOPER COSTS - 95 Developer Fee 1,000, ,000,000-1,072, ,512 2,500, Total Developer Costs - 1,000, ,000,000-1,072, ,512 2,500, Total Uses of Funds - 33,473,137 2,807,344 2,825,161 3,658,914 4,499,250 4,603,042 51,866, ,048 2,052, ,512 55,263,514 Westminster Manor - all funders proforma

46 Westminster Manor Design Consultants As of 5/29/14 Basis Arch - include mech, electrical & struct eng 87,000 Electrical 30,000 Mech/Plumbing 32,000 Structural Eng 25,000 Fire Sprinkler - Western Design 47,145 Fire Alarm - Allcom 13,200 Civil Eng (incl pre & post ALTA, fire service plans) - Peace Eng 17,500 Engery & TCAC Analysis, Verification, Final Report - Energy Inspectors 11,541 Landscape Arch - Ivy 17,400 Utility Eng Ptrs - Utility Consulting w/ SDG&E 3,500 Visual Concepts - Site Lighting 2,500 Interior Designer - Artisan Design Group 16,800 Exterior Color - Ann Mateson 7,400 Balcony Mock-Up - Remedy 3,420 Signage - TBD 7,500 estimate Solar - TBD 5,000 estimate Art Consultant - TBD 5,000 estimate Total 331,906 Due Diligence Consultants As of 5/29/14 PCNA 7,500 PML 5,000 Geotechnical Report - Leighton 17,700 Phase 1 & Asbestos/Lead - SCS 5,245 Phase 2 - SCS 5,000 if required, estimate O&M Plan - SCS 3,500 Asbestos Testing/Report - MTGL 25,000 if required, estimate Mold Testing 5,000 if required, estimate Rent Comparability Study - Westnap 4,850 Appraisal building/site - Lea & Company 4,500 Appraisal adjacent west parking lot - Hilco 2,800 Market Study - Lea & Company 6,000 Elevator Analysis - HKA 1,600 Sound Study - Veneklasen 4,000 Total 97,695

47 Relocation Budget As of May 28, 2014 Concierge Compensation 210,833 Joe and Gina - 19 months; 5k office expense Relocation Consultant 238,000 OPC Moving/Storage 220,000 incl. common areas and contingency Temporary Housing Costs 1,872, /day hotel + 30/day incidentals (pets, taxi, long distance, rentals); 120 days Permanent Relocation 51,000 per OPC estimate , incl. contingency Transportation 100,000 estimate Contingency 269,183 10% 2,961,017

48 OPERATING BUDGET & INCOME ANALYSIS Westminster Manor 2014 TCAC Rents: as of 12/18/13 Square Total HAP TCAC Gross Utility Monthly TCAC Annual TCAC Rent: Income Level %AMI Units Feet/Unit Sq. Ft. Rents Rents Allowance Net Rent Rent 0BR/1BA TCAC 60% BR/1BA HAP 60% ,759 1, ,348 0BR/1BA TCAC 50% , ,920 1BR/1BA MGR MGR ,058 N/A N/A N/A N/A N/A 1BR/1BA HAP 60% ,167 1, ,200 1BR/1BA TCAC 60% , ,472 1BR/1BA TCAC 50% , ,064 Community/Office/Library 0 2, Total Rents ,791 1,400,004 Laundry, Hallways, Balancies, Storage, Maintenance 48,662 Construction Square Feet 118,453 Laundry - Per unit/ Per month 0 Other Income (App. Fees, Late, etc.) 3.00 Per unit/ Per month 5,472 Rental Assistance 663,012 Sub-Total 2,068,488 Less: 5% 103,424 Total Income 1,965,064 Operating Expenses 5,076 Per Unit 771,574 Issuer Fee 107 Per Unit 16,227 Monitoring Fee 150 Per Unit 22,800 Total Operating Expenses 5,333 Per Unit 810,601 Net Operating Income 1,154,463 Reserves 350 Per Unit 53,200 MHP mandatory payment 0.00% 0 MIP 0.000% 0 Net Income Available for Debt Service 1,101,263 Perm Loan Tranche A: Perm Loan Tranche B: Net Income for Debt Service 471,401 Net Income for Debt Service 629,861 Debt Service Coverage 1.15 Debt Service Coverage 1.15 Interest 5.05% Interest 4.90% Term 15 Term 15 Amortization 30 Amortization 19 Loan Amount 6,327,224 Loan Amount 6,654,267 Monthly Payment 34,160 Monthly Payment 45,642 Annual Payment 409,914 Annual Payment 547,706 Cash Flow After Debt Service 143,643 Westminster Manor - all funders proforma