EXECUTIVE SUMMARY HOUSING COMMISSION EXECUTIVE SUMMARY SHEET. MEETING DATE: October 6, 2017

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1 ITEM 101 EXECUTIVE SUMMARY HOUSING COMMISSION EXECUTIVE SUMMARY SHEET MEETING DATE: October 6, 2017 HCR SUBJECT: Disposition of Town & Country Apartments and Final Bond Authorization and related TEFRA Actions COUNCIL DISTRICT(S): 4 ORIGINATING DEPARTMENT: Real Estate Division CONTACT/PHONE NUMBER: Ted Miyahara (619) REQUESTED ACTION: That the San Diego Housing Commission authorize the sale of Town & Country Village Apartments at 4066 Messina Drive, San Diego, California, to HDP Town & Country LP, a California limited partnership, for a purchase price of 24,040,000 and recommend that the Housing Authority of the City of San Diego authorize the issuance of Multifamily Housing Revenue Bonds to facilitate the acquisition and rehabilitation of Town & Country Village Apartments, which will remain affordable for 55 years. EXECUTIVE SUMMARY OF KEY FACTORS: This is a request for the San Diego Housing Commission (Housing Commission) Board to authorize the sale of Town & Country Village Apartments to HDP Town & Country LP, a single-asset California limited partnership that will include an affiliate of Housing Development Partners, the Housing Commission s nonprofit affiliate, and Chelsea Investment Corporation, for a purchase price of 24,040,000. The Housing Commission would provide a Seller Carryback Note of up to 13,250,000 to HDP Town & Country LP. The Seller Carryback Note amount may be decreased and will be contingent upon the number of market rate households that voluntarily elect to permanently relocate from the development. Staff also requests that the Housing Commission Board recommend that the Housing Authority of the City of San Diego authorize the issuance of up to 30,000,000 in Multifamily Housing Revenue Bonds to fund the acquisition and rehabilitation of Town & Country Apartments and that the San Diego City Council hold a Tax Equity and Fiscal Responsibility Act (TEFRA) public hearing and adopt a resolution approving the issuance of the bonds. Town & Country Apartments is an existing 145-unit multifamily housing rental development with 97 affordable housing units restricted to 50 percent and 60 percent of San Diego s Area Median Income (AMI) and 48 market-rate units. Town & Country was constructed in 1982 and requires rehabilitation to address immediate and long-terms capital needs. Total development cost is 48,166,994, which is 332,186 per unit. If approved by all parties, the developer could close financing and commence rehabilitation in December 2017 and complete the rehabilitation by December 2018.

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3 ITEM 101 REPORT DATE ISSUED: September 28, 2017 REPORT NO: HCR ATTENTION: SUBJECT: Chair and Members of the San Diego Housing Commission For the Agenda of October 6, 2017 Disposition of Town & Country Village Apartments and Final Bond Authorization and related TEFRA Actions COUNCIL DISTRICT: 4 REQUESTED ACTION Seven-Day Advance Notice Of San Diego Housing Commission hearing of the following matter has been provided to the Housing Authority Members in accordance with the terms and provisions of San Diego Municipal Code Section (e)(4)(b) concerning Staff Recommendation No. 1-3 only: That the San Diego Housing Commission (Housing Commission) authorize the sale of Town & Country Village Apartments at 4066 Messina Drive, San Diego, California to HDP Town & Country LP, a California limited partnership, pursuant to terms and conditions in this report, for a purchase price of 24,040,000. Matter requiring hearing by both the San Diego Housing Commission and the Housing Authority of the City of San Diego pursuant to the provisions of San Diego Municipal Code Section (D)(9)(A) Through (E) the following matter requires a hearing by both the San Diego Housing Commission Board and thereafter by the Housing Authority of the City of San Diego: That the San Diego Housing Commission recommend that the Housing Authority of the City of San Diego authorize the issuance of Housing Authority of the City of San Diego Multifamily Housing Revenue Bonds to facilitate the acquisition and rehabilitation of Town & Country Village Apartments, a 145-unit multifamily rental housing development, in the Mountain View Community Plan Area, which will remain affordable for 55 years. STAFF RECOMMENDATION That the San Diego Housing Commission (Housing Commission) take the following actions: 1. Approve the sale of Town & Country Village Apartments to HDP Town & Country LP, a California limited partnership, for a purchase price of 24,040,000 and authorize a Housing Commission Seller Carryback Promissory Note of up to 13,250,000 to HDP Town & Country LP, a California limited partnership, to facilitate the acquisition and rehabilitation of the Town & Country Village Apartments, a 145-unit multifamily rental housing development, located at 4066

4 September 28, 2017 Disposition of Town & Country Village Apartments and Final Bond Authorization and related TEFRA Actions Page 2 Messina Drive, San Diego, in the Mountain View Community Plan Area, which will remain affordable for 55 years. The Housing Commission s Seller Carryback Promissory Note amount may be decreased and will be contingent upon the number of market-rate households that voluntarily elect to permanently relocate from the development. The Seller Carryback Promissory Note amount will be adjusted and finalized prior to final bond authorization by the Housing Authority of the City of San Diego (Housing Authority). The final Seller Carryback Promissory Note amount will be reflected in Housing Authority Report HAR In no event shall the Seller Carryback Promissory Note exceed 13,250,000; 2. Authorize the Executive Vice President and Chief of Staff (COS), or designee, to amend the existing Housing Commission Declaration of Covenants, Conditions and Restrictions for the purpose of extending the affordability term of the existing affordable units and inclusion of market-rate units converting to affordable at or below 60 percent of the San Diego Area Median Income (AMI) for a 55-year term; 3. Authorize the Executive Vice President & COS, or designee, of the Housing Commission, to execute any and all documents and to perform any and all acts reasonably necessary to implement the financing plan for the rehabilitation of the project within the parameters set for within this report; Housing Authority Action: 4. Recommend that the Housing Authority authorize the issuance of up to 30,000,000 in taxexempt Multifamily Housing Revenue Bonds to facilitate HDP Town & County LP s acquisition and rehabilitation of Town & Country Village Apartments; and San Diego City Council Action: 5. Recommend that the San Diego City Council hold a Tax Equity and Fiscal Responsibility Act (TEFRA) hearing, and adopt a resolution approving the issuance of Multifamily Housing Revenue Bonds in an amount up to 30,000,000. SUMMARY The Development Town & Country Village Apartments (Town & Country) is an existing 145-unit multifamily housing rental development located at 4066 Messina Drive in the Mountain View Community Plan Area (Attachment 1). The development currently has 97 affordable housing units restricted to 50 percent and 60 percent of San Diego s Area Median Income (AMI) and 48 market-rate units. The development is a two-story apartment complex composed of 79 two-bedroom and 66 three-bedroom units. Current amenities include laundry facilities, tot lot playground, and community room.

5 September 28, 2017 Disposition of Town & Country Village Apartments and Final Bond Authorization and related TEFRA Actions Page 3 Table 1 Development Details Address 4066 Messina Drive, Council District 4 Community Plan Area Mountain View Construction Type Type V Parking Type Surface Parking Housing Type Multifamily Units 145 Site Size 8.5 acres Affordable Unit Mix Gross Building Area 147,785 Net Rentable Area 143,285 Mixed Income; 70% Affordable & 30% Market Rate 79 two-bedroom units and 66 three-bedroom units Building Condition/Proposed Rehabilitation Work Town & Country was constructed in 1982 and requires rehabilitation to address immediate and longterms capital needs. The developer is requesting the issuance of up to 30,000,000 in Multifamily Housing Revenue Bonds to finance the acquisition and rehabilitation of the property to extend its useful life and maintain its marketability. The scope of the proposed rehabilitation includes major capital improvements to unit interiors and exterior components. Unit interiors will be renovated with new kitchen and bathrooms, Energy Star appliances, fixtures and flooring. Additional improvements include addition of a new community room, upgrading 10 units to be compliant with the Americans with Disabilities Act of 1990 (ADA), path of travel improvements, replacement of water supply lines, new roofs and landscaping improvements. Development History Town & Country was acquired in 1996 and rehabilitated in 1998 with low-income housing tax credits, tax-exempt Multifamily Housing Revenue Bonds and Housing Commission loan. The Housing Commission purchased the property in February of 2017 and entered into a Purchase and Sale agreement with a limited partnership composed of the Housing Commission s nonprofit affiliate, Housing Development Partners (HDP), and Chelsea Investment Corporation (CIC) in May of Project Sustainability Town & Country will comply with the California Tax Credit Allocation Committee s (TCAC) minimum energy efficiency standards for rehabilitation projects, which require demonstrating at least 10 percent post-rehabilitation improvements in energy efficiency over existing conditions. Development Team During the 15-year tax credit compliance period, Town & Country will be owned by HDP Town & Country LP, a California limited partnership (a single-asset limited partnership) that will include: an affiliate of HDP and CIC as co-general partners and Richman Group as tax-credit investor limited partner. A statement for public disclosure for HDP and CIC is included in Attachment 2. HDP is an affiliate of the Housing Commission and is a separate legal entity established by the Housing Commission to acquire and develop low- and moderate-income housing and to provide services related to housing. HDP is an experienced developer and has successfully participated in affordable

6 September 28, 2017 Disposition of Town & Country Village Apartments and Final Bond Authorization and related TEFRA Actions Page 4 development throughout San Diego. HDP has developed 1,133 units of affordable rental housing, including multiple affordable developments utilizing Housing Commission loans. HDP s previous Housing Commission loans are in full compliance. Based upon the developer s past experience and performance, Housing Commission staff has determined that the developer has the requisite capacity to successfully complete the proposed rehabilitation. CIC is a for-profit real estate development firm located in Carlsbad. The firm specializes in the development of affordable housing. Since 1987, CIC has developed more than 8,000 rental units in California, Arizona and New Mexico. CIC s developments include rehabilitation and new construction of senior, family and special needs rental housing. CIC s previous Housing Commission loans are in full compliance. Based upon the developer s past experience and performance, Housing Commission staff has determined that the developer has the requisite capacity to successfully complete the proposed rehabilitation. Owner Table 2 - Ownership Structure ROLE FIRM/CONTRACT HDP Town & Country LP Investor Limited Partner Administrative General Partner Managing General Partner Construction & Permanent Lender Architect General Contractor Richman Group Chelsea Investment Corporation Housing Development Partners Citibank Basis Architecture Emmerson Construction Financing Structure Town & Country was appraised by Lea & Company pursuant to California Tax Credit Allocation Committee (TCAC) guidelines on May 9, The appraisal determined that the market value of the fee simple estate is 24,040,000. Town & Country has an estimated total development cost of 48,166,994 and estimated total per unit cost of 332,186. The development will be financed with a combination of 4 percent tax credits, tax-exempt Multifamily Housing Revenue Bonds, seller carryback note, deferred developer fee, developer fee contribution and soft loan interest. Estimated permanent sources and uses of financing are provided in Table 3. Full project pro forma is also provided as Attachment 3.

7 September 28, 2017 Disposition of Town & Country Village Apartments and Final Bond Authorization and related TEFRA Actions Page 5 Table 3 Sources & Uses Permanent Financing Sources Amounts Permanent Financing Uses Amounts Permanent Loan 16,514,130 Acquisition Cost 24,040,000 4% Tax Credit Equity 13,505,336 Hard Cost 13,286,361 SDHC Loan-Seller Carryback 13,246,952 Soft Costs 1,453,865 Developer Fee Contribution 1,200,000 Financing Costs 3,366,121 Deferred Developer Fee 2,905,758 Reserves 514,889 Soft Loan Interest 794,818 Developer Fee 5,505,758 Total Development Cost 48,166,994 Total Development Cost 48,166,994 Developer Fee 5,505,758 Gross Developer Fee 1,200,000 Minus Developer Fee Contribution 2,905,758 Minus Deferred Developer Fee 1,400,000 Net Cash Developer Fee (paid from development sources) The net cash developer fee shall be 1,400,000. The proposed fee structure is below the authorized amount included in the Request for Approval of Updated Developer Fees, approved by the Housing Commission Board on March 10, 2017 (HCR17-022) and the Housing Authority of the City of San Diego on April 25, 2017 (HAR17-011). Development Cost Key Performance Indicators Housing Commission staff has identified development cost performance indicators, which were used to evaluate the proposed development. The key performance indicators listed in Table 4 are commonly used by real estate industry professionals and affordable housing developers. Table 4 Key Performance Indicators Development Cost Per Unit 48,7166, ,186 Acquisition Cost Per Unit 24,040, ,793 Gross Building Square Foot Hard Cost 13,286, , Net Rentable Square Foot Hard Cost 13,286, , Development Cost Factors Substantial capital improvements as a result of deferred maintenance Large units - the development includes two- and three-bedroom units Construction of a community room for resident services and community space; two units were previously converted to a community room and will be reverted back to residential occupancy Conversion of two units from community space to residential units Replacement of unit water supply lines as a result of ongoing leaks Updating 10 units to be in compliance with the Americans with Disabilities Act (ADA) of 1990

8 September 28, 2017 Disposition of Town & Country Village Apartments and Final Bond Authorization and related TEFRA Actions Page 6 Project Comparison Chart There are multiple factors and variables that influence the cost of developing multifamily affordable rental housing, including but not limited to project location, site conditions, site improvements needed, environmental factors, land use approval process, community involvement, construction type, design requirements/constraints, economies of scale, City of San Diego impact fees, developer experience and capacity, and amenities necessary to gain tax credit approval. Table 5 shows a comparison of the subject property and other recent developments of the same construction type and project size. Table 5 Comparable Developments Project Name Year Construction Type Units Total Development Cost Cost Per Unit HC Subsidy Per Unit. Gross Hard Cost Per Sq. Ft. Subject- Town & Country 2017 V ,166, ,186 91, Vista La Rosa 2016 V ,954, , Vista Terrace Hills 2016 V ,207, , Coronado Terrace 2017 V ,721, , Proposed Housing Bonds 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 bonds is limited under the U.S. Internal Revenue Code. To issue bonds for a development, the Housing Authority must first submit an application to the California Debt Limit Allocation Committee (CDLAC) for a bond allocation. Prior to submitting applications to CDLAC, developments are brought before the Housing Commission, Housing Authority and City Council. Housing Authority bond inducement resolutions must be obtained prior to application submittal, and City Council TEFRA resolutions must be secured no later than 30 days after application submittal. These actions were previously completed for Town & Country on October 18, On September 15, 2017, the developer submitted an application to CDLAC for 30,000,000 in Multifamily Housing Revenue Bonds, and on September 16, 2017, the developer submitted an application to the TCAC for an allocation of 15,401,690 in 4 percent tax credits. It is anticipated that CDLAC and TCAC will approve the request for funding at their respective November 15 meetings. The developer proposes to issue the bonds through a tax-exempt private placement bond issuance. The proposed financing structure will fully comply with the City of San Diego s (City) ordinance on bond disclosure. The Bonds/note amount that will ultimately be set will be based upon development costs, revenues, and interest rates prevailing at the time of bond issuance. The description of Multifamily Housing Revenue Bond Program and the actions that must be taken by the Housing Authority and by the City Council to initiate and finalize proposed financing are described in Attachment 4.

9 September 28, 2017 Disposition of Town & Country Village Apartments and Final Bond Authorization and related TEFRA Actions Page 7 Public Disclosure and Bond Authorization The tax-exempt debt, in the form of the Bonds/note, will be sold through a private placement, purchased directly by Citibank. Citibank is a qualified institutional buyer within the meaning of the U.S. securities laws. At closing, Citibank will sign an Investor s Letter certifying, among other things, that it is buying the Bonds/note for its own account and not for public distribution. Because the Bonds/note is being sold through a private placement, an Official Statement will not be used. In addition, the Bonds/note will be neither subject to continuing disclosure requirements nor credit enhanced or rated. Under the private placement structure for this transaction, Citibank will make a loan to the Housing Authority pursuant to the terms of the Funding Loan Agreement among Citibank, the Housing Authority, and a Bank of New York Mellon as Fiscal Agent (Fiscal Agent). The Loan made by Citibank to the Housing Authority (Funding Loan) will be evidenced by the Bonds/note, which obligate the Housing Authority to pay Citibank the amounts it receives from the Borrower, as described below. The Housing Authority and the Borrower will enter into a Borrower Loan Agreement pursuant to which the proceeds of the Funding Loan will be advanced to the Borrower. In return, the Borrower agrees to pay the Fiscal Agent amounts sufficient for the Fiscal Agent to make payments on the Bonds/note. The Housing Authority s obligation to make payments on the Bonds/note is limited to the amounts the Fiscal Agent receives from the Borrower under the Borrower Loan Agreement, and no other funds of the Housing Authority are pledged to make payments on the Bonds/note. The transfer of the Bonds/note to any subsequent purchaser will comply with Housing Commission policy number PO Moreover, any subsequent Bonds/note holder would be required to represent to the Housing Authority that it is a qualified institutional buyer or accredited investor who is buying the Bonds/note for investment purposes and not for resale, and it has made due investigation of any material information necessary in connection with the purchase of the Bonds/note. The following documents will be executed on behalf of the Housing Authority with respect to the Bonds/note: 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 Note will be issued pursuant to the Funding Loan Agreement. Based upon instructions contained in the Funding Loan Agreement and the Borrower Loan Agreement, Citibank will disburse Note proceeds for eligible costs and will, pursuant to an assignment from the Housing Authority, receive payments from the Borrower. 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 receive repayments under the loan to Citibank. The Regulatory Agreement will also ensure that the project complies with all applicable federal and state laws. An Assignment of Deed of Trust and other Loan Documents, which assigns the Housing Authority for the benefit of Citibank. Rights and responsibilities that are assigned to Citibank 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 Citibank to protect its financial interests as the holder of the Note. Financial Advisor s Report Orrick Herrington Sutcliffe LLP serves as bond counsel and Ross Financial as financial advisor to the Housing Commission on this transaction. After evaluating the terms of the proposed financing and the public benefits to be achieved, it is the financial advisor s recommendation that the Housing Authority

10 September 28, 2017 Disposition of Town & Country Village Apartments and Final Bond Authorization and related TEFRA Actions Page 8 should proceed with the issuance of the bonds/note. The financial advisor s analysis and recommendation is included as Attachment 5. TEFRA Hearing A San Diego City Council TEFRA hearing for Town & Country was held on October 18, 2016 (Resolution Number ). The TEFRA is effective for a one-year period beginning on the hearing date. The one-year period will elapse prior to the Housing Authority issuing bonds; therefore, a second TEFRA hearing will be held on November 14, Estimated Development Schedule The estimated development timeline is as follows. Milestones Estimated Dates Housing Commission proposed final bond authorization October 6, 2017 Housing Authority proposed final bond authorization November 14, 2017 City Council TEFRA hearing November TCAC & CDLAC Award November 15, 2017 Estimated bond issuance and escrow closing November 16, 2017 Estimated start of rehabilitation December 2017 Estimated completion of rehabilitation December 2018 Affordable Housing Impact Under the proposed bond financing, Town & Country would restrict: 24 units are currently restricted to households with incomes at or below 50 percent of San Diego Area Median Income (AMI), currently 45,450 per year for a family of four; and 73 units are currently restricted to households at or below 60 percent AMI, currently 54,540 per year for a family of four; Town & Country will be affordable for a 55-year term. Table 6 summarizes the affordability: Table 6 Current Rent Restrictions Unit Type AMI Number of Units 2-Bedroom Flat 50% AMI 20 2-Bedroom Flat 60% AMI 38 2-Bedroom Townhome 60% AMI 4 3-Bedroom Flat 50% AMI 4 3-Bedroom Flat 60% AMI 22 3-Bedroom Townhome 60% AMI 9 2-Bedroom* Market 17 3-Bedroom* Market 31 Manager Units Total Units 145 *Units potentially reduced from market rate to 50-60% AMI

11 September 28, 2017 Disposition of Town & Country Village Apartments and Final Bond Authorization and related TEFRA Actions Page 9 The developer is currently pursuing the conversion of 46 market-rate units to affordable restricted housing at or below 60 percent of AMI. It is currently estimated that 27 of the 46 market-rate unit households currently qualify under the low-income housing tax credit program regulations. Income qualifying households at or below 60 percent of AMI will remain at the property, and their units will be restricted at or below 60 percent of AMI. It is currently estimated that the remaining 19 market-rate unit households have incomes exceeding 60 percent of AMI. These households do not qualify under the lowincome housing tax credit program. The developer intends to offer the 19 over-income households voluntary relocation benefits in exchange for voluntarily electing to permanently relocate from the property. At this time, the number of households electing to relocate has not been finalized; however, this figure will be finalized prior to Housing Authority considering the final bond authorization on November 14, The final Seller Carryback Promissory Note amount will be based upon the number of marketrate units relocating from the property. The Housing Authority report will be updated to reflect the estimated number of market-rate units and final Seller Carryback Promissory Note amount. In no event shall the SDHC Seller Carryback Promissory Note exceed 13,250,000 Overland, Pacific & Cutler, Inc. has been engaged by the developer to assist with temporary and permanent voluntary relocation activities. FISCAL CONSIDERATIONS The sale of Town & Country Village Apartments as proposed in this action will result in a gain to SDHC as follows:

12 September 28, 2017 Disposition of Town & Country Village Apartments and Final Bond Authorization and related TEFRA Actions Page 10 Reimbursement of Housing Commission Acquisition Costs 7,268,271 Payoff of SDHC 1996 HOME Loan to Previous Owner 3,224,271 Balance to SDHC 297,458 Net Cash Proceeds from Sale 10,790,000 Add: SDHC Seller Carryback Note 13,250,000 Total SDHC Proceeds from Sale 24,040,000 Less: SDHC Cost of Acquistion (10,492,537) Net Gain to SDHC 13,547,463 Budget Impact The proposed funding sources and uses approved by this action were not included in the Housing Authority-approved Fiscal Year 2018 Housing Commission budget and will increase the FY18 Budget by 10,790,000. Funding sources and uses will be as follows: Fiscal year 2018 funding sources: Program Income - HOME 3,224,271 Affordable Housing Fund (AHF) - Inclusionary 7,565,729 10,790,000 Fiscal year 2018 funding uses: Reserves - HOME 3,224,271 Reserves - AHF Inclusionary 7,565,729 10,790,000 Approval of the bond inducement and TEFRA resolutions does not commit the Housing Authority to issue bonds. The bonds would not constitute a debt of the City. If bonds are ultimately issued for the development, the bonds will not financially obligate the City, the Housing Authority or the Housing Commission because security for the repayment of the bonds will be limited to specific private revenue sources of the development. Neither the faith and credit nor the taxing power of the City or the Housing Authority would be pledged to the payment of the bonds. 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. KEY STAKEHOLDERS and PROJECTED IMPACTS Stakeholders include Housing Development Partners, Chelsea Investment Corporation, current Town & Country residents, and the Mountain View community and residents. ENVIRONMENTAL REVIEW The proposed rehabilitation is categorically exempt from the requirements of the California Environmental Quality Act (CEQA) pursuant to Section of the State CEQA Guidelines because Town & Country is an existing facility and the proposed actions do not involve expansion of the existing use. The project meets the criteria set forth in CEQA Section 15301(a), which allows for exterior and

13 September 28, 2017 Disposition of Town & Country Village Apartments and Final Bond Authorization and related TEFRA Actions Page 11 interior alterations of existing facilities. Processing under the National Environmental Policy Act (NEPA) is not required as there are no Federal funds involved with this action. CONFLICT DISCLOSURE STATEMENT HDP Conflict Disclosure Statement: HDP s Board of Directors includes the President and CEO of the Housing Commission, Vice Chair Dorothy Surdi, Commissioner Ben Moraga and community members. The current HDP Board consists of five members. Vice Chair Surdi and Commissioner Moraga, and CEO of the Housing Commission, Richard C. Gentry, are each directors and officers of Housing Development Partners, a California nonprofit public benefit corporation qualified as an Internal Revenue Code Section 501(c) (3) corporation. Vice Chair Surdi, Commissioner Moraga, and CEO Gentry receive no compensation for their service on the Housing Development Partners Board of Directors. Pursuant to the provisions of Government Code Sections (a) (7) and (a) (8), Vice Chair Surdi, Commissioner Moraga, and CEO Gentry each have a non-interest as described in Government Code Section Furthermore, none of HDP s board members has a financial interest in this development that would legally preclude their participation under the provisions of Government Code Sections 1090 and/or 87100, et. seq. because a 501(c) (3) nonprofit corporation is not a business entity for the purposes of state law and because HDP has been determined to be a public agency by the Ethics Commission for local conflict law purposes and/or the Housing Commission s Conflict of Interest Code. This disclosure shall be and is hereby documented in the official records of the Housing Commission. Further, HDP has formed an affiliated limited partnership, HDP Town & Country LP, to act as owner and borrower. HDP will be the sole member/managing member of HDP Town & County LP. HDP Town & Country LP has the same makeup as the HDP Board, and Vice Chair Surdi, Commissioner Moraga and CEO Gentry will all have non-interests with any affiliated limited partnership or LLC. This disclosure shall be and is hereby documented in the official records of the Housing Commission. Respectfully submitted, Ted Miyahara Ted Miyahara Vice President, Multifamily Housing Finance Real Estate Division Approved by, Jeff Davis Jeff Davis Executive Vice President & Chief of Staff San Diego Housing Commission Attachments: 1) Location Map 2) Developer Disclosure Statements a. Housing Development Partners b. Chelsea Investment Corporation 3) Pro Forma 4) Multifamily Housing Revenue Bond Program 5) Financial Advisor Report

14 September 28, 2017 Disposition of Town & Country Village Apartments and Final Bond Authorization and related TEFRA Actions Page 12 Hard copies are available for review during business hours at the security information desk in the main lobby and the fifth floor reception desk 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 in the Public Meetings section of the San Diego Housing Commission website at

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55 PROJECT SUMMARY Town & Country Revision Date: Print Date: 9/13/2017 9/13/17 12:00 AM SOURCES AND USES SUMMARY FINANCING ASSUMPTIONS PRELIM DEVELOPMENT PROGRAMMING SUMMARY Development Costs Equity City: San Diego Acquisition Closing Completion Conversion 8,609 MSA: San Diego Land 314,924/acre 18,483/unit 2,680,000 Equity Pay I 10.00% 0.00% 87.75% 2.25% 4 Person 50% AMI: Basis Eligible Acquisition Cost 147,310/unit 21,360,000 Federal Tax Credit Price Site (acres): Subtotal Acquisition 165,793/unit 24,040,000 State Tax Credit Price Solar Tax Credit Price - - Construction Type: No. of Stories: Hard Costs 9% Credit Rate Parking Type: Design Assist (excluded from contingency) 0/unit 0 4% Credit Rate TCAC App Rate 3.25% No. of Stalls: Offsites 345/unit 50,000 LP Interest 99.99% Extraorindary Cond: Sitework 162,666/acre 1,384, Yr Federal Tax Credits 13,111,977 Impact Fees per Unit: 0 Parking 0 stalls #DIV/0! 0 3 Yr State Credits 2,294,086 Financing Sources: 4%, SDHC Seller Carryback Vertical 61.99/gsf 63,179/unit 9,160,899 Solar Credits 407,455 Overhead, Profit, General Conditions 14.0% 10,230/unit 1,483,326 IRR - Quarterly Effective (Loaded) 5.16% Prevailing Wage 0/unit 0 IRR - Quarterly Effective (Unloaded) 5.16% PROJECT UNIT & INCOME MIX Owner Contingency 12,078,510 10% 8,330/unit 1,207,851 Subtotal Hard Costs 89.90/gsf 91,630/unit 13,286,361 Debt AMI Studio 1BR 2BR 3BR Totals Opr. Exp./Unit/Year 5,338/unit Avg. Sq. Ft , ,979 Tenant Services 347/unit A&E 1.98% of GC 1,813/unit 262,935 Replacement Reserves/Unit/Year 300/unit UA Financing Fees and Interest 23,215/unit 3,366,121 Vacancy Rate 5.00% 60% Legal Fees 1,931/unit 280,000 DCR % 0 Reserves 3,551/unit 514,889 Perm Loan Amort 35 50% Development Impact and Permit Fees 1,234/unit 179,000 Interest Rate - Construction/Permanent Loan 4.90% 45% 0 Developer Fee 37,971/unit 5,505,758 Interest Rate - Construction Loan 4.00% 40% 0 Misc (Acctg, Marketing, Reports, Studies, Etc) 4,358/unit 631,929 Tax- Exempt Bonds - Construction/Perm 16,514,130 35% 0 Contingency 100,000 Tax- Exempt Bonds - Construction 10,640,874 Market Subtotal Soft Costs 74,763/unit 10,840,633 Tax- Exempt Bonds - C Bond 0 Mgr. 2 2 Total Bonds 27,155,004 Totals Total Development Costs 332,186/unit 48,166,994 Tax Credit Considerations Common 3,000 Net SF 140,979 Cost psf Cash Developer Fee 1,400,000 Sources Year 55 Residual Value (market conversion) (56,967,939) Eff Loss 32% Gross SF 207,322 Cost psf DDA/QCT Boost 130% Federal LIHTC Equity 28% 13,505,336 Rural Designation No State LIHTC Equity 0% 0 50% Test 60.49% Solar LIHTC Equity + Rebates 0% 0 CA 9% Site Amenity Score 15 PROJECT TIMING Construction/Perm Loan - Tranche A 34% 16,514,130 CA 9% Tiebreaker N/A Contribution of Developer fee 2% 1,200,000 Housing Set Aside Family Deferred Developer Fee 6% 2,905,758 Prevailing Wage (State, Federal, Both): No Tax Credit Allocation 11/15/17 0% 0 Construction Begin - Initial Closing 12/1/17 0% Solar State Fed Construction Complete 12/1/18 SDHC Seller Carryback Loan 91,358/unit 13,246,952 1st Yr Credit Delivery ,865 Lease Up Complete 12/1/18 Soft Loan Interest 2% 794,817 2nd Yr Credit Delivery 0 0 1,311,198 Conversion/Stabilizatiion 6/1/19 Total Development Sources 100% 48,166,994 3rd Yr Credit Delivery 0 0 1,311, /1/19 CASH FLOW Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Net Income 2,068,519 2,109,889 2,152,087 2,195,128 2,239,031 2,283,812 2,329,488 2,376,078 2,423,599 2,472,071 2,521,513 2,571,943 2,623,382 2,675,849 2,729,366 2,783,954 Operating Exp 810, , , , , , , , ,573 1,009,990 1,040,289 1,071,498 1,103,643 1,136,752 1,170,855 1,205,981 NOI 1,257,765 1,312,594 1,330,873 1,349,278 1,367,805 1,386,449 1,405,204 1,424,066 1,443,027 1,462,082 1,481,223 1,500,445 1,519,739 1,539,097 1,558,511 1,577,973 Debt Service 987, , , , , , , , , , , , , , , ,534 Services 50,000 51,500 53,045 54,636 56,275 57,964 59,703 61,494 63,339 65,239 67,196 69,212 71,288 73,427 75,629 77,898 Reserves 43,500 44,805 46,149 47,534 48,960 50,428 51,941 53,500 55,104 56,758 58,460 60,214 62,021 63,881 65,798 67,772 Issuer Fees 28,600 28,600 28,600 28,600 28,600 28,600 28,600 28,600 28,600 28,600 28,600 28,600 28,600 28,600 28,600 28,600 Mandatory Pymts LP Fee 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 0 Residual CF 143, , , , , , , , , , , , , , , ,169 Deferred Fee Pmt-50% 71,565 97, , , , , , , , , , , , , , ,084 SDHC-50% CF 71,565 97, , , , , , , , , , , , , , ,084

56 PROJECTED SOURCES AND USES OF FUN Town & Country Construction Period Construction Stabilization Conversion 8609 Total Pre-Dev Close Quarter 1 Quarter 2 Quarter 3 Quarter 4 Subtotal 6 mos 25% 25% 25% 25% SOURCES OF FUNDS 1 Federal LIHTC Equity 507, , ,350,534-11,850, ,870 13,505,336 2 State LIHTC Equity Solar Equity Solar Rebates Construction Loan - Tranche B 2,305,099 3,789,827 3,746,802 9,841, ,145 (10,640,874) Construction/Perm Loan - Tranche A 11,373,798 4,301, , ,514, ,514,130 7 Contribution of Developer fee ,200,000 1,200, ,200,000 8 Deferred Developer Fee ,905,758-2,905,758 9 SDHC Seller Carryback Loan 91,358/unit 13,246, ,246, ,246, Soft Loan Interest - 198, , , , , , Income From Operations Total Sources of Funds 507,819 25,463,465 4,500,657 3,342,183 3,988,532 5,145,507 42,948, ,145 4,115, ,870 48,166, USES OF FUNDS 16 ACQUISITION 17 Land Cost 2,680, ,680, ,680, Basis Eligible Acquisition Cost 147,310 21,360, ,360, ,360, Other: Closing Costs 15, , , Total Land / Acquitisiton 24,055, ,055, ,055, REHABILITATION 27 Off-site Improvements 0.34/sq ft - 50, , , Environmental Remediation Site Work 0/acre - 346, , , ,072 1,384, ,384, Structures 0.00/sq ft - 2,049,425 2,049,425 2,049,425 2,049,425 8,197, ,197,700 General Contractor Contingency 10% 244, , , , , , General Requirements 4% - 107, , , , , , Contractor Overhead 4% - 107, , , , , , Contractor Profit 6% - 161, , , , , , Contractor General Liability Insurance Other: Total Rehabilitation - - 3,066,653 3,003,953 3,003,953 3,003,953 12,078, ,078, RELOCATION 39 Temporary Relocation - 50,000 50,000 50,000 50, , , Permanent Relocation Expense Total Relocation ,000 50,000 50,000 50, , , ARCHITECTURAL 59 Building 70,500 79,500 7,500 7,500 7,500 7, , , Total Architectural 70,500 79,500 7,500 7,500 7,500 7, , , SURVEY & ENGINEERING 68 Civil 29,579 20,769 3,147 3,147 3,147 3,147 62, , ALTA 7,500-7,500-15, , Phase I & 2 5,000-5, , Total Survey & Engineering 42,079 20,769 3,147 10,647 3,147 3,147 82, , CONTINGENCY COSTS 79 Hard Cost Contingency 10% - 306, , , ,395 1,207, ,207, Soft Cost Contingency 3.0% - 33,333 33,333 33, , , Total Contingency , , , ,395 1,307, ,307, CONSTRUCTION PERIOD EXPENSES 84 Construction Loan Interest - Tranche A - 170, , , , , ,102-1,263, Construction Loan Interest - Tranche B ,238 47,549 97, , , , Soft Loan Interest - 198, , , , , , Origination Fee 1.00% 263, , , Credit Enhancement & Application Fee Owner Paid Bonds Lender Inspection Fees - 2,700 2,700 2,700 2,700 10, , Taxes During Construction 3, , , Other: Application fee Insurance During Construction 40, , , Title and Recording Fees 30, , , Construction Mgmt. and Monitoring 72,600-29,700 29,700 29,700 29, , , Predevelopment Loan Interest 25, , , Termite - 156, , , Total Construction Period Expense 72, , , , , ,012 2,494, , ,205, PERMANENT FINANCING EXPENSES 102 Loan Origination Fees 0.00% ,000-10, Credit Enhancement & Application Fee Title and Recording Fees ,500-7,500

57 PROJECTED SOURCES AND USES OF FUN Town & Country Construction Period Construction Stabilization Conversion 8609 Total Pre-Dev Close Quarter 1 Quarter 2 Quarter 3 Quarter 4 Subtotal 6 mos 25% 25% 25% 25% 105 Property Taxes Insurance Other: Issuer Fee 0.250% 67, ,888 67, , Other: Misc. Conversion Fees ,500-7, Total Permanent Financing 67, ,888 67,888 25, , LEGAL FEES 112 Construction Lender Legal 65, , , Permanent Lender Legal ,000-15, Sponsor Legal 0 50, , , Organizational Legal 45, , , Other Legal (Issuer Legal, Bond Counsel) 90, , , Other: Other: GP Legal 0 15, , , Total Legal Fees - 265, ,000-15, , CAPITALIZED RESERVES 122 Operating Reserve 3 months , , Replacement Reserve Total Reserves , , REPORTS & STUDIES 131 Market Study 12, , , Relocation Plan & consulting 0-24,000 24,000 24,000 24,000 96, , Appraisal 5, , , Environmental 1, , , Other: Lender Deposit 25, , , Other Third Party Reports Total Reports & Studies 45,500-24,000 24,000 24,000 24, , , OTHER 142 TCAC App./Alloc/Monitoring Fees 15, ,112-59,040-74, CDLAC/CDIAC Fees 0.05% 14, , , Local Permit Fees 1,234/unit 134,250 44, , , Local Development Impact Fees 0/unit CFD Prepayment Syndicator/Investor Fees & Expenses Furnishings- Community ,000 50, , Final Cost Audit Expense , , Marketing - 5,000-10,000 15,000 5, , MGP Services Fee SDHC Financial Advisor/Monitoring Fee 53, , , Accounting/Finance/Admin 0 10,000 7,500 7,500 7,500 7,500 40, , Trustee/Trustee Legal 0 5, , , Bond Performance Deposit/Inducement Fees 113,000 - (110,000) , , Total Other Costs 277, ,250 (97,500) 7,500 67,500 7, ,389 20,000 59, , DEVELOPER COSTS 159 Developer Fee 500, ,200,000 1,700,000 3,501, ,870 5,505, Consultant/Processing Agent Project Administration Syndication Consultant Guarantee Fees Broker Fees Paid to Related Party Construction Oversight & Mgmt Total Developer Costs - 500, ,200,000 1,700,000-3,501, ,870 5,505, Total Uses of Funds 507,819 25,463,465 3,951,566 3,891,274 3,988,532 5,145,507 42,948, ,145 4,115, ,870 48,166, Net Source & Use - 549,091 (549,091) Distributions Balance of Funds - 549,

58 OPERATING BUDGET & INCOME ANALYSIS Town & Country Year 2017 Square Total Gross Rent Utility Monthly Annual Rent: Restriction %AMI Units Feet/Unit Sq. Ft. Rents Adjustment Allowance Net Rent Rent 2BR - Townhome LIHTC 60% 9 1,015 9,135 1, , ,820 2BR - Flat LIHTC 60% ,036 1, , ,480 2BR - Flat LIHTC 50% ,380 1, ,200 2BR - Townhome Market 0% 2 1,015 2,030 1, ,592 38,208 2BR - Flat Market 0% ,276 1, ,454 69,792 3BR - Townhome LIHTC/Bond 60% 14 1,324 18,536 1, , ,200 3BR - Flat LIHTC/Bond 60% 30 1,075 32,250 1, , ,840 3BR - Flat LIHTC/Bond 50% 7 1,075 7,525 1, ,042 87,528 3BR - Townhome Market 0% 8 1,324 10,592 1, , ,248 3BR - Flat Market 0% 5 1,075 5,375 1, ,591 95,460 3 BR - Flat LIHTC MGR 2 1,075 2, Total Rents ,285 2,098,776 Community Room/Office 4,500 Commercial 100 per sq ft 0 - % Loss to Efficiency Construction Square Feet 147,785 RA Overhang 47,292 Income from Operations PUPM Laundry ,360 Other Income (App. Fees, Late, etc.) ,960 Garage - 0 Garages 0 Cable & Highspeed Data Income - 0 Telephone Income - 0 Sub-Total ,177,388 Less: 5% 108,869 Commercial Income Less: 50% 0 Total Income 2,068,519 Operating Expenses PUPA Comps Diff Admin 0% - 0 Management Fee 0% - 0 Utilities 0% - 0 Payroll 0% - 0 Repair & Maintenance 0% - 0 Insurance 0% - 0 Loss To Lease (Only Year 1) 0% - 36,681 Other: 5, % 5, ,073 Total Expenses 5, % 5, ,754 Net Operating Income 1,257,765 Reserves /unit 43,500 Services 347/unit (excludes manager unit) 50,000 Issuer and Monitoring Fee 0.125% (Min 10k or 0.125% + 150/unit for SDHC) 28,600 Mandatory Debt Service 0.000% 0 Net Income Available for Debt Service 1,135,665 DSC TEST 1.15 Loan Sizing Loan Amount Interest Term Amortization Debt Service Coverage Monthly Payment Annual Payment Cash Flow After D/S Tranche A 16,514, % , , ,130 Tranche B % ,135,665

59 TAX CREDITS & BASIS CALCULATION Town & Country ACTUAL OR EST. ACQUISITION REHAB DESCRIPTION OF COSTS OF COSTS ELIGIBLE BASIS ELIGIBLE BASIS ACQUISITION Land Cost 2,680,000 XXXXXXXXXXXXX XXXXXXXXXXXXX Demolition - XXXXXXXXXXXXX XXXXXXXXXXXXX Legal & Carrying Costs - XXXXXXXXXXXXX XXXXXXXXXXXXX Land Lease Rent Prepayment - XXXXXXXXXXXXX XXXXXXXXXXXXX Verifiable Carrying Costs - XXXXXXXXXXXXX XXXXXXXXXXXXX Existing Improvement Costs 21,360,000 21,360,000 XXXXXXXXXXXXX Other: Closing Costs 15,000 XXXXXXXXXXXXX XXXXXXXXXXXXX TOTAL LAND/AQUISITION COSTS 24,055,000 21,360,000 - REHABILITATION Off-Site Improvements 50,000 45,000 Environmental Remediation - - Site Work 1,384,286 1,384,286 Structures 9,160,899 9,160,899 General Requirements 423, ,807 Contractor Overhead 423, ,807 Contractor Profit 635, ,711 Contractor General Liability Insurance - - Other: - - TOTAL REHABILITATION COSTS 12,078,510-12,073,510 RELOCATION Temporary Relocation 200,000 XXXXXXXXXXXXX Permanent Relocation - XXXXXXXXXXXXX TOTAL RELOCATION COSTS 200, ARCHITECTURAL FEES Building 180, ,000 Landscape - - Energy Consultant - - Other: Acoustic Study - - Other: Traffic Study - - Other: - - TOTAL ARCHITECTURAL COSTS 180, ,000 SURVEY & ENGINEERING Civil 62,935 62,935 ALTA 15,000 15,000 Phase I & 2 5,000 5,000 TOTAL SURVEY & ENGINEERING 82,935-82,935 CONTINGENCY COSTS Hard Cost Contingency 1,207,851 1,207,851 Soft Cost Contingency 100, ,000 TOTAL CONTINGENCY COSTS 1,307,851-1,307,851 CONSTRUCTION PERIOD EXPENSES Construction Loan Interest - Tranche A 1,263, ,898 Construction Loan Interest - Tranche B 426,800 19,373 Soft Loan Interest 794, ,174 Origination Fee 263,559 66,939 Credit Enhancement & Application Fee - - Owner Paid Bonds - - Lender Inspection Fees 10,800 10,800 Taxes During Construction 3, Prevailing Wage Monitoring - - Insurance During Construction 40,000 10,159 Title and Recording Fees 30,000 7,619 Construction Management & Testing 191, ,400 Predevelopment Loan Interest 25,000 25,000 TOTAL CONSTRUCTION PERIOD EXPENSE 3,205,346-1,140,251 PERMANENT FINANCING EXPENSES Loan Origination Fee 10,000 XXXXXXXXXXXXX XXXXXXXXXXXXX Credit Enhancement & Application Fee - XXXXXXXXXXXXX XXXXXXXXXXXXX Title and Recording Fees 7,500 XXXXXXXXXXXXX XXXXXXXXXXXXX Property Taxes - XXXXXXXXXXXXX XXXXXXXXXXXXX Insurance - XXXXXXXXXXXXX XXXXXXXXXXXXX Other: Issuer Fee 135,775 XXXXXXXXXXXXX XXXXXXXXXXXXX Other: Misc. Conversion Fees 7,500 XXXXXXXXXXXXX XXXXXXXXXXXXX TOTAL PERMANENT FINANCING COSTS 160, LEGAL FEES Construction Lender Legal 65,000 16,509 Permanent Lender Legal 15,000 XXXXXXXXXXXXX Sponsor Legal 50,000 50,000 Organizational Legal 45,000 XXXXXXXXXXXXX Bond Legal 90,000 XXXXXXXXXXXXX Other: GP Legal 15,000 15,000 TOTAL LEGAL 280,000-81,509

60 CAPITALIZED RESERVES Operating Reserve 467,597 XXXXXXXXXXXXX XXXXXXXXXXXXX Replacement Reserve - XXXXXXXXXXXXX XXXXXXXXXXXXX Rent-up Reserve - XXXXXXXXXXXXX XXXXXXXXXXXXX Transition Reserve 47,292 XXXXXXXXXXXXX XXXXXXXXXXXXX Other: Prepaid HOA - XXXXXXXXXXXXX XXXXXXXXXXXXX Other: Capitalized LP Fee - XXXXXXXXXXXXX XXXXXXXXXXXXX TOTAL RESERVE COSTS 514,889 - XXXXXXXXXXXXX REPORTS & STUDIES Market Study 12,300 12,300 Relocation Plan & consulting 96,000 96,000 Appraisal 5,800 5,800 Environmental Studies 1,900 1,900 Other: Lender Deposit 25,000 25,000 Other Third Party Reports Other - - Other - - TOTAL REPORTS & STUDIES 141, ,500 OTHER EXPENSES TCAC App./Alloc/Monitoring Fees 74,152 XXXXXXXXXXXXX XXXXXXXXXXXXX CDLAC/CDIAC Fees 14,778 XXXXXXXXXXXXX Local Permit Fees 179, ,000 Local Development Impact Fees - - CFD Prepayment - - Syndicator/Investor Fees & Expenses - XXXXXXXXXXXXX XXXXXXXXXXXXX Furnishings- Community 50,000 50,000 Final Cost Audit Expense 15,000 15,000 Marketing 20,000 XXXXXXXXXXXXX XXXXXXXXXXXXX MGP Services Fee - - SDHC Financial Advisor/Monitoring Fee 53,500 53,500 Accounting/Finance/Admin 40,000 40,000 Trustee/Trustee Legal 5,000 XXXXXXXXXXXXX Other: 3,000 3,000 TOTAL OTHER COSTS 454, ,500 SUBTOTAL 42,661,236 21,360,000 15,345,056 DEVELOPER COSTS Developer Fee Limit 5,505,758 3,204,000 2,301,758 Developer Fee Calculation 5,505,758 3,204,000 2,301,758 Developer Fee 5,505,758 3,204,000 2,301,758 Consultants/Processing Agent - - Project Administration - - Syndication Consultant - - Guarantee Fees - - Broker Fees Paid to Related Party - - Construction Oversight & Mgmt - - TOTAL DEVELOPER FEE 5,505,758 3,204,000 2,301,758 TOTAL RESIDENTIAL COSTS 48,166,994 24,564,000 17,646,814 TOTAL COMMERCIAL COSTS - - TOTAL PROJECT AND BASIS COSTS 48,166,994 24,564,000 17,646,814 Adjustment for Excess Basis - Additional Amount Voluntarily Excluded From Basis - Requested Undadjusted Eligible Basis 24,564,000 17,646, % DIFFICULT DEVELOPMENT FACTOR? Tract #: Not Avail. y 47,504,859 Credit Reduction 0.00% - Total Adjusted Qualified Basis 47,504,859 TX % LI Eligible@ Tx Credit Rt 84.93% 3.25% 3.25% TCAC APP RATE TX % LI Eligible 677,999 1,311,198 TX CREDITS OVER TEN YEARS 6,779,993 13,111,977 TX CREDIT EQ'Y@/Credit@% Investment % 13,505,336 For TCAC App State Tax Credits - 13% of Eligible Basis & Over 4 Yrs 13.00% 2,294,086 State Tax Credits Equity % - Solar Credits - 30% of Eligible Basis 30.00% 1,358,185 Solar Equity % - Solar Rebates -