Housing Finance Authority of Pinellas County

Transcription

1 Housing Finance Authority of Pinellas County Credit Underwriting Report Boca Ciega Townhomes Multifamily Housing Revenue Bond Program Section A: Report Summary Section B: Multifamily Housing Revenue Bond ( MHRB ) Loan Special Conditions Section C: Supporting Information and Schedules Prepared by AmeriNational Community Services Final Report

2 Boca Ciega Townhomes TABLE OF CONTENTS Section A Report Summary Recommendation Overview Uses of Funds Operating Pro Forma Page A1-A7 A8-A11 A12-A16 A17-A19 Section B MHRB Loan Special Conditions B1 Section C Supporting Information and Schedules Additional Development & Third Party Information Borrower Information Guarantor Information Syndicator Information General Contractor Information Property Management Information C1-C7 C8-C11 C12 C13 C14-C15 C16-C17 Exhibits 15 Year Pro Forma 1 Completeness and Issues Checklist 2 1-2

3 Section A Report Summary

4 Recommendation AmeriNational Community Services ( ) recommends the issuance of Multifamily Housing Revenue Bonds ( MHRB or Bonds ) in the amount of $9,900,000 to Boca Ciega Partners TC, LP ("Applicant" or "Borrower") for the acquisition/rehabilitation of Boca Ciega Townhomes (the Development ). The Tax- Exempt Bonds are projected to be paid-off and retired in their entirety at or prior to Permanent Loan Conversion. DEVELOPMENT & SET-ASIDES Development Name: Boca Ciega Townhomes Address: 3401 and th Street South City: St. Petersburg Zip Code: County: Pinellas County Size: Large Development Category: Rehabilitation Development Type: Townhomes (Rental) Construction Type: First Floor: Block with stucco finish. Second Floor: Wood frame with wood siding Demographic Commitment: Elderly: Homeless: ELI: 0 AMI Farmworker or Commercial Fish Worker: Family: X Link: Units Bed Bath Gross HC Low HOME High HOME Utility RD/HUD Cont Net HC Applicant Appraiser Annual Rental Rooms Rooms Units Square Feet AMI% Rent Rents Rents Allow Rents Rent Rents Rents CU Rents Income % $796 $126 $0 $670 $670 $670 $670 $8, % $930 $0 $930 $930 $930 $312, % $930 $0 $930 $930 $930 $234, % $1,100 $0 $1,100 $1,100 $1,100 $356, ,390 60% $1,100 $0 $1,100 $1,100 $1,100 $422, ,153 $1,333,680 Rental Assisted Units: 108 Buildings: Residential - 20 Non-Residential - 1 Parking: Parking Spaces Accessible Spaces - 9 Set Asides: Program % of Units # of Units % AMI Set-Aside Term (Years) BOND 100% % 30 Absorption Rate: 35 units per month for 3 months. Occupancy Rate at Stabilization: Physical Occupancy 96.00% Economic Occupancy 95.00% Occupancy Comments Weighted average occupancy rate in the CMA is 100% BOCA CIEGA TOWNHOMES PAGE A-1

5 DDA?: Yes QCT?: Yes Site Acreage: Density: units/acre Flood Zone Designation: X Zoning: NSM-1 Neighborhood Suburban Mulit-Family Flood Insurance Required?: No Applicant/Borrower: General Partner 1: Limited Partner 1: Special Limited Partner: Guarantor(s): Developer: Principal 1 Principal 2 Principal 3 General Contractor 1: Management Company: Syndicator: Bond Issuer: Architect: Market Study Provider: Appraiser: DEVELOPMENT TEAM Boca Ciega Partners TC, LP % Ownership th Street, LLC 0.01% PNC Bank, NA or an affiliate 99.98% Columbia Housing SLP Corporation 0.01% Boca Ciega Partners TC, LP th Street, LLC Frederick Menowitz Marc Menowitz Todd Menowitz MTF Development, LLC Frederick Menowitz Marc Menowitz Todd Menowitz Halfacre Construction Company Menowitz Management Corporation PNC Bank, NA or an affiliate Housing Finance Authority of Pinellas County RGA - Design, LLC Meridian Appraisal Group, Inc. Integra Realty Resources - Tampa Bay BOCA CIEGA TOWNHOMES PAGE A-2

6 PERMANENT FINANCING INFORMATION 1st Source 2nd Source 3rd Source 4th Source 5th Source Other Lien Position First Second Lender/Grantor PNC Bank, NA BCA, LLC Amount $9,900,600 $3,000,000 Underwritten Interest Rate 3.90% 6.00% All In Interest Rate 3.90% 6.00% Loan Term Amortization Market Rate/Market Financing LTV Restricted/Market Financing LTV 84.05% % 84.40% % Loan to Cost 52.19% 15.81% Debt Service Coverage Operating/Deficit Service Reserve Period of Operating Expenses/Deficit Reserve in Months $596,318 6 Deferred Developer Fee $44,328 Land Value As-Is Value (Rehabilitation) $689,000 $9,750,000 Market Rent/Market Financing Stabilized Value $11,780,000 Rent Restricted Market Financing Stablized Value $11,730,000 Projected Net Operating Income (NOI) - Year 1 $687,374 Projected Net Operating Income (NOI) - 15 Year $829,087 Year 15 Pro Forma Income Escalation Rate 2.00% Year 15 Pro Forma Expense Escalation Rate 3.00% Bond Structure Short Term Cash Collateralized CONSTRUCTION/PERMANENT SOURCES: Source Lender Construction Permanent Perm Loan/Unit First Mortgage - Bonds HFAPC $9,900,000 $0 $0 First Mortgage - HUD 223(f) PNC $0 $9,900,600 $90,831 Seller's Note BCA, LLC $3,000,000 $3,000,000 $27,523 Bridge Loan PNC $4,180,000 $0 $0 HC Equity PNC $519,478 $6,025,448 $55,279 Deferred Developer Fee Developer $1,370,898 $44,328 $407 TOTAL $18,970,376 $18,970,376 $174,040 BOCA CIEGA TOWNHOMES PAGE A-3

7 Note: The proceeds for the First Mortgage HUD 223(f) Loan will be used to cash collateralize the MHRB during construction and permanently finance the Development after completion as the Bonds will be paid off in their entirety prior to or at permanent loan conversion. Changes from the Application: COMPARISON CRITERIA YES NO Does the level of experience of the current team equal or exceed that of the team described in the Application? 1. Are all funding sources the same as shown in the Application? 2. Are all local government recommendations/contributions still in place at the level described in the Application? Is the Development feasible with all amenities/features listed in the Application? Do the site plans/architectural drawings account for all amenities/features listed in the Application? Does the Applicant have site control at or above the level indicated in the Application? Does the Applicant have adequate zoning as indicated in the Application? Has the Development been evaluated for feasibility using the total length of set-aside committed to in the Application? Have the Development costs remained equal to or less than those listed in the Application? Is the Development feasible using the set-asides committed to in the Application? If the Development has committed to serve a special target group (e.g. elderly, large family, etc.), do the development and operating plans contain specific provisions for implementation? HOME ONLY: If points were given for match funds, is the match percentage the same as or greater than that indicated in the Application? HC ONLY: Is the rate of syndication the same as or greater than that shown in the Application? Is the Development in all other material respects the same as presented in the Application? The following are explanations of each item checked "No" in the table above: X X X X X X X X N/A X At the time of Application, the Developer was Todd Menowitz, but has been replaced by MTF Development, LLC ( MTF or Developer ). Todd Menowitz has a 40% membership interest in the Developer. 2. The amount of the short-term Multifamily Housing Revenue Bonds ( MHRB ), to be issued by the Housing Finance Authority of Pinellas County ( HFAPC ), has increased from $8,000,000 to $9,900,000. BOCA CIEGA TOWNHOMES PAGE A-4

8 Lancaster Pollard Mortgage Company ( LPMC ) was the proposed U.S. Department of Housing and Urban Development ( HUD ) 223(f) first mortgage provider at the time of Application; LPMC has been replaced by PNC Bank, NA ( PNC ). The HUD first mortgage loan amount has increased from $8,000,000 to $9,900, Development Costs have increased by $608,637 since the time of Application primarily due to increases in financial costs. 4. The Applicant committed to providing a new irrigation system using the City s Reclaimed Water System. However, this feature will most likely no longer be provided. According to the HFAPC, this change is not a deviation from the affordability of the Development, and per the construction consultant, will not create any zoning issues. Strengths: 1. The Development Team has demonstrated the ability to successfully develop and operate affordable multifamily rental communities using a variety of different subsidies. 2. Per the Market Study completed by Meridian Appraisal Group, Inc. ( Meridian ), dated April 29, 2015, Meridian concludes there will be a strong demand for the Development based on the rentassisted and public housing units that comprise the Development s Competitive Market Area ( CMA ) are well-occupied with waiting lists. The overall occupancy rate for existing stabilized properties in the CMA is 100%. 3. The Development is currently operating under a HAP contract, expiring in 2029, whereby 108 of the 109 units receive rental assistance, with one market rate unit. The Developer provided a HUD Contract Renewal Request Form, dated October 20, 2014, requesting a 20-year renewal of the HAP contract. Under the renewed HAP contract, 108 of the 109 units will receive rental assistance and one unit will become a Low Income Housing Tax Credit ( LIHTC ) unit with rents at or below 60% of the Area Median Income ( AMI ). A renewed, 20-year HAP Contract will be provided at loan closing. Other Considerations: None. Issues and Concerns: 1. Menowitz Management Corporation ( MMC ) demonstrates sufficient experience in the management of affordable multifamily housing to serve as the Property Manager for the Development. However, the selection of MMC to manage the Development must be approved by the FHFC s Asset Management Department, prior to MMC assuming responsibility of the Development, pursuant to Rule Chapter F.A.C. BOCA CIEGA TOWNHOMES PAGE A-5

9 Mitigating Factor: As the Development is an acquisition and rehabilitation, satisfactory confirmation the selection of MMC to manage the Development is approved by FHFC is a condition precedent to loan closing and listed in Section B of this report. 2. Based on the representations of the draft, Amended and Restated Limited Partnership Agreement ( LPA ), received June 10, 2015, a total of $519,478 will be funded at construction loan closing. Comprising 8.62% of total equity, the first installment amount falls short of the 15% minimum Housing Credit ( HC ) criteria. Mitigating Factors: A PNC Bridge Loan, in the amount of $4,180,000, will be provided during construction to facilitate construction and bridge the capital contributions thereby satisfying the 15% minimum HC criteria. Waiver Requests: None Additional Information: 1. The Development consists of 109 townhomes within 20, two story buildings (with the exception of one, single-story flat unit and the leasing office) and built on two non-contiguous properties located about 800 from each other along 37 th Street South. The northern property with 60 units and the leasing office is located at the southwest corner of 37th Street South and 34th Avenue South and the southern property with 49 units is located at the northwest corner of 37th Street South and 38th Avenue South. 2. Notwithstanding the guarantor requirements of any individual or entity within the development team by the lender or HC Syndicator, recommends the guarantors execute standard HFA guarantees of construction completion, operating deficit, environmental indemnity, and recourse obligations as illustrated on page C-12. The HFA Guarantors include Mark Menowitz, who maintains a 50% ownership interest in the Developer and a 32% ownership interest in the General Partner. In addition to Frederick and Todd Menowitz, Mark Menowitz is a key principal in the acquisition/ rehabilitation of the Development that further strengthens the HFA guarantees. Recommendation: recommends an issuance of MHRB in the amount of $9,900,000 to be utilized for the acquisition/rehabilitation of the Development. This recommendation is based upon the assumptions detailed in the Report Summary (Section A), and Supporting Information and Schedules (Section C). In addition, these recommendations are subject to the MHRB Loan Special Conditions Recommendation (Section B). BOCA CIEGA TOWNHOMES PAGE A-6

10 This recommendation is only valid for six months from the date of the report. The reader is cautioned to refer to these sections for complete information. Prepared by: Reviewed by: Kimberly A. Thorne Credit Underwriter Michael Drapkin, Jr. Multifamily Credit Underwriting Manager BOCA CIEGA TOWNHOMES PAGE A-7

11 Overview Construction Financing Sources: Source Lender Applicant's Total Applicant's Revised Total Underwriter's Total Interest Rate Debt Service During Construction First Mortgage - Bond HFAPC $8,000,000 $9,900,600 $9,900, % $104,939 Seller's Note BCA, LLC $3,300,000 $3,000,000 $3,000, % $0 Bridge Loan PNC $0 $4,180,000 $4,180, % $53,213 HC Equity PNC $6,074,852 $790,100 $519,478 Deferred Developer Fee Developer $986,887 $1,096,982 $1,370,898 Total : $18,361,739 $18,967,682 $18,970,376 $158,152 Proposed First Mortgage Loan: The Housing Finance Authority of Pinellas County ( HFAPC ) will issue short term, Tax-Exempt Multifamily Housing Revenue Bonds ( MHRB ) in an amount not to exceed $9,900,000 for the acquisition/rehabilitation of the Development as reflected in their Resolution No. HFA adopted on April 1, Raymond James & Associates, Inc. ( Raymond James ) has provided a Letter of Intent dated February 23, 2015 to facilitate the sale of the MHRB through a public offering. Terms include semi-annual interest payments due February and August, commencing on February 1, The interest rate will be 75 basis points ( bps ) with a cushion of 25 bps for an all-in interest rate of 1.00%. The maturity date is estimated at August 1, PNC Bank, NA ( PNC ), a FHA Mortgagee and Multifamily Accelerated Processing ( MAP ) lender, will facilitate a $9,900,600 loan insured under the HUD 223(f) program ( First Mortgage Loan ) as reflected in the FHA Form No MM commitment, dated April 6, 2015, between HUD and PNC. The proceeds of the First Mortgage Loan will be used to collateralize the MHRB during construction and permanently finance the Development after completion. Proposed Seller s Note: The Applicant provided a draft, HUD Surplus Cash Note between the Applicant and Boca Ciega Apartments, LLC ( BCA, LLC ) in the amount of $3,000,000. Terms include an interest rate at 6.00%, with principal and interest payments due annually beginning May 1, Payments due under this Surplus Cash Note shall be payable only from 75% of available surplus cash flow. Any and all unpaid principal and accrued interest shall be due and payable on the maturity date of July 31, Proposed Bridge Loan: A letter of intent from PNC, or its assigns, was provided dated June 4, 2015, whereby PNC will provide a bridge loan in the amount of $4,180,000. The loan will have a term of 24 months, with two six month extension periods. The interest will accrue and shall be payable monthly based on an interest rate of LIBOR plus 200 bps. The underwriter has included a cushion of 25 bps for an all-in interest rate of 2.43%. A commitment fee of.50% of the loan amount is payable at loan closing. BOCA CIEGA TOWNHOMES PAGE A-8

12 Repayment of the Bridge Loan will take place upon the earlier of: 1) achievement of all conditions for the Third Installment of the investment limited partner s capital contribution, or 2) maturity of the credit facility. The bridge loan shall be secured by the following: i) Funding Agreement, ii) an assignment of capital contributions from the investment limited partner, iii) second priority assignment of the construction contract, iv) second priority security interest in all other assets of the Borrower, v) assignment of partnership interests in the Borrower and vi) mortgage on the Development if required by PNC. Additional Construction Sources of Funds: Based on the representations of the draft, Amended and Restated Limited Partnership Agreement ( LPA ), received June 10, 2015, PNC or an affiliate will acquire a 99.99% limited partnership interest in the Applicant at $1.00 per housing credit for a total investment of $6,025,448. The LPA also states that $519,478 or 8.62% will be provided at closing, which falls short of the 15% minimum criteria. However, the PNC Bridge Loan will be provided to facilitate construction and bridge capital contributions. Repayment of the Bridge Loan will take place upon the earlier of: 1) achievement of all conditions for the Third Installment of the investment limited partner s capital contribution, or 2) maturity of the credit facility. Deferred Developer Fee: The Applicant will be required to defer $1,370,898 or 53.41% of total developer fee during the construction phase. BOCA CIEGA TOWNHOMES PAGE A-9

13 Permanent Financing Sources: Source Lender Applicant's Total Applicant's Revised Total Underwriter's Total Interest Rate Amortization Years Term Years Annual Debt Service First Mortgage - HUD 223(f) PNC $8,000,000 $9,900,600 $9,900, % $518,946 Seller's Note BCA, LLC $3,300,000 $3,000,000 $3,000, % $186,952 HC Equity PNC $6,074,852 $6,115,687 $6,025,448 Deferred Developer Fee Developer $986,887 $49,444 $44,328 Proposed First Mortgage Loan: Total : $18,361,739 $19,065,731 $18,970,376 $705,898 PNC, a MAP lender, will facilitate the First Mortgage Loan in the amount of $9,900,600 insured under the HUD 223(f) program. The proceeds for the First Mortgage Loan will be used to collateralize the MHRB during construction and permanently finance the Development after completion. The First Mortgage Loan will be collateralized with a first lien position on the Development s site and the improvements constructed thereon. According to the FHA Form No commitment, the all-in underwriting interest rate for the First Mortgage Loan will be fixed at 3.90% (base rate of 3.45% plus MIP of.45%). In addition, the First Mortgage Loan will be due and payable 35 years from closing and amortized in full over the same 35 year period. Proposed Seller s Note: The Applicant provided a draft, HUD Surplus Cash Note between the Applicant and Boca Ciega Apartments, LLC in the amount of $3,000,000. Terms include an interest rate at 6.00%, with principal and interest payments due annually beginning May 1, Payments due under this Surplus Cash Note shall be payable only from 75% of available surplus cash flow. Any and all unpaid principal and accrued interest shall be due and payable on the maturity date of July 31, Additional Permanent Sources of Funds: Based on the representations of the draft LPA, PNC or an affiliate will acquire a 99.99% limited partnership interest in the Applicant at $1.00 per housing credit for a total investment of $6,025,448 to be paid as follows: Note: All equity installments are rounded to the nearest whole dollar. BOCA CIEGA TOWNHOMES PAGE A-10

14 Capital Contributions Amount Percent of Total Due upon 1st Installment $519, % Paid on or about the Closing Date Interim Installment $0 0.00% 3rd Installment $4,329, % 4th Installment $1,062, % Paid on an as needed basis in accordance with the LPA and with the Bridge Loan documents; after final construction completion Upon 97% occupancy, Cost Certification, 8609 Application filing, October 5, 2016 Upon achievement of stabilized occupancy and mortgage loan commencement 5th Installment $114, % Upon receipt of Form(s) 8609 and recorded LURA Total: $6,025, % Annual Credits Per Syndication Agreement $602,545 Total Credits Per Syndication Agreement $6,025,450 Calculated HC Rate: $1.00 Limited Partner Ownership Percentage 99.99% Proceeds During Construction $519,478 Deferred Developer Fee: The Applicant will be required to permanently defer $44,328 or 1.73% of total developer fee after stabilization. BOCA CIEGA TOWNHOMES PAGE A-11

15 Uses of Funds CONSTRUCTION COSTS: Applicant Costs Revised Applicant Costs Underwriters Total Costs - CUR Cost Per Unit Accessory Buildings $32,700 $15,260 $15,260 $140 Recreational Amenities $32,700 $20,618 $20,618 $189 Rehab of Existing Common Areas $404,063 $164,590 $164,590 $1,510 Rehab of Existing Rental Units $3,006,656 $3,102,576 $3,102,576 $28,464 General Conditions $208,568 $198,183 $198,183 $1,818 Overhead $65,045 $66,061 $66,060 $606 Profit $208,568 $198,183 $198,183 $1,818 Total Construction Contract/Costs $3,958,300 $3,765,471 $3,765,470 $34,546 Hard Cost Contingency $395,830 $376,547 $376,547 $3,455 Other: General Liability Insurance $0 $6,000 $29,943 $275 Other: Payment and Performance Bond $0 $34,442 $34,442 $316 Total Construction Costs: $4,354,130 $4,182,460 $4,206,402 $38,591 Notes to Actual Construction Costs: 1. A U.S. Department of Housing and Urban Development Construction Contract between the Applicant and Halfacre Construction Company ( GC ) where the basis of payment is a Lump Sum in the amount $3,765,471 (the Construction Contract ), dated January 5, 2015, has been provided. The Construction Contract indicates substantial completion shall be achieved in 210 days or no later than April 15, 2016, and provides for retainage of not less than 10% until the work of the contract is 100% complete. 2. General Contractor s Fee (consisting of general requirements, overhead, and profit) is within the industry standard of 14%, and is calculated exclusive of Payment and Performance Bonds and Hard Cost Contingency. 3. Hard Cost Contingency in the amount of $376,547 has been included and is outside of the Construction Contract, which is within the industry standard at 10% of Total Construction Costs. 4. General Liability Insurance is based on a letter provided by PCS Insurance Group and the Payment and Performance Bond is based upon the estimate of the GC. 5. GLE Associates, Inc. ( GLE ) prepared a Plan and Cost Review ( PCR ), dated June 11, 2015, on the Development. The estimated value of the projected costs for the site work is $203,580, or approximately $1.34 per square foot for the proposed developed area. It is GLE s opinion overall, this cost per square foot is appropriate for the scope of work. The estimated value of the projected costs for the vertical construction is $3,099,464, or approximately $33.59 per square foot. This cost per square foot is within an acceptable range for the scope of work indicated and individual line item costs generally appear appropriate. GLE finds the construction schedule of 210 days appropriate for the project. BOCA CIEGA TOWNHOMES PAGE A-12

16 GENERAL DEVELOPMENT COSTS: Applicant Costs Revised Applicant Costs Underwriters Total Costs - CUR Cost Per Unit Accounting Fees $15,000 $15,000 $15,000 $138 Appraisal $8,500 $8,500 $8,500 $78 Architect's and Planning Fees $125,000 $125,000 $105,000 $963 Architect's Fee - Supervision $25,000 $25,000 $25,000 $229 Building Permits $25,000 $25,000 $25,000 $229 Builder's Risk Insurance $55,000 $55,000 $6,000 $55 Capital Needs Assessment/Rehabilitation $0 $4,425 $4,425 $41 Engineering Fees $7,500 $7,500 $7,500 $69 Environmental Report $7,500 $7,500 $7,500 $69 FF&E paid outside Construction Contract $15,000 $0 $0 $0 FHFC Administrative Fees $0 $58,262 $50,000 $459 FHFC Application Fee $0 $3,000 $3,000 $28 FHFC Credit Underwriting Fee $0 $11,341 $11,341 $104 FHFC HC Compliance Fee (HC) $82,000 $107,218 $107,218 $984 Lender Inspection Fees / Const Admin $41,883 $20,380 $20,380 $187 Insurance $0 $0 $69,277 $636 Legal Fees $200,000 $106,000 $106,000 $972 Market Study $9,500 $9,500 $6,000 $55 Marketing and Advertising $25,000 $25,000 $25,000 $229 Plan and Cost Review Analysis $0 $4,475 $4,475 $41 Property Taxes $98,000 $98,000 $98,000 $899 Survey $8,500 $8,500 $8,500 $78 Tenant Relocation Costs $200,000 $200,000 $200,000 $1,835 Title Insurance and Recording Fees $70,000 $70,000 $70,000 $642 Utility Connection Fees $12,000 $0 $0 $0 Soft Cost Contingency $30,000 $49,555 $49,155 $451 Total General Development Costs: Notes to the General Development Costs: $1,060,383 $1,044,156 $1,032,271 $9, Building Permits are an estimate of the Architect; Builder s Risk Insurance and Insurance are based on a letter provided by PCS Insurance Group. 2. reflects actual costs for the Capital Needs Assessment, Plan and Cost Review and FHFC Fees: Administrative, Application, Credit Underwriting and HC Compliance. 3. FF&E paid outside Construction Contract has been reduced to zero as this cost is no longer applicable. 4. The FHFC Administrative Fee is an estimate and based upon a fee of 8% of the Annual HC Recommendation. The FHFC HC Compliance Fee was derived from the 2015 Monitoring Fee Chart. 5. Tenant Relocation Costs are based upon the Applicant s estimate of relocating between 8 and 10 households simultaneously to include furniture rental, moving, utility and miscellaneous expenses. The estimate also includes costs associated with tenants relocating to a local motel if they choose not to move into a unit on site. Tenants who choose to stay with friends or family will reportedly receive $85 a day, which is the same cost as the local motel expense. BOCA CIEGA TOWNHOMES PAGE A-13

17 6. Utility Connection Fees has been reduced to zero as the Developer will most likely not provide a new irrigation system using the City s Reclaimed Water System. 7. The Soft Cost Contingency is within the industry standard of 5% of total general development costs. 8. The remaining General Development Costs appear reasonable. FINANCIAL COSTS: Applicant Costs Revised Applicant Costs Underwriters Total Costs - CUR Cost Per Unit Construction Loan Origination Fee $60,000 $15,292 $15,292 $140 Construction Loan Interest $165,000 $132,000 $158,512 $1,454 Permanent Loan Origination Fee $40,000 $104,006 $104,006 $954 Bridge Loan Commitment Fee $0 $20,900 $20,900 $192 Local HFA Bond Application Fee $24,000 $9,900 $9,900 $91 Local HFA Bond Underwriting Fee $80,000 $13,846 $13,846 $127 Local HFA Bond Origination Fee $24,000 $0 $0 $91 Local HFA Bond Trustee Fee $0 $10,470 $10,470 $96 Local HFA Bond Closing Costs $30,000 $9,900 $9,900 $91 Misc Loan Application Fee $0 $29,702 $29,702 $272 Reserves - Operating Deficit $55,000 $596,318 $596,318 $5,471 Reserves - Replacement Escrow $130,503 $130,503 $130,503 $1,197 Financial Advisor Fee $0 $12,400 $12,400 $114 Legal Fees - Bond Counsel $0 $50,000 $50,000 $459 Legal Fees - Issuer's Counsel $0 $22,500 $22,500 $206 Legal Fees - Lender's Counsel $0 $27,500 $27,500 $252 FHA MIP (Prepayment) $80,000 $99,006 $99,006 $908 FHA Exam Fee $0 $29,702 $29,702 $272 Other: HFA Compliance Fee $20,000 $0 $0 $0 Other: HFA Inducement Fee $0 $9,900 $9,900 $91 Other: HFA Annual Admin Fee (2 Yrs) $0 $48,504 $49,504 $454 Other: HFA Short Term Bond Issuer Fee $0 $990 $9,900 $91 Other: HFA Disclosure Reporting Svc Fee $0 $5,000 $5,000 $46 Total Financial Costs: Notes to the Financial Costs $764,503 $1,378,339 $1,414,761 $13, Financial costs were derived from the representations illustrated in the letters of intent for equity, construction and permanent financing and HUD, and appear reasonable to. 2. Construction Loan Interest, including bridge loan interest, is supported by the underwriter s Total Development Costs, the all-in underwriting interest rate, and the resultant calculation completed by through the use of a construction draw schedule provided by the Applicant. 3. The HFA Fees listed above are based on the HFAPC Application Procedures and Program Guidelines for Multifamily Mortgage Revenue Bonds. 4. The Applicant provided a letter of intent from PNC that outlines the terms and conditions for which an Operating Deficit Reserve account is required in the amount of $596,318. BOCA CIEGA TOWNHOMES PAGE A-14

18 5. HUD Form 2453-MM, Commitment to Insure Upon Completion, stipulates the requirement of a Reserve Fund for Replacements with an initial deposit amount of $130, The HFA Compliance Fee was reduced to zero as this fee will be charged annually by HFAPC and reflected in the Operating Proforma. 7. The remaining Financial Costs appear reasonable. NON-LAND ACQUISITION COSTS Applicant Costs Revised Applicant Costs Underwriters Total Costs - CUR Cost Per Unit Building Acquisition Cost $9,288,000 $9,061,000 $9,061,000 $3,727 Total Non-Land Acquisition Costs: $9,288,000 $9,061,000 $9,061,000 $3,727 Notes to Non-Land Acquisition Costs: 1. A Property Purchase and Sale Agreement was provided, effective June 12, The Agreement is by and between the Applicant ( Buyer ) and Boca Ciega Apartments, LLC ( Seller ) in the amount of $9,788,000. The closing shall occur concurrent with the Buyer s closing of the contemplated bond transaction. This is not an arms-length transaction. 2. A First Amendment to Property Purchase and Sale Agreement was provided, dated August 1, 2014, stating the following: 1) the purchase price shall be adjusted upward or downward based on an appraisal; 2) a Seller Carry-Back Note will be provided; and 3) the underwriting period was extended. 3. An Amended and Restated Property Purchase and Sale Agreement was provided, dated June 1, 2015, reflecting a reduction in the purchase price to $9,750, According to the appraisal prepared by Integra, dated May 19, 2015, the As Is appraised value of the Development is $9,750,000, which supports the purchase price of $9,750,000. Based on FHFC s Land Allocation criteria, the calculated lowest land value is $689,000. has attributed the difference between the purchase price and the land value, $9,061,000, to the Building Acquisition Cost. OTHER DEVELOPMENT COSTS Applicant Costs Revised Applicant Costs Underwriters Total Costs - CUR Cost Per Unit Development Cost Before Developer Fee $15,467,016 $6,604,955 $15,714,434 $64,859 Developer Fee on Acquisition of Buildings $0 $1,468,992 $1,500,152 $13,763 Developer Fee $2,394,723 $1,072,735 $1,066,790 $9,787 Total Other Development Costs: Notes to the Other Development Costs: $2,394,723 $2,541,727 $2,566,942 $23, The total Developer Fee is within 18% of the Total Development Costs less Developer Fee, Land and Reserves. The Developer Fee on Acquisition of Buildings equals 18% of Building Acquisition Costs. The Developer Fee attributable to rehabilitation is the balance of the total Developer Fee less the Acquisition Fee, which is within industry standard. BOCA CIEGA TOWNHOMES PAGE A-15

19 LAND ACQUISITION COSTS Applicant Costs Revised Applicant Costs Underwriters Total Costs - CUR Cost Per Unit Land $500,000 $760,000 $689,000 $6,321 Total Acquisition Costs: Notes to Land Acquisition Costs: $500,000 $760,000 $689,000 $6, According to the appraisal prepared by Integra, the As If (vacant land) market value of the property is $760,000. Based on FHFC s Land Allocation criteria, the calculated lowest land value is $689,000. TOTAL DEVELOPMENT COSTS: Notes to Total Development Costs: $18,361,739 $18,967,682 $18,970,376 $94, Total Development Costs have increased by $608,637 since the time of Application primarily due to increases in financial costs. BOCA CIEGA TOWNHOMES PAGE A-16

20 OPERATING PRO FORMA FINANCIAL COSTS: Year 1 Year 1 Per Unit OPERATING PRO FORMA Gross Potential Rental Income $1,333,680 $12,236 Other Income Ancillary Income $15,696 $144 Gross Potential Income $1,349,376 $12,380 Less: Physical Vac. Loss Percentage: 4.00% $53,975 $495 Collection Loss Percentage: 1.00% $13,494 $124 Total Effective Gross Income $1,281,907 $11,761 Fixed: Real Estate Taxes $117,175 $1,075 Insurance $54,500 $500 Variable: Management Fee Percentage: 5.165% $66,211 $607 General and Administrative $46,870 $430 Payroll Expenses $92,650 $850 Utilities $111,725 $1,025 Marketing and Advertising $2,180 $20 Maintenance and Repairs/Pest Control $39,785 $365 Grounds Maintenance and Landscaping $16,350 $150 Reserve for Replacements $47,088 $432 Total Expenses $594,534 $5,454 Net Operating Income $687,374 $6,306 Debt Service Payments First Mortgage - HUD 223(f) $518,946 $4,761 Second Mortgage - Seller's Note $114,764 $1,053 Other Fees - HFA Compliance Monitoring Fee $3,960 $36 Total Debt Service Payments $637,670 $5,850 Cash Flow after Debt Service $49,704 $456 FINANCIAL COSTS: Annual Per Unit Debt Service Coverage Ratios DSC - First Mortgage 1.32 DSC - Second Mortgage 1.10 DSC - All Mortgages and Fees 1.08 Financial Ratios Operating Expense Ratio 46.38% Break-even Economic Occupancy Ratio (all debt) 91.32% INCOME: EXPENSES: BOCA CIEGA TOWNHOMES PAGE A-17

21 Notes to the Operating Pro Forma and Ratios: 1. Gross potential rental revenue is based upon the As-Renovated HAP Contract rents provided by the US Department of Housing and Urban Development ( HUD ), and the 2015 restricted rents published by Florida Housing less utility allowances published by HUD, as of May 31, Overall, the 60% AMI rents for the Development are at achievable levels confirmed by the appraiser. The Development is currently operating under a HAP contract, expiring in 2029, whereby 108 of the 109 units receive rental assistance, with one market rate unit. The Developer is requesting a renewed, 20-year HAP contract whereby 108 of the 109 units will receive rental assistance and one unit will become a LIHTC unit with rents at or below 60% AMI. Therefore, tenants will pay rental rates based on 30% of their adjusted monthly income with the balance between the tenant contribution and the rental rate paid through government subsidies (rental assistance). Under the HAP contract, the income restrictions are 75% of the units at or below 30% of the Area Median Income ( AMI ) and 25% of the units at or below 50% AMI. The net HAP contract rents reflected below are As-Renovated rental rates as provided by HUD. A rent roll for the Development property is illustrated in the following table: MSA (County): Tampa-St. Petersburg-Clearwater MSA (Pinellas County) Bed Bath Gross HC Low HOME High HOME Utility RD/HUD Cont Net HC Applicant Appraiser Annual Rental Rooms Rooms Units Square Feet AMI% Rent Rents Rents Allow Rents Rent Rents Rents CU Rents Income % $796 $126 $0 $670 $670 $670 $670 $8, % $930 $0 $930 $930 $930 $312, % $930 $0 $930 $930 $930 $234, % $1,100 $0 $1,100 $1,100 $1,100 $356, ,390 60% $1,100 $0 $1,100 $1,100 $1,100 $422, ,153 $1,333, Ancillary Income of $144 per unit is comprised of fees associated with late charges, cleaning fees, pet deposits, forfeiture of security deposits and laundry income. The Developer will lease sets of washer/dryer appliances to tenants for an estimated income of $7 per unit or $9,156 annually. 3. A 5.0% vacancy and collection loss rate was concluded by the appraisal based on comparables in the market and occupancy weighted average rate of 100%. relied upon this figure for underwriting purposes. 4. The appraiser utilized a real estate tax expense of $117,175 or $1,075 per unit, which is based on multiplying the estimated tax assessed value of $4.4M by the Development s 2014 millage rate. 5. Payroll expenses include onsite personnel including maintenance workers, porters and a resident superintendent. Integra concludes the payroll expense is within the range of comparables and the Development s historical expenses. 6. The tenant is responsible for in-unit electric expenses, cable and broadband. The landlord will pay all other utility expenses including gas, water, sewer, trash, as well as all community areas and vacant units. Integra estimated the utility expenses by using the Development s historical expenses and comparable data. BOCA CIEGA TOWNHOMES PAGE A-18

22 7. The Applicant submitted a Management Agreement, dated June 9, 2015, between the Applicant and Menowitz Management Corporation ( Agent ), which provides for compensation in an amount equal to 5.165% of the Borrower s Gross Collected Rent. The term of this Agreement is effective for one year from the date of the Agreement and shall automatically renew each year. The underwriter utilized the 5.165% rate for underwriting purposes. 8. Based upon an estimated Net Operating Income ( NOI ) of $687,374 for the proposed development s initial year of stabilized operations; the first mortgage loan can be supported by operations at a 1.32 to 1.00 Debt Service Coverage ( DSC ). For the first and second mortgages, the DSC is 1.10 to 1.00, which is the minimum DSC for first and second mortgages with Housing Credits, per Rule Chapter F.A.C. The DSC for all mortgages and fees is 1.08 to Replacement Reserves totals $47,088 or $432 per unit per year, which is based upon the Capital Needs Assessment report provided by GRS Group. 10. The HFA Compliance Monitoring Fee is based on the contract between the HFA and its servicer, which stipulates an annual amount equal to.04% times the amount of the Bonds outstanding, with a minimum annual fee of $2,928 per annum. In the event the Bonds are retired prior to the end of the Property s Qualified Project Period, the annual compensation shall be at a fixed annual fee for the duration of the Qualified Project Period at an amount equal to.04% per annum of the principal balance of the Bonds outstanding at the time the Bonds were retired, or a minimum of $2,928 per annum. 11. A 15-year Operating Pro Forma reflects rental income increasing at an annual rate of 2% and expenses increasing at an annual rate of 3%. BOCA CIEGA TOWNHOMES PAGE A-19

23 Section B MHRB Loan Special Conditions

24 Special Conditions This recommendation is contingent upon receipt of the following item by HFAPC at least two weeks prior to loan closing. Failure to submit this item within this time frame may result in postponement of the loan closing date. 1. Written confirmation of FHFC Asset Management Department s approval of the selection of Menowitz Management Corporation to manage the Development. 2. The Applicant to apply for Non-Competitive Housing Credits (4 Percent HC) through Florida Housing Finance Corporation. 3. The Seller s Note in conformance with the assumptions referred to herein and in form and substance acceptable to the HFA. 4. Satisfactory current state of Florida Certificates of Status for Boca Ciega Partners TC, LP, th Street, LLC and MTF Development, LLC. 5. Satisfactory signed and sealed as submitted for permitting civil and architectural plans and specifications reflecting no material changes since the time of credit underwriting. BOCA CIEGA TOWNHOMES PAGE B-1

25 Section C Supporting Information & Schedules

26 Additional Development & Third Party Supplemental Information Appraised Value: received and reviewed a satisfactory appraisal dated May 19, 2015 performed by Integra Realty Resources-Tampa Bay ( Integra ). The report was certified by PJ Cusmano, Director/Principal, a state certified general real estate appraiser (RZ2436). The report indicates a value, as completed and stabilized, based on market rents of $11,780,000, resulting in a 84.05% first mortgage loan to value. The valuation, as completed and stabilized, based on the HAP contract rents value is $11,730,000, resulting in an 84.40% first mortgage loan to value. The As Is market value of the property is $9,750,000, which supports the purchase price of $9,750,000. According to the appraisal, the As If (vacant land) market value of the property is $760,000. The total purchase price is $9,750,000, of which $9,061,000 is allocated to the buildings and improvements. Based on FHFC s Land Allocation criteria, $689,000 is allocated to the purchase price of the land, which is less than the appraised value of $760,000. Market Study: requested and reviewed a satisfactory market study prepared by Meridian dated April 29, The market study concludes that, based on market research and demographic analysis, strong demand exists for the Development. Demand in the market is evidenced by the occupancy rates of comparable properties in the market and the capture rates for the Development. Strengths of the Development include continued receipt of rental subsidy under the project s Section 8 HAP contract, and the property s 100% occupancy combined with Development not displacing tenants during the proposed rehabilitation. The apartment market within Pinellas County consists of a wide variety of unit types ranging from older subsidized housing to luxury market rate projects. The appraiser s survey of both market and affordable properties from CoStar reported existing inventory in Pinellas County (70,404 units) and in the ten and three mile rings centered from the subject property, consisting of 27,853 units and 4,804 units, respectively. Occupancy rates in Pinellas County and in the ten and three mile rings from the subject are at higher levels than the average of the past five years. Conversely, vacancy rates surveyed in Pinellas County and in the ten and three mile rings from the subject were 5.0%, 5.6% and 4.5%, respectively, were lower compared to their five year averages of 5.4%, 5.8%, and 5.6%, respectively. The Development s neighborhood is located in south St. Petersburg, at the southern end of Pinellas County, within the Tampa-St. Petersburg-Clearwater MSA. Large bodies of water influence the area, with the neighborhood having frontage on the Gulf of Mexico to the east and south, along with its proximity to Boca Ciega Bay and Lake Maggiore. The neighborhood nearly 100% built up BOCA CIEGA TOWNHOMES PAGE C-1

27 and consists primarily of older residential uses in average to good condition constructed between 1950 and Commercial uses and development exist within the immediate area of the neighborhood, prominently along U.S. Highway 19. The Development s immediate area has a concentration of special needs subsidized housing provided by Boley Centers and Clam Bayou consisting of 48 existing units and ten units under construction. Overall, Meridian opines that the Development is proximate to necessary commercial services, employment centers and schools and is well suited for affordable multi-family use. According to the demographic analysis performed by Meridian, an adequate number of households exist within the income band necessary to support potential demand for the Development. The Capture Rates of the Development in the three, five, and ten-mile rings of 1.7%, 0.8%, and 0.4%, respectively, are very good. Additionally, the Capture Rates are also low assuming there is no HAP contract, at 4.2%, 1.9% and 0.9% in the three, five, and ten-mile rings. A Capture Rate of 10% or less in the three-mile ring is a typical developer s benchmark that a project is appropriately sized for the market. There are currently an adequate number of households within the income band necessary to support demand for the subject s units, with a maximum Level of Effort ( LOE ) of 12.6% in the five-mile ring, and lower at 9.3% in the three-mile ring, and 10.1% in the ten mile ring. The Development s LOE are relatively low due to the size of the existing and funded supply in relation to the size of the income qualified renter households in the market. Further, existing subsidized projects near the Development have maintained high occupancy rates with waiting lists indicating strong demand for the subsidized apartment units. Meridian estimates the Development will be able to achieve maximum HC allowable rental rates for the 60% AMI units. The Development will also benefit from the rental rate advantage it will have when compared to market rents. The unit set side for families with incomes at or below 60% of AMI will have an advantage over achievable market rents of 21%, which satisfies the Rule. Remaining Potential Demand, or income qualified renter households minus supply, for the three, five and ten mile rings of 5,851, 12,401, and 25,493, respectively, is positive. Remaining Potential Demand is the number of income qualified renter households that are not housed in existing or funded affordable units. According to Meridian, the development s remaining potential demand is significant in all market areas. Household growth of age and income-qualified renter households in the development s ten-mile ring is expected to increase by 165 households annually over the next five years. Annual growth that is greater than the development size is a positive demographic factor. BOCA CIEGA TOWNHOMES PAGE C-2

28 The Primary Market Area ( PMA ) is defined as a ten-mile ring centered on the Development. In large markets, as in this case, numerous like-kind properties can be found in close proximity (within two to three mile rings) of the Development. The Competitive Market Area ( CMA ) is defined as those developments lying in closest proximity to the Development with similar income restrictions and demographic commitments with rental subsidies. The terms CMA and sub-market are synonymous. Within the CMA, there are no proposed or under construction projects, however there are six existing affordable developments totaling 367 units, which are considered stabilized like-kind properties. The CMA s weighted average occupancy rate is 100%, which satisfies the minimum 92% occupancy rate requirement of the Rule. Meridian estimated a hypothetical absorption pace of 35 units per month and an absorption period of approximately three months if the Development were vacant. It should be noted that this hypothetical absorption analysis is moot as the Development is an existing property with tenants that will be temporarily relocated off-site during rehabilitation. As such, the Development will require minimal re-tenanting. All current tenants are expected to be income-qualified following renovations. There are no FHFC Guarantee Fund developments located within a five-mile radius or within the PMA of the Development. Therefore, the Development is not expected to have a negative impact on any Guarantee Fund properties. According to Meridian, there will be no short term impact to developments within the CMA due to the overall strength of the market and the Development being a rent-subsidized project. The Development is an existing project that stays at or near 100% occupied with a waiting list and the tenants will return to their units following renovations. Meridian opines there will be no long-term impact to developments within the CMA due to the strength of the Pinellas County economy and the apartment market are expected to perform well over the long term. Environmental Report: A Phase I Environmental Site Assessment ( ESA ) was performed by Global Realty Services Group ( GRS ) and their assessment was compiled in a report dated April 14, The ESA was conducted in accordance with ASTM Practice E and noted there were no Recognized Environmental Conditions in connection with the Development s site. GRS identified materials which may contain asbestos, including vinyl floor tile, drywall, joint compound, ceiling texturing and exterior shingles. GRS stated an Operations and Maintenance (O&M ) Plan should be implemented to assure the appropriate long-term handling of building materials suspected of containing asbestos. GRS also noted that lead-based paint may be present at the property; however, no sampling was conducted. GRS stated an O&M should be implemented to assure appropriate handling of suspected leadbased paint. BOCA CIEGA TOWNHOMES PAGE C-3

29 Lead- Based Paint Report: A Lead-Based Paint Inspection was performed by Get the Lead Out, LLC, on June 26, 2014, by Kyle Gunion, a licensed Florida Lead Paint Risk Assessor (FL- R ). The purpose of this assessment was to identify any lead-based paints ( LBP ) within the Development. The assessment included the testing of all painted components according to the specifications described in the HUD Lead Guidelines 7.0, 2 nd Edition, revised July 2012, and all Federal, State and City regulations. A survey of 25 townhome units were selected for testing, as well as the common areas, leasing office and 16 building exteriors. The results indicated that lead-based paint above the EPA/HUD regulatory levels was not found on the property. Lead Operations And Maintenance Plan: Asbestos Report: Asbestos Operations And Maintenance Plan: Capital Needs Assessment: GRS provided an O&M for Lead-Based Paint, dated June 10, The purpose of the O&M is to implement a satisfactory approach to controlling exposure to LBP identified at the Development and to maximize employee and building occupant health and protection. Based on the findings of the ESA, the Development will follow the guidelines stipulated in the Asbestos O&M Report discussed below. Neither a separate asbestos inspection nor report was provided. GRS provided an Asbestos O&M, dated August 19, The purpose of the O&M is to minimize exposure of all building occupants to asbestos fibers. To accomplish this objective, an O&M includes work practices to (1) maintain Asbestos Containing Materials ( ACM ) in good condition, (2) ensure proper cleanup of asbestos fibers previously released, (3) prevent further release of asbestos fibers, and (4) monitor the condition of ACM. The O&M provides guidance to accomplish these objectives within criteria established by the Environmental Protection Agency. GRS completed a Project Capital Needs Assessment ( PCNA ) of the subject site and buildings dated July 19, The purpose of the PCNA was to identify the immediate needs of the subject property including structural deficiencies, health and safety violations, repairs, replacements, and deferred maintenance that is required to be addressed in order for it to operate as a competitive affordable residential rental community. GRS inspected the entire site and building, the common areas, and 25.7% of the occupied or unoccupied apartment units. GRS opined the site and its residential buildings and leasing office were in fair condition at the time of the inspection. GRS performed a replacement reserve analysis based upon a 20 year schedule to identify and estimate the costs of capitalized expenses that will be necessary BOCA CIEGA TOWNHOMES PAGE C-4