Housing Finance Authority of Hillsborough County

Transcription

1 Housing Finance Authority of Hillsborough County Credit Underwriting Report SWEETWATER VILLAS Multifamily Mortgage Revenue Note Program (MMRN) Section A: Report Summary Section B: Multifamily Mortgage Revenue Bond Special and General Conditions Section C: Supporting Information and Schedules Prepared by AmeriNat Second Draft Report

2 SWEETWATER VILLAS TABLE OF CONTENTS Section A Report Summary Recommendation Overview Uses of Funds Operating Pro forma Page A1 A7 A8 A11 A12 A15 A16 A18 Section B MMRN Loan Special and General Conditions B1 B4 Section C Supporting Information and Schedules Additional Development & Third Party Information Borrower Information Guarantor Information Syndicator Information General Contractor Information Property Management Information C1 C5 C6 C12 C13 C14 C15 C16 C17 C18 C19 Exhibits 15 Year Pro forma 1 Description of Features and Amenities 2: 1 2 Completeness and Issues Checklist 3: 1 2

3 Section A Report Summary

4 Recommendation AmeriNat recommends the issuance of a Multifamily Mortgage Revenue Note ( MMRN ) by the Housing Finance Authority of Hillsborough County ( HFAHC ) in the amount of $6,000,000 to Blue Humphrey Street, LLC ( Applicant ) for the construction and permanent phase financing of Sweetwater Villas (the proposed Development ). DEVELOPMENT & SET ASIDES Development Name: Sweetwater Villas Program Numbers: C 4102 W. Humphrey Street, Address: 8437/8441/8713 N. Lois Avenue City: Tampa Zip Code: County: Hillsborough County Size: Large Development Category: New Construction Development Type: Townhomes Construction Type: Wood framing with vinyl siding, soffits and wood fascia. The building roofs will be asphalt shingles. Demographic Commitment: Elderly: Homeless: x ELI: AMI Farmworker or Commercial Fish Worker: Family: x Link: Units Low Bed Bath Square Gross HC HOME Rooms Rooms Units Feet AMI% Rent Rents % $666 $666 High HOME Rents RD/HUD Cont Rents Utility Net HC Applicant Appraiser Annual Rental Allow Rent Rents Rents CU Rents Income $83 $583 $583 $583 $583 $20, % $799 $83 $716 $716 $716 $716 $283, % $770 $770 $98 $672 $672 $672 $672 $16, % $924 $98 $826 $826 $826 $826 $178, $499,068 Buildings: Residential 2 Non Residential 1 Parking: Parking Spaces 116 Accessible Spaces 5 Set Asides: Program % of Units # of Units % AMI Term (Years) MMRB 91% 51 60% 50 MMRB 9% 5 50% 50 HC 100% 56 60% 30 HOME 40% 23 80% 20 HOME 9% 5 50% 20 HOME 10% 6 Homeless 20 Absorption Rate: 20 units per month for 3 months. Occupancy Rate at Stabilization: Physical Occupancy 96% Economic Occupancy 95% According to the market study, comparable developments in the CMA have an average weighted Occupancy Comments occupancy of 99.1%. SWEETWATER VILLAS PAGE A 1

5 DDA?: No QCT?: Yes Site Acreage: 6.15 Density: 9.1 Flood Zone Designation: A and X Zoning: Planned Development limited to 56 multifamily units Flood Insurance Required?: Yes DEVELOPMENT TEAM Applicant/Borrower: General Partner 1: Limited Partner 1: Guarantor(s): Developer: Principal 1 Principal 2 Principal 3 Principal 4 Principal 5 General Contractor 1: Management Company: Syndicator: Bond Issuer: Architect: Market Study Provider: Appraiser: Blue Humphrey Street, LLC % Ownership Blue Humphrey Street M, LLC 0.01% Raymond James Tax Credit Funds, Inc. or its assigns 99.99% Blue Humphrey Street, LLC Blue Humphrey Street M, LLC Blue Sky GE, LLC Blue Sky Communities, LLC Shawn Wilson James Chadwick Blue Sky Communities, LLC Shawn Wilson Scott Macdonald Weedon Enterprises II, LLC Harry R. Chadwick and Laurel J. Chadwick Family Trust Sembler Provision Fund Generation Skipping Trust #5 NDC Construction Company, LLC Carteret Management Corporation Raymond James Tax Credit Funds, Inc. or its assigns Housing Finance Authority of Hillsborough County Architectonics Studio, Inc. Meridian Appraisal Group, Inc. Meridian Appraisal Group, Inc. PERMANENT FINANCING INFORMATION 1st Source 2nd Source 3rd Source 4th Source 5th Source Other Lien Position 1 2 Hillsborough Lender/Grantor Citi County Amount $2,000,000 $4,500,000 Underwritten Interest Rate 5.81% 0.10% All In Interest Rate 5.81% 0.10% Loan Term Amortization 35 n/a Market Rate/Market Financing LTV Restricted Market Financing LTV 28.78% 93.53% 63.09% % Loan to Cost 16.60% 37.35% Debt Service Coverage Operating/Deficit Service Reserve Period of Operating Expenses/Deficit Reserve in Months $106,768 3 SWEETWATER VILLAS PAGE A 2

6 Deferred Developer Fee $653,392 Land Value $685,000 Market Rent/Market Financing Stabilized Value $6,950,000 Rent Restricted Market Financing Stablized Value $3,170,000 Projected Net Operating Income (NOI) Year 1 $190,467 Projected Net Operating Income (NOI) 15 Year $202,611 Year 15 Pro Forma Income Escalation Rate 2% Year 15 Pro Forma Expense Escalation Rate 3% Bond Structure Tax Exempt Back to Back Note Housing Credit Syndication Price $1.095 Housing Credit Annual Allocation $452,709 CONSTRUCTION/PERMANENT SOURCES: Source Lender Construction Permanent Perm Loan/Unit First Mortgage Citi $6,000,000 $2,000,000 $35,714 Second Mortgage Hillsborough County $4,500,000 $4,500,000 $80,357 HC Equity RJTCF $734,124 $4,894,161 $87,396 Deferred Developer Fee Developer $813,429 $653,392 $11,668 TOTAL $12,047,553 $12,047,553 $215,135 SWEETWATER VILLAS PAGE A 3

7 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? X Are all funding sources the same as shown in the Application? 1 Are all local government recommendations/contributions still in place at the level described in the Application? X 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: 1. Since the time of application, the Applicant requested the issuance of MMRN be increased from $5,400,000 to $6,000,000. The Permanent First Mortgage also increased from $1,800,000 to $2,000, Total Development Costs ( TDC ) have increased by $727,906 from $11,319,647 to $12,047,553 primarily due to increases in construction costs, financial costs, and Developer fee. 3. Since the time of application, Raymond James Tax Credit Funds, Inc. ( RJTCF ) reduced the rate of syndication from $1.105 to $ However, the Development anticipates receiving $397,261 of additional HC equity as the amount of anticipated annual HC credits increased from $407,000 to $447,000. X X X X X X n/a 2 3 SWEETWATER VILLAS PAGE A 4

8 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 February 13, 2017, the Development has a capture rate of 0.3% in the Primary Market Area ( PMA ), a ten mile ring centered on the Development with an estimated population of 22,206 potential households that are income qualified with a propensity to rent. The capture rate indicates the Development is correctly sized relative to the amount of income qualified renter households in the market and strong demand exists for affordable rental units. Additionally, Meridian identified ten existing comparable properties totaling 2,318 units located within the Competitive Market Area ( CMA ), which encompasses the same area as the PMA. The report concludes an average weighted occupancy rate for the CMA of 99.1%. 3. An appraisal, also completed by Meridian, dated April 12, 2017, concludes that the Development has good affordability for the restricted rents compared to the concluded market rents. The units set aside for tenants with incomes at or below 50% of AMI will have an advantage over achievable market rents of between 182% and 197%. The units set aside for tenants with incomes at or below 60% of AMI will have an advantage over achievable market rents of between 148% and 161%. The average market rental rates are in excess of 110% of the applicable maximum HC rental rates. Other Considerations: None. Issues and Concerns: 1. Mr. Chadwick, a financial beneficiary in the transaction, indicated four separate incidences of bankruptcy/reorganization filings; foreclosure, deed in lieu of foreclosure, short sale, loan default, or payment moratorium; or loan(s) in arrears for principal, interest, taxes, or insurance premiums due. Mitigating factor: AmeriNat received the following details regarding these items: a. Botanica Gardens (228 units of market rate multifamily housing located in Mandeville, LA): Chadwick Investment Partnership, Ltd., of which Mr. Chadwick was the sole member, had 12% interest in Botanica Group LLC. Original financing was provided by Regions Bank in August 2006 in the amount of $27,364,031 and the loan matured as of 8/31/10; Mr. Chadwick was a personal guarantor for the loan. The note was acquired by LTP Real Estate Solutions I, LLC. The company could find no alternative financing and amicably agreed to a deed in lieu of foreclosure in September Mr. Chadwick agreed to a settlement of $125M for full release from his personal guarantee. b. The Cove (689 units of market rate multifamily housing located in Tampa, FL): Mr. Chadwick and his wife, Cecile, held a 15% interest in Westshore Acquisition Trust Group LLC. Original financing was provided by LB Commercial Mortgage Trust in May 2007 in the amount of $54MM; Mr. Chadwick was a personal guarantor in the transaction. The property located in Tampa, FL was purchased in 2005 with funds provided by Wachovia with the intent to redevelop. The real estate market declined and the owner contributed SWEETWATER VILLAS PAGE A 5

9 $14MM of equity to it. Despite renovations and equity contributions, the performance of the asset continued to decline. The partnership filed bankruptcy. A settlement was reached wherein the property was deeded to the lender and Mr. Chadwick paid $375M for a full release of his guarantee as of March c. The Villas of Seagate at St. Joseph Sound (33 for sale townhomes in Dunedin, FL): Mr. Chadwick and his wife held a 49% interest in the managing member of C2FS Dunedin, LLC. Bank of America (1st mortgage of $2,769,777 in June 2005) and St. Joseph Sound Development Group, Inc. (2nd mortgage) provided the financing. A total of 33 townhomes were built and 28 of the units sold. The remaining five units had a value significantly greater than the 1st mortgage, and the 2nd mortgagee refused to negotiate. The owner entered into a stipulated foreclosure agreement with Bank of America to take back the property in full satisfaction of the debt and releasing the guarantors in August d. The Cottages at Green Key (vacant land located in New Port Richey, FL): Mr. Chadwick held a 15% interest in Lagoon Investment Partners LLC. Regions Bank provided acquisition financing of $3,663,782 in March 2006 with Mr. Chadwick listed as a personal guarantor. The Applicant represents that the loan was kept current throughout its term. Regions agreed to accept the property in full satisfaction of the debt in account of a deficiency as of June None of the above defaults are related to affordable housing developments, which is in agreement with the Rule. In addition, AmeriNat was advised that all of the defaults were settled amicably between the respective Lenders and Mr. Chadwick. Waiver Requests: None Special Conditions: 1. The existing HOME Investment Partnerships ( HOME ) from Hillsborough County must agree to subordinate to the MMRN first mortgage. 2. Receipt of a final Plan and Cost Review that verifies each of the features and amenities are reflected in the plans and specifications to be constructed at the Development. Additional Information: 1. The Applicant has provided an executed HOME Program Funding Agreement dated October 24, 2016, between the Applicant and Hillsborough County. The Agreement states Hillsborough County awarded the Applicant $4,500,000 to construct the Development in exchange for 23 HOME assisted rental units. The Agreement further requires 25% of the HOME units (5 units) will be Low HOME units set aside for tenants earning 50% or less of the Area Median Income ( AMI ) and six units of the 23 HOME units must be set aside for persons transitioning out of homelessness. 2. On April 7, 2017, the Applicant requested an Applicant entity change as follows: SWEETWATER VILLAS PAGE A 6

10 Application Blue Humphrey Street LLC Manager/Member: Blue Humphrey Street M, LLC Managers: Jim Chadwick and Shawn Wilson Members: Shawn Wilson (28.5%) Scott Macdonald (5%) Weedon Enterprises, LLC (66.5%) Members: Chadwick Family Trust (50%) Sembler Provision Generation Skipping Trust #4 (50%) Proposed Blue Humphrey Street LLC Manager/Member: Blue Humphrey Street M, LLC Managers: Jim Chadwick and Shawn Wilson Members: Shawn Wilson (28.5%) Scott Macdonald (5%) Chadwick Family Trust (33.25%) Sembler Provision Generation Skipping Trust #5 (33.25%) Per the Application Instructions for the 4% HC, any material change in the ownership structure of the Applicant will require FHFC Board approval prior to the change and cannot occur prior to the issuance of a Preliminary Determination. The Applicant intends to submit the proposed change for FHFC Board approval upon receipt of the Preliminary Determination. Recommendation: AmeriNat recommends a MMRN Loan in the amount of $6,000,000 to be utilized for the construction and permanent phase financing of the Development. These recommendations are 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 MMRN Loan Special and General Conditions (Section B). 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: Kyle Kuenn Senior Credit Underwriter Mark Fredericks Senior Vice President Multifamily Services SWEETWATER VILLAS 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 Citi $5,400,000 $6,000,000 $6,000, % $343,217 Second Mortgage Hillsborough County $4,500,000 $4,500,000 $4,500,000 HC Equity RJTCF $674,535 $734,124 $734,124 Deferred Developer Fee Developer $745,112 $853,146 $813,429 Proposed First Mortgage Loan: Total : $11,319,647 $12,087,270 $12,047,553 $343,217 The Applicant provided a term sheet dated January 30, 2017 from Citi Community Capital illustrating the proposed terms of construction and permanent financing for the Development. Citibank, N.A. ( Citi ) will fund a tax exempt construction/permanent loan up to $5,750,000 to the Housing Finance Authority of Hillsborough County ( HFAHC ) at loan closing ( Funding Loan ). HFAHC, or its appointed fiscal agent, will loan the proceeds of the Funding Loan to the Applicant ( Construction Loan ) on a draw down basis. Terms and conditions of the Funding Loan include: an initial term of 24 months with two, 6 month extensions available for a fee of 0.25% and 0.50% of the Funding Loan amount, respectively. Payments during the construction phase will be interest only based upon a variable interest rate equal to the One Month LIBOR (presently at 0.99%) plus 2.70%. The Governmental Lender (Issuer) Fee of 0.20%, and a Credit Underwriting cushion of 1.00% were added to derive the all in interest rate of 4.89% during the construction phase. Proposed Second Mortgage Loan HOME: The Applicant has provided an executed HOME Program Funding Agreement dated October 24, 2016, between the Applicant and Hillsborough County. The Agreement states Hillsborough County awarded the Applicant $4,500,000 of HOME funds to construct the Development. Terms and conditions of the HOME loan include a 20 year term with interest only payments based on a fixed interest rate of one tenth percent (0.10%) paid annually in arrears out of available development cash flow after payments. The principal and any accrued unpaid interest shall be due at maturity. Additional Construction Sources of Funds: According to the equity proposal dated April 4, 2017, Raymond James Tax Credit Funds, Inc. ( RJTCF ) will purchase a 99.99% limited interest in the Applicant. The Applicant will receive a net equity contribution of $4,894,161 from an affiliated entity of RJTCF in return for a proportionate share of the total HC allocation estimated in the proposal to be $4,470,000. The HC allocation will be syndicated at a rate of $1.095 for each $1.00 of tax credits delivered. A total of $734,124 (15% of total equity) is to be paid prior to or simultaneously with the closing of the construction financing, which satisfies the equity criteria requirement of Florida Housing. No further equity is anticipated to be received by the Applicant during construction. SWEETWATER VILLAS PAGE A 8

12 Deferred Developer Fee: As indicated in the term sheet provided by CITI, any payment of developer fee prior to permanent loan conversion is subject to CITI s approval. AmeriNat estimates that the Applicant will be required to defer $813,429 of the total developer fee during the construction phase. SWEETWATER VILLAS 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 Citi $1,800,000 $2,000,000 $2,000, % $133,797 Second Mortgage Hillsborough County $4,500,000 $4,500,000 $4,500, % n/a 20 $4,500 HC Equity RJTCF $4,496,900 $4,872,263 $4,894,161 Deferred Developer Fee Developer $522,747 $715,007 $653,392 Total : Proposed First Mortgage Loan: $11,319,647 $12,087,270 $12,047,553 $138,297 The Construction Loan shall be paid down with other sources identified herein by $3,950,000 to $1,800,000 ( Permanent Loan ) or such other amount as determined by Citi during its underwriting performed at permanent loan conversion. The following conditions must be met in order to convert to permanent financing: 1) construction must be complete and 2) the Development must be a minimum of 90% occupied for three consecutive calendar months. Citi will determine the final Permanent Loan amount based upon a minimum Debt Service Coverage of 1.30 to 1.00 and a maximum loan to value ( LTV ) not to exceed 90% based upon a re underwriting of the actual income and expenses in place at the time of conversion. The Applicant will pay a conversion fee of $10,000 plus other expenses for an insurance review, site inspection, and loan servicer set up fees that are estimated to be $5,000. Terms and conditions of the Permanent Loan include a 15 year term and a 35 year amortization period. The all in fixed interest rate used for underwriting purposes is estimated to be 5.81%, which is equal to the 18 year LIBOR Swap rate (estimated to be 2.61%) plus a 2.50% Citi spread, the Governmental Lender (Issuer) fee of 0.20% and an underwriting cushion of 0.50% for possible future rate fluctuations. A yield maintenance penalty will be enforced from the Construction Loan closing until six months prior to the end of the 15 th year of the Permanent Loan. Proposed Second Mortgage Loan HOME: The Applicant has provided an executed HOME Program Funding Agreement dated October 24, 2016, between the Applicant and Hillsborough County. The Agreement states Hillsborough County awarded the Applicant $4,500,000 of HOME funds to construct the Development. Terms and conditions of the HOME loan include a 20 year term with interest only payments based on a fixed interest rate of one tenth percent (0.10%) paid annually in arrears out of available development cash flow after payments. The principal and any accrued unpaid interest shall be due at maturity. Additional Permanent Sources of Funds: According to the equity proposal dated April 4, 2017, RJTCF will purchase a 99.99% limited interest in the Applicant. The Applicant will receive a net equity contribution of $4,894,161 from an affiliated entity of RJTCF in return for a proportionate share of the total HC allocation estimated in the proposal to be $4,470,000. The HC allocation will be syndicated at a rate of $1.095 for each $1.00 of tax credits delivered. The HC equity contributions are anticipated to be paid as follows: SWEETWATER VILLAS PAGE A 10

14 Capital Contributions Amount Percent of Total 1st Installment $734, % Clos ing Due upon 2nd Installment $195, % Later of April 1, 2018 or Construction Completion Later of October 1, 2018, Stabilized operations, and receipt of 3rd Installment $3,964, % Forms 8609 Total: $4,894, % Annual Credits Per Syndication Agreement $447,000 Total Credits Per Syndication Agreement $4,470,000 Calculated HC Rate: $1.095 Limited Partner Ownership Percentage 99.99% Proceeds During Construction $734,124 Deferred Developer Fee: As indicated in the term sheet provided by Citi, any payment of developer fee prior to permanent loan conversion is subject to Citi s approval. The Applicant will be required to permanently defer $653,392 of the total developer fee after stabilization. SWEETWATER VILLAS PAGE A 11

15 Uses of Funds CONSTRUCTION COSTS: Applicant Costs Revised Applicant Costs Underwriters Total Costs CUR Cost Per Unit HC Ineligible Costs CUR New Rental Units $5,817,984 $6,257,167 $4,553,626 $81,315 $0 Site Work $0 $0 $1,598,112 $28,538 $0 General Conditions $0 $0 $369,104 $6,591 $0 Overhead $0 $0 $123,034 $2,197 $0 Profit $814,518 $876,003 $369,104 $6,591 $0 Total Construction Contract/Costs $6,632,502 $7,133,170 $7,012,980 $125,232 $0 Hard Cost Contingency $331,625 $356,659 $350,649 $6,262 $0 Other: Subcontractor Default Insurance $0 $0 $80,647 $1,440 $0 Other: P&P Bonds $60,000 $74,898 $74,898 $1,337 $0 Total Construction Costs: Notes to Actual Construction Costs: $7,024,127 $7,564,727 $7,519,174 $134,271 $0 1. Standard Form of Agreement Between Owner and Contractor where the basis of payment is the Cost of the Work Plus a Fee with a Guaranteed Maximum Price in the amount $7,190, (the Construction Contract ) has been provided. The Construction Contract was entered into as of January 31, 2017 and is executed by the Applicant and NDC Construction Company, LLC (the General Contractor ). It contains a production schedule indicating completion within 365 days from the date of commencement. Retainage of ten percent (10%) is to be withheld from the General Contractor s application for payment until the Development is 50% complete, at which time, no retainage will be required thereafter. Retainage will not be released until successful completion of construction and issuance of all certificates of occupancy. The Applicant and General Contractor executed Change Order #1, which amended the schedule of values to decrease costs by $57,000 from $7,190, to 7,133, to remove the FGBC GC Required Testing and Certification and adjust the General Contractor s Fee (consisting of general conditions, overhead, and profit). The Applicant and General Contractor executed Change Order #2, which amended the schedule of values to decrease costs by $39, from $7,133, to $7,093, in order to reduce the SDI premiums and adjust the General Contractor s Fee (consisting of general conditions, overhead, and profit) accordingly so the GC Fee does not exceed 14.00% of allowable hard costs as allowed by the Rule. The GC fee stated herein is for credit underwriting purposes only, and the final GC fee will be determined pursuant to the final cost certification process as per Rule Chapter A Plan and Cost Review ( PCR ) was engaged by AmeriNat and performed by GLE Associates, Inc. ( GLE ). GLE summarized their review of the schedule of values in a PCR dated April 12, The review concludes that the construction budget is within an acceptable range for the scope of work and the individual line items appear appropriate. The costs for similar type projects identified in the PCR range from $108,300 per unit to $144,099 per unit. With a projected unit cost of $128,396 per unit, it is GLE s opinion that the cost is within an acceptable range due to the Development s site locations compared to the comparables. 3. A 5% hard cost contingency was utilized by AmeriNat and is supported by the plan and cost review. 4. General Contractor s Fee (consisting of general requirements, overhead, and profit) is within the industry standards of 14.0% and is calculated exclusive of payment and performance bonds and insurance. SWEETWATER VILLAS PAGE A 12

16 5. The General Contractor will secure a Payment and Performance Bond to secure the Construction Contract and its cost is not included within the Construction Contract s schedule of values. GENERAL DEVELOPMENT COSTS: Applicant Costs Revised Applicant Costs Underwriters Total Costs CUR Cost Per Unit HC Ineligible Costs CUR Accounting Fees $30,000 $30,000 $30,000 $536 $30,000 Appraisal $11,000 $11,000 $5,000 $89 $0 Architect's Fee Landscape $26,085 $26,085 $26,085 $466 $26,085 Architect's Fee Site/Building Design $135,000 $140,000 $115,000 $2,054 $0 Architect's Fee Supervision $30,000 $30,000 $30,000 $536 $0 Building Permits $30,000 $6,383 $11,354 $203 $0 Engineering Fees $43,600 $43,600 $43,600 $779 $0 Environmental Report $6,000 $6,000 $6,000 $107 $0 FF&E paid outside Construction Contract $60,000 $60,000 $60,000 $1,071 $0 FHFC Administrative Fees $36,000 $36,000 $40,744 $728 $40,744 FHFC Application Fee $3,000 $30,000 $3,000 $54 $3,000 FHFC Credit Underwriting Fee $15,000 $25,000 $11,696 $209 $11,696 FHFC HC Compliance Fee (HC) $112,710 $112,710 $109,923 $1,963 $109,923 Impact Fee $174,276 $192,044 $161,583 $2,885 $0 Lender Inspection Fees / Const Admin $42,000 $42,000 $42,000 $750 $0 Green Building Cert. (LEED, FGBC, NAHB) $0 $12,500 $12,500 $223 $0 Insurance $103,953 $105,885 $105,885 $1,891 $0 Legal Fees $158,845 $118,845 $118,845 $2,122 $43,845 Local Subsidy Underwriting Fee $0 $0 $13,970 $249 $0 Market Study $0 $0 $5,000 $89 $5,000 Marketing and Advertising $15,000 $15,000 $15,000 $268 $15,000 Plan and Cost Review Analysis $0 $0 $3,075 $55 $0 Property Taxes $19,424 $19,424 $19,424 $347 $0 Soil Test $7,313 $7,313 $7,313 $131 $7,313 Start Up/Lease up Expenses $24,417 $39,770 $39,770 $710 $39,770 Survey $25,000 $40,000 $40,000 $714 $0 Title Insurance and Recording Fees $47,000 $47,000 $47,000 $839 $0 Traffic Study $4,990 $4,990 $4,990 $89 $0 Utility Connection Fees $138,493 $149,493 $149,493 $2,670 $0 Soft Cost Contingency $67,955 $71,297 $63,912 $1,141 $0 Total General Development Costs: Notes to the General Development Costs: $1,367,061 $1,422,339 $1,342,162 $23,967 $332, AmeriNat reflects actual costs for the appraisal, market study, and plan and cost review analysis. 2. Building Permits fees are an estimate based upon Permit Fee Schedule published on the Hillsborough County website. 3. AmeriNat reflects the costs associated with the Architect s fees as stated in an executed AIA B101 Agreement between Owner and Architect dated July 18, 2016 between the Applicant and Architectonics Studio, Inc., which was reviewed by the Underwriter. 4. AmeriNat reflects the costs associated with the Engineer s fees as stated in an executed Proposal for Civil Engineering dated May 17, 2016 between Hamilton Engineering and Surveying, Inc., and the Applicant, which was reviewed by the Underwriter. 5. The FHFC Administrative Fee is based on 9% of the recommended annual allocation of HC as outlined in the Non Competitive Application Instructions. The FHFC Underwriting Fee reflects the underwriting fees associated with the HC program based on the 2017 fee schedule posted on the FHFC website. SWEETWATER VILLAS PAGE A 13

17 6. The insurance costs is the Borrower s estimate for General Liability and Builder s Risk insurance. 7. Local subsidy Underwriting Fees reflect the underwriting costs associated with the MMRN underwriting for the HFA. 8. A soft cost contingency of 5% has been underwritten, which is consistent with the allocating agency s rule and may be utilized by the Applicant in the event soft costs exceed these estimates. 9. The remaining general development costs appear reasonable. FINANCIAL COSTS: Applicant Costs Revised Applicant Costs Underwriters Total Costs CUR Cost Per Unit HC Ineligible Costs CUR Construction Loan Application Fee $25,000 $25,000 $25,000 $446 $0 Construction Loan Origination Fee $94,500 $105,000 $105,000 $1,875 $0 Construction Loan Interest $195,000 $242,000 $343,217 $6,129 $171,150 Permanent Loan Closing Costs $0 $0 $15,000 $268 $15,000 Reserves Operating Deficit $105,150 $105,731 $106,768 $1,907 $106,768 Other: HFAHC COI $216,000 $215,000 $215,000 $3,839 $215,000 Total Financial Costs: Notes to the Financial Costs $635,650 $692,731 $809,985 $14,464 $507, Financial costs were derived from the representations illustrated in the letters of intent for equity and construction and permanent financing and appear reasonable to AmeriNat. 2. An interest reserve for the Construction Loan is supported by the MMRN Loan rate illustrated in the letter provided by Citi, the duration of construction referenced in the Construction Contract and the resultant calculation completed by AmeriNat through the use of a construction draw schedule provided by the Applicant. The computation includes a 1.00% cushion added to the sizing of this line item pursuant to the CITI term sheet. 3. The letter provided by RJTCF outlining the terms and conditions for which they would make an equity investment in the Borrower requires an Operating Deficit Reserve ( ODR ) of $106,768 to be funded upon the stabilization of the Development. The ODR represents approximately three months of expenses and debt service. The calculation of developer fee will be exclusive of the budgeted ODR and any ODR proposed or required by a limited partner or other lender in excess of the amount of the ODR deemed satisfactory by the credit underwriter will be a subset of developer fee. At the end of the Compliance Period, any remaining balance of the ODR less amounts that may be permitted to be drawn, which includes Deferred Developer Fee and reimbursements for authorized member and guarantor loan(s) pursuant to the operating agreement, any remaining balance shall be used to pay any outstanding HFAHC fees, deferred developer fee and partner funding. In no event shall the payments of amounts to the Applicant or the Developer from the Reserve Account cause the Developer Fee or General Contractor Fee to exceed the applicable percentage limitations provided for in the Rule. If any balance in the ODR account is remaining after the payments above, the amount should be placed in a Replacement Reserve account for the Development. Any and all terms and conditions of the ODR must be acceptable to HFAHC, its Servicer and its legal counsel. 4. Cost of Issuance is associated with the MMRN and includes certain origination and multiple legal counsel fees. The costs are based upon an estimate prepared by RBC Capital Markets, LLC. SWEETWATER VILLAS PAGE A 14

18 OTHER DEVELOPMENT COSTS Applicant Costs Revised Applicant Costs Underwriters Total Costs CUR Cost Per Unit HC Ineligible Costs CUR Development Cost Before Developer Fee and Land Costs $9,026,838 $9,679,797 $9,671,321 $172,702 $840,294 Developer Fee $1,607,809 $1,722,473 $1,721,619 $30,743 $0 $1,607,809 $1,722,473 $1,721,619 $30,743 $0 Total Other Development Costs: Notes to the Other Development Costs: 1. Total Developer Fee of $1,717,069 does not exceed 18.00% of the Total Development Costs ( TDC ), less reserves, as allowed by the allocating agency s rule. LAND ACQUISITION COSTS Applicant Costs Revised Applicant Costs Underwriters Total Costs CUR Cost Per Unit HC Ineligible Costs CUR Land $650,000 $650,000 $650,000 $11,607 $650,000 Land Closing Costs $35,000 $35,000 $4,613 $82 $4,613 $685,000 $685,000 $654,613 $11,690 $654,613 Total Acquisition Costs: Notes to Land Acquisition Costs: 1. The Applicant provided a Special Warranty Deed executed as of January 19, 2017 between New Tampa Investment Group, LLC ( Seller ) and the Applicant. An accompanying Acquisition Closing Statement dated January 19, 2017 illustrates the terms in which the Seller conveyed the land to the Applicant for a purchase price of $650,000, including recording fees of $4, An Appraisal performed by Meridian identifies an as is value of the land of $685,000 which supports the purchase price. The lessor of the sales price and as is value was used for underwriting purposes. TOTAL DEVELOPMENT COSTS: Notes to Total Development Costs: $11,319,647 $12,087,270 $12,047,553 $215,135 $1,494, Total Development Costs of $12,047,553 have increased by $727,906 from $11,319,647 to $12,047,553 since the Application primarily due to increases in construction costs, financial costs, and developer fee. SWEETWATER VILLAS PAGE A 15

19 OPERATING PRO FORMA FINANCIAL COSTS: Year 1 Year 1 Per Unit OPERATING PRO FORMA Gross Potential Rental Income $499,068 $8,912 Other Income $0 Ancillary Income $13,440 $240 Washer/Dryer Rentals $17,640 $315 Gross Potential Income $530,148 $9,467 Less: Physical Vac. Loss Percentage: 4.00% $21,206 $379 Collection Loss Percentage: 1.00% $5,301 $95 Total Effective Gross Income $503,641 $8,994 Fixed: Real Estate Taxes $46,355 $828 Insurance $33,600 $600 Variable: Management Fee Percentage: 6.00% $30,218 $540 General and Administrative $19,600 $350 Payroll Expenses $72,800 $1,300 Utilities $46,200 $825 Marketing and Advertising $5,600 $100 Maintenance and Repairs/Pest Control $25,200 $450 Grounds Maintenance and Landscaping $16,800 $300 Reserve for Replacements $16,800 $300 Total Expenses $313,173 $5,592 Net Operating Income $190,467 $3,401 Debt Service Payments First Mortgage Citi $133,797 $2,389 Second Mortgage Hills Cty HOME $4,500 $80 Other Fees Compl iance Monitoring/Servicing $5,508 $98 Other Fees Fiscal Agent $2,750 $49 Total Debt Service Payments $146,555 $2,617 Cas h Flow after Debt Service $43,912 $784 FINANCIAL COSTS: Annual Per Unit Debt Service Coverage Ratios DSC First Mortgage DSC Second Mortgage DSC All Mortgages and Fees Financial Ratios Operating Expense Ratio 62.18% Break even Economic Occupancy Ratio (all debt) 86.72% INCOME: EXPENSES: SWEETWATER VILLAS PAGE A 16

20 Notes to the Operating Pro forma and Ratios: 1. Gross Potential Rental Revenue is based upon the maximum gross HC rents per the FHFC website and Low HOME Rent Limits for the Tampa St. Petersburg Clearwater, FL MSA published by the U.S. Department of Housing and Urban Development ( HUD ) as of June 6, The Development will offer 5 Low HOME units. The utility allowances are $83 for two bedroom units and $98 for threebedroom units based on an energy consumption model conducted by John J. Kelly, P.E. and approved by Florida Housing. The appraisal confirms the Development s ability to achieve 2016 maximum restricted rent levels for the 50% and 60% of AMI units based on current market conditions. A rent roll for the Development property is illustrated in the following table: MSA (County): Tampa St. Petersburg Clearwater, FL MSA (Hillsborough) Low Bed Bath Square Gross HC HOME Rooms Rooms Units Feet AMI% Rent Rents % $666 $666 High HOME Rents RD/HUD Cont Rents Utility Net HC Applicant Appraiser Annual Rental Allow Rent Rents Rents CU Rents Income $83 $583 $583 $583 $583 $20, % $799 $83 $716 $716 $716 $716 $283, % $770 $770 $98 $672 $672 $672 $672 $16, % $924 $98 $826 $826 $826 $826 $178, $499, A 5.00% total economic vacancy rate (4.00% physical and 1.00% collection loss) was concluded by the appraisal and was relied upon by AmeriNat for underwriting purposes. 3. Ancillary Income is comprised of income related to multifamily operations in the form of vending income, late charges, pet deposits, forfeited security deposits, etc. 4. AmeriNat utilized a real estate tax expense of $828 per unit based upon the current millage rate for the municipality and an estimated assessment of $43,750 per unit presented by the appraiser. The estimate also took into account the income restrictions of the Development. Comparable properties indicated a range of assessments from $23,501 to $33,435 per unit. The average rent as a percentage of the assessment per unit range from 2.14% to 2.94%. Applying the average ratio of 2.49% to the Development s estimated average rent of $740 as a restricted property results in an assessment of $29,715 per unit. However, since Meridian valued the Development in exchange, the sale of the Development was assumed at the appraised value. 5. AmeriNat utilized an estimate of $600 per unit for insurance, which is consistent with the appraisal. The figure used is consistent with insurance expenses for restricted rent comparables presented by the appraiser, which ranged from $286 to $469 per unit. The Development will be located in a flood zone designated A and X, which appears to lie inside of the 500 year flood plain and requires flood insurance. 6. The Applicant has submitted a Management Agreement executed as of January 19, 2017 between Carteret Management Corporation ( Management Company ) and the Applicant. The agreement states the initial term will be for 3 years and will be automatically renewed for an additional year unless terminated by either party in accordance with the conditions of the Management Agreement. The Agreement provides for compensation to the Management Company in the amount of $2,000 or 6% of the total gross rental collections, whichever is greater, received during the preceding month. 7. Replacement Reserves of $300 per unit per year are required by CITI and RJTCF and is considered reasonable by AmeriNat. 8. Based upon an estimated Net Operating Income ( NOI ) of $190,467 for the proposed Development s initial year of stabilized operations; the first mortgage loan can be supported by operations at a 1.42 SWEETWATER VILLAS PAGE A 17

21 to 1.00 Debt Service Coverage ( DSC ). The combined amount of all mortgage loans and fees yields a DSC ratio of 1.30 to 1.00 in the initial year of operations. 9. A 15 year Operating Pro forma attached hereto as Exhibit 1 reflects rental income increasing at an annual rate of 2% and expenses increasing at an annual rate of 3% SWEETWATER VILLAS PAGE A 18

22 Section B MMRN Special and General Conditions

23 Special Conditions This recommendation is contingent upon the review and approval of the following items by HFAHC and the Servicer, at least 30 days prior to the MMRN closing. Failure to submit and to receive approval of these items within this time frame may result in postponement of the loan closing date. 1. The existing HOME loan from Hillsborough County must agree to subordinate to the MMRN first mortgage. 2. Receipt of a final PCR that verifies each of the features and amenities are reflected in the plans and specifications to be constructed at the Development. General Conditions This recommendation is contingent upon the review and approval of the following items by HFAHC and the Servicer at least 30 days prior to the MMRN closing. Failure to submit and to receive approval of these items within this time frame may result in postponement of the closing date. 1. Borrower is to comply with any and all recommendations noted in the Plan and Cost Review prepared by GLE. 2. Signed and sealed survey, dated within 90 days of closing, unless otherwise approved by HFAHC, and its Legal Counsel, based upon the particular circumstances of the transaction. The Survey shall be certified to HFAHC, and its Legal Counsel, as well as the title insurance company, and shall indicate the legal description, exact boundaries of the Development, easements, utilities, roads, and means of access to public streets, total acreage and flood hazard area and any other requirements of HFAHC. 3. Building permits and any other necessary approvals and permits (e.g., final site plan approval, water management district, Department of Environmental Protection, Army Corps of Engineers, Department of Transportation, etc.). An acceptable alternative to this requirement is receipt and satisfactory review of a letter from the local permitting and approval authority stating that the above referenced permits and approvals will be issued upon receipt of applicable fees (with no other conditions), or evidence of 100% lien free completion, if applicable. If a letter is provided, copies of all permits will be required as a condition of the first post closing draw. 4. Final sources and uses of funds itemized by source and line item, in a format and in amounts approved by the Servicer. A detailed calculation of the construction interest based on the final draw schedule (see below), documentation of the closing costs, and draft loan closing statement must also be provided. The sources and uses of funds schedule will be attached to the Loan Agreement as the approved development budget. 5. A final construction draw schedule showing itemized sources and uses of funds for each monthly draw. The closing draw shall include appropriate backup and ACH wiring instructions. 6. During construction, the Developer is only allowed to draw a maximum of 50% of the total developer fee during construction, but in no case more than the payable developer fee, which is determined to be developer s overhead. No more than 35% of developer s overhead during construction will be allowed to be disbursed at closing. The remainder of the developer s overhead will be disbursed during the construction on a pro rata basis, based on the percentage of completion of the Development, as approved by HFAHC and Servicer. The remaining unpaid developer fee shall be considered attributable to developer s profit and may not be funded until the development has SWEETWATER VILLAS PAGE B 1

24 achieved 100% lien free completion and retainage has been released. 7. Evidence of general liability, flood (if applicable), builder s risk and replacement cost hazard insurance (as certificates of occupancy are received) reflecting HFAHC as Loss Payee/Mortgagee, with coverages, deductibles and amounts satisfactory to HFAHC. 8. If the development is not 100% lien free completed, a 100% Payment and Performance Bond or a Letter of Credit (LOC) in an amount not less than 25% of the construction contract is required in order to secure the construction contract between the GC and the Borrower. In either case, HFAHC must be listed as co obligee. The P&P bonds must be from a company rated at least A by A.M. Best & Co with a financial size category of at least FSC VI. HFAHC, and/or Legal Counsel must approve the source, amount(s), and all terms of the P&P bonds, or LOC. If the LOC option is utilized, the LOC must include evergreen language and be in a form satisfactory to the Servicer, HFAHC, and its Legal Counsel. 9. Architect, Construction Consultant, and Borrower certifications on forms provided by HFAHC will be required for both design and as built with respect to Section 504 of the Rehabilitation Act, Americans with Disabilities Act, and the Federal Fair Housing Act requirements, as applicable. 10. A copy of the Amended and Restated Limited Partnership Agreement ( LPA ) reflecting purchase of the HC under terms consistent with the assumptions contained within this Credit Underwriting Report. The LPA shall be in a form and of financial substance satisfactory to Servicer, HFAHC, and its Legal Counsel. 11. Satisfactory resolution of any outstanding past due or non compliance issues by closing of the loan(s). 12. Final as permitted (signed & sealed) site plans, building plans & specifications. The geotechnical report must be bound within the final plans & specifications. 13. Payment of any outstanding arrearages to the Corporation, its legal counsel, Servicer or any agent or assignee of the Corporation for past due issues applicable to the development team (Applicant or Developer or Principal, Affiliate or Financial Beneficiary, as described in (5) and (5) F.A.C., of an Applicant or a Developer). This recommendation is contingent upon the review and approval by HFAHC, and its Legal Counsel at least 30 days prior to real estate loan closing. Failure to receive approval of these items within this timeframe may result in postponement of the bond pricing date. For competitive bond sales, these items must be reviewed and approved prior to issuance of the notice of bond sale. 1. Documentation of the legal formation and current authority to transact business in Florida for the Borrower, the general partner/principal(s)/manager(s) of the Applicant, the guarantors, and any limited partners of the Applicant. 2. Signed and sealed survey, dated within 90 days of closing, unless otherwise approved by HFAHC, and its legal counsel, based upon the particular circumstances of the transaction. The Survey shall be certified to HFAHC and its legal counsel, as well as the title insurance company, and shall indicate the legal description, exact boundaries of the Development, easements, utilities, roads, and means of access to public streets, total acreage and flood hazard area and any other requirements of HFAHC. 3. An acceptable updated Environmental Audit Report, together with a reliance letter to HFAHC, prepared within 90 days of MMRN loan closing, unless otherwise approved by HFAHC, and Legal Counsel, based upon the particular circumstances of the transaction. Borrower to comply with any and all recommendations noted in the Environmental Assessment(s) and Update and the Environmental Review, if applicable. SWEETWATER VILLAS PAGE B 2

25 4. Title insurance pro forma or commitment for title insurance with copies of all Schedule B exceptions, in the amount of the MMRN proceeds naming HFAHC as the insured. All endorsements required by HFAHC shall be provided. 5. HFAHC and its legal counsel shall review and approve all other lenders closing documents and the limited partnership or other applicable agreement. HFAHC shall be satisfied in its sole discretion that all legal and program requirements for the Loans have been satisfied. 6. Evidence of general liability, flood (if applicable), builder s risk, and replacement cost hazard insurance (as certificates of occupancy are received) reflecting HFAHC as Loss Payee/Mortgagee, in coverage, deductibles and amounts satisfactory to HFAHC. 7. Receipt of a legal opinion from the Borrower's Legal Counsel acceptable to HFAHC addressing the following matters: a. The legal existence and good standing of the Borrower and of any partnership or limited liability company that is the general partner of the Borrower (the "GP") and of any corporation or partnership that is the managing general partner of the GP, and of any corporate guarantor and any manager; b. Authorization, execution, and delivery by the Borrower and the guarantors, of all Loan documents; c. The loan documents being in full force and effect and enforceable in accordance with their terms, subject to bankruptcy and equitable principles only; d. The Borrower's and the guarantor's execution, delivery and performance of the loan documents shall not result in a violation of, or conflict with, any judgments, orders, contracts, mortgages, security agreements or leases to which the Borrower is a party or to which the Development is subject to the Borrower s Partnership Agreement and; e. Such other matters as HFAHC or its legal counsel may require. 8. Evidence of compliance with local concurrency laws, if applicable. 9. UCC Searches for the Borrower, its partnerships, as requested by counsel. 10. Such other assignments, affidavits, certificates, financial statements, closing statements and other documents as may be reasonably requested by HFAHC or its legal counsel in form and substance acceptable to HFAHC or its legal counsel, in connection with the Loan(s). 11. Any other reasonable conditions established by HFAHC and its Legal Counsel. This recommendation is also contingent upon the following additional conditions. 1. Compliance with all provisions of Rule Chapters 67 21, 67 48, 67 53, F.A.C., RFA , Section 42 of the I.R.C., and any other State and Federal requirements. 2. Acceptance by the Borrower and execution of all documents evidencing and securing the MMRN proceeds in form and substance satisfactory to HFAHC, including, but not limited to, the Promissory Note, the Loan Agreement(s), the Mortgage and Security Agreement, and the Land Use Restriction Agreement(s). 3. All amounts necessary to complete construction or any phased pay in of amount necessary to complete construction shall be contingent upon an unconditional obligation, through a Joint Funding Agreement or other mechanism acceptable to HFAHC, of the entity providing HC Equity payments (and evidence that 100% of such amount is on deposit with such entity at Loan Closing) to pay, SWEETWATER VILLAS PAGE B 3