REPORT. San Diego Square - Loan Recommendation and Preliminary Bond Items

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1 REPORT DATE ISSUED: August 15, 2013 REPORT NO: HCR ATTENTION: SUBJECT: Chair and Members of the San Diego Housing Commission For the Agenda of September 13, 2013 San Diego Square - Loan Recommendation and Preliminary Bond Items COUNCIL DISTRICT: 3 REQUESTED ACTION Recommend Housing Authority of the City of San Diego approval of a proposed $6,000,000 residual receipts loan, and take the initial steps to issue Housing Authority multifamily housing revenue bonds to facilitate the acquisition and rehabilitation of 156 rental units for seniors at San Diego Square, located at th Avenue. STAFF RECOMMENDATION Seek Housing Authority of the City of San Diego (Housing Authority) approval, as described in this report, for the following: That the San Diego Housing Commission (Housing Commission) recommend the Housing Authority take the following actions: 1) Approve a Housing Commission 55-year residual receipts loan in an amount not to exceed $6,000,000 to Housing Development Partners of San Diego (HDP), or a to-be-formed limited partnership or LLC, to finance the acquisition and rehabilitation of San Diego Square (SDS). a. The Housing Commission s proposed loan will be contingent upon the developer receiving all necessary third party funding commitments including approximately $7,458,141 of 4 percent tax credits, an approximate $15,510,000 tax exempt bond financed loan, as well as additional funds from third-party sources as described in this report. b. The proposed loan will be contingent upon the General Counsel s satisfaction with the terms of the proposed City of San Diego (City) ground lease to HDP for SDS. c. Before closing, as part of the final authorization for bonds issuance, the Housing Commission will verify that the estimated funding sources are adequate and in place. 2) Approve initial steps to issue Housing Authority multifamily housing revenue bonds, including: a. Issue a bond inducement resolution (Declaration of Official Intent) to issue up to $17,825,000 in multifamily housing revenue bonds for this project. b. Authorize an application (and subsequent applications if necessary) to the California Debt Limit Allocation Committee (CDLAC) for an allocation of authority to issue tax-exempt private activity bonds in an amount up to $17,825,000 for this project. c. Approve a bond financing team of Jones Hall Professional Law Corporation as bond counsel and CSG Advisors as financial advisor to work on the project.

2 August 15, 2013 San Diego Square - Loan Recommendation and Preliminary Bond Items Page 2 d. Request that the San Diego City Council (City Council) hold a Tax Equity and Fiscal Responsibility Act (TEFRA) public hearing and adopt a resolution approving the issuance of up $17,825,000 in tax-exempt bonds by the Housing Authority for this project. 3) Authorize the Executive Vice President & Chief Operating Officer (Executive Vice President), or his designee: a. to execute any and all documents and instruments, as approved by the Executive Vice President, General Counsel, and bond counsel and to authorize the Executive Vice President to perform such acts as are necessary or appropriate to implement these approvals, upon the advice of the Housing Commission s General Counsel. b. to adjust financing terms and conditions as necessary for consistency with requirements of other funding sources or to accommodate market changes that may occur after approval of this report but before close of escrow, provided that the $6,000,000 maximum Housing Commission loan may not increase. c. allow the substitution of any portion of the proposed funding sources identified above with alternate funding sources, provide that the substituted funds are available within the Housing Authority approved budget of the Housing Commission and/or are made available from third party sources upon terms and conditions which are financially beneficial and commercially reasonable for the project, as determined by the Executive Vice President upon the advice of General Counsel, and provided that the total project Housing commission loan amount after substitution does not exceed the amounts approved by this action. SUMMARY SDS is an existing 156-unit rental complex for seniors (over age 62) located at th Avenue in downtown San Diego (Attachment 1 - map). The project consists of a 12-story residential tower (with 154 one-bedroom, one-bath rental units and two managers units) and a two-story adjoining commercial building located along Broadway with approximately 18,849 square feet. A 10,262 square feet portion of the commercial space is subleased to Community Research Foundation to provide mental health services. The remaining commercial space (8,587 square feet) is for residential community use. SDS includes a 29-space surface parking lot, gated access, recreation room, outdoor pool and spa, laundry room, and two elevators. A trolley stop is located two blocks east at Park Boulevard and C Street. Bus service is available on multiple sides. SDS has access to shopping, downtown services, and cultural amenities. Currently SDS is fully occupied and has a substantial waiting list of prospective tenants. The SDS land (approximately 1.38 acres, 60,113 square feet) is owned by the City and leased, since 1979 to San Diego Kind Corporation (SDKC), a California nonprofit. The current SDKC lease expires in SDKC s existing lease with the City restricts occupancy to low-income senior renters (62 and older). Under the current SDKC lease, the building ownership transfers to the City at the end of the lease term. The SDS construction was originally financed by a U.S. Department of Housing and Urban Development (HUD) Section 202 direct mortgage loan to SDKC. The 202 loan can be prepaid upon 30 day notice to HUD. The project receives a HUD operating subsidy in the form of a project-based Section 8 Housing Assistance Payment (HAP) contract for all the affordable units. Under this projectbased program, tenants pay a maximum of 30 percent of their income toward rent with the remainder federally subsidized up to a contract rent level approved by HUD. The current HAP contract expires in January 2014, at which time the affordability restriction goes away. HDP plans to request that HUD

3 August 15, 2013 San Diego Square - Loan Recommendation and Preliminary Bond Items Page 3 provide a 20-year HAP contract extension which will keep the units affordable to the senior residents. HDP proposes to pay off the existing HUD 202 loan, obtain 4 percent tax credits, obtain tax-exempt multifamily housing revenue bond financing, and rehabilitate the property. Developer s Request In response to the Housing Commission s Notice of Funding Availability (NOFA) for Affordable Rental Housing Development dated August 23, 2012, HDP submitted a $6,000,000 residual receipts loan request for the acquisition and rehabilitation of the SDS project (Attachment 2 Proforma). Developer HDP will act as the managing general partner of a to-be-formed limited partnership that will own and operate SDS. HDP is a California 501(c)(3) non-profit public benefit corporation which was incorporated in April 1990 and is an affiliate of the Housing Commission. HDP is a separate legal entity established by the Housing Commission to acquire and develop low and moderate-income housing and to provide services related to housing. HDP is an experienced developer and has successfully participated in affordable housing developments throughout San Diego, most recently completing the Mason Hotel in downtown San Diego (an historic rehabilitation and reconfiguration of an SRO building which had been severely damaged). HDP has developed 789 units of affordable housing within the City, including projects serving seniors, families, and special needs residents. HDP is working on the rehabilitation of the 94 unit vacant Hotel Churchill. HDP s Board of Directors includes the President & CEO of the Housing Commission, Housing Commissioners Gary Gramling and Roberta Spoon, and community members. The current Board of HDP consists of five members. Development Team ROLE/FIRM Owner - a California limited partnership or LLC, to be formed later. Architect - Basis Architecture (San Rafael) Civil Engineer - Kettler and Leweck Engineering (San Diego) Environmental Phase II - Leighton and Associates (San Diego) Contractor - Allgire General Contractors Inc., (Carlsbad) Relocation Consultant EPIC Land Solutions Inc., (San Diego) Current Property Manager - Falkenberg/Gilliam and Associates (Pasadena) Construction and Permanent Lender (multifamily revenue bond issue) - to be determined Tax Credit Investor - Boston Capital (Boston) HDP Purchase and New Lease HDP has executed a purchase and sale agreement with SDKC to purchase the improvements and the existing leasehold interest for $7,241,154 (assumption of existing debt plus $4,479,900). The existing improvements were appraised on August 14, 2013, at $11,250,000 (building market value as is) by appraiser Wayne Froboese, MAI. HDP has negotiated a new ground lease with the City (Resolution R ) that will have a term of up to 65 years and will require a $4,000,000 additional rent prepayment to the City, due when the construction loan is recorded. Annual ground lease payments will be equal to a base rent of 4 ½ percent of gross revenue with an adjustment made every five years based upon growth in the Consumer Price Index over the prior five-year period. In addition, for the second through fifth year of each five-year lease cycle, the City will receive a supplemental rent lease payment equal to 50 percent of the increase in base rent from the first year of the five-year cycle. The City will receive 50 percent of net commercial operating income. To the extent that cash flow is insufficient to

4 August 15, 2013 San Diego Square - Loan Recommendation and Preliminary Bond Items Page 4 make the City lease payments as required, unpaid balances will accrue. Building ownership transfers to the City when the 65-year ground lease term ends. Building Conditions/Proposed Rehabilitation Work SDS has been in operation for approximately 35 years with no significant upgrades or repairs, and therefore is currently in need of significant rehabilitation. HDP has prepared a rehabilitation hard costs budget of $9,802,192 ($62,835 per unit) including approximately a 10 percent contingency and commercial space improvements. HDP intends to complete a comprehensive renovation of San Diego Square, including: interior upgrades (cabinets, counters, floors, hardware, painting, windows, doors, appliances, bathrooms, fixtures, fire/life safety); exterior upgrades (balconies, handrails, entrances, exterior façade); site work (fencing, parking, sidewalk, pool, ADA upgrades); full roof replacement; and building systems (mechanical, electrical, elevators). A rehabilitation summary is included as Attachment 3. To optimize energy performance and building sustainability, HDP will select replacement products, fixtures, and appliances in accordance with the Housing Commission s Sustainability Guidelines. The rehabilitation will comply with federal accessibility standards. Relocation Permanent relocation is not anticipated. However, rehabilitation work may require temporary relocation. A relocation study was completed by EPIC Land Solutions Inc. and relocation noticing has been completed. HDP will comply with all federal and state relocation requirements. Financing Structure The acquisition and rehabilitation of SDS has an estimated total development cost of $27,280,827, $174,877 per unit. HDP proposes to finance the project through the use of housing revenue bonds issued by the Housing Authority, 4 percent tax credits, replacement reserves acquired from the seller, rental income during rehabilitation/stabilization, and a residual receipts loan from the Housing Commission. The following tables summarize the proposed estimated sources and uses of funds: Table 1 - Proposed Total Project Estimated Sources Estimated Sources of Funds Estimated Amounts Per Unit % of Total Tax exempt bond financed loan $12,112,183 $77, % Proposed Estimated Housing Commission loan: a. Local Inclusionary Funds b. HOME funds c. Subtotal $4,400,000 +$1,600,000 $6,000,000 $28,205 +$10,257 $38, % +5.86% 21.99% 4 Percent Tax Credits $7,458,141 $47, % Acquired Reserves $1,000,000 $6, % Construction Period Cash Flow Income $710,503 $4, % Total Project Estimated Sources of Funds $27,280,827 $174, % HDP will apply for funds from Civic San Diego and other third party sources. If HDP receives funds from other sources then it is intended that the Housing Commission loan will be reduced by a commensurate amount.

5 August 15, 2013 San Diego Square - Loan Recommendation and Preliminary Bond Items Page 5 Table 2 - Proposed Total Project Estimated Uses Estimated Financing Uses Estimated Amounts Per Unit % of Total Acquisition of Improvements $7,241,154 $46, % Front End Ground Lease Payment $4,000,000 $25, % Rehabilitation Hard Costs $9,802,192 $62, % Permits/Fees $130,000 $833.48% Architectural and Engineering $365,000 $2, % Due Diligence $112,017 $718.41% Financing Costs. $947,293 $6, % Soft Costs. $2,023,002 $12, % Reserves $914,563 $5, % Bond and Tax Credit costs. $345,606 $2, % Developer Fee $1,400,000 $8, % Estimated Total Development Cost (TDC $27,280,827 $174, % Estimated TDC Per Unit (for 156 units. $174,877 Approval of the staff loan recommendation will result in the expenditure of up to $4,400,000 in local Inclusionary funds, and up to $1,600,000 in federal HOME funds. The final determination regarding funding source composition will be made by the Executive Vice President, or his designee. Project based administrative soft costs may be charged to HOME as non-loan funds as allowed by HUD under the HOME regulations. The Housing Commission s proposed loan terms are summarized in the Letter of Intent at Attachment 4. In order to increase the tax credits basis and thus increase the tax credits awarded, the Executive Vice President may adjust the $1,400,000 developer fee to a maximum $2,500,000 amount but if and only if allowed by the State Tax Credit Allocation Committee (TCAC) and only if the additional $1,100,000 becomes a developer contribution to the project. Further, 50 percent of all project cost savings and/or improved tax credit equity pricing will be used to reduce the Housing Commission's loan amount. The proposed loan will have a term of 55 years, accrue interest at 3 percent, and require payments based on the availability of residual receipts. After distribution of the City s annual ground lease payment, at the end of the first full year after completion of the rehabilitation, HDP and the Housing Commission will each receive 50 percent of residual receipts. The Housing Commission loan is intended to fill the financial gap between the total costs of development and the other sources of funding the developer is able to secure. The loan amount will not exceed $6,000,000, but if additional funding sources or improved debt or equity financing terms are achieved, the Housing Commission will require a reduction in the loan amount. Funding of the proposed loan is contingent upon HDP securing other funding sufficient to complete the project. The developer is applying to the Department of Industrial Relations for a determination whether prevailing wages will apply to the project. Proposed Housing Bonds The first position loan will be capitalized through the issuance of private activity tax-exempt bonds by the Housing Authority. The Housing Commission utilizes the Housing Authority's tax-exempt borrowing status to pass on lower interest rate financing (and make federal 4 percent tax credits available) to developers of affordable housing. The Housing Authority's ability to issue bonds is limited under the U.S. Internal Revenue Code. To issue bonds for a project, the Housing Authority must first

6 August 15, 2013 San Diego Square - Loan Recommendation and Preliminary Bond Items Page 6 submit an application to CDLAC for a bond allocation. Prior to submitting applications to CDLAC, projects are brought before the Housing Commission, Housing Authority, and City Council. Housing Authority bond inducement resolutions must be obtained prior to CDLAC application submittal, and City Council TEFRA resolutions must be secured no later than five calendar days prior to the first public posting of the CDLAC Committee recommendations. These actions do not obligate the Housing Authority to issue bonds. It is anticipated that with a CDLAC application on October 11, 2013, SDS could receive a bond allocation at CDLAC's December 11, 2013 meeting. If necessary, staff will submit additional applications to CDLAC to secure a bond allocation for the project. A general description of the Multifamily Bond Program and a summary of the actions that must be taken by the Housing Authority and City Council to initiate and finalize proposed financings are described in Attachment 5. HDP proposes to issue the bonds through a private placement. It is expected that the bonds will be used for both construction financing and permanent financing of the project. HDP will be seeking a $17,825,000 CDLAC allocation which is 15 percent higher than the amount for which the project is currently being underwritten ($15,510,000). This increased amount represents a cushion to account for possible increases in the bond amount due to increases in construction costs, decreases in the assumed interest rate, or the loss of other planned funding sources. The bond amount that is ultimately issued will be based upon project costs, revenues, and interest rates at the time of bond issuance. Staff will return to the Housing Commission and Housing Authority for approval of the final bond amount. The proposed bonds will meet all the requirements of the Housing Commission's Multifamily Housing Revenue Bond Program policy. Housing Commission staff will also work with the City to ensure that the bond issuance fully complies with the City's ordinance on bond disclosure. There are no fiscal impacts to the Housing Commission, the City, or the Housing Authority associated with the requested bond actions. Approval of the bond inducement and TEFRA resolutions do not commit the Housing Authority to issue bonds. The bonds will not constitute a debt of the City. If bonds are ultimately issued for the project, the bonds will not financially obligate the City, the Housing Authority or the Housing Commission because security for the repayment of the bonds will be limited to specific private revenue sources. Neither the faith and credit nor the taxing power of the City nor the faith and credit of the Housing Authority will be pledged to the payment of the bonds. The developer is responsible for the payment of all costs under the financing, including the Housing Commission's bond issuer fee, annual bond monitoring fee, bond counsel and financial advisor fees, attorney costs, a 1 percent loan origination fee, and an annual affordability monitoring fee. Staff recommends assigning CSG Advisors as financial advisor and Jones Hall Professional Law Corporation as bond counsel to work on the project. The proposed financing team members have been selected in accordance with the existing Housing Commission policy for the issuance of bonds. Financial advisors and bond counsels are designated on a rotating basis from the firms selected through a competitive RFP process. AFFORDABLE HOUSING IMPACT The Housing Commission s residual receipts loan to HDP will provide construction and permanent gap financing to acquire and rehabilitate 154 units to preserve affordability for seniors plus two unrestricted

7 August 15, 2013 San Diego Square - Loan Recommendation and Preliminary Bond Items Page 7 manager s units. Housing Commission rent and occupancy restrictions will be recorded against the property for 55 years. Unit Mix and Affordability SDS consists of 155 one-bedroom units and 1 two-bedroom unit. The two-bedroom unit and one of the one-bedroom units will be occupied by two resident managers. The 154 affordable units will be occupancy and rent restricted to very-low and low-income seniors (age 62+) with incomes ranging from 50 percent of Area Median Income (AMI) ($28,250 income per year for one person) to 60 percent of AMI ($33,900 income per year for one person). Under the HUD HAP contract, tenants will pay rents equal to 30 percent of their income. With the proposed Housing Commission financing, these affordability restrictions will remain for 55 years. Under the HOME financing, 11 units must be rent/affordability restricted including three units at 50 percent AMI (low HOME rents) and eight units at 60 percent AMI (high HOME rents). Five percent of the units must meet federal accessibility requirements with an additional 2 percent for hearing and visually impaired tenants. Affordability Mix Table 3 Affordability & Rent Table One Bedrooms (1 bath, 505 sq. ft.) One Bedroom Units Estimated Range Net Rents* Two Bedrooms (1 bath, 800 sq. ft.) Two Bedroom Est d Market Rents Total Units Units 50% AMI units 23 $684-$ $1,150 60% AMI units 131 $825-$ $1,150 Managers units 1 Manager 1 Manager 2 N/A Total Units * Developer s estimated rents after utility allowance deduction. The tax credit restricted units and the HOME Investment Partnerships restricted units may be counted against the same specific units. The more stringent of the affordability restrictions will take precedence during the term of their applicability. Estimated Timeline Milestone Date Applications to CDLAC (bonds) and TCAC (tax credits) October 11, 2013 CDLAC and TCAC Allocation Award Meetings December 11, 2013 Housing Commission and Housing Authority Reviews for Final February 2014 Bond Authorization Estimated Escrow and Financing Closing April 1, 2014 Estimated Start of Rehabilitation April 2014 Estimated Completion of Rehabilitation April 2015 FISCAL CONSIDERATIONS The proposed funding sources and uses approved by this action were approved by the Housing Authority in the Fiscal Year 2014 Housing Commission Budget. Approving this report s proposed actions will not change the Fiscal Year 2014 Total Budget.

8 August 15, 2013 San Diego Square - Loan Recommendation and Preliminary Bond Items Page 8 Funding sources approved by this action will be as follows: HOME Funds - up to $1,600,000 Inclusionary Housing Funds - up to $4,400,000 Funding uses approved by this action will be allocated as follows: Loans and Grants - up to $6,000,000 Approving this action will further grant the Executive Vice President and Chief Operating Officer, or his designee, the authority to substitute the above funding sources with other available funding sources so long as the total Housing Commission loan amount does not exceed the approved total loan amount, should the operational need arise or should such actions be to the benefit of the San Diego Housing Commission and its mission. Funding substitutions will be memorialized in an Informational Report at the next scheduled Housing Commission Board Meeting. PREVIOUS COUNCIL and/or COMMITTEE ACTION On May 14, 2013, the City Council approved (R ) HDP s new land lease for SDS. On September 24, 2013, the recommendations contained in this report will be presented for consideration by the Housing Authority and the City Council will conduct a TEFRA hearing. COMMUNITY PARTICIPATION and PUBLIC OUTREACH EFFORTS On June 19, 2013, the Downtown Community Planning Council unanimously approved HDP s proposal to acquire and rehabilitate SDS. KEY STAKEHOLDERS and PROJECTED IMPACTS Stakeholders for this project include: the residents of SDS, the City of San Diego as the land owner and lessor of the land, SDKC as seller, and HDP as the developer and managing general partner of a to-beformed limited partnership that will own and operate the project. Community Research Foundation is a sub-lessee of the SDS commercial space, and the Housing Commission is the proposed lender. The property rehabilitation is expected to have a positive impact on the community and residents because it will preserve existing affordable housing for downtown seniors. ENVIRONMENTAL REVIEW The proposed rehabilitation is categorically exempt from the requirements of the California Environmental Quality Act (CEQA) pursuant to Section because San Diego Square is an existing facility and the proposed actions do not involve expansion of the existing use. Additionally, the project is categorically exempt pursuant to Section as an in-fill development. On August 28, 2013, the County of San Diego Department of Environmental Health issued a No Further Action letter indicating that no mitigation measures would be required for the proposed scope of work; therefore, the project does not have significant potential to effect the environment and the exceptions listed under CEQA Section do not apply. This project may be partially funded with federal HOME funds. A final reservation of HOME funds shall occur only upon satisfactory completion of environmental review under NEPA and the City s receipt of a release of funds from HUD. The Housing Commission and the developer agree that the provision of any HOME funds to the project is conditioned on the City s determination to proceed with, modify, or cancel the project, based on the results of a subsequent environmental review under NEPA.

9 August 15, 2013 San Diego Square - Loan Recommendation and Preliminary Bond Items Page 9 Additionally, requirements of the adopted Final Mitigation, Monitoring and Reporting Program (MMRP) for the Downtown EIR will be applied at the time of project review and permitting. STATEMENT for PUBLIC DISCLOSURE HDP s Statement for Public Disclosure is at Attachment 6. A Development Summary is included at Attachment 7. CONFLICT DISCLOSURE STATEMENT: Commissioners Gary Gramling, Roberta Spoon, and CEO of the Housing Commission, Richard Gentry, are each directors and officers of Housing Development Partners, a California nonprofit public benefit corporation qualified as an Internal Revenue Code Section 501(c)(3) corporation. Commissioner Gramling, Commissioner Spoon, and CEO Gentry receive no compensation for their service on the Housing Development Partners Board of Directors. Pursuant to the provisions of Government Code Sections (a)(7) and (a)(8), Commissioner Gramling, Commissioner Spoon, and CEO Gentry each have a non-interest as described in Government Code Section Furthermore, none of HDP s board members has a financial interest in this development that would legally preclude their participation under the provisions of Government Code Sections 1090 and/or 87100, et.seq. [because a 501(c)(3) non-profit corporation is not a business entity for the purposes of state law and because HDP has been determined to be a public agency by the Ethics Commission for local conflict law purposes] and/or the Housing Commission s Conflict of Interest Code. As members of the Board of Commissioners of the Housing Commission, Mr. Gramling and Ms. Spoon are legally entitled to vote and be counted for quorum purposes. This disclosure shall be and is hereby documented in the official records of the Housing Commission. Further, HDP may form an affiliated limited partnership or LLC and under such a scenario, HDP will be the managing general partner for its affiliated to-be-formed limited partnership or LLC. The managing general partner is planned to have the same makeup as the HDP Board and Commissioners Gramling, Spoon and CEO Gentry will all have non interests with any affiliated limited partnership or LLC. This disclosure shall be and is hereby documented in the official records of the Housing Commission. Respectfully submitted, J.P. Correia J.P. Correia Real Estate Manager Real Estate Division Approved by, Deborah N. Ruane Deborah N. Ruane Senior Vice President Real Estate Division Attachments: 1) Site Map 2) Developer Estimated Proforma 3) Estimated Rehabilitation Scope of Work and Summary 4) Letter of Intent - Loan Terms 5) Multifamily Bond Summary 6) Developer Disclosure Statement 7) Development Summary

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21 Tatum Consulting and Management, LLC Rough Order of Magnitude Via Conchita Mission, CA tel: Type: ROM 4 PROJECT: SD Square DATE: 5/20/2013 DESCRIPTION: Project includes Prevailing wages. Renovation based on Project Capital Needs Assessment/Property Inspection Report prepared by EMG on November 2, 2011, job site visit, and plans prepared by Maxwell Starkman AIA & Associates dated 06/11/79. The work consists of an interior and exterior renovation of cosmetic components within residential units and in all common areas. Residential Tower SF: 130,000 Common Space: 29,000 SF/Unit: 640 Building Units: 156 Stories: 12 Per Floor SF: 10,833 Commercial Space: 19,000 INFLATION 10% ITEMS NOT SPECIFICALLY INCLUDED BELOW ARE EXLUDED FROM THE SCOPE OF WORK AND PROJECT. Construction duration is approximately 12 months total. Prepared by: CT TOTAL COSTS TOTAL COSTS (5% Inflation Per Year) COST/SF COST/UNIT TASK-DESCRIPTION QUAN. UN. U/C Jan-12 Apr-14 Apr-14 Apr-14 Comments Exterior work Interior Units Remove vines 1 LS $25, $25,000 $27,500 $0.21 $176 Paint Exterior building 57,750 SF $4.10 $236,775 $260,453 $2.00 $1,670 Paint/add ornament screens to balcony railings 156 EA $ $124,800 $137,280 $1.06 $880 New Windows 156 EA $1, $265,200 $291,720 $2.24 $1,870 New Sliding glass doors 156 EA $2, $421,200 $463,320 $3.56 $2,970 New Roof (Demo included) 10,833 SF $17.50 $189,583 $208,542 $1.60 $1,337 Repair exterior access gates and fencing 1 LS $10, $10,000 $11,000 $0.08 $71 Replace all exterior doors and hardware 10 EA $ $8,000 $8,800 $0.07 $56 Repair/Replace all exterior stairs/rails 1 LS $7, $7,500 $8,250 $0.06 $53 ADA upgrades as needed 1 LS $50, $50,000 $55,000 $0.42 $353 New signage and wayfinding 1 LS $15, $15,000 $16,500 $0.13 $106 New storefront windows and entries 2 EA $12, $24,000 $26,400 $0.20 $169 Allowance for Architectural Enhancements to Façade 57,750 SF $16.00 $924,000 $1,016,400 $7.82 $6,515 Demo Flooring and cabinetry at each unit 156 EA $ $78,000 $85,800 $0.66 $550 New Base and Upper Cabinets at unit kitchens 156 EA $2, $340,080 $374,088 $2.88 $2,398 New Countertops for unit kitchens (P-Lam) 156 EA $ $94,380 $103,818 $0.80 $666 New bathroom vanities at each unit 156 EA $ $31,200 $34,320 $0.26 $220 Replace all interior door hardware 312 EA $ $46,800 $51,480 $0.40 $330 Install Electronic Key FOB system for all entry doors 156 EA $ $124,800 $137,280 $1.06 $880 Resident entry door hinges and closers 156 EA $ $33,540 $36,894 $0.28 $237 New Closet Doors 156 EA $ $62,400 $68,640 $0.53 $440 New Closet Shelving/Hardware 156 EA $ $46,800 $51,480 $0.40 $330 New Kitchen Light 156 EA $ $31,200 $34,320 $0.26 $220 New Bathroom Light 156 EA $ $31,200 $34,320 $0.26 $220 New Bathroom exhaust fan 156 EA $ $31,200 $34,320 $0.26 $220 Replace Garbage Disposal 156 EA $ $26,520 $29,172 $0.22 $187 New Kitchen sink 156 EA $ $62,400 $68,640 $0.53 $440 New Tile Backsplash 156 EA $ $46,800 $51,480 $0.40 $330 New Refrigerator 156 EA $ $124,800 $137,280 $1.06 $880 New Range 156 EA $ $109,200 $120,120 $0.92 $770 New Hood 156 EA $ $93,600 $102,960 $0.79 $660 Replace Tub/Surround 156 EA $1, $234,000 $257,400 $1.98 $1,650 Replace Bathroom Sink 156 EA $ $31,200 $34,320 $0.26 $220 Replace Bathroom Faucet 156 EA $ $31,200 $34,320 $0.26 $220 Replace Toilet 156 EA $ $46,800 $51,480 $0.40 $330 Replace Towel Hanger 156 EA $90.00 $14,040 $15,444 $0.12 $99 Replace Bathroom Grab Bars 156 EA $ $29,952 $32,947 $0.25 $211 Replace TP Holder 156 EA $35.00 $5,460 $6,006 $0.05 $39 Replace shower rods, rings and curtains 156 EA $ $20,280 $22,308 $0.17 $143 New Bedroom Carpet 156 EA $ $79,560 $87,516 $0.67 $561 New Living Room Carpet 156 EA $ $53,040 $58,344 $0.45 $374 New Bathroom Resilient Flooring 156 EA $ $23,400 $25,740 $0.20 $165 New Kitchen Resilient Flooring 156 EA $ $39,000 $42,900 $0.33 $275 New window treatments-blinds/doors 156 EA $ $17,160 $18,876 $0.15 $121 New window treatments-blinds/windows 156 EA $ $17,160 $18,876 $0.15 $121

22 Scrape all acoustical ceilings and prep for paint 156 EA $ $78,000 $85,800 $0.66 $550 New molding, trim, and base 156 EA $ $62,400 $68,640 $0.53 $440 Paint Throughout 156 EA $ $117,000 $128,700 $0.99 $825 Upgrade Fire/Life Safety Equipment 156 EA $ $49,920 $54,912 $0.42 $352 Replace Fan Coil and valves 156 EA $1, $234,000 $257,400 $1.98 $1,650 Replace Vents and grills 156 EA $ $23,400 $25,740 $0.20 $165 Replace Thermostats 156 EA $ $19,500 $21,450 $0.17 $138 Upgrade, repair, or replace plumbing as required 156 EA $ $46,800 $51,480 $0.40 $330 Replace all electrical switches, outlets, and plates 156 EA $ $31,200 $34,320 $0.26 $220 New signage and wayfinding 156 EA $ $31,200 $34,320 $0.26 $220 Replace Unit Shut Off Valves in Corridors 156 EA $ $40,560 $44,616 $0.34 $286 1/4 Turn Angle Stops All Sinks 156 EA $38.00 $5,928 $6,521 $0.05 $42 Replace unit entry sconce 156 EA $90.00 $14,040 $15,444 $0.12 $99 Replace balcony sconce 156 EA $90.00 $14,040 $15,444 $0.12 $99 Replace GFI outlets in bathrooms 156 EA $55.00 $8,580 $9,438 $0.07 $61 Replace GFI outlets in kitchens 156 EA $55.00 $8,580 $9,438 $0.07 $61 Repair Existing Nurse Call System 156 EA $ $98,280 $108,108 $0.83 $693 Install Outlet for Range Hood 156 EA $ $17,160 $18,876 $0.15 $121 Upgrade telepone lines to units with Cat5e 156 EA $ $31,200 $34,320 $0.26 $220 Common Areas Ballroom improvements 7,000 SF $10.00 $70,000 $77,000 $0.59 $494 New Carpet/Tile throughout 29,000 SF $5.00 $145,000 $159,500 $1.23 $1,022 New Lighting Fixtures throughout 29,000 SF $1.00 $29,000 $31,900 $0.25 $204 New molding, trim, and base throughout 29,000 SF $3.50 $101,500 $111,650 $0.86 $716 Paint Throughout 29,000 SF $2.00 $58,000 $63,800 $0.49 $409 New wall sconces in hallways 192 EA $ $48,000 $52,800 $0.41 $338 Remodel Common Area Bathrooms 2 EA $35, $70,000 $77,000 $0.59 $494 Upgrade Elevators/refinish cabs 2 EA $20, $40,000 $44,000 $0.34 $282 Elevator modernization 12 FLR $24, $288,000 $316,800 $2.44 $2,031 Upgrade Fire/Life Safety 29,000 SF $2.00 $58,000 $63,800 $0.49 $409 Upgrade Laundry Facility as needed 1 LS $7, $7,500 $8,250 $0.06 $53 ADA Upgrades as needed 1 LS $50, $50,000 $55,000 $0.42 $353 New Acoustical Ceilings throughout (includes demo) 29,000 SF $7.00 $203,000 $223,300 $1.72 $1,431 New Corridor Handrail/Lean rail throughout 6,555 LF $20.00 $131,100 $144,210 $1.11 $924 New signage and wayfinding 1 LS $5, $5,000 $5,500 $0.04 $35 New HE water heaters 2 EA $27, $55,000 $60,500 $0.47 $388 TOTAL TASK-DESCRIPTION QUAN. UN. U/C COST COST/SF COST/UNIT Comments Upgrade CCTV System 1 EA $25, $25,000 $27,500 $0.21 $176 Mailboxes 1 LS $30, $30,000 $33,000 $0.25 $212 New security system including FOB locks at entries. 10 EA $ $8,000 $8,800 $0.07 $56 Install New Single ADA Drinking Fountain 1 EA $1, $1,650 $1,815 $0.01 $12 Site Upgrades Utilities 1 LS $15, $15,000 $16,500 $0.13 $106 New Parking lot 7,000 SF $2.50 $17,500 $19,250 $0.15 $123 New perimeter sidewalks to match city requirements 5,400 SF $8.00 $43,200 $47,520 $0.37 $305 Storm, Sewer, Erosion Control allowance 1 LS $25, $25,000 $27,500 $0.21 $176 Landscaping upgrade allowance 1 LS $30, $30,000 $33,000 $0.25 $212 General Site Improvements 1 LS $15, $15,000 $16,500 $0.13 $106 Pool-reline and new equipment 1 LS $30, $30,000 $33,000 $0.25 $212 Structural Systems Structural allowance 1 LS $100, $100,000 $110,000 $0.85 $705 Building MEP MEP allowance 1 LS $100, $100,000 $110,000 $0.85 $705 SUBTOTAL: $7,089,468 $7,798,415 $59.99 $49,990 GENERAL CONDITIONS: RATE = 6.00% $425,368 $467,905 $3.60 $2,999 SUBTOTAL: $7,514,836 $8,266,320 $64 $52,989 CONTINGENCY RATE = 10.00% $751,484 $826,632 $67 $5,299 SUBTOTAL: $8,266,320 $9,092,952 $131 $58,288 GC OH & PROFIT (6%) RATE = 6.00% $495,979 $545,577 $4 $3,497 TOTAL RESIDENTIAL $8,762,299 $9,638,529 $135 $61,785 Commercial Space Commercial Renovations $500,000 $550,000 $4.23 $3,526 Contingency 10% $50,000 $55,000 $0.42 $353 TOTAL COMMERCIAL $550,000 $605,000 $5 $3,878 GRAND TOTAL (RESIDENTIAL & COMMERCIAL) $9,312,299 $10,243,529 $140 $65,664

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50 ATTACHMENT 7 Development Summary San Diego Square Summary Details: Location th Avenue, San Diego, CA Council District 3 Community Planning Area Centre City Developer Housing Development Partners of San Diego Architect Basis Architecture Project Type Acquisition of building with rehabilitation (on leased land) Housing Type Housing for seniors Year Built 1980 Number of Housing Units 156 (in 12 stories) Affordable Housing Units 154 Parking 29 spaces Lot Size/Density 60,113 square feet (1.38 acres); 113 dwelling units per acre Gross Residential Square Footage Commercial Space Common Areas and Hallways Gross Building Area 86,337 square feet (estimated as per appraisal) 10,292 square feet (leased to Community Research Foundation) +35,204 (estimated as per appraisal) 131,833 total square feet (estimated as per appraisal) Construction Type Concrete and steel construction Prevailing Wages for Rehabilitation No Financing Structure 4% tax credits with tax exempt bond financing Affordability Term 55 years Unit Affordability (estimated rent and occupancy restrictions are summarized below): Affordability Mix One Bedrooms (1 bath, 505 sq.ft.) Two Bedrooms (1 bath, 800 sq.ft.) HUD HOME Funded Units: One Bdrm Units Estimated Net Rents Two Bdrm Units Estimated Net Rents Total Units Est d Market Rents 50% AMI units * 3 $690 ** $1,150 60% AMI units * 8 $888 ** $1,150 Subtotal HOME Funded Units: Inclusionary Funded Units: 50% AMI units 20 $684 ** $1,150 60% AMI units 123 $825 ** $1,150 Subtotal Inclusionary Funded Units: Managers units 1 Manager 1 Manager 2 N/A Total Units * The AMI affordability percentages are as follows: the 50% AMI affordable units are 15 percent (23 units 154), and the 60% AMI affordable units are 85 percent (131 units 154). ** Developer s estimated rents after utility allowance deduction. 7-1

51 Attachment 7: Development Summary San Diego Square Construction Financing - Estimated Sources and Uses: Sources of Funds Amount Uses of Funds Amount Bond financed construction loan $15,510,000 Acquisition $ 7,241,154 San Diego Housing Commission 5,400,000 Ground lease payment to City 4,000,000 4 percent tax credits 3,395,760 Rehabilitation hard costs 9,802,192 Acquired reserves 1,000,000 Permits and fees 130,000 Construction period income 710,503 Architectural 365,000 Due diligence 112,017 Financing costs 947,293 Soft costs 2,023,002 Bond and tax credit costs 345,606 Developer fee 1,050,000 Total $26,016,263 Total $26,016,263 Permanent Financing - Estimated Sources and Uses: Sources of Funds Amount Uses of Funds Amount Tax exempt bond financed loan $12,112,183 Acquisition $ 7,241,154 San Diego Housing Commission 6,000,000 Ground lease payment to City 4,000,000 4 percent tax credits 7,458,141 Rehabilitation hard costs 9,802,192 Acquired reserves 1,000,000 Permits and fees 130,000 Construction period income 710,503 Architectural/Engineering 365,000 Due diligence 112,017 Financing costs 947,293 Soft costs 2,023,002 Reserves 914,563 Bond and tax credit costs 345,606 Developer fee 1,400,000 Total $27,280,827 Total $27,280,827 Per Sq. Ft. (131,833 sq.ft.) Development Costs Analysis: Amount Per Unit Acquisition costs $7,241,154 $46,418 $54.93 Ground lease payment to City 4,000,000 25, Residential Hard Costs 9,592,286 61, Commercial Hard Costs 209,906 1, Permits and Fees 130, Architect/Engineering 365,000 2, Due diligence 112, Financing costs 947,293 6, Soft costs 2,023,002 12, Operating Reserves (6 months) 914,563 5, Bond and tax credit costs 345,606 2, Developer fee 1,400,000 8, Total Development Cost $27,280,827 $174,

52 Attachment 7: Development Summary San Diego Square Pro Forma Summary Year 1*: Amount Comments Estimated Residential Units Income Distribution (from Proforma Attachment 2): Gross Income * $2,064,756 Not including commercial income. Vacancy -41,295 Estimated 2% vacancy (based upon the property s history). Effective Gross Income * 2,023,461 $6,067 per unit per year (156 units) (including $54,600/year [$350/unit/year] for replacement reserves). Operating Expenses -946,514 Net Operating Income 1,076,947 Debt Service -882, debt coverage ratio. Subtotal 194,335 Partnership Fees -15,000 City Ground Lease Payment (year 1) * -91,056 Year one. Net Cash Flow Available to SDHC & Borrower * 88,279 Estimated Residual Receipt Payment to Housing Commission Year 1 * 44, Estimated Residual Receipt Payment to developer Year 1 * 44, % of residual receipts (residential units). 50% of residual receipts (residential units). Estimated Commercial Income Distribution (from Proforma Attachment 2): Estimated Commercial Income Portion to City $78,922 50% portion Estimated Commercial Income Portion to Housing Commission 39,461 25% portion Estimated Commercial Income Portion to Developer 39,461 25% portion 7-3