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1 March 2, 2015 Mr. Robert Dearduff, Special Programs Administration Florida Housing Finance Corporation City Centre Building 227 North Bronough Street, Suite 5000 Tallahassee, Florida Re: Boulevard Art Lofts P-09 PLP Dear Mr. Dearduff: The proposed 45 unit affordable housing rental development is comprised of seven parcels totaling approximately 1.51 acres located at 408 Hammondville Road, Pompano Beach, Florida. The Applicant, MFK/REVA Development, LLC ( MFK/REVA ) has applied for a $670,000 Florida Housing Finance Corporation ( FHFC or Florida Housing ) Pre-Development Loan Program ( PLP ) loan. The recommended PLP loan amount from the Technical Assistance Provider ( TAP ) is $670,000, of which $170,000 is requested for site acquisition. The remaining $500,000 in requested PLP funds will be used for eligible pre-development costs. Please see Exhibit B of this report for additional information. First Housing recommends a loan amount of $670,000. The PLP Loan will bear an interest rate of 1% per annum. The PLP Loan is non-amortizing, with principal and interest deferred until loan maturity. The PLP loan shall mature on the earlier of (a) the date of closing on the permanent or construction loan for the Development; or (b) three years from the date of execution of the loan documents by the Corporation or other such extended loan Maturity Date approved by the Board. If the Development does not obtain construction or permanent financing from Florida Housing and no Florida Housing funds remain in the Development, the compliance period shall be 15 years from the date the PLP loan is paid off. If the Development obtains construction and permanent financing from a Florida Housing program, then the most restrictive compliance periods shall be in effect for a period equal to the compliance periods committed to by the Applicant under the other Florida Housing programs providing the additional funding with compliance monitoring being performed through those programs. Florida Housing may extend the term of the PLP loan for an additional period if Boulevard Art Lofts Page 1

2 circumstances exist and if such extension would not jeopardize Florida Housing s security interest. The Applicant has selected a target population of Workforce and has committed to set-aside 20% of the units (9 units) for persons earning 50% or less of the Area Median Income ( AMI ), as determined by HUD, with adjustments for household size for the metropolitan statistical area or county in which the development is located. The development will be targeted to artists. Proposed tenants will submit an application that will require them to demonstrate that at least one member of the household is a professional artist. A committee of artists from the community will review each application to determine eligibility. The proposed property manager, Apogee Property Management, has experience leasing and managing a similar affordable property located in Ft. Lauderdale. That property has been in service for approximately eight years and is currently 100% occupied. The Applicant proposes to utilize PLP funds to finance the acquisition of the subject and certain other pre-development activities. For the Applicant to utilize PLP funds for the purchase of land, a Preliminary Assessment must be performed. The Preliminary Assessment is primarily limited to a review of the Application and Project Development Plan, an analytical review of the subject s sources and uses of funds, a determination that PLP funds drawn for acquisition costs are adequately collateralized, and the performance of limited due diligence relating to the Applicant. The subject s Project Development Plan has been reviewed and approved by Mr. Stan Fitterman, Technical Assistance Director of the Florida Housing Coalition, Tallahassee, Florida. As Mr. Fitterman is no longer with the Coalition, Lisa Hoffmeyer is now the TAP for the subject development and has confirmed the earlier approval. The results of First Housing s findings are presented below. Borrower Information The Applicant is a Florida limited liability company organized under the laws of the State of Florida on November 20, REVA Development Corporation ( REVA ), a Florida not for profit organization and designated Community Housing Development Corporation, is the developer of the proposed development and % Co-Managing Member of the Applicant. Don Patterson, President of REVA, has affordable housing development experience. REVA will be responsible for community outreach, site acquisition, concept development, structure of financing, and long term sustainability of the affordable housing development. The Co- Managing Member of the Applicant with % ownership is MFK Development, LLC whose managing member is Fred Knoll. MFK Development, LLC will secure the permanent financing and provide all required guarantees associated with the financing. REVA is the 99.99% Member of the Applicant which will be replaced by a to-be-determined Investor Member at closing. The Applicant, however, is a new non-profit with no financial statements. REVA is managed by a six member Board of Directors. Officers include: George Gadson, Chairman, Sherwood Dubose, Vice-Chair, and Don Patterson as President/Chief Executive Officer. Boulevard Art Lofts Page 2

3 The principals of REVA have a significant track record of working with local, state, and federal agencies throughout the Southeast Florida MSA. Generally, REVA is focused on development opportunities within underinvested neighborhoods and communities, supporting efforts of the local municipality to meet one or more of HUD s National Objectives, which requires that federal funding made available for certain activities by the municipality, meet specific tests. REVA works with private investors, other real estate developers, and community based organizations to build affordable spaces and innovative art spaces for families and entrepreneurs. REVA and its principals have a long history of partnering on low income housing tax credit developments in Florida. REVA s management team is very involved with the South Florida Community Development Coalition and a founding member of Broward Alliance of Neighborhood Developers. REVA has secured financing from FHFC on ten (10) developments including Magnolia Landing, Esmerelda Bay and Madison View. Copies of the Articles of Incorporation and the current Certificate of Status have been provided. Documentation supporting the Applicant s 501(c)(3) tax-exempt status has also been received. The Applicant through its joint venture partners has the prerequisite development and construction experience to acquire and complete construction of the proposed development. An Experian Business Report dated January 8, 2015 for REVA and MFK Development, LLC reflects no previous credit history and no negative information. First Housing reviewed satisfactory financial information for REVA and MFK Development, LLC. Development Cost A summary of total development costs is presented in Exhibit A. The Applicant s budget totals $9,135,556 (or $203,012 per unit). Development costs include land, construction, predevelopment and general development, impact/permit, developer fee and contingency. The Applicant anticipates receiving a Multifamily Mortgage Revenue Bond ( MMRB ) loan, an allocation of 4% Low Income Housing Tax Credits ( HC ), a Home Investment Partnerships Loan ( HOME ) from Florida Housing and deferred developer fees for construction and permanent financing of the proposed development. First Housing cannot offer an opinion on funding availability or the anticipated terms of the identified funding sources at this time as all funding sources have not been applied for to date. No evidence of site control was provided. Purportedly, the Applicant will purchase the site from the Pompano Beach CRA. The CRA is willing to sell it provided the land is used for affordable Boulevard Art Lofts Page 3

4 housing and the Developer agrees to pay for certain off-site improvements during construction. The Applicant is seeking approval for the sale of the seven parcels at a meeting scheduled for March 17, A Development Agreement for the land conveyance is to be prepared and is scheduled for approval on April 21, This recommendation is conditioned upon the satisfactory review of site control documentation prior to any PLP funding. An appraisal dated November 17, 2014 indicates an As Is market value of the fee simple interest in the 1.51 acre parcel site of $900,000. An Extraordinary Assumption of the appraisal contained the following information. The appraiser was provided a legal description for the subject property but it did not conclude to a land area estimate for the subject site. The appraiser was not provided with a survey reflecting a land area estimate and instead, relied on public records from the Broward County Property Appraisers website for the land area estimate of 1.51 acres. A current Phase I Environmental Site Assessment ( ESA ) has not been engaged by the Applicant. The Applicant intends to utilize PLP funding to satisfy this requirement. A portion of the site is a former gas station that the city has already remediated. Broward County still needs to approve the remediation report and determine if there are any limits on how much of the site can be developed. This recommendation is conditioned upon the satisfactory review of the Broward County environmental approval prior to any PLP funding. Hard construction costs, exclusive of contingency, total approximately $5,382,795 or $119,618 per unit. The Applicant notes that plans and specifications have not been prepared at this time. The construction design phase will commence once the Applicant has acquired the property and has applied for permanent financing; therefore, the amount included in the budget is an estimate of construction costs. The developer fee totals $1,278,360, or 18.00% of development costs before contingency, land and developer fee which is within the maximum 18% allowed per the Rule. Proposed Financing Sources The source of funds schedule is also included in Exhibit A. The Applicant anticipates receiving a Multifamily Mortgage Revenue Bond ( MMRB ) loan, an allocation of 4% Low Income Housing Tax Credits ( HC ), a Home Investment Partnerships Loan ( HOME ) from Florida Housing and deferred developer fees for construction and permanent financing of the proposed development. First Housing cannot offer an opinion on funding availability or the anticipated terms of the identified funding sources at this time as all funding sources have not been applied for to date. Boulevard Art Lofts Page 4

5 PLP Budget The TAP has provided an approved PLP budget as of August 2014 totaling $670,000 which is presented in Exhibit B. Total acquisition costs are $400,000 of which $170,000 in FHFC PLP funds will be used for this purpose. The non-acquisition portion of the PLP loan totaling $500,000 will be used for eligible pre-development activities. Requested amounts for non-acquisition pre-development activities appear reasonable and are reimbursable under the PLP program. Additional Information This development will be targeted to artists. Proposed tenants will submit an application that will require them to demonstrate that at least one member of the household is a professional artist. A committee of artists from the community will review each application to determine eligibility. The property management company, Apogee Property Management, has experience leasing and managing a similar affordable property located in Ft. Lauderdale, FL. The Applicant will purchase the site from the Pompano Beach CRA. The CRA is willing to sell it provided the land is used for affordable housing and the developer agrees to pay for certain off-site improvements during construction. Stormwater permits will be required and an environmental assessment has been ordered. A portion of the site is a former gas station that the city has already remediated. Broward County still needs to approve the remediation report and determine if there are any limits on how much of the site can be developed. The original PLP application was submitted for a different site. The Applicant was awarded funding for the original site under RFA Due to community opposition, the city did not approve the sale of the original site to the Applicant. As a result, the Applicant was unable to close on the original award. The Applicant has worked with city staff to identify the currently proposed site. There is no indication of any community opposition to the proposed site. Conclusion and Recommendation First Housing s review of the development costs indicate that the assumptions utilized appear reasonable and internally consistent. Further, the Applicant through its joint venture partners has sufficient experience and financial strength in this type of development and success appears likely. First Housing recommends approval of the PLP loan in the amount of $670,000, subject to the following: 1. This recommendation is conditioned upon the satisfactory review of site control documentation prior to any PLP funding. Boulevard Art Lofts Page 5

6 2. This recommendation is conditioned upon the satisfactory review of the Broward County environmental approval prior to any PLP funding. 3. Satisfactory resolution of any outstanding past due or non-compliance issues by the closing of the PLP loan. 4. 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). 5. Any other reasonable requests by FHFC, its counsel, or the Servicer. Thank you for the opportunity to provide these services to FHFC relating to the PLP Program. If you require any additional information or require additional services relating to this transaction, please do not hesitate to contact me. Prepared by: Boulevard Art Lofts Page 6

7 Exhibit A Total Development Budget Acquisition $400,000 Construction $5,382,795 Financial Costs $772,000 General Development Costs $947,296 Contingency $355,105 Developer Fee $1,278,360 Total $9,135,556 Boulevard Art Lofts Page 7

8 Exhibit B PLP Loan Budget Appraisal $15,000 Architect/Engineer $232,500 Acquisition $170,000 Environmental/Soil $7,860 Consultant Fees $16,400 Legal $45,000 Application/Loan Commitment Fees $91,500 FHFC Underwriting $28,740 Survey $3,000 Closing Costs $20,000 Contingency $40,000 Total $670,000 Boulevard Art Lofts Page 8