River Trace Apartments (fka River Trace Senior Apartments) MMRB 2000 Series V / 4% HC C

Transcription

1 Page 1 of 10 To: From: Brantley Henderson Florida Housing Finance Corporation Thais Pepe, Senior Credit Underwriter First Housing Development Corporation Date: Subject: River Trace Apartments (fka River Trace Senior Apartments) MMRB 2000 Series V / 4% HC C Transfer of Ownership and Subordination of the LURA and ELIHA At the request of Florida Housing Finance Corporation ( FHFC ), First Housing Development Corporation ( First Housing ) has reviewed a letter from Broad and Cassel, Attorneys at Law, on behalf of River Oaks Housing Partners, Ltd. ( Seller ), dated November 9, 2016, requesting FHFC s approval to acquire River Trace Apartments ( Development ). The transaction will also include the acquisition of a separate development known as Manatee Pond Apartments. Once acquired, Bradenton Leased Housing Associates III, LLLP ( Buyer ) intends to refinance and combine the two referred developments into a single scattered site development utilizing Manatee County Bonds, a Seller s Note, and new 4% Housing Credits ( HC ). Specifically, First Housing has been requested to determine that the Buyer has the prerequisite financial strength and experience to successfully own and operate the Development. Overview River Trace Apartments consist of 178 units located at 2710 River Trace Circle, Bradenton, Manatee County, Florida. The Development was initially financed by the issuance of $6,900,000 Florida Housing Finance Corporation Housing Revenue Bonds, 2000 Series V-1 and $1,200,000 Florida Housing Finance Corporation Taxable Housing Revenue Bonds, 2000 Series V-2 (collectively, the Bonds ). On June 30, 2009, the Seller obtained permanent financing in the amount of $398, from FHFC under the Subordinate Mortgage Initiative ( SMI ) Loan program. On October 1, 2013,

2 Page 2 of 10 the Seller paid off the SMI Loan and Bonds, and transferred the General and Limited Partnership interests of the Seller from SAH River Oaks, LLC (0.01% General Partner) and SAH River Oaks Investor, LLC (99.99% Limited Partner) to Bradenton Leased Housing Associates I, LLC (0.01% General Partner) and Polaris Holdings I, LLC (99.99% Limited Partner). A Land Use Restriction Agreement ( LURA ) dated December 28, 2000 and subsequent Amendments dated April 4, 2002, January 1, 2005, April 24, 2009, and October 1, 2013, respectively require 5% of the units (9 units) to be set aside for tenants earning 30% or less of the area medium income ( AMI ) and 80% of the units (143 units) to be set aside for tenants earning 60% or less of AMI, for a term of twenty-five (25) years. The Extended Low-Income Housing Agreement ( ELIHA ) dated November 20, 2001 and subsequent Amendments dated and effective as of April 24, 2002 and April 24, 2009 respectively require 5% of the units (9 units) to be set aside for tenants earning 30% or less of the AMI and 95% of the units (remaining units) to be set aside for tenants earning 60% or less of the AMI, for a term of thirty (30) years: River Trace Apartments Page 2

3 Page 3 of 10 Current Ownership Structure River Oaks Housing Partners, LTD Bradenton Leased Housing Associates I, LLC (GP) 00.01% Polaris Holdings I, LLC (LP) 99.99% Paul Sween ( %) Armand Brachman ( %) Mark Moorhouse (18.225%) Chris Barnes (20.00%) Jeff Huggett (2.50%) Paul Sween ( %) Armand Brachman ( %) Mark Moorhouse (18.225%) Chris Barnes (20.00%) Jeff Huggett (2.50%) River Trace Apartments Page 3

4 Page 4 of 10 Proposed Ownership Structure/Background Bradenton Leased Housing Associates III, LLLP, a Minnesota limited liabilitied limited partnership Brandenton Leased Housing Associates III, LLC.005% General Partner RBC Tax Manager II, Inc..01% Special Limited Partner RBC Tax Credit Equity, LLC 99.98% Investor Limited Partner Brandenton Leased Housing Associates LP III, LLC.005% Limited Partner Mark Moorhouse 75% Member Mark Moorhouse 75% Member Christopher Barnes 25% Member Christopher Barnes 25% Member The Buyer and Bradenton Leased Housing Associates III, LLC are newly formed single purpose entities, both filed on September 9, 2016; therefore, they do not have a history of real estate owned, audited financial statements or tax returns. Mark Moorhouse and Christopher Barnes have substantial experience in affordable housing; therefore, First Housing relied on the Principals of the General Partner to verify their real estate experience. Mr. Barnes joined Dominium in 1999, and since then has developed or acquired more than 60 assets; placing over $350,000,000 in project debt and raising over $130,000,000 in equity while working on a variety of different project types in 11 states. Mr. Barnes has worked on several new construction and rehabilitation projects, including historic, Section 8, and conventional properties, as well as numerous financings and sales. Mr. Barnes has also worked on nearly 40 workout transactions for their financial partners totaling over 3,000 units and $150,000,000 of new debt and equity financing. Since joining Dominium in 1996, Mr. Moorhouse has worked on the acquisition of several portfolios, new project development, and the acquisition of several existing apartment projects. Mr. Moorhouse has also played an integral role in the financing of over $600,000,000 of apartments and has helped raise in excess of $350,000,000 in equity. River Trace Apartments Page 4

5 Page 5 of 10 The Officers of the General Partner and Class B Limited Partner for River Trace Apartments, Mark Moorehouse and Christopher Barnes, are also Principals of Dominium Development and Acquisitions. There is no remaining FHFC debt on River Trace Apartments and the Principals, Mr. Moorhouse and Mr. Barnes, have provided September 30, 2016 unaudited financials to show financial strength and experience as Principals of the Ownership entities, which were reviewed by First Housing and found to be satisfactory. Both principals also provided No material change certifications dated December 28, 2016 as well as 2014 and 2015 IRS Tax Returns. Sources and Uses of Funds The Buyer has applied to JLL Capital Markets ( JLL ) to provide first mortgage funding for the acquisition/rehabilitation and permanent financing of the Development pursuant to the Federal Home Loan Mortgage Corporation ("Freddie Mac") Multifamily Direct Purchase of Tax Exempt Loan Program (the "TEL Program"). The Funding Loan is requested pursuant to any Federal, State or Local requirements concerning the proposed tax exempt private activity allocation and/or the Low Income Housing Tax Credit requirements. The Funding Loan will be originated by JLL on behalf of Manatee County Housing Finance Authority ( MCHFA ). Subordination of the LURA and ELIHA, as applicable to the first mortgage. Additionally, the proposed financing will include a Seller Note and 4% Housing Credit Equity. To balance the sources and uses of funds, the Developer plans to defer the Developer Fee. First Housing reviewed a letter of proposal from JPMorgan Chase Bank, N.A. ( Chase ) indicating Chase will purchase tax exempt and taxable bonds in the aggregate amount of $22,600,000, the proceeds of which will fund the construction loan. Upon construction completion and stabilization the construction loan will be repaid by a permanent loan from JLL and other sources. First Housing reviewed a letter of proposal from JLL, dated September 16, 2016, indicating an estimated loan amount of $14,730,000, based on 85% loan to value of the as-rehabilitated asstabilized value. The terms of this loan will be for 15 years, amortized over 35 years. The estimated all-in note rate (excluding Issuer and Trustee fees) is 4.76%. First Housing reviewed a letter of proposal from RBC Tax Credit Equity, LLC, dated October 12, 2016, indicating a total capital contribution of $10,714,589. The letter indicates a price per tax credit dollar of $ River Trace Apartments Page 5

6 Page 6 of 10 See below a summary of the sources and uses of funds. Please note, the sources and uses contemplates the acquisition of both properties, River Trace Apartments and Manatee Pond Apartments. Sources of Funds Total Tax Exempt Notes $14,730,000 Seller Note (Tax-Exempt) $3,124,500 HC Equity $10,714,589 Operating Income $601,787 Deferred Developer Fee $1,850,760 Total $31,021,636 Uses of Funds Total Acquisition Costs $19,075,000 Construction Costs $4,416,400 Cash Accounts $1,450,244 Professinal Services $562,875 Construction Fin. Costs $249,000 Permanent Fin. Costs $588,900 Closing Costs $152,388 Tax Credit Fees $262,615 Developer Fee $4,264,214 Total $31,021,636 First Housing reviewed the executed Purchase Agreement, dated September 28, 2016, between the Seller and the Buyer, for a total purchase price of $16,124,500. The difference between the aforementioned Acquisition Costs and the total purchase price for River Trace is the $2,950,500 purchase price of Manatee Pond Apartments. The Purchase Agreement for River Trace includes a Seller Note in the amount of $3,124,500. River Trace Apartments Page 6

7 Page 7 of 10 Development Economics First Housing received and reviewed the management prepared 2015 Annual Statement for the Development. The results of that review is as follows: River Trace Apartments, Brandenton, Manatee County 2015 Annual Statement per unit FHDC Proforma per unit Revenue Gross Potential Rental Revenue 1,648,591 1,681,563 Vacancy Loss (22,065) (67,263) 4.00% Collection Loss 124 (16,816) 1.00% Rent Concessions (4,627) 0 Effective Gross Revenue (EGR) 1,622,023 1,597,484 Misc. Income 24,644 25,137 Total Effective Gross Revenue 1,646,667 1,622,621 Expenses Taxes 122, , Insurance 68, , Management Fees 49, , Administrative 23, , Payroll 234,116 1, ,139 1,355 Utilities 121, , Marketing & Advertising 17, , Operating & Maintenance 94, , Replacement Reserve , Total Expenses 732,241 4, ,608 4,537 Net Operating Income 914,426 5, ,013 4,579 First Mortgage 457,951 2, ,215 4,861 Total Debt Service Payments 457,951 2, ,215 4,861 Cash Flow Before Tax Management/Leasing Agent First Housing reviewed a Draft Management Agreement between the Buyer and Dominium Florida Management Services, LLC. The agreement indicates a management fee of 4.5% of the gross monthly collections (rental and non-housing income), of which 0.5% will be from available net cash flow. The approval of the selection of the Management Compnay by FHFC Asset Management is a condition of closing. Founded in 1972 by David Brierton and Jack Safar, Dominium is now the second largest affordable apartment development and management company in the nation. Created as a family of companies (Dominium Development and Acquisition, LLC / Dominium Management Services, LLC), Dominium utilizes a variety of real estate disciplines throughout the development and acquisition process. Dominium has grown substantially over the past several years by becoming a leader in the real estate industry. Since 1991, Dominium has grown from River Trace Apartments Page 7

8 Page 8 of 10 a company with 3,000 apartment units to a company that now owns over 25,000 apartment units. The management contact person is: Jack Sipes, CPM Senior Vice President Dominium Florida Management Services 2905 Northwest Blvd. Ste.150, Plymouth, MN Phone jsipes@dominiuminc.com Status of Development Noncompliance/Past Due First Housing is currently the Compliance Monitoring agent for River Trace Apartments. An Annual Management Review and Physical Inspection was completed on December 29, 2015 which found the property to be in noncompliance. Subsequently, all issues were corrected and a closeout letter was issued on March 17, According to FHFC s Asset Management Noncompliance Report, dated January 5, 2017, the Development Team has the following noncompliance items outstanding: Manatee Pond: Failure to meet farmworker categorical requirement. 3/24/09: Unable to move forward on owner's 1/15/09 request for relief from farmworker set-aside. Owner failed to respond to requests made by credit underwriter. Last activity: 1/11/2017 Letter to owner. Whistler s Green: Expired Affirmative Fair Housing Marketing Plan. Last activity: 1/3/2017- to Management According to FHFC s Past Due Report, dated January 5, 2017, the Development Team has no past due items outstanding. River Trace Apartments Page 8

9 Page 9 of 10 Recommendation First Housing s review indicates that the Buyer has the prerequisite financial strength and experience to successfully own and operate the Development. Based upon the review of the information submitted and within the scope of this analysis as described herein; First Housing recommends approval of the transfer of ownership from the Seller to the Buyer, and subordination of the LURA and ELIHA (as applicable). Conditions The following is a summary of conditions outlined in this report: 1. Buyer and any other parties are to execute any and all assignment and assumption documents that FHFC deems necessary to effectuate the ownership change. 2. The Buyer shall agree that through the regulatory period, Florida Housing and their compliance monitoring agent shall have access to the property to perform their management review and physical inspection during the remaining affordability period. Subordination of the existing LURA and ELIHA to the new first mortgage. 3. Payment of any outstanding arrearages to FHFC, its legal counsel, Servicer or any agent or assignee of FHFC for past due issues applicable to the Development team (Borrower or Developer or Principal, Affiliate or Financial Beneficiary, as described in (11) F.A.C., of a Borrower or a Developer). 4. The Buyer shall agree to maintain all set-asides and other requirements of the LURA and HC ELIHA. 5. Confirmation of approval of the transfer of ownership interests by all other lenders, if applicable. 6. Confirmation of FHFC approval of the selection of the Management Company. 7. Satisfactory resolution of any outstanding FHFC noncompliance and/or past due items. 8. Receipt of non-refundable transfer of ownership and assumption fee of $2, Verification that all Insurance Certificates are current and acceptable to Servicer and FHFC. 10. Review and approval of all loan documents consistent with the terms outlined above by FHFC, its legal counsel and servicer. River Trace Apartments Page 9

10 Page 10 of Consent of Equity Provider, as deemed applicable. 12. Review of final first mortgage loan terms. 13. Prepayment of any required compliance monitoring fees, as applicable. 14. All other due diligence required by FHFC, its legal counsel and Servicer. Prepared by: Reviewed by: Thais Pepe Senior Credit Underwriter Ed Busansky Senior Vice President River Trace Apartments Page 10