San Francisco Rental Assistance Demonstration Program (RAD) Conversion Nomination Packet Table of Contents

San Francisco Rental Assistance Demonstration Program (RAD) Conversion Nomination Packet Table of Contents Background... The RAD Conversion s Key Dates. Description of Properties 2 Amount and Type of Financial Resources 2 Program Innovations.. 4 Breakdown and Characteristics of the Residents.. 4 Resident Services 4 Resident Impacts...5 Goals, Objectives, and Long-range Benefits.....6 Industry Partners and Their Roles......6 Key Implementation Strategies.....7 Role of the Community and Elected Officials...... 8 Challenges... 9 Financial Appendices Portfolio Sources & Uses by Phase...... Before and After Photographs.....5 Map of San Francisco RAD Projects...... 7 Press Releases Media Stories City of San Francisco, November 3 26, Mayor s Office Completes Transfer of Public Housing to Community-Based Management..... 8 BofA Merrill Lynch, developers and S.F. hatched largest affordable housing deal in history, SF Business Times, March 25, 26..... 23 SF Tries a New Model for Public Housing, San Francisco Chronicle, November 5, 26...25 San Francisco to Turn Much Public Housing Over to Private Owners, Laura Kusisto, Wall Street Journal, November 3, 26,..... 28 San Francisco Rehabilitates Public Housing in Largest RAD Deal to Date, Mark O Meara, Novogradac Journal of Tax Credits, January 27..... 3

San Francisco s RAD Portfolio Conversion Background: When the San Francisco Housing Authority (SFHA) was first declared troubled by HUD in December 22, Mayor Edwin Lee kicked of a citywide Public Housing Re-Envisioning Process to identify strengths, challenges, and a path forward for the beleaguered agency. Six months later, over a hundred representatives from 72 different organizations including residents, non-profit service providers, affordable housing developers, local labor unions, and private sector development experts, along with 2 City departments and representatives from United States Department of Housing and Urban Development (HUD) had met a total of 8 times to discuss strategies for improving the delivery of services to public housing residents in the face of declining federal funding and a history of local mismanagement. The community support for the Re-Envisioning process set the stage for the RAD transformation and the teamwork it has required. In 25, as a result of federal underfunding, the San Francisco Housing Authority (SFHA) s capital repair backlog was over $27 million, with growth projections of over $5 million per year. With only $ million annually in HUD capital repair funding, it would have taken SFHA 5 years to restore its portfolio to a basic level of decency. At the same time, public housing, which is often the last barrier between severe hardship or homelessness for its residents, was acutely needed to help mitigate the impacts of economic displacement from San Francisco s white-hot housing market. Doing nothing while the housing decayed further was not an option. Accessing the extraordinary resources necessary to preserve the units was imperative. But San Francisco s high construction and operating costs made any solution to SFHA s challenges elusive. Led by Mayor Edwin Lee, the City negotiated a unique, San Francisco-only structure with HUD that allowed maximization of federal Rental Assistance Demonstration (RAD) program subsidies across 28 projects, utilizing San Francisco s robust affordable housing development infrastructure. Though the project functioned as one portfolio from HUD s standpoint, it closed as 28 separate but simultaneous transactions, half of them in November 25 and half in October 26. The closings involved 28 partnerships, 28 separate financings and document sets, and 28 building permits. The RAD Conversion s Key Dates: 22 SFHA declared troubled by the U.S. Department of Housing Development Spring 23 - Mayor Lee convenes Re-Envisioning process, a citywide conversation about future of SFHA; begins negotiations with HUD to preserve and protect the units at risk September 23 SFHA and MOHCD apply to HUD for RAD portfolio award for 4 projects including 29 public housing properties, six HOPE VI projects, and six phases of HOPE SF public housing revitalization at Hunters View and Alice Griffith January 24 HUD makes RAD portfolio award April 24 Eight developer teams selected through a competitive RFQ process to develop, own and operate the 28 projects February 25 MOHCD and HUD conclude negotiations regarding the financing structure, allowing MOHCD to combine RAD program rents with traditional Housing Choice Voucher (HCV) rents across the portfolio, expanding the amount of supportable property rehabilitation

June 25 Bank of America Merrill Lynch selected as portfolio construction lender and tax credit investor, with Freddie Mac as permanent lender November 25 Phase I (,422 units in 4 projects) closes; City of SF issues over $362 million in tax exempt bonds; $29,925,334 in rehabilitation commences. October 26 Phase II (2,58 units in 4 projects) closes; City of SF issues almost $7 million in tax exempt bonds; $475,83,26 in rehabilitation commences. Description of Properties SFHA s public housing properties were acquired and built over a 75-year period and reflect broad variations in building type, neighborhood, and age: 95 Eddy, the oldest property, was built in 9 and acquired by SFHA in the 97s. Holly Courts, the first public housing built west of the Mississippi River, was constructed by SFHA as public housing in 942 and is eligible for listing on the National Register of Historic Places. Ping Yuen and Ping Yuen North were designed and constructed in 97 specifically to house residents of San Francisco s Chinatown. They are also eligible for listing on the National Register. Robert B. Pitts, a 23 unit building, was built in 99. Twelve of the 28 projects were found to have contributory historic value and as a result any façade improvements were reviewed and approved by Preservation Planners at the SF Planning Department. The most typical typology for properties housing senior and disabled residents is the mid-rise tower, often in a brutalist concrete style. Average project size in the senior disabled sites is 6 units; with the smallest project containing 42 units (462 Duboce) and the largest containing 276 units (32-33 Clementina). Family projects are typically walk-up townhome or garden apartment styles, and have an average of 82 units. The smallest family project is Holly Courts (8) and the largest is Prior to RAD conversion, the SFHA properties were in fair to poor shape. Years of deferred maintenance due to inadequate funding from HUD affected building wide systems and many properties were operating with their original plumbing, sewer, electrical, mechanical and seismic systems. Unit and common area finishes needed replacement and upgrade. The number of units accessible to people with disabilities (physical, sight and hearing) was inadequate to meet the legal requirements and to meet the needs of a population that was aging in place. Given the tremendous need originally estimated by SFHA over its entire portfolio at $27 million but later discovered to be over $ billion a triage approach was developed for the RAD properties that would ensure that basic and urgent needs could all be addressed at all sites, and that other owner upgrades would be completed in an equitable manner. The triage approach incorporated the following priorities in order: ) Life safety issues: seismic deficiencies, pervasive mold and mildew often caused by dry rot or inadequate ventilation, sewer upgrades, unsafe elevators, outdated or malfunctioning fire alarm systems, fire damaged units, missing sprinkler systems; accessibility upgrades (the number of ADA units was increased at every property to meet (and in some cases exceed) the City of San Francisco s more stringent requirements) 2) Building envelope needs: roofing, waterproofing to address water intrusion, new windows to address water intrusion and meet requirements for energy upgrades 2

3) Common areas. Many sites lacked adequate property management, social services, and community building space. RAD conversion provided an opportunity to provide these spaces in response to tenant needs. 4) Unit upgrades. Countertops, cabinets, flooring and appliances were replaced where items had met the end of their useful life and/or posed quality of life issues for residents. The average amount of rehabilitation per RAD unit, across phases and building types, is $99,. Construction contracts ranged in size from $7 million to $79 million. Amount and Type of Financing Resources: SAN FRANCISCO RAD CONVERSION SFHA Seller Carryback Loan The Total Development Cost for the RAD portfolio is over $2 billion. See Appendices at p. for project detail, by phase. Principal financing sources include: Permanent Sources of Funds Permanent SFHA Perm Loan Tax-Exempt Debt Accrued Interest TOTAL PERMANENT SOURCES Tax Exempt Construction Debt Total by Phase Total Units MOHCD Loan DDF/GP Capital Tax Credit Equity PHASE I 422 39,2,592 245,64,676 22,9, 83,38, 2,54,597 7,,2 284,6,74 672,98,749 362,349, PHASE II 258 5,23,58 452,923,645 4,95, 248,58,5 23,78,896 35,2,57 53,37,537,345,449,26 697,292, TOTAL 348 89,234,73 697,988,32 27,95, 33,69,5 35,683,493 42,2,59 85,98,7 2,7,547,965,59,64, Tax exempt construction debt. Over $ billion in debt issued by the City and County of San Francisco, purchased by Bank of America Merrill Lynch, the construction lender on all projects. Construction interest rate for both phases was 3-Day LIBOR plus up to 2%. Soft debt. $2 million in soft debt provided by Bank of America Merrill Lynch at % for an 8 year term. Tax credit equity. Bank of America Merrill Lynch selected as the tax credit investor on all projects, with a strong bid of $.23 per credit for Phase I, and $.22 for Phase II. However, the size of the Phase II projects exceed BAML s available equity, and Aegon stepped in as investor for three Phase II projects, at varying pay-in rates. SFHA Seller Carryback Loan. SFHA provided $697 million in 55-year seller loans at the AFR for the improvements on all properties, as well as $27 million for 55-year permanent loans at 3%. Loans repaid through residual receipts with the exception of $5,-per-project must-pay debt payment each year. In Phase I, residual receipts payments shared with City pari passu; in Phase II, residual receipts payments split 5/5 with City. Permanent Tax Exempt Debt. Freddie Mac provided permanent loan commitments for all projects. Interest rate set at Year US Treasury rate plus 2%-2.4%, for amortization periods ranging from 5 to 35 years.. City Soft Loans: $89 million in soft debt from the City and County of San Francisco at % interest. Each dollar of soft City debt leveraged over $22 of other financing sources. A single financial consultant, California Housing Partnership Corporation (CHPC), acted as the overall portfolio consultant as well as the consultant to each individual transaction. CHPC was critical in developing and negotiating the financial terms of the SF portfolio with HUD, which essentially pooled and redistributed all of the RAD and non-rad PBV resources available to the portfolio, and distributed these across the projects in such a way that maximized capital resources and ensured each property was adequately subsidized. The complex challenge at the heart of this exercise -- ensuring not only that the 3

portfolio as a whole was feasible, but that as each of the 28 projects was feasible for the long term, to the satisfaction of financial partners as well as the owners -- was conducted within the limitations of the RAD statute and regulations. Program Innovations. Beyond the structuring of the financial transactions, the RAD conversion has allowed for new methods of project management, construction procurement, and service delivery. For example, recognizing that the volume of projects and the limited pool of General Contractors familiar with affordable housing occupied rehab could severely impact subcontractor bid coverage, the City hosted a RAD Phase I contractor mixer to encourage participation from a wide swathe of subcontractors. Services staffing and funding are standardized across the projects to maintain equity and fairness regardless of the developer s services approach. Bundling of projects has allowed for economies of scale when approvals e.g., Building Department, Mayor s Office on Disability, Planning Department but also required substantial coordination and staff support. Rapid conversion and implementation schedules led to the creation of a developer cohort, in a number of RAD Working Groups, that gathered to brainstorm and develop consensus on all angles of RAD including relocation planning, housing retention strategies, lease and house rules language, and best practices for services. Breakdown and Characteristics of the Residents Preservation and rehabilitation under RAD meets San Francisco s goals to preserve units that are affordable to extremely low income households in perpetuity. Extraordinary market pressures have resulted in the displacement of many vulnerable and lower income City residents. Preservation of 3,48 deeply subsidized units eliminates the risk of displacement for current households and will ensure the units will continue to serve as resources for San Francisco s neediest citizens. As administrator of the Project-Based Vouchers (PBVs) that are in place on every unit, SFHA maintains site-based waiting lists for all RAD projects. SFHA s preferences system ensures that priority for RAD units will be granted first to households displaced by eviction, homeless households, veterans, and victims of domestic violence. All RAD residents will pay 3% of their income for rent and will be at or below 5% Area Median Income. Of the 3,48 units in the RAD portfolio, 63% (2,92 units in 22 projects) are designated for extremely low income seniors and disabled individuals, most of whom are on fixed incomes such as Social Security. The remaining 37% (,288 units in 7 projects) are in family projects, in units ranging from one-bedroom to five-bedroom apartments. While the federal public housing program allows residents to earn up to 8% of the median income, the income of SFHA households have averaged $6,45. Approximately 89% of RAD households are at or below 3% of AMI, which in San Francisco in 26 was $22,6 for a single adult and $32,3 for a family of 4. Racially and ethnically, residents of the RAD projects mirror the demographics of the City s low income residents, and are 38% Caucasian, 32% Black, and 26% Asian; of the total, 2% are Hispanic. Resident Services. Former public housing projects that have converted to RAD now have, for the first time, a dedicated funding stream that provides residents with service connection and referral, health and wellness activities, housing stability, and community building. Services and activities at the senior sites include coffee hours, exercise classes, public health nurse visits, support groups, community celebrations, nutrition classes, and games. Family site services include family literacy nights, outings, youth activities, nutrition classes, 4

community gardening programs, and exercise classes. Referral to case management, mental health and substance abuse, and other more comprehensive services is available at all sites. During the predevelopment period, the Mayor s Office of Housing and Community Development provided funds for family site services and augmented funds that had previously been provided by the City s Department of Aging and Adult Services at some of the senior/disabled sites. After conversion to RAD, service connectors are funded by each site s operating budget at a ratio of one service provider for every 75 units, with additional City funds from contracts with the Human Services Agency supporting program costs and supervision at both the family and senior/disabled sites. Resident Impacts The portfolio conversion to RAD under an accelerated schedule required extensive, consistent and sensitive messaging to thousands of public housing residents about the impacts of conversion on their lives. Given the rapid advancement of gentrification and displacement in San Francisco, resident anxiety was heightened. Lead staff from the SF Housing Authority (Commissioners and staff), Mayor s Office of Housing and Community Development (leadership and staff), service providers, developer project managers, legal and anti-eviction organizations, and resident-led organizations all participated in forming, carrying and disseminating a simple yet powerful message to residents about RAD: No displacement of existing residents. No rescreening of existing residents. Method of rent calculation will not change. If any relocation is required, it will be temporary. Once residents principal concerns were addressed, the developer teams could more easily focus on addressing resident needs through the provision of direct services on site and involving residents in discussions of construction scope. Developers and their services teams also worked to prepare residents for the transition to a new form of subsidy, a new property management team, a new lease, new house rules, and, in some cases, short-term off site relocation. This work with residents was broad and deep and was standardized across the portfolio to the extent possible. RAD conversion has stabilized residents housing while reducing isolation caused by poverty and limited resources. Due to declining operating and capital subsidies from the federal government, San Francisco s public housing residents for many years endured deferred maintenance and minimal property management services. Conditions at SFHA properties continued to deteriorate as projects aged and repair funds declined. The RAD conversion has made available over $7 million for rehabilitation and repair at the sites. Improved housing means improved health, safety and habitability, and allows residents to focus on their other life goals. With the assistance of service partners, post-rad conversion residents are less isolated, better connected to the City safety and services network, and more integrated into the broader San Francisco affordable housing network. By ending isolation and bringing residents into the larger SF community, RAD allows residents to become more involved not only in the development and conversion of their own property but also in issues of importance to the larger community. Senior residents can age in place in their newly improved housing units with the support of services and property management staff. 5

Goals, Objectives and Long-Range Benefits The principal goal of the RAD portfolio program is the improvement and long-term preservation of 3,48 units of housing serving extremely low income San Francisco. Objectives and measurable outcomes are wide-ranging, addressing human needs, program planning, and financial feasibility. They include: Maintain the diversity of the existing public housing stock which is located in desirable and diverse neighborhoods across San Francisco, including the Castro District and Lower Pacific Heights Maintain San Francisco s socio economic, racial and ethnic diversity Stem outmigration of African American families displaced by gentrification Ensure 99 years of affordability through long-term ground leases Guarantee equitable access to RAD resources by all public housing projects regardless of individual property conditions or history Increase property management staffing to ensure safe, sound and supportive building environments Create or enhance community spaces where residents can gather Integrate public housings residents into San Francisco s affordable housing network so they can benefit from resources and community building Offer optional resident support services and youth programming Leverage San Francisco s significant CRA opportunities when selecting the lender/investor team in order to maximize the amount of resources available to improve the housing Leverage scarce soft city debt to the extent possible Create a national model for RAD conversion Renovate properties and fund reserves in order to achieve a 2 year useful life Design a portfolio-wide implementation program that ensures equal treatment of residents, equal resources at sites, and consistency with RAD program regulations and values Assist residents through the transition to RAD Support residents to retain their housing through timely and consistent rent payment Generate prevailing wage construction opportunities for SFHA residents and other disadvantaged SF residents Support SFHA staff who are transitioning or terminating their employment by creating jobs, offering severance payments, and re-training as appropriate Industry Partners and Their Roles Financing partners. City Role. The City played a unique role in the RAD portfolio transaction. Beyond its customary roles as bond issuer, project manager, and soft lender, and led by Mayor Ed Lee, the Mayor s Office of Housing and Community led the $2 billion RAD transaction which involved 28 limited partnerships, 8 developer teams, service providers, hundreds of building consultants and general contractors and subconsultants, and over a dozen City agencies. All in all, over, distinct individuals touched the RAD transaction not to mention the thousands of residents who participated in the development of work scopes, 6

house rules, and services. In its leadership role, the City established the one deal, 28 executions concept and designed a plug and play deal structure that despite limited staffing resources and an expedited schedule, closed on time. MOHCD staff developed the services staffing model and strategy and worked tirelessly at all sites to ensure the necessary City contracts were developed to fund the most responsive and appropriate resident services. City staff also negotiated with developers and residents to create equitable resident screening policies, lease and house rules documents, housing retention strategies, and tenant leadership structures across the portfolio. The City was primarily responsible for negotiations with HUD regarding the RAD transaction and, on behalf of the RAD developers, closed the 28 individual transactions directly with HUD. Lenders/Investors. As the lead lender and investor, Bank of America Merrill Lynch showed a deep commitment to solving the challenges of an immense transaction and achieving a successful closing. While BAML is the sixth largest bank in the world, it had not undertaken a complex portfolio transaction of this kind. Lead staff designed and implemented an approach that featured its most talented staff, achieved economies of scale, and streamlined approval processes. The historic tax credit equity terms provided by BAML have demonstrated its confidence in the RAD program and the City of San Francisco, and positioned it as a national leader in RAD transactions. While Aegon joined the transaction relatively late in the second phase and contributed equity to just three Phase II projects, it demonstrated flexibility and cooperation in order to ensure that Phase II closed on time. Freddie Mac. As the permanent lender on all 28 transactions, Freddie Mac committed over $33 million in first mortgages and dedicated its resources to meeting the accelerated schedule and intense volume of transactions. SF Housing Authority. As MOHCD s key partner, SFHA filled a huge financial, coordinating, and resident coordination role. SFHA is not part of the RAD partnership entities, but as the owner of the land on which all RAD projects are situated, SFHA is ultimately the steward and guardian of the San Francisco RAD 99-year affordability requirement. As a soft lender, SFHA is also jointly responsible, with the City, for monitoring developer performance and housing quality for a 55-year period. As the long time landlord of the public housing that converted to RAD, the SFHA helped craft the resident communications strategy and bring that to the sites and the residents. Lastly, as the administrator of the Project Based Vouchers that subsidize % of the 3,48 RAD units, SFHA holds a key role in developing and processing waiting lists; ensuring compliance with occupancy and habitability standards; income verification of residents; and payment of landlords. Financial Consultant. As stated above on page 3, A single financial consultant, California Housing Partnership Corporation (CHPC), acted as the overall portfolio consultant as well as the consultant to each individual transaction. CHPC was doubly tasked in ensuring not only that the 7

portfolio as a whole was feasible, but that as each of the 28 projects was feasible for the long term, to the satisfaction of financial partners as well as the owners. Key Implementation Strategies. As stated above, equity was a key principle and strategy for RAD development and implementation. In coordinating the work of eight development teams in diverse neighborhoods and in properties with diverse levels of resident stability and building deterioration, the City applied the financing principle of one deal, 28 executions to the implementation of RAD. With the tireless help of Enterprise Community Partners, MOHCD convened key members of each developer team and lead tenant representatives in a cohort that met regularly to create consensus on all matters affecting the RAD transition and the residents: the services staffing model and funding resident screening policies presenting the fewest barriers to housing possible new lease and house rules documents housing retention strategies relocation benefits, approaches, and priorities lease-up of vacant units to future applicants by SFHA RAD resident protections (required by HUD, further extended and deepened in San Francisco) included in all communications, leases, addenda, ground leases, and loan documents Role of the Community and Elected Officials Any undertaking as deep and broad as the RAD transformation requires a huge commitment from all stakeholders. The leadership of Mayor Lee, beginning in late 22 when the SF Housing Authority was declared troubled, set the tone for what was to become a herculean effort on the part of all participants: funders, residents, developers, City approval agencies, current and future property managers, relocation consultants, service providers, and attorneys. Eight RAD developer teams were identified relatively late the process and completed the conversion on an accelerated timeline. Enterprise Community Partners convened the developers through a complex working group process to create consensus and consistency across the projects on implementation challenges and resident communications. The San Francisco Mayor s Office of Housing and Community Development contributed critical staffing, predevelopment financing, critical bridge financing to SFHA, and permanent soft loans totaling almost $8 million. Other City departments (Human Services, Department of Building Inspection, Planning Department, Department of Environment, City Attorney, Public Works Department) provided timely service and support despite the high volume of projects and high level of complexity, all moving on the same schedule. The state Tax Credit Allocation Committee (TCAC) and the California Debt Limit Allocation Committee (CDLAC) partnered with the City on finding ways to manage the extensive workload caused by 28 projects, adapting timelines and assignments as needed to meet the ambitious schedule. With few exceptions, the conversion to RAD has been applauded as a sound, equitable solution to a profound problem for which no other solution was identified. Certainly RAD building neighbors have been pleased by the availability of funds to repair and maintain the often dilapidated public housing sites that converted to RAD. Though some community advocates have expressed concerns over what has been characterized as the privatization of public housing, the San Francisco RAD program s commitment to 99 years of affordability has assuaged these reservations. Deep-held fears of displacement of lower 8

income people often anchored in residents recent memories of other public housing improvement projects that did result in displacement and the splintering of communities -- have been laid to rest thanks to the RAD cohort s commitment to equity across projects, to housing retention, and to a screen-in policy framework that will ensure the very lowest income San Franciscans can continue to access the deep subsidies provided at the RAD sites. Challenges. Without belaboring the sheer effort and chutzpah required by the San Francisco RAD portfolio conversion, it is a fact that this historic endeavor did strain the people and the institutions that were responsible for its implementation. Another challenge was the all-for-one aspect of the work, which sometimes ran counter to one of the developer teams skill sets, which is to innovate and negotiate their individual deals. The all-for-one schedule meant that any straggler project manager had the potential to delay the entire closing and implementation a circumstance that did not come to pass, though it might have. Lastly, the RAD portfolio was simply too large for its own good, straining the resources of the lender/investor institution identified for the portfolio, and requiring an infusion of additional equity investment from another party close to the Phase II closing. This had the potential to delay the entire Phase II closing, but it did not. Delay risk translates to interest rate risk, and while interest rates did rise slightly before the Phase II closing, they rose much higher the week after the closing. Three weeks after the closing, Donald J. Trump was elected, and the equity markets tumbled. 9

FINANCIAL APPENDICES Phase I Portfolio Summary Phase II Portfolio Summary

SF RAD PORTFOLIO Phase I Portfolio Summary -- FINAL /23/25 Permanent Sources of Funds Updated Project 99 PACIFIC AVENUE 227 BAY STREET ROBERT B. PITTS 939-95 EDDY STREET 43 TURK STREET 666 ELLIS STREET HOLLY COURTS 462 DUBOCE AVENUE 255 WOODSIDE AVENUE 25 SANCHEZ STREET 88 PINE STREET 345 ARGUELLO STREET 49-3st AVENUE HUNTERS POINT EAST/WEST PHASE I TOTALS Total Units Average Staff Units RAD Rent 92 5 2 62 89 99 8 42 9 9 3 69 75 23 2 2,422 4,64,24 7 797,52,82 73,38,6,2,53,62,255 785 Permanent TaxExempt Debt MOHCD Predev Loan Seller Carryback Loan MOHCD Gap Loan* Accrued Interest SFHA Perm Loan 7,2,,5, 4,76,,989, 2,982, 3,388,,5, 444, 4,448, 3,6, 8,753, 3,974, 6,39, 4,934, 8,5, 947,7,43,6,344,599,296,753,25,23 282,676,44,27,,9 845,79 7,94, 8,75, 32,54,57 7,4, 2,925, 4,375, 27,457,957 6,734,587 2,, 6,, 3,796,59,78,,26,96 47,3, 2,54,82 2,78,73,622,886,768,432,354,444,94,65 8,385,5 33,684,44,23,4,224 455,2,578,952 285,27 553,62 862,2,4,339 346,58,33,4 822,4 65,46 57,98 45,924 2,43,22 4, 5, 2,5, 6, 2,5, 4,9, 5,, 8, 5,7, 5, 5, 5, 5, 5, 5, 5, 5, 5, 5, 5, 5, 5, 5, 29,78,86,489,884 32,66,72 9,78,536 5,56,5 6,24,364 27,99,44 3,48,77 2,55,277 7,89,434 5,7,48 3,269,622,636,365 5,5,45 66,693,23 24,899,385 83,69,76 23,367,255 37,79,679 39,24,753 69,8,736 3,95,58 52,779,93 44,45,725 38,87,46 3,876,682 28,652,385 22,826,46 83,38, 7,53,3 245,64,676 2,472,29 2,52,443 22,9, 7,,2 284,935,952 694,443,664 DDF/GP Capital Tax Credit Equity TOTAL SOURCES

SF RAD PORTFOLIO Phase I Portfolio Summary -- FINAL /23/25 Uses of Funds Updated Project 99 PACIFIC AVENUE 227 BAY STREET ROBERT B. PITTS 939-95 EDDY STREET 43 TURK STREET 666 ELLIS STREET HOLLY COURTS 462 DUBOCE AVENUE 255 WOODSIDE AVENUE 25 SANCHEZ STREET 88 PINE STREET 345 ARGUELLO STREET 49-3st AVENUE HUNTERS POINT EAST/WEST PHASE I TOTALS Total Units Staff Units 92 5 2 62 89 99 8 42 9 9 3 69 75 23 2 2,422 4 Average RAD Rent,64,24 7 797,52,82 73,38,6,2,53,62,255 785 Acquisition Costs Hard Costs Hard Cost Financing Costs Contingency Accrued Interest Soft Costs Developer Fee Rent Reserve Other Reserves TOTAL USES 8,428,5 8,786,5 36,284, 8,78, 5,89,625 5,389,375 32,84, 9,67, 25,665, 2,565, 7,577,75,99,5 2,596,25 54,345, 27,68,34 7,755,334 27,79,277 7,5,555,36,523 2,734,959 9,67,663,555,55 3,83,725,8,8,35,782,395,54 7,845,274 4,764,63 4,226,942,97,99 4,85,,77,73,72,938,926,669 2,93,87,75,596 2,92,66,669,9,532,472,57,7,52,929 6,297,662,892,88 878,633 2,58,249 655,3,5,826,328,73 2,23,775,252,456,748,7,527,95,278,967 965,9 932,486 3,439,796,4,224 455,2,578,952 285,27 553,62 862,2,4,339 346,58,33,4 822,4 65,46 57,98 45,924 2,43,22 9,32,88 2,76,84 5,48,88 2,846,77 3,22,544 2,869,7 5,94,329 3,663,53 3,954,638 3,754,892 3,873,83 3,93,584 2,486,45 8,78,383 2,5, 2,5, 2,5, 2,5, 2,5, 2,5, 2,5, 2,5, 2,5, 2,5, 2,5, 2,5, 2,5, 2,5, 92,648 23,58,525,669 35,276 497,3 844,98,48,579 322,54 889,4 73,386 336,76 26,2 65,986,49,638 68,682 36,357,647,49 468,668,2,499 749,39,2,82 457,49,8,872 89,65 986,5 626,74 622,86,777,698 66,693,23 24,899,385 83,69,76 23,367,255 37,79,679 39,24,753 69,8,736 3,95,58 52,779,92 44,45,724 38,87,46 3,876,682 28,652,384 22,826,46 288,422,5 29,925,334 33,298,26 2,699,69 2,52,443 6,76,46 35,, 9,55,974 2,373,46 694,443,663

SF RAD PORTFOLIO Phase II Portfolio Summary //26 Permanent Sources of Funds Updated Project Total Units PBV Units RAD Units Staff Units Permanent Tax- Exempt Debt MOHCD Predev Loan Seller Carryback/ SFHA Perm Loan MOHCD Gap Loan Accrued Interest MOHCD/AHP Loan DDF/GP Capital Tax Credit Equity TOTAL SOURCES /6/6 PING YUEN 234 72 6 28,326, 68,6, 4,737,522 3,65,745 2,7, 65,379,428 72,98,795 /6/6 PING YUEN NORTH 2 87 2 28,775, 6,87, 3,893,83 4,2,55 3,, 58,26,38 59,696,789 /7/6 WESTSIDE COURTS 35 52 82 7,84, 9,264,38 26,92,,53,75 3,7, 36,959,43 95,558,886 /2/6 75 MCALLISTER 97 55 42 9,63, 22,66,32,2,789 97, 2,6,989 24,55,846 6,37,936 /4/6 ROSA PARKS I 23 24,6, 32,44,42,527,45 2,97, 45,47,377 6,54,664 /5/6 35 ELLIS 96 49 47 2,428, 5,778,734 7,475, 993,89,32, 2,87,86 26,5,239 67,376,95 /6/6 32 AND 33 CLEMENTINA 276 6 3 2 26,576, 36,7,853,87,2 2,25, 47,786,2 4,5,274 /5/6 ALEMANY 5 64 84 2 28,3, 3,828,778 5,8, 2,735,34 3,5, 56,542,67 45,94,799 /4/6 385 8TH STREET 7 5 55 8,6, 22,545,473 79,32 2,4,742 23,377,29 57,363,746 /6/6 MISSION DOLORES 9 46 44 9,93, 9,655, 734,66 2,7,2 22,96,266 54,586,93 //6 76 BUSH STREET 8 63 44 8,79,5 9,658,77 6,47,869,7 9,4,276 49,972,654 //6 JFK TOWER 98 55 42,254, 2,29,47 96,376 2,277,258 23,759,86 59,38,587 /3/6 2698 CALIFORNIA 4 7 22 3,42, 485,,8, 2,847,74 47,853 4, 93,47 3,72,36 32,853,343 //6 WESTBROOK APARTMENTS 223 84 37 2 3,35, 6,75,632 46,38, 2,4,76 2,84, 69,2,25 68,897,697 PHASE II TOTALS 2,58 957,86 5 248,58,5 36,62,524 457,8,645,479,57 23,78,896 2,69, 35,2,57 53,37,537,345,449,25

Updated SF RAD PORTFOLIO Phase II Portfolio Summary Project //26 Total Units PBV Units RAD Units Staff Units Acquisition Costs Hard Costs Hard Cost Accrued Financing Costs Contingency Uses of Funds Interest Soft Costs Developer Fee Rent Reserve Other Reserves TOTAL USES /6/6 PING YUEN 234 72 6 69,954, 53,77,74 7,925,7 7,97,947 3,724,25 9,787,635 6,,,586,837 2,36,27 72,98,795 /6/6 PING YUEN NORTH 2 87 2 65,89,4 48,536,245 7,65,997 7,623,997 4,29,3 6,364,633 6,,,52,72 2,34,99 59,696,79 /7/6 WESTSIDE COURTS 35 52 82 27,623, 4,9,537 5,82,73 3,744,36,53,75 8,9,226 6,,,44,7,322,83 95,558,886 /2/6 75 MCALLISTER 97 55 42 25,48,75 8,677,32 2,452,294 2,257,887,2,789 4,9,968 4,6,989 755,885,474,342 6,37,936 /4/6 ROSA PARKS I 23 34,46,875 39,4,475 5,942,949 4,34,547,527,45,96,42 6,,,639,83,86,53 6,54,664 /5/6 35 ELLIS 96 49 47 8,236,875 27,955,672 4,23,34 2,92,623 993,89 6,73,96 4,87,86 46,94,5,48 67,376,95 /6/6 32 AND 33 CLEMENTINA 276 6 3 2 42,56,875 38,89,634 5,747,855 5,269,94,87,2,383,35 6,,,89,948 2,226,84 4,5,274 /5/6 ALEMANY 5 64 84 2 52,36,2 53,65,727 7,773,695 5,99,25 2,735,34 3,26,52 6,, 27,647 3,96,454 45,94,8 /4/6 385 8TH STREET 7 5 55 24,64,55 6,47,34 2,34,55 2,3,634 79,32 5,627,74 4,,742 39,74,7,7 57,363,746 /6/6 MISSION DOLORES 9 46 44 2,389,975 7,69,3 2,426,848,936,64 734,66 5,29,768 4,7,29 284,2 924,83 54,586,93 //6 76 BUSH STREET 8 63 44 2,892,75 4,3,95 2,5,6,57,85 6,47 3,97,69 3,99,7,7,453 88,655 49,972,653 //6 JFK TOWER 98 55 42 25,46,25 7,66,9 2,554,675 2,32,47 976,376 5,28,484 4,277,258 692,54 93,423 59,38,587 /3/6 2698 CALIFORNIA 4 7 22,489,5,2,274,458,53,99,598 47,853 4,79,3 2,93,47 296,78 879,44 32,853,343 //6 WESTBROOK APARTMENTS 223 84 37 2 47,569,5 79,522,743,,873 6,255,627 2,4,76,895,352 6,,,857,7 2,273,772 68,897,697 PHASE II TOTALS 2,58 957,86 5 488,497,24 475,83,26 69,47,667 55,56,93 23,49,639 26,77,999 7,23,465 3,744,792 23,28,39,345,449,24

RAD Phase I Photographs Before and After RAD Conversion. 227 Bay Street (Chinatown Community Development Center) 2. Hunters Point East West (John Stewart Company) 5

3. Holly Courts (BRIDGE Housing and Bernal Heights Neighborhood Center) 6

µ RAD Projects by Phase and Housing Type District 2 District 3 Project Phase & Type Phase I (Senior/Disabled) Phase I (Family) Phase II (Senior/Disabled) Phase II (Family) Number of Units 24-74 75-24 25-74 District District 5 District 6 75-224 225-276 Supervisorial Districts District 4 District 8 District 9 District 7 District District.5 2 Miles

FOR IMMEDIATE RELEASE Thursday, November 3, 26 Contact: Mayor s Office of Communications, 45-554-63 *** PRESS RELEASE *** MAYOR S OFFICE COMPLETES TRANSFER OF PUBLIC HOUSING TO COMMUNITY-BASED MANAGEMENT New community-based management to complete over $7 million in repairs and improvements to San Francisco Public Housing San Francisco, CA Mayor Edwin M. Lee announced the completion of the historic transfer of ownership of all 29 public housing sites and nearly 3,5 units from the San Francisco Housing Authority (SFHA) to community-based affordable housing teams as part of the Mayor s 23 Re-Envisioning Public Housing Plan and the Department of Housing and Urban Development s Rental Assistance Demonstration Program (RAD). With the transfer of ownership and management now complete, all 29 buildings and units can begin repairs to address critical life safety issues such as seismic deficiencies, pervasive mold and mildew, dry rot, deficient elevators, water intrusion, fire alarm systems, fire damaged units, missing sprinkler systems. Once again San Francisco is at the forefront of creating innovative solutions to make government programs work better and benefit our most vulnerable residents, said Mayor Lee. For decades, San Francisco s public housing has been under-funded, but today we take a significant step towards revitalizing and rebuilding distressed public housing for our extremely low-income families and residents. This milestone marks the end of many months of hard work by the City and our many partners. In 24, led by Mayor Lee, the City and HUD worked together to address both the serious conditions of disrepair in the public housing stock as well as the region s extremely high construction costs. By allowing the City to blend two separate kinds of rental subsidies across the portfolio, the City and SFHA, in partnership with eight different community-based, affordable housing development teams, were able to maximize all available financial resources for the project. Bank of America Merrill Lynch (BAML) led the $2.2 billion financing, including $.6B in tax-exempt construction debt, $33 million in tax-exempt permanent debt, and $86 million in tax credit equity with Aegon. This resulted in one of the country s largest and most complex RAD financial transactions, which also included BAML working with Freddie Mac and five other participant Banks. Bank of America Merrill Lynch is pleased to continue its work with the City of San Francisco and the San Francisco Housing Authority on the second phase of SF-RAD, said Maria Barry, Bank of America Merrill Lynch community development executive. Our team provided a comprehensive financing solution to rehabilitate nearly 3,5 affordable housing units, utilizing a combination of construction debt, permanent debt, tax-credit equity, subordinate forgivable 8

debt and financing for services for the tenants as part of our continued commitment to help create safe and strong communities. All San Franciscans deserve safe, affordable housing to live in and raise their families, said Olson Lee, Director of the Mayor s Office of Housing and Community Development. By transferring the ownership and management of San Francisco s public housing to our community-based partners, we have permanently preserved the affordability of these buildings, giving our most vulnerable residents assurances they can remain in San Francisco. The new owners, who specialize in affordable housing, are now in the process of completing over $7 million in deferred repair and capital needs, stabilizing residents tenancies with professional management and support services, and preserving the units as decent and affordable housing for the City s most vulnerable residents, including seniors, disabled people, and families. Half of the projects transferred ownership in November 25; the other half closed in October 26. Under the leadership of our Mayor, distressed public housing is being transformed and preserved to provide better living conditions, connections to services and community based management for our lowest income San Francisco residents, said Barbara Smith, Authority Acting Executive Director. "It's a powerful example of what Housing Authorities and cities across the country can achieve for our communities through innovative collaborations like these. In addition to building improvements, properties converting to RAD will, for the first time, have a dedicated funding stream that can provide residents with service connection and referral, health and wellness activities, housing stability, and community building. These services are being funded through project operations and by a historic $2.8 million tax-credit equity contribution from Bank of America Merrill Lynch. Services and activities at the senior sites include coffee hours, exercise classes, public health nurse visits, support groups, community celebrations, nutrition classes, and games. Family site services include family literacy nights, outings, youth activities, nutrition classes, community gardening programs, and exercise classes. Referral to case management, mental health and substance abuse, and other more comprehensive services is available at all sites. RAD also provides for rigorous tenant protections and ensures a right to return for residents who may need to move temporarily while their units are rehabbed. Few communities have the will and talent to pull this off, and the rewards will be immense: high quality, well-managed housing for very low income individuals and families, affordable for decades and decades to come, said Donald Falk, CEO of the Tenderloin Neighborhood Development Corporation. The complexity and challenges of organizing a billion-plus dollar renovation of a citywide portfolio of buildings highlights the capacity of the San Francisco affordable housing community, including nonprofit developers, city staff, contractors, architects and many others. Improved housing means improved health, safety and habitability, and allows residents to focus on their other life goals. With the assistance of service partners, post-rad conversion residents 9

are less isolated, better connected to the City safety and services network, and more integrated into the broader San Francisco affordable housing network. ### 2

BofA Merrill Lynch, developers and S.F. hatched largest affordable housing deal in history San Francisco Business Times Mar 25, 26, 3:am PDT Mary Ann AzevedoContributorSan Francisco Business Times When the city of San Francisco decided to transfer ownership of more than,4 public housing units from the scandal-ridden San Francisco Housing Authority to local nonprofit housing developers, there was concern that the process would be too complex. The problems were evident: decades of underfunding and mismanagement had left San Francisco s public housing units as decrepit and unsafe, with tenants complaining of mold, rodents and leaks. The goal was to transform and rehabilitate the units into up-to-date and well-managed lowincome housing for San Francisco residents. Under a federal program passed in 22, the city was finally able to bring in a private-sector funding partner: Bank of America Merrill Lynch ultimately served as both an investor and lender in the San Francisco Rental Assistance Demonstration (SF-RAD) project in 25. SF-RAD ended up being the single largest affordable housing transaction in history and represented the collaboration between Bank of America Merrill Lynch and the San Francisco Mayor s Office; San Francisco Housing Authority; Freddie Mac; Enterprise Community Partners; and seven development partners. In an effort to streamline the process, BofA came up with the solution of treating it as one large project versus 4 separate projects. It is the first city known to approach RAD in this way. 2

BofA ultimately provided a combination of construction debt, permanent debt, tax-credit equity, $2 million in subordinate forgivable debt and some $2 million in financing for services for tenants. The transaction which closed in November 25 involved seven development teams, including Chinatown CDC, Related California, TNDC, Bridge Housing, Mercy Housing California and John Stewart Co. Those nonprofit developers will oversee the upgrades and then manage the properties. In the second phase of SF-RAD, another 2, units in an additional 4 properties will be addressed. Together the two phases will mean over $ billion in net new funding resulting in about $75 million in improvements to outdated buildings that make up the bulk of San Francisco s public housing. Bank of America Vice President Ari Beliak said the bank made it a condition of its proposal that the transaction be completed as a single transaction. We had to close a number of transactions in a short period of time, he said. I don t think it could have been done any other way. The bank created a template document that removed 8 percent of the negotiation that occurs in a normal closing. In total, the bank had over 5 team members who worked on the deal, with about 2 working on it on a daily basis for several months. It took a major commitment from all parties to get it done, Beliak said. And it was important to us to help the tenants in the transition from public housing to private (nonprofit) developers, and in understanding the new rules. Olson Lee, executive director of the mayor s housing office, acknowledges there was concern among the tenants that they would be evicted and the properties would be sold off to market-rate developers. We had to assure them that one of the RAD principles was that there was no rescreening of tenants, he said. This was a way of preserving existing affordable housing for the future, and we had no intention of displacing anybody. Lee agrees that overall, everyone tried to simplify the process as much as possible. This would be a huge, huge lift for any community to do, especially with multiple developers and scattered sites, he said. Our staff negotiated very hard with the developers and everybody cooperated. SF-RAD overall Size:,4 units 22

Location: 5 properties throughout San Francisco Value:$77 million, including about $8 million from Freddie Mac Seller: S.F. Housing Authority Buyer: Nonprofit developers listed below Law firm: Lubin Olsin & Niewiadomski SF-RAD PHASE I Key: Location, developers, architects, brokers, size CHINATOWN 227 Bay St. and 99 Pacific Ave.: Chinatown Community Development Center, AmOne for Bay Street and BBI for Pacific Avenue, Gelfand Partners Architects, 5 units for Bay and 92 units for Pacific WESTERN ADDITION Robert B. Pitts at 8 Scott St.: Related California and Tabernacle CDC, Nibbi, Gelfand Partners Architects, 2 units 939-95 Eddy St.: Tenderloin Neighborhood Development Corp, Transworld, Paulett Taggart Architects, 62 units TENDERLOIN/SOMA 666 Ellis St.: Community Housing Partnership, D&H, Paulett Taggart Architects, 99 units 43 Turk St.: Tenderloin Neighborhood Development Corp., Fineline, Gelfand Partners Architects, 89 units BERNAL HEIGHTS Holly Courts: Appleton, Bernal Heights Housing Corporation and Bridge Housing Corp., Fineline, Gelfand Partners Architects, 8 units MISSION/CASTRO 25 Sanchez St.: MEDA and Bridge Housing Corp., Fineline, Barcelon Jang, 9 units 462 Duboce: Fineline, 42 units 255 Woodside: Fineline, 9 units 23

CALIFORNIA AVE. CORRIDOR 88 Pine: Mercy Housing California and Japanese American Religious Federation, Nibbi, Paulett Taggart Architects, 3 units 345 Arguello: Mercy Housing California, Nibbi, Barcelon Jang, 69 units 49 3st Ave.: John Stewart Co., Nibbi, Gelfand Partners Architects, 75 units BAYVIEW Hunters Point East/West: John Stewart Co. and SF Housing Development Corp. and Related California and Ridgepoint Non-Profit Corp., Cahill, Saida + Sullivan, 23 units 24

SF tries a new model for public housing The San Francisco Chronicle November 5, 26 Updated: November 6, 26 4:4pm Photo: Michael Macor, The Chronicle A tenant walks through the Rosa Parks apartments in S.F. San Francisco s Housing Authority has completed the transfer of the last of the city s public housing to private developers. It s a huge shift for the troubled agency, which, thanks to bad management as well as serious federal disinvestment, has struggled for decades to keep the housing units in habitable condition. It s also a huge shift for some of San Francisco s poorest residents during an unprecedented housing crisis. The Housing Authority has relinquished control of nearly 3,5 units to private management since 24. San Francisco took advantage of a new program from the federal Department of Housing and Urban Development, teaming up with affordable housing developers and banks to upgrade the city s badly deteriorating public housing stock. 25

The program came about because there is an estimated $26 billion worth of deferred maintenance on public housing nationwide and due to the constraints of the program, no way for cities to tap into other sources of funding. Cities were being forced to tear down their public housing as it became inhabitable. Congress was not funding public housing, said Lydia Ely, senior project manager for the mayor s office of housing and community development. We had to leverage outside funding we used subsidies coming in from HUD to get mortgages on these properties that allowed us to pay for $7 million worth of repairs. We couldn t entertain losing these units. PUBLIC HOUSING SF s public housing is now all privately run 26

Need for decent public housing hits home with Mayor Lee San Francisco s financial transaction, which included billions of dollars in financing from six different banks, was a highly complex one. But it will result in the rehabilitation of all the units, now close to completion, and Mayor Ed Lee s office insists that the residents will have 99 years of guaranteed subsidized housing. The new owners are bringing supportive services like exercise classes and case management to the units, too. The residents early reviews have been positive, and the previous state of San Francisco s public housing was absolutely shameful. Most of the new owners are nonprofit developers of affordable housing who already have strong track records for working in San Francisco, and Ely says the for-profit developers had to partner with community developers to be part of the deal. These are not carpetbaggers coming to our community to take advantage of these opportunities, Ely said. Will it work? In the short term, the results are already proving better than the status quo. In the long term, the program s success will depend on how much oversight HUD, the Housing Authority and City Hall choose to exercise over the bank loan terms and the developers management. Considering the size and complexity of this transfer not to mention the vulnerabilities of the residents none of the original housing institutions can afford to be disengaged. 27

San Francisco to Turn Much Public Housing Over to Private Owners Effort to attract needed investment in properties will leave city owning just 6 units San Francisco is turning over its last big chunk of public housing to private owners in an effort to attract badly needed private-sector investment in the properties. PHOTO: BLOOMBERG NEWS Wall Street Journal By LAURA KUSISTO Nov. 3, 26 :3 a.m. ET 2 COMMENTS San Francisco officials are expected to announce Thursday that the city is turning over its last big chunk of public housing to private owners, part of a multiyear effort to attract badly needed private-sector investment in the properties. In recent weeks, the San Francisco Housing Authority has transferred 2,58 housing units to private developers and nonprofits. After the latest wave of transactions, the city is slated to own just 6 units, down from 6,5 several years ago. The buyers are mostly nonprofit affordable-housing developers. They usually pay little but agree to make needed repairs to the properties and take over maintenance. Officials feared units would continue to become uninhabitable due to disrepair. Because rental costs in San Francisco are so high, the mayor and his staff really knew that if we didn t take action and dramatic action we really couldn t replace these units after they were lost, said Kate Hartley, deputy director of housing at the Mayor s Office of Housing and Community Development. As part of the latest agreements, the new owners are required to make about $75 million of improvements, including mold abatement, upgrading elevators, replacing fire alarm systems, outfitting buildings to withstand earthquakes and installing missing sprinkler systems. One building with plumbing dating to 94 will get an upgrade. 28

Faced with mounting repair backlogs, housing authorities across the U.S. are seeking private investors through the federal Rental Assistance Demonstration program. The program, established in 22, converts buildings from public housing to the Section 8 rentalsubsidy program, which makes it easier for the new owners to use debt and tax credits to pay for the repairs. Some cities, like San Francisco, also elect to turn over ownership and management to private companies and nonprofits, with agreements in place to keep the buildings affordable. Tenant advocates are worried that it will be harder to hold the new owners accountable. They also fear the arrangements will be a slippery slope toward higher rents. There s a lot of concern, said Jessica Cassella, a staff attorney at the National Housing Law Project, mainly because it s a very new program and it s still working out some of the kinks. San Francisco has been among the most active participants. While housing authorities across the U.S. have generated $3.2 billion of investment in public housing through the program, $. billion of that has been in San Francisco. There s a lot of demand to participate in the program to solve the problem of this incredibly depressing deferred maintenance problem that is occurring in our public housing stock, said Tom Davis, director of the office of recapitalization at the Housing and Urban Development Department. Mercy Housing, a nonprofit public-housing group, is taking over ownership of 32 units, many in San Francisco s tony Pacific Heights neighborhood. Doug Shoemaker, president of Mercy Housing California, acknowledged that some tenants are nervous. But he said many have greeted the arrival of new management with relief. Every single unit of affordable housing feels like something we need to covet...it s just so important that we get this right, Mr. Shoemaker said. This is a fairly seismic shift. 29