San Diego Housing Commission Transition of Assets from a Public Housing Model March 6, 2013 Richard C. Gentry President & CEO San Diego Housing Commission
2 2005: SDHC Background Federal subsidies were decreasing and dependency on housing programs were not sustainable Difficult to set aside adequate funds for on-going maintenance and future capital improvement needs (aging portfolio) Traditional public housing model was not sustainable for this large portfolio (1,366 units in 137 properties) Action: In the FY2006-2008 Business Plan, SDHC committed to reducing its dependency on Federal subsidy and housing programs through asset development and enhancement of alternative financial resources SDHC application submitted to the U.S. Department of Housing & Urban Development (HUD) November 2006 HUD approval in September 2007 landmark agreement, largest public housing conversion at the time
3 SDHC Background HUD Approval SDHC requested and HUD Approved: SDHC to own and operate 1,366 units of Public Housing Rents at or below 80% AMI for Families and 50% AMI for Seniors Housing Choice Vouchers awarded to all tenants with an option to relocate SDHC to leverage equity in former Public Housing (PH) portfolio (1,366 units) Create a minimum of 350 additional affordable workforce housing units rents at or below 80% AMI affordable for 55 years Sale Price of $1.00/unit = $1,366
4 SDHC Finance Plan Phase 1 Withdraw approximately $100 mil. in equity from former PH portfolio Former PH portfolio to support debt service Acquire/Invest in new affordable rental units Phase 2 Refinance new acquisitions to acquire more affordable housing Critical Aspect of Plan - minimal risk and diversification Minimal Financial Risk (low LTV, several lenders, high DSC, etc.) Acquisitions/Investments (type, location, age, size, etc.)
5 SDHC Finance Plan - continued Loans proceeds to be spent on Public/Private partnerships Approximately 40% of total capital funds Good vehicle for SDHC Investments in Tax Credit transactions Loans proceeds to be used on Publically Owned acquisitions Approximately 60% of total capital funds 100% SDHC or in partnership with another municipal agency Also utilized BAB s funds (Build America Bonds) Meetings: Real Estate Developers (Nonprofit and For Profit) Public/Neighborhood Groups and the Business Community Appointed and Elected Officials (HC, HA, IBA, LU&H)
6 SDHC Due Diligence for Financing Loan Underwriting Risk Averse FHA/Fannie Mae 70-75% LTV 1.37 DCR Fixed interest rate, 30 year vs. 10 year Reserve Accounts established Loans Closed - $95 Million Raised in Total Fannie Mae December 30, 2009 $37,140,000, 30 year amortized, 7.32% interest rate FHA - August 31, 2010 $58,243,400, 35 year amortized, 3.76% interest rate Effective interest rate of 2.44% with BABs rebate
7 SDHC Partnership Investments Partnerships # of Units (incl. Mgr s Units) # of Affordable Units Type SDHC Investment SDHC Investment per Affordable Unit Acquisition/Rehab Arbor Village Apartments 112 111 Family $7,980,976 $71,901 Vista Grande Apartments 49 48 Family $3,851,025 $80,230 New Construction Riverwalk Apartments 50 49 Family $4,525,391 $92,355 Estrella del Mercado Apartments 92 91 Family $7,111,224 $78,145 Mission Apartments 85 84 Family $6,027,000 $71,750 Park Terramar Apartments 21 20 Family $2,151,699 $107,585 Total 409 403 $31,647,315
8 SDHC Owned Investments Property # of Units (incl. Mgr s Units) # of Affordable Units Type SDHC Investment SDHC Investment per Affordable Unit Acquisition/Rehab Hotel Sandford 130 129 Senior $6,460,700 $50,083 Mariner's Village Apartments 172 171 Family $34,819,289 $203,622 Courtyard Apartments* 37 37 Family $7,851,633 $212,206 Park Crest Apartments 71 70 Senior $8,915,520 $125,571 Total 410 407 $58,047,142 *No Manager s Unit
9 SDHC Total Investments # of Units (incl. Mgr s Units) # of Affordable Units SDHC Investment Total 819 810 $89,694,457
10 SDHC Owned Investments Hotel Sandford 129 Affordable Units (Seniors) and 1 Manager Unit Acquisition/Rehabilitation (Occupied) SDHC Investment: $6.4 million ($50,083/unit) Remains affordable for 99 years To be completed: Early 2013 Transit-oriented development Historic Mariner s Village Apartments 171 Affordable Units and 1 Manager Unit Acquisition/Rehabilitation (Occupied) SDHC Investment: $34.8 million ($203,622/unit) Remains affordable for 55 years Renovations of nine units to ADA Transit-oriented development
11 SDHC Owned Investments Courtyard Apartments 37 Affordable Units Acquisition (Occupied) SDHC Investment: $7.8 million ($212,206/unit) Remains affordable for 55 years Foreclosure Transit-oriented development Park Crest Apartments 70 Affordable Units (Seniors) and 1 Manager Unit Acquisition/Rehabilitation (Occupied) SDHC Investment: $8.9 million ($125,571/unit) Remains affordable for 55 years Transit-oriented development
12 SDHC Partnerships: Acquisition/Rehab Arbor Village Apartments 111 Affordable Units and 1 Manager Unit Acquisition/Rehabilitation (Occupied) SDHC Investment: $7.9 million ($71,901/unit) Total Cost: $24 million Remains affordable for 55 years Transit-oriented development Vista Grande Apartments 48 Affordable Units and 1 Manager Unit Acquisition/Rehabilitation (Occupied) SDHC Investment: $3.8 million ($80,230/unit) Total Cost: $15.1 million Remains affordable for 55 years Transit-oriented development
13 SDHC Partnerships: New Construction Riverwalk Apartments 49 Affordable Units and 1 Manager Unit SDHC Investment: $4.52 million ($92,355/unit) Total Cost: $14.1 million Remains affordable for 55 years Transit-oriented development Park Terramar Apartments 20 Affordable Units and 1 Manager Unit SDHC Investment: $2.15 million ($107,585/unit) Total Cost: $7.6 million Remains affordable for 55 years
14 SDHC Partnerships: New Construction Estrella del Mercado Apartments 91 Affordable Units and 1 Manager Unit SDHC Investment: $7.1 million ($78,145/unit) Total Cost: $43 million Remains affordable for 99 years Transit-oriented development Mission Apartments 84 Affordable Units and 1 Manager Unit SDHC Investment: $6.02 million ($71,750/unit) Total Cost: $25.9 million Remains affordable for 55 years Transit-oriented development
15 SDHC Real Estate Property Investments Locations www.sdhc.org
16 SDHC Beneficial Outcomes and Results Individual property statements generated Utilization of new property specific documentation Strategic use of procurement processes = expeditious due diligence Creation of TOD Plan and energy sustainability guidelines ongoing at same time Performed capital improvements on properties to improve marketability to lenders Improved efficiency of operations via implementation of private sector methodologies (enhanced Property Management approach)
17 SDHC Beneficial Outcomes and Results Creation of Portfolio Management Department Creation of Risk Rating system to identify portfolio concerns Managing on-going lender requirements Replacement reserves Strategic plan for accumulating adequate reserves (Physical Needs Assessment) and capital budgeting needs Establishment of reserve accounts - year 15 acquisition options Continuous and integral collaboration for reporting requirements All business units Regular updates to SDHC Board of Commissioners and Housing Authority of the City of San Diego
18 SDHC Next Steps Continue actively monitoring portfolio Physical Needs Assessment Reserve Analysis Routine Reviews (HA/HC and Project Status Meeting) Conduct analysis for potential Phase 2 of acquisitions Equity refinance of Mariner s Village, Courtyard and Park Crest
19 SDHC Timeline 2006 2013 Fannie Mae Loan Closing Dec 2009 First Acquisition Hotel Sandford March 2010 FHA Loan Closing August 2010 HUD Application 2006 HUD Application Approved 2007 Collection of Section 8 vouchers & Development of the Finance Plan Finance Plan HC/HA Approval 2009 Due Diligence Critical / Non Critical Repair Loan Underwriting / Closing LLC Formation Project Selection Acquisition / Investment Time Project Underwriting Project Approval Project Due Diligence Project Construction, Monitoring, Portfolio Management Oversight, Financial Analysis, Ongoing Update Reports Phase II - Refinance of newly acquired assets