November 17, 2015 Riviera Family Apartments Resources for Community Development (RCD) thanks the City of Walnut Creek for its commitment to affordable housing and for providing substantial funding for the acquisition of 1515 and 1738 Riviera Avenue and predevelopment costs for creating 58 new homes there that are affordable to low-income families. RCD has leveraged the City s $5 million loan to secure significant financing commitments for Riviera Family Housing (including $2.8 million in Infill Infrastructure Grant and $4.3 million in Affordable Housing and Sustainable Communities (AHSC) funds from the state of California, an allocation of project based rental vouchers from the Housing Authority of Contra Costa County, and $1.5 million in Contra Costa County HOME and HOPWA funds). Applications for Federal Home Loan Bank Affordable Housing Program (AHP), Low Income Housing Tax Credits (9%), and state Multifamily Housing Program funds have so far been unsuccessful. Anticipating that the 2016 9% Tax Credit funding rounds are likely to be equally competitive, RCD is pursuing a financing plan involving non-competitive
4% Tax Credits and bonds issued by Contra Costa County. The advantage of this approach is it removes the risk of competing for funding in programs that are routinely oversubscribed, and provides confidence that construction can start in 2016. The downside is that the 4% Tax Credits generate millions less in equity. RCD is seeking additional funding to fill this gap from AHSC, the County, AHP, and the City of Walnut Creek. Since RCD applied to the City for funding in 2014, RCD has pursued approaches to contain development costs overall and on a per unit basis, and applied for additional funding sources to manage rapid inflation in the construction market, including increasing the number of units at Riviera Family Apartments from 56 units to 58. RCD respectfully requests $1,000,000 in increased City funding to reflect the additional units, the City-required design requirements and the additional financing costs related to the 4% and bond financing plan. Development Summary. The Riviera Family Apartments will be a scattered-site, family-oriented community of 58 apartments serving households at 30% to 60% of Area Median Income (AMI) at 1515 Riviera and1738 Riviera Avenue immediately north of the Walnut Creek BART station. This two-site development will include studios, 1-, 2- and 3-bedrooms along with community spaces, including property management and resident services manager offices, community rooms, shared computer terminals for residents, laundry rooms, and a sidewalk mini-park. Between the sites, three bedroom units comprise 30% of the income-restricted apartments. Additionally, five to eight of the smaller units are special needs units serving households with a person living with AIDS/HIV under the HOPWA (Housing Opportunities for Persons with AIDS) program. The City of Walnut Creek approved the development plans in March 2015. Increasing Building Efficiency and Impact. In an effort to meet more of the need for affordable homes, to make the construction of Riviera Family Homes as efficient as possible, and to leverage as much as possible from low income housing tax credit investments and bank financing, the development team identified an opportunity to fit two more apartments within the development: one 1-bedroom and one 3-bedroom unit were added at 1738 Riviera. The updated proposed unit mix is as follows: Unit Type Area (SF) Total Units Number of Units 1738 Riviera 1515 Riviera # of Units at each Affordability Level (as a percent of the Area Median Income) 30% 40% 50% 60% Studio 643 8 1 7 3 3 2 0 1 Bedroom 751 24 14 10 3 4 9 8 2 Bedroom 980 7 0 7 1 1 5 0 3 Bedroom 1288 18 12 6 2 1 7 8 3 Bedroom 1288 1 1 0 Manager s Unit Total 58 28 30-2-
Updated Financing Plan. The proposed financing plan for Riviera Family Apartments differs from the previous 9% tax credit scenario in three main ways. First, the construction costs have increased due to the heated construction market. Secondly, bond financing provides the opportunity generate additional private equity contributions by RCD reinvesting a significant portion of a higher developer fee. Thirdly, bond financing has higher financing costs. The updated financing plan shows the continuing power of the City of Walnut Creek s loan to leverage additional private and public funding. In 2014 the City of Walnut Creek loaned the development $5,000,000 from the affordable housing development fund. The City funding, together with grants from the Local Initiatives Support Corporation, the Metropolitan Transportation Commission, and the Enterprise Foundation, have paid for predevelopment costs. To help cover the increasing construction costs, in RCD is willing to defer up to $200,000 of its net developer fee and has applied for and received the following additional funding sources: $2.8 million in Infill Infrastructure Grant funds $4.3 million in AHSC funds (out of $4.9 million requested) from the State Department of Housing and Community Development 18 project based rental assistance vouchers, which will leverage a new Section 8 loan of $1.7 million. Pending and future funding applications include: RCD has applied for the rest of the AHSC funds initially requested, which are likely to be received and would bring total AHSC financing up to $4.9 million. $500,000 more for three more County HOPWA units CDLAC/TCAC. These funds are non-competitive. $570,000 in AHP. The Federal Home Loan Bank projects that the pool of AHP funds will be much larger in 2016, so Riviera, which missed funding by just 1.5 points, is more likely to be successful next year. The City of Walnut Creek s investment continues to represent under 18% of total development sources. Increasing Funding Request. Despite these significant additional resources secured, the 4% financing scenario leaves a gap of $2.3 million, which RCD is closing with a combination of cutting costs and requesting an additional $500,000 in HOPWA from the County, $1,000,000 from the City of Walnut Creek, and reapplying for AHP. RCD respectfully requests the City s approval to add these potential sources to the financing plan and requests that the City consider increasing its loan for Riviera Family Apartments by $1,000,000. RCD suggests that the additional funding requested is justified for two sets of reasons: 1. Extending the City s prior investment of $89,286 per unit to the additional two units, for a total of $178,000, reflects the benefit to the City of creating additional affordable housing for families at this excellent location. Adding two apartments within the -3-
envelope of the planned building at 1738 Riviera spreads the fixed building costs over more units, helps two more lower-income families live healthy, stable lives, and generates more in tax credit investor equity and permanent loan. 2. Construction costs have increased as a result of the following design and planning requirements imposed by the City through the land use approvals and design review process that are not normally part of affordable housing developments: a. 200 cubic feet of storage space for each unit outside of the units (at an estimated cost of $248,000). RCD s request for a concession on this requirement under State Density Bonus law was received coolly by City staff and Design Review and Planning Commissions. RCD has requested a partial concession to provide an average of 180 cu.ft. of storage space per unit at 1515 Riviera, which the City Planning Commission will consider in January. This partial concession provides only a minimal reduction in the cost of the closets. b. Realignment of the intersection of Riviera Avenue and Parkside Drive and an additional bulb-out at the intersection of Riviera and Short (at an estimated cost of $170,000). This realignment will benefit the surrounding community as well as residents of Riviera Family Apartments. c. Stacked parking with mechanical lifts (at an estimated cost of $673,000). RCD would consider deleting the lifts in order to contain construction costs, given the aggressive Transportation Demand Management plan and excellent location of the development, but the lifts remain in the design due to feedback from City Council Housing Committee members, Planning Commissioners, and staff. d. Fund a transit bus pass reserve for residents (at a cost of $30,000). The proposed development sources and uses are as follows: -4-
Sources Uses First Mortgage 1,326,500 Acquisition 3,708,100 Section 8 permanent loan 1,720,596 City of Walnut Creek 6,000,000 Hard Costs 22,056,939 Deferred Developer Fee 200,000 Hard Cost Contingency (7.1%) 1,562,293 LISC Grant 7,500 Permits, Fees, and Utilities 1,711,233 MTC Grant 45,000 Design Costs 1,312,485 Enterprise Grant 15,000 Construction Loan Financing 848,311 9% Tax Credit Equity 14,476,126 Bond Issuance Costs 379,802 AHP 570,000 Syndication Costs 139,075 Infill Infrastructure Grant 2,800,240 Capitalized Operating Reserve 367,880 County HOPWA 1,000,000 Developer Fee 2,500,000 County HOME 1,000,000 Other Soft Costs 811,457 AHSC 4,936,610 Gen. Partner Investment 1,300,000 Construction Loan 18,236,000 Total 35,397,575 Total 35,397,575 Updated Development Schedule. RCD acquired the Riviera properties in 2014, received City planning approvals in early 2015, and is preparing to apply for a bond allocation from the California Debt Limit Allocation Committee in December 2015, and for 4% Low Income Housing Tax Credits in March 2016. This timeline would allow RCD to submit building permit applications in early 2016, and to break ground on Riviera Family Apartments by the summer of 2016. Residents would begin moving in by late 2017. Thank you very much for your consideration. -5-