REPORT DATE ISSUED: January 18, 2013 REPORT NO: HCR13012 ATTENTION: SUBJECT: Chair and Members of the San Diego Housing Commission For the Agenda of February 15, 2013 Village at Zion Loan Recommendation COUNCIL DISTRICT: 7 REQUESTED ACTION: Approve a residual receipts loan in an amount up to $2,300,000 to CANV Construction Company, Incorporated for the construction of the 60unit Village at Zion Apartments located in the Navajo community of San Diego. STAFF RECOMMENDATION: That the San Diego Housing Commission ( Housing Commission ) recommend the following actions to the Housing Authority of the City of San Diego ( Housing Authority ): 1) Approval of a residual receipts loan to CANV Construction Company, Incorporated ( CANV ) in an amount up to $2,300,000 to be used as gap financing for the construction of 59 units of affordable rental housing and one manager s unit, contingent upon City Council s approval of a Community Plan Amendment, Rezone, and Conditional Use Permit, obtaining all necessary thirdparty funding commitments, including 9 percent tax credits, as determined by the President & Chief Executive Officer ( President & CEO ) of the Housing Commission, or designee, upon advice of General Counsel. 2) Approval of entry into an option and first right of refusal agreement whereby the Housing Commission will have the option to purchase the property and improvements at the end of the fifteenyear tax credit compliance period, for an amount equal to the greater of fair market value (restricted value of the leasehold) or the sum of exit taxes, forgiveness of all principal and interest on the Housing Commission loan, plus assumption of the first position loan. 3) Authorization of the President & CEO of the Housing Commission, or designee: a. To execute all necessary documents and instruments to effectuate the transaction and implement the project, in a form approved by General Counsel, and to take such actions as are necessary, convenient and/or appropriate to implement the approvals upon advice of General Counsel; and b. To adjust financing terms/conditions as necessary for consistency with requirements of other funding sources or to accommodate market changes, not to exceed the maximum Housing Commission loan amount of $2,300,000. c. To substitute approved funding sources with any other available funds as deemed appropriate, contingent upon budget availability, and further authorize the President & CEO, or designee, to take such actions as are necessary, convenient and/or appropriate to implement this approval and delegation of authority by the Housing Commission, upon advice of General Counsel.
January 18, 2013 Loan Recommendation for the Village at Zion Page 2 SUMMARY: The Project CANV proposes to build a 60unit, twostory apartment complex for seniors located at 5150 Zion Avenue, between Mission Gorge Road and Waring Road in the Navajo Community of San Diego (see Attachment 1). The project will consist of a two story, 47,584 square foot building above subterranean parking (see Attachment 2 Site Plan). CANV proposes to construct 50 onebedroom, and 9 twobedroom affordable rental housing units plus one manager s unit on the 1.21 acre property. The development will include a community room, computer room, fitness room, library, laundry room and two courtyards. The community room is designed to offer resident services that will include a combination of social programs, education classes, and health and nutritional programs. The development will have a part time services coordinator to implement and oversee the programs. The site is currently vacant land and is directly bordered by a church and Allied Gardens Recreation Center to the north, Allied Gardens Pool and Benjamin Branch Library to the east, single family homes to the south, and Ascension Lutheran Preschool to the west. City of San Diego Approvals The proposed project will require a Community Plan Amendment from single family to multifamily, a Rezone from RS17 to RM37, and a Conditional Use Permit to construct senior housing. The Planning Commission approved the project on January 17, 2013 by a vote of 60. The project is scheduled for the February 26 th and March 5 th City Council Meetings for final approvals. Project Sustainability The Village at Zion project is designed to meet LEED Silver standards. The project will include the following sustainable construction methods and improvements: Energy Star Appliances LowE Windows LowVOC emitting paints, carpeting, paints and glues Lowflow toilets and plumbing fixtures Energy efficient lighting Recycled construction materials Highefficiency, lowvolume, smart controlled irrigation system Moderate water use, low maintenance, and noninvasive San Diego region plant selection Development Team CANV, a forprofit General Contractor and its affiliate Fore Property Company ( FPC ), a forprofit housing developer, will be responsible for the development of the project. Together CANV and FPC have developed, constructed and operated 17,500 units spanning thirtyfour cities across fourteen states. The developer currently has twenty seven affordable housing projects under management totaling 4,373 units. CANV is proposing to act as general contractor and construct the project, provided that all federal HOME Program requirements are met. The Housing Commission is requiring CANV to competitively bid the construction contract to a minimum of three qualified subcontractors for each construction industry trade, to assure compliance with HOME Program regulations.
January 18, 2013 Loan Recommendation for the Village at Zion Page 3 Foundation for Affordable Housing, a nonprofit 501(c)(3), will serve as the project s Managing General Partner and provide social services and programs to the tenants. Foundation for Affordable Housing will also apply for a welfare exemption from the State of California s Board of Equalization which will allow for a property tax exemption from the County of San Diego Assessor s Office. Developer Disclosure documents for CANV, FPC and Foundation for Affordable Housing are provided as Attachment 3. AFFORDABLE HOUSING IMPACT: The project as proposed will create 59units of affordable housing plus one manager s unit as detailed in the following table: Type AMI Number of Units Table 1 Affordability Rent Table Net Square Feet/Unit Monthly Maximum Gross Rent Est. Market Rents 1 BR / 1 BA 30% 5 570 $453 $1,170 2 BR / 1 BA 30% 1 784 $544 $1,275 1 BR / 1 BA 40% 5 570 $605 $1,170 2 BR / 1 BA 40% 1 784 $726 $1,275 1 BR / 1 BA 50% 23 570 $756 $1,170 2 BR / 1 BA 50% 3 784 $907 $1,275 1 BR / 1 BA 60% 17 570 $907 $1,170 2 BR / 1 BA 60% 2 780 $1,089 $1,275 2 BR / 1 BA 60% 2 784 $1,089 $1,275 2 BR / 1 BA Manager 1 784 Exempt $1,275 Unit Total 60 Rents on tax credit units cannot exceed 30 percent of the targeted Area Median Income based on the unit s bedroom size. Property rents will remain affordable for a period of 55 years and be enforced through affordability restrictions recorded against the property. FINANCING STRUCTURE: The acquisition and construction of the Village at Zion has an estimated total development cost of $13,572,944. CANV proposes to finance the project through the use of 9 percent tax credits, conventional financing, deferred developer fee and a residual receipts loan from the Housing Commission. PNC Financial Services Group has provided letters of intent to provide tax credit equity, construction and permanent financing for the development of the project. The project s total development costs and sources and uses of funds are detailed in the proforma attached to this report (Attachment 4) and summarized below. A development summary is provided as Attachment 5.
January 18, 2013 Loan Recommendation for the Village at Zion Page 4 Sources and Uses of Permanent Financing Sources of Funding Uses of Funding Tax Credit Equity $8,591,409 Land/Acquisition/Broker Commission $2,550,000 Conventional Loan 2,681,535 Hard Costs 6,946,394 San Diego Housing Commission Loan 2,300,000 Financing Costs 765,931 Soft Costs 1,690,163 Reserves 237,289 Developer Fee 1,383,167 Total Project Sources $13,572,944 Total Project Uses $13,572,944 Funding Request Housing Commission Total Subsidy $2,300,000 Housing Commission Subsidy per Unit $38,333 The proposed Housing Commission loan will be funded with $1,650,000 in Housing Commission federal HOME Investment Partnerships funds, and up to $650,000 of local Inclusionary Housing Funds A final determination of Housing Commission funding sources will be made by the Housing Commission s President & CEO, or designee, contingent upon budget availability. The Housing Commission s loan will be a residual receipts loan. At the end of the first full year of the project after construction completion, the Housing Commission shall require an annual payment equal to 50 percent of the residual receipts of the project. In the event that 100 percent of the project s residual receipts equals $10,000 or less, then 100 percent of the project s residual receipts shall be payable to the Housing Commission. Draft loan terms are provided as Attachment 6. Housing Commission staff has negotiated a purchase option at year 15, the end of the tax credit compliance period. The Housing Commission shall have first right of refusal to purchase the property and the improvements at the end of the fifteenyear tax credit compliance period. The Housing Commission and CANV will enter into an option agreement whereby the Housing Commission will have the option to purchase the property and the improvements at any time during the threeyear period beginning at the end of the fifteenyear tax credit compliance period for an amount equal to the greater of: (i) the fair market value of the properties land and building; or (ii) the sum of the limited partner s related exit taxes, the forgiveness of all principal and interest on the Housing Commission loan, plus assumption of the first position loan. If improved debt or equity financing terms and/or pricing are achieved, CANV will first make an adjustment to the total tax credit allocation as required by Tax Credit Allocation Committee, then apply the excess sources towards the reduction of the Housing Commission loan. The Housing Commission loan is contingent upon CANV obtaining the proposed funding approvals from the various other sources including 9 percent tax credits. The term of the Housing Commission s loan commitment permits two tax credit applications (March 6 and July 13, 2013 application rounds) and will automatically expire in the event CANV is not successful in receiving a tax credit allocation. The proposed project timeline is provided as Attachment 7.
January 18, 2013 Loan Recommendation for the Village at Zion Page 5 FISCAL CONSIDERATIONS: The proposed funding sources and uses approved by this action were approved by the Housing Authority in the Fiscal Year 2013 Housing Commission Budget. Approving this action will not change the Fiscal Year 2013 Total Budget. Approving this action will produce 59 affordable housing units and one manager s unit at an average Housing Commission subsidy of $38,333.00 per unit. Funding sources approved by this action will be as follows: HOME Investment Partnerships funds $ 1,650,000 Inclusionary Housing Funds $ 650,000 SOURCES TOTAL $2,300,000 Funding uses approved by this action will be allocated as follows: Rental Housing Finance Loans & Grants $2,300,000 Approving this action will further grant the President & CEO, or his designee, the authority to substitute the above funding sources with other available funding sources so long as the total program/project budget amount after substitution does not exceed the approved total budget, should the operational need arise or should such actions be to the benefit of the San Diego Housing Commission and its mission. Funding substitutions will be memorialized in an Informational Report at the next scheduled Housing Commission Board Meeting. COMMUNITY PARTICIPATION and PUBLIC OUTREACH EFFORTS: The developer presented the proposed Village at Zion Apartment development to the Navajo Community Planners on October 17, 2011 and April 16, 2012. The project has undergone redesign to address community feedback. KEY STAKEHOLDERS and PROJECTED IMPACTS: Key stakeholders include CANV, FPC, Foundation for Affordable Housing, PNC and residents of the Allied Gardens Community. A new multifamily housing development would have a positive impact on the community by improving vacant land and providing quality affordable housing to the neighborhood. ENVIRONMENTAL REVIEW: On December 10, 2012, the City s Development Services Department completed a final environmental report (Project No. 266702) on the effects associated with the proposed development of the Village of Zion Apartments resulting in a Mitigated Negative Declaration ( MND ). The City of San Diego Planning Commission approved the MND and other pertinent actions relating to this project by a vote of 60 on January 17, 2013. The City of San Diego City Council is scheduled to take action on the proposed project, including evaluating the MND, on March 5, 2013. This project will be partially funded with federal HOME funds. A final reservation of HOME funds will occur only upon satisfactory completion of environmental review and receipt by the City of San Diego of a release of funds from the U.S. Department of Housing and Urban Development under 24 CFR Part 58 of the National Environmental Protection Act ( NEPA ). The release of funds is anticipated to be
January 18, 2013 Loan Recommendation for the Village at Zion Page 6 received on or about February 26, 2013. The Housing Authority and the developer agree that the provision of any HOME funds to the project is conditioned on the City of San Diego s determination to proceed with, modify, or cancel the project, based on the results of a subsequent environmental review under NEPA. Respectfully submitted, Ted Miyahara Ted Miyahara Real Estate Manager Real Estate Department Approved by, Deborah N. Ruane Deborah N. Ruane Senior Vice President Real Estate Department Attachments: 1. Location Map 2. Project Site Plan & Renderings 3. Developer Disclosure Statement* a. CANV Property Company b. Fore Property Company c. Foundation for Affordable Housing 4. Developer Proforma 5. Development Summary 6. Draft Loan Terms 7. Project Timeline * Distribution of this attachment is limited. A copy is available for review at the San Diego Housing Commission offices at 1122 Broadway, Suite 300 San Diego, CA 92101 and at the Office of the San Diego City Clerk, 202 C Street, San Diego, CA 92101.
ATTACHMENT 1 Site Map Subject Site
ATTACHMENT 2
ATTACHMENT 2
ATTACHMENT 3A
ATTACHMENT 3A
ATTACHMENT 3A
ATTACHMENT 3A b. By loans from affiliated or associated corporations or firms: Name: N/A Address: Amount: $ c. By sale of readily salable assets/including marketable securities: Description Market Value ($) Mortgages or Liens ($) 17. Names and addresses of bank references, and name of contact at each reference: Name and Address Name: US Bank, NA Address: 2300 W. Sahara, Suite 200 Las Vegas, NV 89102 Name: Wells Fargo Bank, NA Address: 5340 Kietzke Lane, Suite 200 Reno, NV 89511 Name: Nevada State Bank Address: 750 E. Warm Springs Rd., 4 th Floor Las Vegas, NV 89119 Contact Name Cheryl A. Colbus Matthew J. Anderson Ray Lancaster 18. Has the CONTRACTOR or any of the CONTRACTOR's officers or principal members, shareholders or investors, or other interested parties been adjudged bankrupt, either voluntary or involuntary, within the past 10 years? Yes No If yes, give date, place, and under what name. 19. Has the CONTRACTOR or anyone referred to above as "principals of the CONTRACTOR" been convicted of any felony within the past 10 years? Yes No If yes, give for each case (1) date, (2) charge, (3) place, (4) court, and (5) action taken. Attach any explanation deemed necessary. 4
ATTACHMENT 3A 20. List undertakings (including, but not limited to, bid bonds, performance bonds, payment bonds and/or improvement bonds) comparable to size of the proposed project which have been completed by the CONTRACTOR including identification and brief description of each project, date of completion, and amount of bond, whether any legal action has been taken on the bond: PLEASE SEE ATTACHED DOCUMENT. Type of Bond Project Description Date of Completion Amount of Bond Action on Bond 21. If the CONTRACTOR, or a parent corporation, a subsidiary, an affiliate, or a principal of the CONTRACTOR is to participate in the development as a construction contractor or builder, provide the following information: a. Name and addresses of such contractor or builder: Name and Address Name: CANV Construction, Inc. Address: 1741 Village Center Circle Las Vegas, NV 89134 Name: Address: Same Affiliation Name: Address: b. Has such contractor or builder within the last 10 years ever failed to qualify as a responsible bidder, refused to enter into a contract after an award has been made, or failed to complete a construction or development contract? Yes No If yes, please explain, in detail, each such instance: c. Total amount of construction or development work performed by such contractor or builder during the last three (3) years: $ 102,651,000 General description of such work: See attached 5
ATTACHMENT 3A List each project, including location, nature of work performed, name, address of the owner of the project, bonding companies involved, amount of contract, date of commencement of project, date of completion, state whether any change orders were sought, amount of change orders, was litigation commenced concerning the project, including a designation of where, when and the outcome of the litigation. (Attach extra sheet if necessary) Project Name See attached list Project Owner Contact Information Project Location Name Address Project Details Bonding Company Involved Change Order Details Name Amount of Contract Change Order Cost Litigation Details Location/Date Outcome Details d. Construction contracts or developments now being performed by such contractor or builder: Identification of Contract or Development None Location Amount Date to be Completed e. Outstanding constructioncontract bids of such contractor or builder: None Awarding Agency Amount Date Opened 6
ATTACHMENT 3A
ATTACHMENT 3A
26. State the name, address and telephone numbers of CONTRACTOR's insurance agent(s) and/or companies for the following coverage s: List the amount of coverage (limits) currently existing in each category: Alliant Insurance Services, Prestonwood Towers, 5151 Belt Line Road, #605, Dallas, TX 75254; contact: Cris Allen 2142733184 a. General Liability, including Bodily Injury and Property Damage Insurance [Attach certificate of insurance showing the amount of coverage and coverage period(s)] Project specific to be obtained at closing Check coverage(s) carried: Comprehensive Form Premises Operations Explosion and Collapse Hazard Underground Hazard If needed Products/Completed Operations Hazard If needed Contractual Insurance Broad Form Property Damage Independent Contractors Personal Injury b. Automobile Public Liability/Property Damage [Attach certificate of insurance showing the amount of coverage and coverage period(s)] Attached Check coverage(s) carried: Comprehensive Form Owned Hired NonOwned ATTACHMENT 3A c. Workers Compensation [Attach certificate of insurance showing the amount of coverage and coverage period(s)] Attached d. Professional Liability (Errors and Omissions) [Attach certificate of insurance showing the amount of coverage and coverage period(s)] N/A e. Excess Liability [Attach certificate(s) of insurance showing the amount of coverage and coverage period(s)] See Attached f. Other (Specify) [Attach certificate(s) of insurance showing the amount of coverage and coverage period(s)] N/A 27. CONTRACTOR warrants and certifies that it will not during the term of the PROJECT, GRANT, LOAN, CONTRACT, DEVELOPMENT and/or RENDITIONS OF SERVICES discriminate against any employee, person, or applicant for employment because of race, age, sexual orientation, marital status, color, religion, sex, handicap, or national origin. The CONTRACTOR will take affirmative action to ensure that applicants are employed, and that employees are treated during employment, without regard to their race, age, sexual orientation, marital status, color, religion, sex, handicap, or national origin. Such action shall include, but not be limited to the following: employment, upgrading, demotion or termination; rates of pay or other forms of compensation; and selection for 8
ATTACHMENT 3A
ATTACHMENT 3A
ATTACHMENT 3A
ATTACHMENT 3A
ATTACHMENT 3A
ATTACHMENT 3A
ATTACHMENT 3A
ATTACHMENT 3A
ATTACHMENT 3B
ATTACHMENT 3B
ATTACHMENT 3B
ATTACHMENT 3B
ATTACHMENT 3B
ATTACHMENT 3B
ATTACHMENT 3B
ATTACHMENT 3B
ATTACHMENT 3B
ATTACHMENT 3B
ATTACHMENT 3B
ATTACHMENT 3B
ATTACHMENT 3B
ATTACHMENT 3C
ATTACHMENT 3C
ATTACHMENT 3C
ATTACHMENT 3C
ATTACHMENT 3C
ATTACHMENT 3C
ATTACHMENT 3C
ATTACHMENT 3C
ATTACHMENT 3C
ATTACHMENT 3C
ATTACHMENT 3C
ATTACHMENT 3C
ATTACHMENT 3C
ATTACHMENT 3C CERTIFICATION The CONTRACTOR, Foundation for Affordable Housing II, Inc., hereby certifies that this CONTRACTOR's Statement for Public Disclosure and the attached information/evidence of the CONTRACTOR's qualifications and financial responsibility, including financial statements, are true and correct to the best of CONTRACTOR's knowledge and belief. By: Thomas E. Willard Title: President Dated: January 8, 2013 By: Title: Dated: WARNING: 18 U.S.C. 1001 provides, among other things, that whoever knowingly and willingly makes or uses a document or writing containing any false, fictitious or fraudulent statement or entry, in any matter within the jurisdiction or any department or agency of the United States, shall be fined not more than $10,000 or imprisoned for not more than five years, or both. JURAT State of California County of Orange Subscribed and sworn to (or affirmed) before me on this 8th day of January, 2013, ThomasE.Willard, personally known to me or proved to me on the basis of satisfactory evidence to be the person(s) who appeared before me. SEAL 13
ATTACHMENT 4 PROJECT SUMMARY Zion Senior Apartments PROPOSED DEVELOPMENT NAME Zion Senior Apartments APPLICANT CANV Construction DEVELOPMENT ADDRESS 5150 Zion Avenue APPLICANT ADDRESS 1741 Village Center Circle, Las Vegas, NV 89134 DEVELOPMENT TYPE ZONING ACREAGE Senior RM37 1.21 APN NUMBERS 6723000500 Total Units 60 Cost Per Unit 226,216 Gross Sq/Ft 47,616 Gross Hard Cost Sq/Ft $146 Net Rentable Sq/Ft 36,332 Net Rentable Cost Sq/Ft $191 CONSTRUCTION FINANCING SOURCES CONSTRUCTION USES OF FUNDS 9% Tax Credits 5,123,900 Land Acquisition Cost 2,550,000 4% Tax Credits Rehabilitation HCD Total Relocation Expenses CalHFA New Construction 6,946,394 Federal Home Loan Bank Architectural Fees 170,000 HUD Total Survey & Engineering 135,000 San Diego Housing Commission 2,070,000 Construction Interest & Fees 563,031 Deferred Developer Fee Permanent Financing 202,900 Conventional Lender Legal Fees 90,000 Other: Fee Waivers Reserves Other: Prestabalized Income Appraisal 15,000 Other: Construction loan 4,788,588 Contingency Cost 115,000 Other: (Specify) Other Project Costs 1,165,163 Total Sources 11,982,488 Developer Costs 30,000 TOTAL PROJECT COSTS 11,982,488 PERMANENT FINANCING SOURCES PERMANENT USES OF FUNDS 9% Tax Credits 8,591,409 Land Acquisition Cost 2,550,000 4% Tax Credits Rehabilitation HCD Total Relocation Expenses CalHFA New Construction 6,946,394 Federal Home Loan Bank Architectural Fees 170,000 HUD Total Survey & Engineering 135,000 San Diego Housing Commission 2,300,000 Construction Interest & Fees 563,031 Deferred Developer Fee Permanent Financing 202,900 Conventional Lender 2,681,535 Legal Fees 90,000 Other: Fee Waivers Reserves 237,289 Other: Prestabalized Income Appraisal 15,000 Other: (Specify) Contingency Cost 115,000 Other: (Specify) Other Project Costs 1,165,163 Total Sources 13,572,944 Developer Costs 1,383,167 TOTAL PROJECT COSTS 13,572,944 UNIT BREAKDOWN SQ/Ft # UNITS SQUARE FOOTAGE SRO/Studio 0 Community 1,782 1 Bedroom 570 50 Corridor 9,502 2 Bedroom 780 10 Common Areas 3 Bedroom 0 Commercial 4 Bedroom 0 Other Total Units 60 Gross Common Area 11,284 Gross Building Square Footage 47,616 TARGETED AMI LEVELS 30% AMI 35% AMI 40% AMI 45% AMI 50% AMI 55% AMI 60% AMI >60%AMI Market Rents Totals SRO/Studio 1 Bedroom 5 5 23 17 50 2 Bedroom 1 1 3 4 1 10 3 Bedroom 4 Bedroom Project Totals 10% 0% 10% 0% 43% 0% 35% 0% 2% 60 RENTAL INCOME 30% AMI 35% AMI 40% AMI 45% AMI 50% AMI 55% AMI 60% AMI >60%AMI Market Rents Totals SRO/STUDIO 1 Bedroom 2,075 2,835 16,514 14,773 36,197 2 Bedroom 498 680 2,583 4,172 1,043 8,976 3 Bedroom 4 Bedroom Total Income 45,173 Total Annual Income 542,076
ATTACHMENT 4 ADDITIONAL INCOME PROJECT UNIT UTILITY ALLOWANCES 0 BR 1 BR 2 BR 3 BR 4 BR Laundry 7,200 Electric Heating 3 4 5 6 7 Vending Electric Cooking 2 3 4 4 6 Commercial Electric Water Heating 7 10 13 15 20 Other: Late Rent/App Fees 1,920 32 Yes Other Electric 9 13 16 20 25 Other: Pet Fees 360 6 No Water 0 0 0 0 0 No Sewer 0 0 0 0 0 OPERATING COSTS Project Unit Yes Trash 8 8 8 8 8 Operating Budget 269,099 4,485 No Range 0 0 0 0 0 Replacement Reserves 18,000 300 No Refrigerator 0 0 0 0 0 TOTALS 29 38 46 53 66 TAX CREDIT INFORMATION LIMITED PARTNER ASSET MANAGEMENT FEES Eligible Basis 10,374,284 LP Asset Management Fee 7,500 Total Ineligible Amount MGP Management Fee 3,000 Voluntary Ineligible Amount 2,383,879 Admin. GP Management Fee 7,500 Total Unadjusted Eligible Basis 7,990,405 QCT or DDA Yes 130% RESIDUAL RECEIPT SPLIT Total Adjusted Eligible Basis 10,387,526 SDHC 50% Applicable Fraction 9.00% Applicant 50% Total Qualified Basis 934,877.34 Total Credit Reduction 30,428 SDHC PURCHASE OPTION Total Adjusted Qualified Basis 904,449 Yes Applicable Percentage 100.00% Subtotal Annual Credit 904,449 ANTICIPATED TIEBREAKER SCORE Total 10 Year Tax Credits 9,044,493 32.86% Limited Partner Interest 99.99% Limited Partner Tax Credits 9,043,589 Sale Rate 0.95 Estimated Total Tax Credits 8,591,409 CONVENTIONAL LENDER PNC SECOND THIRD Term 30 Term Term Rate 5.75% Rate 0.00% Rate 0.00% Loan Amount 2,681,535 Loan Amount Loan Amount FOURTH FIFTH Term Term Rate 0.00% Rate 0.00% Loan Amount Loan Amount DEVELOPER NOTES 1. Due to the estimated timing of the SDHC HOME loan and equity contributions, the maximum outstanding balance of the construction loan will be $9,050,000.
ATTACHMENT 4 Development Budget Zion Senior Apartments CANV Construction Description Amount Unit Cost Eligible Basis Notes Land Acquisition Cost Land Cost or Value 2,400,000 $ 40,000 Demolition $ Legal 25,000 $ 417 Land Lease Rent Payment $ Total Land Cost or Value 2,425,000 $ 40,417 Existing Improvements Value $ OffSite Improvements 125,000 $ 2,083 Other: (Specify) $ Total Acquisition Cost 125,000 $ 2,083 Total Land Cost / Acquisition Cost 2,550,000 $ 42,500 Rehabilitation Site work $ Structures $ General Requirements $ Contractor Overhead $ Contractor Profit $ Prevailing Wages $ General Liability Insurance $ Other: (Specify) $ Total Rehabilitation Cost $ Total Relocation Expenses $ New Construction Site work $ Structures 5,767,978 $ 96,133 5,767,978 Contingency 288,399 $ 4,807 288,399 5% of Hard Costs General Requirements 353,579 $ 5,893 353,579 6.13 % Per TCAC Calculation Contractor Overhead 235,719 $ 3,929 235,719 3.89% Per TCAC Calculation Contractor Profit 235,719 $ 3,929 235,719 3.89% Per TCAC Calculation Prevailing Wages $ General Liability Insurance 65,000 $ 1,083 65,000 Other: (Specify) $ Total New Construction Costs 6,946,394 $ 115,773 6,946,394 Architectural Fees Design 150,000 $ 2,500 150,000 Supervision 20,000 $ 333 20,000 Total Architectural Costs 170,000 $ 2,833 170,000 Total Survey & Engineering 135,000 $ 2,250 135,000 Architect & Engineer 5.3% Hard Cost Construction Interest & Fees Construction Loan Interest 382,531 $ 6,376 382,531 Origination Fee 90,500 $ 1,508 90,500 Credit Enhancement/ Application Fee $ Bond Premium $ Taxes 60,000 $ 1,000 60,000 Insurance $ Title & Recording 30,000 $ 500 30,000 Other: (Specify) $ Other:(Specify) $ Total City Costs 563,031 $ 9,384 563,031 Permanent Financing Loan Origination Fee 27,400 $ 457 Credit Enhancement/Application Fee $ Title & Recording 20,000 $ 333 Taxes $ Insurance $ Other: SDHC Origination & Legal 43,000 $ 717 Other: TCAC Asset Management Fee 112,500 $ 1,875 Total Legal Costs 202,900 $ 3,382 Legal Fees Lender Legal Paid by Applicant 20,000 $ 333 20,000 Other: (Specify) 70,000 $ 1,167 Total Attorney Costs 90,000 $ 1,500 20,000 Reserves Rent Reserves $ Capitalized Rent Reserves $ Operating Reserve 237,289 $ 3,955 Other: (Specify) $ Total Reserve Costs 237,289 $ 3,955 Appraisal Total Appraisal Cost 15,000 $ 250 15,000.00 Contingency Cost Total Contingency Cost 115,000 $ 1,917 115,000 Other Project Costs TCAC App/Allocation/Monitoring 96,971 $ 1,616 Environmental Audit 50,000 $ 833 50,000 Local Development Impact Fees 793,692 $ 13,228 793,692 Permit Processing Fees 65,000 $ 1,083 65,000 Capital Fees 30,000 $ 500 30,000 Marketing 29,000 $ 483 Furnishings 58,000 $ 967 58,000 Market Study 10,000 $ 167 10,000 Accounting/Reimbursable 20,000 $ 333 20,000 Soft Cost Contingency $ Other: Community Outreach $ Other: FTB Cost $ Other: General Reimbursements $ Other: Organizational Costs 12,500 $ 208 Other: (Specify) $ Total Other Project Costs 1,165,163 $ 19,419 1,026,692 Developer Costs Developer Overhead/Profit 1,353,167 $ 22,553 1,353,167 Consultant/Processing Agent 30,000 $ 500 30,000 Project Administration $ Broker Fees Paid to Related Party $ Construction Oversight by Developer $ Other: Accounting $ Other: (Specify) $ Total Developer Costs 1,383,167 $ 23,053 1,383,167 TOTAL PROJECT COSTS 13,572,944 226,216 10,374,284
ATTACHMENT 4 55 YEAR CASH FLOW INCOME Trend 1 2 3 4 5 6 7 8 Residential Rents 2.5% 542,076 555,628 569,519 583,757 598,350 613,309 628,642 644,358 Other Income 2.5% 9,480 9,717 9,960 10,209 10,464 10,726 10,994 11,269 Gross Residential Income 551,556 565,345 579,479 593,965 608,815 624,035 639,636 655,627 Residential Vacancy 5.0% 27,578 28,267 28,974 29,698 30,441 31,202 31,982 32,781 Effective Gross Income 523,978 537,078 550,505 564,267 578,374 592,833 607,654 622,845 EXPENSES Operating Expenses 3.5% 269,099 278,517 288,266 298,355 308,797 319,605 330,791 342,369 Replacement Reserves 3.5% 18,000 18,630 19,282 19,957 20,655 21,378 22,127 22,901 Total Expenses 287,099 297,147 307,548 318,312 329,453 340,984 352,918 365,270 NET OPERATING INCOME 236,879 239,930 242,957 245,955 248,921 251,850 254,736 257,575 CASH FLOW AVAILABLE FOR DEBT SERVICE Conventional Lender Debt Service (189,628) (189,628) (189,628) (189,628) (189,628) (189,628) (189,628) (189,628) Net Cash Flow 47,251 50,302 53,329 56,327 59,293 62,222 65,108 67,947 DISTRIBUTION OF NET CASH FLOW Deferred Developer Fee Managing General Partner 3,000 3,105 3,214 3,326 3,443 3,563 3,688 3,817 Administrative General Partner 7,500 7,763 8,034 8,315 8,606 8,908 9,219 9,542 Limited Partner 7,500 7,763 8,034 8,315 8,606 8,908 9,219 9,542 Residual Cash Flow 29,251 31,672 34,047 36,370 38,638 40,843 42,981 45,046 RESIDUAL RECEIPT PAYMENT San Diego Housing Commission 14,626 15,836 17,023 18,185 19,319 20,422 21,491 22,523 Limited Partnership 14,626 15,836 17,023 18,185 19,319 20,422 21,491 22,523 Permanent Financing 1 2 3 4 5 6 7 8 Conventional Financing Term 30.00 Payment (189,628) (189,628) (189,628) (189,628) (189,628) (189,628) (189,628) (189,628) Rate 5.75% Principal (35,440) (37,478) (39,633) (41,911) (44,321) (46,870) (49,565) (52,415) Origination Amount 2,681,535 Interest (154,188) (152,150) (149,996) (147,717) (145,307) (142,758) (140,063) (137,213) Ending Balance 2,646,095 2,608,618 2,568,985 2,527,074 2,482,752 2,435,882 2,386,318 2,333,903 San Diego Housing Commission Term 55 Sch. Payment (77,313) (77,313) (77,313) (77,313) (77,313) (77,313) (77,313) (77,313) Rate 3.00% Principal (15,213) (15,213) (15,213) (15,213) (15,213) (15,213) (15,213) (15,213) Origination Amount 2,070,000 Interest (62,100) (62,100) (62,100) (62,100) (62,100) (62,100) (62,100) (62,100) Payment 14,626 15,836 17,023 18,185 19,319 20,422 21,491 22,523 Ending Balance 2,117,474 2,163,738 2,208,815 2,252,730 2,295,511 2,337,189 2,377,799 2,417,375 DEFERRED DEVELOPER FEE 1 2 3 4 5 6 7 8 Beginning Balance Distributions
ATTACHMENT 4 9 10 11 12 13 14 15 16 17 18 19 20 660,467 676,979 693,903 711,251 729,032 747,258 765,939 785,088 804,715 824,833 845,454 866,590 11,550 11,839 12,135 12,439 12,750 13,068 13,395 13,730 14,073 14,425 14,786 15,155 672,017 688,818 706,038 723,689 741,782 760,326 779,334 798,818 818,788 839,258 860,239 881,745 33,601 34,441 35,302 36,184 37,089 38,016 38,967 39,941 40,939 41,963 43,012 44,087 638,417 654,377 670,736 687,505 704,692 722,310 740,367 758,877 777,849 797,295 817,227 837,658 354,352 366,754 379,591 392,876 406,627 420,859 435,589 450,835 466,614 482,945 499,848 517,343 23,703 24,532 25,391 26,279 27,199 28,151 29,137 30,156 31,212 32,304 33,435 34,605 378,055 391,286 404,981 419,156 433,826 449,010 464,726 480,991 497,826 515,250 533,283 551,948 260,362 263,091 265,755 268,349 270,866 273,300 275,642 277,886 280,023 282,045 283,944 285,710 (189,628) (189,628) (189,628) (189,628) (189,628) (189,628) (189,628) (189,628) (189,628) (189,628) (189,628) (189,628) 70,734 73,462 76,127 78,721 81,238 83,671 86,014 88,258 90,395 92,417 94,316 96,082 3,950 4,089 4,232 4,380 4,533 4,692 4,856 5,026 5,202 5,384 5,572 5,768 9,876 10,222 10,579 10,950 11,333 11,730 12,140 12,565 13,005 13,460 13,931 14,419 9,876 10,222 10,579 10,950 11,333 11,730 12,140 47,031 48,930 50,736 52,441 54,039 55,520 56,877 70,666 72,188 73,573 74,812 75,895 23,516 24,465 25,368 26,221 27,019 27,760 28,439 35,333 36,094 36,787 37,406 37,948 23,516 24,465 25,368 26,221 27,019 27,760 28,439 35,333 36,094 36,787 37,406 37,948 9 10 11 12 13 14 15 16 17 18 19 20 (189,628) (189,628) (189,628) (189,628) (189,628) (189,628) (189,628) (189,628) (189,628) (189,628) (189,628) (189,628) (55,429) (58,616) (61,986) (65,550) (69,320) (73,305) (77,521) (81,978) (86,692) (91,676) (96,948) (102,522) (134,199) (131,012) (127,642) (124,078) (120,308) (116,323) (112,108) (107,650) (102,936) (97,952) (92,680) (87,106) 2,278,474 2,219,858 2,157,872 2,092,322 2,023,002 1,949,697 1,872,176 1,790,198 1,703,507 1,611,830 1,514,882 1,412,360 (77,313) (77,313) (77,313) (77,313) (77,313) (77,313) (77,313) (77,313) (77,313) (77,313) (77,313) (77,313) (15,213) (15,213) (15,213) (15,213) (15,213) (15,213) (15,213) (15,213) (15,213) (15,213) (15,213) (15,213) (62,100) (62,100) (62,100) (62,100) (62,100) (62,100) (62,100) (62,100) (62,100) (62,100) (62,100) (62,100) 23,516 24,465 25,368 26,221 27,019 27,760 28,439 35,333 36,094 36,787 37,406 37,948 2,455,960 2,493,595 2,530,327 2,566,206 2,601,286 2,635,626 2,669,288 2,696,054 2,722,060 2,747,374 2,772,068 2,796,220 9 10
ATTACHMENT 4 21 22 23 24 25 26 27 28 29 30 888,255 910,461 933,223 956,553 980,467 1,004,979 1,030,103 1,055,856 1,082,252 1,109,308 15,534 15,922 16,320 16,729 17,147 17,575 18,015 18,465 18,927 19,400 903,789 926,383 949,543 973,282 997,614 1,022,554 1,048,118 1,074,321 1,101,179 1,128,708 45,189 46,319 47,477 48,664 49,881 51,128 52,406 53,716 55,059 56,435 858,599 880,064 902,066 924,618 947,733 971,426 995,712 1,020,605 1,046,120 1,072,273 535,450 554,191 573,588 593,663 614,441 635,947 658,205 681,242 705,086 729,764 35,816 37,070 38,367 39,710 41,100 42,538 44,027 45,568 47,163 48,814 571,266 591,261 611,955 633,373 655,541 678,485 702,232 726,810 752,249 778,577 287,333 288,804 290,111 291,244 292,192 292,941 293,480 293,794 293,871 293,695 (189,628) (189,628) (189,628) (189,628) (189,628) (189,628) (189,628) (189,628) (189,628) (189,628) 97,705 99,175 100,483 101,616 102,564 103,313 103,852 104,166 104,243 104,067 5,969 6,178 6,395 6,618 6,850 7,090 7,338 7,595 7,861 8,136 14,923 15,446 15,986 16,546 17,125 17,724 18,345 18,987 19,651 20,339 76,812 77,551 78,102 78,452 78,589 78,499 78,169 77,585 76,731 75,593 38,406 38,776 39,051 39,226 39,294 39,249 39,085 38,792 38,366 37,796 38,406 38,776 39,051 39,226 39,294 39,249 39,085 38,792 38,366 37,796 21 22 23 24 25 26 27 28 29 30 (189,628) (189,628) (189,628) (189,628) (189,628) (189,628) (189,628) (189,628) (189,628) (189,628) (108,417) (114,651) (121,244) (128,215) (135,588) (143,384) (151,629) (160,347) (169,567) (179,317) (81,211) (74,977) (68,384) (61,413) (54,040) (46,244) (37,999) (29,281) (20,061) (10,311) 1,303,943 1,189,291 1,068,047 939,832 804,244 660,860 509,232 348,885 179,317 0 (77,313) (77,313) (77,313) (77,313) (77,313) (77,313) (77,313) (77,313) (77,313) (77,313) (15,213) (15,213) (15,213) (15,213) (15,213) (15,213) (15,213) (15,213) (15,213) (15,213) (62,100) (62,100) (62,100) (62,100) (62,100) (62,100) (62,100) (62,100) (62,100) (62,100) 38,406 38,776 39,051 39,226 39,294 39,249 39,085 38,792 38,366 37,796 2,819,914 2,843,238 2,866,287 2,889,161 2,911,967 2,934,818 2,957,833 2,981,141 3,004,875 3,029,179
ATTACHMENT 5 Development Summary Village at Zion Summary Details Location 5150 Zion Avenue Council District 7 Community Planning Area Navajo Developer CANV Construction Company Architect Biltform Architecture Project Type New Construction Housing Type Senior Year Built 2014 Number of Units 60 Affordable Units 59 Lot Size/Density 1.21 /50 dwelling units per acre Gross Residential Square Footage 47,584 Retail Space None Construction Type Type V over Podium Prevailing Wages No Financing Structure 9% Tax Credits/Conventional Financing Affordability Term 55 years Unit Affordability Unit Type Square Footage AMI Number Gross Restricted Rent Market Rent % Below Market 1 Bedroom 570 30% 5 $453 $1,170 61.3% 2 Bedroom 784 30% 1 $544 $1,275 57.3% 1 Bedroom 570 40% 5 $605 $1,170 48.3% 2 Bedroom 784 40% 1 $726 $1,275 43.1% 1 Bedroom 570 50% 23 $756 $1,170 35.4% 2 Bedroom 784 50% 3 $907 $1,275 28.9% 1 Bedroom 570 60% 17 $907 $1,170 22.5% 2 Bedroom 780 60% 2 $1,089 $1,275 14.6% 2 Bedroom 784 60% 2 $1,089 $1,275 14.6% 2 Bedroom 784 MGR 1 N/A $1,275 N/A Construction Sources and Uses of Funds Sources of Funds Amount Uses of Funds Amount 9% Tax Credits $5,123,900 Acquisition Cost $ 2,550,000 San Diego Housing Commission 2,070,000 Hard Costs 6,946,394 Construction Loan 4,788,588 Financing Costs 765,931 Soft Costs 1,690,163 Developer Fee 30,000 Total $11,982,488 Total $11,982,488 31
Attachment 5: Development Summary Village at Zion Permanent Sources and Uses of Funds Sources of Funds Amount Uses of Funds Amount 9% Tax Credits $8,591,409 Acquisition Cost $ 2,550,000 San Diego Housing Commission 2,300,000 Hard Costs 6,946,394 Conventional Lender 2,681,535 Financing Costs 765,931 Soft Costs 1,690,163 Reserves 237,289 Developer Fee 1,383,167 Total $13,572,944 Total $13,572,944 Cost Analysis Amount Per Unit Gross Per S.F. Net Rentable Per S.F. Comments Acquisition Costs $2,550,000 $42,500 $48 Acre sq.ft. cost Hard Costs* 6,946,394 115,773 $146 $191 Soft Costs 1,690,163 28,169 Financing Costs 765,931 12,766 Reserves 237,289 3,955 Developer Fee 1,383,167 23,053 Total Development Cost $13,572,944 $226,216 *Includes podium parking estimated at $660,000 Pro Forma Summary Year 1 Amount Comments Gross Income $551,556 Vacancy 27,578 5% Operating Expenses 269,099 $4,485 per unit per year Replacement Reserves 18,000 $300 per unit per year Net Operating Income 236,879 Debt Service 189,628 1.25 DCR Cash Flow* 47,251 Estimated Residual Receipt Payment Year 1 14,626 50% of residual receipts *Available cash flow will be used to pay Limited Partnership fees and residual receipt payments 32
ATTACHMENT 6 PROPOSED LOAN NONBINDING COMMITMENT TERMS SUMMARY Village at Zion Affordable Housing Project 5150 Zion Avenue ( Property ) January 28, 2013 The San Diego Housing Commission ( Housing Commission ) is pleased to submit this nonbinding commitment terms summary. This commitment terms summary is not a binding contract. The purpose of this commitment terms summary is to set forth the general terms and conditions under which the Housing Commission is interested in making a loan ( Housing Commission Loan ) to CANV Construction Company, Inc. or an entity controlled by CANV Construction Company, Inc. ( Borrower ) with respect to the Property. Closing must occur within twelve (12) months of Housing Authority of the City of San Diego approval of the Housing Commission Loan, unless an extension is granted by the President & CEO of the Housing Commission in his sole discretion. In the event of a conflict between any term or provision (or absence of any term or provision) of this commitment terms summary and any term or provision of any approval of any applicable board or governing body, the term or provision of such board or governing body shall apply. Provided the Housing Commission Loan is approved by the Housing Authority of the City of San Diego, the following terms shall apply to the Housing Commission Loan. In addition, Exhibit A details other Housing Commission requirements. 1. Maximum loan amount Not to exceed $2,300,000. To be used for the acquisition, construction and permanent financing of a 59unit (plus 1 manager s unit) affordable housing project ( Project ) located at 5150 Zion Avenue ( the Property ). The Housing Commission Loan will be secured by a deed of trust which will be subordinate to the deed of trust and security instruments securing the conventional construction and permanent financing to be provided by a commercial bank, only. 2. Loan Simple interest, the lesser of 4 percent or 10year Treasury Rate plus 200 basis points. 3. Term 55 year maximum. 4. Residual payments The proposed loan will be repaid with annual residual receipt payments to the Housing Commission. The Housing Commission shall require an annual payment equal to the greater of $10,000 ( Minimum Payment ) or 50 percent of residual receipts. Provided, however in the event 100% of the project s residual receipts equals $10,000 or less, then 100% of the project s residual receipts shall be payable to the Housing Commission, and the following year s Minimum Payment shall be increased by the difference between $10,000 and the amount actually paid. Residual receipt payments will be payable beginning on May 1, in the year immediately following the calendar year in which construction of the Project is completed. 5. Affordability 38 units (64%) are to be rent and occupancy restricted at 50% AMI and 21 units (36%) are to be rent and occupancy restricted at 60% AMI. 6. Funding Sources The Housing Commission may fund the Housing Commission Loan from various sources including local, State, and/or federal funds, including HOME Investment Partnership Program funds. The Housing Commission reserves the right to allocate available program funds in the best interest of the Housing Commission. Borrower should be familiar with the HOME program rules and regulations, Federal Davis Bacon law and Section 3. 7. Managers Units There will be one manager s unit (the number of manager s units must be in conformance with the TCAC program requirements). 1
ATTACHMENT 6 8. Cost Savings If there are any cost savings, improved debt, or improved tax credit equity pricing then such funds will be first used to make an adjustment to the total tax credit allocation as may be required by TCAC and thereafter apply 100% of the excess sources/cost savings towards the reduction of the Housing Commission s loan. Up to 50% of any costs savings can be used to pay any deferred developer fees. 9. Financing Gap The Borrower will cover any financing gap with its equity, its developer fee and/or other nonhousing Commission sources, all of which shall be subject to the approval of the Housing Commission in its sole discretion and will not be unreasonably withheld. 10. Recourse The Housing Commission s loan will be recourse until the timely completion of the construction, after which it will become nonrecourse. 11. Builder General Conditions, Profit & Overhead The construction contract shall be competitively bid to at least three qualified subcontractors for each trade involved in the construction of the project. 12. Contingency 10% of the Housing Commission loan amount will be withheld as contingency and will be paid upon final cost certification and conversion to permanent loan. This contingency amount will be reduced by any project cost savings. 13. Limited Partnership Fees Amounts not to exceed: General Partner(s) $10,500/year, and Limited Partner $7,500/year. 14. Property Management Fee $32,400 ($45.00/unit/month). 15. Replacement Reserve To be consistent with TCAC Regulations (estimated at $300/unit/year). 16. Operating Reserve To be consistent with TCAC Regulations (three months estimated operating expenses and three months debt service under stabilized occupancy). 17. Loan Disbursement Schedule Upon submittal and approval of eligible costs, the Housing Commission Loan will be disbursed as follows: up to thirty percent (30%) at escrow closing, up to thirty percent (30%) at fifty percent (50%) construction completion, up to thirty percent (30%) upon receipt of certificate of occupancy, and ten percent (10%) upon conversion to permanent financing. Ten percent of the HOME Investment Partnership funds are to be withheld until issuance of a Certificate of Occupancy and all unconditional lien releases are forwarded to the Housing Commission. The President and Chief Executive Officer is authorized to modify the Housing Commission loan disbursement schedule in his sole reasonable discretion. 18. Developer Fee Maximum $1,400,000. The developer fee disbursement will be confirmed by the tax credit investor partner. It is estimated that the developer fee will be disbursed at completion of construction. Developer fee may be deferred and paid out of projects operations cash flow within ten years from projects placed in service date. Any unpaid deferred developer fee after this tenyear period shall become Borrower s capital contribution to the project. 19. Deferred Developer Fee The applicant s proforma does not project deferred developer fee. 2
ATTACHMENT 6 20. SDHC Monitoring Fees Borrower will pay a monitoring fee for setup and an annual monitoring fee in accordance with the thenexisting Housing Commission fee schedules. 21. SDHC Legal Fees Borrower will pay Housing Commission legal fees in an amount estimated at $20,000 and to be calculated at escrow closing. 22. Origination Fee Borrower to pay Housing Commission loan origination fee equal to 1% of the Housing Commission Loan amount. 23. Closing Costs Borrower shall pay all escrow, title and closing costs, including, without limitation, paying for an ALTA lenders policies for the Housing Commission Loan, with endorsements acceptable to the Housing Commission, insuring the Housing Commission Loan lien priority as referenced in this letter. 24. Additional Conditions The Housing Commission reserves the right to impose such additional conditions in the final documentation of the transaction as are reasonably necessary to protect the interests of the Housing Commission and fulfill the intent of this letter. 25. Purchase Option Housing Commission shall have a first right of refusal to purchase the Property and the Project. The Housing Commission and the Borrower will enter into an option agreement whereby the Commission will have the option to purchase the Property and the Project at any time during the threeyear period beginning at the end of the fifteenyear tax credit compliance period for an amount equal to the greater of: (i) the fair market value of the Property and the Project (taking into account the various rent and occupancy restrictions); or (ii) the sum of: (a) the limited partner project related tax liability; plus (b) the principal of and all accrued interest of the Housing Commission loan and all other loans secured by the property. 3
ATTACHMENT 6 Exhibit A 1. Pursue Maximum Financing from Other Sources The borrower is required to pursue maximum available financing from other sources including a funding application the Federal Home Loan Bank Affordable Housing Program (AHP). If awarded, these other sources funds would used first to pay Housing Commission approved cost overruns and/or reductions in estimated funding. The remaining additional proceeds, as allowed by TCAC, would reduce the Housing Commission s permanent financing loan. 2. Insurance Borrower shall at all times during the term of the loan maintain General Liability and Property Insurance in a form and in acceptable to the Housing Commission and approved by the Housing Commission s General Counsel. The San Diego Housing Commission, the Housing Authority of the City of San Diego, and the City of San Diego shall be listed as an additional insured for General Liability Insurance and Property Insurance and the San Diego Housing Commission shall be endorsed as a loss payee of the Private Insurance. 3. Loan Security The Housing Commission loan shall be evidenced by a deed of trust, in a form and format acceptable to the Housing Commission and its General Counsel in their sole discretions, made in favor of the Housing Commission and secured by the value of the property. 4. Senior Financing The Housing Commission loan will be subordinate to a senior loan. 5. Cure Rights The Housing Commission shall have the right, but not the obligation, to cure all senior encumbrances in all subordinating agreements that it executes. All subordination agreements shall be subject to the sole approval of the Housing Commission s President and Chief Executive Officer and General Counsel. 6. Management Plan The Management Plan shall be subject to periodic approval by the Housing Commission, in its reasonable discretion. 7. Approval of Management The Housing Commission reserves the right to declare Borrower in default of the loan agreement after an uncured ninety (90) day written notice of malfeasance and/or misfeasance in management of the project. 8. ALTA Lender s Policy The Borrower shall acquire, at its sole cost and expense, ALTA Lender s Policies for the loan with endorsements acceptable to the Housing Commission insuring the Housing Commission s lien position. 9. Environmental Requirements Notwithstanding any provision of this Letter, the parties agree and acknowledge that this Letter constitutes a conditional reservation and does not represent a final commitment of HOME funds or site approval under 24 CFR Part 58 of the National Environmental Policy Act (NEPA). Should HOME funds constitute a portion of the funding for the project, a final reservation of HOME funds shall occur only upon satisfactory completion of environmental review and receipt by the City of San Diego of a Release Of Funds from the U.S. Department of Housing and Urban Development under 24 CFR Part 58 of NEPA. The parties agree that the provision of any HOME funds to the project is conditioned on the City of San Diego s determination to proceed with, modify or cancel the project based on the results of subsequent environmental review under NEPA. By execution of this Letter, you acknowledge no legal claim to any amount of HOME funds to be used for the project or site unless and until the site has received environmental clearance under NEPA. You are also prohibited from undertaking or committing any funds to physical or choicelimiting actions, including property acquisition, demolition, movement, clearance, rehabilitation, conversion, repair or construction prior to environmental clearance under NEPA. Violation of this provision may result in denial of any HOME funds for this project. 4