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HomeMy WebLinkAbout7.1 AgSt SrHousDevSelect CITY CLERK File #430-80 & 600-60 AGENDA STATEMENT CITY COUNCIL MEETING DATE: September 23' 2002 SUBJECT: Key Issue Summary for Senior Housing Developer Selection Report Prepared By: Julia Abdala/Housing Specialist ATTACHMENTS: 1. Developer's Proposals' ...... 2. Proposals Comparison Chart 3. Consultant's Report on Proposals 4. Questions for Housing Developers RECOMMENDATION: Staff recommends that the City Council:  1. Receive this report, 2. Receive the presentations by the four Housing Developers, 3. Interview the developers using the attached questions, 4. Make a preliminary selection of a developer, subject to reference checks, and 5. Authorize the City Manager to negotiate an agreement with the selected developer. FINANCIAL STATEMENT: NO financial impact at this time. DESCRIPTION: On April 16, 2002 the City Council directed Staff to proceed with a Request for Proposals (RFP) to obtain proposals from developers interested in providing Senior Housing at 7607 Amador Valley Blvd. The proposals received provide the information necessary for the City Council to select a developer to proceed with the project. On September 3, 2002 the City Council decided that the selection process for the Senior Housing developer would take place at a special City Council meeting. Each developer's proposal would be presented and the City Council, as well as Staff, would ask questions of the developers. Staff anticipates additional questions may be necessary as a result of Developer responses and therefore proposes that Staff be also permitted to ask questions at the Council meeting. The four proposals received have been reviewed by Staff, three outside raters and by the City's housing consultant, Daniel B. Lopez, for financial feasibility. A Chart comparing basic information provided by the four developers is attached as Attachment 2. The City's housing consultant has also prepared an analysis of the developer's proposals. (See Attachment 3.) Staff has listed a number of factors which the City Council should consider in evaluating each proposal. Each factor is followed by information pertinent to that particular factor. COPIES TO: In-House Distribution ITEM NO, -~.7~ Important Factors to Consider in Interviewing Developers 1. How quickly does the City Council want the project completed? It is very important to understand that the speed with which the project could be developed is a trade- off with the amount of money that the City may be requested to contribute to the project. All four developers have sited one or two primary funding sources for this project, 9% Tax Credits and HUD Section 202 Supportive Housing for the Elderly. Typically, it cost a City less to assist a project developed with Section 202 funds from HUD. It, however, takes longer to procure these funds. First, they are highly competitive and secondly, HUD has a lengthier process in releasing the funds. For these reasons both of the developer proposals that sited Section 202 as a primary funding source showed the longest time needed (Eden Housing 8/30/06, American Baptist Homes of the West 5/06) for completion of the project. 9% Tax Credits are also highly competitive, if awarded during 2003, the tax credits would allow for construction to begin sooner and may allow for earlier completion dates; however, as indicated in the proposals, this primary funding source may require more funding from the City. 2. How much is the City willing to provide as a loan to the selected developer to complete the project? As indicated above, it may cost the City more money to have this project completed as quickly as possible. Other factors influence the amount of funding the City may be required to provide. HUD 202 funding may require less funding from the City, however HUD tends to pay for fewer amenities and architectural embellishments than the City Council may be interested in providing for the Senior Project. For example, the City Council may decide that balconies would be an important feature of the new senior project. It is possible that HUD would not approve such an amenity and therefore the City would need to pay the added expense for this amenity. Similarly, if the City Council is interested in assuring that the Senior Housing Project and the Senior Center are well integrated, architecturally, the City may need to contribute more funding to the housing project. Another option which the City Council could consider to reduce the amount of the City's loan would be to consider a smaller number of units. 3. How quickly does the City Council want the City loan repaid? All four of the proposals from the developers assume some financing from the City of Dublin to complete this project. The exact amount that the developers will request as a loan from the City would not be definite until the developer has all the necessary funding sources committed to the project. At this point the proposals hold a preliminary guess of how much may be requested if they are successful in procuring various other financing sources. Those various sources are listed in their proposals. The City of Dublin, would be interested in maximizing the amount of outside financing that the developer acquire for every dollar of Dublin's money that is loaned, however the sooner the City wants the City loan repaid the more the City will need to provide as a loan. This is because if the developer is required to pay back an amortized loan to the City, the developer will not be able to pay back other sources, such as a bank. Other lenders are aware of this and their underwriting criteria used to determine how much can be provided to the developer would result in allowing for substantially lower amounts. At this point all four proposals assume that any loan from the City would be a residual receipt loan. This means that the developer would begin repaying the City after the revenue (rents and subsidy) exceeds the expenses of the project. At this point there would be excess cash flow, some of which would return to the City, usually on an annual basis. In some cases there may never be sufficient cash flow from the project to offer repayment. The City could propose a deferred loan as well, deferred repayment for an amount of time that would not interfere with the other funding sources, such as 30 years or 55 years. 4. How deep affordability does the City Council want at the Senior Housing Development? Some financing soUrces such as the HUD Section 202 allow for very low rents ($220). Because HUD provides a subsidy payment for each unit, the rents can be kept extremely low and still allow the project to receive enough income to survive. These units with extremely low rents would house extremely low-income seniors. While Section 202 financing may assist in serving seniors with incomes as low as 20% of the area median income, housing projects financed by 9% tax credits would also serve seniors at various income levels, all below 60% of the area median. The particular income mix to be served by a housing project funded by 9% tax credit would depend on the final financing package received. 5. How much parking should be provided for the Senior Housing Development? The amount of parking that the City requires will impact how many units can be accommodated in the project. The proposals range in requesting a reduction in parking to providing .5 parking spaces per unit to providing 1 parking space per unit. 6. How large does the City Council want the apartments to be? Two of the proposals indicate a range from 540 s.f. for one bedrooms to 790 s.f. for two bedroom units. As a comparison, the new Archstone Apartments at 6233 Dougherty Road have one-bedroom units ranging in size from 599 s.f. to 708 s.f. The ratio of two-bedroom units to one-bedroom units is another important factor in determining how many units can be constructed at this site. One of the current trends in Senior Housing is to provide for "aging in place." This concept encourages more two-bedroom units, to accommodate a caregiver as the senior resident becomes frailer and needs more care. While the exact number of units that will be constructed may be determined at the design review stage and may change as the project takes shape, it is important to review the proposals with this future decision in mind. RECOMMENDATION Staff recommends that the City Council receive this report, receive the presentations by the four Housing Developers, interview the d~velopers using the attached questions, make a preliminary selection of a developer, subject to reference checks; and authorize the City Manager to negotiate an agreement with the selected developer. COMPARISON OF PROPOSALS FOR SENIOR HOUSING BY 4 DEVELOPERS 7/26/02 EDEN HOUSING, iNC. EAH, INC. AM. BAPTIST HOMES OF THE WEST MERCY HOUSING OF CALIFORNIA Will dual track application HUD Sect. 9% Tax Credit 202 9% Tax Credit HUD Sect. 202 9% Tax Credits 9% Tax Credit Preliminary Amt. Requested in subsidy from City $1,700,000 $1,800,000 $1,980,000 . $1,753,358 $1,774,095 $1,882fi45 % Financed by CitY 21% 19% 22% 23% 19% 24% No units proposed, 54 units 48 units 50 units 48 Units 48 units 44 units # lbdrm, 53- lbdrm 40- lbdrm 45 - 1 bdrm 47- 1 bdrm 47- 1 bdrm 44,1 bdrm #2 bdrms 2 bdrms (1 for 8- 2 bdrm (incl 5 - 2 bdrms 1- 2 bdrms (mgr) 1 - 2 bdrm (mgr) mgr) 1 for Mgr) Square Footage of 1 bdrm 540 sf Same Not listed Not listed Not listed Approximately 600- units 2 bdrm 790 sf sf. All units Rental Affordability 53 units 22 units<45% 5 units <30% From <20% ofmedi, a 24 units <45% All < 40% median <45% 24 units<50% 5 unitS < 40% to <50% of median 23 units < 50% lunit mgr 1 unit < 60% 25 units < 50% 1 unit mgr 1 unit mgr 15 units < 60% ~arliest possible completion date 8/30/06 3/4/05 June 2004 May 2006 May 2006 2/25/05 Requesting pre- construction financing? Not yet Not yet Not yet Not yet Not yet Yes, amt. Not listed Total Construction Cost $8,167,471 $9,265,740 $8,998,495 $7,534,158 $9,573,379 $7,933,500 __T°tal cost per unit $151,249.46 $171,587.78 $179,970 $156,962 $199,445. $180,307 C__ity subsidy per unit $31,481 .g8 $37,500.00 $39,715 $36,528.29 $36,960,31 $42,776.02 ATTAOHMENT July 15, 2002 Memorandum To: Eddie Peabody, Jr., City o£Dublin Julia Abdala, City of Dublin From: Daniel B. Lopez, Consultant Re: Findings In Regards to the Proposed Dublin Senior Apartments Background Attached are project evaluations for each of the four submitted proposals and the development scenari°s contained in each. Below are two charts comparing the proposals submitted by the four applicants (i.e., American Baptist Homes of the West or ABHOW; Mercy Housing California of MHC; Eden Housing, Inc. or EHI; and Ecumenical Association for Housing or EAH) for both the HUD 202 and 9% Tax Credit scenarios. As you will note, the development timeframe for a HUD 202 financed project is approximately four years while in general the development timeframe for a 9% Tax Credit financed project is approximately two and one-half years. Total Development City Funds Applicant Costs h-UD 202 # of Units. Timeframe Income Level ABHOW $7,534,158 $1,753,358 48 4 years 20% AMI MHC $ 0 $ 0 ........................ EHI $8,167,471 $1,721,132 54 4yrs, 1 mos. 45% AMI EAH $ 0 $ 0 ........................ Total Development City Funds Applicant Costs Tax Credits. # of Units. Timeframe_ Income Level ABHOW $9,573,380* $1,774,000 48 4years 45-50% AMI MHC $7,933,500** $1,882,145 44 2yrs. 7.5 mos. 40% AMI EHI $9,294,740 $1,829,156 48 2yrs. 7 mos. 45-60% AMI EAH $8,998,495 $1,985,727 50 2yrs. 2 mos. 30-60% AMI * - By the end of year 30, City could receive residual receipt payments of approximately $274,239. ** - Beginning in year 16, because MHC has a 15-year fully amortizing loan as its projected first deed of trust, the City potentially could receive residual receipt payments of approximately $532,323. In evaluating the four proposals, there are a few key points to stress: 1. Each of the applicants used a slightly different format in reporting their proposed development budgets. Some of the development budgets were more Memo To: Eddie Peabody, Jr. and Julia Abdala " ATTACHMENT Re: Dublin Senior Apartments Proposals July 15, 2002 Page 2 of 2 specific than others. An attempt was made to standardize the presented information. However, please note that after a sponsor is selected and begins to work with the City, the development budget will become more detailed, 2. As identified in some of the proposals, another option the City has in financially participating in the development of this proposed project is to waive or reduce fees. 3. One sponsor, EAH, stated that it was willing to leave part of its proposed developer fee in the project as a source of permanent financing. Asking the sponsors to defer a portion of their developer's fee is an option that the City might choose to invoke if the project experiences budget overruns. This option would allow the project to proceed while not requiring additional financial participation from the City. 4. As discussed in the context of the attached.reviews, another technique, which the City could use to minimize its long-term financial participation while ensuring project feasibility, is to provide more short-term funding in the 9% Tax Credit scenario. By providing greater short-term funding, the project could reap the benefits of a greater tax credit equity investment because those investment funds could come into the project at a later date once the project has achieved stabilized occupancy. Recommendation It is in the best interest of the City to interview all four applicants and give each the opportunity to present their proposals and answer direct questions. An alternative to holding interviews is to select one proposal based on its merits. The City is fortunate to have received proposals from four very qualified and experienced nonprofit housing developers. Dublin Senior Apartments Eden Housing, Inc. (EHD *Investigated both the HUD 202 and 9% Tax Credits programs and recommended dual tracking both approaches. The HUD 202 program provides a Project Rental Assistance Contract (PRAC) that ensures residents do not have to pay more than 30% of their income towards rent. While the 202-selection process is competitive, it is relatively inexpensive to apply when compared to the tax credit program. It minimizes many of the major costs of developing housing, primarily financing fees and construction period interest. The capital advance provided by the program does not require ongoing debt service nor any repayment at the completion of its term (i.e., 40 years). *City of Dublin funds requested: $1,721,132 for the HUD 202 financing and $1,829,156 for the 9% Tax Credit financing (Note! Applicant believes that under both financing scenarios the project would compete favorably and receive funds from the Metropolitan Transportation Commission which could total $137,500 under the HUD scenario and $140,000 under the 9% Tax Credit scenario although neither is included in the Development Proformas presented. If awarded, these funds would reduce the amount needed from the City. For purposes of this analysis, this entire amount as identified as needed is assumed). *Timeframe (from negotiating an agreement with the City to construction completion) The HUD 202 financing would take approximately 4 years and one month while the 9% Tax Credit financing would take approximately 2 years and seven months. *Tenants projected to pay $629 per month rent (includes utility allowance; 45% adjusted median income or AMI) under HUD 202 financing; and $629 per month rent for households at 45% AMI and $698 per month for households at 50% AMI for the one- bedrooms; and $755 per month rent for households at 45% AMI; $838 per month rent for households at 50% AMI; and $1,006 per month rent for households at 60% AMI for the two-bedrooms. *54 units under the HUD 202 scenario with: 53 one-bedroom and I two-bedroom (manager's unit). 48 units under the 9% Tax Credit scenario with 40 one-bedrooms and 8 two-bedrooms (one of these will be the manager's unit; while the other two-bedroom units would allow for live-in aide if necessary). Both proposals will utilize the same building footprint and configuration. *Used parking ratio of 0.6 spaces per unit (29-32 spaces depending on scenario). This would result in a surplus of two to six parking spaces. EHI would be willing to consider a sharing of these surplus spaces with the Senior Center. 1 of 5 * One-bedroom unit size of 540 square feet and two-bedroom unit size of 790 square feet for the 9% Tax Credit scenario (Note: The unit size for the HUD 202 is not identified). Total living and common area space square footage is 37,440 which results in a total development cost of $218.15 per square foot and $151,249.46 (estimated) per unit for the HUD 202 scenario and total square footage of 35,950 which results in a total development cost of $257.74 per square foot and $193,036.25 (estimated) per unit for the 9% Tax Credit scenario. All units are furnished. *Willing to consider using the architect selected by the City for the Senior Center. In addition, would be willing to discuss the use of the same general contractor. *Three-story Type V residential construction elevator building built on top of a Type II parking structure built at grade. Units will have "front porches" and landscaping wilt be minimal because of limited space but will inelude trees and layers of planting'. *Under both the HUD 202 and 9% Tax Credit scenarios, the City will be asked to release funds during predeveloprnent ($447,171 - HUD 202) and $477,060 - 9% Tax Credits) with the balance being released during construction and rolling into permanent financing. Permanent Sources of Financing: HUD 202 Per Unit Percent Total City of Dublin $ 31,873 21% $1,721,132 FHLB AHP $ 4,000 3% $ 216,000 HUD Capital Advance Funds $115,377 76% $&230,339 $8,167,471 Permanent Sources of Financing:. 9% Tax Credits First Deed of Trust $ 26,693 I4% $1,281,283 City of Dubtin $ 38,107 20% $1,829,156 FHI,lq AHP $ 4,000 2% $ 192,000 General Partner $ 124 0.1% $ 5,957 Tax Credit Equity Proceeds $124,111 64% $5,957,343 $9,265,740* * - Does not match 9% Tax Credit figure below. First Deed of TrUst: In the HUD 202 scenario there is no private financing involved. Under the 9% Tax Credit scenario, the sponsor assumed a fully amortizing 30~year loan with a debt service coverage (DSC) of 1.15 (Note: Because EH[ will charge a Partnership Management Fee and seek to fund residential services, the 30-year proforma assumes no payrnents to the City's residual receipt note). 2 of 5 City of Dublin: 30-year deferred payment residual receipt note with interest rate TBD. Federal Home Loan Bank (FHLB) Affordable Housing Program (AHP): 30-year deferred for as long as units remain affordable. Tax Credit Equity Proceeds: 83 cents/SI.00 of tax credit pay-in. Note: Might be able t° obtain a better cents/dollar, if pay-in occurs at stabilized occupancy (i.e., full lease-up which is maintained for three-months). Tiffs would require City to advance more funds in the short term, and then have less as a permanent source of funds when tax credit equity proceeds are invested. Development Budget: HUD 202 9% Tax Credits Acquisition Cost $ 0 $ 0 Construction Costs $5,762,298 $5,574,372 Construction Contingency $ 285,545 $ 276,233 Architectural/Engineering $ 412,228 $ 398,725 Survey & Soils $ 15,000 $ 15,000 Construction Period Loan Interest $ 0 $ 323,042 Construction Loan Int. After Construction $ 0 $ 0 Origination Fee $ 0 $ 59,823 Insurance $ 30,000 $ 30,000 Title and Recordation $ 25,000 $ 15,000 Construction Management $ 50,000 $ 50,000 Audit/Cost Certification $ 11,000 $ I 1,000 Permanent Financing: -Loan Origination $ 0 $ 32,032 -Title and Recordation $ 0 $ 10,000 -Taxes $ 0 $ 0 Legal Fees: '-Lender legal fee $ 0 $ 20,000 -Construction/Permanent Financing $ 35,000 $ 35,000 Reserves: -Capitalized Operating Reserves $ 0 $ 83,408 -Social Services Reserve $ 0 $ 250,000 Appraisal $ 10,000 $ 15,000 Other: -Minimum Capital Investment $ 0 $ 0 -TCAC App/Monitoring Fee $ 0 $ 79,680 3of5 -Marketing Study $ 0 $ 7,500 -Environmental/Phase I $ 5,000 $ 5,000 -Permit Processing Fee $ 810,000 $ 720,000 -Capital Fees (utility fee~/hook-ups) $ 0 $ 0 -Marketing $ 32,400 $ 28,800 -Furnishings $ 55,000 $ 55,000 -Construction Testing $ 24,000 $ 24,000 -Soft Cost Contingency $ 40,000 $ 40,000 Developer Costs: -Developer and Project Admin. Fees $ 540,000 $1,071,125 -Audit and Tax Returns $ 0 $ 0 -HUD Consultant Fee $ 25,000 $ 0 Total Syndication'Costs $ 0 $ 65,000 Total Development Costs $8,167,471 $9,294,740 Predevelopment Steps: Will work with representatives of the neighborhood, community, and local seniors to ensure that the project meets local needs and is accepted by the community. Will collaborate with local senior social service providers, to create a quality senior housing environment. EHI would work with the City and the development team of the Senior Center to ensure that staging of development of both the Senior Center and the senior housing is efficient and that negative impacts are minimized. Project Operations: Operating Expenses are projected at $4,144 per unit annually for the HUD 202 and $3,969 per unit annually for the 9% tax credit scenarios. Neither scenario identifies the. accumulation of Replacement Reserves. Operating Reserves accumulate at 4% of unit construction costs annually resulting in an annual accumulation of $22,744 under the HUD 202 scenario and at $22,000 annually under the 9°/6 tax credit scenario. It is not clear if this is consistent with TCAC regulations. Proforma projections in terms of Income (2.5%) and Expense (3.5%) inflation factors are the same under both scenarios, which is consistent with TCAC requirements. Under the H~JD 202' scenario, t00% of the units affordable to households at 4 of 5 approximately 45% adjusted median income (AMI). Under the tax credit scenario, affordability would be 45-60% AMI. Proposal Stren~hs: 1. Depending on the City's goals, the HUD alternative offers the deepest affordability and will serve low income households at approximately 45% AMI. The 9% Tax Credit scenario would provide two-bedroom units to allow for live-in aide as needed. EHI will dual track both scenarios. 2. The HUD PKAC will also cover the on-site Services Coordinator position. Under the 9% Tax Credit scenario, EHI proposes to create and capitalize a social services reserve to cover the position when cash flow is insufficient. This will add to the upfront costs from the City. 3. Willing to consider using the architect selected by the City for the Senior Center. In addition, if timing allows, would consider using the same general contractor. 4. Will try to coordinate with the existing delivery of social services by other local social service providers to residents. 5. Organization is financially strong. 6. Experience of development team is good. Proposal Weaknesses: 1. Completion timeframe is approximately four years and one month under the HUD 202 scenario. 2. Did not really discuss how proposed property management and the delivery of social services would be coordinated within the project by the sponsor. 5 of 5 Dublin Senior Apartments Ecumenical Association for Housing, Inc. 0gAH) *Although their primary proposal is the 9% Tax Credit program, EAH also reviewed the 4% Tax Credit/Tax Exempt Bond program, utilizing 501©-3 bonds, and the HUD 202 program. In reviewing the HUD 202 program, EAH states, "...Even with allowable high-cost adjustments, Section 202 projects in the Bay Area Provide capital only on'a level roughly equivalent to tax credits, but with far greater procedural obstacles and far less control and predictability. These parameters make it more difficult to assemble the necessary gap financing for 202 projects." Under the 4% Tax Credit/Tax Exempt Bond program, rents would need to be higher and would require an additional $9,000 per unit subsidy from the City. Utilizing 501©-3 bonds would also require higher rents and additional subsidy from the City. *City of Dubtin funds requested: $1,985,727 for the 9% Tax Credit financing (Note: Applicant is also anticipating the successful attainment of $200,000 from the Alameda County HOME/CDBG program. I_f obtained, the projected amount from the City would remain as identified. In addition, sponsor plans on leaving $100,000 of equity in the development). *Timeframe (from final developer selection to construction completion) The 9% Tax Credit financing scenario would take approximately 2 years and two months. *Tenants projected to pay $350 and $429 per month rent (includes utility allowance; affordable to tenants earning 30%) on one and tWo-bedroom units respectively; $489 and $596 per month rent (40% AMI) on one and two-bedroom units respectively; $629 and $764 per month rent (50% AMI) on one and two-bedroom units respectively; and $769 and $932 per month rent (60% AMI) on one and two-bedroom units respectively. *50 units under the 9% Tax Credit scenario with 45 one-bedrooms and 5 two-bedrooms (one of these will be the manager's unit; while the other two-bedroom units would allow for live-in aide if necessary). *Parking ratio of one space per unit for a total of 50 spaces. *One-bedroom and two-bedroom unit sizes are unstated. However, gross building area is 31,075 square feet and the gross square foot cost is $289.57 with a per unit cost of $179,970 for the 9% Tax Credit scenario. *Would definitely consider using the same architect for the senior housing as the one selected by the City for the Senior Center. Would consider using the same general contractor so as to alleviate potential construction difficulties. 1 of 4 *Anticipate a two-story Type V residential construction with an elevator with a community room on top of on-grade parking. In addition, at least 5% of the unks are fully handicapped-accessible and all of the units are adaptable. Permanent Sources of Financing: 9°4. Tax Credits First Deed of Trust $ 29,092 16% $1,454,617 City of Dublin $ 39,715 22% $1,985,727 FHLB AHP $ 4,900 3% $ 245,000 County HOME/CDBG $ 4,000 2% $ 200,000 Developer Equity $ 2,000 1% $ 100,000 Int. Earned on Construction Loan Proceeds $ 2,297 1% $ 114,848 Foundation Funds $ 500 0.3% $ 25,000 Tax Credit Equity Proceeds $ 97,466 54% $4,873,303 $8~998,495' First Deed of Trust: Under the 9% Tax Credit scenario, the sponsor assumed a fully amortizing 30-year loan with a debt service coverage (DSC) of 1.1 (Note: Because EAH wilt charge both Partnership and Asset Management Fees the 1 O-year proforma assumes no payments to the City's residual receipt note). City of Dublin: 30-year deferred payment residual receipt note with interest rate TBD. Federal Home Loan Bank (FHLB) Affordable Housing Program (AHP): 30-year deferred for as long as units remain affordable. Tax Credit Equity Proceeds: 78 cents/S1.00 of tax credit pay-in. Note: Might be able to obtain a better cents/dollar, if pay-in occurs at stabilized occupancy (i.e., full lease-up which is maintained for three-months). This would require City to advance more funds in the short term, and then have less as a permanent source of funds when tax credit equity proceeds are invested. Development Budget: 9% Tax Credits Acquisition Cost $ 0 Construction Costs $4,681,622 Construction Contingency $ 422,715 Architectural/Engineering $ 445,529 Survey & Soils $ 0 Construction Period Loan Interest $ 0 Construction Loan Int. After Construction $ 0 Origination Fee $ 442,671 Insurance $ 32,408 Title and Recordation $ 45,000 2 of 4 Construction Management $ 0 Audit/Cost Certification (Includes Appraisal $ 27,500 & Market Study) Permanent Financing: -Loan Origination $ 0 -Title and Recordation $ 0 -Taxes (included in Insurance above) $ 0 Legal Fees: -Lender legal fee $ 0 -Construction/Permanent Financing $ 75,000 Reserves: -Capitalized Operating & Rep[ Reserves $ 110,176 -Social Services Reserve $ Appraisal (Included in Audit) $ 0 Other: -Minimum Capital Investment $ 0 -TCAC App/Monitoring Fee $ 44,651 -Marketing Study (Included in Audit) $ 0 -Environmental/Phase I $ 0 -Permit Processing Fee $ 0 -Capital Fees (utility fees/hook-ups) $1,384,965 -Marketing $ 50,000 -Furnishings $. 25,000 -Construction Testing $ 0 -Soft Cost Contingency $ 50,561 Developer Costs: -Developer and Project Admin. Fees $ I, 115,696 -Audit and Tax Returns $ 0 -HUD Consultant Fee $ 0 Total Syndication Costs $ 45,000 Total Development Costs $8,998,495 predevel0pment Steps: Will work with City staff to discuss site plan, overall project concept, and timeframe. 3 of 4 Plan, on having an on-site service worker's office to coordinate planned social service activities. EAH would work with the City and the development team of the Senior Center to ensure that staging of development of both the Senior Center and the sexfior housing is efficient and that negative impacts are minimized~ Project Operations: Operating Expenses are projected at $4,300 per unit annually for the 9% tax credit scenario. The Development Budget above identifies that both Operating and Replacement Reserves are being initially capitalized at $110,176. Proforma identifies that Operating Reserves will be accumulated at 3% of annual operating expense and Replacement Reserves accumulate at the rate of $300 per unit annually. Both are consistent with TCAC regulations. Proforma projections in mrms of Income (2.5%) and Expense (3.5%) inflation factors are both consistent with TCAC requirements. As noted above, under the tax credit scenario rents are affordable to households earning between 30-60% AMI. Proposal Strengths: 1. The 9% Tax Credit scenario would provide two-bedroom units to allow for live-in aide as needed. 2. EAH plans on exploring other sources of funding such as foundations to help underwrite the cost of providing on-site sociaI services as well as leave $100,000 of equity in the development in support of the project. In addition, the sponsor plans on capturing earned interest during the construction period to the benefit of the project. 3. Willing to consider using the architect selected by the City for the Senior Center. In addition, if t~rmng allows, would consider using the same general contractor. 4. Organization is financially strong. 5. Experience of development team is good. Proposal Weaknesses: 1. Equity earned from the sale of the 9% tax credits is conservative and impacts the amount of funds that the City may ultimately be asked to contribute. Conversely, this proposal is seeking the greatest amount of subsidy from the City. 2. Did not really discuss how proposed property management and the delivery of social services would be coordinated within the project by the sponsor. 4 of 4 Dublin Senior Apartments American Baptist Homes of the West (ABHOW) *Preferred financing alternative is the HUD 202 "...because it will ensure that the project serves seniors with limited resources." The HUD 202 program provides a Project Rental Assistance Contract (PRAC) that ensures residents do not have to pay more than 30% of their income towards rent. While the 202-selection process is competitive, it is relatively inexpensive to apply when compared to the tax credit program. It minimizes many of the major costs of developing housing, primarily financing fees and construction period interest. The capital advance provided by the program does not require ongoing debt service nor any repayment at the completion of its term (i.e., 40 years). *City of Dublin funds requested: $1,753,358 for the HUD 202 financing and $1,774,000 for the 9% Tax Credit financing (Note: Applicant states that this amount could potentially come from the City, County, or other public sources. The Applicant also notes that i__fthe State Bond Initiative passes in November 2002, there will be additional funding available from State HCD's Multifamily Housing Program. For purposes of this analysis, this entire amount is assumed to be needed from the City). In addition, ABHOW is willing to provide $100,000 of its own funds in support of the project. *Timeframe (for both HUD 202 and 9% Tax Credit financing; to anticipated Certificate of Occupancy issuance): approximately 4 years. *Tenants projected to pay $220 per month rent (includes utility allowance; 20% adjusted median income or AMI) under HUD 202 financing and $662 per month rent on average (includes utility allowance; 45-50% AMI). *48 units: 47 one-bedroom and 1 two-bedroom (manager's unit) for both the HUD 202 and 9% Tax Credit scenarios. *Used parking ratio of 0.5 spaces per unit (24 spaces); provides for option of sharing underground parking with Senior Center. *One-bedroom unit size: Not identified. Total living and common area space square footage is 40,500 which results in a total development cost of $186.03 per square foot and $156,961.63 per unit for the HUD 202 scenario and $236.36 per square foot and $199,430.38 per unit for the 9% Tax Credit scenario. *Willing to consider using the architect selected by the City for the Senior Center. *Three-story Type V residential construction building over underground parking and on grade landscaping with its entrance directly across from the entrance to the Senior Center. 1 of 5 Permanent Sources of Financing: HUD 202 per Unit Percent Total City of Dublin $ 36,528 23% $1,753,358 FHLB AHP $ 5,000 3% $ 240,000 HUD Capital Advance Funds $115,433 74% $5,540,800 $7,534,158 Permanent Sources of Financing: 9% Tax Credits First Deed of Trust $ 27,069 14% $1,299,300 City of Dublin $ 36,958 19% $1,774,000 FHLB AHP $ 5,000 29% $ 240,000 Tax Credit Equity Proceeds $130,403 65% $6,259,358 $9,572,658* * - Does not match 9% Tax Credit figure below. First Deed of Trust: h~t the HUD 202 scenario there is no private financing involved. Under the 9% Tax Credit scenario, the sponsor assumed a fully amortizing 30-year loan with a debt service coverage (DSC) of 1.15 (Note: ABHOW assumed that the City's loan would be a residual receipt note. However, ABHOW did not take into account that the City could receive payments in excess of the required 1.15 DSC. Taking this into consideration, by the end of year 30 the city could receive approximately $274,239 in residual receipt payments). City of Dublin: 30-year deferred payment residual receipt note with interest rate TBD. Federal Home Loan Bank (FHLB) Affordable Housing Program (AHP): 30-year deferred for as long as units remain affordable. Tax Credit Equity Proceeds: 85 cents/S1.00 of tax credit pay-in. Note: Might be able to obtain a better cents/dollar, if pay-in occurs at stabilized occupancy (i.e., full lease-up which is maintained for three-months). This would require City to advance more funds in the short term, and then have less as a permanent source of funds when tax credit equity proceeds are invested. DeYelopment Budget: HUD 202 9% Tax Credits Acquisition Cost $ 0 $ 0 Construction Costs $5,874,520 $5,874,520 Construction Contingency $ 293,726 $ 293,726 Architectural/Engineering $ 469,962 $ 469,962 Survey & Soils $ 22,500 $ 22,500 2 of 5 Construction Period Loan Interest $ 0 $ 395,816 Construction Loan Int. After Construction $ 0 $ 101,491 Origination Fee $ 0 $ 96,150 Insurance $ 25,000 $ 25,000 Title and Recordation $ 15,000 $ 20,000 Construction Management $ 30,000 $ 30,000 Audit/Cost Certification $ 7,500 $ 7,500 Permanent Financing: -Loan Origination $ 0 $ 30,986 -Title and Recordation $ 5,000 $ 15,000 -Taxes $ 35,000 $ 35,000 Legal Fees: -Lender legal fee $ 0 $ 0 -Construction/Permanent Financing $ 25,000 $ 15,000 Reserves: -Capitalized Operating Reserves $ 20,000 $ 100,000 Appraisal $ 15,000' $ 15,000 Other: -Minimum Capital Investment $ 10,000 $ 0 -TCAC App/Monitoring Fee $ 0 $ 50,729 -Marketing Study $ 4,500 $ 4,500 -Environmental/Phase I $ 4,500 $ 4,500 -Permit Processing Fee $ 352,950 $ 432,000 -Capital Fees (utility fees/hook-ups) $ 159,000 $ 159,000 -Marketing $ 25,000 $ 25,000 -Furnishings $ 25,000 $ 25,000 -Construction Testing $ 15,000 $ 15,000 -Soft Cost Contingency $ 50,000 $ 50,000 Developer Costs: -Developer and Project Admin. Fees $ 50,000 $1,200,000 -Audit and Tax Returns $ 0 $ 0 Total Syndication Costs $ 0 $ 60,000 Total DeveloPmem Costs $7,534,158 $9,573,380 3 of 5 Predevelopment Steps: Will work with representatives of the neighborhood, community, and local seniors to ensure that the project meets local needs and is accepted by the community. In planning for the amerdties and services at the proposed development, ABHOW will seek to complement those at the Senior Center so as not to duplicate. If the Senior Center is completed and operational before the construction of the senior housing is completed, the sponsor wilt coordinate with the operation of the Senior Center. Project Operations: Operating Expenses are projected at $4,000 per unit annually for both the HUD 202 and 9% tax credit scenarios with Replacement Reserves accumulating at $400 per unit annually for both scenarios. Operating Reserves are initially capitalized at $20,000 under the HUD 202 scenario while under the 9% tax credk scenario operating reserves are initially capitalized at $100,000. Operating Reserves then accumulate at 5% of Effective Gross Income annually under the HUD 202 scenario and at 2% under the 9% tax credit scenario that is below TCAC regulations. Proforma projections in terms of Income (2%) and Expense (3%) inflation factors are the same under both scenarios, which is consistent with TCAC requirements. Under the HUD 202 scenario, 100% of the units affordable to households at approximately 20% adjusted median income (AMI). Under the tax credit scenario, affordability would be 45-50% AMI. Proposal Strengths: t. Depending on the City's goals, the HUD alternative offers the deepest affordability and will serve the lowest income possible at approximately 20% AMI. 2. Willing to consider using the architect selected by the City for the 'Senior Center. 3. Will try to coordinate and augment existing delivery of social services to residents. 4. Organization is financially strong. 5. Experience of development team is good.. 4 of 5 Proposal Weaknesses: 1. Completion timeframe is approximately four years under both the HUD 202 and 9% Tax Credit scenarios. 2. Presentation of 9% Tax Credit Development Budget scenario appears to be a bit inflated. Cost estimates seem to be high estimates. Would tike additional information on project costs in regards to podium construction and financing structure. 3. Did not really discuss how proposed property management and the delivery of social services would be coordinated within the project by the sponsor. 5of5 Dublin Senior Apartments Mercy Housing California (MHC) ,9% tax credit alternative (only alternative considered); eliminated the HUD 202 alternative because "...the per unit subsidy level needed fi.om the City is higher than a 9% tax credit deal." However, the income level to be served need~ to be higher in a 9% tax credit scenario than in a HUD 202 scenario. *City of Dublin funds requested: $1,882,145. *Timeframe (from negotiating MOU with City to close of permanent loan at 90% occupancy): 2 years 7 ½ months. *Tenants projected to pay $559 per month rent (40% adjusted median income). *44 units: 43 one-bedroom and 1 two-bedroom (manager's trait) *Used parking ratio of 0.5 spaces per unit (22 spaces); suggest utilizing/sharing of 20+/- of the Senior Center spaces. *One-bedroom unit size: 600 square feet. Total residential square footage is 37,200 which results in a total development cost of $213.66 per square foot and $128,198.48 per unit. *Not able to use Senior Center architect. *Four-story Type V construction with some tuck under parking and on grade landscaping which will visually connect it with the Senior Center. Each unit will be handicapped accessible and each floor will be accessible by an elevator. The development will include a community room (600-800 square feet), on-site laundry, and property management offices. *City funds are projected to partially go in during predevelopment phase and be fully funded during construction rolling-over into a permanent financing source. Permanent Sources of Financing.:. Per Unit Percent Total First Deed of Trust $ 10,146 6% $ 446,443 City of Dublin $ 42,776 24% $1,882,145 FHLB AHP $ 5,000 3% $ 220,000 Tax Credit Equity Proceeds $122,721 68% $5~399,718 $7,948,306 1 of 4 First Deed of Trust: Fully amortizing 15-year loan with a debt service coverage (DSC) of 1. t 5. Note: BecaUse the loan is fully amortized for 15 years, it is projected that Mercy Housing will begin to pay City's residual receipts beginning in year 16. After year 30, Mercy Housing is projected to have paid the City approximately $532,323. City of Dublin: 30-year deferred payment residual receipt note with interest rate TBD. Federal Home Loan Bank (FHLB) Affordable Housing Program (AHP): 30-year deferred for as tong as units remain affordable. Tax Credit Equity Proceeds: 82 cents/St.00 of tax credit assumes bulk of pay-in at end of construction used to repay construction loan. Note: Might be able to obtain a better cents/dollar, ii'pay-in occurs at stabilized occupancy (i.e., full lease-up which is maintained for three-months). This wotfld require City to advance more funds (to repay construction loan)in the short term, and then have less as a permanent source of funds when tax credit equity proceeds are invested. Development Budget: 9% Tax Credits Acquisition Cost $ 0 Construction Costs $4,852,224 Architectural Costs $ 291,I33 Survey & Engineering $ 9,000 Construction Period Loan Interest $ 241,163 Origination Fee $ 24,703 Insurance $ 16,000 Title and Recordation $ 10,000 Permanent Financing: -Loan Origination $ 4,659 -Title and Recordation $ 5,000 Legal Fees: -Lender legal fee $ 10,000 -Construction/Permanent Financing $ 10,000 Reserves: - -Capitalized Operating Reserves $ 71,968 Appraisal $ 6,500 Other: -TCAC App~donitoring Fee $ 72,720 -Environmental/Phase I $ 4,000 -Permit Processing Fee $ 793,461 -Capital Fees (utility fees/hook-ups) $ 109,347 2 of 4 -Marketing $ 30,350 -Furnishings $ 36,250 -Construction Testing $ 5,000 -Soft Cost Contingency $ 50,000 Developer Costs: -Developer and Project Admin. Fees $ 750,000 -Audit and Tax Returns $ 3,000 Total Syndication Costs $ 36,800 Total DeVelopment Costs $7,933,500 (Does not match Permanent Sources of Financing above) Predevelopment Steps: Want to work with the City to coordinate site design. MHC plans on submitting a request for predevelopment funding from the City to cover the initiation of design work, site due diligence, and other predevelopment activities. MHC will coordinate with Senior Center construction and/or operation so as to minimize disruptions and maintain schedule. Project Operations: Operating Expenses are projected at $4,300 per unit annually with Replacement Reserves accumnlating at $250 per unit annually. Operating Reserves are initially capitalized at $71,968 and then accumulate at 3% of Effective Gross Income annually per TCAC regulations (Note: A proposed development needs to show a 1% differential between Income and Expenses with Income being projected at the lower rate). Proforma projections in terms of Income (2.5%) and Expense (3.5%) inflation factors are in accordance with TCAC requirements. t00% of the units affordable to households at 40% adjusted median income (AM[). Community Operations Manager would serve as the on-site property manager and support services coordinator. A janitor and maintenance technician would also be assigned to the property. "Property management staff.., would be clustered with property management staff at two large properties [also in Alameda County], creating management efficiencies and support." 3 of 4 Proposal Strengths: - 1. comPletion timeframe is less than three years. 2. Affordability level is at 40% ANti. 3. Would begin paying City residual receipts at the start of year 16 and af[er 30 years would have paid the City $532,323. 4. Organization is financially strong. 5. Experience of development team is good. Proposal Weaknesses: 1. Do not clearly identify how support services would potentially be delivered in coordination with other support services providers. 2. Are unable to even consider using the same architect as Senior Center. 3. The total development cost for the 9% Tax Credit scenario seems to be aggressive. 4. Do not accurately assess the potential use of HUD 202 funding. 5. Concerned about proposed property management cluster approach. Although it would create economies, there is a concern about property management's response to ongoing resident issues. 4 of 4 INTERVIEW QUESTIONS FOR HOUSING DEVELOPERS Design and Compatibility Questions: 1. The City is going to build a new Senior Center adjacent to this housing project. How does the design and site plan of the housing project as proposed by your organization relate to the Senior Center and nearby area? 2. What key design and improvement amenities are needed for this senior project as proposed by your organization? 3. "Aging in place" is now an important concept to consider in senior housing development. Do you anticipate this in your design, and how do you accommodate for the needs of the senior resident aging while residing in the apartment? l Financing Questions: 4. Are you intending to apply for a Section 202 loan for any other project during the next funding cycle? 5. Has your organization entered into an agreement with a City for the development of affordable housing, was approved for a loan from that City, and as construction began the cost exceeded the available financing? How did you handle this situation? 6. Have you ever deferred the developer's fee? (The developer fee is the fee that the developer uses to pay the agency's expenses, such as staff cost, for the project) How do you defer it? When do you start collecting money on this deferred fee? 7. Do you have any alternatives to your 'current financing proposal? 8. Would you consider applying for both Section 202 AND 9% tax credits for this project? Would you consider trying to use both to fund the project, or applying for both to increase the chances of receiving funding in one year's time? Affordability Level and Tenant Questions: 9. Senior housing often provides additional supportive services to the residents. How have you coordinated with other agencies to pay for these services in your exiSting senior projects? 10. The City of Dublin has certain priorities that are to be used in tenant selection. How do you see implementing these priorities? ATTACHMENT #4 Interview Questions for Housing Developers September 23, 2002 Page 2 Completion Time line 11. The property where this project will be constructed is currently owned by the County of Alameda. This property will be transferred to the City of Dublin once the new library in the Civic Center is complete. It is anticipated that thc library will be complete in January of 2003. Thc land transfer would occur shortly afterwards. Thc City would not be able to enter into a ground lease for the property until it holds thc title to the property. Do you anticipate this being a problem in securing financing? 12. The City is interested in having this constructed as soon as possible. How would you feel about being given a definite amount of time in which to secure financing for the project? (i.e. two rounds of tax credit applications) Management Capacity and History 13. Describe thc history o£ one o£ the senior projects you have built 5-10 years ago. How long has the project been operational under your management and what is its present condition? Describe the maintenance history of the project.