80A - PRE-LOAN COMMITMENT LACY PROJECT

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Commitment of Affordable Housing Funds and a Ground -Lease to Habitat for Humanity February 5, 2019 Page 5 Award Recommendation: • Inclusionary Housing Fund: $231,494.00 • Lease Agreement for 826 and 830 N Lacy St. o Appraised Value as of October 25, 2018: $578,000 The commitment letter with Habitat for Humanity for $231,494 in Inclusionary Housing Funds and a 99 -year ground -lease of 826 N Lacy Street and 830 N. Lacy Street (APN: 398-041-22 / 398- 041-18) for the development of the Lacy Street affordable housing project provides the official award from the Housing Authority (Exhibit 1). In compliance the City's Affordable Housing Funds Policies and Procedures, the City's real estate advisor, Keyser Marston Associates (KMA), has confirmed the underwriting for the Project, the financial gap, and other programmatic requirements related to the funding sources. KMA has reviewed the developer's estimates and projections of rents, expenses, reserves and development costs in accordance with industry - standard underwriting guidelines and recommends the full amount of the award based on their underwriting and subsidy layering analysis (Exhibit 2) along with other policy recommendations. It is important to note that this award above was amended after the initial recommendation by the Review Panel. Following the initial award recommendation by the Review Panel for only a 99 - year ground lease, Habitat for Humanity met with staff and communicated that the economic feasibility of the project had changed since the submission of their proposal on August 15, 2018 under RFP # 18-056 due to changes requested by the French Park Neighborhood Association to the design of the project. Specifically, Habitat for Humanity had submitted a proposal before the deadline for the RFP on August 15, 2018 based on a design that they had not reviewed with the French Park Neighborhood Association. After the deadline, Habitat for Humanity met with the French Park Neighborhood Association, as required in the RFP, [The RFP. stated, 'This vacant site will need to comply with the design guidelines of the French Park Historic District and will require review by the French Park Design Committee."] Following their meeting, the French Park Neighborhood Association requested revisions to the design and construction of their project, which increased the cost of construction for Habitat for Humanity to develop the project. As a result, the financial gap for the construction of the project actually increased for more than $231,494 than initially requested and Habitat for Humanity had preliminarily accepted an award (the 99 -year Ground Lease) for a project that they no longer had the financial capacity to develop. In order to support this project to move forward and comply with the French Park Neighborhood Association, staff reviewed the affordable housing funds available in RFP # 18-056. [As stated in the RFP, "Available affordable housing funds and land assets being made available in this RFP are subject to change."] On January 14, 2019, the City received a disbursement of in -lieu fees from the Heritage Phase III project for over $3.8 million. With these new Inclusionary Housing Funds received by the City, staff was able to amend the original award recommended by the Review Panel for Habitat for Humanity to meet their full original request. Habitat for Humanity plans to address their remaining financial gap through resource development activities in the form of a grant for the project.