RSG, INC - Laserfiche WebLink

Home Browse Search

3 SCOPE OF SERVICES The following section details our approach and methodology for the Scope of Work requested by the City. Financial Feasibility Analysis and Affordable/Market Rate Housing Finance Strategies: RSG staff would conduct a thorough review of developer project proformas to determine the reasonableness of estimated development costs, revenue assumptions and proposed financing structure, including, but not limited to, the potential for receiving Low Income Housing Tax Credits ("LIHTC"). More specifically, RSG staff will: • Review development costs, constraints, extraordinary issues, and financing sources (both equity and debt). RSG will scrutinize the developer's assumptions to ensure that the anticipated.costs, revenues, and operating and replacement reserves are realistic and not over/understated. Developer fees, deferred fees and long-term cash flow will also be reviewed to ensure that the prospective developer can remain solvent as operator throughout the duration of the affordability period. Additional detail on tasks involved with this review are presented below. o Costs (Uses) - Direct and indirect development costs will be examined to identify budget excesses or deficiencies based on third -party data sources and comparable project experience. RSG will evaluate proposed construction costs for the improvements based on data obtained for Marshall & Swift Valuation Services, and our recent comparable project experience, as well as the related "indirect" construction costs identified by each developer proposal. RSG would perform a residual land value analysis for comparison to market values for such land. Expenses will be reviewed for completeness to ensure they fairly reflect continuing needs. Additionally, if Capital Needs Assessment for the project is provided, RSG can review to ensure that costs are aligned with the improvements. o Rents - Proposed rents will be researched and confirmed to ensure that they comply with all program regulations. This will include a summary of the minimum and maximum rents that can be charged to tenants. The analysis will identify the financial implications associated with the application of the lesser of the California Health and Safety Code ("H&SC") or California Tax Credit Allocation Committee ("TCAC") rents for the project based on the proposed use of any Low and Moderate -Income Housing Asset Funds to assist the project pursuant to the requirements under Senate Bill 341. o Funding/Financing (Sources) - The financial capacity will be evaluated by examining the viability of the proposed capital stackto finance construction and permanent financing based on current market lending limitations and opportunities. Current requirements and availability of funds related to County Notices of Funding Availability ("NOFAs") (including County project -based vouchers and HOME funds), Affordable Housing Program ("AHP") and other potential financing sources will be reviewed to determine if all potential funding sources have been maximized to reduce the requested subsidy from the City. As applicable, RSG will examine each development proposal to ensure that they meet HOME, project -based voucher, and/or any other regulatory requirements. In cases where the restrictions conflict, RSG recommends that the most stringent requirement be followed. RSG can also prepare a subsidy layering analysis to ensure that federal funds are not over subsidizing the affordability of units. • Conduct a return on investment ("ROI") analysis based on a combination of RSG experience, research of comparable transactions in Orange county, and discrete consultations with lenders and investor representatives in our professional network. Y Utilizing the analyses from the above tasks, deliver a peer review pro forma analysis, consisting of a detailed construction and project phasing assessment, a phasing and post -stabilization 55-year operating forecast, and various measures of ROI based on the proposed developer's preferred disposition of the project once developed. This analysis will indicate if any potential gap financing is needed.