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Amendments to Promissory Notes with C&C Development Company and Orange Housing Development Corporation March 6, 2018 Page 3 COMMUNITY REDEVELOPMENT AND HOUSING COMMISSION RECOMMENDATION At its regular meeting on January 24, 2018, the Community Redevelopment and Housing Commission (CRHC) approved the recommended actions by a vote of 7:0 (Frazier absent). DISCUSSION On October 30, 2017, C&C Development Company and Orange Housing Development Corporation submitted a request to increase the property management fee to 8% of gross rents for six (6) of their affordable housing developments (Exhibit 1). The costs to provide management services have increased at each project while the gross rents have minimally increased. Specifically, the very -low rents provided by the California Department of Housing and Community Development have only increased an estimated two (2) percent since 2009. The proposed increase would raise property management fees for the six properties and decrease the amount of residual receipts payable to the City and/or Housing Authority as the Successor Housing Agency under the City's / Agency's Loan Agreements for each property. As a result, the rents for the occupants of the units will not increase. The property names and current management fees are outlined below: Property Name Current Management Fee Proposed Management Fee Ross & Durant 6.25% 8.00% Wilshire & Minnie 6.50% 8.00% Townsend & Raitt 6.50% 8.00% 1410 N. Durant 6.50% 8.00% Lacy & Raitt 7.00% 8.00% 326 S. Gamsey 7.00% 8.00% The request was submitted to Keyser Marston Associates (KMA). KMA verified that an 8% management fee is reasonable and comparable to other affordable housing projects across the State of California. Staff also reviewed the management fees for the last five affordable housing development projects that were approved by City Council/Housing Authority including the Depot at Santiago, Andalucia, the Orchard, Santa Ana Arts Collective, and First Street Apartments. All five projects have a management fee of 8% of gross rents. As a property gets older, it gets more expensive to manage due to the limited lifespan of various assets on the property and staff agrees with the developer's request to adjust their management fees to the current standard. In return for an increase in their property management fees, C&C Development Company and Orange Housing Development Corporation are proposing to hire additional staff to maintain the high level of service and maintenance at these properties. The requested increase in property management fees will not result in an increase to any tenants rents. Rent limits are based on limits set by the California Tax Credit Allocation Committee (TCAC) and/or the California Department of Housing and Community Development (HCD), depending on how the property was financed. Based on 2017 rents for the six properties the total increase between the 8% • I .