HomeMy WebLinkAbout25J - AGMT ARTS COLLECTIVE GRANTREQUEST FOR
COUNCIL ACTION
CITY COUNCIL MEETING DATE:
AUGUST 21, 2018
TITLE:
APPROVE AMENDMENT TO LOAN
AGREEMENT FOR THE SANTA ANA
ARTS COLLECTIVE GRANT FUNDED
(STRATEGIC PLAN NOS. 5,3A; 5,3C)
J'
CITY ANAGER
RECOMMENDED ACTION
CLERK OF COUNCIL USE ONLY:
APPROVED
❑ As Recommended
❑ As Amended
❑ Ordinance on 1s' Reading
❑ Ordinance on 2n° Reading
❑ Implementing Resolution
❑ Set Public Hearing For
CONTINUED TO
FILE NUMBER
Authorize the City Manager and the Clerk of the Council to execute an Amendment to the Loan
Agreement with Santa Ana Arts Collective, L.P. for an additional $407,871 in HOME Investment
Partnerships Program funds for a total loan amount not to exceed $2,627,631, subject to non -
substantive changes approved by the City Manager and City Attorney.
DISCUSSION
As an entitlement jurisdiction, the City of Santa Ana annually receives federal grant funds through
the HOME Investment Partnerships Program (HOME) for the development of affordable housing.
However, the National Defense Authorization Act of 1991 (Act) established rules and deadlines
governing the availability of federal appropriations for expenditure. This legislation mandated a
statutory and non-waiveable eight-year expenditure deadline for HOME Program grants. As a
result of this Act, any HOME Program funds appropriated to the City in FY 2011 will not be
available to expend after September 20, 2018 and HOME Program funds remaining in the City's
FY 2011 HOME Program grant on this date will be recaptured by the United States Treasury.
The City currently has $384,573.41 remaining from the City's FY 2011 grant that will be
recaptured on September 20, 2018 if the City is unable to commit and expend the funds before
that date. Other similar -sized cities throughout the country also have FY 2011 HOME Program
grant funds that are subject to recapture on that date as well as show on HUD's HOME Expiring
Funds Report from July 2, 2018. (Exhibit 1)
In addition to the $384,573.41 remaining from the City's FY 2011 HOME Program grant funds
that are subject to recapture on September 20, 2018, the City also has earned $24,710.24 in
program income during FY 2017 that has not been expended. Under the, HOME Grant -Based
Accounting Interim Rule, the $24,710.24 in program income must be drawn down before the
$384,573.41 of expiring FY 2011 HOME Program grant funds. Therefore, the City must draw
down and expend a total of $409,283.65, equal to the $384,573.41 remaining from the City's FY
;I
25J-1
Amendment to HOME Loan Agreement for the Santa Ana Arts Collective
August 21, 2018
Page 2
2011 HOME Program grant funds plus $24,710.24 in FY 2017 program income that must be
expended prior to drawing down the expiring FY 2011 funds.
Following the adoption of the City's Affordable Housing Funds Policies and Procedures, on June
19, 2018, City Council authorized the Community Development Agency to release the Fiscal
Year 2018 — 2019 Request for Proposals (RFP) seeking proposals to develop affordable rental
and ownership project(s) in the City of Santa Ana with funding from the HOME Program,
Community Development Block Grant Program, Project Based Voucher Program, and Housing
Successor Agency Fund. As part of this RFP, the City made available the $384,573.41 in FY
2011 HOME Program funds that must be expended by September 20, 2018.
In order to commit and expend these funds before the deadline for recapture, staff worked
proactively to determine if there were eligible proposals that could be received from developers
for the $384,573.41 of expiring FY 2011 HOME Program funds. After discussions with the City
and Keyser Marston Associates, Meta Housing Corporation submitted a proposal on July 23,
2018 for an additional $407,871 for the Santa Ana Arts Collective to cover the increased costs of
construction. (Exhibit 2) After receiving the proposal, staff formed a Review Panel to review the
proposal. The proposal was evaluated by the Review Panel based only upon the written
evaluation criteria in the RFP. Following the evaluation process, the Review Panel recommends
an award of $407,871 to pay for the increased costs of construction for the Santa Ana Arts
Collective.
The proposal received from Meta Housing Corporation exceeds the FY 2011 expiring HOME
grant funds by $23,297.59, equal to $407,871 minus the $384,573.41 of expiring FY 2011 HOME
Program funds. However, since the total funds that the City must draw down and expend is
equal to $409,283.65, the additional $23,297.59 is available for the project. If the City does not
commit and expend these funds for this project, the City will lose $384,573.41 on September 20,
2018.
Background on Funding for the Santa Ana Arts Collective and the Amendment
On November 3, 2015, City Council awarded Meta Housing Corporation (Developer) a pre -loan
commitment of Inclusionary Housing Funds, Community Development Block Grant (CDBG) and
HOME Investment Partnerships Program (HOME) funds, not to exceed $4,635,000, for an
affordable housing project called the Santa Ana Arts Collective (Project) located at 1666 N. Main
Street. Due to a substantial financial gap remaining for the Project, on June 20, 2017, City
Council directed staff to amend the Inclusionary Housing loan agreement for an additional
amount not to exceed $2,900,000 in Inclusionary Housing funds and provide for City Council
consideration at the July 5, 2017 meeting. And on July 5, 2017, City Council authorized the City
Manager and the Clerk of the Council to:
1) Execute an amended and restated Community Development Block Grant and Inclusionary
Housing Funds loan agreement with Santa Ana Arts Collective, L.P. for an additional $2,900,000
in Inclusionary Housing Funds as approved by City Council on June 20, 2017 for a total loan
amount not to exceed $5,275,000;
25J-2
Amendment to HOME Loan Agreement for the Santa Ana Arts Collective
August 21, 2018
Page 3
2) Execute a loan agreement with Santa Ana Arts Collective, L.P. for $2,219,760 in HOME
Program funds as approved by City Council on November 3, 2015;
Following the approvals by City Council on July 5, 2017, the amended and restated Community
Development Block Grant and Inclusionary Housing Funds loan agreement with Santa Ana Arts
Collective, L.P. was executed for a total loan amount not to exceed $5,275,000, and a loan
agreement with Santa Ana Arts Collective, L.P. for $2,219,760 in HOME Program funds was also
executed for the development of the project. The total amount of both loans together is
$7,494,760. With these two loan agreements approved and recorded against the property, the
developer Santa Ana Arts Collective, L.P., closed on their financing in July 2017.
The Amendment to the original HOME Program loan will keep the same terms as the existing loan
including the same affordability restrictions and covenants. (Exhibit 3) The Amendment adds
$407,871 to the existing HOME loan amount of $2,219,760 for a new total loan amount of
$2,627,631. The additional $407,871 will be used to pay for unanticipated hard costs of
construction that increased after the project closed on their financing. This Amendment will
increase the total loans for the project to $7,902,631.
The Santa Ana Arts Collective is the first project entitled under the City of Santa Ana's Adaptive
Reuse Ordinance, which was adopted in December 2014, to encourage the recycling of historic,
underutilized, commercial buildings into housing. Though challenges are common for adaptive
reuse buildings, Meta Housing Corporation has found cost effective ways of overcoming many of
them. Still the project needs $407,871 in additional gap financing. Keyser Marston Associates
completed a subsidy layering analysis and confirmed that the $407,871 in additional funds is
necessary for the development of the project (Exhibit 4). Specifically, these additional funds will
pay for:
- General contract (hard cost) work completed during July 2018
- Deputy inspections completed in June 2018
- Architecture, structural engineering, and soils engineering completed from January 2018 to
June 2018.
- Utility engineering started in March 2018.
In order to reduce their financial gap, Meta Housing Corporation is also currently applying for
additional financing through the County of Orange Special Needs Housing Program for Mental
Health Services Act funds. If approved, ten of the 57 units would be assisted by the Special Needs
Housing Program for eligible persons with a disability who qualify under the project's artist
preference.
If approved by City Council, $407,871 will be drawn down from HUD before September 14, 2018
and expended for the project.
25J-3
Amendment to HOME Loan Agreement for the Santa Ana Arts Collective
August 21, 2018
Page 4
STRATEGIC PLAN ALIGNMENT
The activities covered by this report allow the City to meet Goal #5 - Community Health,
Livability, Engagement & Sustainability, Objective # 3 (Facilitate diverse housing opportunities
and support efforts to preserve and improve the livability of Santa Ana neighborhoods), Strategy
A (Continue to explore options Citywide regarding the re -use of commercial or industrial buildings
that are currently underutilized or vacant for mixed-use residential projects), and Strategy C
(Provide that Santa Ana residents, employees, artists and veterans receive priority for affordable
housing created under the City's Housing Opportunity Ordinance or with City funding to the
extent allowed under state law).
FISCAL IMPACT
Funds for the HOME Program loan will be carried forward from prior year for expenditure in FY
2018-19 as follows:
Grant Year
Account No. Amount
2011
13018780-69152 $384,573.41
2017
13018780-69152 $ 23,297.59
Totals $407,871.00
Steven A. Mendoza
Executive Director
Community Development Agency
APPR VED AS TO FUNDS AND ACCOUNTS:
Sergio Vidal G 1-,
Assistant Director d
Finance and Management Services Agency
Exhibits: 1. HUD's HOME Expiring Funds Report from July 2, 2018
2. Proposal from Meta Housing Corporation
3. Amendment to HOME Investment Partnerships Program Loan Agreement
4. Subsidy Layering Analysis by Keyser Marston Associates
25J-4
PJ's with Undrawn Funds EXHIBIT 1
(1992 - 2011)
HUD's HOME Expiring Funds Report from July 2, 2018
FISCAL
YEAR
ST
PARTICIPATING JURISDICTION
RECIPIENT OF FUNDS
FUND
TYPE
BALANCETO
COMMIT
DRAW PENDING
APPROVAL
BALANCE TO DRAW
2011
AL
HUNTSVILLE
HUNTSVILLE
CO
$0.35
$0.00
$0.35
2011
AR
ARKANSAS
ARKANSAS
EN
$37,263.00
$0.00
$37,263.00
2011
AR
ARKANSAS
HABITAT FOR HUMANITY OF PULASKI C
SU
$439,273.34
$0.00
$439,273.34
2011
AR
ARKANSAS
LAKEVIEW, CITY OF
SU
$891.00
$0.00
$891.00
2011
AR
ARKANSAS
ARKANSAS LAND & FARM DEVELOPME
SU
$154,000.00
$0.00
$171,238.71
2011
AR
LITTLE ROCK
LITTLE ROCK
EN
$45,640.60
$0.00
$104,446.00
2011
CA
BALDWIN PARK
BALDWIN PARK
CR
$70,776.60
$0.00
$70,776.60
2011
CA
BALDWIN PARK
BALDWIN PARK
EN
$55,747.84
$0.00
$55,952.84
2011
CA
BURBANK
BURBANK
AD
$31,840.84
$0.00
$36,620.74
2011
CA
CALIFORNIA
CALIFORNIA
CO
$116,007.00
$0.00
$116,007.00
2011
CA
CALIFORNIA
CALIFORNIA
CR
$942,658.32
$0.00
$942,658.32
2011
CA
CORONA
CORONA
AD
$39,579.73
$0.00
$39,579.73
2011
CA
COSTA MESA
COSTA MESA
EN
$94,551.85
$0.00
$94,551.85
2011 CA
DOWNEY
DOWNEY
EN
$0.00
$0.00
$6,655.93
2011
CA
FULLERTON
FULLERTON
CR
$106,322.55
$0.00
$106,322.55
2011
CA
FULLERTON
FULLERTON
EN
$0.00
$0.00
$306,455.26
2011
CA
HAWTHORNE
New Life Christian Fellowship Church, I CR
$0.00
$0.00
$66,275.00
2011
CA
INGLEWOOD
INGLEWOOD
EN
$0.00
$0.00
$232,911.29
2011
CA
LYNWOOD
Partnership Housing, Inc.
CR
$7,292.71
$0.00
$7,292.71
2011
CA
MODESTO
MODESTO
EN
$0.00
$0.00
$13,209.73
2011
CA
MONTEBELLO
MONTEBELLO
AD
$12,658.24
$0.00
$29,726.49
2011
CA
ORANGE
ORANGE
AD
$1,015.24
$0.00
$44,329.44
2011
CA
ORANGE
ORANGE HOUSING DEVELOPMENT COI
CR
$86,154.15
$0.00
$86,154.15
2011
CA
PASADENA
ABODE COMMUNITY HOUSING
CR
$0.00
$0.00
$139,922.46
2011 CA
RICHMOND
RICHMOND
AD
$72,602.54
$0.00
$72,602.54
2011
CA
ROSEMEAD
ROSEMEAD
CR
$30,171.50
$0.00
$30,171.50
2011 CA
SANTAANA
SANTA ANA
AD
$0.00
$0.00
$87,270.33
2011
CA
SANTA ANA
SANTA ANA
EN
$224,555.93
$0.00
$384,573.41
2011
CA
SANTA CLARA
SANTA CLARA
EN
$0.00
$0.00
$49,323.49
2011
CA
SANTA CRUZ
SANTA CRUZ
CR
$79,447.35
$0.00
$79,447.35
2011 CA
SANTA MONICA
SANTA MONICA
CR
$105,665.85
$0.00
$105,665.85
2011
CA
SANTAMONICA
SANTAMONICA
EN
$0.00
$0.00
$456,440.85
2011
CA
STOCKTON
ASSOCIACION CAMPESINA LAZARD CA
CR
$0.00
$0.00
$160,198.50
2011
CA
WHITTIER
WHITTIER
CR
$66,888.90
$0.00
$66,888.90
2011
CO
ARAPAHOE COUNTY
COMMUNITY HOUSING DEVELOPMENI
SU
$0.00
$0.00
$37,490.00
2011
CO
BOULDER
FLATIRONS HABITAT FOR HUMANITY
CR
$598.04
$0.00
$598.04
2011
CO
BOULDER
BOULDER
EN
$14,401.96
$0.00
$14,401.96
2011
CT
STAMFORD
STAMFORD
CR
$75,413.45
$0.00
$75,413.45
1999
DC
DISTRICTOF COLUMBIA
DISTRICT OF COLUMBIA
EN
$0.00
$0.00
$360,952.50
2011
DC
DISTRICTOF COLUMBIA
DISTRICT OF COLUMBIA
EN
$1,018,103.54
$0.00
$2,402,912.06
2001
DC
DISTRICTOF COLUMBIA
DISTRICT OF COLUMBIA
EN
$0.00
$0.00
$360,952.50
2011
FL
BROWARD COUNTY
BROWARD ALLIANCE FOR NEIGHBORH
CR
$0.00
$0.00
$6,203.04
2011
FL
COLLIER COUNTY
COLLIER COUNTY
EN
$89,403.97
$0.00
$276,374.32
2011
FL
DAYTONA BEACH
DAYTONA BEACH
CR
$21,316.65
$0.00
$21,316.65
2011
FL
DAYTONA BEACH
HAVEN RECOVERY CENTER INC.
CR
$22,500.00
$0.00
$22,500.00
2011
FL
HIALEAH
HIALEAH
AD
$0.00
$0.00
$102,859.73
2011
FL
MARION COUNTY
MARION COUNTY
EN
$175,556.86
$0.00
$175,556.86
20111
FL
I MIAMI BEACH
MIAMI BEACH
EN
$0.00
$0.00
$100,842.18
2011
FL
PALM BEACH COUNTY
NEIGHBORHOOD RENAISSANCE, INC.
CR
$0.00
$0.00
$229,622.78
2011
FL
PALM BEACH COUNTY
WORD OF FAITH CDC
CR
$3.66
$0.00
$3.66
2011
FL
SARASOTA
SARASOTA
AD
$0.00
$0.00
$88,571.10
2011
FL
WEST PALM BEACH
WEST PALM BEACH
AD
$0.00
$0.00
$6,250.24
2011
FL
WEST PALM BEACH
WEST PALM BEACH
EN
$0.00
$0.00
$88,358.32
2011
GA
ATLANTA
PEOPLESTOWN REVITALIZATION CORP
Cl-
$5,770.88
$0.00
$5,770.88
2011
GA
ATLANTA
UNIVERSITY COM MUNITYDEVELOPME
CL
$5,076.00
$0.00
$5,076.00
2011
GA
ATLANTA IATLANTA
ICR 1
$140,276.62 1
$0.001
$140,276.62
25J1-5 7/3/2018
PJ's with Undrawn Funds
(1992 - 2011)
FISCAL
YEAR
ST
PARTICIPATING IURISDICTION
RECIPIENT OF FUNDS
FUND
TYPE
BALANCETO
COMMIT
DRAW PENDING
APPROVAL
BALANCE TO DRAW
2011
GA
ATLANTA
SUMMECH CDC
CR
$63,752.07
$0.00
$155,838.06
2011
GA
ATLANTA
PITTSBURGH COMMUNITY IMPROVEM
CR
$0.00
$0.00
$70.00
2011
GA
ATLANTA
PEOPLESTOWN REVITALIZATION CORP
CR
$20,576.00
$0.00
$20,576.00
2011
GA
FULTON COUNTY
FULTON COUNTY
CR
$162,164.85
$0.00
$162,164.85
2011
GA
MACON-BIBB COUNTY
MACON-BIBB COUNTY
CR
$115,073.60
$0.00
$115,073.60
2001
IL
EAST ST. LOUIS
EAST ST. LOUIS
EN
$0.00
$0.00
$16,287.13
2011
IL
JOLIET
JOLIET
AD
$0.00
$4,030.00
$4,138.93
2011 IL
SPRINGFIELD
Nehemiah Expansion, Inc.
CR
$16,419.95
$0.00
$16,419.95
2011
IL
WILLCOUNTY
WILL COUNTY
AD
$30,441.73
$0.00
$30,441.73
20111N
MUNCIE
MUNCIE HOMEOWNERSHIP AND DEVE SU
$1,722.72
$0.00
$1,722.72
2011
KY
OWENSBORO
OWENSBORO
CR
$0.05
$0.00
$0.05
2011 LA
BATON ROUGE
URBAN RESTORATION ENHANCEMENT
CR
$0.00
$0.00
$204,080.35
2011
LA
BATON ROUGE
MID CITY REDEVELOPMENT ALLIANCE,
CR
$0.00
$0.00
$125,163.00
2011 LA
JEFFERSON PARISH
JEFFERSON PARISH
EN
$0.00
$0.00
$115,748.94
2011 LA
ILAKE CHARLES
GREATER SOUTHWEST LOUISIANA CHE
CR
$8,214.00
$0.00
$8,214.00
2011
LA
LAKE CHARLES
LAKE CHARLES
CR
$26.85
$0.00
$26.85
2011
MD
BALTIMORE COUNTY
ST. AMBROSE HOUSING AID CENTER, It
CR
$0.00
$0.00
$255,014.40
2011
MI
FLINT
GENESEE COUNTY HABITAT FOR HUMP
CR
$0.00
$0.00
$62,899.26
2011
MN
HENNEPIN COUNTY
Housing Authority of St. Louis Park
SU
$0.00
$0.00
$119,448.00
2011
MO
MISSOURI
COMMUNITYACTION PARTNERSHIP D1
CR
$1.00
$0.00
$1.00
2011
MO
ST. JOSEPH
ST. JOSEPH
EN
$0.00
$0.00
$45,098.13
2011
NC
CHARLOTTE
BELMONTCDC
CR
$101,957.57
$0.00
$101,957.57
2011
NC
ROCKY MOUNT
South Eastern North Carolina CDC
CR
$0.00
$0.00
$84,429.25
2011
NC
ISURRY COUNTY
THE GREATER MOUNTAIRY HABITAT F
CR
$0.00
$0.00
$45,071.84
2011
NJ
IRVINGTON TOWNSHIP
IRVINGTON TOWNSHIP
AD
$0.00
$0.00
$47,809.03
2011
NJ
NEWARK
NEWARK
AD
$6,262.80
$0.00
$261,000.95
2011
NJ
OCEAN COUNTY
OCEAN COUNTY
AD
$0.00
$0.00
$24,456.26
2011
NJ
SOMERSETCOUNTY
SOMERSET COUNTY
CR
$30,816.40
$0.00
$30,816.40
2011
NJ
TRENTON
TRENTON
EN
$371,981.91
$0.00
$371,981.91
2011
NJ
UNION COUNTY
Premier Community Development
CR
$0.00
$0.00
$99,244.75
2011
NJ
VINELAND
VINELAND
EN
$0.00
$0.00
$5,167.87
2011
NV
CLARK COUNTY
NEVADA HAND INC.
CR
$0.00
$0.00
$77,890.65
2011
NY
I Babylon Township
Babylon Township
EN
$16,252.09
$0.00
$17,341.09
2011
NY
Binghamton
FIRST WARD ACTION COUNCIL, INC
CR
$1.00
$0.00
$3.00
2011
NY
Binghamton
Binghamton
CR
$2,773.00
$0.00
$2,773.00
2011
NY
BUFFALO
ST. JOHN FRUITBELT CDC
CO
$26,000.00
$0.00
$26,000.00
2011
NY
BUFFALO
BLACK ROCK -RIVERSIDE NHS, INC.
CO
$0.00
$0.00
$24,000.00
2011
NY
DUTCHESS COUNTY
HUDSON RIVER HOUSING
CR
$17,809.06
$0.00
$17,809.06
2011
NY
ISLIP TOWNSHIP
SUBURBAN HOUSING DEV & RESEARCI
CR
$0.00
$0.00
$49,375.80
2011
NY
MOUNTVERNON
COMMUNITY HOUSING INNOVATIONS
CR
$0.00
$0.00
$96,353.30
2011
NY
NASSAU COUNTY
Mt. Sinai Development Corporation
CL
$30.00
$0.00
$30.00
2011
NY
I NASSAU COUNTY
LONG ISLAND HOUSING PARTNERSHIP
CR
$0.00
$0.00
$466,525.71
2011
NY
NASSAU COUNTY
NASSAU COUNTY
CR
$5,812.47
$0.00
$5,812.47
2011
NY
ORANGE COUNTY
ORANGE COUNTY
CR
$217,982.40
$0.00
$217,982.40
2011
NY
UTICA
UTICA
CR
$9,443.65
$0.00
$9,443.65
2011
NY
UTICA
UTICA
EN
$0.00
$0.00
$11,334.71
2011
OH
CUYAHOGA COUNTY
CUYAHOGACOUNTY
AD
$0.00
$0.00
$1,994.64
2011
OH
DAYTON
HOMESTART, INC
CR
$139,906.83
$0.00
$139,906.83
2011
OH
MANSFIELD
MARY MCLEOD-BETHUNE INTERVENTH
CR
$7,723.93
$0.00
$7,723.93
2011
PA
ALLENTOWN
ALLENTOWN
CR
$130,833.25
$0.00
$130,833.25
2011
PA
IHARRISBURG
TRI -COUNTY HDC/CAC
CR
$20,510.00
$0.00
$20,510.00
2011
PA
HARRISBURG
HARRISBURG
CR
$10,527.16
$0.00
$10,527.16
2011
PR
AGUADILLA
INDESOVI, INC.
CR
$0.00
$0.00
$76,049.21
2011
PR
AGUADILLA
COMITE COMUNITARIO PRO-VIVIENDA
CR
$0.70
$0.00
$773.79
2011
PR
ARECIBO
ARECIBO
EN
$83,227.62
$0.00
$104,745.62
2011
PR
BAYAMON
BAYAMON
CL
$2,500.00
$0.00
$2,500.00
2011
PR
BAYAMON
ESPERANZA PARA LA VEJEZ INC.
CR
$0.00
$0.00
$90,675.45
2011
PR
BAYAMON
COMMUNITY PROPERTIES DEVELOPM
CR
$0.00
$0.00
$4,030.01
25J-6 7/3/2018
PJ's with Undrawn Funds
(1992 - 2011)
FISCAL
YEAR ST
PARTICIPATING JURISDICTION
RECIPIENT OF FUNDS
FUND
TYPE
BALANCE TO
COMMIT
DRAW PENDING
APPROVAL
BALANCE TO DRAW
1994 PR
BAYAMON
BAYAMON
EN
$0.00
$0.00
$799,101.96
2011 PR
CAROLINA
CAROLINA
AD
$0.00
$0.00
$35,797.02
2011 PR
CAROLINA
INDESOVI, INC.
CR
$203,382.60
$0.00
$203,382.60
2011 PR
GUAYNABO
GUAYNASO
EN
$60,119.17
$0.00
$335,539.94
2011 PR
MAYAGUEZ
MAYAGUEZ
CO
$163.83
$0.00
$163.83
2011 PR
MAYAGUEZ
INDESOVI, INC.
CR
$53,824.22
$0.00
$53,824.22
2011 PR
TOA BAJA
TOA BAJA
EN
$0.00
$0.00
$50,665.15
2011 TN
MEMPHIS
MEMPHIS
CR
$2,075.30
$0.00
$2,075.30
2011 TN
MEMPHIS
N.H.O. MANAGEMENT
CR
$0.00
$0.00
$14,055.75
2011 TN
MEMPHIS
NORTH MEMPHIS CDC
CR
$0.00
$0.00
$100,185.00
2011 TN
TENNESSEE
SUMNERCOUNTY
AD
$0.00
$0.00
$16,033.38
2011 TX
FORT BEND COUNTY
FORT BEND COUNTY
EN
$180,345.13
$0.00
$197,897.65
2011 TX
IRVING
IRVING
EN
$216,099.73
$0.00
$235,435.12
2011 TX
MONTGOMERY COUNTY MONTGOMERY COUNTY
EN
$107,281.20
$0.00
$107,281.20
2011 TX
ODESSA
ODESSA
AD
$0.00
$0.00
$4,925.05
2011 TX
TEXAS
COMMUNITY DEVELOPMENT CORP OF
CR
$0.00
$0.00
$44,801.00
2011 TX
TEXAS
TEXAS
CR
$33,199.00
$0.00
$33,199.00
2011 TX
TEXAS
BURKECENTER
SU
$0.00
$0.00
$503.00
2011 VA
ALEXANDRIA
ALEXANDRIA
EN
$0.00
$0.00
$40,756.20
2011 VA
DANVILLE
DANVILLE
CR
$21,086.63
$0.00
$21,086.63
2011 VA
NORFOLK
NORFOLK
EN
$0.00
$0.00
$156,988.98
2011 VA
PORTSMOUTH
PORTSMOUTH
EN
$105,969.59
$0.00
$159,687.61
2011 VA
PRINCE WILLIAM COUNT
PRINCE WILLIAM COUNTY
CR
$1.00
$0.00
$1.00
2011VA
SUFFOLK
ISLE OF WIGHT
lLU
$0.00
$0.00
$7,446.70
2011 WA
PIERCE COUNTY
PIERCE COUNTY ALLIANCE FOR HABITA
CR
$0.00
$O.OD
$158.57
2011 WA
PIERCE COUNTY
LIHI LOW INCOME HOUSING INSTITUT
CR
$21,230.56
$0.00
$21,230.56
2011 WI
I MILWAUKEE COUNTY
MOVIN'OUT, INC
ICR 1
$23,771.29 1
$0.00
$23,771.29
25J-7
7/3/2018
25J-8
EXHIBIT 2
Meta Housing Corporation
July 23, 2018
Judson Brown
City of Santa Ana, Community Development Agency
20 Civic Center Plaza
Santa Ana, CA 92701
Re: Santa Ana Arts Collective -1666 N. Main St.
Project Cost Increases since July 2017
Dear Mr. Brown,
Thank you for this opportunity to update you on our progress at Santa Ana Arts Collective (SAAC). As you know,
SAAC Is the first project entitled under the City of Santa Ana's Adaptive Reuse Ordinance, which was adopted in
December 2014, to encourage the recycling of historic, underutilized, commercial buildings into housing. Though
challenges are common for adaptive reuse buildings, we have found cost effective ways of overcoming many of
them. Still, for reasons described below, the project Is in need of $407,871 in gap financing.
Because limited performance information could be gathered about the existing structural system, the path and
cost to upgrade the building to modern seismic standards were previously ill-defined. Although July 2017's
structural engineering aided in meeting a tax credit deadline, if implemented project costs would have
immediately made the project infeasible. A more economic approach was permitted in Spring 2018, which limited
hard cost increases related to structural modifications to approximately $1.3 million. The creation and plan check
of the new structural engineering system delayed construction completion by six months, costing $401,833 in
equity timing adjusters and $176,000 in Contractor General Conditions. The project is now back under construction
and expected to open June 2019.
While value engineering has been an important cost -control strategy, we've pursued this as far as possible without
Interfering with the integrity of design and arts programming.
We remain committed to finding a solution to bridge the remaining funding gap and appreciate any assistance the
City can provide to that end. Please feel free to contact me or Michelle Coulter at (310)575-3543 x 127 if you need
any additional information or have any questions.
Thank you again,
Christopher Maffris
Executive Vice President
Meta Housing Corporation
25J-9
25J-10
FREE RECORDING REQUESTED PURSUANT
TO GOVERNMENT CODE SECTION 6103 & 27383
When Recorded Mail to:
City of Santa Ana
Clerk of the Council
20 Civic Center Plaza (M-30)
P.O. Box 1988
Santa Ana, California 92702
Attention: Clerk of the Council
EXHIBIT 3
SPACE ABOVE THIS LINE FOR RECORDING USE
FREE RECORDING REQUESTED
[GoWmment Code Section 61031
FIRST AMENDMENT TO
HOME LOAN AGREEMENT
by and between the
CITY OF SANTA ANA
and
SANTA ANA ARTS COLLECTIVE, L.P., a California limited partnership
(1666 N. Main Street, Santa Ana, California)
Dated: August 21, 2018
25J-11
EXHIBIT 3
FIRST AMENDMENT TO HOME LOAN AGREEMENT
THIS FIRST AMENDMENT TO HOME LOAN AGREEMENT dated, for
identification purposes only, as of August 21, 2018, is made and entered into by and between the
CITY OF SANTA ANA, a charter city and municipal corporation ("City") and SANTA ANA
ARTS COLLECTIVE, L.P., a California limited partnership ("Developer"), with reference to
the following:
RECITALS:
A. The City and Developer entered into a HOME Loan Agreement dated July 5, 2017,
and recorded in Official Records, Orange County, with filing number
2017000308368. on July 26, 2017 ("said HOME Loan Agreement").
B. The purpose of said HOME Loan Agreement is to assist with the development of
an adaptive reuse project consisting of a fifty-eight (58) unit multi -family
residential housing development, with live/work units and a possible commercial
art studio, as well as a community room located at 1666 N. Main Street, Santa Ana,
California ("Project").
C. In accordance with the terms and conditions of said HOME Loan Agreement, the
parties desire to amend said HOME Loan Agreement, including the Affordability
Restrictions on Transfer of Property, HOME Deed of Trust, HOME Promissory
Note, and Project Budget attached as exhibits to said HOME Loan Agreement, to
increase the amount of HOME funding provided by the City to Developer for the
Project, and to update the unit mix and requirements for the HOME assisted units,
as necessary.
NOW, THEREFORE, for and in consideration of the mutual covenants and agreements
herein contained, and subject to the terms and conditions of said HOME Loan Agreement, except
as herein modified, City and Developer agree as follows:
1. Section 1. 1, Defined Terms, of said HOME Loan Agreement shall be amended to
increase the amount of HOME funds in the definitions of "HOME Loan" and
"HOME Loan Promissory Note" from "TWO MILLION, TWO HUNDRED AND
NINETEEN THOUSAND, SEVEN HUNDRED AND SIXTY DOLLARS
($2,219,760.00)" to "TWO MILLION, SIX HUNDRED AND TWENTY SEVEN
THOUSAND, SIX HUNDRED AND THIRTY ONE DOLLARS
($2,627,631.00)."
2. Section 3, Scope of Work/Project Budget, of said HOME Loan Agreement shall be
amended to replace the "Project Budget" attached to said HOME Loan Agreement
as Exhibit E with the "Project Budget" attached herewith as Exhibit 1.
3. Section 5, HOME Loan, of Said HOME Loan Agreement shall be amended to
increase the amount of HOME funds by FOUR HUNDRED AND SEVEN
25J-12
EXHIBIT 3
THOUSAND, EIGHT HUNDRED AND SEVENTY ONE DOLLARS
($407,871.00) from "TWO MILLION, TWO HUNDRED AND NINETEEN
THOUSAND, SEVEN HUNDRED AND SIXTY DOLLARS ($2,219,760.00)" to
"TWO MILLION, SIX HUNDRED AND TWENTY SEVEN THOUSAND, SIX
HUNDRED AND THIRTY ONE DOLLARS ($2,627,631.00)."
4. Section 6.2, Disbursement Procedures for Loan, of said HOME Loan Agreement
shall be amended to allow architectural, engineering, or related professional
services required to prepare plans, drawings, specifications, or work write-ups as
allowed HOME eligible cost categories. These HOME eligible costs may be paid
if they were incurred not more than 24 months before the date that HOME funds
are committed to the Project.
5. Section 7. 1, Use Covenants and Restrictions, subsection (C), of said HOME Loan
Agreement shall be amended to state that the HOME assisted units will be "fixed"
rather than "floating" units.
6. Section 7.2, Affordability Levels/Unit Mix, of said HOME Loan Agreement shall
be amended to replace the HOME Assisted Units matrix with the following:
HOME Assisted Units
Total # of
Unit TypeDescription/
Level of
# of HOME
HOME Share
Units
No. of Blts
Affordability
Assisted Units
of Unit Type
Notes
26
1 Bed
1
30% AMI
3
11.53%
14
2 Bed
2
0
0.0%
30%AMI —
4
23.53%
Low HOME
17
3 Bed
3
60%AMI —
High HOME
4
23.53%
Additionally, subsection (2) shall be amended to state that the HOME assisted units
will be "fixed" rather than "floating" units.
Further, subsection (3) shall be amended to state that "unit substitution" is not
allowed without first obtaining City's consent.
7. Definitions in Exhibit B, Affordability Restrictions on Transfer of Property, of said
HOME Loan Agreement shall be amended to increase the amount of HOME funds
in the definitions of "HOME Loan" and "HOME Loan Promissory Note" from
"TWO MILLION, TWO HUNDRED AND NINETEEN THOUSAND, SEVEN
HUNDRED AND SIXTY DOLLARS ($2,219,760.00)" to "TWO MILLION, SIX
HUNDRED AND TWENTY SEVEN THOUSAND, SIX HUNDRED AND
THIRTY ONE DOLLARS ($2,627,631.00)."
25J-13
EXHIBIT 3
8. Section 3.1, Use Covenants and Restrictions, in Exhibit B, Affordability
Restrictions on Transfer of Property, of said HOME Loan Agreement shall be
amended to replace the HOME Assisted Units matrix with the following:
HOME Assisted Units
Total # of
Unit Type
Description/No. of BRs
Level of
# of HOME
HOME Share
Units
NotesotesAffordability
Assisted Units
of Unit Type
26
1 Bed 1
30% AM[
3
11.53%
14
2 Bed 2
0
0.0%
30%AMI —
Low HOME
4
23.53%
17
3 Bed 3
60%AMI —
Hi h HOME
4
23.53%
Additionally, subsection (2) shall be amended to state that the HOME assisted units
will be "fixed" rather than "floating" units.
Further, subsection (3) shall be amended to state that "unit substitution" is not
allowed without first obtaining City's consent.
9. Exhibit C, HOME Deed of Trust, of said HOME Loan Agreement shall be amended
to increase the amount of HOME funds in the reference to the HOME Promissory
Note in the final recital from "TWO MILLION, TWO HUNDRED AND
NINETEEN THOUSAND, SEVEN HUNDRED AND SIXTY DOLLARS
($2,219,760.00)" to "TWO MILLION, SIX HUNDRED AND TWENTY SEVEN
THOUSAND, SIX HUNDRED AND THIRTY ONE DOLLARS
($2,627,631.00)."
10. Exhibit D, HOME Promissory Note, of said HOME Loan Agreement shall be
amended to increase the amount of HOME funds noted at the beginning of the
document from "$2,219,760.00" to "$2,627,631.00: '
11. Exhibit D, HOME Promissory Note, of said HOME Loan Agreement shall be
amended to increase the amount of HOME funds noted in the initial paragraph from
"TWO MILLION, TWO HUNDRED AND NINETEEN THOUSAND, SEVEN
HUNDRED AND SIXTY DOLLARS ($2,219,760.00)" to "TWO MILLION, SIX
HUNDRED AND TWENTY SEVEN THOUSAND, SIX HUNDRED AND
THIRTY ONE DOLLARS ($2,627,631.00)."
12. Section 5, Annual Loan Repayment/Residual Receipts, subsection (d), in Exhibit
D, HOME Promissory Note, of said HOME Loan Agreement shall be amended to
replace the residual receipts matrix with the following:
25J-14
EXHIBIT 3
SOURCE
PERCENTAGE
CDBG Loan
1.95%
HOME Loan
10.23%
Inclusionary Housing Loan
18.58%
State of California Housing and Community
Development Affordable Housing Loan
19.24%
TOTAL
50.00%
13. Except as hereinabove modified, all terms and conditions of said HOME Loan
Agreement, including the Affordability Restrictions on Transfer of Property,
HOME Deed of Trust, HOME Promissory Note, and Project Budget attached as
exhibits to said HOME Loan Agreement, shall remain in full force and effect.
(Signatures on following page)
25J-15
EXHIBIT 3
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment to HOME
Loan Agreement the date and year first written above.
ATTEST:
Maria D. Huizar
Clerk of the Council
APPROVED AS TO FORM
Sonia R. Carvalho
City Attorney
By I&= Hodge
Assistant City Attorney
RECOMMENDED FOR APPROVAL:
Steven A. Mendoza
Executive Director
Community Development Agency
CITY OF SANTA ANA
Raul Godinez II
City Manager
(Signatures continue on following page)
25J-16
DEVELOPER:
Santa Ana Arts Collective, L.P., a California limited partnership
By: Santa Ana Arts Collective, LLC,
a California limited liability company,
its general partner
By:
Kasey Burke, Vice 'resi ent
By: WCH Affordable XVIII, LLC,
a California limited liability company,
its managing general partner
0
Graham P. Espley-Jones, President
25J-17
EXHIBIT 3
DEVELOPER:
EXHIBIT 3
Santa Ana Arts Collective, L.P., a California limited partnership
By: Santa Ana Arts Collective, LLC,
a California limited liability company,
its general partner
M
Kasey Burke, Vice President
By: WCH Affordable XVIII, LLC,
a California limited liability company,
its managing general partner
By: t,
Graham P. Espley-Jones, Presi ent
25J-18
EXHIBIT 3
Exhibit 1
Project Budget
25J-19
HOME UNDERWRITING &
SUBSIDY LAYERING REVIEW
Santa Ana Arts Collective
City of Santa Ana
Keyser Marston Associates, Inc.
August 6, 2018
25J-21
Table of Contents
I.
Executive Summary .............................................................................................................
1
II.
Project Description.............................................................................................................
3
III.
Project Underwriting Assessment......................................................................................
4
A. Estimated Development Costs (Table 1).......................................................................
4
B. Stabilized Net Operating Income (Table 2)...................................................................
7
C. Financial Gap Analysis (Table 3)....................................................................................
9
D. Cash Flow Over Affordability Term (Table 4)..............................................................
11
E. Profit and Returns.......................................................................................................
13
IV.
Developer Assessment......................................................................................................
13
A. Development Team.....................................................................................................
14
B. Ability to Perform........................................................................................................
14
C. Fiscal Soundness.........................................................................................................16
D. Conclusion...................................................................................................................16
V.
Market Assessment...........................................................................................................
16
VI.
HOME Requirements........................................................................................................
17
A. HOME Program Deadlines..........................................................................................
17
B. Cost Reasonableness..................................................................................................
18
C. Written Agreement.....................................................................................................
18
D. Layering Requirements...............................................................................................
19
E. Cost Allocation (§92.205(d)) and HOME Unit Designation (Table 5) ..........................19
F. Affordability Period.....................................................................................................
20
G. Property Standards (§92.251).....................................................................................
21
H. HOME Rents/ Utility Allowances...............................................................................
21
I. Financial Commitments..............................................................................................21
VII.
Certifications.....................................................................................................................22
VIII.
Commitment Checklist(§92.2).........................................................................................
23
Appendix A Pro Forma Analysis, Cash Flow Analysis, Cost Allocation
City of Santa Ana HOME Subsidy Layering Review: Santa Ana Arts Collective Page I i
1808002:SA:TRB
25J-22
On July 5, 2017, the City of Santa Ana (City) entered into a HOME Loan Agreement with Meta
Housing Corporation (Developer) for the purposes of providing HOME Program (HOME) funds
for the construction of a 58 -unit apartment project (Project) located at 1666 North Main Street
(Site). The 2017 HOME Loan Agreement required the City to provide $2,219,760 in HOME
funds to the Project that are allocated to the City by the United States Department of Housing
and Urban Development (HUD).
However, due to unforeseen issues with the proposed adaptive reuse of an existing building as
well as construction cost increases, the Project's budget has changed materially since the 2017
HOME Loan Agreement was executed. The City intends to amend the 2017 HOME Loan
Agreement to reflect the revised Project budget, and to increase the amount of HOME funds
being provided by the City.
At the City's request, Keyser Marston Associates, Inc. (KMA) prepared the following HOME
Underwriting & Subsidy Layering Review for the Project. This analysis is prepared in compliance
with the requirements imposed by the HOME Program and the City's HOME Project
Underwriting and Subsidy Layering Review Guidelines.
The KMA analysis includes the following components:
1. An underwriting review to determine the feasibility and to ensure that no more than the
necessary amount of HOME funds, in combination with other governmental assistance,
is invested by the City in order to provide affordable housing. This section also provides
an assessment of the reasonableness of the Developer Fee, cash flow, equity
appreciation and profit anticipated to be generated by the Project.
2. An evaluation of the Developer's capacity to develop and operate the Project.
3. A review and summary of the residential rental market for the Project.
4. An assessment of other HOME requirements and deadlines, including the financial
commitment documentation submitted by the Developer.
EXECUTIVE SUMMARY
The Developer proposes to develop the 58 -unit Project on the 0.99 -acre Site, currently owned
by the Developer. The Project is currently under construction and will be financed with the
following funding sources:
City of Santa Ana HOME Subsidy Layering Review: Santa Ana Arts Collective Page I 1
25J-23
Funding
Conventional Loan
Source
Provided by California Community Reinvestment Corporation (CCRC)
9% Tax Credits
Allocated byTCAC, Provided by Bank of America as Investor
HOME Loan
Provided by City for construction of the Project
AHSC AHD Loan
Provided by California Housing and Community Development
Department (HCD)
AHSC Program Grant
Provided by HCD
Deferred Developer Fee
Provided by Developer
The KMA analysis concluded the following:
1. Underwriting Analysis:
The Project costs are estimated at $35,896,000 and the available funding sources
are estimated at $33,218,000, resulting in a financial gap of approximately
$2,678,000. The financial gap estimated by KMA is $51,000, or approximately
2% higher than the Developer's request of HOME funds from the City. Thus, the
analysis demonstrates that the proposed $2,627,000 in HOME assistance is
necessary to provide the proposed affordable housing units.
b. The cash flow analysis projects that the Project will have positive cash flow
through the 55 -year affordability and loan term.
C. The developer fee, cash flow projection, equity appreciation, and profit
anticipated to be generated by the Project are appropriate.
The Developer has demonstrated the development capacity and fiscal soundness to
undertake the Project.
3. The Developer provided a market study prepared by Novogradac & Company, LLP.,
which demonstrates that there will be sufficient demand in the market area to absorb
the 57 affordable units within two to three months of opening.
4. Other HOME Requirements:
HOME Program Deadlines The Project is estimated to meet the construction
commencement, Project completion and Project lease -up
requirements imposed by HOME.'
Written Agreement The 2017 HOME Loan Agreement and Amendment meets
the HOME requirements for written agreements.
'The Project is currently under construction. The HOME Program regulations allow participating jurisdictions to
commit additional HOME funds up to one year after the completion of construction.
City of Santa Ana HOME Subsidy Layering Review: Santa Ana Arts Collective Page 12
25J-24
Layering Requirements
The assistance package complies with the HOME layering
687
requirements.
HOME Unit Designation
The Project will meet the HOME requirements for the
Three -Bedroom Units
number of HOME designated units as well as the number
1,280
of units restricted to very -low income households. The
58
HOME units will be fixed.
Affordability Period
The Project will meet the HOME requirement for the
affordability period.
Cost Allocation
The HOME units are determined to not be comparable to
other units within the Project. Thus, the standard cost
allocation methodology was utilized.
Property Standards
The Project will meet the HOME property standard
requirements for new construction and on-going
property management.
HOME Rents/ Utility Allowances
The HOME units will be restricted at the appropriate
rents and utility allowances.
Financial Commitments
The funding sources discussed in this Report are
sufficient, and timely in availability, to cover the Project
costs.
II. PROJECT DESCRIPTION
The proposed scope of development can be described as follows:
1. The Site is comprised of 0.99 acres, or 43,293 square feet of land area. The Site includes
an existing office building, which the Developer will convert through adaptive reuse into
48 apartment units. The Developer will build two additional buildings on the Site, which
will consist of a total of 10 apartment units. Thus, the Project will include a total of 58
apartment units (inclusive of a manager's unit). The project will have an estimated
gross building area (GBA) of 74,499 sf, with approximately 5,992 square feet reserved
for community facilities including an art gallery, laundry facilities, and leasing offices.
The Project's density is 58 units per acre.
2. The Project's unit mix is as follows:
One -Bedroom Units
26
687
Two -Bedroom Units
15
939
Three -Bedroom Units
17
1,280
Total/Averaee
58
926
3. The Project includes 113 parking spaces located in an existing subterranean parking
garage. This equates to 1.95 parking spaces per unit.
City of Santa Ana HOME Subsidy Layering Review: Santa Ana Arts Collective Page 13
25J-25
4. The units will be restricted for affordability purposes by the City with the following
affordability mix:
Tax Credit Median @ 30%
20
Tax Credit Median @ 35%
6
Tax Credit Median @ 40%
6
Tax Credit Median @ 60%
25
Manager's Unit (unrestricted)
1
Total Units
58
5. The Project will include 11 HOME -designated units. At least 20% of these units will be
restricted to Low HOME households.
Ili. PROJECT UNDERWRITING ASSESSMENT
KMA prepared a pro forma analysis to assist in evaluating Developer's proposal. The analysis is
in Appendix A located at the end of this report and is organized as follows:
Table 1:
Estimated Development Costs
Table 2:
Stabilized Net Operating Income
Table 3:
Financial Gap Calculation
Table 4:
Cash Flow Analysis
Table 5:
HOME Cost Allocation Analysis
A. Estimated Development Costs (Table 1)
KMA reviewed Developer's cost estimate provided in July 2018. The Developer provided a
general contractor contract from Westport Construction, Inc. as well as requested and
approved change orders to support the construction cost estimates. After reviewing the
proposed scope of work and the acquisition costs, KMA found the assumptions to be
reasonable and necessary to complete the proposed Project. The resulting estimated
development costs are as follows:
PropeityAssemb/age Costs
The total property assemblage costs are estimated to total $8.91 million, or $206 per square
foot of land area as follows:
Property Acquisition Costs
The Developer acquired the property for $7.48 million on January 11, 2016. According to an
appraisal prepared by Pacific Real Estate Appraisal, dated June 27, 2017, the As -Is market value
of the property is $8.20 million, which is $795,000 higher than the purchase price.
City of Santa Ana HOME Subsidy Layering Review: Santa Ana Arts Collective Page 14
25J-26
Relocation Costs
The building was approximately 50% occupied with office tenants when it was acquired by the
Developer. A relocation plan prepared by LACAL Consulting, Inc., dated May 31, 2016,
estimated the relocation costs at $907,000. However, it was later determined that there were
lease termination options that were understated by the Developer's appraiser. The Developer
estimates the current relocation costs at $1.47 million.z
Closing Costs
The Developer estimates closing costs at $34,000, or 0.5% of the purchase price.
cae M
The direct cost estimates assume that the Project will be not be subject to Federal or State
prevailing wage requirements. The direct costs are estimated at $17,886,000, or $308,400 per
unit and $240 per square foot of GBA.
1. The off-site improvement costs are estimated at $376,000.
2. The on-site improvement costs are estimated at $469,000, or $11 per square foot of
land area.
3. The adaptive reuse and new building construction costs are estimated at $14.08 million,
or $189 per square foot of GBA.
4. The Developer included a $350,000 allowance for furnishings, fixtures and equipment.
5. A 12% allowance for contractor fees and general requirements is included, which is
lower than the maximum 14% allowed by ICAC. The construction is being undertaken
by a third party general contractor.
6. A 2% allowance for construction insurance and bonds is included.
KMA included a 3% direct cost contingency allowance.3
KMA concludes that the proposed direct costs are reasonable and necessary for the
construction of the Project per the proposed scope of work.
Indirect Costs
KMA utilized the following assumptions for the indirect costs:
'The Developer provided a breakdown of relocation payments that total $1.41 million. KMA assumes that the
additional $63,000 in costs are related to administering relocation activities.
z A 5% to 10% direct cost contingency allowance would be more typical for underwriting purposes. However, given
that the Project is already under construction, KMA reduced the direct cost contingency allowance amount.
City of Santa Ana HOME Subsidy Layering Review: Santa Ana Arts Collective Page 15
25J-27
1. Architecture, engineering and consulting costs are estimated at 16% of direct costs, or
$2.86 million. This estimate is higher than typical due to the complex nature of
designing and engineering an adaptive reuse project.
2. The Developer estimated the public permits and fees costs at $1.64 million, or $28,200
per unit.
3. The taxes, insurance, legal and accounting costs are estimated at 3% of direct costs, or
$537,000.
4. The marketing and leasing budget equates to $140,000, or $2,400 per unit.
5. The Developer Fee is set at $2.0 million, which is the maximum amount allowed by
TCAC.
6. A 2% indirect cost contingency allowance is provided.°
KMA estimates the total indirect costs at $7.32 million, which are reasonable and necessary for
the development of the Project.
financing Costs
The financing costs for the Project are estimated as follows:
1. The Developer included $206,000 in property carrying costs.
2. The interest costs on the construction loan are estimated at $995,000. These costs are
based on the following assumptions a 4.86% interest rate, a 21 -month development
period, and a 55% average outstanding balance
3. The financing costs are estimated at $318,000 and are based on 1.25 points for the
construction loan and 1.50 points for the permanent loan.
4. A $162,000 capitalized operating reserve is provided. This equates to three months of
operating expenses and debt service payments on the permanent loan supported by the
Project's income.
5. The Tax Credit fees are estimated at $97,000 based on the following:
a. A $2,000 application fee;
b. A $410 per unit monitoring fee; and
4 A 5% indirect cost contingency allowance would be more typical for underwriting purposes. However, given that
the Project is already under construction, KMA reduced the indirect cost contingency allowance amount.
City of Santa Ana HOME Subsidy Layering Review: Santa Ana Arts Collective Page 16
25J-28
C. Four percent (4%) of the gross Tax Credit proceeds for one year.
KMA estimates the total financing costs at $1.78 million, which are reasonable and necessary to
complete the Project.
Tota/ Development Costs
As shown in Table 1, KMA estimates the total development costs at $35.90 million, which
equates to approximately $618,900 per unit. In comparison, the Developer estimates the total
development costs at $35.85 million, or $618,000 per unit. This equates to a less than 1%
differential, which can be considered inconsequential.
As such, KMA finds the Developer's cost estimates to be reasonable and necessary to construct,
lease -up, and complete the Project. As the Project moves through the development process,
the City needs to keep track of the changes to the costs, if any.
B. Stabilized Net Operating Income (Table 2)
The Project's funding sources include City Inclusionary Housing funds, HOME Program funds,
CDBG funds, AHSC funds, and 9% Tax Credits. The Project's income and affordability standards
must comport with the most stringent of the following standards:
1. Income Restrictions: The tenants' household incomes cannot exceed the strictest of:
a. HOME Program income restrictions as defined under United States Code, Title
26, Section 142(d)(2)(B).
b. Federal Low Income Housing Tax Credits income restrictions defined under
United States Code, Title 26, Section 142(d)(2)(B).
2. Affordability Restrictions: Rents applied to all of the units must reflect the most
stringent of:
a. HOME Program rents published annually by HUD; and
Tax Credit rents published annually by the California Tax Credit Allocation
Committee (TCAC).
The HOME affordability requirements will remain in place for 20 years, which is the minimum
period that the HOME Program requires.
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Achievable Renta/Income
The Project rents must adhere to the most restrictive of the requirements imposed by the
proposed funding sources. The rents used in this analysis are based on 2018 income and rent
information. The maximum allowable rents, net of the appropriate utility allowances, are
estimated as follows:s
Estimated Net Operating Income (N01)
The Project's effective gross income (EGI) is estimated at approximately $686,000 based on the
following assumptions:
'The Developer estimates the monthly utility allowances at: $43 for one -bedroom units; $49 for two-bedroom
units; and $71 for three-bedroom units.
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Three -
Bedroom
BedroomBedroom
Rent Restrictions
Units
Units
Units
30% AMI TCAC / Low HOME
# of Units
3
N/A
4
TCAC Rent
$572
N/A
$781
HOME Rent
$935
N/A
$1,285
Applicable Rent
$572
N/A
$781
30% AMI TCAC
# of Units
11
2
N/A
TCAC Rent
$572
$689
N/A
Applicable Rent
$572
$689
N/A
35% AMI TCAC
# of Units
6
N/A
N/A
TCAC Rent
$674
N/A
N/A
Applicable Rent
$674
N/A
N/A
40% AMI TCAC
# of Units
6
N/A
N/A
TCAC Rent
$777
N/A
N/A
Applicable Rent
$777
N/A
N/A
60% AMI TCAC / High HOME
# of Units
N/A
N/A
4
TCAC Rent
N/A
N/A
$1,634
HOME Rent
N/A
N/A
$1,710
Applicable Rent
N/A
N/A
$1,634
60% AMI TCAC
# of Units
N/A
12
9
TCAC Rent
N/A
$1,427
$1,634
Applicable Rent
N/A
$1,427
$1,634
Estimated Net Operating Income (N01)
The Project's effective gross income (EGI) is estimated at approximately $686,000 based on the
following assumptions:
'The Developer estimates the monthly utility allowances at: $43 for one -bedroom units; $49 for two-bedroom
units; and $71 for three-bedroom units.
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1. The gross potential rental income is estimated at $714,900
The laundry and miscellaneous income is estimated at $7,200 per year, or $10 per unit
per month.
A vacancy and collection allowance equal to 5% of gross income is deducted.
The residential operating expenses are estimated at $417,300 based on the following
assumptions:
1. The general operating expenses are estimated at $5,660 per unit per year.
2. KMA assumes the Developer will apply for the property tax abatement that is accorded
to non-profit housing organizations that own income -restricted apartments. The
Developer estimated the property tax assessment overrides at $13,400 per year.
3. The annual social services budget is estimated at $20,000, or $345 per unit.
4. The mandatory HCD debt service payment for the AHSC loan is equal to 0.42% of the
initial AHSC loan amount, or $20,800 per year.
5. The annual capital replacement reserve deposits are estimated at $600 per unit, which
is the requirement of the AHSC Program.
When the Project's $417,300 in operating expenses are deducted from the Project's $686,000
EGI, KMA estimates the stabilized NO[ at $268,700.
C. Financial Gap Analysis (Table 3)
Aval/able Funding Sources.•
The following summarizes the available funding sources:
Conventional Permanent Loan
California Community Reinvestment Corporation (CCRC) provided the Developer with an
executed Loan Purchase Agreement, dated July 2, 2017, for a permanent loan with an
estimated principal amount of $3,043,100. The Loan Agreement stipulates that the final loan
amount will be calculated prior to conversion based on the terms included in the Loan
Agreement. The Developer estimates that the permanent loan amount will be increased to
$3.44 million by utilizing 2018 rents and the following loan terms:
1. A 30 -year loan term with a 30 -year amortization;
2. A 1.16 debt service coverage ratio; and
3. A 5.36% interest rate.
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Tax Credit Proceeds
In November 2016, the Project was awarded gross Tax Credits with a value of $17.90 million
paid out over a 10 -year period. These Tax Credits are sold on a secondary market, and the net
syndication value is ultimately determined based on competitive market conditions and on the
timing of disbursements. Bank of America (Tax Credit Investor) agreed to purchase the gross
Tax Credits for a price of $1.01 per gross Tax Credit dollar. Initially, $18.04 million in total Tax
Credit proceeds were available to the Project. However, due to construction delays the Tax
Credit Investor has imposed a $508,800 Tax Credit Adjustor to the Tax Credit Proceeds. As
such, the net Tax Credit equity available to the Project is $17.53 million.
AHSC Program Funds
The Developer received a total of $4.97 million in funding from the AHSC Program. The specific
sources for these funds are as follows:
1. A $4.94 million AHSC Affordable Housing Development Loan; and
2. A $22,500 AHSC Program Activities (PRG) Grant.
Deferred Developer Fee
The Developer is proposing to defer 100% of the $2.0 million developer fee. The deferred
developer fee will be paid from cash flow, and is required by the Internal Revenue Service to be
repaid within 15 years. Based on the cash flow analysis, it is anticipated that there will be
insufficient cash flow to meet the 15 -year repayment deadline. At that time, the Administrative
General Partner (AGP) will make a loan to the Limited Partner for the outstanding balance of
the deferred developer fee. This AGP Loan will remain in priority position and will be required
to be repaid in full before residual receipts are distributed.
City Inclusionary Housing Funds
The City entered into a Loan Agreement with the Developer on July 5, 2017 to provide
$4,775,000 in City Inclusionary Housing funds to the Project.
City CDBG Funds
The City entered into a Loan Agreement with the Developer on July 5, 2017 to provide $500,000
in City CDBG funds to the Project.
Total Available Funding Sources
As shown in Table 3, the available funding sources total $33.22 million.
Financial Gap Calculation
Based on the assumptions outlined in this analysis, the financial gap is calculated as follows:
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Total Development Costs $35,896,000
(Less) Available Funding Sources (33,218,000)
Financial Gap $2,678,000
Per Affordable Unit $46,200
Based on the KMA analysis, the Project's financial gap is estimated at $2.68 million. In
comparison, the Developer is requesting $2,627,631 in HOME funds from the City, which is less
than the KMA financial gap estimate. Thus, it is concluded that the $2.63 million in HOME
assistance to the Project is warranted by the Project economics.
As noted previously, the City entered into a HOME Loan Agreement with the Developer on July
5, 2017 to provide $2,219,760 in HOME funds to the Project. The purpose of this analysis is to
increase the amount of HOME funds provided by the City. Based on the KMA analysis, the
Developer's request for $2,627,631 in total HOME funds for the Project is warranted. This
equates to an additional $407,871 in HOME funds to be provided by the City. The City is
planning to designate 11 units as HOME units.
D. Cash Flow Over Affordability Term (Table 4)
KMA also conducted a cash flow analysis to estimate the present value of the debt service
payments to the City. The following describes the basic cash flow assumptions:
1. Year 1 is based on the pro forma rent and expense assumptions presented in the
stabilized analysis (Table 2).
2. Additional revenue and expense assumptions are as follows:
a. The projected residential income and miscellaneous income are estimated to
increase at 2.5% per year.
b. A 5.0% vacancy and collection allowance.
C. The general operating expenses and social services are increased at 3.5% per
year.
d. The property taxes are increased at 2.0% per year.
e. Replacement reserves and the HCD mandatory payment remain constant.
The priority distributions are categorized as follows:
An annual debt service payment of $230,904;
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ii. An asset management fee to the limited partnership of $5,000 for 15
years escalated at 3% per year; and
iii. An asset management fee to the general partner of $5,000 for 55 years
escalated at 3% per year;
iv. A managing general partnership fee of $10,000 for 55 years escalated at
3% per year; and
V. Repayment of the deferred Developer Fee, which will have a 0% interest
rate.
g. The annual residual receipts payments to the soft lenders will be set as follows:
City Inclusionary Housing Loan: $4,775,000 loan will be repaid with
18.58% of the total annual residual receipts. This loan will have a 3%
simple interest rate and a 55 -year term. At the end of the term, the
outstanding loan balance is estimated at $11.33 million.
ii. City CDBG Loan: $500,000 will be repaid with 1.95% of the total annual
residual receipts. This loan will have a 3% simple interest rate and a 55 -
year term. At the end of the term, the outstanding loan balance is
estimated at $1.19 million.
iii. City HOME Loan: $2,627,631 will be repaid with 10.23% of the total
annual residual receipts. This loan will have a 3% simple interest rate and
a 55 -year term. At the end of the term, the outstanding loan balance is
estimated at $6.23 million.
iv. AHSC Loan: $4,944,000 will be repaid with 19.24% of the total annual
residual receipts. This loan will have a 3% simple interest rate and a 55 -
year term. At the end of the term, the outstanding loan balance is
estimated at $11.73 million.
h. The City HOME Loan is estimated to generate the following in nominal terms and
present value terms, assuming a 6.0% discount rate:
Loan Amount Nominal Value Present Value
City HOME Loan $2,627,631 $730,000 $63,000
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The NOI is projected to be positive through Year 55. Thus, it is concluded that the
Project will have a positive cash flow during the term of the HOME affordability and loan
terms.
E. Profit and Returns
The following analyzes the anticipated profit to the Developer/Owner.
Developer Fees
$2,000,000, which is the maximum allowed per TCAC.
Cash Flow
The Developer will receive 50% of the annual residual
receipts, which are estimated to total $3.57 million
over 55 years, or a net present value of $306,000. This
equates to an estimated 3% IRR based on the $2.0
million deferred Developer Fee provided by the
Developer.
Tax Benefits
The Project will generate $17.53 million in Federal Tax
Credits that will be sold to Bank of America and the
cash will be used as equity in the Project.
Equity Appreciation
The equity appreciation is not expected to be
significant until year 56 when the units are converted
to market rate units.
identity of Interest Roles
No related parties will be benefiting from the Project.
In conclusion, the developer fee, cash flow projection, equity appreciation, and profit
anticipated to be generated by the Project are appropriate.
IV. DEVELOPER ASSESSMENT
The Developer, Meta Housing Corporation, was founded in 1993 and is based in Los Angeles,
California. The Developer develops and manages affordable and mixed -income apartment
communities throughout California. The Developer's model focuses on projects that are
financially viable, architecturally pleasing, affirmatively marketed with fairly selected tenants,
service enriched, well-built and maintained, and compliant with all funder requirements.
Since 1993, the Developer has developed more than 8,700 residential units with costs of over
$2.1 billion. These projects include a grocery store in South Los Angeles, adaptive reuse of a
nine -story bank building in Los Angeles's Chinatown, numerous arts colonies, housing for
veterans and formerly homeless individuals and families, along with many transit -oriented and
inclusionary housing developments.
The following provides an assessment of the experience and the capacity of the Developer to
implement the Project, as well as the fiscal soundness of the Developer to meet its financial
obligations and risks of the Project.
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A. Development Team
The Developer's strategy is to secure and leverage local, state and federal funding sources, and
arrange complex financial structures that ensure the highest and best use of available funds. In
addition, the Developer has a strong sense of social advocacy, and interest in innovation to
sustain strong relationships with public and private partners.
The Development Team involved in the Project will include the following:
1. Chris Maffris, Executive Vice President — Since joining Meta Housing in 2003, Chris has
supervised the completion of more than 3,700 apartment units and 30,000 square feet
of commercial space. Chris focuses on urban center infill and revitalization projects and
oversees the firm's development team through all aspects of the development process
including acquisition, entitlements, financing, and construction. Chris holds a degree in
economics with Specialization in Computer Science from University of California, Los
Angeles.
2. Michelle Espinosa Coulter, Director of Artist Housing — Since joining Meta Housing in
2011, Michelle has managed the development of over 21 affordable projects, with $530
million in total development costs and 1,540 units. Michelle is a former Certified Public
Accountant and holds a Master of Arts in Urban Planning from University of California,
Los Angeles and a Master of Science in Accounting from Texas A & M University.
The development team will consist of the following entities:
Santa Ana Arts Collective,_LP ^
Meta Housing Corporation
WSH Management_
After School Program — Bowers Museum
Adult Education, Health & Wellness—Actors Fund
Service Coordination — TAO Central
Studio One Eleven__
DK Engineer, Corp _ —
Studio One Eleven
LACALConsulting'
Pacific Real E_sta_te_Appraisal
RJC Group _ _
Bocarsly Emden Cowan —Es—mail & Arndt LLP _
Novogradac & Company LLP
Westport Construction, Inc.
B. Ability to Perform
HUD guidance related to this evaluation indicates that the Developer's recent, similar,
successful experience developing and operating comparable projects may be used to assist in
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establishing the Developer's capacity to undertake a project that is requesting HOME Program
assistance.
Since 1993, the Developer has built an asset portfolio that includes the development of
and/or ownership interest in more than 8,700 housing units in more than 105 affordable
housing developments.
The Developer has 25 years of experience providing quality affordable housing.
The Developer has affirmed that none of their projects have been placed into
foreclosure or are at risk of foreclosure.
The Developer has successfully completed three similar projects in Southern California in the
past 5 years.
The Metro @ Chinatown SeniorLaRs
Completed in 2013, The Metro @ Chinatown Senior Lofts consisted of transforming a blighted
and vacant Los Angeles office building into a transit -oriented senior apartment property. The
project consists of 123 affordable units restricted to seniors ages 55 and up. The Developer
utilized funding sources such as: Tax Credits, HUD Neighborhood Stabilization Program funds,
and HCD Transit -Oriented Development Program funds.
ACE/121
Completed in 2017, ACE/121 is a modern, 70 -unit affordable apartment community consisting
of one-, two-, and three-bedroom units. The project is one of the Developer's family arts
colonies and features a modern architectural design that upholds the community's arts -focused
concept. Residents of this community can enjoy professional -grade art studio and gallery
spaces, while participating in free, professional -level arts activities and classes on an on-going
basis. The project includes many community areas, including an art gallery, large community
rooms, and a sculpture garden. ACE/121 was funded with Tax Credits and funds from the City
of Glendale Housing Authority.
PaMlts
Completed in 2015, PacArts is the Developer's first family arts colony. The project is located
just outside of San Pedro's thriving Downtown Arts District. The project includes 49 affordable
apartment units, with six ground floor live/work units, as well as professional -grade art studios
and art gallery spaces. Every resident is an artist and was selected based upon submission of
artistic works. The project was financed with 9% Tax Credits and funds from the former
Community Redevelopment Agency of Los Angeles.
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C. Fiscal Soundness
The Developer has extensive affordable housing development and asset management
experience using HOME funds as well as a variety of other federal funding sources. Therefore, it
is determined that the Developer meets the financial management systems and practices
required by the HOME Program.
The Developer provided audited financial statements for 2016 and 2017 prepared in
accordance with generally accepted accounting principles. The financial statements
demonstrate that the Developer has sufficient cash -on -hand and financial strength to complete
the Project.
D. Conclusion
The Developer has demonstrated the development capacity and fiscal soundness to undertake
the Project.
V. MARKET ASSESSMENT
The Developer provided KMA with a multifamily rental market study conducted by Novogradac
& Company, LLP. KMA has reviewed the Market Study and prepared a summary of the findings.
A. Identification of Neighborhood Target Area
The market study identifies the neighborhood target area to be central Santa Ana, as well as
portions of the cities of Garden Grove and Orange with the following boundaries
Direction
Boundary
North:
Chapman Avenue
South:
Interstate 405/San Diego Freeway
East:
Costa Mesa Freeway/State Highway 55
West:
Harbor Boulevard
B. Pricing
The following compares the Project's highest proposed rents to the adjusted market rents of
surveyed properties:
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C. Absorption
The demand estimate indicates there area sufficient number of income eligible households in
the Target Area. The overall vacancy rates among the comparable properties average 1%.
Three of the five Tax Credit comparables reported zero vacancies, as did two market rate
comparables. Further, four of the Tax Credit comparables maintain waiting lists.
The Market Study estimates that the Project will reach stabilized occupancy within two to three
months of completion. This equates to an absorption pace of approximately 25 units per
month.
D. Market Study Conclusions
Based on the market assessment results, KMA concludes that there is adequate demand for
affordable housing to support the Project. Therefore, it is anticipated that the Project will be
leased up well before the six-month HOME requirement.
VI. HOME REQUIREMENTS
The following summarizes additional HOME requirements.
A. HOME Program Deadlines
Deadline
Acquisition
§92.2 states that acquisition of
The Site has
housing will occur within 6
already been
months of contract date.
acquired.
Demolition/Construction
§92.2 states that
The Project is
construction/demolition of
currently under
property is scheduled or
construction
reasonably can be expected to
start within 12 months of the
agreement date (8/21/18).
Project Completion
§92.205(e)(2), 92.2 state that the
To be
project must be completed
completed in
within 4 years of the date the
June 2019
funds are committed to the
project (8/29/2018).
Lease -up
§92.252 states that HOME
To be
assisted units must be occupied
completed
by an eligible tenant within six
within 6
months following project
months
completion.
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B. Cost Reasonableness
The Developer provided an executed contract with Westport Construction, Inc, the general
contractor for the Project. The contract describes the costs associated with the scope of work
for the Project. In addition, the Developer provided requested and approved change orders to
revise the scope of work and associated costs. Together the construction contract and
approved change orders represent the current Project budget. The costs included in the
Project budget appear reasonable for the scope of work proposed for the Project.
C. Written Agreement
The City must execute a written agreement before committing HOME funds to the Project. The
written agreement must capture the Project and financing terms that result from the
underwriting process. The City and Developer entered into an initial HOME Loan Agreement in
July 2017 and propose to amend that Agreement in August 2018. The following summarizes
the financial deal points memorialized in the written agreements:
1. The term of the HOME Loan is 55 years.
2. The term of the HOME affordability restrictions is 20 years.
3. A total of 11 units in the Project are restricted as fixed HOME units as follows:
Three (3) one -bedroom units will be restricted as Low HOME units;
b. Four (4) three-bedroom units will be restricted as Low HOME units; and
C. Four (4) three-bedroom units will be restricted as High HOME units.
4. The HOME Loan terms are as follows:
a. A total of $2,627,631 will be disbursed to the Developer for eligible costs related
to the construction of the 11 HOME assisted units.
b. A 3.0% simple interest rate.
C. The outstanding loan balance will be due and payable at the end of the 55 -year
term.
d. The loan is secured by a subordinated deed of trust.
e. Annual payments will be made to the City based on 10.23% of total annual
residual receipts.
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The following verifies that the written agreement includes the provisions required in Section
92.504:
Required Provisions
Use of HOME Funds
Included in
Written
Agreement
®
Section of
Written
Agreement
5A
Affordability
®
7
Project is identified by Address or Legal Description
®
Exhibit A
Project Requirements
®
7
Property Standards
®
11.11
Other Federal Requirements
®
11
Affirmative. Marketing
®
11.9
Requests for Disbursement of Funds
®
6
Records & Reports
11.16
Enforcement of the Agreement
®
21
Duration of the Agreement
®
7.1.A
Conditions for Religious Organizations
❑
NA
CHDO Provisions
❑
NA
Identifies all Parties to the Agreement
®
Recitals
Provides dated signatures for each Party
X
21.19
Recommended Additional Provisions:
■ Description of Project
®
Exhibit F
■ Roles & Responsibilities
®
6
• Conflict of Interest
®
11.18
■ Monitoring
®
11.19
D. Layering Requirements
HOME regulations require projects to provide a layering analysis demonstrating that the HOME
assistance is required to provide affordable housing. Based on the results of the preceding
underwriting analysis, KMA concludes that the Developer's request for $2,627,631 in HOME
assistance from the City is warranted by the Project economics. As such, it can be concluded
that the assistance package complies with the HOME layering requirement.
E. Cost Allocation (§92.205(d)) and HOME Unit Designation (Table 5)
HOME funds may only be used to pay eligible costs for HOME assisted units. When the City
designates fewer than 100% of the units as HOME assisted, the City must calculate the eligible
costs that are allocable to the assisted units and may only pay the actual costs related to those
HOME assisted units, capped by the maximum subsidy limits previously described. The
financial gap analysis concludes that the Project needs $2,639,000 in HOME assistance;
however, the Developer is only requesting $2,627,631 in HOME funds.
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Given that the units are not uniform in size, KMA used the Standard Method to determine the
cost allocation. As detailed in Table 5, KMA estimated that eligible project costs equate to $638
per square foot of gross residential area. Therefore, a total of $7.70 million can be allocated to
the 11 HOME -designated units as specified in AppendixA —Table 5.
However, there is also a maximum HOME subsidy requirement that must be met. In order to
commit $2,627,631 to this Project, based on the 2018 maximum subsidy limits, three one -
bedroom units and eight three-bedroom units need to be restricted as HOME units.
The following summarizes the maximum HOME subsidy that can be made to the Project based
on 11 HOME units:
Maximum I
HOME Minimum HOME
Assistance Designated
Proposed HOME Assistance $2,627,631 N/A
Cost Allocation Test $7,695,589 11 units
Maximum Subsidy Test $2,627,632 11 units
Maximum Allowable HOME Subsidy $2,627,631 11 units
F. Affordability Period
The HOME assisted units must meet the affordability requirements for not less than the
applicable period specified in the following table, beginning after project completion:
Projects
Acquisition / Rehabilitation Projects:
Minimum
Affordability
PeriodRental
HOME Funds Under $15,000 per Unit
5 Years
HOME Funds Under $15,000 - $40,000 per Unit
10 Years
HOME Funds Over $40,000 per Unit
15 Years
Rehabilitation Projects Involving Refinancing
15 Years
New Construction Projects
20 Years
The HOME Program affordability requirements must:
1. Apply without regard to the term of any loan or mortgage, repayment of the HOME
investment, or the transfer of ownership;
2. Be imposed by a deed restriction, a covenant running with the land, an agreement
restricting the use of the property, or other mechanisms approved by HUD and must
give the City the right to require specific performance; and
3. Must be recorded in accordance with State recordation laws.
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The HOME Agreement requires the 11 HOME units to be restricted as affordable for 20 years.
Therefore, the Project will meet the HOME requirement for new construction projects. The
affordability restrictions are detailed in the HOME Loan Agreement that will be recorded on the
property.
G. Property Standards (§92.251)
The Project will be subject to the following property standards:
H. HOME Rents / Utility Allowances
The tenants will be responsible for paying utilities. The following provides the current HOME
rents as of July 2018 for Orange County as published by HUD less the estimated utility
allowances:
The HOME Regulatory Agreement requires that seven units are restricted as Low HOME units
I. Financial Commitments
The Developer provided financial commitment documentation for the following sources:
1. An executed Loan Purchase Agreement from CCRC dated July 21, 2017 to provide a
$21,260,574 construction loan and an estimated $3,043,100 permanent loan.
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Included in
HOME
PropertyAgreement
State and local codes, ordinances and zoning
requirements
Accessibility:
■ Accessibility requirements of 24 CFR part 8
• Design and construction requirements at 24
CFR 100.205
Disaster Mitigation
Not Applicable
Written cost estimates, construction contracts and
construction documents
Construction progress inspections
H. HOME Rents / Utility Allowances
The tenants will be responsible for paying utilities. The following provides the current HOME
rents as of July 2018 for Orange County as published by HUD less the estimated utility
allowances:
The HOME Regulatory Agreement requires that seven units are restricted as Low HOME units
I. Financial Commitments
The Developer provided financial commitment documentation for the following sources:
1. An executed Loan Purchase Agreement from CCRC dated July 21, 2017 to provide a
$21,260,574 construction loan and an estimated $3,043,100 permanent loan.
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2. An executed Second Amended and Restated Agreement of Limited Partnership with
Bank of America as the Investor dated July 1, 2017 to provide $18.04 million in Tax
Credit equity.
A Standard Loan Agreement from HCD for $4.94 million in AHSC funds executed on July
26, 2017.
4. A Standard Grant Agreement from HCD for $22,500 in AHSC funds executed on July 26,
2017.
5. The City entered into the 2017 HOME Loan Agreement to provide $2,219,760 to the
Project on July 5, 2018. The City intends to amend the 2017 HOME Loan Agreement in
August 2018 to provide $2,627,631 in HOME funds to the Project.
VII. CERTIFICATIONS
Based on the results of the analysis, the following certifications are provided:
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Requirement
Certifications
The funding sources discussed in this Report are sufficient, and timely in
Met
availability, to cover the Project costs.
The estimated costs for the Project are necessary, reasonable, and in
compliance with the cost principles described in 2 CFR part 200.
The scope and budget for the Project are sufficient to meet the HOME
property standards set forth at 24 CFR 92.251 over the life of the
affordability covenants imposed by the HOME Loan Financing Agreement.
The Developer's operating pro forma includes realistic assumptions
regarding the base year revenues and expenses, and reasonable escalation
factors for the revenues and expenses.
The market assessment confirms the demand for the Project, and the
Project can be expected to be leased up within the 18 -month period
mandated by HUD.
The Developer's experience and financial capacity are adequate to
implement the Project, and meet the financial obligations and risks related
to the Project.
The developer fee, cash flow projection, equity appreciation, and profit
anticipated to be generated by the Project are appropriate.
The Project meets the minimum HOME investment requirement of $1,000
per HOME designated unit.
The Project will provide the minimum number of HOME -Assisted Units as
required under the cost allocation rule at 24 CFR 92.504.
The HOME Program assistance provided to the Project does not exceed the
subsidy limits, and the appropriate number of units have been designated
as HOME units as established by 24 CFR 92.504.
City of Santa Ana HOME Subsidy Layering Review: Santa Ana Arts Collective Page 122
25J-44
In accordance with 24 CFR 92.205(e)(2), the Project will be completed
Requirement
Met
within four years of the date the HOME funds are committed.
Project is associated with approved Consolidated Plan /
Annual Action Plan projects
The Project will comply with the property standards and affordability
requirements imposed by CFR 92.252(e).
VIII. COMMITMENT CHECKLIST (§92.2)
HOME funds are not committed to an identifiable project in IDIS until the parties have provided
the following:
Requirements
Requirement
Met
Completion Dates
Project is associated with approved Consolidated Plan /
Annual Action Plan projects
Environmental Review Requirements have been met
Legally binding written agreement has been executed
®
July 5, 2018 & August
21, 2018
All necessary financing is secured
®
August 21, 2018
Subsidy Layering & Underwriting Analysis Completed
®
August 6, 2018
Construction Expected to begin within 12 months
Commitment Date
I Not Applicable
By September 20, 2018
City of Santa Ana HOME Subsidy Layering Review: Santa Ana Arts Collective Page 123
25J-45
Appendix A
25J-46
APPENDIX A -TABLE 1
ESTIMATED DEVELOPMENT COSTS
SANTA ANA ARTS COLLECTIVE
SANTA ANA, CALIFORNIA
I. Property Assemblage Costs
Property Acquisition Costs
2
43,299
Sf Land
$171
/Sf Land
$7,405,000
Relocation Costs
2
1,473,000
Closing Costs
0.5%
Purchase Price
34,000
Total Property Assemblage Costs
$8,912,000
II. Direct Costs
3
Off-site Improvements
$376,000
On-site Improvements
43,299
Sf Land
$11
/Sf Land
469,000
Adaptive Reuse & New Const Costs
4
74,499
Sf GBA
$189
/Sf GBA
14,080,000
Furnishings, Fixtures & Equipment
350,000
Contractor Fees / General Requirements
12%
Construction Costs
1,791,000
Construction Bonds
2%
Construction Costs
299,000
Contingency Allowance
3%
Other Direct Costs
521,000
Total Direct Costs
58
Units
$308,400
/Unit
17,886,000
III. Indirect Costs
Arch, Eng, Consulting & Construction Mgt
16%
Direct Costs
$2,862,000
Public Permits & Fees
6
58
Units
$28,220
/Unit
1,637,000
Taxes, Insurance, Legal & Accounting
3%
Direct Costs
537,000
Marketing & Leasing
58
Units
$2,414
/Unit
140,000
Developer Fee
6
8%
Eligible Basis
2,000,000
Contingency Allowance
2%
Other Indirect Costs
144,000
Total Indirect Costs
$7,320,000
IV. Financing Costs
Interest During Construction
Predevelopment Loan
7
$206,000
Construction Loan
a
$21,260,574
Loan Amount
4.86%
Interest
995,000
Financing Fees
Construction Loan
$21,260,574
Loan Amount
1.25
Points
266,000
Permanent Loan
$3,442,000
Loan Amount
1.50
Points
52,000
Operating Reserve
3
Months Operating Expenses / Debt Service
162,000
TCAC Fees
'
97,000
V.
Total Financing Costs $1,778,000
Total Construction Costs 58 Units $465,200 /Unit $26,984,000
Total Development Costs 58 Units $618,900 /Unit $35,896,000
2 An appraisal prepared on June 27, 2017 estimates the As -Is market value of the property at $8,200,000.
2 Based on Developer estimate. LACAL Consulting, Inc. prepared a relocation plan on May 31, 2016 and estimated the relocation costs at $907,000.
However, the report underestimaterd the lease termination options. The Developer provided back-up documenation for the additional costs.
3 Estimates assume prevailing wage requirements will not be imposed on the Project.
4 Based on Developer estimate. The Developer provided a general contractor contract and change orders to support the construction cost estimates.
s Based on Developer estimate. The estimate should be verified by City staff.
6 This is the maximum amount allowed to be included in the Project by TCAC.
7 Based on Developer estimate.
6 Includes debt on the 78% of the Tax Credit Equity which will not be funded during construction. Assumes a 21 -month development period with a
55% average outstanding balance.
3 Includes a $2,000 application fee; $410/unit monitoring fee; and 4% of the gross Tax Credit proceeds for one year.
Prepared by: Keyser Marston Associates, Inc.
Filename: Meta -8 618; PF_9%; trb 25J-47
APPENDIX A -TABLE 2
STABILIZED NET OPERATING INCOME
SANTA ANA ARTS COLLECTIVE
SANTA ANA, CALIFORNIA
I. Gross Residential Income
Manager's Unit
1
Unit
$0
/Unit/Month
$0
Low HOME/TC Cd 30% Median
1 -Bedroom Units @ (687-Sf)
14
Units
$572
/Unit/Month
96,100
2 -Bedroom Units @ (939-Sf)
2
Units
$689
/Unit/Month
16,500
3 -Bedroom Units @ (1,280-Sf)
4
Units
$781
/Unit/Month
37,500
Low HOME/TC to 35% Median
1 -Bedroom Units @ (687-Sf)
6
Units
$674
/Unit/Month
48,500
Low HOME/TC (x140%Median
1 -Bedroom Units @ (687-Sf)
6
Units
$777
/Unit/Month
55,900
High HOME/TC Cel 60% Median
2 -Bedroom Units @ (939-Sf)
12
Units
$1,427
/Unit/Month
205,500
3 -Bedroom Units @ (1,280-Sf)
13
Units
$1,634
/Unit/Month
254,900
Laundry/Miscellaneous Income
58
Units
$10
/Unit/Month
7,200
Gross Base Income
$722,100
(Less) Vacancy & Collection Allowance
5%
Gross Base Income
(36,100)
Effective Gross Base Income
$686,000
II. Operating Expenses
General Operating Expenses
58
Units
$5,660
/Unit
$328,300
Property Taxes
z 58
Units
$232
/Unit
13,400
Services
58
Units
$345
/Unit
20,000
HCD Required Debt Service
$4,944,000
AHSC Loan
0.42%
AHSC Loan
20,800
Replacement Reserve
58
Units
$600
/Unit
34,800
Total Operating Expenses
$417,300
III. I Net Operating Income $268,700
Based on Orange County Incomes distributed by HUD/HCD. As pertinent, the rents are based on those published in 2018 by TCAC, and the HOME
Program. Utility Allowances per the Developer: $43 for 1-Bdrm units; $49 for 2-Bdrm units; and $71 for 3-Bdrm units.
z Based on Developer estimate. Assumes that the Developer will receive the property tax abatement accorded to non-profit housing organizations
that develop income -restricted apartments.
Prepared by: Keyser Marston Associates, Inc.
Filename: Meta_8618; PF_9%; trb 25J -48
Q O
APPENDIX A - TABLE 3
FINANCIAL GAP CALCULATION
SANTA ANA ARTS COLLECTIVE
SANTA ANA, CALIFORNIA
I. Available Funding Sources
Permanent Loan
Net Operating Income ' $268,700 NOI (See Table 2)
Income Available for Mortgage 1.16 DCR $230,900 Debt Service
Interest Rate 5.36% Interest Rate 6.71% Mortgage Constant
Permanent Loan
Tax Credit Equity z
Gross Tax Credit Value
Syndication Rate
Net Tax Credit Equity
AHSC Affordable Hsg Development Loan 3
AHSC Program Grant 3
Deferred Developer Fee
$17,908,000
$1.01 /Tax Credit Dollar
$3,442,000
$17,534,000
$4,944,000
$23,000
$2,000,000
City of Santa Ana Inclusionary Funds 3
$4,775,000
City of Santa Ana CDBG Funds 3
$500,000
Total Available Funding Sources
$33,218,000
II. Unfunded Financial Gap Calculation
Total Available Funding Sources
$33,218,000
(Less) Total Development Costs
(35,896,000)
Unfunded Financial Gap $2,678,000
' Assumes a 30 -year amortization term.
z Assumes an $15.9 million requested unadjusted eligible basis, which includes a $776,000 million voluntary basis reduction, a 130% difficult -to -
develop premium, a 9.0% Tax Credit rate and an applicable fraction of 100%. Due to delays in construction, the Project is subject to a $509,000
equity timing adjuster.
3 The Developer provided commitment documentation for these funding sources.
Prepared by: Keyser Marston Associates, Inc. A 9A
Filename: Meta _8618;PF_9%;trb 25J-4
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25J-55
APPENDIX A - TABLE 5
COST ALLOCATION WORKSHEET - STANDARD MODEL
SANTA ANA ARTS COLLECTIVE
SANTA ANA, CALIFORNIA
Step 1: Determine Comparability, Select Method of Cost Allocation Gross Res SF 53,702
Step 2: Proposed HOME Investment $2,627,631
Step 3: Calculate Actual Cost of HOME Units
Total Development Costs $35,845,177
Ineligible Development Costs (1,571,790)
Unit -Specific Upgrades 0
Relocation Costs 1,473,000
Assign Relocation Exclusively to HOME Units? NO
Base Project Cost $638
/Sf Gross Residential SF
$34,273,387
Assign Units ft of Bdrms
Unit Size
Cost Unit
1 1
624
$398,246
2 1
624
398,246
3 1
624
398,246
4 3
1,214
774,792
5 3
1,248
796,492
6 3
1,298
828,402
7 3
1,274
813,085
8 3
1,302
830,955
9 3
1,274
813,085
10 3
1,302
830,955
11 3
1,274
813.085
Subtotal HOME Unit Costs
$7,695,589
Add: Relocation Costs Allocated Exclusively to HOME Units (if applicable)
$0
Actual Cost of HOME Units $7,695,589
Step 4: Calculate Maximum Project Subsidy
Proposed Investment (Step 2)
$2,627,631
Unit Size
p of Units
Max Subsidy/Unit
Maximum Subsidy
0 Bedroom
0
$147,074
$0
1 Bedroom
3
$168,600
505,800
2 Bedroom
0
$205,502
0
3 Bedroom
8
$265,229
2,121,832
Maximum Project Subsidy
11
$2,627,632
Step 5: Maximum HOME Investment, Lesser of
Proposed Investment (Step 2)
$2,627,631
Actual Cost of HOME Units (Step 3)
$7,695,589
Maximum Project Subsidy (Step 4)
$2,627,632
Maximum HOME Investment
11 HOME Units $2,627,631
Prepared by: Keyser Marston Associates, Inc.
Filename: Meta -8 618; HOME; trb 25J-57
25J-58