HomeMy WebLinkAbout3 - PRE-LOAN_COMMITMENT_2019-01-15REQUEST FOR HOUSING
AUTHORITY ACTION
MEETING DATE:
JANUARY 15, 2019
TITLE:
APPROVE A PRE -LOAN COMMITMENT OF
$1,069,947 OF AFFORDABLE HOUSING
FUNDS, A 99 -YEAR GROUND -LEASE, AND
THREE PROJECT -BASED VOUCHERS TO
HOMEAID ORANGE COUNTY AND MERCY
HOUSE LIVING CENTERS FOR THE
DEVELOPMENT OF THE FRANCES XAVIER
RESIDENCE PROJECT
{STRATEGIC PLAN NO. 5,3C)
EXECUTIVE DIRECTOR
RECOMMENDED ACTION
RECORDING SECRETARY USE ONLY:
APPROVED
❑ As Recommended
❑ As Amended
CONTINUED TO
Authorize the Executive Director of the Housing Authority and the Recording Secretary to
execute a pre -loan commitment letter with HomeAid Orange County ("HomeAid") with Mercy
House Living Centers ("Mercy House") as the service provider for $1,069,947 in Low and
Moderate Income Housing Asset Funds and a 99 -year ground -lease of 801, 809 & 809 1/2 E.
Santa Ana Blvd (APN: 398-303-04 1 398-303-05 1 398-303-06 1 398-303-07) for the
development of the Frances Xavier Residence affordable housing project, subject to non -
substantive changes approved by the Executive Director of the Housing Authority and
Authority General Counsel.
2. Approve an award of three (3) project -based vouchers and authorize the Executive Director
of the Housing Authority and the Recording Secretary to execute an Agreement to Enter into
a Project -Based Vouchers Housing Assistance Payments Contract with HomeAid for the
development of the Frances Xavier Residence affordable housing project, subject to non -
substantive changes approved by the Executive Director of the Housing Authority and
Authority General Counsel.
COMMUNITY REDEVELOPMENT AND HOUSING COMMISSION RECOMMENDATION
At its special meeting on December 19, 2018, the Community Redevelopment and Housing
Commission (CRHC) by a vote of 5:0 (Ramos and Urzua abstained):
1) Recommended that the Housing Authority authorize the Executive Director of the Housing
Authority to execute a pre -loan commitment letter with HomeAid with Mercy House as the
service provider for $1,069,947 in Low and Moderate Income Housing Asset Funds and a
99 -year ground -lease of 801, 809 & 809'/2 E. Santa Ana Blvd (APN: 398-303-04 1 398-
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Commitment of Affordable Housing Funds, a Lease and PBVs to HomeAid
January 15, 2019
Page 2
303-05 1398-303-06 1398-303-07) for the development of the Frances Xavier Residence
affordable housing project).
2) Recommended that the Housing Authority approve an award of three (3) project -based
vouchers and authorize the Executive Director of the Housing Authority to execute an
Agreement to Enter into a Project -Based Vouchers Housing Assistance Payments
Contract with HomeAid for the development of the Frances Xavier Residence affordable
housing project.
DISCUSSION
On June 19, 2018, the City Council authorized the Community Development Agency (CDA) to
release a Fiscal Year 2018 — 2019 Request for Proposals (RFP) to develop affordable rental and
ownership project(s) in the City of Santa Ana with available funds from the HOME Investment
Partnerships Program (HOME), Community Development Block Grant Program (CDBG), Project
Based Voucher Program (PBV), Inclusionary Housing Fund, and Housing Successor Agency
Fund. The RFP also included land assets currently owned by the Housing Authority of the City
of Santa Ana. The RFP was drafted in compliance with the City's Affordable Housing Funds
Policies and Procedures adopted by City Council on March 20, 2018.
On July 2, 2018, CDA issued RFP # 18-056 for Affordable Housing Development. The RFP was
published on both the City and Housing Authority's websites; a public notice was published in the
OC Register on July 2, 2018; an e-mail was sent out by Orange County's largest affordable
housing membership associations including the Kennedy Commission, 2-1-1 Orange County,
and Southern California Association of Nonprofit Housing; and an electronic letter was e-mailed
to interested developers and nonprofit organizations who had previously requested to be
informed of development opportunities on CDA's RFP Process Database.
The first annual deadline for the City's RFP # 18-056 for Affordable Housing Development closed
on Wednesday, August 15, 2018 at 5:00 p.m. The City received thirteen (13) proposals prior to
the deadline. The affordable housing developers that submitted a proposal are:
Affordable Housing Developer
Cesar Chavez Foundation
Chelsea Investment Corporation
Community Development Partners — 2 Proposals
Community HousingWorks
Habitat for Humanity of Orange County
HomeAid Orange County
Jamboree Housing — 2 Proposals
National Community Renaissance & Mercy House Living Centers
Orange Housing Development Corporation & C&C Development, LLC
Related California
LINC Housing Corporation
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January 15, 2019
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After the deadline, staff conducted a minimum threshold review of each proposal to ensure the
proposal complied with all of the minimum requirements in the RFP. Following the minimum
threshold review, staff formed a Review Panel that consisted of the Executive Director of the
City's Public Works Agency with his designee, the Executive Director of the Planning and
Building Agency with his designee, the Executive Director of the Community Development
Agency, and the Housing Division Manager. The Veterans Affairs Medical Center of Long
Beach, the County of Orange, Keyser Marston Associates, and MDG Associates served as
advisors to the Review Panel.
In compliance with the City's Affordable Housing Funds Policies and Procedures, the Review
Panel used the proposal Scoring and Selection Criteria from the RFP to conduct their review and
analysis of each proposal. In addition to the Scoring and Selection Criteria from the RFP, the
Review Panel also reviewed the proposed project design for appropriateness for the proposed
target group, compatibility with surrounding uses, cost effectiveness of construction, and
appropriateness of the design and construction for low maintenance and long term durability.
On October 30, 2018, the Review Panel met and interviewed all of the developers who submitted
a proposal. LINO Housing requested to be removed from consideration prior to their scheduled
interview and therefore their proposal was removed from consideration, On November 14, 2018,
the Review Panel met a second time to discuss and deliberate upon the scoring and selection of
the proposals. Following this deliberative selection process, the Review Panel agreed upon the
final scores below based on an average of the Individual Reviewer Scores:
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Commitment of Affordable Housing Funds, a Lease and PBVs to HameAid
January 15, 2019
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Housing Authority Land Asset Requested t
HUD-VASH Vouchers 1 Non -Housing
Authority Land Asset
Developer Name
Project Name
FINAL SCORE (Average of Individual
Reviewer Scores)
1126 & 1146 E. Washington Avenue
Orange Housing Development Corporation and
C&C Development, LLC
11201146 E. Washington Site
92
Related California
The Crossroads at Washington
91
Jamboree Housing
REVD Apartments
87
Cesar Chavez Foundation
Santa Ana Place
84
Community Housi ngWorks
Transformar
80
Community Development Partners
Washington Piaza, GRFLD, Lacy Walk
77
Chelsea Investment Corporation
Cielo
76
826 N. LacyJ830 N. Lacy
Habitat for Humanity of Orange County
Lacy Street Project
82
Community Deveiopmenl Partners
Washington Plaza, GRFLD, Lacy Walk
77
801,809 & 809112 E. Santa Ana Blvd.
HameAid Orange County
Frances Xavier Residence
-
90
Community Development Partners
Washington Plaza, GRFLD, Lacy Walk
77
HUD-VASH Vouchers (As the Primary Source
of Financing)
Jamboree Housing
Budget Inn Site
86
Community Development Partners
Westview House
81
Non -Housing Authority Land Asset
National Community Renaissance and Mercy
House Living Centers
Santa Ana United Methodist Church Site
93
3-4
Commitment of Affordable Housing Funds, a Lease and PBVs to HomeAid
January 15, 2019
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Based on the scores above and the relative scoring of proposals competing for the same land
asset(s) or source of affordable housing funds (e.g. HUD-VASH PBVs), the Review Panel
recommends the following award for this project:
Developer: HomeAid Orange County and Mercy House
Project Name: Frances Xavier Residence
Developer Request:
• $1,051,629
8 HUD-VASH PBVs
Award Recommendation:
• Lease Agreement for 801 E. Santa Ana Blvd.
o Appraised Value as of Oct 25, 2018: $788,000.00
Low and Moderate Income Housing Asset Fund (Housing Successor Agency Fund):
$1,069,947
• Project -Based Voucher Program (PBV): Three (3) HUD-VASH PBVs
Staff notified HomeAid and Mercy House in writing of the award recommendation by the Review
Panel, contingent on final approval by the Community Redevelopment and Housing Commission
(CRHC) and Housing Authority (Exhibit 1). The pre -loan commitment letter with HomeAid with
Mercy House as the service provider for $1,069,947 in Low and Moderate Income Housing Asset
Funds and a 99 -year ground -lease of 801, 809 & 809 '/a E. Santa Ana Blvd (APN: 398-303-04 I
398-303-05 1 398-303-06 1 398-303-07) for the development of the Frances Xavier Residence
affordable housing project provides the official award from the Housing Authority (Exhibit 2). In
compliance the City's Affordable Housing Funds Policies and Procedures, the City's real estate
advisor, Keyser Marston Associates (KMA), has confirmed the underwriting for the Project, the
financial gap, and other programmatic requirements related to the funding sources. KMA has
reviewed the developer's estimates and projections of rents, expenses, reserves and
development costs in accordance with industry -standard underwriting guidelines and
recommends the full amount of the award based on their underwriting and subsidy layering
analysis (Exhibit 3).
Project Description
HomeAid Orange County, in partnership with Mercy House and with C & C Development acting
as an advisor, is proposing to develop Frances Xavier Residence.
The Proposed Project will be 100% affordable to households earning less than 80 percent of the
Area Median Income (AMI). All units will be set-aside for Permanent Supportive Housing (PSH).
However, the project may remove one PSH units to include an on-site property manager's unit of
the 12 units which is not listed below. The proposed unit mix and rent restrictions are as follows:
3-5
PSH - 30%-
80% AM]
Total
1 -bedroom
5
5
2 -bedroom
5
5
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Commitment of Affordable Housing Funds, a Lease and PBVs to HomeAid
January 15, 2019
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3Tbedroom 2 2
Total 12
The proposed Francis Xavier Residence supports a 12 -unit two story building that will provide
permanent supportive housing for homeless individuals and families. The surrounding
neighborhood has a mixture of recently developed mixed use residential buildings and long
standing apartment buildings in support of the multi -unit residential nature for the Francis Xavier
Residence. While the 12 -unit building fits with surrounding residential typologies, the proposed
affordable housing opportunity allows for a density bonus to achieve the proposed 12 affordable
units on this site under the existing UN -2 zoning which accommodates 30 dwelling units per acre.
The current site, on the corner of Santa Ana Boulevard and Garfield, boasts a pedestrian forward
location with its proximity to the train station and other public transportation resources — ideal for
the proposed tenants of the Francis Xavier Residence. The proposed Francis Xavier Residence
is designed specifically to accommodate 2 key populations: homeless veterans and homeless
families or individuals.
The building will also include 2 and 3 bedroom units to promote a family oriented community
environment for the residents. The adjacency to the elementary school provides an unmatched
resource opportunity for future kids and their parents that may utilize this proposed facility.
HomeAid is seeking to serve single homeless and some larger families which requires a
reduction in parking through either a standard variance or an affordable housing incentive. A one
to one parking ratio is reasonable for these populations since it is common for emergency
shelters and housing developed by HomeAid for low-income and homeless families over the past
3 decades to have more no more than 1 .car per household.
HomeAid will also incorporate green building measures such as dual pane windows, planning of
window orientation, drought tolerant landscaping, inclusion of some energy star appliances
(where the items are not cost prohibitive), sections of pervious pavement, and potentially
measures such as rainwater collection. Many of these measures are standard for developments
completed by HomeAid in partnership with Mercy House.
The current design shows a 15,800 sq. ft. building divided between a 6,425 sq. ft. main floor;
7,540 sq. ft. second floor; and covered garage parking. Site parking, including covered garage
parking supports (12) spaces, including (4) tandem stalls, that have direct access into the
building. A central main entry lobby controls access to the main level, including the large
community room and 2,400 sq. ft. open to sky interior courtyard with small play structure and
resident gathering spaces. The design, which may be amended includes: units with private entry
locations off of common hall ways comprised of (2) three bedroom with two bath units around
1,100 sq. ft., (5) two bedroom with one bath units around 830 sq. ft.; and (5) one bedroom with
one bath units between 550-790 sq. ft. All of the units share a common laundry facility that
supports multiple laundry machines for resident use. Based on the needs of populations served,
a second floor storage space is being proposed to provide area for the residents to store
belongings that are not necessarily needed on a regular basis, or do not fit inside their
designated living unit. While the units are arranged to provide privacy for the residents at the
unit, the overall building is designed for a sense of shared community and the residents
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Commitment of Affordable Housing Funds, a Lease and PBVs to HomeAid
January 15, 2019
Page 7
themselves promoting a safe environment for all the individuals that become a part of the Francis
Xavier community.
Due to the fact that all units will be- dedicated for permanent supportive housing, the bedroom
counts above and project design are conceptual in nature. It may be necessary to modify the
bedroom count of units throughout the project to accommodate family size of potential residents
that match program criteria. This also means that the building footprint and square footage may
be adjusted, both to ensure that the project is viable based on available funding, and to address
the above listed concerns. All architecture presented at this time is based on original design
documents from 2010, and is conceptual. HomeAid will increase or decrease the bed count as
necessary to achieve a functional project and to guarantee the financial feasibility of the project.
Development Summary:
• Site Control - Current Zoning: The proposed project does not require rezoning the site.
Lots must be combined as a part of the approval process to accommodate the proposed
building.
• Anticipated Development Costs: $3,764,713
• Authority Loan Terms: The Low and Moderation Income Housing Asset Funds would be
turned into a residual receipts loan at a 3% interest repayable out of 50% of the actual
cash flow.
• Developer Access to Additional Funds: HomeAid does have access to additional funds,
and will consider pursuit of funding through the County of Orange Mental Health Services
Act program and/or the forthcoming No Place Like Home program. HomeAid has
previously fundraised $4,000,000 in donations I pledges for the development and ongoing
maintenance of the recently opened HomeAid Family CareCenter and HomeAid has
significant experience in pursuing numerous grants for projects.
• The property is currently owned by the Housing Authority of the City of Santa Ana.
For the development of this project by HomeAid Orange County with Mercy House Living
Centers, the Review Panel is recommending an award of $1,069,947 in Low and Moderate
Income Housing Asset Funds and a 99 -year ground -lease of 801, 809 & 809 '/2 E. Santa Ana
Blvd (APN: 398-303-04 1 398-303-05 1 398-303-06 1 398-303-07). The Review Panel is also
recommending an award of three (3) HUD-VASH PBVs following a competitive selection process
through RFP # 18-056 in compliance with the City's Affordable Housing Funds Policies and
Procedures. After HomeAid secures all of their remaining financing for the development of the
project, staff will return to the Housing Authority with the loan agreement and 99 -year ground -
lease agreement.
On January 8, 2019, the County of Orange Board of Supervisors authorized County staff to
submit a joint project application to the State of California Housing and Community Development
Department for the first round of competitive No Place Like Home (NPLH) funding. The NPLH
program will provide funding to support the development of supportive housing for adults with
serious mental illness in the City of Santa Ana. The deadline for their NPLH application is
January 30, 2019. NPLH funding in the amount of $3,382,389 is being requested from HCD to
support the development of up to 9 of the 12 units in the project. The City's pre -commitment
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Commitment of Affordable Housing Funds, a Lease and PBVs to HomeAid
January 15, 2019
Page 8
letter will enhance and support the Developer's application for this additional source of financing
to make the project feasible.
STRATEGIC PLAN ALIGNMENT
Approval of this item supports the City's efforts 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), 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
Upon approval of the loan agreement, funds in the amount of $1,069,947 within the Low and
Moderate Income Housing Asset Fund will be made availalble for distribution (account number
60718830-69152). Any payment associated with the lease agreement will be addressed at the
time the agreement is presented to the Housing Authority Board for approval.
Each project based voucher is estimated to be valued at $10,550 annually, based on HUD's
initial award of the vouchers from April 2018. The actual annual expenditure for the three
vouchers may be different based on when the development of the project is completed and the
units are leased. Funds will be budgeted in future fiscal years in the Housing Choice Voucher
Program, Housing Assistance Payment account (no. 13618760-69158).
Juds n Brown
Housing Division Manager
Community Development Agency
APPROVED AS TO FUNDS AND ACCOUNTS:
Kathryn Downs, CPA
Executive Director
Finance and Management Services Agency
Exhibits: 1. Award Announcement to HomeAid and Mercy House
2. Pre -Loan Commitment Letter with HomeAid and Mercy House
3. Underwriting and Subsidy Layering Analysis by Keyser Marston Associates
UK
December 4, 2018
Scott Larson, Executive Director of HomeAid Sent via E-mail
Larry Haynes, Executive Director of Mercy House
HomeAid Orange County / Mercy House Living Centers
24 Executive Park, Suite 100
Irvine, CA 92614
Subject: Award Recommendations by Review Panel for RFP # 18-056
Dear Mr. Larson and Mr. Haynes,
Thank you very much for your proposal submitted in response to our RFP for Affordable
Housing Development (RFP # 18-056). The City of Santa Ana received a total of thirteen
(13) proposals requesting over $52 million and 304 Project -Based Vouchers. We thank
you for your proposal and your commitment to develop affordable housing for the
residents of the City of Santa Ana.
In compliance with the City's Affordable Housing Funds Policies and Procedures adopted
by City Council on March 20, 2018, staff formed a Review Panel that consisted of the
Executive Director of the City's Public Works Agency with his designee, the Executive
Director of the Planning and Building Agency with his designee, the Executive Director of
the Community Development Agency, and the Housing Division Manager. The VAMC of
Long Beach, the County of Orange, Keyser Marston Associates, and MDG Associates
served as advisors to the Review Panel. The Review Panel used the proposal Scoring
and Selection Criteria from the RFP to conduct their review. In addition to the Scoring and
Selection Criteria from the RFP, the Review Panel also reviewed the proposed project
design for appropriateness for the proposed target group, compatibility with surrounding
uses, cost effectiveness of construction, and appropriateness of the design and
construction for low maintenance and long term durability.
On October 30, 2018, the Review Panel met and interviewed all of the developers who
submitted a proposal. LINC Housing requested to be removed from consideration prior to
their scheduled interview and therefore their proposal was removed from consideration.
On November 14, 2018, the Review Panel met a second time to discuss and deliberate
SANTA ANA CITY COUNCIL
Miguel A. Pulido Michele Martinez Vicente Sarmiento Jose Solorio P. David Benavides Juan Villegas Sal Tinajero
Mayor MayorPro Tem, Ward 2 Ward 1 Ward 3 Ward 4 Ward 5 Ward 6
mpulidot7g.santa-ana.org mimartinez(cilsanta-ana.org vsarmiento(c),santa-ana.org solori sa-ana.or dbenavides(@.santa-ana.org ivillegas(&,santa-ana.org stinaiero(cilsanta-ana.org
EXHIBIT 1
MAYOR
CITY MANAGER
Miguel A. Pulido
Raul Godinez II
MAYOR PRO TEM
CITY ATTORNEY
Michele Martinez
(D.
Sonia R. Carvalho
COUNCILMEMBERS
CLERK OF THE COUNCIL
P. David Benavides
Maria D. Huizar
Vicente Sarmiento
Jose Solorio
Sal Tinajero
Juan Villegas
CITY OF SANTA ANA
20 Civic Center Plaza • P.O. Box 1988
Santa Ana, California 92702
www.santa-ana.org
December 4, 2018
Scott Larson, Executive Director of HomeAid Sent via E-mail
Larry Haynes, Executive Director of Mercy House
HomeAid Orange County / Mercy House Living Centers
24 Executive Park, Suite 100
Irvine, CA 92614
Subject: Award Recommendations by Review Panel for RFP # 18-056
Dear Mr. Larson and Mr. Haynes,
Thank you very much for your proposal submitted in response to our RFP for Affordable
Housing Development (RFP # 18-056). The City of Santa Ana received a total of thirteen
(13) proposals requesting over $52 million and 304 Project -Based Vouchers. We thank
you for your proposal and your commitment to develop affordable housing for the
residents of the City of Santa Ana.
In compliance with the City's Affordable Housing Funds Policies and Procedures adopted
by City Council on March 20, 2018, staff formed a Review Panel that consisted of the
Executive Director of the City's Public Works Agency with his designee, the Executive
Director of the Planning and Building Agency with his designee, the Executive Director of
the Community Development Agency, and the Housing Division Manager. The VAMC of
Long Beach, the County of Orange, Keyser Marston Associates, and MDG Associates
served as advisors to the Review Panel. The Review Panel used the proposal Scoring
and Selection Criteria from the RFP to conduct their review. In addition to the Scoring and
Selection Criteria from the RFP, the Review Panel also reviewed the proposed project
design for appropriateness for the proposed target group, compatibility with surrounding
uses, cost effectiveness of construction, and appropriateness of the design and
construction for low maintenance and long term durability.
On October 30, 2018, the Review Panel met and interviewed all of the developers who
submitted a proposal. LINC Housing requested to be removed from consideration prior to
their scheduled interview and therefore their proposal was removed from consideration.
On November 14, 2018, the Review Panel met a second time to discuss and deliberate
SANTA ANA CITY COUNCIL
Miguel A. Pulido Michele Martinez Vicente Sarmiento Jose Solorio P. David Benavides Juan Villegas Sal Tinajero
Mayor MayorPro Tem, Ward 2 Ward 1 Ward 3 Ward 4 Ward 5 Ward 6
mpulidot7g.santa-ana.org mimartinez(cilsanta-ana.org vsarmiento(c),santa-ana.org solori sa-ana.or dbenavides(@.santa-ana.org ivillegas(&,santa-ana.org stinaiero(cilsanta-ana.org
EXHIBIT 1
upon the final scoring and selection of the proposals. Following this process, the Review
Panel agreed upon the final scores below based on an average of the scores from each
member of the Panel:
Housing Authority Land Asset Requested I
HUD-VASH Vouchers I Non -Housing
Authority Land Asset
Developer Name
Project Name
FINAL SCORE (Average of Individual
Reviewer Scores)
1126& 1146 E. Washington Avenue
Orange Housing Development Corporation and
C&C Development, LLC
1126-1146 E. Washington Site
92
Related California
The Crossroads at Washington
91
Jamboree Housing
REVO Apartments
87
Cesar Chavez Foundation
Santa Ana Place
84
Community HousingWorks
Transfonnar
80
Community Development Partners
Washington Plaza, GRFLD, Lacy Walk
77
Chelsea Investment Corporation
Cielo
76
826 N. Lacy/830 N. Lacy
Habitat for Humanity of Orange County
Lacy Street Project
82
Community Development Partners
Washington Plaza, GRFLD, Lacy Walk
77
801, 809 & 809 1/2 E. Santa Ana Blvd.
HomeAid Orange County
Frances Xavier Residence
90
Community Development Partners
Washington Plaza, GRFLD, Lacy Walk
77
HUD-VASH Vouchers (As the Primary Source
of Financing)
Jamboree Housing
Budget Inn Site
86
Community Development Partners
Westview House
81
Non -Housing Authority Land Asset
National Community Renaissance and Mercy
House Living Centers
Santa Ana United Methodist Church Site
93
*Supporting documentation for the scores above may be provided upon request.
3-10
EXHIBIT 1
Based on the scores above and the relative scoring of proposals competing for the same
land asset or source of affordable housing funds, the Review Panel is recommending the
following award for your organization to our Community Redevelopment and Housing
Commission and to the City Council / Housing Authority for final approval:
Developer: HomeAid Orange County and Mercy House
Project Name: Frances Xavier Residence
Developer Request:
• $1,051,629.00
• 8 HUD-VASH PBVs
Award Recommendation:
• Lease Agreement for 801 E. Santa Ana Blvd.
o Appraised Value as of Oct 25, 2018: $788,000
• Low and Moderate Income Housing Asset Fund (Housing Successor
Agency Fund): $1,069,947.00
• Project -Based Voucher Program (PBV): Three (3) HUD-VASH PBVs
This recommendation is continaent uaon final aaaroval by the Communit
Redevelopment and Housing Commission (CRHC) and City Council / Housing
Authority. This letter should not be confused with a final pre -loan commitment
letter from the Citv or Housina Authoritv. This is only a recommendation by our
Review Panel.
For the next steps:
1) Please acknowledge your willingness to accept this award recommendation and
develop your project (by responding to this e-mail) including the additional
requirements listed below that will be incorporated into your final commitment
from the City / Housing Authority among various other terms:
a. Efforts must be made to incorporate ground -level retail in the project
design to incorporate the site into the forthcoming OC Streetcar.
b. 100% of the units must be permanent supportive housing for individuals
and families referred from the Coordinated Entry System who are residing
in the City of Santa Ana based upon:
i. Proof of strong ties to the community, to include current residency
of an immediate family member — mother, father, sibling, or
grandparent in the City of Santa Ana;
ii. Proof that the individual attended a K-12 school in Santa Ana;
iii. Proof that the individual resided on property zoned for residential
use in Santa Ana and the individual was on the lease and/or paid
utilities necessary for legal use of the property for residential
purposes; or
iv. Knowledge — either first-hand or recorded — by the Santa Ana
Police Department that the individual has been a member of the
Santa Ana homeless community.
3-11
EXHIBIT 1
2) Please acknowledge (by responding to this e-mail) your willingness to reimburse
the City for the cost of an underwriting and subsidy layering review to be
conducted by Keyser Marston Associates (KMA).
3) Staff will coordinate with you a first look of your project in coordination with the
City's Planning and Building Agency to verify that the project design complies
with the City's requirements.
4) Staff will complete a National Environmental Policy Act review in compliance with
your award of federal funds.
5) Please draft a presentation that you will provide with staff to the Community
Redevelopment and Housing Commission (CRHC) on December 19th at 4:30PM
in the City Council Chambers. This presentation must be provided to staff before
COB on Tuesday, December 11th. Staff will also coordinate with you on the Staff
Report that will be presented to the Commission and then to City Council /
Housing Authority.
6) Staff will be recommending your award to the CRHC on December 19, 2018 and
to City Council and the Housing Authority in January or February 2019. You
must be present and ready to present your project at both meetings as well as
respond to any questions or concerns.
From all of us here at the City, thank you again for your proposal and congratulations on
your award recommendation. We look forward to working with you to develop affordable
housing for the residents of the City of Santa Ana.
Sincerely,
Judson Brown
Housing Division Manager
Community Development Agency
Housing and Neighborhood Development Division
20 Civic Center Plaza (M-26)
Santa Ana, CA 92701
T: (714) 667-2241
F: (714) 647-6549
www.santa-ana.ora/cda
3-12
MAYOR
Miguel A. Pulido
MAYOR PRO TEM
Juan Villegas
COUNCILMEMBERS
Cecilia Iglesias
David Penaloza
Roman Reyna
Vicente Sarmiento
Jose Solorio
January 15, 2019
Scott Larson
CITY OF SANTA ANA
SANTA ANA HOUSING AUTHORITY
20 Civic Center Plaza • P.O. Box 22030
Santa Ana, California 92702
(714)667-2200
www.santa-ana.org
Executive Director
HomeAid Orange County
24 Executive Park, Suite 100
Irvine, CA 92614
Larry Haynes
Executive Director
Mercy House Living Centers
Re: Francis Xavier Residence
EXHIBIT 2
CITY MANAGER
Raul Godinez II
CITY ATTORNEY
Sonia R. Carvalho
CLERK OF THE COUNCIL
Maria D. Huizar
801, 809, and 809'/2 East Santa Ana Boulevard, Santa Ana, CA 92701
Pre -Commitment Letter for: LMIHAF Loan, Project Based Vouchers, and Lease
Agreement
Dear Messrs. Larson and Haynes:
HomeAid Orange County and Mercy Housing Living Centers ("Developer") requested
financial assistance in connection with the proposed development of a twelve (12) unit
affordable housing complex to be located at 801, 809, and 809'/2 East Santa Ana Boulevard,
Santa Ana, CA 92701 ("Project").
The City of Santa Ana ("City") and the Housing Authority of the City of Santa Ana ("Housing
Authority") have reviewed the Developer's request for assistance, and at the City
Council/Housing Authority meeting on January 15, 2019, the Housing Authority Board
authorized and approved issuance of this pre -commitment letter evidencing the preliminary
award of (collectively, the "Agency Assistance"):
- A loan in the maximum amount of $1,069,947.00 from the Low and Moderate
Income Housing Asset Fund ("LMIHAF") held by the Housing Authority of the City
of Santa Ana acting as the Housing Successor Agency ("Agency") for the Project
("Agency Loan");
SANTA ANA CITY COUNCIL
Miguel A. Pulido
Juan Villegas Vicente Sarmiento David Penaloza Jose Solorio Roman Reyna Cecilia Iglesias
Mayor
Mayor Pro Tem, Ward 5 Ward 1 Ward 2 Ward 3 Ward 4 Ward 6
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IVillegaSCa�Santa-ana.Orq VSarmientOnG.Santa-ana.Orq d e )Za ta-ana.Or isolorio Cl_santa-ana.orq rreynanGsanta-ana.orq ciglesiasnGsanta-ana.org
EXHIBIT 2
Pagp 12
- A 99 -year ground lease for the property located at 801, 809, and 809'/2 East Santa
Ana Boulevard (APNs: 398-303-04, 398-303-05, 398-303-06, and 398-303-07,
with a combined appraised value of $788,000.00 as of October 25, 2018); to be
used for development of affordable housing at 801, 809, and 809'/2 East Santa
Ana Boulevard, Santa Ana, CA 92701 ("Ground Lease"); and,
Three (3) U.S. Department of Housing and Urban Development -Veterans Affairs
Supportive Housing ("HUD-VASH") Project -Based Vouchers ("PBV") for
Permanent Supportive Housing for the Project.
This letter shall evidence the Agency's pre -commitment of the Agency Assistance to the
Developer for the Project subject to the conditions described below.
Agency Loan:
The amount of the proposed Agency Loan has been determined based upon the Agency's
review of the Developer's request for the receipt of the Agency Assistance and the
development proforma and projected cash flows for the Project submitted by the Developer
to the Agency ("Proforma"). The Housing Authority Executive Director has authority to
approve revised development proformas and projected cash flows for the Project; provided,
however, that the Agency Assistance is not increased or extended.
The Agency Loan shall include the following terms:
$1,069,947.00 maximum principal amount, or as much thereof as is disbursed for
hard and soft costs in constructing the Project, provided from Santa Ana Housing
Successor Agency Low and Moderate Income Housing Asset Funds.
• 3% simple interest per annum.
Repayment from 50% of Residual Receipts (pro -rata with payments due in
connection with other financing provided by other public agencies) (after payment of
operating expenses, debt service, any deferred developer fee, and partnership fees
to be described in the Agreement) with the remaining 50% to be disbursed to the
Developer.
Remaining principal and accrued interest due upon the 55th anniversary of the
issuance of Certificate of Occupancy and/or final building permits or earlier upon sale,
refinancing or default. On that date, the City/Agency agrees to review the
performance of the property and consider in good faith any reasonable request by
Developer to modify the terms or extend the term of the Agency Promissory Notes.
Additionally, the Agency will receive a pro rata share of 50% of the net proceeds
received from any sale or refinancing of the Project, after payment of outstanding
debt and payment in full of any deferred developer fee and establishment of any
reserves and transaction costs.
3-14
EXHIBIT 2
Pact 13
Cost savings from the Project, if any, will be applied first to pay down the Agency
Loan, subject to compliance with the Tax Credit Allocation Committee ("TCAC")
Regulations and California Health and Safety Code.
Ground Lease:
The Project will be located at 801, 809, and 809'/2 East Santa Ana Boulevard (APNs: 398-
303-04, 398-303-05, 398-303-06, and 398-303-07) ("Property"). The Housing Authority
currently owns the Property. Accordingly, the Housing Authority Board authorized the
lease of the Property to the Developer for the Project. After Developer secures all of its
remaining financing for the development of the Project, staff will return to the Housing
Authority for consideration of a 99 -year Ground Lease Agreement.
HUD-VASH PBV's:
The Project consists of twelve (12) permanent supportive housing units for homeless
individuals and families, including three (3) units to be made available at affordable rents
to HUD-VASH eligible homeless veterans for a term of fifty-five (55) years. All individuals
and families shall be referred from the Orange County Coordinated Entry System, and
are residing or working in the City of Santa Ana as defined under the City's criteria. Efforts
shall be made to incorporate ground -level retail as an interface for the forthcoming
Orange County Streetcar.
The HUD-VASH PBV's shall include the following terms:
• Voucher Source: The three (3) HUD-VASH PBVs will be funded exclusively out of
the tenant -based voucher program annual budget authority received by the
Housing Authority from the U.S. Department of Housing and Urban Development
(HUD).
Rents: The PBV Housing Assistance Payments ("HAP") Contract rents below are
preliminary and contingent upon a reasonable rent determination to be conducted
at the time of execution of the HAP Contract-
* 1 Bedroom - $1,599
0 2 Bedroom - $1,996
In accordance with HUD regulations and the Housing Authority's Housing Choice
Voucher Program Administrative Plan, these rents are subject to review prior to
the execution of a HAP Contract.
Rents and income requirements for the remaining affordable units shall be based
on the requirements of the federal Low Income Housing Tax Credit Program as
administered by TCAC.
• Annual Amount: The Project will receive PBVs for three (3) units:
3-15
EXHIBIT 2
Page 14
Unit Size
Income
No. Units
Proposed Rent
Total Annual
Target
Revenue
1 -Br
30% AMI
1
$1,599
$19,188
2 -Br
30% AMI
2
$1,996
$47,904
The estimated maximum annual amount received under this award is $67,092.
These estimates assume 100% occupancy of the assisted units over the twelve-
month period.
• Term: The HAP Contract will have a term of twenty (20) years. Any time before
the expiration of the HAP Contract, the Developer may request an additional
twenty (20) years, subject to a determination by the Housing Authority that it is
appropriate to continue providing affordable housing for low-income families or to
expand housing opportunities and HUD funding. Subsequent extensions are
subject to the same requirements.
• Units Receiving PBV Assistance: The maximum number of units receiving PBV
assistance will be three (3).
General Provisions:
The Agency's obligation to provide the Agency Assistance to the Project is subject to each
of the following conditions:
• Developer must provide proof that it has secured all of its remaining financing for
the development of the Project before staff will return to the City Council and/or
Housing Authority for consideration of the Loan Agreement and Ground Lease
Agreement.
• All provided funding and project requirements shall conform to the City's adopted
Affordable Housing Funds Policies and Procedures, unless alternative
requirements are expressly provided in the executed Loan Agreement, Ground
Lease Agreement, or any other documents related to the development of the
Project.
• Approval of all required entitlements and discretionary actions, to allow the
construction of a 12 -unit affordable housing complex to be located at 801, 809, and
809'/2 East Santa Ana Boulevard, Santa Ana, CA 92701.
• The Agency's obligation to provide the Loan is and shall remain subject to all
covenants, conditions, and restrictions set forth in the Loan Agreement, and in
particular Agency's analysis of the available funding sources and development and
operating costs of the Project and the overall economic feasibility of the Project.
3-16
EXHIBIT 2
Pagp 15
• Review and approval of the documents evidencing the Agency Loan by the City
Council and/or Housing Authority, as applicable.
• Review and approval of the documents evidencing the Ground Lease by the Housing
Authority.
• Execution of HAP Contracts and all necessary documents for the PBV's.
• Project funding and PBV awards are predicated on the successful execution of a
99 -year Ground Lease Agreement by the Developer with the Housing Authority.
• Compliance with California Health and Safety Code and applicable regulations set
forth in Section 34176.
Developer, at its sole cost and expense, will be responsible for securing any and all
permits and discretionary approvals that may be required for the Project by the City,
Housing Authority, or any other federal, state, or local governmental entity having or
claiming jurisdiction over the Property or Project. Notably, this pre -commitment letter
shall not obligate the City or any department thereof to approve any application or request
for or take any other action in connection with any planning approval, permit or other
action necessary for the construction, rehabilitation, installation or operation of the
Project.
This pre -commitment letter for the Project will expire on January 15, 2021.
If you have any questions or require any additional information regarding this award letter,
please contact Judson Brown, Housing Division Manager, by telephone at (714) 667-
2241 or by e-mail at ibrown(cD-santa-ana.orq.
Sincerely,
Steven Mendoza
Housing Authority Executive Director
Attest:
Maria D. Huizar
Recording Secretary
3-17
EXHIBIT 3
KEYSER MARSTON ASSOCIATES,.
ADVISORS IN PUBLIC/PRIVATE REAL ESTATE DEVELOPMENT
MEMORANDUM
ADVISORS IN:
Real Estate To: Judson Brown, Housing Division Manager
Affordable Housing
Economic Development City of Santa Ana
BERKELEY
A. Jerry Keyser From: Tim Bretz
Timothy C. Kelly
Debbie M. Kern
David Doezema Date: January 9, 2019
Kevin Feeney
LOS ANGELES
Kathleen H. Head Subject: Francis Xavier Residence: Preliminary Financial Gap Analysis
James A. Rabe
Gregory D. Soo -Hoo
Kevin E. Engstrom
Julie L. Romey
Tim R. Bretz At your request, Keyser Marston Associates, Inc. (KMA) prepared a preliminary financial
SAN DIEGO gap analysis for the project proposed to be developed at 801— 809 % East Santa Ana
Paul C. Marra Boulevard (Site) by HomeAid Orange County (HomeAid) and Mercy House (Mercy
House), collectively referred to as "Developer." The Site is currently owned by the City
of Santa Ana Housing Authority (Authority). As proposed, the project will include 12
units that will be restricted to extremely -low income households (Project).
The Developer is requesting the following financial assistance:
1. $1.07 million in Low and Moderate Income Housing Asset Funds (LMIHAF) from
the Authority;
2. Veterans Affairs Supportive Housing (VASH) Vouchers allocated to the Authority
by the United States Department of Housing and Urban Development (HUD); and
3. To enter into a long-term ground lease with the Authority for the Site.
The purpose of the KMA analysis is to evaluate the Developer's financial assistance
request.
500 SOUTH GRAND AVENUE, SUITE 1480 , LOS ANGELES, CALIFORNIA 90071 PHONE 213.622.8095
WWW.KEYSERMARSTON.COM
3-18
1901007:SA:TRB
19090.017.010
EXHIBIT 3
Judson Brown, City of Santa Ana January 9, 2019
Francis Xavier Residence: Preliminary Financial Gap Analysis Page 2
EXECUTIVE SUMMARY
Estimated Financial Gap
The results of the KMA financial gap analysis are compared to the Developer's financial
proposal in the following table:
KMA Developer Difference
Total Construction Costs $4,195,000 $4,234,000 ($39,000)
Outside Funding Sources 3,164,000 3,164,000 -0-
Financial Gap $1,031,000 $1,070,000 ($39,000)
As shown in the preceding table, KMA estimates the Project's financial gap at $1.03
million. Comparatively, the Developer is requesting $1.07 million in financial assistance
from the Authority. This represents an approximately 1% differential which can be
considered inconsequential. However, it is important to note that the KMA and
Developer estimates differ on a line item by line item basis.
Proposed Funding Sources
The following summarizes the proposed funding sources for the Project:
1. The Project's stabilized net operating income (NOI) supports a $449,000
conventional permanent loan. The NO1 includes the rental subsidy generated by
the following:
a. Three (3) VASH Vouchers awarded to the Project by the Authority; and
b. A Capitalized Operating Subsidy Reserve (COSR) for nine units awarded
by the California Department of Housing and Community Development
(HCD) through the No Place Like Home Program (NPLH).
2. The Developer is proposing to apply for a $2.35 million loan of NPLH funds
awarded by HCD.
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EXHIBIT 3
Judson Brown, City of Santa Ana January 9, 2019
Francis Xavier Residence: Preliminary Financial Gap Analysis Page 3
3. The Developer is proposing to defer $365,000 of the Developer Fee that is
included in the Project's development costs. The deferred amount will be repaid
from the cash flow generated by the Project over time.
PROJECT DESCRIPTION
The proposed scope of development can be described as follows:
1. The Site area totals 0.34 acres, or approximately 15,000 square feet of land area.
2. The 12 -unit Project represents a density of 35 units per acre.
3. The Project's unit mix is as follows:
Number of Units Unit Size (SF)
One -Bedroom Units 10 600
Two -Bedroom Units 2 800
Total / Weighted Average 12 633
4. The Project's gross building area (GBA) is estimated at approximately 14,800
square feet.
5. The Project will include 12 garage parking spaces, which equates to one space
per unit.
6. Each of the 12 units in the Project will be restricted to households earning the
lesser of:
a. Extremely Low Income per the definitions set forth in California Health
and Safety Code (H&SC); and
b. 25% of the NPLH Area Median Income (AMI).
7. The Project will not include an on-site manager's unit.
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EXHIBIT 3
Judson Brown, City of Santa Ana January 9, 2019
Francis Xavier Residence: Preliminary Financial Gap Analysis Page 4
8. The Project's units are targeted towards homeless veterans and homeless
individuals.
FINANCIAL GAP ANALYSIS
KMA prepared a pro forma analysis to estimate the Project's financial gap. The analysis
is located at the end of this memorandum, and is organized as follows:
Table 1: Estimated Construction Costs
Table 2: Stabilized Net Operating Income
Table 3: Financial Gap Calculation
Estimated Construction Costs (Table 1)
KMA reviewed the Developer's January 9, 2019 pro forma and then independently
prepared a pro forma analysis of the Project. The resulting construction costs are as
follows:
Direct Costs
The direct costs assume that the Project will not be subject to State of California and/or
Federal Davis Bacon prevailing wage requirements. The direct costs applied in this
analysis can be summarized as follows:
1. The on-site improvement costs are estimated at $15 per square foot of land
area, or $225,000.
2. The residential building costs are estimated at $130 per square foot of GBA,
which equates to $1.92 million.
3. A $50,000 allowance for furnishings, fixtures and equipment is provided.
4. The contractor costs are estimated as follows:
a. A 12% allowance for contractors' fees and general requirements is
provided.
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EXHIBIT 3
Judson Brown, City of Santa Ana January 9, 2019
Francis Xavier Residence: Preliminary Financial Gap Analysis Page 5
b. An allowance for construction bonds / general liability insurance at 2% of
construction costs is provided.
5. KMA included a $125,000 direct cost contingency allowance, which is equal to
5% of other direct costs.
KMA estimates the total direct costs at $2.62 million. This equates to $177 per square
foot of GBA.
Indirect Costs
KMA utilized the following assumptions in estimating the indirect costs:
1. The architecture, engineering and consulting costs are estimated at 7% of direct
costs.
2. The Developer estimated the public permits and fees costs at $375,000, or
approximately $31,300 per unit. City of Santa Ana (City) staff should verify the
accuracy of this estimate.
3. The taxes, legal and accounting costs are estimated at 6% of direct costs.
4. The insurance costs are estimated at $27,000, or $2,250 per unit.
5. An approximately $1,700 per unit allowance for marketing and leasing costs is
provided, which equates to $20,000.
6. The Developer set the Developer Fee at $498,000, which is equal to 13% of the
net construction costs.'
7. An indirect cost contingency allowance equal to 7% of other indirect costs is
provided.
KMA estimates the total indirect costs at $1.35 million.
1 Net construction costs equate to the total construction costs less the developer fee amount.
1901007:sA:TRB
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3-22
Judson Brown, City of Santa Ana
Francis Xavier Residence: Preliminary Financial Gap Analysis
Financing Costs
The financing costs for the Project are estimated as follows:
EXHIBIT 3
January 9, 2019
Page 6
1. The construction period and absorption period interest costs are estimated at
$13,000. These costs are based on the following assumptions:
a. The construction period interest costs are based on a 5.30% interest rate,
a 14 -month construction period, and a 60% average outstanding balance.
b. The absorption period interest costs are based on a four-month
absorption period with a 100% average outstanding balance.
2. The Developer estimates the financing fees as follows:
a. The financing fees for the construction loan are estimated at $18,000,
which equates to 7.75 points; and
b. The financing fees for the permanent loan are estimated at $12,000,
which equates to 2.75 points.
3. The following capitalized reserves will be provided:
a. A $67,000 capitalized operating reserve is provided, which equates to six
months of operating expenses and debt service payments; and
b. The Developer included a $112,000 transition reserve to satisfy the NPLH
Program.
KMA estimates the total financing costs at $222,000.
Total Construction Costs
As shown in Table 1, KMA estimates the total construction costs at $4.20 million, which
equates to approximately $349,600 per unit. In comparison, the Developer estimates
the total construction costs at $4.23 million. This equates to an approximately 1%
differential, which can be considered an insignificant difference.
1901007:sA:TRB
19090.017.010
3-23
EXHIBIT 3
Judson Brown, City of Santa Ana January 9, 2019
Francis Xavier Residence: Preliminary Financial Gap Analysis Page 7
Stabilized Net Operating Income (Table 2)
The Project's funding sources include NPLH funds and LMIHAF funds. The Project's
income and affordability standards must comport with the most stringent of the
following:
1. Income Restrictions: The tenants' household incomes cannot exceed the stricter
of:
a. H&SC Section 50106 for extremely low income households; and
b. The applicable income limits published by HCD for the NPLH Program.
2. Affordability Restrictions: Rents applied to all of the units must reflect the more
stringent of:
a. H&SC extremely low income rents based on the calculation defined in
Section 50053; and
b. The applicable rents published by HCD for the NPLH Program.
Tenant -Paid Rents
The rents used in this analysis are based on 2018 income and rent information published
by HCD. Additionally, for the purposes of underwriting the project, the maximum
tenant -paid rents are also limited by 30% of the monthly Supplemental Security Income
allowance. The maximum allowable rents, net of the appropriate utility allowances, are
estimated as follows:z
Rent Restriction 1 -Bedroom 2 -Bedrooms
H&SC ELI / NPLH @ 25% Median
30% Supplemental Security Income $250 $429
H&SC Extremely Low Income $527 $586
NPLH @ 25% NPLH Median $586 $698
Applicable Rents $250 $429
z The utility allowances are estimated at: $29 for one -bedroom units and $40 for two-bedroom units.
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3-24
EXHIBIT 3
Judson Brown, City of Santa Ana January 9, 2019
Francis Xavier Residence: Preliminary Financial Gap Analysis Page 8
The Authority will provide VASH Vouchers for three of the income -restricted units. The
VASH payments are based on the difference between the rent paid by the tenant and
the fair market rent (FMR) approved by HUD. The 2019 FMRs are as follows:
1. $1,599 per unit per month for the one -bedroom units; and
2. $1,996 per unit per month for the two-bedroom units.
In addition, the NPLH Program will provide a COSR for nine one -bedroom units in the
Project. The Developer estimates the FMR for the COSR units at $845 per unit per
month.
Estimated Effective Gross Income
KMA estimates the Project's effective gross income (EGI) at $142,600 based on the
following:
1. The gross tenant -paid rents are estimated to total $40,300.
2. The gross VASH and COSR subsidies are estimated to total $118,100.
3. A 10% vacancy and collection allowance is applied to the gross income.
Estimated Operating Expenses
The operating expenses are estimated at $88,300 based on the following:
1. The general operating expenses are estimated at $5,700 per unit per year.
2. KMA assumes that the Developer will apply for the property tax abatement that
is accorded to non-profit housing organizations that own and operate apartment
units restricted to households earning less than 80% of the area median income.
The property tax assessment overrides are estimated at $4,200.
3. The Project's operating budget does not include any social service expenses. Per
the Developer, under the NPLH Program the social services will be provided by
the County of Orange or their designated service provider to provide social
services to the Project's residents.
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EXHIBIT 3
Judson Brown, City of Santa Ana January 9, 2019
Francis Xavier Residence: Preliminary Financial Gap Analysis Page 9
4. The NPLH Loan has a mandatory debt service payment equal to 0.42% of the
NPLH Loan amount, which equals $9,900 per year.
5. The replacement reserve deposits are set at $500 per unit per year, which is
required by the NPLH Program.
Estimated Stabilized Net Operating Income
The Project's EGI is estimated at $142,600, and the operating expenses are estimated at
$88,300. This results in estimated stabilized net operating income of $54,300.
Financial Gap Calculation
The financial gap is estimated by deducting the available outside funding sources from
the Project's total construction costs. The outside funding sources anticipated to be
received by the Project are described in the following sections of this memorandum.
Available Outside Funding Sources
Permanent Loan
To estimate the maximum permanent loan that can be supported by the Project's NOI,
KMA assumed that the loan would be underwritten based on the following
requirements:
1. A 118% debt service coverage ratio;
2. A 6.15% interest rate; and
3. A 15 -year amortization period.
KMA estimates that the Project's stabilized NOI can support a $449,000 conventional
loan.
AIDI N I non
The Developer anticipates receiving a $2.35 million NPLH Loan.
1901007:SA:TRB
19090.017.010
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EXHIBIT 3
Judson Brown, City of Santa Ana January 9, 2019
Francis Xavier Residence: Preliminary Financial Gap Analysis Page 10
Deferred Developer Fee
The Developer is proposing to defer $365,000, or 73% of the Developer Fee that is
included in the Project's construction costs. The deferred amount will be repaid from
the cash flow generated by the Project over time.
Total Available Outside Funding Sources
As shown in Table 3, the outside funding sources available to the Project are estimated
at $3.16 million.
Financial Gap Calculation
Based on the preceding analysis, KMA estimates the Project's financial gap as follows:
Total Construction Costs $4,195,000
(Less) Total Available Funding Sources (3,164,000)
Financial Gap $1,031,000
Per Unit $85,900
As shown in the preceding analysis, KMA estimates that the Project exhibits a $1.03
million financial gap. In contrast, the Developer is requesting $1.07 million in financial
assistance from the Authority. This represents a $39,000 differential, which is an
approximately 1% difference. It is the KMA opinion that a difference of this magnitude
can be considered insignificant.
CONCLUSIONS / ISSUES FOR CONSIDERATION
The following summarizes the conclusions of the KMA analysis:
1. Based on the currently available information, it is KMA's conclusion that the
Project exhibits a $1.03 million financial gap, which is approximately equal to the
Developer's $1.07 million financial assistance request. As such, KMA concludes
that the Developer's request is warranted by the Project's economics.
1901007:SA:TRB
19090.017.010
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EXHIBIT 3
Judson Brown, City of Santa Ana January 9, 2019
Francis Xavier Residence: Preliminary Financial Gap Analysis Page 11
2. It should be noted that the Developer and City staff are discussing the possibility
of adding ground floor retail space to the Project. The addition of retail space to
the Project may require this financial analysis to be updated. Furthermore, it is
important to note that the LMIHAF funds cannot be used to pay for any retail
costs.
3. While the construction costs appear reasonable, KMA recommends that the City
require the Developer to obtain three general contractor bids prior to selecting a
general contractor. The three bids should be provided to the City for review and
approval.
4. KMA recommends the following ground lease terms:
a. A 55 -year ground lease.
b. A capitalized ground rent payment equal to the appraised fair market
value of the Site and secured by a promissory note with the following
terms:
i. A 3% simple interest rate; and
ii. Repayment of the capitalized ground rent promissory note equal
to the pro rata share of 50% of residual receipts with other soft
lenders.
1901007:SA:TRB
19090.017.010
00 M
EXHIBIT 3
TABLE 1
ESTIMATED CONSTRUCTION COSTS
FRANCIS XAVIER RESIDENCE
SANTA ANA, CALIFORNIA
I. Direct Costs
1
Site Improvements
15,000
Sf Land
$15
/Sf Land
$225,000
Residential Building Costs
14,792
Sf GBA
$130
/Sf GBA
1,923,000
Furnishings, Fixtures & Equipment
50,000
Contractor Fees / General Requirements
12%
Construction Costs
258,000
General Liability Insurance / Const Bonds
2%
Construction Costs
43,000
Contingency Allowance
5%
Other Direct Costs
125,000
Total Direct Costs
14,792
Sf GBA
$177
/Sf GBA
$2,624,000
II. Indirect Costs
Architecture, Engineering & Consulting
7.0%
Direct Costs
$184,000
Permits & Fees
Z
12
Units
$31,250
/Unit
375,000
Taxes, Legal & Accounting
6.0%
Direct Costs
157,000
Insurance
12
Units
$2,250
/Unit
27,000
Marketing & Leasing
12
Units
$1,667
/Unit
20,000
Developer Fee
3
13%
Net Construction Costs
498,000
Contingency Allowance
7.0%
Other Indirects
88,000
Total Indirect Costs
$1,349,000
III. Financing Costs
Interest During Construction
4
$238,000
Loan Amount
5.30%
Interest
$13,000
Financing Fees
5
Construction Loan
$238,000
Loan Amount
7.75
Points
18,000
Permanent Loan
$449,000
Loan Amount
2.75
Points
12,000
Capitalized Reserves
Operating Reserve
5
6
Months Operate Expenses & Debt
Svc Pmts
67,000
NPLH Transition Reserve
5
112,000
Total Financing Costs
$222,000
IV. ITotal Construction Costs
12
Units
$349,600
/Unit
$4,195,000
1 Estimates assume prevailing wage requirements will not be imposed on the Project.
z Based on Developer estimate. The estimate should be verified by City staff.
3 Net construction costs equate to the total construction costs less the developer fee.
4 Based on a 14 -month construction period with a 60% average outstanding balance; and a 4 -month absorption period with a 100% average outstanding
I Based on Developer estimates.
Prepared by: Keyser Marston Associates, Inc. �_��
Filename: Francis Xavier Residence PF -1 9 19; Pro Forma; trb
TABLE 2
STABILIZED NET OPERATING INCOME
FRANCIS XAVIER RESIDENCE
SANTA ANA, CALIFORNIA
I. Gross Residential Income
Manager's Unit
ELI H&SC/NPLH @ 25% Median/VASH
1 -Bedroom Units @ (600-Sf)
2 -Bedroom Units @ (800-Sf)
ELI H&SC/NPLH @ 25% Median/COSR
1 -Bedroom Units @ (600-Sf)
VASH/COSR Subsidy
ELI H&SC/NPLH @ 25% Median/VASH
1 -Bedroom Units @ (600-Sf)
2 -Bedroom Units @ (800-Sf)
ELI H&SC/NPLH @ 25% Median/COSR
1 -Bedroom Units @ (600-Sf)
Gross Rental Income
(Less) Vacancy & Collection Allowance
Effective Gross Income
EXHIBIT 3
- Unit $0
/Unit/Month
$0
1 Units $250
/Unit/Month
3,000
2 Units $429
/Unit/Month
10,300
9 Units $250
/Unit/Month
27,000
1 Units $1,349 /Unit/Month 16,200
2 Units $1,567 /Unit/Month 37,600
9 Units $595 /Unit/Month 64,300
12 Units $158,400
10.0% Gross Income (15,800)
$142,600
II. Operating Expenses
General Operating Expenses
12
Units
$5,680
/Unit
$68,200
Property Taxes
z 12
Units
$350
/Unit
4,200
HCD Mandatory Interest Payment
3 $2,350,000
NPLH Loan
0.42%
NPLH Loan
9,900
Replacement Reserve
3 12
Units
$500
/Unit
6,000
Total Operating Expenses
12
Units
$7,358
/Unit
$88,300
III. Net Operating Income
$54,300
1 Based on Orange County 2018 Incomes distributed by HUD/HCD. As pertinent, the rents are based on rents published in 2018 by HCD, CA H&SC
Section 50053, and 30% of SSI. Utility Allowances per the Developer: $29 for 1-Bdrm units; and $40 for 2-Bdrm units.
z Based on the assumption that the Developer will receive the property tax abatement accorded to non-profit housing organizations that own and
operate apartment units restricted to households earning less than 80% of the area median income.
3 Based on the requirements of the No Place Like Home (NPLH) Program.
Prepared by: Keyser Marston Associates, Inc. 3-3�
Filename: Francis Xavier Residence PF -1 9 19; Pro Forma; trb
TABLE 3
FINANCIAL GAP CALCULATION
FRANCIS XAVIER RESIDENCE
SANTA ANA, CALIFORNIA
I. Available Funding Sources
Permanent Loan
Net Operating Income
Income Available for Mortgage
Interest Rate
Permanent Loan
No Place Like Home (NPLH) Loan
Deferred Developer Fee
Total Available Funding Sources
II. Financial Gap Calculation
Total Available Funding Sources
(Less) Total Construction Costs
EXHIBIT 3
13
$54,300 NOI (See Table 2)
1.18 DCR $45,929 Debt Service
6.15% Interest Rate 10.22% Mortgage Constant
z
z 73% Total Developer Fee
$449,000
$2,350,000
$365,000
$3,164,000
$3,164,000
(4,195,000)
III. I Financial Surplus/ (Financial Gap) 12 Units ($85,900) /Unit ($1,031,000)
1 Assumes a 15 -year amortization term.
z Based on Developer estimate.
Prepared by: Keyser Marston Associates, Inc. �_�
Filename: Francis Xavier Residence PF -1 9 19; Pro Forma; trb
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