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HomeMy WebLinkAbout25B - AGMT - AMEND LOAN AGMT SA VETSREQUEST FOR COUNCIL ACTION CITY COUNCIL MEETING DATE: JULY 16, 2019 TITLE: APPROVE AMENDMENT TO LOAN AGREEMENT WITH SANTA ANA VILLAGE L.P. FOR THE SANTA ANA VETERANS VILLAGE PROJECT IN THE AMOUNT OF $124,383 (GRANT FUNDED) (STRATEGIC PLAN NOS. 5,3A; 5,3C) CLERK OF COUNCIL USE ONLY: F.11=ii0 ❑ As Recommended ❑ As Amended ❑ Ordinance on V1 Reading ❑ Ordinance on 2n1 Reading ❑ Implementing Resolution ❑ Set Public Hearing For CONTINUED TO FILE NUMBER CITY MANAGER RECOMMENDED ACTION Authorize the City Manager and the Clerk of the Council to execute an amendment to the loan agreement with Santa Ana Village, L.P. for an additional $124,383 in HOME Investment Partnerships Program funds for a total loan amount not to exceed $477,346, 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. The HOME Program regulations requires a HOME participating jurisdiction (PJ) to expend its annual allocation of HOME funds within no more than five (5) years of receiving its HOME grant. Compliance with this requirement is based on a review of the PJ's allocations and expenditures as reported in the Integrated Disbursement and Information System at the time of its deadline. On May 16, 2019, the City received a letter from the U.S. Department of Housing and Urban Development (HUD) stating that the City was facing a shortfall of $241,084 (Exhibit 1). If the City did not commit and expend these funds before July 31, 2019, HUD would recapture these funds. Staff reviewed the letter from HUD and created a projection of how much in funding would be recaptured by HUD. Upon further review and analysis, staff found that the letter from HUD was not taking into consideration the most recent expenditures by the City. Based on this revised projection, staff determined that only $124,383 would be recaptured by HUD on July 31, 2019 if the City did not take action. Other similar -sized jurisdictions throughout the country also have HOME Program grant funds that are subject to recapture on that date as shown on HUD's Cumulative Deadline Compliance Status Report (Exhibit 2) as of January 31, 2019. This report includes the City of Santa Barbara and Santa Clara County. 25B-1 Amendment to HOME Loan Agreement for the Santa Ana Veterans Village July 16, 2019 Page 2 In order to commit and expend these HOME Program funds before the deadline for recapture on July 31, 2019, staff worked proactively to determine if there were eligible proposals that could be received from developers for the $124,383 of expiring funds. Staff approached Jamboree Housing and Community Development Partners to determine if their two projects that are under construction (Santa Ana Veterans Village and Aqua Housing, respectively) need these additional funds. Community Development Partners has a need, but the expenses they requested were not an eligible use of the funds. Specifically, they were seeking to pay for furnishings for the units in their project. Jamboree Housing indicated that they had a need and could use the funds for eligible expenses in their Santa Ana Veterans Village project. Therefore, on June 24, 2019, Jamboree Housing submitted a written proposal to the City to use and expend the $124,383 in expiring HOME Program funds (Exhibit 3) for their Santa Ana Veterans Village project. Specially, during the demolition of existing asphalt and concrete pavements for the project, a second buried layer of asphalt was discovered beneath the driveway section of the Northeast parking lot. Due to it being buried, this material was not shown on the geotechnical report; thus, the $67,841 cost associated with the demolition and removal of this material was not reflected in Jamboree's initial development budget. Additionally, during recent grading activities, approximately 400 cubic yards of contaminated soil was encountered onsite. The discovery of contaminated soil resulted in a $35,271 added to Jamboree's development budget. Furthermore, consecutive days of inclement weather have posed yet another challenge. The stockpiled soil contained a high moisture content and needed to be air dried prior to it being treated onsite. The cost to airdry the contaminated soil was $58,176. Although the additional HOME Program funds will not cover the entirety of these unforeseen costs, Jamboree is requesting the $124,383 in financial assistance from the City for the successful development of their project. Background on Funding for the Santa Ana Veterans Village Project and the Amendment On April 4, 2017, the Housing Authority Board awarded Jamboree Housing Corporation seventy- five (75) project -based vouchers for the Santa Ana Veterans Village project located at 3312 West 1st St, Santa Ana, CA 92703 to create 75 permanent supportive housing units with wrap -around supportive services to be provided by Step Up on Second for homeless veterans. The Housing Authority also authorized the Executive Director of the Housing Authority to execute an Agreement to enter into a Project -Based Vouchers Housing Assistance Payments Contract (AHAP) between the Housing Authority and Jamboree Housing Corporation for the development of the Santa Ana Veterans Village project. Also, on August 21, 2018, City Council authorized the City Manager to execute a Loan Agreement with Santa Ana Village L.P. (c/o Jamboree Housing Corporation) for $352,963 in HOME Program funds for the Santa Ana Veterans Village project. Following these two funding approvals by the Housing Authority and City Council, the AHAP Contract and HOME Program Loan Agreement with Santa Ana Village L.P. were executed for the development of the project. With these two Agreements approved, Jamboree Housing closed on their financing in December 2018 and broke ground on the project in January 2019. 25B-2 Amendment to HOME Loan Agreement for the Santa Ana Veterans Village July 16, 2019 Page 3 The Amendment to the original HOME Program loan keeps the same terms as the existing loan including the same affordability restrictions and covenants. (Exhibit 4) The Amendment adds $124,383 to the existing HOME loan amount of $352,963 for a new total loan amount of $477,346. The additional $124,383 will be used to pay for unanticipated hard costs of construction that increased after the project closed on their financing. The Santa Ana Veterans Village project consists of a new construction development on a vacant site. The project will provide 71 one -bedroom units and 5 two -bedroom units. With the exception of a single one -bedroom property manager's unit, the remaining 75 units will be restricted to homeless veterans. The design will feature one three-story building including a multipurpose space, counseling offices for service providers, property management offices, a central laundry facility, a fitness room, TV/lounge room, training room, a community kitchen, a community garden, pet spa, and barbeque grills. Over 30% of the site is dedicated to open space and each unit will have private open space by way of individual balconies. The interior of the units will feature a full bathroom and a fully equipped kitchen with all appliances provided by the project, a clothing closet, storage space, and a living room. All units will be fully furnished. Wrap -around supportive services for the veterans will be provided on site by Step Up on Second, Goodwill of Orange County's Tierney Center, Veterans Legal Institute, Strength in Support and the Veterans Affairs Long Beach Healthcare System. The unit mix and affordability restrictions are as follows: Bedroom Size 30% AMI Manager's Unit Total One -Bedroom 70 1 71 Two -Bedroom 5 5 Totals 75 1 76 Though challenges and obstacles are common for new construction projects, Jamboree Housing needs this $124,383 in additional gap financing. Keyser Marston Associates completed a subsidy layering analysis and confirmed that the $124,383 in additional funds is necessary for the development of the project (Exhibit 5). Specifically, these additional funds will pay for unforeseen construction costs. If approved by City Council, $124,383 will be drawn down from HUD before the July 31, 2019 deadline and these funds will be expended for the project. 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 25B-3 Amendment to HOME Loan Agreement for the Santa Ana Veterans Village July 16, 2019 Page 4 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 amendment will be carried forward from prior year for expenditure in FY 2019-20 as follows: Accounting Unit Accounting Unit, Fiscal Year _ Account # Fund Description Account Amount Description HOME Program FY19-20 July 13018780-69152 Federal Fund Loans & Grants $124,383 Grant Year 2014 Total Loan Amount $124,383 Steven A. Mendoza Executive Director Community Development Agency APPROVED AS TO FUNDS AND ACCOUNTS: Kathryn Downs, CPA Executive Director Finance and Management Services Agency Exhibits: 1. Letter from HUD Regarding Expiring Funds 2. HUD's HOME Expiring Funds Report as of January 31, 2019 3. Proposal from Jamboree Housing Corporation 4. Amendment to HOME Investment Partnerships Program Loan Agreement 5. Subsidy Layering Analysis by Keyser Marston Associates 25B-4 EXHIBIT 1 ha MAY 16 20'19 Kristine Ridge City Manager City of Santa Ana 20 Civic Center Plaza, Santa Ana, CA 92702 Dear Ms. Ridge: U.S. Department of Housing and Urban Development Office of Community Planning and Development Los Angeles Field Office, Region IX 300 N. Los Angeles Street, Suite #4054 Los Angeles, CA 90012 SUBJECT: HOME Program Year 2018 Community Housing Development Organization (CHDO) Requirement HUD's records indicate that the City of Santa Ana, California is in danger of missing its 2019 Community Housing Development Organization (CHDO) requirement deadline, which occurs on July 31, 2019. Funds not reserved to CHDOs by the deadline will be deobligated. The HOME Program regulation requires a HOME participating jurisdiction (PJ) to expend its annual allocation of HOME funds within 5 years of receiving its HOME grant. Compliance with this requirement is based on a review of the PJ's allocations and expenditures, as reported in the Integrated Disbursement and Information System (IDIS) at the time of its deadline The attached HOME Deadline Compliance Status Report(s) identifies the expenditure requirement amount for the City's July 31, 2019 deadlines; the total amount expended as reported in IDIS through the date of the report; and a $241,083.85 expenditure requirement shortfall. This information is updated monthly on the HOME website at: www.hudexchanoe.info/manage-a-oroeram/home-deadline-compliance-status-reports/ and www.hudexchan2e.info/oroorams/home/home-deadline-compliance-status-reports-srant- specific/. HUD is providing this warning notice to the City so that it may expend HOME funds before its upcoming deadline and enter those expenditures in IDIS to meet its deadline requirement. 25B-5 If you have any questions or require assistance, please contact Mr. Frank Caballero, Financial Analyst at (213) 534-2559, or via email at Frank.Caballero@hud.eov. Sincerely, C 1,-� Vim/ 0"'t ' Rufus Washington irector Office of Community Planning and Development Enclosure cc: Janice Eckles, Housing Programs Analyst r + p w Q W Q W D D D Q it z 3 0 c o 0 2 rii y � N 3 d N Q s Q Q D m E m Q A Q I+ Q N IQ 1p i a � OI I�, �% V O N L•J w o I{O ° CrFi o H P 47 a N W rt ar ct 7 ai o + o a N N C7 (D + mo N W v M N z .. � 3 � o• � N d N d 0 � M ro �W `° w OJ0 S n M W m z N Q m o. N J o + h o la° EAa r o N ro S 0 rt k! 25B-7 EXHIBIT 3 »x Jamboree «'=st June 24, 2019 Judson Brown City of Santa Ana — Community Development Agency 20 Civic Center Plaza Santa Ana, CA 92701 RE: Santa Ana Veterans Village — Project Cost Increases 3312 W. First Street Mr. Brown, The Santa Ana Veterans Village project is the largest affordable supportive housing development for homeless veterans in Orange County. The successful completion of this project will enable homeless veterans to not only live in high -quality housing but also receive wrap around services that will aid in their successful integration into mainstream society. With construction underway, the project has encountered several unforeseen field conditions that have caused an increase in the projects total development budget Santa Ana Village LP is formally requesting $124,383 in additional HOME funding to help alleviate these additional costs. During the demolition of existing asphalt and concrete pavements, a second buried layer of asphalt was discovered beneath the driveway section of the Northeast parking lot. Due to it being buried, this material was therefore not shown on the geotechnical report; thus, the $67,841 cost associated with the demo and removal of this material was not reflected in our initial development budget Additionally, during recent grading activities, approximately 400 cubic yards of contaminated soil was encountered onsite. The discovery of contaminated soil resulted in a $35,271 add to our development budget Furthermore, consecutive days of inclement weather posed yet another challenge. The stockpiled soil contained a high moisture content and needed to be air dried prior to it being treated onsiite. The cost to alrdry the contaminated soil was $58,176. The contaminated soil has since been treated, buried and capped in place with a low permeable asphalt material, per the recommendations outlined in the remediation plan written by our third -party environmental consultant. Although the additional HOME Funds will not cover the entirety of these unforeseen costs, we appreciate any assistance the City can provide to the project Should you have any questions or require additional information, please feel free to contact me or Sandra Viramontes at 949-263-8676. Thank you, Santa Ana Village LP, a California limited partnership J A M s o P E E H O u s i N G C ORPORATION REGIONAL OFFICES: SACRAMENTO AND SAN DIEGO 17701 COWAN AvENua Sum 200 IRY:NE CA 92614 P 949.263.8676 F 949.263.0647 l a mb area housin g. cc 25B-9 EXHIBIT 3 By: JHC-Santa Ana Village LLC, a California Limited Liability Company Its: Managing General Partner By: Jamboree Housing Corporation, a California non-profit p blic benefit corporation Its: Managing ember By: Name: Michael Massie Title: Chief Development Officer J A h1 s o A E E H 0 0 9 1 N G C 0? F 0 R A T I G N REGIONAL 07F!CFE: SArn AMFNTO ANO SAN ❑IEG❑ 17701 COWAN AVENUE SUITE 200 IFv:NE CA 92614 P 949.263.6678 F 949 263 0647 Iambareehausing COM 25B-10 EXHIBIT 4 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 SPACE ABOVETHIS LINE FOR RECORDING USE FREE RECORDING REQUESTED [Govemment Code Section 6103] FIRST AMENDMENT TO 0OT,] MAKi7:�/:re1:> WO . Z" by and between the CITY OF SANTA ANA and SANTA ANA VILLAGE LP, a California limited partnership (3312 W. First Street, Santa Ana, California) Dated: July 16, 2019 25B-11 EXHIBIT 4 FIRST AMENDMENT TO HOME LOAN AGREEMENT THIS FIRST AMENDMENT TO HOME LOAN AGREEMENT dated, for identification purposes only, as of July 16, 2019, is made and entered into by and between the CITY OF SANTA ANA, a charter city and municipal corporation ("City") and SANTA ANA VILLAGE LP, a California limited partnership ("Developer'), with reference to the following: RECITALS: A. The City and Developer entered into a HOME Loan Agreement dated August 21, 2018, and recorded in Official Records, Orange County, with filing number 2018000341750 on September 18, 2018 ("said HOME Loan Agreement'. B. The purpose of said HOME Loan Agreement is to assist with the development of a seventy-six (76) unit residential housing development, including seventy-five (75) permanent supportive housing units, with wrap -around support services for homeless veterans, located at 3312 W. First Street, Santa Ana, California, and commonly referred to as the Santa Ana Veterans Village ('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 Scope of Work and Project Budget, to increase the amount of HOME funding provided by the City to Developer for the Project, and to update the 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: Section 1.1, Definitions and Interpretations, of said HOME Loan Agreement shall be amended to increase the amount of HOME funds in the definitions of "City/HOME Loan Note" by $124,383.00 from "$352,962.90" to "$477,345.90." 2. Section 3, Scope of Work/Project Budget, of said HOME Loan Agreement shall be amended to append the "Scope of Work" attached to said HOME Loan Agreement as Exhibit B by adding the "I" Amendment to Scope of Work" attached herewith as Exhibit 1. Section 3, Scope of Work/Project Budget, of said HOME Loan Agreement shall be amended to replace the first page of the "Project Budget" attached to said HOME Loan Agreement as Exhibit C with the "Project Budget" attached herewith as Exhibit 2. 4. Section 5, Loans, subsection (A)(1), of Said HOME Loan Agreement shall be amended to increase the amount of HOME funds by $124,383.00 from "$352,962.90" to "$477,345.90." 25B-12 EXHIBIT 4 5. Section 7.1, Use Covenants and Restrictions, subsections (A) and (B), of said HOME Loan Agreement shall be amended to increase the number of HOME assisted units from two (2) units to three (3) units, including two (2) one -bedroom units and one (1) two -bedroom unit, fixed. 6. Section 7.2, Affordability Levels/Unit Mix, of said HOME Loan Agreement shall be amended to replace the affordability levels/unit mix matrix with the following: Unit Size 30% AbH Total No. Units Current Rent 1 Bedroom 70 $1,025 70 2 Bedroom 5 $1,230 5 Total 75 75 The remaining unit will be a 1-bedroom unit reserved for the onsite manager. 7. 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 Geed) Total # of Unit Type Level of # of HOME % Share of Units Affordability Assisted Units Unit Type 70 1 Bed 30%TCAC/ Low HOME 2 2.9% 5 2 Bed 1 20% 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. 8. Section 7.7, Increase in Rent and Occupancy Restrictions upon Termination of Rental Subsidies, of said HOME Loan Agreement shall be amended to increase the number of HOME assisted units from two (2) units to three (3) units, fixed. 9. Except as hereinabove modified, all terms and conditions of said HOME Loan Agreement shall remain in full force and effect. (Signatures on following page) 25B-13 EXHIBIT 4 IN WITNESS WHEREOF, the parties hereto have executed this First Amendment to HOME Loan Agreement the date and year fast written above. ATTEST: Daisy Gomez Clerk of the Council APPROVED AS TO FORM Sonia R. Carvalho City Attorney By. yan . Hodge Assistant City Attorney RECOMMENDED FOR APPROVAL: Steven A. Mendoza Executive Director Community Development Agency CITY OF SANTA ANA Kristine Ridge City Manager {Signatures continue on following page} 25B-14 EXHIBIT 4 DEVELOPER: SANTA ANA VILLAGE LP, a California limited partnership By: JHC-Santa Ana Village LLC, a California limited liability company, Managing General Partner By: Jamboree Housing Corporation, a California no rofit publi A benefit corporation, Manager T t �1 By: Name: Title: rk 25B-15 EXHIBIT 4 Exhibit 1 1st Amendment to Scope of Work 25B-16 EXHIBIT 4 1 st Amendment to Scope of Work Jamboree has incurred significant increases to the construction budget for the Santa Ana Veterans Village due to unforeseen conditions that occurred after the start of construction. Jamboree has had the following construction change orders: Change Order #1: Demolition of unforeseen conditions. During excavation, a double layer of asphalt was discovered. Specifically, during the demolition of existing asphalt and concrete pavements for the project, a second buried layer of asphalt was discovered beneath the driveway section of the Northeast parking lot. Due to it being buried, this material was not shown on the geotechnical report; thus, the $67,841 cost associated with the demolition and removal of this material was not reflected in Jamboree's initial development budget. Change Order #2: Treatment and removal of contaminated soil that was discovered as part of the soils management plan. During recent grading activities, approximately 400 cubic yards of contaminated soil was encountered onsite. The discovery of contaminated soil resulted in a $35,271 added to Jamboree's development budget. Change Order #3 & #4: Soil treatment for elevated moisture content caused by heavy rain. Consecutive days of inclement weather have posed yet another challenge. The stockpiled soil contained a high moisture content and needed to be air-dried prior to it being treated onsite. The cost to air dry the contaminated soil was $58,176. 25B-17 EXHIBIT 4 Exhibit 2 Project Budget 25B-18 EXHIBIT 4 Santa Ana Arts Collective Project Budget 111�111�111111�111111�111111��11111�1111�1111111111111111 ®®®®®®®®®®®® 4COUISIigN �' �' �'�' ��'(✓(✓(✓�'�'�' (✓(✓(✓(✓(✓(✓(✓(✓(m�'1©' CONSTRUCTION ilONOMERS! ��1l�ltttt���t✓���1✓•Il✓•tt!✓��lt✓�� ��lttttt✓��ttt�l>���1✓����1✓•Il✓ MCNnECiURFL __ ___ SUR®IIIII'®IIIIIIIIIIIIIII�®®©IIIIIIIIIIIIIII�IIIIIIIIIIIIIII�IIIIIIIIIIIIIII�IIIIIIIIIIIIIII�IIIIIIIIIIIIIII��® VEYB ENGINEERING tt tt tt tt� tt� tt� tt� l tt CONTINGENCY COSTS COxS1RVCi10N PERIOD EXPENSES �—ltalt+lta�t>at>alr_lreta��lta®�� l�c�tattt���w�tatat>at>a®��—��� �2���I�O��t✓s�l�ltitta—®®� r�����lr��lastr_�trat>a�s�sit>,t>,t>,t>r�a L.'���lttttttt��lttttttttt✓l���t✓��t?!l�ttttt✓f�it✓•ttlt?!t?!f i'�����lttttt�tttlt?!t?!t?!t?atttttt�tt�tt�itt�ltttttttttttttiDfl�tt PERMANENT FINANCING EXPENSES LEGAL FEES C<PI}GL6E0 RESERVES ADIES t✓�tt�tt�tt�ltt�tt�tt��f�tt�tt REPORTS 6 SiVOlE3 .T. (✓(✓(✓ (✓(✓(✓(✓(✓(✓ �����(✓(✓(✓(✓(✓(✓(✓(✓(✓m(✓(✓(✓(✓(✓� OTHER E. MIMI, ltrrrrrra�t>„�������t>,r,t>,t>,t, laces-��la�7gla_la�la���lt>,�lr_�� MEN MEMORIES lt� l✓ • t✓ • I ltttttttttttim t>,t>r��ra�ltr_�lr�—�l✓•Ilt��ll�l✓•IIt�D � lttttttEEM� ltt� t� � � � � l✓ r l✓ e✓ • t✓ • I lt✓ tr•MENEM= �ta�t>at»t»t»t»�alr�trat>at�lr_tasB>_t>arrr� mmou� mongubmil DEVELOPER COSH A=M1111111111110��-�� w�Bf✓�B� 25B-19 EXHIBIT 4 FREE RECORDING REQUESTED PURSUANT TO GOVERNMENT CODE SECTION 6103 & 27383 When Recorded Mail to: City of Santa Ana Clerk of the Council 20 Civic Canter Plaza (M-30) P.O. Box 1988 Santa Ana, California 92702 Attention: Clerk of the Council SPACE ABOVE THIS LINE FOR RECORDING USE FREE RECORDING REQUESTED [Government Code Section 61031 FIRST AMENDMENT TO AFFORDABILITY RESTRICTIONS ON TRANSFER OF PROPERTY by and between the CITY OF SANTA ANA and SANTA ANA VILLAGE LP, a California limited partnership (3312 W. First Street, Santa Ana, California) Dated: July 16, 2019 25B-20 EXHIBIT 4 FIRST AMENDMENT TO AFFORDABILITY RESTRICTIONS ON TRANSFER OF PROPERTY THIS FIRST AMENDMENT TO AFFORDABILITY RESTRICTIONS ON TRANSFER OF PROPERTY dated, for identification purposes only, as of July 16, 2019, is made and entered into by and between the CITY OF SANTA ANA, a charter city and municipal corporation ("City) and SANTA ANA VILLAGE LP, a California limited partnership ("Developer"), with reference to the following: RECITALS: A. The City and Developer entered into a HOME Loan Agreement dated August 21, 2018, and recorded in Official Records, Orange County, with filing number 2018000341750 on September 18, 2018 ("said HOME Loan Agreement"). B. The City and Developer executed the Affordability Restrictions on Transfer of Property dated August 21, 2018, and recorded in Official Records, Orange County, with filing number 2018000463084 on December 11, 2018 ("Said Affordability Restrictions"). C. The purpose of said HOME Loan Agreement and said Affordability Restrictions is to assist with the development of a seventy-six (76) unit residential housing development, including seventy-five (75) permanent supportive housing units, with wrap -around support services for homeless veterans, located at 3312 W. First Street, Santa Ana, California, and commonly referred to as the Santa Ana Veterans Village ("Project"). D. In accordance with the terms and conditions of said HOME Loan Agreement and said Affordability Restrictions, the parties desire to amend said Affordability Restrictions to increase the amount of HOME funding provided by the City to Developer for the Project, and to update the 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 and said Affordability Restrictions, except as herein modified, City and Developer agree as follows: Section 3.1, Use Covenants and Restrictions, subsections (A) and (B), of said Affordability Restrictions shall be amended to increase the number of HOME assisted units from two (2) units to three (3) units, including two (2) one -bedroom units and one (1) two -bedroom unit, fixed. 2. Section 3.2, Affordability Levels/Unit Mix, of said Affordability Restrictions shall be amended to replace the affordability levels/unit mix matrix with the following: 25B-21 EXHIBIT 4 Unit Size 30% AMI Total No. Units Current Rent 1 Bedroom 70 $1,025 70 2 Bedroom 5 $1,230 5 Total 75 75 The remaining unit will be a 1-bedroom unit reserved for the onsite manager. Section 3.2, Affordability Levels/Unit Mix, of said Affordability Restrictions shall be amended to replace the HOME Assisted Units matrix with the following: HOME Assisted Units (Fixed) Total # of Units Unit Type Level of Affordability # of HOME Assisted Units % Share of Unit Type 70 1 Bed 30% TCAC/ Low HOME 2 2.9% 5 2 Bed 1 20% 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. 4. Section 3.2, Affordability Levels/Unit Mix, of said Affordability Restrictions shall be amended to increase the number of HOME assisted units from two (2) units to three (3) units, fixed. 5. Section 3.4, Increase in Rent and Occupancy Restrictions upon Termination of Rental Subsidies, of said Affordability Restrictions shall be amended to increase the number of HOME assisted units from two (2) units to three (3) units, fixed. 6. Except as hereinabove modified, all terms and conditions of said Affordability Restrictions shall remain in full force and effect. {Signatures on following page} 25B-22 EXHIBIT 4 IN WITNESS WHEREOF, the parties hereto have executed this First Amendment to Affordability Restrictions the date and year first written above. ATTEST: Daisy Gomez Clerk of the Council APPROVED AS TO FORM Sonia R. Carvalho City Attorney gAt:::� B . yan . Hodge Assistant City Attorney FOR APPROVAL: Steven A. Mendoza Executive Director Community Development Agency CITY OF SANTA ANA Kristine Ridge City Manager (Signatures continue on following page) 25B-23 I_WA;11=3WE DEVELOPER: SANTA ANA VILLAGE LP, a California limited partnership By: JHC-Santa Ana Village LLC, a California limited liability company, Managing General Partner By: Jamboree Housing Corporation, a California nonprofit public benefit corporation, Manager D By: -)�.4 k . Name: 6WL & d 1 Title: PIJ//-F 6A/0-0q4,7tR of-Ple 25B-24 EXHIBIT 4 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 SPACE ABOVE THIS UNE FOR RECORDING USE FREE RECORDING REQUESTED [Government Code Section 6103] FIRST AMENDMENT TO CITY HOME DEED OF TRUST AND ASSIGNMENT OF RENTS by and between the CITY OF SANTA ANA MI SANTA ANA VILLAGE LP, a California limited partnership (3312 W. First Street, Santa Ana, California) Dated: July 16, 2019 25B-25 EXHIBIT 4 FIRST AMENDMENT TO CITY HOME DEED OF TRUST AND ASSIGNMENT OF RENTS THIS FIRST AMENDMENT TO CITY HOME DEED OF TRUST AND ASSIGNMENT OF RENTS dated, for identification purposes only, as of July 16, 2019, is made and entered into by and between the CITY OF SANTA ANA, a charter city and municipal corporation ("City") and SANTA ANA VILLAGE LP, a California limited partnership ("Developer"), with reference to the following: RECITALS: A. The City and Developer entered into a HOME Loan Agreement dated August 21, 2018, and recorded in Official Records, Orange County, with filing number 2018000341750 on September 18, 2018 ("said HOME Loan Agreement"). 13, The Developer executed the CITY HOME DEED OF TRUST AND ASSIGNMENT OF RENTS dated August 21, 2018, and recorded in Official Records, Orange County, with filing number 2018000463089 on December 11, 2018 ("Said HOME Deed of Trust"). C. The purpose of said HOME Loan Agreement and said HOME Deed of Trust is to assist with the development of a seventy-six (76) unit residential housing development, including seventy-five (75) permanent supportive housing units, with wrap -around support services for homeless veterans, located at 3312 W. First Street, Santa Ana, California, and commonly referred to as the Santa Ana Veterans Village ("Project'. D. In accordance with the terns and conditions of said HOME Loan Agreement and said HOME Deed of Trust, the parties desire to amend said HOME Deed of Trust to increase the amount of HOME funding provided by the City to Developer for the Project, and to update the 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 and said HOME Deed of Trust, except as herein modified, City and Developer agree as follows: Said HOME Deed of Trust shall be amended to increase the amount of HOME funds in the reference to the HOME Promissory Note in the final recital by $124,383.00 from "$352,962.90" to "$477,345.90." 2. Except as hereinabove modified, all terms and conditions of said HOME Deed of Trust shall remain in full force and effect. (Signatures on following page) 25B-26 EXHIBIT 4 IN WITNESS WHEREOF, the parties hereto have executed this First Amendment to HOME Deed of Trust the date and year first written above. ATTEST: Daisy Gomez Clerk of the Council APPROVED AS TO FORM Sonia R. Carvalho City Attorney By yan . Hodge Assistant City Attorney RECOMMENDED FOR APPROVAL: Steven A. Mendoza Executive Director Community Development Agency Kristine Ridge City Manager (Signatures continue on following page) 25B-27 EXHIBIT 4 DEVELOPER: SANTA ANA VILLAGE LP, a California limited partnership By: JHC-Santa Ana Village LLC, a California limited liability company, Managing General Partner By: Jamboree Housing Corporation, a Californi non rofit public benefit corporation, Manager �1 I n A By: Name: Title: 25B-28 EXHIBIT 4 FIRST AMENDMENT TO CITY HOME LOAN NOTE THIS FIRST AMENDMENT TO CITY HOME LOAN NOTE dated, for identification purposes only, as of July 16, 2019, is made and entered into by and between the CITY OF SANTA ANA, a charter city and municipal corporation ("City") and SANTA ANA VILLAGE LP, a California limited partnership ("Developer"), with reference to the following: RECITALS: A. The City and Developer entered into a HOME Loan Agreement dated August 21, 2018, and recorded in Official Records, Orange County, with filing number 2018000341750 on September 18, 2018 ("said HOME Loan Agreement'). 13. The Developer executed the CITY HOME LOAN NOTE dated August 21, 2018 ("said HOME Loan Note"). C. Thepurpose of said HOME Loan Agreement and said HOME Loan Note is to assist with the development of a seventy-six (76) unit residential housing development, including seventy-five (75) permanent supportive housing units, with wrap -around support services for homeless veterans, located at 3312 W. First Street, Santa Ana, California, and commonly referred to as the Santa Ana Veterans Village ("Project'). D. In accordance with the terms and conditions of said HOME Loan Agreement and said HOME Loan Note, the parties desire to amend said HOME Loan Note to increase the amount of HOME funding provided by the City to Developer for the Project, and to update the 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 and said HOME Loan Note, except as herein modified, City and Developer agree as follows: 1. Said HOME Loan Note shall be amended to increase the amount of HOME funds noted at the beginning of the document by $124,383.00 from "$352,962.90" to "$477,345.90." 2. Said HOME Loan Note shall be amended to increase the amount of HOME funds noted in the initial paragraph by $124,383.00 from "$352,962.90" to "$477,345.90." 3. Except as hereinabove modified, all terms and conditions of said HOME Loan Note shall remain in full force and effect. (Signatures on following page} 25B-29 EXHIBIT 4 IN WITNESS WHEREOF, the parties hereto have executed this First Amendment to HOME Loan Note the date and year fast written above. ATTEST: Daisy Gomez Clerk of the Council APPROVED AS TO FORM Sonia R. Carvalho City Attorney B . yan . Hodge Assistant City Attorney RECOMMENDED FOR APPROVAL: Steven A. Mendoza Executive Director Community Development Agency CITY OF SANTA ANA Kristine Ridge City Manager (Signatures continue on following page) 25B-30 EXHIBIT 4 DEVELOPER: SANTA ANA VILLAGE LP, a California limited partnership By: JHC-Santa Ana Village LLC, a California limited liability company, Managing General Partner By: Jamboree Housing Corporation, a California nonprofit public benefit corporation, Manager J By: U9 Name: A ltAk-i L_ (fidSS l Title: ON 19P C11 25B-31 25B-32 HOME UNDERWRITING & SUBSIDY LAYERING REVIEW Veteran's Village City of Santa Ana Keyser Marston Associates, Inc. July 3, 2019 25B-33 Table of Contents I. Executive Summary............................................................................................................. 2 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....................................................................................................... 12 IV. Developer Assessment......................................................................................................13 A. Development Team.....................................................................................................14 B. Ability to Perform........................................................................................................15 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 Vill. Commitment Checklist(§92.2)......................................................................................... 23 Appendix A Pro Forma Analysis City of Santa Ana Underwriting & Subsidy Layering Review: Veteran's Village 1907001:SA:TRB Page I i 25B-34 On August 21, 2018, the City of Santa Ana (City) entered into a HOME Loan Agreement with Jamboree Housing Corporation (Developer) for the purposes of providing HOME Program (HOME) funds for the construction of a 76-unit apartment project (Project) located at 3312 West First Street (Site). The 2018 HOME Loan Agreement required the City to provide $352,963 in HOME funds to the Project that are allocated to the City by the United States Department of Housing and Urban Development (HUD). However, the Project's budget has changed materially since 2018, including the following unforeseen issues: During the demolition of existing asphalt and concrete pavements, a second layer of asphalt was discovered beneath the driveway section. During grading activities, approximately 400 cubic yards of contaminated soil was encountered on the Site. Due to consecutive days of precipitation, the stockpiled soil had to be treated for elevated moisture, which also added delays to the Project's construction schedule. The contaminated soil has been treated, buried and capped in place with a low permeable asphalt material per the recommendations of the remediation plan written by the Developer's third -party environmental consultant. As such, the City intends to amend the 2018 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: 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. An evaluation of the Developer's capacity to develop and operate the Project. 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. City of Santa Ana Underwriting & Subsidy Layering Review: Veteran's Village Page 11 25B-35 EXECUTIVE SUMMARY The Developer proposes to develop the 76-unit Project on the 1.54-acre Site, currently owned by the Developer. The Project will be financed with the following funding sources: Funding Conventional Loan Source Provided by Union Bank 9%Tax Credits Allocated by TCAC, Provided by Union Bank as Investor HOME Loan Provided by City OCCF Loan Provided by Orange County Community Foundation Home Depot Grant Provided by Home Depot SNHP Loan Allocated by CaIHFA and Orange County AHP Loan Allocated by Federal Home Loan Bank Deferred Developer Fee Provided by Developer VASH Vouchers Allocated by Santa Ana Housing Authority The KMA analysis concluded the following: 1. Underwriting Analysis: a. The Project costs are estimated at $29.95 million and the available funding sources are estimated at $29.48 million, resulting in a financial gap of approximately $477,000. The financial gap is equal to Developer's request of HOME funds from the City. Thus, the analysis demonstrates that the proposed $477,346 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. 2. Developer has demonstrated the development capacity and fiscal soundness to undertake the Project. 3. Developer provided a market study which demonstrates that there is more than adequate demand for affordable housing to support the Project. 4. Other HOME Requirements: City of Santa Ana Underwriting & Subsidy Layering Review: Veteran's Village Page 12 25B-36 HOME Requirement Conclusion HOME Program Deadlines The Project is currently under construction and expected to meet the Project completion and' Project lease -up requirements imposed, by HOME. Written Agreement The HOME Agreement meets the HOME requirements for written agreements. Layering Requirements The assistance package complies with the HOME layering requirements HOME Unit Designation The Project will meet the HOME requirements for the number of HOME designated units as well as the number of units restricted to very -low income households. KMA recommends that the units be fixed. Affordability Period The Project will meet the HOME requirement forthe affordability period. Cost Allocation The standard cost allocation methodology was utilized. Property Standards The Project will meet the HOME property standards requirements for new construction and the on -going property management. HOME Rents / Utility Allowances The HOME units will be restricted at the appropriate rents and the 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 vacant Site is comprised of 1.54 acres, or 66,994 square feet, and the proposed project will consist of a three-story apartment building. The project will have a gross building area of 67,868 square feet and includes 76 residential units (inclusive of a manager's unit), with approximately 6,765 square feet reserved for community facilities including recreational space, meeting rooms, fitness room, a laundry facility and staff offices. The project density is 49.4 units per acre. 2. The Project's unit mix is as follows: One -Bedroom Units 71 536 Two -Bedroom Units 5 788 Total/Averaee 76 553 3. The Project includes forty-two parking spaces, four of which will be designated for guest parking, equating to 0.5 spaces per unit. Sixteen stalls of bike parking will be provided. City of Santa Ana Underwriting & Subsidy Layering Review: Veteran's Village Page 13 25B-37 4. The Project will provide permanent supportive housing for homeless veterans, and will be restricted for affordability purposes by the City and HOME Program with the following affordability mix: Affordability Extremely Low Income (30%AMI) 75 Manager's Unit (unrestricted) 1 Total Units 76 5. The Project will include 6,080 sf of private open space, and 20,809 square feet of common open space, for a total of 26,889 square feet. 6. Support services will be provided by the Long Beach VA in partnership with Step Up on Second, Inc., an experienced veteran's services provider with a history of working in conjunction with the Veterans Administration. Step Up's services will be augmented with additional supportive services from the Tierney Center for Veteran Services, the Veterans Legal Institute, and Strength in Support. Three full-time case managers will provide general social services to residents, including counseling, medical services, and mental health treatment. Additionally, two on -site Resident Service Coordinators will provide support to the case managers along with a part-time employee who will provide administrative support. III. 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: Cost Allocation Analysis A. Estimated Development Costs (Table 1) KMA reviewed Developer's cost estimate provided in July 2019, which was originally based on a cost estimate provided by Advent Companies dated May 25, 2018. Advent Companies is a third -party contractor. 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: LandAssemblage Costs Total land assemblage costs are estimated to total $4,400,000, or $66 per square foot of land area or $57,900 per unit. The Developer entered into a Purchase and Sale Agreement on City of Santa Ana Underwriting & Subsidy Layering Review: Veteran's Village Page 14 25B-38 November 21, 2016 with 3312 W. First Street, LLC, a third -party owner, to purchase the Site for $4,400,000. According to an appraisal prepared by Lea & Company, dated February 7, 2017, the fair market value of the Site was set at $4,940,000. On January 10, 2018, the Developer closed escrow on the Site with the assistance of a $4,400,000 acquisition loan from Century Housing Corporation. Given that the purchase price was approximately 11% lower than the appraised value, KMA concludes that the purchase price of $4,400,000 for the Site is reasonable. Direct Casts The direct cost estimates assume that the Project will be subject to both federal and state prevailing wage requirements. The direct costs are estimated at $17,275,000, or $227,300 per unit and $255 per square foot of GBA. 1. Onsite costs are estimated at $1.28 million, or $19 per square foot of land area. 2. Building construction costs are estimated at $12.98 million , or $209 per square foot of GBA. This cost estimate is on the high side of the typical range. However, it considers the smaller units, meeting GreenPoint standards, and installation of solar hot water and PV energy generation. 3. Furnishings, fixtures and equipment are estimated at $439,000, or $5,800 per unit. 4. The general conditions and contractor fees are estimated at 10% of construction costs, which is lower than the maximum 14% allowed by TCAC and within the typical 10-12% allowance. The Developer plans to use Quality Development and Construction, Inc., a related party, as the Contractor for the Project. 5. Construction insurance is estimated at 2% of construction costs. 6. A 5% contingency allowance is provided. 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 and Developer utilized the following assumptions for the indirect costs: 1. Architecture, engineering and consulting costs are estimated at 8% of direct costs, or $1,305,000. 2. Developer estimated the public permits and fees costs at $1,271,000, or $16,700 per unit. City of Santa Ana Underwriting & Subsidy Layering Review: Veteran's Village Page 15 25B-39 3. The taxes, insurance, legal and accounting costs are estimated at 2% of direct costs, or $298,000. 4. The marketing and leasing budget equates to $110,000, or $1,447 per unit. 5. The Developer will receive a $2,200,000 developer fee, which is the maximum allowed by TCAC. 6. A 4% indirect cost contingency allowance is provided. The total indirect costs are estimated at $5,372,000, which KMA concludes are reasonable and necessary for the development of the Project. Flnandng Casts The financing costs for the Project are estimated as follows: 1. Century Housing Corporation, provided a $4,400,000 acquisition loan to the Project, which closed escrow in January 2017. The loan has a 6.59% interest rate. Assuming a 13-month loan term, the interest owed during the development period is estimated at $314,000. 2. The construction period and absorption period debt service payments are estimated at $1.32 million. This estimate is based on the following assumptions: a. $21,750,000 conventional construction loan; 5.58% interest rate; C. A 24-month development period; and d. An average outstanding balance of 55%. 3. The construction lender and other financing costs are estimated at $825,000, 4. The Tax Credit fees are estimated at $135,000. 5. A three-month capitalized operating reserve will be provided. However, no transitional reserve is required by Union Bank, the lender. The total financing costs are estimated at $2,907,000, which KMA finds to be reasonable and necessary to complete the Project. As the Project moves through the construction process, the City is required to keep up to date with any changes to the costs. City of Santa Ana Underwriting & Subsidy Layering Review: Veteran's Village Page 16 25B-40 Total Estimated Development Casts The total estimated development costs are $29,954,000, or $394,100 per unit. Based on the analysis above, KMA finds Developer's cost estimates to be reasonable and necessary in order to construct, lease -up and complete the Project. As the Project moves through the construction 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 proposed funding sources include HOME Program funds, low income housing tax credits (Tax Credits), Special Needs Housing Program (SNHP), and other funds. Income limits are published for households that are qualified to reside in units that have received assistance from these sources. The HOME Program publishes rent standards for projects receiving assistance from HOME funds. Tax Credit and SNHP program also publishes rent standards. Developer will be required to adhere to the strictest of the standards imposed by the funding sources. The HOME affordability requirements will remain in place for 20 years, which is equal to the 20- year minimum period that the HOME Program requires. Therefore, the Project will meet the minimum HOME Program requirements. The following summarizes the affordability restrictions that will be placed on the Project: Achlemble Rentallncome 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 2019 income and rent information. The maximum allowable rents, net of the appropriate utility allowances, are estimated as follows:, 1 The property owner will City of Santa Ana all utilities. Underwriting & Subsidy Layering Review: Veteran's Village Page 17 25B-41 30%AMI TCAC & SNHP / Low HOME # of Units 2 1 TCAC Rent $667 $801 SNHP Rent $231 $347 HOME Rent $1,113 $1,336 Applicable Rent $231 $347 Project -Based Vouchers Yes Yes 30%AMI TCAC & SNHP # of Units 68 4 TCAC Rent $667 $801 SNHP Rent $231 $347 Applicable Rent $231 $347 Project -Based Vouchers Yes Yes Estimated Net Opeiat/ng Income (NO/) The Project's effective gross income (EGI) is estimated at approximately $1.35 million based on the following assumptions: 1. The gross potential rental income is estimated at approximately $215,000. 2. The PBV subsidy overhand is estimated at $1.23 million. 3. The miscellaneous income is estimated at $9 per unit per month. 4. A vacancy and collection allowance equal to 7% of gross income is deducted, which is standard for a special needs project. The residential operating expenses are estimated at $596,000 based on the following assumptions: 1. The general operating expenses are estimated at $5,640 per unit per year. It should be noted that the property management expenses are estimated at $60 per unit per month and limited to 8% of gross rental income in the HOME Agreement. 2. KMA assumes Developer will apply for the property tax abatement that is accorded to non-profit housing organizations that own income -restricted apartments. Developer estimated the property tax assessment overrides at $5,016 per year. 3. The social services budget is estimated at $112,000, or $1,474 per unit. 4. The mandatory HCD debt services payment for the SNHP loan is equal to $12,230. 5. The annual capital replacement reserve deposits are estimated at $500 per unit. City of Santa Ana Underwriting & Subsidy Layering Review: Veteran's Village Page 18 25B-42 The Project's EGI is estimated at $1,353,000 and the operating expenses are estimated at $596,000. This results in an estimated stabilized NO1 of $757,000 C. Financial Gap Analysis (Table 3) A va!/a b/e fun ding Sources. - The following summarizes the available funding sources: Conventional Loan Union Bank provided the Developer with an executed term sheet, dated June 6, 2018, for an up to $23,000,000 construction loan and an estimated $9,790,000 permanent loan. The following summarizes the associated loan terms: 1. Construction Loan: a. An interest rate based on the 30-day LIBOR rate plus a 1.60% loan spread, which has been set at 5.58%; b. A 24-month term; C. The loan is secured with a first trust deed during the construction period; and d. The Developer is to provide a construction completion guaranty and repayment guaranty. 2. Permanent Loan: a. A 15-year term and a 40-year amortization; b. Loan sizing based on 1.15 debt coverage ratio and maximum 80% loan to value ratio based on a bank commissioned appraisal; C. The loan will be secured with a first trust deed for the term of the loan; and d. A currently estimated interest rate of 5.56%. e. The permanent loan is currently estimated at $10.30 million, but will be finalized at permanent loan closing. f. The estimated annual debt service payment is $642,546. 9%Tax Credits The Project received a $12,648,740 competitively awarded Tax Credit allocation from TCAC in a Reservation Letter dated June 13, 2018. Union Bank has also committed to provide Tax Credit equity at a rate of $1.02 per gross Tax Credit dollar. The equity will be provided as follows: City of Santa Ana Underwriting & Subsidy Layering Review: Veteran's Village Page J 9 25B-43 A total of $121,691 upon the limited partnership and construction loan closing; A total of $12,392,745 at lease -up, initial qualified occupancy and conversion of permanent loans; and $385,989 at receipt of 8609 and tenant file audit. OCCF Loan In a February 8, 2018 letter, OCCF agreed to provide the Project with a $1,500,000 loan with the following terms: • A 15-year term from permanent loan conversion; ■ A 3% simple interest rate; ■ Annual payments of 72% of the residual receipts; and • Secured by a second trust deed that will be subordinated to the construction and permanent loans. SNHP Loan The $2,912,000 SNHP Loan from the County was confirmed in a letter from CaIHFA dated February 21, 2017 for 20 units dedicated to homeless veterans. This loan will have a 3% simple interest rate, a 55-year term and will be paid with 25% of the net residual receipts after the OCCF loan payment is paid. The SNHP loan will be secured by a third trust deed that will be subordinated to the construction/permanent and OCCF loans. VASH Vouchers The Santa Ana Housing Authority committed to provide 75 VASH vouchers to the Project for a 15-year term in a May 4, 2017 letter. AHP Grant The Federal Home Loan Bank agreed to provide the Project with $750,000, dated June 18, 2018. Payment on the loan will only be required if the Project is not in compliance with the regulatory agreement. Home Depot Grant On May 1, 2018, Home Depot committed to provide the Project with a $500,000 grant. Deferred Developer Fee The Developer will defer $615,000 of the $2,200,000 developer fee to be paid from cash flow. It is estimated that the deferred fee will be paid to the Developer within five years. Total Available Funding Sources As shown in Table 3, the available funding sources total $29,477,000. Flnandal Gap Calculatlon Based on the assumptions outlined in this analysis, the financial gap is calculated as follows City of Santa Ana Underwriting & Subsidy Layering Review: Veteran's Village Page 1 10 25B-44 Total Development Costs $29,477,000 (Less) Available Funding Sources (29,954,000) Financial Gap $477,000 Per Affordable Unit $6,400 The City proposes to fund the financial gap with $477,346 of HOME Program funds. Based on the KMA analysis, it is concluded that the $477,346 in HOME assistance to the Project is warranted. 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 7.0% 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 will remain flat for 55 years. The priority distributions are categorized as follows: An annual debt service payment of $642,546; ii. Repayment of the deferred Developer fee; and iii. The Owner Partnership Management and Asset Management Fees are set at $35,000 in Year 1 and are not to exceed 5% of gross rents. g. The annual residual receipts payments to the soft lenders will be se as follows: OCCF Loan: $1,500,000 will be repaid with 72% of the residual receipts. This loan will have a 3% simple interest rate and a 15-year term. The loan City of Santa Ana Underwriting & Subsidy Layering Review: Veteran's Village Page 111 25B-45 is estimated to have a $609,000 outstanding balance in Year 15, which will be repaid through resyndication. ii. SNHP Loan: $2,912,000 loan will be repaid with 25% of the residual receipts net of the OCCF loan payment. This loan will have a 3% simple interest rate and a 55-year term. The loan is estimated to be repaid in year 52. iii. City HOME Loan: $477,000 will be repaid with 3% of the residual receipts net of the OCCF and SNHP loan payments. This loan will have a 3% simple interest rate and a 55-year term. The loan is estimated to have a $470,000 outstanding loan balance in Year 55. The City HOME Loan will be secured with a fourth trust deed. h. The City HOME Loan is estimated to generate the following in nominal terms and present value terms, assumption a 6.0% discount rate, as follows: The NOI is projected to be positive through Year 55 and the HOME loan not anticipated to be repaid until Year 55. Therefore, 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 $2,200,000, which is the maximum allowed per TCAC. Cash Flow Residual receipts after payment on the soft loan will go to Developer, which is estimated to total $29 million over 55 years, or a net present value of $3.58 million. This equates to an estimated 21% IRR based on the $615,000 deferred fee provided by the Developer. Tax Benefits The Project will generate $12.65 million in federal tax credits that will be sold to Union Bank 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. City of Santa Ana Underwriting & Subsidy Layering Review: Veteran's Village Page 112 25B-46 Identity of Interest Roles Quality Development &Construction, Inc., a subsidiary of the Developer, is estimated to earn a $1.48 million, or 11% of construction costs, for contractor fees and general requirements. This amount is within the 10% to 14% range typically required by contractors. As the general partner, the Developer/Owner will also share an Ownership Partnership / Asset Management Fee with the limited partner (Tax Credit Investor). The fee is limited to up to 5% of gross rents, which is estimated to total $906,000 in present value terms, assuming a 6% discount rate, over a 55-yearterm. This fee is paid out of cash flow after the annual debt service payments have been made. In conclusion, the developer fee, cash flow projection, equity appreciation and profit anticipated to be generated by the Project are appropriate. IV. DEVELOPER ASSESSMENT Founded in 1990 and based in Irvine, CA, Jamboree Housing Corporation (JHC) is a non-profit organization that develops and manages affordable housing throughout California with the goal of serving working families, seniors, veterans and people with special needs. JHC's model for success is based around providing not only quality housing but responsive social services that are tailored to serve residents' needs. JHC has provided affordable housing for veterans for over 15 years and is currently the largest developer and supportive services provider for Orange County residents suffering from homelessness and mental illness. Over 25 years, JHC has assembled a $1.1 billion asset portfolio including more than 8,200 homes across California serving over 18,000 residents. Currently, the organization has a total of $280 million in affordable housing projects in the development pipeline. Among the organization's newer projects are affordable residential communities in the cities of El Monte, Claremont, Brea, Buena Park, Irvine, Garden Grove, Anaheim, and Riverside. JHC has extensive experience working closely with local stakeholders and local officials to develop projects that will strengthen and revitalize communities. Following project development, JHC's 55+year ownership structure ensures that projects are managed effectively and remain in compliance in the long-term. The following provides an assessment of the experience and the capacity of JHC to implement the Project as well as the fiscal soundness of JHC to meet its financial obligations and risks of the Project. City of Santa Ana Underwriting & Subsidy Layering Review: Veteran's Village Page 113 25B-47 A. Development Team JHC's mission is to deliver quality affordable housing and services that transform lives and strengthen communities. JHC develops, acquires, renovates and manages affordable rental and ownership housing while providing a continuum of social services to residents. The organization's Development team is experienced in new construction, as well as acquisition and rehabilitation of existing structures, while the Asset Management team provides effective property management and programming following project completion. JHC is a CHDO certified at the State and County level as well as by various California cities. OCCHC's Board members are professionals in real estate and related fields. JHC is headquartered in Irvine and the staff works alongside various advisors and consultants in the development and management process. The Development Team involved in the Project will include the following: 1. Laura Archuleta, President— Prior to joining JHC in 1999, Laura Archuleta held positions in the public sector where she was responsible for the development and preservation of thousands of affordable homes throughout California. She has worked for the cities of Garden Grove, Anaheim and Cypress, and served as Deputy Redevelopment Director for the City of Palmdale. She serves on the board of California Housing Consortium and Building Industry Association of Orange County. Laura holds a bachelor's degree in Criminal Justice and a master's degree in Public Administration from California State University, Fullerton. 2. Marcy V. Finamore, Executive Vice President/Chief Financial Officer— Prior to joining JHC in 2001, Marcy Finamore was Assistant Asset Manager and Financial Analyst for Western National Properties, a property management and investment company, and served as Controller for Oak Springs, Inc., a real estate investment firm. She holds a bachelor's degree in Business Administration Accounting from California State University, Fullerton and is a Certified Public Accountant. 3. Mary Jo Goelzer, Vice President of Marketing and Communication — Mary Jo Goelzer joined JHC in 2001 after working nearly 20 years at Newport Pacific Capital Company, a national real estate development firm. As a Vice President, she served in several areas including marketing, public and private syndication, mortgage instrument programs, portfolio management, sales, financing, association management, and as a legal liaison. Previously, she was Director of Investor Services at American Diversified Corporation. She holds a bachelor's degree in Communications from the University of Washington. 4. Jose Sanchez, Vice President of Asset Management — Prior to joining JHC in 2015, Jose Sanchez served as the Chief Financial Officer at Eagle Real Estate Group where he was responsible for all aspects of corporate financial functions and the oversight of a $.5 billion property portfolio. Prior to his work at Eagle, Jose was the Director of Strategic Planning at The Irvine Company and a Portfolio Manager at Edison Capital. Jose City of Santa Ana Underwriting & Subsidy Layering Review: Veteran's Village Page 114 25B-48 graduated with a bachelor's degree from Cal State Fullerton and has an executive MBA from Chapman University. Michael Massie, Vice President of Finance— Prior to rejoining JHC in 2017, Michael Massie served as vice president at Related Companies of California where he was responsible for the company's affordable housing developments in San Diego and Los Angeles counties. Preceding his work at Related, Michael oversaw the development of the Picerne Group's multifamily projects throughout Southern California and was a member of the executive committee. Michael previously served as JHC's Director, Housing Development from 2008-2014 and before that as senior project manager from 2005 to 2008. Michael graduated from the University of Pennsylvania's Wharton School with a bachelor's degree in Economics and concentrations in Real Estate and Finance. 6. George Searcy, Senior Vice President, Community Impact— Prior to joining JHC in 2014, George Searcy served as both the Executive Director of Hope Through Housing Foundation and the Executive Vice President of Operation & Program Services at National Community Renaissance (CORE) in Rancho Cucamonga. Prior to his work at CORE, George worked for many years at the City of Irvine as the Community Services Superintendent — Human and Social Services and for the Irvine Adult Day Health Services, Inc. as the Executive Director of Adult Day Health Care Services. The development team will consist of the following entities: B. Ability to Perform HUD guidance related to this evaluation indicates that JHC's recent, similar, successful experience developing and operating comparable projects may be used to assist in establishing JHC's capacity to undertake a project that is requesting HOME Program assistance. City of Santa Ana Underwriting & Subsidy Layering Review: Veteran's Village Page 115 25B-49 • Since 1990, JHC has built a $1.1 billion asset portfolio that includes the development of and/or ownership interest in more than 8,300 housing units in more than 88 affordable housing developments. ■ JHC has 15 years of experience providing quality housing for veterans, and approximately 7% of the organization's 17,000 residents are veterans. ■ JHC has successfully completed three similar projects in Orange County utilizing HOME Funds in the past 5 years. ■ JHC has affirmed that none of their projects have been placed into foreclosure or are at risk of foreclosure. C. Fiscal Soundness JHC 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 JHC meets the financial management systems and practices required by the HOME Program. JHC provided audited financial statements for 2015, 2016, and 2017. The financial statements demonstrate that JHC has sufficient cash -on -hand and financial strength to complete the Project. D. Conclusion JHC 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 Lea & Company. The study includes an overview of the market area economy, household and income trends, demand estimates, and absorption rates. The study also presents rental comparables for both affordable and market rate properties as follows: Development Ross & Durant Apartments Structure LIHTC Subject Site 2.61 miles Triada at the Station District Apartments LIHTC 3.08 miles Warwick Square Apartments LIHTC 4.01 miles Bentley Parke Apartments Market 0.26 miles Vintage Wood Apartments Market 0.50 miles Villa Del Sur Apartments Market 0.89 miles The market study offers the following conclusions: • The achievable market rent for one -bedroom units is approximately $1,510 per month. • The achievable market rent for two -bedroom units is approximately $1,840 per month. City of Santa Ana Underwriting & Subsidy Layering Review: Veteran's Village Page 116 25B-50 Given that the highest affordable rents being proposed for the subject property is $273, the proposed rents represent at least an 85% discount from the currently prevailing market rents. The market area is experiencing very low vacancy rates ranging from 0.0%to 1.8%, and waiting lists are maintained at both market rate and comparable income restricted developments. In addition, the Demand Estimate section of the study considers the number of existing homeless households, number of homeless adults, and the number of homeless veterans, concluding that there is considerable unmet demand for supportive housing targeted towards homeless veterans in the area. There are currently only 12 existing affordable housing developments in the area, and one development in the pipeline, that provide housing for special needs households which could potentially compete with the proposed project. Based on high rates of absorption at three recently constructed properties in the area, the proposed project is anticipated to reach stabilized occupancy within one to two months of completion. 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 N/A housing will occur within 6 months of contract date Demolition/Construction §92.2 states that Under construction/demolition of property Construction is scheduled or 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 completed project must be completed within 4 within 18 years of the date the funds are months committed to the project (8/29/2018). Lease -up §92.252 states that HOME assisted To be completed units must be occupied by an eligible within 6 months tenant within six months following project completion City of Santa Ana Underwriting & Subsidy Layering Review: Veteran's Village Page 1 17 25B-51 B. Cost Reasonableness The construction costs have been estimated in detail by a third -party consultant, Advent Companies, as of May 25, 2018. In addition, the indirect and financing costs were reviewed by KMA and found to be reasonable when compared to similar project in the region. However, if there are any changes to the scope of development or costs increases experienced by the Project during construction, a third party will be required to review the revised estimates. C. Written Agreement The City must execute a written agreement (HOME 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 following summarizes the financial deal points memorialized in the written agreement: 1. The term of the HOME Loan is 55 years. 2. The term of the HOME Affordability Period is 20 years. 3. A total of three units in the Project should be restricted as fixed HOME units, occupied by very -low households (two one -bedroom units and one two -bedroom unit). 4. The HOME Loan terms are as follows: a. A total of $477,346 will be disbursed to the Developer for eligible costs related to the construction of the three 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 if the Project is not in default. d. The loan is secured by a of trust that will be subordinated to the construction/permanent loans, OCCF Loan and SNHP Loan. e. Annual payments will be made to the City based on 3% of residual receipts after the OCCF and SNHP loan payment have been made. The following verifies that the written agreement includes the provisions required in Section 92.504: City of Santa Ana Underwriting & Subsidy Layering Review: Veteran's Village Page 118 25B-52 Required Provisions Use of HOME Funds Included in Written Agreement ® Section of Written Agreement 5.A.1 Affordability ® 7.1 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 6.2 Records & Reports ® 11.16 Enforcement of the Agreement t9 20 Duration of the Agreement Definitions Conditions for Religious Organizations 11.33 CHDO Provisions 7.8 & 11.1 Identifies all Parties to the Agreement Recitals Provides dated, signatures for each Party ® 21.16 Recommended Additional Provisions: - Description of Project Exhibit B ■ Roles & Responsibilities Li -- - Conflict of Interest 0 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 of $477,346 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 $477,346 in HOME assistance. 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 $696 per square foot of net residential area. Therefore, per the cost allocation test, one 779-square City of Santa Ana Underwriting & Subsidy Layering Review: Veteran's Village Page 119 25B-53 foot two -bedroom unit is required to be restricted as a HOME unit in order to justify providing $477,346 in HOME assistance. However, there is also a maximum HOME subsidy requirement that must be met. In order to commit $477,346 to this Project, based on the 2018 maximum subsidy limits, two one -bedroom units and one two -bedroom unit need to be restricted as HOME units. The following summarizes the maximum HOME subsidy that can made to the Project based on three HOME 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. City of Santa Ana Underwriting & Subsidy Layering Review: Veteran's Village Page 120 25B-54 The HOME Agreement must require that at least the three HOME units be restricted as affordable for at least 20 years. Therefore, the Project will meet the HOME requirement for new construction projects. The affordability restrictions are detailed in the HOME Regulatory Agreement that will be recorded on the property. G. Property Standards (§92.251) The Project will be subject to the following property standards: 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 The Project will also meet the current edition of the Model Energy Code published by the Council of American Building Officials. H. HOME Rents / Utility Allowances The tenants will not be responsible for paying utilities. The following provides the current HOME rents as of July 2019 for Orange County as published by HUD: The HOME Regulatory Agreement should require that three units are restricted as Low HOME units I. Financial Commitments The Developer provided financial commitment documentation for the following sources: 1. An executed financing commitment letter from Union Bank dated June 6, 2018 to provide up to a $23,000,000 construction loan and an estimated $9,790,000 permanent City of Santa Ana Underwriting & Subsidy Layering Review: Veteran's Village Page 121 25B-55 loan. The permanent loan is now estimated at $10.30 million, but will be finalized closer to the time of permanent loan closing. 2. An executed financing commitment letter from Union Bank dated June 6, 2018 to provide $1.02 per Tax Credit as equity financing. 3. A reservation letter dated June 13, 2018 from TCAC to provide $12,648,740 in federal Tax Credits. 4. A commitment letter from OCCF dated February 8, 2018 to provide a $1,500,000 loan. S. A commitment letter from CaIHFA dated February 2, 2017 to provide $2,912,000 in SNHP loan for 20 units. 6. A commitment letter from the Federal Home Loan Bank dated June 18, 2018 to provide a $750,000 loan. Home Depot provided a letter dated May 1, 2018 that commits a $500,000 grant to the Project. 8. Santa Ana Housing Authority provided a May 4, 2017 commitment letter to provide 75 VASH vouchers to the Project. 9. The City entered into the HOME Agreement to provide $352,963 to the Project on August 21, 2018. The City proposes to amend the 2018 HOME Agreement to provide a total of $477,346 in HOME funds to the Project. VII. CERTIFICATIONS Based on the results of the analysis, the following certifications are provided: 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 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. City of Santa Ana Underwriting & Subsidy Layering Review: Veteran's Village Page 122 25B-56 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. In accordance with 24 CFR 92.205(e)(2), the Project will be completed within four years of the date the HOME funds are committed. 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 Project is associated with approved Consolidated Plan / Annual Action Plan projects Requirement Met ® Completion Dates May 15, 2018 Environmental Review Requirements have been met August 2018 Legally binding written agreement has been executed August 2018 / July 2019 All necessary financing is secured August 21, 2018 Subsidy Layering & Underwriting Analysis Completed August 2018 / July 2019 Construction Expected to begin within 12 months Under Construction Commitment Date ❑ August 21, 2018 / July 2019 City of Santa Ana Underwriting & Subsidy Layering Review: Veteran's Village Page 123 25B-57 Appendix Pro Forma Analysis 25B-58 APPENDIX A -TABLE 1 ESTIMATED DEVELOPMENT COSTS VETERANS VILLAGE SANTA ANA, CALIFORNIA I. Land Assemblage Costs 2 Land Acquisition Costs 2 67,082 Sf Land Area $66 /Sf Land $4,400,000 Holding Costs Allowance 0 Closing Costs 0.0% of Acquisition Costs 0 Total Land Assemblage Costs 76 Units $57,900 /Unit $4,400,000 II. Direct Costs 3 Off -site Improvements Allowance $0 On -site Improvements 67,082 Sf Land Area $19 /Sf Land Area 1,282,000 At -Grade Parking Structure Cost 0 Spaces $0 /Space 0 Residential Shell Costs 67,868 Sf GBA $191 /Sf GBA 12,980,000 OtherAmenities Costs 76 Units $0 /Unit 0 Furnishings, Fixtures & Equipment 76 Units $5,782 /Unit 439,000 Contractor Fees / General Requirements 10% of Construction Costs 1,482,000 Construction Insurance/ Bonds 2% of Construction Costs 242,000 Contingency Allowance 5% of Other Direct Costs 850,000 Total Direct Costs 76 Units $227,300 /Unit $17,275,000 III. Indirect Costs' Architecture, Engineering & Consultants 8% of Direct Costs $1,305,000 Permits & Fees 76 Units $16,726 /Unit 1,271,000 Taxes, Insurance, Legal & Accounting 2% of Direct Costs 298,000 Marketing & Leasing 76 Units $1,447 /Unit 110,000 Developer Fee s 2,200,000 Contingency Allowance 4% of Other Indirect Costs 188,000 Total Indirect Costs $5,372,000 IV. Financing Costs2 Acquisition Loan Interests $4,400,000 Loan Amount 6.59% Interest $314,000 Construction Interest 7 $21,750,000 Loan Amount 5.58% Interest 1,323,000 Financing Fees Predevelopment Loan $4,400,000 Loan Amount 0.00 Points 0 Construction Loan $21,750,000 Loan Amount 2.51 Points 546,000 Permanent Loan $10,300,000 Loan Amount 0.00 Points 0 Other Fees Allowance 279,000 Tax Credit Fees 76 Units $1,776 /Unit 135,000 Capitalized Reserves Operating $103,207 /Month 3 Months 310,000 Transition 75 DHS Units $0 /DHS Unit 0 Total Financing Costs $2,907,000 V. ITatal Development Costs 76 Units $394,132 /Unit $29,954,000 2 Based on Developer's estimates. 2 Based on Purchase and Sale Agreement dated 11/21/2016. The Developer closed escrow on the property on January 10, 2018. According to a FMV appraisal by Lea & Company, dated 217/2017, the current value of the Site is $4,940,000. a Based on Developer's estimates. Includes state and federal prevailing wages. Included in the On -site Improvement Costs. 6 Based on maximum allowed by TCAC regulations. 6 Assumes a 13-month loan term. z Assumes a 24-month development period, and a 55% average outstanding balance. Prepared by: Keyser Marston Associates, Inc. Fil_59 Rename: Santa Ana W - 2018 9% Model - 7 319; Financial Gap - 9%- KMA; jlr APPENDIX A - TABLE 2 STABILIZED NET OPERATING INCOME VETERANS VILLAGE SANTA ANA, CALIFORNIA I. Project Revenue 1 Manager Unit(s) 30% MedianTCAC / 30%SNHP / Low HOME 1-Bedroom Units @ (536-Sf) 2-Bedroom Units @ (788-Sf) 30% MedianTCAC / 30%SNHP 1-Bedroom Units @ (536-Sf) 2-Bedroom Units @ (788-So Total Potential Gross Rental Income Add: PBVSu1bsidy2 Add: Miscellaneous Income' Total Potential Gross Income (Less) Vacancy & Collection Allowance 3 Effective Gross Income II. Operating Expenses a General Operating Expenses Property Taxes Social Services Agency Debt Service Replacement Reserve Total Operating Expenses 1 Units $0 /Month $0 2 Units $231 /Month 5,544 1 Units $347 /Month 4,164 68 Units $231 /Month 188,496 4 Units $347 /Month 16,656 76 Units $236 /Month $214,860 75 Units $1,369 /Month 1,231,980 76 Units $9 /Unit/Month 8,208 $1,455,048 7% of Potential Gross Income (101,853) $1,353,195 76 Units $5,641 /Unit $428,696 76 Units $66 /Unit 5,016 76 Units $1,474 /Unit 112,000 2,912,000 MHSA Loan 0.42%MHSALoan 12,230 76 Units $500 /Unit 38,000 76 Units $7,840 /Unit $595,942 Ill. I Net Operating Income $757,253 1 Based on 2019 TCAC, SNHP and HOME rents. The tenants will not be responsible for utilities. ' Assumes that the City will provide the difference between the fair market rents at $1,580/1-bdrm units and $1,994/two-bedroom units, and the actual rent paid by the tenants for at least 15 years. a Based on Developer's estimates. Prepared by: Keyser Marston Associates, Inc. Filename: Santa Ana VV - 2018 9% Model - 7 319; Financial Gap - 9%- KMA; jlr 2 5 B -60 APPENDIX A -TABLE 3 FAIR REUSE VALUE ANALYSIS VETERANS VILLAGE SANTA ANA, CALIFORNIA I. Potential Funding Sources A. Supportable Permanent Financing Net Operating Income $757,253 NOI Income Available for Mortgage 1.18 DCR Interest Rate / Mortgage Constant 5.56% Int. Rate Supportable Permanent Financing B. 9% Federal Tax Credit Equity $12,648,740 Gross Value C. OCCF Loan D. Home Depot Foundation E. County MHSA Loan F. AHP Loan G. Deferred Developer Fee 28% Developer Fee $642,546 Debt Service 6.24% Mort. Constant $10,300,000 $12,900,000 $1,500,000 $500,000 $2,912,000 $750,000 $615,000 Total Potential Funding Sources $29,477,000 11. Financial Surplus/(Gap) Calculation Total Potential Funding Sources $29,477,000 (Less) Total Development Costs (29,954,000) Financial Surplus/(Gap) 75 Affordable Units ($6,400)/Unit ($477,000) 101.99% Synd. Rate Prepared by: Keyser Marston Associates, Inc. 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Q m N N N N O O M m e mm N no b obN Noi Q e1 N W mi m 0 m O n N n O o m N W 1D O t0 Q d1 W N W N Q N '1 N N W Q Al rl A Q n N N O M M n T b m N N Q N N m T •'1 e1 N N N N N N N J J N JI O~ N W Ot b N m q C n N 'M N b N ml m j N N T N e-1 rl e1 N N N N N O J N J W m ei TI N Ib�l %c N b N WI N N y N N m N e'1 N N N N N m b Q b N O b eel e b m 10 m O N O m N O m m m Q Q N m OI N N W N W W W M Q n O Q m O V nl N m W` t+l Of � N Wl IO '1 N m Q O 111 T N W A N W rl N rl Q N O N m W O ei T N M n N b Q N b '1 b W W N M N T ti 'I W m T N N 111 N ei eel '1 N N N N N N N a w c w m a ¢ C d O N d d a c E a C N N c a w E o N E ¢ a u E N LL > c a^' z n c U' of o f a m E o c `a a g m w cQ E c a D 3 a N a N LL q 1 A N .q C N C X O N z u d d C 0 a° u a o w z Z a x¢ b N f z_ ¢ tg O O h W LL a z a" 25B-65 M — N o O� o m N b rl W m N 1 m O m o 10 O m b W n W T n„ m OI I� n W m OI T O vl N O N N N W n ei Q M m n n N N '1 n Q O j N C VI n Q Q 1D N M T N �-1 N e1 N Iq N N N N V1 N pl N n m N m O m l0 ei „ O O OI O OI O O n n m O M N Q GI Q N W n T O T O n O O N T M Ip Q O N Q Q N '1 O � Q W ei O O ei N N N N OI Q T VI N ml Q T 1D N b N Tl N� Q NI '1 O N IVI m rl W W q T T N O N N m •'I N 'i m W b m N N '1 N m N a y n N O M N Q N b N T b O N N rl O T O N N o Q� m n rl W m o of n v'1 OI �"I O m m m O m o m m n N n Q m n m N m o m Q Q N m b n m n o O •'1 n W n � AI Q N m rl ID m OfJI W W W N n m v'1 10 rl O Q q N N n Q T fl O ei T m N N Q Q O N T N N m m Q C N V T b N W N N e'1 N 'I N ei N Q T O N N N N N N e1 N ri N O N Q m N n N O O m O O O O m W ei O O Q n e'I e1 N n N N Q n N M O n W m N N N m Q O rl m Q m Q m e1 N N O W O T O M N b T m 10 N C m m N O 1(1 N IYI N W m H v'I N n Q n O b QQ� W Q ei O O c N m N m d n O n T Q m ei T N N m m Q N Q N 'i V Q M O N N N N N N N W n m Q m Q N b O O N n OI OJ b O mil n m n O O W m b ry m o Q n N O m N m m T Q Q m m T m Q VI N m N � Ot N O N m b N N O O •'I IM1 �y N A m m N N b m T '1 m .4 W rl m N m n m N m N Q Q m Q m rl „ N N N N N N N N N m N N n m m n O O� m m OI go W M M n m m O T O O N N N W n m n Q Oi 10 N O� b trf Q Q O N O N Q P Q OI T b M N O T n vl ri 'i Ip A N m N m N O N b N N N M m 'I m O 'I N N N N N N N Q m N N O b N N Q O O N T T1 m N n m N T O O n n N VI N n O T mQ n W m N Q N N Q O m m O m N W N O N N b m1 O N W N m N T N m N N T MI m O N m N Q N N O e1 e1 e1 N T O O O m T N Q m m d y N n Q m N 1Y1 O ei Q O N N Ip N N M N ei 'i ei N T e1 m m N N N N N N N Q N n m T O N m Q O O N N OI N O 'I M Q O fl N m O N m n m m m Q W e1 b .i W N m O n m m N O m n N m N W N O NI O N N m T W n 10 W a b •'I Q N O n "'I W� Wl W ei ml W T O O rl j N rri C O .ti N eti .-i N ei N N N N N N N m n O O m M OI M O W m N O m N Q e N ry n m N m n m n b N o Q m .ti ri m ri Q N ri ri 'i ri m vi n ri Q e N m d' ri � N T O fll 'I N e1 'i N ei N N N N N N N m O N T n n O N .-I O O Q N O N O Q Q W O N m m T N Q H b T M N N O N O m m m ei N T n Q 1O V1 m Q n n � e1 VI N m O N N '1� 'I e1 VI O N A m Q eel N m W Q T Q Q M '1 m m m N N N N N N N b g O m m� mil W rl o N N n n O of N m N m Oil m O e9 0l Q �-1 Q o m N m W m o r1 b m .� M n NQ T N N m ti O N V O N Q n N m N O IO .ti W W N N h O N O n n n m N 01 h m m N O m NT O N N n N •'I N m n Q n N Q Q p Q fi e{ eel N T T T N 10 m T O IV1 ."I N N ei N N N N N N N a C C a C 3 LL a o m m c Eo Y. a a a 01 c w Z n E N u m o n a O Uo i 3 a a m 6 O p a a 0 Z E S m i c n a c E a 3� Q C to N y u�i a M YI � a 01 d R n N 1a- a _ = 25B-66 > a V U m d n C i aw m o .+� m o .+ a m o o� e b of b b Q e e ry .+ m e ry m Q .+ m m o Q b n N o n o e m b 1A Q r'I O b T n Q n N m T T e e N O N N N XI ei e1 N N N N N N ei O�'1IOm m Nnm Oo1 b nol n mmmilo m e N o T n m o n mN.�mo V1 m I!1 N o o b m O m o W vl o o YI b m a a AI tV W fV 40 10 OI 10 T m n `m n �n m m a e Vf e'1 OI e'I T b b M e m b m in y N O N N N T «I M N N N N N N m Q e o m m 10 m W m W W Q W m o n O O N O o M m e m e N vi m m v n u v e d ri m ai ri n nN a ry m W m b ry m in Y ? N N O N N N T N e0 N nl N .ni .ni e Q m N N N e b e m vmi n h m N V1 .bi .bi e Q m N N m n m n W b Q rl n T N �y` N a d c a m 3 LL v $ 3 c N d c cc u c d E V d N o E o0 w 01 n E LL n o c N in m c U' of w o � O X � E 75 •N W n F a y d J u C O C C 6' C O d c�> .q LL V' L f• W O U' 2 N 2 K H 2 J Q V O O f n' - = 25B-67 > �i U U W m c n APPENDIX A - TABLE 5 COST ALLOCATION WORKSHEET-STANDARD MODEL VETERANS VILLAGE SANTA ANA, CALIFORNIA Step 1: Determine Comparability, Select Method of Cost Allocation Step 2: Proposed HOME Investment Step 3: Calculate Actual Cost of HOME Units Total Development Costs Ineligible Development Costs Unit -Specific Upgrades Relocation Costs Assign Relocation Exclusively to HOME Units? Base Project Cost $696 /Sf Residential SF Assign Units # of Bdrms Unit Size 1 2 779 Subtotal HOME Unit Costs Add: Relocation Costs Allocated Exclusively to HOME Units (if applicable) Actual Cost of HOME Units Step 4: Calculate Maximum Project Subsidy Unit Size # of Units 0 Bedroom 0 1 Bedroom 2 2 Bedroom 1 3 Bedroom 0 Maximum Project Subsidy Step 5: Maximum HOME Investment, Lesser of Proposed Investment (Step 2) Actual Cost of HOME Units (Step 3) Maximum Project Subsidy (Step 4) Residential SF 41,990 $477,346 $29,954,412 (749,000) 0 0 N/A $29,205,412 Cost Unit $541,820 $541,820 $0 $541,820 Max Subsidy/Unit Maximum Subsidy $147,074 $0 $168,600 337,200 $205,017 205,017 $265,229 0 $542,217 $477,346 $541,820 $542,217 Maximum HOME Investment 3 HOME Units $477,346 Prepared by: Keyser Marston Associates, Inc. _�� Filename: Santa Ana VV - 2018 9% Model - 7319; Cost Allocation; jlr