Florida Housing Finance Corporation. The Addison

Transcription

1 Page 1 of 45 Florida Housing Finance Corporation Credit Underwriting Report The Addison State Apartment Incentive Loan Program ( SAIL ) and Competitive 9% Housing Credits ( HC ) RFA ( CS) Housing Credit and SAIL Financing to Provide Affordable Multifamily Rental Housing that is a Part of Local Revitalization Initiatives Section A: Report Summary Section B: SAIL Loan Special and General Conditions HC Allocation Recommendation and Contingencies Section C: Supporting Information and Schedules Prepared by First Housing Development Corporation of Florida FINAL REPORT

2 Page 2 of 45 The Addison Report Summary Recommendation Overview Use of Funds Operating Pro Forma TABLE OF CONTENTS Section A Page A1-A9 A10-A13 A14-A19 A20-A22 Section B SAIL Loan Special and General Conditions HC Allocation Recommendation and Contingencies B1-B8 B9 Section C Supporting Information and Schedules Additional Development & Third Party Information Applicant Information Guarantor Information General Contractor Information Syndicator Information Property Management Information C1-C12 C13-C18 C19-C20 C21-C22 C23 C24-C25 Exhibits 15 Year Pro Forma 1. Housing Credit Allocation Description of Features and Amenities Completion and Issues Checklist

3 Page 3 of 45 Section A Report Summary

4 Page 4 of 45 Recommendation First Housing Development Corporation ( First Housing,, or Servicer ) recommends a SAIL Loan in the amount of 2,000,000 and an annual HC Allocation of 1,510,000 to finance the construction and permanent financing of The Addison ( Development ). Development Name: The Addison DEVELOPMENT & SET-ASIDES RFA/Program Numbers: RFA / CS Address: 702 6th Avenue East City: Bradenton Zip Code: County: Manatee County Size: Medium Development Category: New Construction Development Type: Mid-Rise (5-6 Stories) Construction Type: Concrete Demographic Commitment: Primary: Family for 100% of the Units Unit Composition: # of ELI Units: 9 ELI Units Are Restricted to 35% AMI, or less. Total # of units with PBRA? # of Link Units: 5 Are the Link Units Demographically Restricted? Yes # of NHTF Units: North Port-Bradenton-Sarasota MSA, Manatee County, FL 0 0 Bed Bath Rooms Rooms Units Square Feet AMI% % % % % 623 Market 651 Market % % % % 884 Market 901 Market 1,044 35% 1,044 60% 1,142 60% 1,044 Market Low HOME Rents High HOME Rents Net Restricted Rents PBRA Contr Rents Gross HC Utility Applicant Appraiser Annual Rental Rent Allow. Rents Rents CU Rents Income , , , , , , , , , ,656 1,130 1,125 1,125 94,500 1,130 1,135 1,135 13, ,580 1, ,152 1, ,768 1,350 1,325 1,325 15, , ,468 The utility allowances are based on an Energy Consumption Model Estimate for electricity and sewer prepared by Matern Professional Engineering, Inc. ( Matern ) and approved by Florida THE ADDISON Page A-1

5 Page 5 of 45 Housing Finance Corporation ( Florida Housing or FHFC ) for credit underwriting purposes only. The allowance for water has been added to the overall approved utility allowance, as the residents are responsible for water. Persons with a Disabling Condition Set-Aside Commitment: The proposed Development must set aside fifty percent (50%) of the ELI Set-Aside units (5 units) as Link units for Persons with a Disabling Condition. In order to meet the commitment to set aside ELI units as Link units for Persons with a Disabling Condition, the Applicant must develop and execute a Memorandum of Understanding ( MOU ) with at least one designated Special Needs Household Referral Agency that provides supportive services for Persons with a Disabling Condition in Manatee County. The MOU was approved by Florida Housing on February 21, Buildings: Residential - 1 Non-Residential - 0 Parking: Parking Spaces Accessible Spaces - 5 Set Asides: Program % of Units # of Units % AMI SAIL/ELI/ Housing Credits 10.0% 9 35% SAIL/ Housing Credits 75.0% 68 60% Term (Years) Absorption Rate: 20 units per month for 5 months. Occupancy Rate at Stabilization: Physical Occupancy 96.00% Economic Occupancy Occupancy Comments N/A - New Construction DDA: No QCT: Yes Multi-Phase Boost: No QAP Boost: Site Acreage: Density: Flood Zone Designation: Zoning: T4-O, General Urban Open Flood Insurance Required?: 95.00% No X No THE ADDISON Page A-2

6 Page 6 of 45 Applicant/Borrower: Manager Manager Member Member Construction Completion Guarantor(s): CC Guarantor 1: CC Guarantor 2: CC Guarantor 3: CC Guarantor 4: CC Guarantor 5: CC Guarantor 6: CC Guarantor 7: CC Guarantor 8: Operating Deficit Guarantor(s): OD Guarantor 1: OD Guarantor 2: OD Guarantor 3: OD Guarantor 4: OD Guarantor 5: OD Guarantor 6: OD Guarantor 7: OD Guarantor 8: Developer: Principal 1 General Contractor 1: Management Company: Syndicator: Architect: Market Study Provider: Appraiser: DEVELOPMENT TEAM HTG Addison, LLC Matthew Rieger Randy Rieger HTG Addison Member, LLC Raymond James Tax Credit Funds, Inc. ("RJTCF") HTG Addison, LLC HTG Addison Member, LLC HTG Holdings, LLC Matthew Rieger, Randy Rieger HTG Addison Developer, LLC and HTG Developer, LLC Rieger Holdings, LLC HTG Affordable, LLC, RER Family Partnership, Ltd. Balogh Family Partnership, LLC HTG Addison, LLC HTG Addison Member, LLC HTG Holdings, LLC Matthew Rieger, Randy Rieger HTG Addison Developer, LLC and HTG Developer, LLC Rieger Holdings, LLC HTG Affordable, LLC, RER Family Partnership, Ltd. Balogh Family Partnership, LLC HTG Addison Developer, LLC HTG Developer, LLC HTG Hennessy, LLC HTG Management, LLC RJTCF Mesh Architecture Colliers International Valuation & Advisory Services ("Colliers") Meridian Appraisal Group ("Meridian") % Ownership 0.00% 0.00% 0.01% 99.99% THE ADDISON Page A-3

7 Page 7 of 45 Lien Position Lender/Grantor Amount Underwritten Interest Rate All In Interest Rate Loan Term Amortization Market Rate/Market Financing LTV Restricted Market Financing LTV Loan to Cost - Cumulative Loan to Cost - SAIL Only Debt Service Coverage Operating Deficit Reserve # of Months covered by the Reserves PERMANENT FINANCING INFORMATION 1st Source 2nd Source 3rd Source 4th Source 5th Source First Second Third Fourth Fifth City of Bradenton - Pillar Financial Community ("Pillar")/ FHFC - SAIL Development Freddie Mac Block Grant Lender Lender ("CDBG") 5,057,000 2,000,000 37, % 5.92% 1.00% 0.00% 0.00% 0.00% % 80% 111% 23% 32% N/A , % 0.00% 0.00% 0.00% 65% 65% 9% 112% 32% N/A % 65% 112% 112% 32% 32% N/A N/A Other The minimum Debt Service Coverage ( DSC ) ratio shall be 1.10x for the SAIL Loan, including all superior mortgages. However, if the Applicant defers at least 35% of its Developer Fee for at least six (6) months following construction completion, the minimum DSC shall be 1.00x for the SAIL Loan, including all superior mortgages. The Applicant will be required to defer 35% of the Developer Fee for at least six months following construction completion. THE ADDISON Page A-4

8 Page 8 of 45 Deferred Developer Fee 367,106 As-Is Land Value 1,200,000 Market Rent/Market Financing Stabilized Value 10,920,000 Rent Restricted Market Financing Stabilized Value 6,350,000 Projected Net Operating Income (NOI) - Year 1 375,392 Projected Net Operating Income (NOI) - 15 Year Year 15 Pro Forma Income Escalation Rate 414, % Year 15 Pro Forma Expense Escalation Rate 3.00% Housing Credit (HC) Syndication Price HC Annual Allocation - Initial Award 1,510,000 HC Annual Allocation - Qualified in CUR 1,510,000 HC Annual Allocation - Equity Letter of Interest 1,510,000 CONSTRUCTION/PERMANENT SOURCES: Source Lender Construction Permanent First Mortgage Fifth Third Bank ("Fifth Third") /Pillar/Freddie Mac 15,600,000 5,057,000 Second Mortgage FHFC - SAIL 2,000,000 2,000,000 Third Mortgage City of Bradenton - CDBG 37,500 37,500 Housing Credit Equity RJTCF 2,622,607 14,570,043 Deferred Developer Fee HTG Addison Developer, LLC 1,510, ,106 Deferred Reserves N/A 260,918 0 TOTAL 22,031,649 22,031,649 Perm Loan/Unit 56,189 22, ,889 4, ,796 Changes from the Application: COMPARISON CRITERIA YES NO Does the level of experience of the current team equal or exceed that of the team described in the Application? Are all funding sources the same as shown in the Application? 1. Are all local government recommendations/contributions still in place at the level described in the Application? Is the Development feasible with all amenities/features listed in the Application? Do the site plans/architectural drawings account for all amenities/features listed in the Application? Does the applicant have site control at or above the level indicated in the Application? X X X X X Does the applicant have adequate zoning as indicated in the Application? Has the Development been evaluated for feasibility using the total length of set-aside committed to in the Application? X X THE ADDISON Page A-5

9 Page 9 of 45 Have the Development costs remained equal to or less than those listed in the Application? Is the Development feasible using the set-asides committed to in the Application? If the Development has committed to serve a special target group (e.g. elderly, large family, etc.), do the development and operating plans contain specific provisions for implementation? SAIL ONLY: If points were given for match funds, is the match percentage the same as or greater than that indicated in the Application? HC ONLY: Is the rate of syndication the same as or greater than that shown in the Application? Is the Development in all other material respects the same as presented in the Application? X X N/A X The following are explanations of each item checked "No" in the table above: 1. The Application indicated that JPMorgan Chase Bank would provide a 15,300,000 construction loan and a 3,400,000 permanent loan. However, Fifth Third will be providing a 15,600,000 construction loan and Pillar will be providing a 5,057,000 permanent loan. 2. The Total Development Cost ( TDC ) has increased a total of 2,745,749 from 19,285,900 to 22,031,649 or 14.24% since the Application. The increase is mainly due to an increase in construction costs. Per the Applicant, the cost of concrete construction in medium counties has increased. Additionally, site work has increased due to soil conditions at the site. 3. The unit mix and legal description have changed since the Application, which have both been approved by Florida Housing. See Additional Information for further explanation. 4. At the time of the Application, the address was unknown. The address has been determined to be th Avenue East, Bradenton, FL The above changes have no substantial material impact to the SAIL Loan or HC recommendation for this Development. THE ADDISON Page A-6

10 Page 10 of 45 Does the Development Team have any FHFC Financed Developments on the Past Due/Noncompliance Report? According to the FHFC Asset Management Noncompliance Report, dated January 11, 2018, the Development has the following noncompliance item(s) not in the correction period: None According to the FHFC Past Due report, dated January 11, 2018, the Development Team has the following past due item(s): None Closing of the loan is conditioned upon verification that any outstanding past due, and/or noncompliance items noted at the time closing, have been satisfied. Strengths: 1. The Principals, Developer, and Management Company are experienced in affordable multifamily housing. 2. The Principals have sufficient experience and substantial financial resources to develop and operate the proposed Development. 3. Colliers prepared a Market Study for the Development, dated October 23, The weighted average occupancy rate for existing properties in the Primary Market Area is 96%. Other Considerations: None Mitigating Factors: None Waiver Requests/Special Conditions: None THE ADDISON Page A-7

11 Page 11 of 45 Additional Information: 1. Per the Request for Application ( RFA ), Florida Housing limits the TDC to 243,000 per unit for a new construction mid-rise, concrete building. The TDC for the Development, exclusive of land and operating deficit reserves is 20,570,731 or 228,564 per unit, which is within the underwriting parameters. 2. has completed the required minimum first mortgage qualifying test and finds that the proposed first mortgage amount equals or exceeds the requirement. 3. The Applicant must develop and execute a MOU with at least one designated Special Needs Household Referral Agency that provides supportive services for Persons with a Disabling Condition for the county where the proposed Development will be located (Manatee County) due February 28, 2018, but no later than the date the first building is placed in serviced. First Housing received a copy of the MOU, which was approved by Florida Housing on February 21, The utility allowances contained in this report are based on an Energy Consumption Model Estimate for electricity and sewer, prepared by Matern and approved by Florida Housing for Credit Underwriting purposes only. The allowance for water has been added to the overall approved utility allowance, as the residents are responsible for water. 5. The Development will include approximately 661 square feet of retail space. Based on the plans, the area is a blank canvas with stub outs for water, sewer, electrical, etc. The plan is to select a tenant during construction. 6. Since the Application, the unit mix and legal description have changed. After the Developer s meeting with the City of Bradenton and after design changes, it was determined that the Development would benefit from an increase in the number of 1- bedroom units, thus the overall unit mix has changed and is described in the attached. Further, as a result of a right-of-way being vacated by the City of Bradenton, the Development s legal description has changed and increased the total acres. The legal description and second unit mix changes were approved by Florida Housing on January 22, An initial unit mix change was approved on August 2, Issues and Concerns: None THE ADDISON Page A-8

12 Page 12 of 45 Recommendation: First Housing recommends a SAIL Loan in the amount of 2,000,000 and an annual HC Allocation of 1,510,000 to finance the construction and permanent financing of the Development. These recommendations are based upon the assumptions detailed in the Report Summary (Section A), and Supporting Information and Schedules (Section C). In addition, these recommendations are subject to the SAIL Loan Special and General Conditions and the HC Allocation Recommendation and Contingencies (Section B). This recommendation is only valid for six months from the date of the report. The reader is cautioned to refer to these sections for complete information. Prepared by: Stephanie Petty Reviewed by: Ed Busansky, Senior Vice President THE ADDISON Page A-9

13 Page 13 of 45 Overview Construction Financing Sources: Construction Sources Lender Application Revised Applicant Underwriter Construction Interest Rate Annual Construction Debt Service First Mortgage Fifth Third 15,300,000 15,600,000 15,600, % 631,800 Second Mortgage FHFC - SAIL 2,000,000 2,000,000 2,000, % 20,000 Third Mortgage City of Bradenton - CDBG 0 37,500 37, % 0 Housing Credit Equity RJTCF 5,616,640 2,622,607 2,622,607 N/A N/A Deferred Developer Fee HTG Addison Developer, LLC 2,000,000 1,529,895 1,510,624 N/A N/A Deferred Reserves N/A 0 260, ,918 N/A N/A Total 24,916,640 22,050,920 22,031, ,800 First Mortgage: First Housing reviewed a Term Sheet, dated December 6, 2017, provided by Fifth Third, which indicates Fifth Third will provide a construction loan in an amount equal to the least of: 1) 15,965,404, 2) the LIHTC equity available to repay the construction loan plus the permanent loan. (Fifth Third will not exceed 90% advance rate on the combined LIHTC equity available to repay the construction loan and the permanent loan), and 3) LTV of 75% on the combined value of LIHTC and the As Stabilized appraised value of the Development based on the restricted rent value. First Housing estimates a construction loan in the amount of 15,600,000, based on the Applicant s request. The term of the Loan will be thirty (30) months from the closing date. Interest shall accrue on the outstanding principal balance at a variable rate equal to 2.20% plus the one month London Interbank Offered Rate ( LIBOR ). Payments of interest only will be required until maturity. The construction interest is calculated based upon the current 30 day LIBOR rate of 1.60% (as of February 20, 2018), plus a 2.20% spread, and a 0.25% underwriting cushion, for an all-in interest rate of 4.05%. FHFC SAIL Loan: First Housing reviewed an invitation to enter credit underwriting, dated May 25, 2017, from FHFC with a preliminary SAIL Loan in the amount of 2,000,000. The SAIL Loan is non-amortizing with an interest rate of 1% plus servicing and compliance monitoring fees for a total term of up to 17.5 years, of which 2.5 years is for the construction/stabilization period (30 months). The SAIL Loan term was extended to be coterminous with the First Mortgage, as permitted by Rule Chapter Annual payments of all applicable fees will be required. To the extent that development cash flow is available, annual interest payments at the 1% rate will be required; any unpaid interest will be deferred until cash flow is available. However, at the maturity of the SAIL Loan, all principal and unpaid interest will be due. THE ADDISON Page A-10

14 Page 14 of 45 City of Bradenton - CDBG: First Housing reviewed s from the City of Bradenton, dated January 18, 2018 and January 22, 2018, outlining the terms for the proposed CDBG funds. The loan amount is 37,500 for a term of 15 years from the date the Certificate of Occupancy is received. The loan will not accrue interest and if the Development remains 51% affordable for 15 years, the loan will be forgiven. Housing Credit Equity: First Housing has reviewed an executed equity letter, dated August 23, 2017, indicating RJTCF, or its designee, will acquire 99.99% ownership interest in the Partnership. Based on the proposal, the annual HC allocation is estimated to be in the amount of 1,510,000 and a syndication rate of per dollar. RJTCF anticipates a net capital contribution of 14,570,043 and has committed to make available 18% or 2,622,607 of the total net equity during the construction period. An additional 11,947,436 will be available at completion, stabilization, and upon receipt of the Form The first installment, in the amount of 2,185,506 or 15.00%, meets the FHFC requirement that 15% of the total equity must be contributed at or prior to the closing. Deferred Developer Fee: To balance the sources and uses of funds during construction, the Developer is required to defer 1,510,624 or approximately 53.24% of the total Developer Fee of 2,837,342. Deferred Reserves: The Syndicator is requiring an Operating Deficit Reserve in the amount of 260,918 to be funded with the Stabilization Capital Contribution. THE ADDISON Page A-11

15 Page 15 of 45 Permanent Financing Sources: Permanent Sources Lender Application Revised Applicant Underwriter Term Yrs. Amort. Yrs. Interest Rate Annual Debt Service First Mortgage Pillar/Freddie Mac 3,400,000 5,179,000 5,057, % 342,760 Second Mortgage FHFC - SAIL 2,000,000 2,000,000 2,000, % 20,000 Third Mortgage City of Bradenton - CDBG 0 37,500 37, % 0 Housing Credit Equity RJTCF 14,041,600 14,570,000 14,570,043 N/A N/A N/A N/A Deferred Developer Fee HTG Addison Developer, LLC 2,000, , ,106 N/A N/A N/A N/A Total 21,441,600 22,050,920 22,031, ,760 First Mortgage: First Housing reviewed a Mortgage Loan Application, dated September 22, 2017, from Pillar Financial (a division of SunTrust Bank), which indicates Pillar will provide a first mortgage loan to be structured under Freddie Mac Portfolio Execution Program, in an amount of 5,500,000, subject to underwriting. First Housing is recommending a loan in an estimated amount not to exceed 5,057,000, based on Debt Service Coverage of the SAIL Loan. The term of the loan is 15 years amortized over a 35 year period. The interest rate will be 279 basis points ( bps ) over the yield on the 10 Year U.S. Treasury Security. For underwriting purposes, the interest is calculated based upon the spread of 2.79%, the current 10 Year U.S. Treasury rate of 2.88% (as of February 20, 2018) and a 0.25% credit underwriting cushion, for an all-in interest rate of 5.92%. Monthly principal and interest payments will be required until maturity. FHFC SAIL Loan: First Housing reviewed an invitation to enter credit underwriting, dated May 25, 2017, from FHFC with a preliminary SAIL Loan in the amount of 2,000,000. The SAIL Loan is non-amortizing with an interest rate of 1% plus servicing and compliance monitoring fees for a total term of up to 17.5 years, of which 2.5 years is for the construction/stabilization period (30 months). The SAIL Loan term was extended to be coterminous with the First Mortgage, as permitted by Rule Chapter Annual payments of all applicable fees will be required. In addition and to the extent that development cash flow is available, annual interest payments at the 1% rate will be required; any unpaid interest will be deferred until cash flow is available. However, at the maturity of the SAIL Loan, all principal and unpaid interest will be due. The annual multiple program Compliance Monitoring Fee of 918 for the SAIL Loan will be billed annually. The Servicing Fee will be billed based upon the outstanding loan amount, with a monthly fee of 25 bps of the outstanding loan amount, with a minimum monthly fee of 211 for the loan, and a maximum monthly fee of 840, billed annually. THE ADDISON Page A-12

16 Page 16 of 45 City of Bradenton - CDBG: First Housing reviewed s from the City of Bradenton, dated January 18, 2018 and January 22, 2018, outlining the terms for the proposed CDBG funds. The loan amount is 37,500 for a term of 15 years from the date the Certificate of Occupancy is received. The loan will not accrue interest and if the Development remains 51% affordable for 15 years, the loan will be forgiven. Housing Credit Equity: Based on a executed equity letter, dated August 23, 2017, RJTCF, or its designee will provide HC equity as follows: Capital Contributions Amount Percentage of Total When Due 1st Installment 2,185, % 2nd Installment 437, % 3rd Installment 2,185, % 4th Installment 9,761, % Total 14,570, % Closing 50% Construction Completion Construction Completion Stabilization, of which 100,000 may be held back until receipt of 8609s Annual Credit Per Syndication Agreement 1,510,000 Calculated HC Exchange Rate Limited Partner Ownership Percentage 99.99% Proceeds Available During Construction 2,622,607 Deferred Developer Fee: To balance the sources and uses of funds during the permanent funding period, the Developer is required to defer 367,106 or approximately 12.94% of the total Developer Fee of 2,837,342. THE ADDISON Page A-13

17 Page 17 of 45 Uses of Funds CONSTRUCTION COSTS: Revised Applicant Costs Underwriters Total Costs - CUR HC Ineligible Costs - CUR Applicant Costs Cost Per Unit New Rental Units 9,500,000 11,795,349 10,634, , ,749 Off-Site Work 100, Site Work 1,000, ,160,379 12,893 0 Constr. Contr. Costs subject to GC Fee 10,600,000 11,795,349 11,795, , ,749 General Conditions 1,400,000 1,651, ,720 7,864 0 Overhead ,906 2,621 0 Profit ,720 7,864 0 General Liability Insurance 0 51,109 51, Payment and Performance Bonds 0 110, ,879 1,232 0 Total Construction Contract/Costs 12,000,000 13,608,683 13,608, , ,749 Hard Cost Contingency 400, , ,334 7,470 0 FF&E paid outside Constr. Contr , ,000 2, ,000 Other: Soils Removal 0 50,000 50, Total Construction Costs: 12,400,000 14,539,117 14,531, , ,749 Notes to the Total Construction Costs: 1. The Applicant has provided an executed construction contract, dated January 29, 2018, in the amount of 13,608,683. This is a Standard Form of Agreement between Owner, HTG Addison, LLC and General Contractor ( GC ), HTG Hennessy, LLC where the basis of payment is the Cost of the Work Plus a Fee with a Guaranteed Maximum Price ( GMP ). Per the contract, substantial completion is to be achieved by no later than 415 days from the date of commencement. The construction contract specifies a 10% retainage until 50% of the GMP, at which time no retainage will be withheld. 2. First Housing utilized the Schedule of Values to complete the construction costs. 3. The ineligible cost of 238,749 includes the construction cost of the retail space and the costs of the washers and dryers. 4. The GC fee is within the maximum 14% of hard costs allowed by Rule Chapter 67-48, excluding Payment and Performance Bonds ( P&P Bonds ) and General Liability Insurance. The GC fee stated herein is for credit underwriting purposes only, and the final GC fee will be determined pursuant to the final cost certification process as per Rule Chapter THE ADDISON Page A-14

18 Page 18 of First Housing adjusted Hard Cost Contingency to 5% of the total construction contract (excluding P&P Bonds and General Liability Insurance), which is within the allowable 5% of total hard costs for new construction developments as required by Rule Chapter The General Contractor has budgeted for P&P Bonds to secure the construction contract. GENERAL DEVELOPMENT COSTS: Revised Applicant Costs Underwriters Total Costs - CUR HC Ineligible Costs - CUR Applicant Costs Cost Per Unit Accounting Fees 40,000 40,000 40, ,000 Appraisal 0 5,750 5, Architect's Fee - Site/Building Design 250, , ,250 3,525 0 Architect's Fee - Supervision 50,000 57,250 57, Building Permits 200,000 15,000 15, Builder's Risk Insurance 90,000 94,400 94,400 1,049 0 Engineering Fees 60,000 55,250 55, Environmental Report 10,000 80,100 80, FHFC Administrative Fees 135, , ,900 1, ,900 FHFC Application Fee 3,000 3,000 3, ,000 FHFC Credit Underwriting Fee 15,000 22,845 18, ,976 FHFC Compliance Fee 212, , ,672 2, ,672 Impact Fee 450, , ,102 3,646 0 Lender Inspection Fees / Const Admin 60,000 90,000 90,000 1,000 0 Green Building Cert. (LEED, FGBC, NAHB) 25,000 19,400 19, ,400 Insurance 65,000 36,800 36, Legal Fees - Organizational Costs 180, , ,500 2, ,250 Market Study 10,000 5,000 4, ,000 Marketing and Advertising 125, , ,000 1, ,000 Plan and Cost Review Analysis 0 5,000 2, Property Taxes 100,000 25,000 25, Soil Test 15,000 23,309 23, Survey 25,000 25,000 25, ,250 Title Insurance and Recording Fees 120,000 93,575 93,575 1,040 93,575 Utility Connection Fees 80,000 57,526 57, Soft Cost Contingency 0 98, ,535 1,139 0 Total General Development Costs: 2,320,900 2,165,178 2,153,245 23, ,023 Notes to the General Development Costs: 1. General Development Costs are the Applicant's updated estimates, which appear reasonable. 2. First Housing has utilized actual costs for: FHFC Credit Underwriting, Market Study, Appraisal, and Plan and Cost Analysis ( PCA ). 3. The FHFC Administrative Fee is based on 9% of the recommended annual Housing Credit allocation of 1,510,000. THE ADDISON Page A-15

19 Page 19 of FHFC Compliance Fee of 204,672 is based on the compliance fee calculator spreadsheet provided by FHFC. 5. Based on a letter for the City of Bradenton, dated February 1, 2018, pursuant to the City s Comprehensive Plan and Impact Fee Ordinances, the City can waive all impact and permit fees for affordable and workforce housing. The Addison will be affordable/workforce housing (under 120% of AMI) and as such, will be eligible for this waiver. The Applicant will be responsible for school impact fees imposed by Manatee County and any tap fees required by the City s utility billing department. 6. First Housing adjusted the Soft Cost Contingency to be 5% of the General Development Costs less the soft cost contingency, as allowed by RFA and Rule Chapter for new construction developments. FINANCIAL COSTS: Revised Applicant Costs Underwriters Total Costs - CUR HC Ineligible Costs - CUR Applicant Costs Cost Per Unit Construction Loan Origination Fee 120,000 78,000 78, Construction Loan Closing Costs 0 25,000 25, Construction Loan Interest 550, , ,000 8, ,850 Permanent Loan Application Fee 0 0 5, ,057 Permanent Loan Origination Fee 30,000 52,550 50, ,570 Permanent Loan Closing Costs 25,000 30,500 30, ,500 SAIL Commitment Fee , ,000 Other: SAIL Extension Fee and Closing Costs 0 40,000 32, ,500 Other: Loan Closing Costs 0 52,500 52, ,500 Other: Cost of Issuance 0 12, Total Financial Costs: Dev. Costs before Acq., Dev. Fee & Reserves Notes to the Financial Costs: 725,000 1,045,707 1,049,127 11, ,977 15,445,900 17,750,002 17,733, ,038 1,595, The Construction Loan Origination Fee of 78,000 is based on a commitment fee of 50 bps on the total Construction loan amount of 15,600, The Construction Loan Interest of 755,000 is based off the Developer s estimates of a 24 month term, which First Housing finds acceptable. 3. The Permanent Application Fee of 5,057 is based on a non-refundable application fee payable to Freddie Mac equal to the greater of 3,000 or 0.1% of the proposed loan amount. THE ADDISON Page A-16

20 Page 20 of The Permanent Loan Origination Fee of 50,570 is based on a loan placement fee of 1% on the total estimated Permanent loan amount of 5,057, The Permanent Loan Closing Costs of 30,500 includes a legal deposit of 10,000 to be applied towards the costs of Pillar s legal fees and 15,000 payable to cover the cost of Pillar s third party reports. Per the Applicant, the remaining amount are review fees. 6. SAIL Commitment Fee is based on 1% of the SAIL Loan. 7. SAIL Extension Fee and Closing Costs of 32,500 includes an extension fee of 1% of the SAIL Loan and SAIL Loan closing costs of 12,500 for FHFC legal counsel fee. 8. Other Loan Closing Costs of 52,500 includes 30,000 paid directly to RJTCF for its due diligence fees and the remaining 22,500 is carry interest and origination on a predevelopment loan. NON-LAND ACQUISITION COSTS Revised Underwriters HC Ineligible Applicant Costs Applicant Costs Total Costs - CUR Cost Per Unit Costs - CUR Building Acquisition Cost Total Non-Land Acquisition Costs: Notes to the Non-Land Acquisition Costs: 1. As this is new construction, there are no non-land acquisition costs. DEVELOPER FEE ON NON-ACQUISTION COSTS Revised Underwriters HC Ineligible Applicant Costs Applicant Costs Total Costs - CUR Cost Per Unit Costs - CUR Developer Fee - Unapportioned 2,000,000 2,840,000 2,837,342 31,526 0 Total Other Development Costs: 2,000,000 2,840,000 2,837,342 31,526 0 Notes to the Other Development Costs: 1. The recommended Developer's Fee does not exceed 16% of Total Development Cost before Developer Fee and Operating Deficit Reserves as allowed by RFA LAND ACQUISITION COSTS Revised Underwriters HC Ineligible Applicant Costs Applicant Costs Total Costs - CUR Cost Per Unit Costs - CUR Land Acquisition Cost 1,500,000 1,200,000 1,200,000 13,333 1,200,000 Total Acquisition Costs: 1,500,000 1,200,000 1,200,000 13,333 1,200,000 THE ADDISON Page A-17

21 Page 21 of 45 Notes to Acquisition Costs: 1. First Housing reviewed an Agreement for Purchase and Sale, dated March 21, 2017, between Central Plaza South, LLC ( Seller ) and Housing Trust Group, LLC ( Buyer ). According to the terms of the agreement and two amendments, the purchase price of the land located in the City of Bradenton, Manatee Count, FL is 1,200,000. The closing date is listed as on or before one hundred fifty (150) days after the expiration of the Investigation Period (which ends March 31, 2019). First Housing reviewed an Assignment of Agreement, dated December 13, 2017, where Housing Trust Group, LLC assigns all of its rights to HTG Addison, LLC. 2. The appraiser valued the vacant land at 1,200,000, which supports the purchase price of 1,200,000. RESERVE ACCOUNTS Revised Underwriters HC Ineligible Applicant Costs Applicant Costs Total Costs - CUR Cost Per Unit Costs - CUR Operating Deficit Reserve (Syndicator) 340, , ,918 2, ,918 Total Reserve Accounts: 340, , ,918 2, ,918 Notes to Reserve Accounts 1. An Operating Deficit Reserve ( ODR ) is required by the Syndicator and will be funded from the Stabilized Capital Contribution. The ODR will be funded in an amount estimated to be 260,918. At the end of the Compliance Period, any remaining balance of the ODR less amounts that may be permitted to be drawn (which includes Deferred Developer Fee and reimbursements for authorized member/partner and guarantor loan(s) pursuant to the operating/partnership agreement), will be used to pay FHFC loan debt; if there is no FHFC loan debt on the proposed Development at the end of the Compliance Period, any remaining balance shall be used to pay any outstanding FHFC fees. If any balance is remaining in the ODR after the payments above, the amount should be placed in a Replacement Reserve account for the Development. In no event shall the payments of amounts to the Applicant or the Developer from the Reserve Account cause the Developer Fee or General Contractor Fee to exceed the applicable percentage limitations provided for in Rule Chapter Any and all terms and conditions of the ODR must be acceptable to Florida Housing, its Servicer and its legal counsel. THE ADDISON Page A-18

22 Page 22 of 45 TOTAL DEVELOPMENT COSTS TOTAL DEVELOPMENT COSTS: Applicant Costs Revised Applicant Costs Underwriters Total Costs - CUR Cost Per Unit HC Ineligible Costs - CUR 19,285,900 22,050,920 22,031, ,796 3,056,667 Notes to Total Development Costs: 1. The Total Development Costs have increased a total of 2,745,749 from 19,285,900 to 22,031,649 or 14.24% since the Application. THE ADDISON Page A-19

23 Page 23 of 45 Operating Pro Forma The Addison FINANCIAL COSTS: Year 1 Year 1 Per Unit OPERATING PRO FORMA Gross Potential Rental Income 825,468 9,172 Other Income Ancillary Income 21, Wa s her/dryer Renta l s 38, Gross Potential Income 885,948 9,844 Less: Physical Vac. Loss Percentage: 4.00% 35, Collection Loss Percentage: 1.00% 8, Total Effective Gross Income 841,651 9,352 Fi xed: Real Estate Taxes 96,442 1,072 Insurance 31, Variable: Management Fee Percentage: 4.00% 33, General and Administrative 31, Payroll Expenses 99,000 1,100 Utilities 61, Marketing and Advertising 5, Maintenance and Repairs/Pest Control 36, Grounds Maintenance and Landscaping 18, Contra ct Servi ces 27, Reserve for Replacements 27, Total Expenses 466,259 5,181 Net Operating Income 375,392 4,171 Debt Service Payments First Mortgage - Pillar 342,760 3,808 Second Mortgage - FHFC - SAIL 20, Third Mortgage - CDBG 0 0 Second Mortgage Fees - FHFC - SAIL 5, Total Debt Service Payments 368,678 4,096 Cash Flow after Debt Service 6, FINANCIAL COSTS: Annual Per Unit Debt Service Coverage Ratios DSC - First Mortgage plus Fees 1.10x DSC - Second Mortgage plus Fees 1.02x DSC - All Mortgages and Fees 1.02x Financial Ratios Operating Expense Ratio 55.40% Break-even Economic Occupancy Ratio (all debt) 94.44% INCOME: EXPENSES: Notes to the Operating Pro Forma and Ratios: 1. The SAIL program does not impose any rent restrictions. However, this Development will be utilizing Housing Credits in conjunction with the SAIL financing which will impose rent restrictions. The rent levels are based on the 2017 maximum LIHTC rents published on FHFC s website for Manatee County less the applicable utility allowance. Below is the rent roll for the Development: THE ADDISON Page A-20

24 Page 24 of 45 Manatee County, North Port-Bradenton-Sarasota MSA Bed Bath Rooms Rooms Units Square Feet ,044 1,044 1,044 AMI% 35% 35% 60% 60% Market Market 35% 35% 60% 60% Market Market 35% 60% 1,142 60% Market Low HOME Rents High HOME Rents Gross HC Rent Utility Allow Applicant Rents 1, ,125 1, ,125 1, , Net Restricted Rents PBRA Contr Rents , Appraiser Rents ,384 55,656 94,500 13,620 5,580 64, , ,350 1,325 CU Rents , Annual Rental Income 3,936 7,872 22, ,300 11,040 33,660 19,392 4,848 1,325 15, , , The Vacancy and Collection loss rate of 5.00% is based on First Housing s estimate, which is supported by the appraisal. 3. Ancillary Income is comprised of revenue from vending machines, late charges, pet deposits, forfeited security deposits and other miscellaneous sources. Total Ancillary Income of 240 per unit/per year is supported by the appraisal. 4. The Development will offer full-size washer/dryer appliances to rent to the residents. The appraiser projected a rate of 80% at a monthly premium of 45, or 432 per unit per year. 5. Based upon operating data from comparable properties, third-party reports (appraisal and market study) and First Housing's independent due diligence, First Housing represents that, in its professional opinion, estimates for Rental Income, Vacancy, Other Income, and Operating Expenses fall within a band of reasonableness. 6. The Applicant has submitted a Management Agreement, dated January 30, 2018, which reflects a management fee equal to the greater of 3,000 or 4% of monthly gross collections. Further, the Manager shall be entitled to receive an additional 2% THE ADDISON Page A-21

25 Page 25 of 45 Management Fee subject to available Cash Flow as an incentive management fee, not to exceed a total Management Fee of 6%. Meridian concluded to an overall management fee of 5% of effective gross income; however, First Housing utilized the 4%. 7. The resident is responsible for electric, water, cable, phone and internet. The landlord is responsible for pest control and trash expenses. 8. The appraiser estimated utility expenses at 700/unit, which includes a garbage expense of 200/unit. The City of Bradenton Solid Waste/Commercial/Recycle Divisions provided an , dated December 5, 2017, indicating that the compactor service will charge a rate of per unit per month or approximately /month. Based on this information, First Housing has estimated garbage expense at 180/unit. 9. Replacement Reserves of 300 per unit per year are required per Rule Chapter The minimum DSC ratio shall be 1.10x for the SAIL Loan, including all superior mortgages. However, if the Applicant defers at least 35% of its Developer Fee for at least six (6) months following construction completion, the minimum debt service coverage shall be 1.00x for the SAIL Loan, including all superior mortgages. The Applicant will be required to defer 35% of the Developer Fee for at least six months following construction completion. 11. Refer to Exhibit I, Page 1 for a 15-Year Pro Forma, which reflects rental income increasing at an annual rate of 2%, and expenses increasing at an annual rate of 3%. THE ADDISON Page A-22

26 Page 26 of 45 Section B SAIL Loan Special and General Conditions HC Allocation Recommendation and Contingencies

27 Page 27 of 45 Special Conditions This recommendation is contingent upon the review and approval of the following items by Florida Housing and First Housing at least two weeks prior to Loan Closing. Failure to submit and to receive approval of these items within this time frame may result in postponement of the SAIL Loan closing date. 1. Firm Commitment from Fifth Third for the construction first mortgage with terms and conditions that are not substantially different than those utilized in this credit underwriting report. 2. Firm Commitment from Pillar and Freddie Mac for the permanent first mortgage with terms and conditions that are not substantially different than those utilized in this credit underwriting report. 3. A Firm Commitment or closing documents for the City Bradenton - CDBG funds with terms and conditions that are not substantially different from those utilized in this credit underwriting report. 4. Receipt of a satisfactory final PCA. 5. Receipt and satisfactory review of an executed operating agreement. 6. Satisfactory receipt and review of updated financials for the Guarantors, dated within 90 days of closing or Audited Financial Statements within one year. 7. Receipt and satisfactory review of the Final signed, sealed approved for construction plans and specifications by the Construction Consultant and the Servicer. 8. If the Applicant defers at least 35% of its Developer Fee for at least six (6) months following construction completion, the minimum DSC shall be 1.00x for the SAIL Loan, including all superior mortgages. The Applicant will be required to defer 35% of the Developer Fee for at least six months following construction completion. 9. Verification of Florida Department of Environmental Protection s ( FDEP ) approval of no further action or verification that all soils conditions will be remediated. 10. The Applicant must follow all recommendations in the Subsurface Soil Exploration and Geotechnical Engineering Evaluation, dated November 30, 2017, prepared by Ardaman & Associates, Inc. ( Ardaman ). THE ADDISON Page B-1

28 Page 28 of Receipt of executed FHFC Fair Housing, Section 504 and ADA as-design certification form 128. General Conditions This recommendation is contingent upon the review and approval of the following items by Florida Housing and First Housing at least two weeks prior to Loan Closing. Failure to submit and to receive approval of these items within this time frame may result in postponement of the SAIL Loan closing date. 1. Payment of any outstanding arrearages to the Corporation, its legal counsel, Servicer or any agent or assignee of the Corporation for past due issues applicable to the development team (Applicant or Developer or Principal, Affiliate or Financial Beneficiary, as described in (5) F.A.C. of an Applicant or a Developer). 2. On Solid Ground is to act as construction inspector during the construction phase. 3. At all times there will be undisbursed loan funds (collectively held by Florida Housing, the first mortgage lender and any other source) sufficient to complete the Development. If at any time there are not sufficient funds to complete the Development, the Applicant will be required to expend additional equity on Development Costs or to deposit additional equity with Florida Housing which is sufficient (in Florida Housing s judgment) to complete the Development before additional loan funds are disbursed. This condition specifically includes escrowing at closing all equity necessary to complete construction or another alternative acceptable to Florida Housing in its sole discretion. 4. During construction, the Developer is only allowed to draw a maximum of 50% of the total Developer Fee but in no case more than the payable Developer Fee during construction, which is determined to be "developer's overhead". No more than 35% of "developer's overhead" will be funded at closing. The remainder of the "developer's overhead" will be disbursed during construction on a pro rata basis, based on the percentage of completion of the Development, as approved and reviewed by FHFC and the Servicer. The remaining unpaid Developer Fee (if applicable) shall be considered attributable to "developer's profit", and may not be funded until the Development has achieved 100% lien free completion, and only after retainage has been released. 5. Signed and sealed survey, dated within 90 days of loan closing, unless otherwise approved by Florida Housing, and its legal counsel, based upon the particular circumstances of the transaction. The Survey shall be certified to Florida Housing, and its legal counsel, as well THE ADDISON Page B-2

29 Page 29 of 45 as the title insurance company, and shall indicate the legal description, exact boundaries of the Development, easements, utilities, roads, and means of access to public streets, total acreage and flood hazard area and any other requirements of Florida Housing. 6. Building permits and any other necessary approvals and permits (e.g., final site plan approval, Department of Environmental Protection, Army Corps of Engineers, the Water Management District, Department of Transportation, etc.) or a letter from the local permitting and approval authority stating that the above referenced permits and approvals will be issued upon receipt of applicable fees (with no other conditions), or evidence of 100% lien-free completion, if applicable. If a letter is provided, copies of all permits will be required as a condition of the first post-closing draw. 7. Final "as permitted" (signed and sealed) site plans, building plans and specifications. The geotechnical report must be bound within the final plans and specifications, if applicable. 8. Final sources and uses of funds schedule itemized by source and line item, in a format and in amounts approved by the Servicer. A detailed calculation of the construction loan interest based upon the final draw schedule, documentation of the closing costs, and draft loan closing statement must also be provided. The sources and uses of funds schedule will be attached to the Loan Agreement as the approved development budget. 9. A final construction draw schedule showing itemized sources and uses of funds for each monthly draw. SAIL Program loan proceeds shall be disbursed during the construction phase in an amount per draw that does not exceed the ratio of the SAIL Loan to the Total Development Costs, unless approved by First Housing. The closing draw must include appropriate backup and ACH wiring instructions. 10. Evidence of insurance coverage pursuant to the RFA governing this proposed transaction and, as applicable, the FHFC Insurance Guide. 11. A 100% Payment and Performance Bond or a Letter of Credit ( LOC ) in an amount not less than 25% of the construction contract is required in order to secure the construction contract between the GC and the Applicant. In either case, Florida Housing must be listed as co-obligee. The P&P Bonds must be from a company rated at least "A-" by A.M. Best & Co with a financial size category of at least FSC VI. FHFC, and/or legal counsel must approve the source, amount(s) and all terms of the P&P Bonds, or LOC. If the LOC option is utilized, the LOC must include "evergreen" language and be in a form satisfactory to Florida Housing, its Servicer and its legal counsel. THE ADDISON Page B-3

30 Page 30 of Architect, Construction Consultant, and Developer Certifications on forms provided by FHFC will be required for both design and as built with respect to Section 504 of the Rehabilitation Act, Americans with Disabilities Act, and the Federal Fair Housing Act requirements, if applicable. 13. Applicant is to comply with any and all recommendations noted in the Plan and Cost Review, prepared by On Solid Ground. 14. At the end of the Compliance Period, any remaining balance of the ODR less amounts that may be permitted to be drawn (which includes Deferred Developer Fee and reimbursements for authorized member/partner and guarantor loan(s) pursuant to the operating/partnership agreement), will be used to pay FHFC loan debt; if there is no FHFC loan debt on the proposed Development at the end of the Compliance Period, any remaining balance shall be used to pay any outstanding FHFC fees. If any balance is remaining in the ODR after the payments above, the amount should be placed in a Replacement Reserve account for the Development. In no event shall the payments of amounts to the Applicant or the Developer from the Reserve Account cause the Developer Fee or General Contractor Fee to exceed the applicable percentage limitations provided for in Rule Chapter Any and all terms and conditions of the ODR must be acceptable to Florida Housing, its Servicer and its legal counsel. 15. A copy of an Amended and Restated Limited Partnership Agreement reflecting purchase of the HC under terms consistent with the assumptions contained within this Credit Underwriting Report. The Amended and Restated Limited Partnership Agreement shall be in a form and of financial substance satisfactory to Servicer and to FHFC and its legal counsel. This recommendation is contingent upon the review and approval of the following items by Florida Housing, and its legal counsel at least two weeks prior to Loan Closing. Failure to receive approval of these items, along with all other items listed on Florida Housing counsel s due diligence, within this time frame may result in postponement of the SAIL Loan closing date. 1. Documentation of the legal formation and current authority to transact business in Florida for the Applicant, the general partner/principal(s)/manager(s) of the Applicant, the guarantor, and any limited partners of the Applicant. 2. Signed and sealed survey, dated within 90 days of closing, unless otherwise approved by Florida Housing, and its legal counsel, based upon the particular circumstances of the transaction. The Survey shall be certified to Florida Housing and its legal counsel, as well as the title insurance company, and shall indicate the legal description, exact boundaries of THE ADDISON Page B-4