FLORIDA AFFORDABLE HOUSING GUARANTEE PROGRAM · 2003-07-24 · PROJECT SUITABILITY ASSESSMENT AND RISK EVALUATION REPORT: BRISTOL BAY APARTMENTS 3 Participation: Construction Loan:

FLORIDA AFFORDABLE HOUSING GUARANTEE PROGRAM

PROJECT SUITABILITY ASSESSMENT AND RISK EVALUATION REPORT TO: Junious D. Brown III

Guarantee Program Administrator

FROM: TIBOR PARTNERS, Inc. ("TPI")

DATE: July 18, 2003

SUBJECT: Application for Mortgage Guarantee for: Bristol Bay Apartments

1241 S. 50th Street Unincorporated Hillsborough County Guarantee Application No. 2003-154

I. PROJECT SUMMARY Project Address: West side of South 50th Street (U.S. Highway 41), between

12th Avenue South and 16th Avenue South, Unincorporated Hillsborough County.

Property Type: Multi-family rental. New construction of 300 units in 15 three

story walk-up garden style residential buildings, a clubhouse, swimming pool, playground, exercise facilities, tot lot, gated entry and computer lab on 27.071 acres. On completion, the Project will consist of 72 one-bedroom/one bath, 132 two-bedroom/two bath, and 96 three-bedroom/two bath units, with 632 outdoor parking spaces, including 20 handicapped spaces. 100% of the units will be leased to persons/families earning 60% or less of the area median income. The Tampa, St. Petersburg-Clearwater (Hernando-Hillsborough/Pasco/Pinellas) median income is $49,700 for 2003.

Property The Project’s market value, utilizing the income approach to Appraisal: value methodology, and based on favorable financing and

restricted rents, at completion of construction and stabilized occupancy, is $18,935,000. This value, as of October 22, 2002, is contained in an appraisal, dated October 31, 2002, and updated on May 16, 2003; prepared by Realvest Appraisal Services, Inc.

Mortgagor/Borrower: Bristol Bay Associates, Ltd.

PROJECT SUITABILITY ASSESSMENT AND RISK EVALUATION REPORT: BRISTOL BAY APARTMENTS

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[a Florida For Profit Limited Partnership] Mara S. Mades 2121 Ponce de Leon Blvd., PH2 Coral Gables, Fl. 33134 General Partner (0.01% interest): Cornerstone Bristol Bay, LLC.; Investor Limited Partner (99.99% interest): Stuart I. Meyers Family Partnership Ltd. ( 29.997%); JL Holding Corp. (49.995%); M3, Inc. (9.999%); MSM, Inc. (9.999%). [Will be replaced at or prior to closing by Lend Lease Real Estate Investments, or an affiliate thereof.]

Guarantor(s): Bristol Bay Associates, Ltd., Cornerstone Bristol Bay, LLC., [for Construction Completion Cornerstone Group Development LLC., Cornerstone Group and Operating Deficits] Development Corporation, and its related Principals, Jorge Lopez,

Stuart I. Meyers, Leon J. Wolfe and Mara Mades. Mortgagee/Guarantee Beneficiary: Florida Housing Finance Corporation

Orlando J. Cabrera, Executive Director Tallahassee, Fl. 32301-1329

Developer: Cornerstone Group Development, LLC.

Jorge Lopez 2121 Ponce de Leon Blvd., PH 2 Coral Gables, Fl. 33134

General Contractor: Alliance Construction, LLC.

(an affiliate of The Cornerstone Group) Frank W. White III, General Contractor 2121 Ponce de Leon Blvd., Suite 510 Coral Gables, Fl. 33134

Property Manager: Cornerstone Residential Management, Inc.

(an affiliate of The Cornerstone Group) Nola Castillo, Senior Vice President 2121 Ponce de Leon Blvd., PH 2 Coral Gables, Fl. 33134

Syndicator: Lend Lease Real Estate Investments, Inc.

Barbara A. Tyrell 617-772-9573 101 Arch Street Boston, Ma. 02110

Guarantee Program


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Participation: Construction Loan: 100% mortgage guarantee, to be effective at the closing of the Project, on a loan (as recommended by Seltzer Management Group, Inc. (‘SMG’)) in an approximate amount of $16,210,000, and

Permanent Loan: 50% ($16,210,000) pari passu first loss) mortgage guarantee, to be effective at completion of construction of the Project and endorsement by HUD/FHA, on a permanent first mortgage loan in an approximate amount of $16,210,000.

Total Project Costs: $24,259,143 (excludes the Debt Service Reserve Fund which is

to be secured by a surety bond as per Seltzer Management Group, Inc. (‘SMG’), dated July 18, 2003).

II. BACKGROUND

The Florida Housing Finance Corporation’s Guarantee Program (the "Guarantee

Program") has been requested to guarantee a $16,210,000 construction and permanent first mortgage loan to be made by the Florida Housing Finance Corporation (the "Mortgagee", “Florida Housing” or "Guarantee Beneficiary") pursuant to the HUD Risk-Sharing Program created under Section 542 of the Housing and Community Development Act of 1992, and made permanent in December of 2000, pursuant to the VA/HUD Appropriations Bill H.R. 5482. Bonds to finance the project will be issued by the Florida Housing Finance Corporation (the "Mortgagee","Florida Housing", or "Guarantee Beneficiary"). A copy of the SMG Final Report, dated July 18, 2003 (Exhibit A) is attached. III. PROJECT DESCRIPTION AND AFFORDABILITY

The proposed Project will be situated on an approximately 27.071 gross acre site (a portion of a larger 39.219 acre owned site) located on the west side of South 50th Street (U.S. Highway 41), between 12th Avenue South and 16th Avenue South in Unincorporated Hillsborough County. The subject site is vacant land and zoned Planned Development-Mixed Use (PD-MU by Hillsborough County), Multi-family Residential; the 39.219 site which is designated Residential 9 within the PD-MU tract permits up to 9 units per acre; the Project site is planned for and has been approved for 300 units. The Project is designed primarily for families, as is evidenced by the following unit mix:

PRO FORMA UNITS UNIT TYPE* SQUARE FEET Net RENT/MO**

Year 2003

72 2br/2ba 700 $ 525 132 2br/2ba 924 $ 631 96 3br/2ba 1155 $ 720

Total: 300 $ 190,212 NOTES:


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* Units are set aside for families earning 60% of the area median income ** Net of utility allowance. Tampa,-St. Petersburg-Clearwater (Hernando-Hillsborough/Pasco/Pinellas) median income is

$49,700 for 2003. IV. PROJECT FINANCING

The Sources and Uses of Funds, bond amount and mortgage amount employed in this analysis are as provided to the Florida Housing Guarantee Program staff and TPI by SMG in its July 18, 2003 Final Report. Information as to bond and mortgage rates was obtained from the same source.

Mortgagee will provide both construction and permanent financing through the sale of FHFC tax exempt bonds in the approximate amount of $16,210,000, together with a NLPI Second Mortgage CDFI/SHIP Loan ($359,000), a Hillsborough County Third Mortgage SHIP Loan (391,000), developer note ($1,180,143 deferred developer fee), and the Housing Credit proceeds ($6,119,000), funding the total project costs of $24,259,143 (including capitalized interest). Principal and interest payments on the bonds will not be guaranteed by the Guarantee Program. The bonds will be secured by the Project’s mortgage and the Debt Service Reserve Fund Surety Bond which, in turn, will, if approved, benefit from the Guarantee Program’s enhancement.

Principal and interest payments on the bonds will be additionally enhanced by a “AAA” credit enhancement. The bonds will be secured by the Project’s mortgage and the Debt Service Reserve Fund. During the construction period the mortgage will be (100%) guaranteed by the Guarantee Program, while during the permanent phase the mortgage will be insured by FHA pursuant to a HUD Risk-Sharing Agreement. Florida Housing’s risk portion will be borne (assumed) by the Guarantee Program. Thus, the Guarantee Program will effectively bear the entire risk during the construction phase of this transaction, and retain a 50% pari passu risk on the mortgage for the term of the permanent loan.

The Credit Underwriter’s calculation of debt service is predicated upon a weighted average “all-in”mortgage loan interest rate of 5.832% based upon the Project’s proposed net operating income. The maximum interest rate that could be incurred for this loan while maintaining 1.15:1.0 debt service coverage would be 5.832%. The mortgage will have a term of forty and one-half (41.5) years (40 year amortization); the Mortgagor will pay interest only during the first eighteen (18) months, and principal and interest for forty (40) years. SMG projects a stabilized net operating income of $1,204,768. The resulting loan to value of the first mortgage (based upon favorable financing and restricted rents) is 85.609%; (90% is the maximum permitted by the Guarantee Fund). The projected debt service coverage ratio on the first mortgage (NOI/DS) is 1.15:1.0 (1.15:1.0 is the minimum permitted for this loan by the Guarantee Program). V. MARKET ANALYSIS

The firm of Realvest Appraisal Services, Inc. was retained by SMG to prepare an appraisal dated October 31, 2002 (updated on May 16, 2003) of the Project. A separate Market Feasibility Study, dated October 28, 2002, was prepared by the same firm. An update to the market study has been requested. SMG’s Final Report indicates that it has reviewed the appraisal and the


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Market Feasibility Study. SMG has determined that the Appraisal and Market Feasibility Study are satisfactory and that there are significant households within the income band necessary to support rent restricted housing. Neighborhood occupancy rates are strong, with the South Central Tampa submarket reflecting a 95.06% occupancy rate. The absorption rate is projected at an acceptable 25 units per month. TPI, based upon the evidence in the SMG Final Report, the information in the Appraisal and the Market Feasibility Study accepts SMG’s conclusion. VI. RISK ANALYSIS

The Guarantee Program has been requested to provide a 100% guarantee of the construction phase and participate in a shared (50-50, first dollar, pari passu) risk arrangement on the permanent phase. The latter will commence when HUD/FHA proffers its endorsement on the mortgage loan (expected to occur at construction completion and issuance of a final certificate of occupancy). In summary, TPI believes that the risks of this transaction are acceptable.

Based upon the Mortgagee's (Florida Housing's) application and related information submitted by it or on it's behalf, TPI's analysis has identified the following risk characteristics of this transaction.

Construction Loan Period The risks to the Guarantee Program during the construction phase are that the Project

will not be completed on time, within budget and according to plans and specifications, or that capitalized interest will be insufficient to carry the interest payments due on the Project’s mortgage through a protracted rent-up period. A 100% Payment and Performance Bond (which assures completion and specific performance) is required by the Guarantee Program in addition to the industry standard retainage. The General Contractor will be expected to conform to Florida Housing's loan underwriting standards consistent with those employed by Florida Housing and SMG.

The proposed Low Income Housing Tax Credit (the “Housing Credits”) pay-in schedule (which provides that payments may be made at one or more intervals from loan closing through construction completion and stabilization) could contribute, directly or indirectly, to a default in the guaranteed mortgage loan during the construction period. TPI recommends that all amounts necessary to complete construction be deposited with the Bond Trustee at closing or evidence be obtained at closing that 100% of such amounts are on deposit, or immediately available, with the entity providing Housing Credit payments.

A successful initial rent-up, as is the norm, represents a substantial risk in any rental project. In order to mitigate this risk, the Guarantee Program is requiring the Developer (Mortgagor) to provide a Net Operating Income Deficit Guarantee until stabilized occupancy has been achieved. The most likely scenario is that the Project would generate some cash flow and the developer would provide cash pursuant to the aforementioned deficit guarantee. As a last resort, the Guarantee Program would be able to make payments sufficient to cover the shortfall. The latter would also be a prudent course of action, since it is in the best interest of the Guarantee Program to nurture the project to the point it qualifies as eligible for HUD’s endorsement. If the guarantees, acceptable to the Guarantee Program, referred to above, are present, TPI is of the opinion that the likelihood of the occurrence of a default of


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this nature is minimal. The financially significant principals in this transaction, Stuart I. Meyers, Jorge Lopez, Leon J. Wolfe and Mara S. Mades as well as the other entities providing Guarantees, demonstrate the liquidity necessary to support the required Construction Completion and Net Operating Deficit Guarantees according to SMG. However, the Cornerstone entities in this transaction, and Messrs. Lopez, Meyers and Wolfe and Ms. Mades are being required to execute a liquidity maintenance agreement requiring minimum liquid balances of $4.5 million in support of the required Construction Completion and Net Operating Deficit Guarantees, of which Messrs. Lopez, Meyers and Wolfe and Ms. Mades are to be required to maintain a minimum liquidity of $3.0 million. SMG is requiring quarterly evidence of this minimum liquidity until project stabilization.

Permanent Loan Period

The permanent loan phase will be characterized by, among other things, the presence

of a first dollar loss risk-sharing partner, HUD/FHA. Thus, in the event of a mortgage default during the permanent loan phase, the net loss will be shared equally between HUD and Florida Housing (supported by payment from the Guarantee Program). This structure diminishes the financial risk to the Guarantee Program.

The Mortgagor's (Cornerstone) controlled entities (Alliance Construction, Inc. (the Project’s general contractor) and Cornerstone Residential Management, Inc. (the Project’s property manager)) abilities to maintain the projected rent/income levels and contain costs, over time, will be a significant predictor of the potential for a claim pursuant to the Guarantee Program's policy. The proposed management company has adequate experience as managers of affordable multifamily rental projects. Cornerstone Residential Management, Inc. is a Florida Housing Finance Corporation approved property management company.

The premium proposed to be charged for both the construction (.65% per annum) and permanent (.50% per annum) phases of this transaction fairly compensates the Guarantee Program for undertaking each risk. VII. SCOPE OF ANALYSIS

TPI has solely relied on the following documents and information, as supplied to it by the Mortgagee or its agent(s), or by the Mortgagor at the direction of the Mortgagee, in the preparation of this Report:

SMG’s Final Report, and Recommendations dated July 18, 2003 the Appraisal dated, October 31, 2002, and updated on May 16, 2003,

prepared by Realvest Appraisal Services, Inc. Consultech’s Plan and Cost Review (# 22575), dated December 23, 2002, and

the Market Feasibility Study, dated October 28, 2002, prepared by Realvest Appraisal Services, Inc.

TPI has not received, and, thus, not had the benefit of information contained in the following documents or provided from the following sources:

Mortgagee Loan Commitment


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Loan Documents: Loan Agreement between Mortgagee and Mortgagor; the Mortgage; the Construction Loan Agreement; the Assignment of Leases; the Note; the Intercreditor Agreement; the Land Use Restriction Agreement

HUD/FHA Firm Approval Letter Information regarding the terms (interest rate) of the bonds to be issued;

this impacts debt service and financial performance calculations the construction contract

VIII. ADDITIONAL CONDITIONS TO THE GUARANTEE PROGRAM'S STANDARD

COMMITMENT TO GUARANTEE AND CERTIFICATE OF GUARANTEE

TIBOR PARTNERS, Inc. recommends that the Commitment and Certificate issued to the Mortgagee contain the following additional terms and conditions which shall be satisfied prior to the time the guarantee is to become effective: 1. Certification by the Mortgagee that the Borrower has complied with the terms and

conditions of the Mortgagee’s Loan Commitment. Any amendments or modifications thereto require the prior approval of the Guarantee Program.

2. Furnishing, in a form acceptable to the Guarantee Program and TPI, the information

which TPI has not been furnished, as is detailed in Section VII of this Report. 3. Certification by the Mortgagee that each of the Conditions and other requirements

contained in the SMG Final Report, dated July 18, 2003, and the Consultech Plan and Cost Review (#22575), December 23, 2002, have been complied with and/or completed.

4. Approval by the Guarantee Program of the mortgage, note, and all other loan

documents related to this transaction. 5. Approval of the agreement between Florida Housing and the Servicer. The selection of

the Servicer shall be subject to approval by the Guarantee Program. 6. The maximum guarantee of the (i) construction loan shall be 100% of an amount not to

exceed $16,210,000, and (ii) permanent loan shall be 50% of the original principal balance of the mortgage loan currently estimated to be $8,105,000, as of the date the guarantee becomes effective.

7. Submission of a management plan for the Project, and a management contract, each

of which shall be acceptable to the Guarantee Program. The management company’s acceptability is contingent upon its continuing designation as a Florida Housing Finance Corporation approved management company.

8. In the event that the guarantee does not become effective prior to December 31, 2003,

this guarantee commitment shall automatically expire.

9. Payment of all fees and premiums due to the Guarantee Program.


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10. Receipt of a copy of each fully executed Loan Document (as that term is defined in the LOAN AGREEMENT; Article I, Definition of Terms), as approved by the Guarantee Program.

11. Certification by the Mortgagee that the Borrower has complied with the terms and

conditions contained in each Loan Document. 12. Provision by the Borrower of a Net Operating Income Deficit Guarantee with an

expiration date not earlier than six (6) months after the date the Mortgagee certifies to the Guarantee Program that the Project has achieved (a) stabilized occupancy for six (6) continuous months, (b) a revenue achievement level of $2,094,886 (annualized), (c) an occupancy level of at least 90%, (d) a ratio of net operating income to debt service of at least 1.15:1.0 and (e) has made all monthly mortgage and escrow payments as required by the Loan documents on a timely basis.

13. Executed copies of the Mortgagee’s Mortgage and Note in form and substance

satisfactory to the Guarantee Program, securing the Guaranteed Mortgage Loan currently estimated to be $16,210,000, and (ii) permanent loan shall be 50% of the original principal balance of the mortgage loan currently estimated to be $8,105,000. Such Mortgage shall provide for payments of interest only for the initial eighteen (18) months of the term of the mortgage loan.

14. Opinion(s) of counsel(s) to the Borrower addressed to the Guarantee Program to the

effect that (a) the Mortgage and each Loan Document executed by the Borrower have been duly executed and delivered by the Borrower and constitute legal, valid and binding obligations of the Borrower enforceable in accordance with their terms, and (b) such other matters as the Guarantee Program may reasonably request.

15. An executed copy of any document or agreement, as approved by the Guarantee

Program, which modifies the Loan Commitment or any Loan Document.

16. Final plans and specifications for all improvements to be constructed and acquired in connection with the Project, together with necessary approvals from city, state and federal governmental jurisdictions as may be required to construct the Project. All recommendations contained in the Consultech Plan and Cost Review (#22575) Report, dated December 23, 2002, and or any revisions thereof, shall be satisfied.

17. Construction related insurance coverage including, but not limited to, builders' risk

insurance.

18. A certificate from the Borrower to the Mortgagee to the effect that, at the Closing of the Construction Mortgage Loan, the Borrower is not then in default under any Loan Document or Agreement. This certification shall also specifically include any and all Florida Housing Guarantee Program Guaranteed Loans.

19. A certificate from the Borrower that all regulatory approvals necessary to commence

construction of the Project have been obtained.


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20. Executed copies of the Payment and the Completion Costs Guarantee, including a 100% Payment and Performance Bond, each approved as to form and substance by the Guarantee Program, and based upon those costs found acceptable to SMG (supported by Consultech Plan and Cost Review (# 22575), dated December 23, 2002), and or any revisions thereof. SMG shall certify that the costs are within the costs to be financed by the first mortgage.

21. Project construction shall be monitored by a consulting professional engineer or architect (the construction monitor) retained by the Mortgagee and approved by the Guarantee Program, the cost of which shall be borne by the Developer.

22. The Developer’s Note as well as any other project related debt (if any) as listed in the

Sources and Uses of Funds Schedule provided by the Mortgagee, shall be fully subordinated to the Guaranteed Mortgage. Guarantee Program approval of the terms of any project related debt is required prior to closing as listed in the Sources and Uses of Funds Schedule.

23. The Mortgagee shall be required to approve and sign off on all construction draw-downs and any change order in excess of $25,000, or on each subsequent change order when the aggregate of change orders exceed an amount equal to $50,000. Mortgagee shall exercise the same degree of care to protect the interests of the Guarantee Program as Mortgagee uses for the protection of its Construction Mortgage Loan to the Borrower.

24. During the construction period, the Developer shall be required to provide statements of request for construction draw-downs to the Mortgagee, which shall be paid subsequent to approval by the construction monitor.

25. The required operating and construction completion guarantees shall be (a) effective at

closing, (b) subject to the approval of SMG as to form, substance and acceptability, and (c) subject to the Guarantee Program finding said guarantees to be acceptable. This Condition is understood to require the credit underwriter’s approval of an acceptable detailed schedule of all contingent liabilities of the guarantors. Said schedule and approval to be filed with the Guarantee Program prior to closing.

26. All Housing Credits amounts necessary to complete construction be deposited with the

Bond Trustee at closing, or evidence be obtained at closing that 100% of such amounts are on deposit, or immediately available, with the entity providing Housing Credit payments.

27. The public purpose options selected by the Developer, and effective at the closing of

the mortgage loan to be guaranteed, for this Project shall remain in effect for as long as this Mortgage Loan continues to be guaranteed by the Guarantee Program.

IX. RECOMMENDATION


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Based upon TPI's review of the proposed transaction, we believe that this housing is eligible under the Mortgagee’s Guarantee Program enabling legislation. TIBOR PARTNERS, Inc. recommends that, subject to these Additional Conditions, the Guarantee Program accept the described mortgage loan as suitable for mortgage guarantee. Attachment: The following Exhibit is attached hereto and made a part here: A -SMG’s Final Report dated July 18, 2003

Florida Housing Finance Corporation

Final Review Report

Bristol Bay Apartments 2002-045B

Section A Board Summary

Section B Loan Commitment Conditions

Section C Supporting Information and Schedules

Prepared by

Seltzer Management Group, Inc.

Final Report

July 18, 2003

MULTIFAMILY MORTGAGE REVENUE BOND FINAL REVIEW REPORT SMG

BRISTOL BAY APARTMENTS i

JULY 18, 2003

FINAL REVIEW CHECKLIST

DEVELOPMENT NAME: Bristol Bay

DATE: July 18, 2003

In accordance with applicable Program Rule(s), Applicant is required to submit the information required to evaluate, complete, and determine its sufficiency in satisfying the requirements for Credit Underwriting to the Credit Underwriter in accordance with the schedule established by Florida Housing Finance Corporation (“Florida Housing” or “FHFC”). The following items must be satisfactorily addressed. “Satisfactorily” means that the Credit Underwriter has received assurances from third parties unrelated to the Applicant that the transaction can close within the allowed time frame. Unsatisfactory items, if any, are noted below and in the “Issues and Concerns” section of the Executive Summary.

STATUS NOTE FINAL REVIEW

REQUIRED ITEMS: Satis. / Unsatis.

1. The development’s final “as submitted for permitting” plans and specifications.

Note: Final “signed, sealed, and approved for construction” plans and specifications will be required thirty days before closing.

Satis.

2. Final site plan and status of site plan approval. Satis.

3. Permit Status. Satis.

4. Pre-construction analysis (“PCA”). Satis.

5. Survey. Satis.

6. Complete, thorough soil test reports. Satis.

7. Full or self-contained appraisal as defined by the Uniform Standards of Professional Appraisal Practice.

Satis.

8. Market Study separate from the Appraisal. Satis.

9. Environmental Site Assessment - Phase I and/or Phase II if applicable (If Phase I and/or II disclosed environmental problems requiring remediation, a plan, including time frame and cost, for the remediation is required). If the report is not dated within one year of the application date, an update from the assessor must be provided indicating the current environmental status.

Satis.


BRISTOL BAY APARTMENTS ii

JULY 18, 2003

FINAL REVIEW

REQUIRED ITEMS:

STATUS NOTE

10. Audited financial statements for the most recent fiscal year ended or acceptable alternative as stated in Rule for credit enhancers applicant, general partner, principals and general contractor.

Satis.

11. Resumes and experience of applicant, general contractor and management agent.

12. Credit authorizations; verifications of deposits and mortgage loans.

Satis.

13. Management Agreement and Management Plan. Satis.

14. Firm commitment from the credit enhancer or private placement purchaser, if any.

Satis.

15. Firm commitment letter from the syndicator, if any. Satis.

16. Firm commitment letter(s) for any other financing sources. Satis.

17. Updated sources and uses of funds. Satis.

18. Draft construction draw schedule showing sources of funds during each month of the construction and lease-up period.

Satis

19. Fifteen-year income, expense, and occupancy projection. Satis.

20. Executed general construction contract with “not to exceed” costs.

Satis.

21. Any additional items required by the credit underwriter. Satis. Revised 11/4/02

Notes and Applicant’s Responses:

None.


BRISTOL BAY APARTMENTS iii

JULY 18, 2003

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?

x

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?

x

Is the Development feasible with all amenities/features listed in the Application? x

Do the site plans/architectural drawings account for all amenities/features listed in the Application?

x

Does the Applicant have site control at or above the level indicated in the Application?

x

Does the Applicant have adequate zoning as indicated in the Application? x

Has the Development been evaluated for feasibility using the total length of set-aside committed to in the Application?

x

Have the Development costs remained equal to or less than those listed in the Application?

x

Is the Development feasible using the set-asides committed to in the Application?

x

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?

x

HOME ONLY: If points were given for match funds, is the match percentage the same as or greater than that indicated in the Application?

n/a

HC ONLY: Is the rate of syndication the same as or greater than that shown in the Application?

x

Is the Development in all other material respects the same as presented in the Application?

x 2

1. Bristol Bay Associates, Ltd. (“Applicant”) has Firm Commitments for financing not reflected in the Multifamily Mortgage Revenue Bond (“MMRB”) Application: a. Neighborhood Lending Partners, Inc. (“NLPI”), Tampa, FL, will provide a Second

Mortgage Loan in the amount of $359,000. NLPI’s Firm Commitment dated April 2, 2003, indicates $117,500 will come from Federal Community Development Financial


BRISTOL BAY APARTMENTS iv

JULY 18, 2003

Institution (“CDFI”) funding and $241,450 will come from Hillsborough County State Housing Initiatives Partnership (“SHIP”) matching funds.

b. Hillsborough County will make a SHIP Loan directly to Applicant in the amount of $391,000, contingent upon Applicant securing funding from FHFC. Hillsborough County will collateralize the SHIP Loan with a Third Mortgage.

2. The following changes have taken place since submission of the MMRB Application. a. Unit Mix:

The MMRB Application reflected a Unit Mix of 76 one-bedroom, 124 two-bedroom and 100 three-bedroom apartments. Applicant has revised the Unit Mix to be 72 one-bedroom, 132 two-bedroom and 96 three-bedroom apartments. The total number of units at 300 has not changed.

b. Limited Partners: One page in the MMRB Application lists Stuart I. Meyers Family Partnership Ltd., Jorge Lopez, Leon J. Wolfe and Mara S. Mades as the (current) Limited Partners. Another page lists J.L. Holding Corp. (49.995%), Meyers Family (29.997%), M3, Inc. (9.999%), and MSM, Inc. (9.999%). The latter page is the correct list of (current) Limited Partners. These entities are owned/controlled by the Principals, Mr. Lopez, Stuart I. Meyers, Leon J. Wolfe and Mara S. Mades.

SMG does not consider the changes from the MMRB Application to be material. They have no impact on Seltzer’s recommendations.

SMG

JULY 18, 2003

Section A

Board Summary


BRISTOL BAY APARTMENTS PAGE A-1

JULY 18, 2003

Executive Summary This is a Seltzer Management Group, Inc. (“Seltzer” or “SMG”) Multifamily Mortgage Revenue Bond (“MMRB”) and Low Income Housing Tax Credits (“HC”) Final Review Report for Bristol Bay, a proposed new construction development to be located at 1241 S. 50th Street in unincorporated Tampa, Hillsborough County, FL 33619. The development will consist of 300 units in 15 residential buildings plus three accessory buildings (Clubhouse, Maintenance Building and Gatehouse). The Building Plans currently reflect 632 parking spaces in accordance with Local Code, including 20 handicapped spaces. Based upon demographic and market analysis including existing and proposed developments, the Appraiser anticipates Bristol Bay to be absorbed as an Affordable Property at a rate of 25 units per month beginning the month the first Certificate of Occupancy (“C/O”) is expected (generally month seven or eight). SMG concurs. The Construction Contract runs for thirteen months. Stabilization is anticipated to occur approximately eleven months following issuance of the first C/O in the seventh month per the Construction Contract Progress Schedule. For purposes of this Credit Underwriting, SMG utilizes an eighteen-month construction/stabilization period in its Capitalized Interest analysis (see Exhibit 1).

Ownership Structure: Bristol Bay Associates, Ltd. (“Applicant”), is a Florida Limited Partnership formed to own and operate Bristol Bay Apartments. The General Partner of Applicant (with a 0.01% ownership interest) is Cornerstone Bristol Bay, L.L.C. (“Cornerstone Bristol Bay”), a Florida Limited Liability Company. The members of Cornerstone Bristol Bay are JL Holding Corp. (“JL Holding”), a Florida Corporation controlled by Jorge Lopez (50%), Stuart I. Meyers Family Partnership, Ltd. (“Meyers Family”), a Florida Limited Partnership controlled by Stuart I. Meyers (30%), M3, Inc., a Florida Corporation controlled by Leon J. Wolfe (10%) and MSM, Inc., a Florida Corporation controlled by Mara S. Mades (10%). The Limited Partners of Applicant totaling a 99.99% ownership interest are Meyers Family at 29.997% (Mr. Meyers), JL Holding at 49.995% (Mr. Lopez), M3 at 9.999% (Mr. Wolfe) and MSM at 9.999% (Ms. Mades). Lend Lease Real Estate Investments Limited Partnership, (“LLREI”), Boston, MA, or an affiliate will be the Equity Investor (Syndicator) of the HC and become the 99.99% Limited Partner at, or prior to MMRB Loan closing. The Developer is Cornerstone Group Development, L.L.C., Coral Gables, FL. The General Contractor is Alliance Construction, L.L.C. (“Alliance”), and the Property Manager is Cornerstone Residential Management, L.L.C. They are related companies, and all are owned 50% by JL Holding (Mr. Lopez), 30% by SIM Interests, Inc. (Mr. Meyers), 10% by M3 (Mr. Wolfe), and 10% by MSM (Ms. Mades).

MMRB Loan: Applicant originally applied for a $16,300,000 MMRB Loan to be issued by Florida Housing Finance Corporation (“Florida Housing” or “FHFC”) for the construction and permanent financing of Bristol Bay. Applicant’s revised request is for a MMRB Loan totaling $16,210,000, all of which is Tax-Exempt. A Debt Service Reserve (“DSR”), currently estimated by SMG at $525,000 will



JULY 18, 2003

be secured by Surety Bond rather than cash funded. The Net MMRB Loan is therefore $16,210,000. Inasmuch as the interest rate of the MMRB Loan cannot be accurately determined until the Bond Purchase closes, SMG is underwriting Bristol Bay by determining its anticipated Net Operating Income (“NOI”). Based upon a projected NOI of $1,204,768, SMG has calculated the supportable MMRB Loan amount for various amortization periods and “all-in” interest rates. This information is presented in the format of a table attached to this Credit Underwriting Report as Exhibit 2. The proposed development can support an MMRB First Mortgage Loan in the amount of $16,210,000 at a tax-exempt interest rate not to exceed 5.832%. Terms and conditions of the MMRB Loan include a 41.5-year term (an eighteen-month construction/stabilization phase followed by a 40-year permanent/amortization period) which meets FHFC underwriting guidelines, a fixed interest rate and a Debt Service Coverage (“DSC”) ratio of not less than 1.15 to 1.00, including scheduled MMRB Loan principal and interest payments, United States Department of Housing and Urban Development (“HUD”), Issuer and Bond Trustee fees, plus Permanent Servicing, Compliance Monitoring and Financial Monitoring fees. The Base Rate for the Tax-Exempt Bonds is currently estimated to be 4.900%. Guaranteed Investment Contract (“GIC”) earnings on un-disbursed MMRB funds will accrue at an estimated rate of 1.25%. It is important to note, however, that interest rates will not be fixed until the Tax-Exempt Bonds are priced, at or near the MMRB Loan closing date. The MMRB Loan will be secured by a First Mortgage on Bristol Bay and a First Security Interest in all Personalty of the subject development. Based upon Applicant’s prepayment of $60,000 (one-half the required Replacement Reserves for Years One and Two), Replacement Reserves of $100 per unit per year will be paid from Operations for Years One and Two, followed by $200 per unit per year thereafter. An inflation factor based upon the Consumer Price Index will be applied to the Replacement Reserve deposit beginning in Year Seven, unless waived or reduced in the event Obligor provides a Physical Needs Study prepared by an independent third party acceptable to the Florida Housing Affordable Housing Guarantee Program (“Guarantee Program”) that evidences an increase in the deposit is excessive or unnecessary. Monthly deposits to an Escrow for Property Taxes and Insurance are also required. Based upon an anticipated NOI of $1,204,768, the subject development can support the recommended MMRB First Mortgage Loan of $16,210,000 at a 1.15 DSC ratio so long as annual Debt Service does not exceed $1,047,624. If the interest rate on the Tax Exempt Bonds is greater than 5.832%, the MMRB Loan will have to be reduced so that annual Debt Service does not exceed $1,047,624. If the MMRB Loan is reduced, Applicant will have to fund any shortfall with an increase to Deferred Developer Fees, the deferral of General Contractor Fees and/or an injection of Developer Cash (Equity). The current “all-in” tax-exempt interest rate of 6.000% for the permanent/amortization period is 0.168% higher than the 5.832% maximum interest rate at which the subject development can support the recommended MMRB Loan of $16,210,000. If interest rates at the time of MMRB Loan closing mirror current rates, the MMRB Loan would have to be reduced by $340,000 (to $15,870,000) in order to achieve a DSC of 1.15 at an NOI of $1,204,768.

Credit Enhancement and MMRB Structure:



JULY 18, 2003

Applicant has applied for Credit Enhancement from the Guarantee Program in combination with HUD Risk Sharing. The MMRB First Mortgage Loan is anticipated to have a term up to 41.5 years (a 40-year permanent/amortization period following a construction/stabilization period of eighteen months). Credit Enhancement Fees include a Guarantee Program Fee of 0.500% and a HUD Risk Sharing fee of 0.250%. In addition, there is an Issuer Fee of 0.350% that includes a Bond Trustee Fee and Loan Servicing Fees (Permanent Servicing, Compliance Monitoring and Financial Monitoring). An Insurance Wrap Fee equivalent to 0.40% of total principal and interest payments over the 41.5-year life of the Tax-Exempt Bonds must be funded at MMRB Loan closing. This Credit Enhancement Structure is expected to impart an “AAA” bond rating. The Guarantee Program in combination with HUD Risk Sharing requires a DSR of six months Debt Service, currently estimated by SMG at $525,000. The DSR Requirement can be met through funding at MMRB Loan closing, with the account to be administered by the Bond Trustee. Alternatively, the Applicant can post a Surety Bond for $525,000, in form and substance acceptable to FHFC. Seltzer’s analysis reflects Applicant’s choice of a Surety Bond.

HC Equity:

Applicant has applied to FHFC for 4% HC. Applicant provided SMG with a copy of a November 20, 2002, Syndication Letter from LLREI that is valid through December 31, 2003. LLREI, or an affiliate, will become the 99.99% Limited Partner concurrent with or prior to MMRB Loan closing. With $7,461,974 of Syndicated HC and a Syndication Rate of $0.820, the Limited Partnership anticipates a Net Equity Contribution of $6,119,000. Of this amount, $3,059,500 will be advanced upon admission to the Limited Partnership, satisfying Florida Housing’s requirement for a minimum 50% of the HC Equity required ($4,125,108, assuming the deferral of all available Developer Fees) to complete construction be funded by MMRB Loan Closing. Subsequent installments during construction include $1,070,825 at the later of six months or 50% completion and $1,070,825 at the later of twelve months or 75% completion. Total HC available during construction is $5,201,150. The remaining installments will be $475,000 at Construction Completion, $136,900 at the later of Final Closing or HC determination and $305,950 at the later of Permanent Loan Conversion, achievement of a 1.12 DSC for six consecutive months or issuance of Form(s) 8609. Seltzer’s recommendations are contingent upon closing of the HC purchase consistent with the terms of this Credit Underwriting Report.

Other Financing Sources:

Additional Source of Funds for the subject development include a Second Mortgage Community Development Financial Institution (“CDFI”)/State Housing Initiatives Partnership (“SHIP”) Loan, a Third Mortgage SHIP Loan and Deferred Developer Fees. Neighborhood Lending Partners, Inc. (“NLPI”), Tampa, FL, will provide a Second Mortgage Loan to Applicant in the amount of $359,000 per a Firm Commitment dated April 2, 2003. $117,500 comes from Federal CDFI funds through NLPI, and $241,500 comes from Hillsborough County SHIP funds. The NLPI Loan term will be 31.5 years, with interest at 2.000% during the construction/stabilization phase estimated to be eighteen months and 1.500% during the 30-year permanent period. All principal and accrued interest will be due and payable at maturity, 30 years following Permanent Loan Conversion. NLPI will secure the loan with a Second Mortgage on Bristol Bay.



JULY 18, 2003

Hillsborough County will make a SHIP Loan of $391,000 direct to Applicant per an April 7, 2003 Commitment. The Loan Term is 30 years, with repayment based upon 0.00% interest (only) for Years 1-5, 1.00% interest (only) for Years 6-10 and 1.00% interest plus (amortizing) principal for years 11-30. The Office of County Administrator confirmed Hillsborough County would be taking a Third Mortgage to collateralize the SHIP Loan. Applicant states it has a standing relationship with BankUnited, Coral Gables, FL, to provide Letters of Credit (“LOC’s”) to cover any Hard Cost Contingency. Seltzer’s Credit Underwriting assumes any such Hard Cost Contingency is secured by a LOC. During the construction/stabilization phase, Developer Fees of $2,097,993 must be deferred to Balance the Sources and Uses of Funds after receipt of all MMRB, CDFI/SHIP and SHIP Loan proceeds plus HC Equity. During the permanent/amortization period, $1,180,143 of Developer Fees must be deferred.

Additional Information: 1. Potential Loan Reduction: Based upon recent MMRB Loan closings, the current “all in”

Tax-Exempt Interest Rate is greater than the 5.832% maximum “all in” interest rate at which the subject development can provide the required 1.15 to 1.00 DSC ratio with an MMRB First Mortgage Loan of $16,210,000. At the current “all in” Tax-Exempt Interest Rate of 6.000%, the recommended MMRB Loan would have to be reduced by $340,000 (to $15,870,000). Any reduction of the MMRB Loan would have to be offset by the deferral of additional Developer Fees, the deferral of General Contractor Fees or the injection of Developer Cash (Equity). This recommendation is contingent upon FHFC or the Bond Trustee holding or controlling funds at all times throughout the construction phase sufficient to complete construction of the subject development.

2. South Central Tampa Sub-Market: Bristol Bay’s development site of 27.071 acres is Iocated on South 50th Street, a moderately traveled roadway in unincorporated Hillsborough County. Exposure is considered average with access via a single entrance/exit on South 50th Street. The neighborhood is light industrial/heavy commercial, influenced by the Port of Tampa. Tenants will have a wide variety of employment and shopping opportunities within a reasonably short commute. The Appraiser considers the local economy to be well balanced and predicts sustainable levels of growth and expansion into the foreseeable future. Based upon its November 11, 2002, Site Inspection, SMG concluded Cypress Trace, Windermere I and Windermere II to be the most relevant of the Appraiser’s seven Affordable Property comparables. Cypress Trace is a Cornerstone property of 348 units. Windermere I and Windermere II are Wilson properties containing a total of 604 units. Seltzer surveyed six of the Appraiser’s Affordable Property comparables during its November 11, 2002 Site Inspection, determining an average Occupancy of . All were obtaining Maximum HC Rents with minimal rental concessions. Average Occupancy for four Affordable Properties (including the Cypress Trace and Windermere developments) reflected on Seltzer’s Exhibit 3 is 95.5%. In a May 16, 2003, update of its October 31, 2002, Appraisal, the Appraiser concluded the subject development would obtain maximum Year 2003 HC Rents with Stabilized Occupancy at 95.0% (not including a 1.0% Collection Loss). SMG concurs.



JULY 18, 2003

3. Net Operating Income Assumptions: Based upon operating data from comparable properties, third-party reports (Appraisal and Market Study) and the Credit Underwriter’s independent Due Diligence, SMG represents that, in its professional opinion, estimates for Rental Income, Vacancy, Other Income and Operating Expenses fall within a band of reasonableness. For purposes of this analysis, Seltzer’s estimates of Total Effective Gross Revenue and Operating Expenses are $33,840 less than, and $50,808 greater than, respectively, those utilized by the Appraiser in determining the Investment Value of the subject development under “Restricted Rents and Favorable Financing”.

4. Extraordinary Development Costs: Costs of $164,797 associated with Off-Site Improvements for a lift station are included in the April 30, 2003, Construction Contract with Alliance, however the Construction Contract Schedule of Values does not detail the costs specific to the Off-Site Improvements. Applicant provided a copy of a subcontractor proposal. Seltzer’s recommendations are contingent upon receipt and satisfactory review of the proposal by Consultech & Associates, Inc. (“Consultech”), Tampa, FL, prior to MMRB Loan closing.

5. Land Acquisition Costs: A 39.219-acre parcel of land was purchased December 28, 2001, for $1,100,000, which is reflected in Applicant’s Sources & Uses of Funds. However, the Bristol Bay development site is only 27.071 acres. Applicant is under contract to transfer the remaining 12.148 acres to Landings Associates, Ltd. (“Landings”), a related entity of the Developer, Cornerstone Group Development, L.L.C., for later development. Land Acquisition Costs included in the development budget are limited to the Lesser of Cost or Market for property held less than two years. SMG therefore allocates the $1,100,000 between the two developments based upon relative acreages. The Off-Site costs of $164,797 reflected in Bristol Bay’s Development Budget are required for the development of Landings as well as Bristol Bay. SMG allocates this cost between the two developments based upon relative acreages. SMG therefore allocates a total of $1,264,797 (Land Purchase Price of $1,100,000 plus Off-Site costs of $164,797). The allocated figures for Bristol Bay and the Landings are $873,029 and $391,768 , respectively. With the entire $164,797 in Off-Site costs included in Bristol Bay’s Development Budget, allowable Land Purchase Costs are limited to $708,232 (total allocated costs of $873,029 less Off-Site costs of $164,797). SMG reflects $391,768, the difference between the $1,100,000 Purchase Price for the full 39.219-acre parcel and the $708,232 allocated to the 27.071-acre Bristol Bay development site, as a sub-set of Developer Fees.

6. Land Carry: Applicant incurred $64,350 in carrying costs (“Land Carry) on the purchase of the Development Site prior to MMRB Loan closing. SMG pro rates Land Carry based upon relative acreage of the two parcels. That portion of the Land Carry attributable to Bristol Bay is $44,418. SMG reclassifies $19,932 of Land Carry attributable to The Landings as a subset of Developer Fees.

7. Liquidity Guarantees: SMG recommends that FHFC obtain Construction Completion and Operating Deficit Guarantees (collectively the “Guarantees”) from Applicant, Cornerstone Bristol Bay, Cornerstone Group Development, L.L.C., and Cornerstone Group Development Corp., along with Stuart I. Meyers, Jorge Lopez, Leon J. Wolfe and Mara S. Mades, personally (collectively the “Guarantors”).



JULY 18, 2003

Based upon its review of Personal Financial Statements and Schedules of Contingent Liabilities, SMG concludes that the above referenced Guarantors, have sufficient Net Worth for the purpose of collateralizing the Guarantees by executing a Liquidity Maintenance Agreement. Seltzer’s recommendation is contingent upon: (i) confirmation two weeks prior to FHFC Mortgage Loan Closing of at least $4.5 million in combined liquidity for the Guarantors; however, Mr. Meyers, Mr. Lopez, Mr. Wolfe and Ms. Mades, individually, shall maintain no less than $3 million of the minimum $4.5 million liquidity requirement at all times and (ii) the Guarantors enter into a Liquidity Maintenance Agreement with FHFC. Terms of the Liquidity Maintenance Agreement must include, but are not limited to requirements for the Guarantors to: (i) continuously maintain liquid balances of not less than $4.5 million until the Guarantees have been released, (ii) certify that the minimum $4.5 million in liquid balances have been continuously maintained and (iii) provide evidence of such liquid balances to the Loan Servicer on a quarterly basis. The Liquidity Maintenance Agreement must also contain a clause such that if not cured within a timely manner, failure to maintain the required balances is an event of MMRB Loan default.

Issues and Concerns:

None.

Recommendations:

1. SMG recommends a MMRB First Mortgage Loan of $16,210,000, consisting entirely of Tax-Exempt Bonds, for the construction and permanent financing of the subject development. If, at the time of MMRB Loan closing, the tax-exempt interest rate is higher than 5.832%, the MMRB Loan will have to be reduced such that annual Debt Service does not exceed $1,047,624. If the MMRB Loan is reduced, Applicant will have to fund any shortfall with an increase to Deferred Developer Fees, the deferral of General Contractor Fees and/or an injection of Developer Cash (Equity). When utilizing a 1.000 to 1 DSC ratio required by the State Board of Administration in their Fiscal Sufficiency Determination, the not-to-exceed Bond Amount is $18,245,000. However, the maximum tax-exempt amount is limited to Applicant’s original request of $16,300,000 in the 2002 MMRB Application.

2. SMG recommends an annual HC allocation up to $766,325 be awarded to Bristol Bay based upon Qualified Basis.

Seltzer’s recommendations are based upon the assumptions detailed in this Credit Underwriting Report and subject to the MMRB Loan Conditions and Housing Credit Allocation Recommendation outlined in Section B.



JULY 18, 2003

Prepared by: Reviewed by:

John A. Elsasser Benjamin S. Johnson Credit Underwriter President



JULY 18, 2003

Bristol Bay Multifamily Mortgage Revenue Bond Program Recommendation:

MMRB Loan Requested: $16,210,000 Tax-Exempt Bonds: $16,210,000 Debt Service Reserve $525,000*

MMRB Loan Recommendation: $16,210,000 * The Debt Service Reserve will be secured by a Surety Bond rather than cash funded

Housing Credit Recommendation: $766,325

Development Type Set Asides Set Aside Term New Construction

Demographic Commitment

Large Family

85% at 60% of AMI (MMRB)

100% at 60% of AMI (HC)

50 Years (MMRB and HC)

Mortgagor Principals Developer Bristol Bay Associates, Ltd. Jorge Lopez, Stuart I.

Meyers, Leon J. Wolfe and Mara S. Mades

Cornerstone Group Development, L.L.C.

Credit Enhancer Syndicator HC Syndication Rate FHFC Guarantee Program

Lend Lease Real Estate

Investments Limited Partnership or Affiliate

$0.820 per dollar of HC

Site Area Density Zoning 27.071 acres 11.08 units per gross acre PD-MU (02-0301)

300 units allowed



JULY 18, 2003

Net Operating Income Appraised Value Total Development Cost $1,204,768

$18,935,000

“Restricted Rents and Favorable Financing”

$19,230,000 “Market Rents and Market

Financing”

$24,259,143



JULY 18, 2003

Rent Roll

MSA/County: Tampa-St. Petersburg-Clearwater MSA/Hillsborough

Sources of Funds

Ratios Loan To Value1 Debt Service Coverage1 Total Cost Per Unit

85.609% “Restricted Rents and Favorable Financing”

84.295% “Market Rents and Market Financing”

1.150 based upon a maximum “all in” interest rate

of 5.832%

$80,864

Loan To Cost1 Loan Per Unit1 FHFC Assistance Per Unit2 66.82% $54,033 $54,033

HC Allocation Per Unit

$2,554 1Based upon the MMRB First Mortgage Loan recommended 2Excludes HC syndication Proceeds (since HC direct from U.S. Treasury)

Source Lender ApplicationRevised

Applicant UnderwriterInterest

RateAmort. Yrs.

Term Yrs.

Annual Debt Service

Tax-Exempt Bonds FHFC $16,300,000 $16,210,000 $16,210,000 5.832% 40 41.5 $1,047,624Second Mortgage CDFI/SHIP Loan NLPI $0 $359,000 $359,000 1.500% n/a 31.5 $0Third Mortgage SHIP Loan Hillsborough County $0 $391,000 $391,000 0.000% n/a 30.0 $0Housing Credit Equity LLREI $6,056,000 $6,119,000 $6,119,000 n/a n/a n/a $0Deferred Developer Fee Cornerstone $1,928,241 $1,735,692 $1,180,143 n/a n/a n/a $0Total $24,284,241 $24,814,692 $24,259,143 $1,047,624

Bed-rooms Baths

No. of

Units

Unit Size (SF)

Median Income

%

Max Gross

HC Rents

Utility Allow-ance

Max Net HC Rents

Applicant Rents

Underwriter Rents

Annual Rents

1 1 72 700 60% $568 $43 $525 $525 $525 $453,6002 2 132 924 60% $682 $51 $631 $631 $631 $999,5043 2 96 1,155 60% $787 $67 $720 $720 $720 $829,440

Totals 300 283,248 $2,282,544



JULY 18, 2003

Construction Financing Sources

Notes to the Construction Period Financing Sources:

1. MMRB First Mortgage financing of $16,210,000 will have Credit Enhancement from the Guarantee Program in concert with HUD Risk Sharing. The MMRB Loan will require payments of interest only during the construction/stabilization phase estimated to be eighteen months. Construction Debt Service (which limits Qualified Basis) is based upon an “all in” Tax-Exempt Interest Rate of 5.732% and an average outstanding MMRB Loan balance of 57% during construction. Capitalized Interest included in the Development Budget is inclusive of this amount, but it also takes into account Debt Service during the stabilization period and GIC earnings generated on un-disbursed bond funds at an estimated rate of 1.25%.

2. NLPI will provide a Second Mortgage Loan to Applicant in the amount of $359,000 per a Firm Commitment dated April 2, 2003. $117,500 comes from Federal CDFI funds through NLPI, and $241,500 comes from Hillsborough County SHIP funds. The NLPI Loan term will be 31.5 years, with interest at 2.000% during the eighteen-month construction/stabilization phase. All principal and accrued interest will be due and payable 30 years following Permanent Loan Conversion. NLPI will secure the loan with a Second Mortgage on Bristol Bay.

3. Hillsborough County will make a Third Mortgage SHIP Loan of $391,000 direct to Applicant per an April 7, 2003 Commitment. The Loan Term is 30 years, with repayment based upon 0.00% interest (only) for Years 1-5, 1.00% interest (only) for Years 6-10 and 1.00% interest plus (amortizing) principal for years 11-30.

4. Applicant provided SMG with a copy of a November 20, 2002, Syndication Letter from LLREI, valid through December 31, 2003. LLREI, or an affiliate, will become the 99.99% Limited Partner concurrent with or prior to MMRB Loan closing. With $7,461,974 of Syndicated HC and a Syndication Rate of $0.820, the Limited Partnership anticipates a Net Equity Contribution of $6,119,000. Of this amount, $3,059,500 will be advanced upon admission to the Limited Partnership, satisfying Florida Housing’s requirement for a minimum 50% of the HC Equity required to complete construction ($4,125,108, assuming the deferral of all available Developer Fees) be funded by MMRB Loan Closing. Subsequent installments during construction include $1,070,825 at the later of six months or 50% completion and $1,070,825 at the later of twelve months or 75% completion. Total HC available during construction is $5,201,150. Seltzer’s recommendations are contingent upon closing of the HC purchase consistent with the terms of this Credit Underwriting Report.



RateConstruction Debt Service

Tax-Exempt Bonds FHFC $16,300,000 $16,210,000 $16,210,000 5.732% $573,785Second Mortgage CDFI/SHIP Loan NLPI $0 $359,000 $359,000 2.000% $0Third Mortgage SHIP Loan Hillsborough County $0 $391,000 $391,000 0.000% $0Housing Credit Equity LLREI $5,147,600 $5,201,150 $5,201,150 n/a $0Deferred Developer Fee Cornerstone $2,836,641 $2,749,174 $2,097,993 n/a $0Total $24,284,241 $24,910,324 $24,259,143 $573,785



JULY 18, 2003

5. Applicant states it has a standing relationship with BankUnited, Coral Gables, FL, to provide LOC’s to cover a Hard Cost Contingency. Seltzer’s Credit Underwriting assumes any such Hard Cost Contingency is secured by a LOC. Developer Fees of $2,097,993 must deferred during construction to balance the Sources & Uses of Funds after receipt of all available MMRB, CDFI/SHIP and SHIP Loan proceeds and HC Equity contributions.



JULY 18, 2003

Permanent Financing Sources

Notes to the Permanent Financing Sources:

1. MMRB First Mortgage financing will have Credit Enhancement through the Guarantee Program in concert with HUD Risk Sharing. Terms of the MMRB Loan include a term of 41.5 years (a 40-year permanent/amortization period following a construction/stabilization phase of eighteen months). The base rate for the Tax-Exempt Bonds is currently estimated to be 4.900%. Credit Enhancement Fees include a Guarantee Program Fee of 0.500% and a HUD Risk Sharing fee of 0.250%. In addition, there is an Issuer Fee of 0.350% that includes a Bond Trustee Fee and Loan Servicing Fees (Permanent Servicing, Compliance Monitoring and Financial Monitoring). An Insurance Wrap Fee equivalent to 0.40% of total principal and interest payments over the 41.5-year life of the Tax-Exempt Bonds must funded at MMRB Loan closing. This Credit Enhancement structure is expected to impart an “AAA” bond rating. A DSR projected to be $525,000 will be secured by Surety Bond rather than cash funded. Replacement Reserves of $200 per unit per year are normally required, however Applicant elected to prepay Replacement Reserves in the amount of $60,000 (one-half the required Replacement Reserves for Years One and Two). Replacement Reserves to be funded from Operations will be $100 per unit per year for Years One and Two, followed by $200 per unit per year thereafter. An inflation factor based upon the Consumer Price Index will be applied to the Replacement Reserve deposit beginning in Year Seven, unless waived or reduced in the event Obligor provides a Physical Needs Study prepared by an independent third party acceptable to the Guarantee Program that evidences an increase in the annual deposit is excessive or unnecessary. Monthly deposits to an Escrow for Property Taxes and Insurance are also required. Note: The current “all-in” tax-exempt interest rate of 6.000% is 0.168% higher than the 5.832% maximum interest rate at which the development can support the recommended MMRB Loan of $16,210,000. If interest rates at the time MMRB Loan closing mirror current rates, the MMRB Loan would have to be reduced by $340,000 (to $15,870,000) in order to achieve a DSC of 1.15 at an NOI of $1,204,768.

2. NLPI will provide a Second Mortgage Loan to Applicant in the amount of $359,000 per a Firm Commitment dated April 2, 2003. $117,500 comes from Federal CDFI funds through NLPI, and $241,500 comes from Hillsborough County SHIP funds. The NLPI Loan term will be 31.5 years, with interest at 2.000% during the eighteen-month construction/stabilization phase and 1.500% during the 30-year permanent period. All principal and accrued interest



RateAmort.

Yrs.Term Yrs.

Annual Debt Service

Tax-Exempt Bonds FHFC $16,300,000 $16,210,000 $16,210,000 5.832% 40 41.5 $1,047,624Second Mortgage CDFI/SHIP Loan NLPI $0 $359,000 $359,000 1.500% n/a 31.5 $0Third Mortgage SHIP Loan Hillsborough County $0 $391,000 $391,000 0.000% n/a 30.0 $0Housing Credit Equity LLREI $6,056,000 $6,119,000 $6,119,000 n/a n/a n/a $0Deferred Developer Fee Cornerstone $1,928,241 $1,735,692 $1,180,143 n/a n/a n/a $0Total $24,284,241 $24,814,692 $24,259,143 $1,047,624



JULY 18, 2003

will be due and payable 30 years following Permanent Loan Conversion. NLPI will secure the loan with a Second Mortgage on Bristol Bay.

3. Hillsborough County will make a Third Mortgage SHIP Loan of $391,000 direct to Applicant per an April 7, 2003 Commitment. The Loan Term is 30 years, with repayment based upon 0.00% interest (only) for Years 1-5, 1.00% interest (only) for Years 6-10 and 1.00% interest plus (amortizing) principal for years 11-30.

4. Per a November 20, 2002, Commitment Letter valid through December 31, 2003, LLREI will become the 99.99% Limited Partner concurrent with or prior to MMRB Loan closing. With $7,461,974 of Syndicated HC and a Syndication Rate of $0.820, the Limited Partnership anticipates a Net Equity Contribution of $6,119,000. Of this amount, $3,059,500 will be advanced upon admission to the Limited Partnership. Subsequent installments include $1,070,825 at the later of six months or 50% completion, $1,070,825 at the later of twelve months or 75% completion, $475,000 at Construction Completion, $136,900 at the later of Final Closing or HC determination and $305,950 at the later of Permanent Loan Conversion, achievement of a 1.12 DSC for six consecutive months or issuance of Form(s) 8609. Seltzer’s recommendations are contingent upon closing of the HC purchase consistent with the terms of this Credit Underwriting Report.

5. Deferred Developer Fees of $1,180,143 represents the amount that must be deferred from payment during the permanent/amortization period after all available loan proceeds and HC Equity contributions have been received.



JULY 18, 2003

Uses of Funds

Notes to the Actual Construction Costs:

1. Applicant provided SMG a copy of an April 30, 2003, Construction Contract with Alliance Construction, L.L.C. (“Alliance”), a related company, in the amount of $15,388,000. The Construction Schedule indicates 100% completion within a period of thirteen months.

2. $164,797 associated with Off-Site Improvements for a lift station are included in Construction Costs. Applicant states they are covered by the April 30, 2003, Construction Contract with Alliance, however the Construction Contract Schedule of Values does not detail costs specific to the Off-Site Improvements. Applicant provided a copy of the subcontractor proposal. Seltzer’s recommendations are contingent upon receipt and satisfactory review of the proposal by Consultech prior to MMRB Loan closing.

3. General Contractor Fees consist of General Requirements, Overhead and Profit. At $1,875,018, General Contractor Fees are 14.00% of the (net) Construction Contract (i.e., the Construction Contract figure of $15,388,000 less Special Inspection Fees of $45,000, Payment & Performance Bonds of $75,000 and the General Contract fee, itself). General Contractor Fees are therefore within the 14% underwriting guidelines.

4. Applicant states it has a standing relationship with BankUnited, Coral Gables, FL, to provide LOC’s to cover a Hard Cost Contingency. This arrangement is acceptable to SMG.

Application Total Costs

Applicant's Revised

Total CostsUnderwriter's Total Costs

HC Ineligible Costs

Actual Construction CostsConstruction ContractSite Work $0 $0 $0 $0Off-Site $130,000 $164,000 $164,797 $164,797New Rental Units $13,027,387 $12,554,668 $12,553,871 $0Special Inspection Fees $45,000 $45,000 $45,000 $0Payment & Performance Bonds $65,000 $75,000 $75,000 $0Recreational Amenities $267,263 $324,314 $324,314 $0Accessory Buildings $275,000 $350,000 $350,000 $0Contractor's Fee (Not to Exceed 14%) $1,911,350 $1,875,018 $1,875,018 $0Total Construction Contract $15,721,000 $15,388,000 $15,388,000 $164,797Contingency $0 $0 $0 $0Total Actual Construction Costs $15,721,000 $15,388,000 $15,388,000 $164,797



JULY 18, 2003

Notes to the General Development Costs:

1. Applicant budgets separate line items for Builders Risk and Property (Operating) Insurance. 2. FHFC Administrative, Application, Compliance Monitoring and Credit Underwriting fees are

actual costs as determined by SMG. FHFC Application Fees consist of Year 2002 MMRB with HC (including TEFRA). FHFC Credit Underwriting Fees consist of MMRB at $10,750, Year 2002 HC at $3,200 and Subsidy Layering Review at $1,800.

3. Appraisal, Market Study and PCA fees are the actual costs engaged by SMG. 4. Legal Fees at 56 basis points (“bp”) are within the “greater of $40,000 or 75 bp” maximum

per FHFC guidelines. 5. Other General Development Costs are Applicant’s estimates, which appear reasonable.


Applicant's Revised


HC Ineligible Costs

General Development CostsAccounting Fees $20,000 $25,000 $25,000 $0Appraisal $8,500 $12,500 $5,000 $0Architect's Fee - Design $202,500 $175,000 $175,000 $0Architect's Fee - Supervision $45,000 $80,000 $80,000 $0Builder's Risk Insurance $135,000 $210,000 $210,000 $84,000Building Permits $100,000 $120,000 $120,000 $0Brokerage Fees $0 $0 $0 $0Closing Costs - Construction $0 $0 $0 $0Closing Costs - Permanent $0 $0 $0 $0Engineering Fee $67,500 $75,000 $75,000 $0Environmental Report $9,000 $4,000 $4,000 $0FHFC Administrative Fee $59,450 $58,901 $59,702 $59,702FHFC Application Fee $2,000 $2,000 $2,560 $0FHFC Compliance MonitoringFee $0 $0 $0 $0FHFC Credit Underwriting Fee $9,000 $16,071 $15,750 $0Impact Fees $512,522 $535,701 $535,701 $0Inspection Fees $18,200 $37,500 $37,500 $0Insurance $0 $165,000 $165,000 $165,000Legal Fees $65,000 $90,000 $90,000 $27,000Market Study $5,000 $4,500 $4,500 $0Marketing and Advertising $175,000 $275,000 $275,000 $275,000Pre-Constr. Analysis/Existing Prop. Eval. $0 $0 $1,800 $0Property Taxes $40,000 $45,000 $45,000 $18,000Soil Test $6,000 $8,500 $8,500 $0Survey $15,000 $12,500 $12,500 $0Title & Recording Fees $85,000 $85,000 $85,000 $59,500Utility Connection Fees $463,200 $209,283 $209,283 $0Other - Clubhouse Furniture $75,000 $135,000 $135,000 $0Miscellaneous $50,000 $150,000 $150,000 $0Total General Development Costs $2,167,872 $2,531,456 $2,526,796 $688,202



JULY 18, 2003

Notes to the Financial Costs:

1. Bond Loan Construction Interest in the Development Budget is Seltzer’s estimate based upon an eighteen-month construction/stabilization phase extending from a July 2003 MMRB Loan closing date. Capitalized Interest is calculated as interest on the bonds (plus any Credit Enhancement and Bond-Related fees not prepaid or escrowed at closing) less GIC earnings on un-disbursed bond funds at an estimated rate of 1.25%.

2. Construction Loan and Permanent Loan Credit Enhancement Costs are Applicant’s revised estimates, which appear reasonable. SMG will confirm these costs with the Bond Underwriter prior to MMRB Loan Closing.

3. An Insurance Wrap Fee equivalent to 0.40% of total principal and interest payments over the 41.5-year life of the Tax-Exempt Bonds must funded at MMRB Loan closing.

4. A 3.5% premium for a Surety Bond substitutes for a $525,000 DSR. 5. Replacement Reserves of $200 per unit per year are normally required, however Applicant

elected to prepay Replacement Reserves in the amount of $60,000 (one-half the required Replacement Reserves for Years One and Two). However, this amount must be funded with sources other than the MMRB First Mortgage Loan. Replacement Reserves to be funded from Operations will be $100 per unit per year for Years One and Two, followed by $200 per unit per year thereafter. An inflation factor based upon the Consumer Price Index will be applied to the Replacement Reserve deposit beginning in Year Seven, unless waived or reduced in the event Obligor provides a Physical Needs Study prepared by an independent third party acceptable to the Guarantee Program that evidences an increase in the deposit is excessive or unnecessary.


Applicant's Revised


HC Ineligible Costs

Financial CostsBond Loan Credit Enhancement Fees $0 $0 $0 $0Bond Loan Construction Interest $938,000 $1,271,931 $1,213,112 $322,760Construction Loan Credit Enhancement $193,766 $206,678 $206,678 $0Permanent Loan Credit Enhancement $567,024 $518,442 $347,282 $347,282NLPI Loan Fees $0 $0 $7,730 $4,846Bridge Loan Origination Fee $0 $0 $0 $0Insurance Wrap Fee $0 $137,785 $152,785 $148,020Surety Bond Premium $0 $18,682 $18,375 $0Prepaid Replacement Reserve $60,000 $60,000 $60,000 $60,000Debt Service Reserve $0 $0 $0 $0Total Financial Costs $1,758,790 $2,213,518 $2,005,962 $882,907



JULY 18, 2003


Applicant's Revised

Total CostsUnderwriter's

Total CostsHC Ineligible

CostsNon-Land Acquisition CostsBuilding Acquisition Costs $0 $0 $0 $0Other $0 $0 $0 $0Total Non-Land Acquisition Costs $0 $0 $0 $0 Notes to the Non-Land Acquisition Costs:

1. Since this is new construction, there are no Non-Land Acquisition Costs.

Notes to the Other Development Costs:

1. SMG limits Total Developer Fees to 18.00% of Development Cost before Land and Developer Fee for transactions with MMRB financing per FHFC Underwriting Guidelines.

2. Included in Developer Fees are $391,768 in excess Land Purchase costs and $19,932 in excess “Land Carry” (see discussion below).

Notes to the Land Acquisition Costs:

1. A 39.219-acre parcel of land was purchased December 28, 2001, for $1,100,000, with that amount reflected in Applicant’s Sources & Uses of Funds. The Bristol Bay development site is 27.071 acres, however. Applicant is under contract to transfer the remaining 12.148 acres


Applicant's Revised


HC Ineligible Costs

Development Cost Before Land and Developer Fee $19,647,662 $20,132,974 $19,920,758 $1,735,906

Other Development CostsDeveloper Fee on Acquisition of Buildings $0 $0 $0 $0Developer Fee $3,536,579 $3,613,000 $3,174,036 $0Excess Land Purchase and Carrying Costs $0 $0 $411,700 $0Total Other Development Costs $3,536,579 $3,613,000 $3,585,736 $0


Applicant's Revised


HC Ineligible Costs

Development Cost Before Land $23,184,241 $23,745,974 $23,506,494 $1,735,906

Land Acquisition CostsLand $1,100,000 $1,100,000 $708,232 $708,232Other (Land Carry) $0 $64,350 $44,418 $44,418Total Land Acquisition Costs $1,100,000 $1,164,350 $752,650 $752,650



JULY 18, 2003

to Landings Associates, Ltd. (“Landings”), a related entity of the Developer, Cornerstone Group Development, L.L.C., for later development. Land Acquisition Costs are limited to the Lesser of Cost or Market for property held less than two years. Extraordinary Development Costs (Off-Site Improvements for a lift station) total $164,797. The Off-Site costs are required for the development of Landings as well as Bristol Bay. SMG therefore allocates Land Acquisition Costs to the two developments based upon relative acreage. The allocation amount is $1,264,797 (Purchase Price of $1,100,000 plus Off-Site costs of $164,797). SMG calculates Land Acquisition Costs to be $873,029 for Bristol Bay and $391,768 for Landings. With the $164,797 Off-Site Costs included in Bristol Bay’s Development Budget, the Allowable Land Cost is limited to $708,232 (allocated Land Acquisition Costs for Bristol Bay of $873,029 less Off-Site Costs of $164,797). SMG reclassifies the $391,768 difference between the $1,100,000 Purchase Price of the full 39.219-acre parcel and the $708,232 Allowable Land Cost for Bristol Bay’s 27.071 acres as a sub-set of Developer Fees.

2. Applicant incurred $64,350 in carrying costs (“Land Carry) on the purchase of the Development Site prior to MMRB Loan closing. SMG pro rates Land Carry based upon relative acreage of the two parcels. That portion of the Land Carry attributable to Bristol Bay is $44,418. SMG reclassifies $19,932 of Land Carry attributable to The Landings as a subset of Developer Fees.

3. Seltzer’s concludes the total cost for the Bristol Bay development site to be $708,232 + $44,418 = $752,650.


Applicant's Revised


HC Ineligible Costs

Total Development Cost $24,284,241 $24,910,324 $24,259,143 $2,488,555



JULY 18, 2003

Operating Pro Forma

ANNUAL PER UNIT

$2,282,544 $7,608

$100,800 $336$38,880 $130$54,000 $180

$0 $0$2,476,224 $8,254

Vacancy Loss - 5.0% ($123,811) ($413)Collection Loss - 1.0% ($24,762) ($83)

$2,327,651 $7,759

$195,000 $650$102,000 $340

Management Fees - 5.0% $116,383 $388$87,000 $290

$283,500 $945$141,000 $470$30,000 $100$81,000 $270

$0 $0$0 $0

$30,000 $100$57,000 $190

$0 $0$1,122,883 $3,743

$1,204,768 $4,016

$1,047,624 $3,492$0 $0$0 $0$0 $0$0 $0

$1,047,624 $3,492

$157,144 $524

Net Operating Income

Debt Service Payments

Total Debt Service Payments

Operating Income After Debt Service - Before Tax Cash Flow

First MortgageSecond MortgageThird MortgageOther Fees - Letter of Credit/GuaranteeOther Fees - Agency/Trustee/Servicer

Replacement ReserveContract Services (Trash Removal, Pool Maintenance, Security, etc.)Other:

Total Expenses

Marketing and AdvertisingMaintenance and RepairsGrounds Maintenance and LandscapingGround Lease

Variable:

General and AdministrativePayroll ExpensesUtilities

ExpensesFixed:

TaxesInsurance

Cable Television IncomeMiscellaneous IncomeInterest Income

Total Effective Gross Revenue

DESCRIPTIONRevenue

Gross Potential Rental Revenue

Less:Gross Potential Income

Other Income:Washer/Dryer Rentals



JULY 18, 2003

Notes to the Operating Pro Forma and Ratios: 1. The Rent Roll is based upon Year 2003 Maximum Restricted Rents published by FHFC,

less Utility Allowances per an October 29, 2002, Utility Provider Letter from Tampa Electric (“TECO”). Market Comparables and the Appraisal support Year 2003 Maximum HC Rents.

2. SMG has underwritten Vacancy Loss at 5.0% and Collection Loss at 1.0%. The Appraisal and Occupancy figures for comparable Affordable Properties, support these assumptions.

3. Washer/Dryer Rental Income is based upon 80% of Bristol Bay units renting washers and dryers at $35 per month. Market Comparables and the Appraisal support the projection.

4. Cable Television Income, the Net Revenues (after Expenses) from bulk cable television service, is based upon 90% of the units subscribing to the service, generating $12 per unit per month. This projection is supported by Market Comparables and the Appraisal.

5. Miscellaneous Income includes Late Fees, Cancellation Fees, Forfeited Deposits, Vending Income and Income from other miscellaneous sources to total $180 per unit per year. SMG utilizes Applicant’s projection, which is significantly below that of the Appraiser.

6. The subject development is located in unincorporated Hillsborough County. SMG concurs with Applicant’s estimate of $650 annually per unit for Real Estate Taxes, which is supported by the Appraisal.

7. SMG projects $340 per unit per year for Insurance, which is in line with an average of four Affordable Properties (“Four Comps”) for which SMG provides Financial Monitoring Services (Exhibit 4). Seltzer’s projection is supported by the renewal policy per-unit premium for Cypress Trace, a Cornerstone property and one of the Four Comps.

8. Management Fees are 5.0% of Total Effective Gross Revenue per a July 9, 2002, Property Management Agreement with Cornerstone Residential Management, L.L.C., a related company.

9. Seltzer’s projection for General and Administrative Expenses is based upon an average for the Four Comps. It is a conservative figure compared to the estimates of the Applicant and Appraiser. Note: Estimated costs associated with Resident Programs are de minimis and are included in General and Administrative Expenses.

10. The estimate for Payroll Expense is conforms to Applicant’s pro forma NOI and is supported by the Four Comps.

1.1501.1501.1501.150

Debt Service Coverage RatiosDebt Service Coverage - First Only (incl. Negative Arbitrage)Debt Service Coverage - First and SecondDebt Service Coverage - All MortgagesDebt Service Coverage - All Mortgages and Fees

48.2%87.7%

Operating Expense RatioBreak-Even Ratio

Financial Ratios



JULY 18, 2003

11. Utilities include tenants’ monthly service of Water and Sewer (which Applicant will pay). The projection is based upon Applicant’s pro forma NOI and is consistent with the Appraisal.

12. The estimate for Marketing and Advertising Expense is based upon Applicant’s pro forma NOI, which is consistent with the Appraisal and the Four Comps.

13. Seltzer’s estimate for Maintenance and Repairs is based upon the Four Comps less a 17% discount for a new property. It is consistent Applicant’s pro forma NOI.

14. The projection for Contract Services is based upon Applicant’s pro forma NOI, supported by the Four Comps. Note: Estimated costs associated with Pest Control and Termite Prevention are de minimis and are included in Contract Services.

15. Replacement Reserves of $200 per unit per year are normally required, however Applicant elected to prepay Replacement Reserves in the amount of $60,000 (one-half the required Replacement Reserves for Years One and Two). Replacement Reserves to be funded from Operations will be $100 per unit per year for Years One and Two, followed by $200 per unit per year thereafter. An inflation factor based upon the Consumer Price Index will be applied to the Replacement Reserve deposit beginning in Year Seven, unless waived or reduced in the event Obligor provides a Physical Needs Study prepared by an independent third party acceptable to the Guarantee Program that evidences an increase in the deposit is excessive or unnecessary.

16. Based upon operating data from comparable properties, third-party reports (Appraisal and Market Study) and the Credit Underwriter’s independent Due Diligence, SMG represents that, in its professional opinion, estimates for Rental Income, Vacancy and Collection Loss Allowances, Other Income and Operating Expenses fall within a band of reasonableness. For purposes of this analysis, Seltzer’s estimates of Total Effective Gross Revenue and Operating Expenses are $33,840 less than, and $50,808 greater than, respectively, those utilized by the Appraiser in determining the Investment Value of the subject development under “Restricted Rents and Favorable Financing”.

17. A 15-year Income and Expense projection that reflects increasing Debt Service Coverage is attached to this report as Exhibit 5.

SMG

JULY 18, 2003

Section B

Loan Commitment Conditions

Housing Credit Allocation Contingencies


BRISTOL BAY APARTMENTS PAGE B-1

JULY 18, 2003

Multifamily Mortgage Revenue Bond Loan Recommendation Seltzer Management Group, Inc. (“Seltzer” or “SMG”), recommends a First Mortgage Loan funded through the Florida Housing Finance Corporation’s (“Florida Housing” or “FHFC”) Multifamily Mortgage Revenue Bond (“MMRB”) Program under the conditions detailed in this section.

Loan Amount The FHFC Mortgage Loan recommended by SMG is $16,210,000, consisting entirely of Tax-Exempt Bonds. A Debt Service Reserve (“DSR”), estimated by SMG to be $525,000, will not be cash funded. Rather, it is to be secured by a Surety Bond in the same amount. The Net MMRB Loan is therefore $16,210,000. The MMRB Loan recommended by SMG is determined as follows:

1. The maximum MMRB Loan is limited to the lesser of: a. Applicant request ($16,210,000) or 90% of Appraised Value or the percentage allowed

by the Credit Enhancer or Bond Purchaser (90% x $18,935,000 = $17,041,500), whichever is less.

b. The Tax-Exempt amount in the Acknowledgement Resolution, plus the Taxable Bond amount (less Debt Service Reserve), if any. The Taxable Bond portion may not exceed 25% of the Total MMRB Bond amount.

c. If applicable, the MMRB Loan must be not less than 90% of the amount stated in the Notice of Intent to Issue by FHFC to the Florida Division of Bond Finance.

d. The amount necessary to make the development feasible; $16,210,000, all of which is Tax-Exempt based upon information provided to date.

e. Bristol Bay Associates, Ltd.’s (“Applicant” or “Borrower”) revised request, which is $16,210,000.

The recommended MMRB First Mortgage Loan is therefore $16,210,000, however Seltzer’s recommendation permits it to be increased up to a maximum of 90% Loan to Value based upon Restricted Rents and Favorable Financing depending upon interest rates at the time of bond pricing. However, Tax-Exempt Bonds are limited to $16,300,000 (Applicant’s original request per the 2002 MMRB Application). A minimum calculation of 1.150 Debt Service Coverage (“DSC”) is required on the MMRB Loan utilizing a pro forma NOI of $1,204,768.

2. Inasmuch as the interest rate of the MMRB Loan cannot be accurately determined until the Bond Purchase closes, SMG recommends: a. DSC for the Total MMRB Loan must not be less than 1.15. Debt Service includes all

MMRB interest, principal and fees (including, but not limited to U.S. Department of Housing and Urban Development (“HUD”), Issuer and Bond Trustee Fees plus Permanent Servicing, Compliance Monitoring and Financial Monitoring Fees.

b. Based upon a projected NOI of $1,204,768, total Debt Service cannot exceed $1,047,624 and achieve a 1.15 DSC.



JULY 18, 2003

c. If, based upon the actual interest rate, projected annual Debt Service exceeds $1,047,624, SMG recommends that the MMRB First Mortgage Loan be reduced to achieve an annual Debt Service not to exceed $1,047,624. SMG recommends that any shortfall created by a reduction in the MMRB Loan be funded with the deferral of additional Developer Fees, the deferral of General Contractor Fees and/or the injection of Developer Cash (Equity). When utilizing a 1.000 to 1 DSC ratio required by the State Board of Administration in their Fiscal Sufficiency Determination, the not-to-exceed Bond Amount is $18,245,000. However, the maximum tax-exempt amount is limited to Applicant’s original request of $16,300,000 in the 2002 MMRB Application.

d. Florida Housing’s Affordable Housing Guarantee Program (“Guarantee Program”) requires a DSR equal to six months’ Debt Service (currently estimated at $525,000 by SMG). The requirement is met by fully funding this amount into an Escrow Account held by the Bond Trustee at MMRB Loan closing. Alternatively, the requirement can be met by obtaining a Surety Bond in the amount of $525,000, in form and substance acceptable to FHFC. The applicant has chosen to provide a Surety Bond.



JULY 18, 2003

Multifamily Mortgage Revenue Bond Loan General Conditions

Purpose: To provide construction and permanent mortgage financing for Bristol Bay (300 residential units on 27.071 acres) located at 1241 South 50th Street (U.S. Hwy. 41) in unincorporated Tampa, Hillsborough County, FL 33619.

Security / Collateral: 1. A First Mortgage Lien on the Land and Improvements 1. A First Security Interest in all Personalty of the subject development 2. Additional collateral as required by FHFC

Typical Documents: 1. Note, First Mortgage and Land Use Restriction Agreement (“LURA”) 2. Assignment of Leases, Rents, Profits 3. Assignment of Management Contract, Service Contracts, etc. 4. Loan Agreement and Trust Indenture 5. Construction Completion and Operation Deficit Guarantees 6. Guarantee of Recourse Obligations 7. Environmental Indemnity Guarantee 8. Other documents as may be required by FHFC Term: Varies. The maturity date of the MMRB First Mortgage Loan is determined by the maturity of the Bonds sold to finance the MMRB Loan.

Interest Rate: Varies. The interest rate is determined by the interest rate of the Bonds sold to finance the MMRB Loan, plus Credit Enhancement, Mortgage Insurance or Private Placement Fees (as applicable), Bond Issuer Fees and Bond Trustee Fees, plus Loan Servicing, Compliance Monitoring and Financial Monitoring Fees. Repayment Schedule: Monthly payments of interest, principal, and fees. Interest and Loan Servicing Fees are calculated based upon the outstanding principal balance of the MMRB Loan.

Escrows: FHFC and/or the Bond Trustee shall maintain Escrow Accounts for Hazard Insurance, Property Taxes and Replacement Reserves throughout the term of the MMRB Loan.



JULY 18, 2003

Replacement Reserves: Applicant elected to prepay $60,000 at MMRB Loan closing representing one-half the required Replacement Reserves for Years One and Two, and then to pay from monthly operations the sum of $100 per unit per year during Years One and Two, with $200 per unit per year thereafter, deposited into a designated Escrow Account to be maintained by FHFC or the Bond Trustee. An inflation factor based upon the Consumer Price Index will be applied to the Replacement Reserve deposit beginning in Year Seven, unless waived or reduced in the event Obligor provides a Physical Needs Study prepared by an independent third party acceptable to the Guarantee Program that evidences an increase in the deposit is excessive or unnecessary. The initial deposit of $60,000 (representing $100 per unit per year for Years One and Two) must be prepaid and deposited to the Replacement Reserve at MMRB Loan closing. FHFC shall have the right to attach the Escrow Accounts in the event of default under the Loan Documents. The application of funds by FHFC shall not be restricted and may include Debt Service payments and/or repairs. Escrowed Replacement Reserve funds are to be used by the Borrower for Capital Expenditures only, and not for normal maintenance and repairs. Capital Expenditures shall include building structural repairs, roof replacement, major building systems replacement, kitchen appliance replacement, carpet replacement and such other permissible uses as are provided in the Loan Documents or Trust Indenture. The release of escrowed Replacement Reserve funds shall be at the sole discretion of FHFC. Prepayment Penalty: Varies. Prepayment Terms (if prepayments are allowed) are established by the terms of the Bonds sold to finance the MMRB Loan.

Assumption: Assumable in some cases, subject to the written approval of FHFC.



JULY 18, 2003

Conditions Seltzer’s recommendation is contingent upon the review and approval of the following items by the Servicer and FHFC at least two weeks before MMRB Loan closing. Failure to receive approval of these items within this timeframe may result in postponement of the MMRB Loan Closing Date. 1. Consultech and Associates (“Consultech”), Tampa, FL, review and sign off on the

Pre-Construction Analysis (“PCA”) and a $164,797 subcontractor proposal for an off-site lift station.

2. An update of the October 28, 2002, Market Study by Robert Robert Von and Connie L. Jennings, MAI, of Realvest Appraisal Services, Inc., Maitland, FL.

3. Signed and sealed Survey, dated within 90 days of MMRB Loan Closing and certified to FHFC, indicating the legal description, the exact boundaries of the subject development, easements, utilities, roads, means of access to public streets, total acreage, flood hazard area and any other requirements of FHFC.

4. Final “as permitted” (signed and sealed) Civil Engineering Plans, Architectural Site Plan and Building Plans and Specifications. The Geotechnical Report must be bound within the final Plans and Specifications. The final Plans and Specifications shall reflect all Features and Amenities committed to by Applicant.

5. Building Permits and any other necessary Permits and Approvals (e.g., Final Site Plan approval, Water Management District, Florida Department of Environmental Protection, U.S. Army Corps of Engineers, Florida Department of Transportation, etc.) or a letter from the local permitting and approval authority that the above referenced Permits and Approvals will be issued upon receipt of applicable fees (and with no other conditions). If a letter is provided, copies of all Permits will be required as a condition to the first post-closing draw.

6. Letter of Credit in lieu of a 3% Hard Cost Contingency, from BankUnited, Coral Gables, FL, or such other financial institution as may be acceptable to FHFC, in form and substance acceptable to FHFC and consistent with the assumptions of this Credit Underwriting Report.

7. Final Sources and Uses of Funds itemized by source and line item, in a format and in amounts approved by the Servicer. A detailed calculation of the Construction Interest based upon the final Draw Schedule (see below), documentation of the Closing Costs and a 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.

8. Final Draw Schedule to be approved prior to MMRB Loan Closing, itemized by line item and showing the Sources of Funds for monthly draws.

9. Surety Bond to take the place of a $525,000 DSR. 10. Evidence of General Liability, Flood (if applicable), Builders Risk and Hazard Insurance (as

Certificates of Occupancy are received) reflecting FHFC as Loss Payee/Mortgagee, in coverages, deductibles and amounts satisfactory to FHFC.

11. 100% Payment & Performance (“P&P”) Bonds to secure the Construction Contract between the Borrower and Alliance Construction, L.L.C., Coral Gables, FL. 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



JULY 18, 2003

least FSC VI. FHFC must be listed as Co-Obligee. FHFC, its Legal Counsel and Servicer must approve the amount and terms of the P&P Bond(s).

12. Architect, Construction Consultant and Borrower Certification Forms provided by FHFC for both design and as-built with respect to Section 504, Americans with Disabilities Act (“ADA”), and Fair Housing requirements, if applicable.

13. A copy of an Amended and Restated Limited Partnership Agreement reflecting purchase of the Low Income Housing Tax Credits (“HC”) by Lend Lease Real Estate Investments Limited Partnership (“LLREI”), Boston, MA, or an affiliate, under terms consistent with the assumptions contained within this Credit Underwriting Report.

14. Receipt and satisfactory review of a Joint Funding Agreement between Applicant and LLREI that requires funding of all HC Equity installments during construction even if the Borrower is in default under the Limited Partnership Agreement.

15. Confirmation two weeks prior to closing of (i) of at least $4.5 million in combined liquidity for Cornerstone Group Development Corporation, Cornerstone Group Development, L.L.C., Mr. Lopez, Mr. Meyers, Mr. Wolfe and Ms. Mades; however, Mr. Meyers, Mr. Lopez, Mr. Wolfe, and Ms. Mades (collectively the “Guarantors”) shall maintain no less than $3 million of the minimum $4.5 million liquidity requirement at all times and (ii) the Guarantors enter into a Liquidity Maintenance Agreement with FHFC. Terms of the Liquidity Maintenance Agreement must include, but not be limited to requirements for the Guarantors to: (i) continuously maintain liquid balances of not less than $4.5 million until the FHFC Guarantees have been released, (ii) certify the minimum $4.5 million in liquid balances have been continuously maintained and (iii) provide evidence of such liquid balances to the Loan Servicer on a quarterly basis. The Liquidity Maintenance Agreement must also contain a clause such that if not cured within a timely manner, failure to maintain the required liquid balances would be an event of loan default. Should the assets (utilized for purposes of meeting the minimum liquidity requirements set forth above) of certain guarantors be held in the names of entities (but solely controlled by the individual Guarantor) other than the Guarantor individually, SMG then recommends that those entities be named as additional Guarantors.

Seltzer’s recommendation is contingent upon the review and approval of the following items by FHFC and its Legal Counsel at least two weeks before MMRB Loan closing. Failure to receive approval of these items within this timeframe may result in postponement of the MMRB Loan Closing Date. 1. Documentation of the legal formation and current authority to transact business in Florida for

the Borrower, the General Partner of the Borrower, the Guarantors and the Limited Partner(s) of the Borrower.

2. Signed and sealed Survey, dated within 90 days of MMRB Loan Closing and certified to FHFC, indicating the legal description, the exact boundaries of the subject development, easements, utilities, roads, means of access to public streets, total acreage, flood hazard area and any other requirements of FHFC.

3. Title Insurance Binder or Commitment for Title Insurance (with copies of all Schedule B exceptions) in the amount of the MMRB First Mortgage Loan.



JULY 18, 2003

4. A copy of an Amended and Restated Limited Partnership Agreement reflecting purchase of the HC by Lend Lease under terms consistent with the assumptions contained within this Credit Underwriting Report.

5. FHFC and its Legal Counsel shall review and approve all other lenders’ Closing Documents plus the Amended and Restated Limited Partnership Agreement. FHFC shall be satisfied in its sole discretion that all legal and program requirements for the Guarantee Program have been satisfied.

6. Evidence of General Liability, Flood (if applicable), Builders Risk and Hazard Insurance (as Certificates of Occupancy are received) reflecting FHFC as Loss Payee/Mortgagee, in coverages, deductibles and amounts satisfactory to FHFC.

7. Receipt of a Legal Opinion from Borrower’s Legal Counsel acceptable to FHFC addressing the following matters: a. The legal existence and good standing of Borrower, the General Partner of Borrower,

any Corporation or Partnership that is a Principal of the General Partner and any Guarantor;

b. The due authorization, execution, and delivery by Borrower and the Guarantors, of all MMRB Loan documents;

c. The MMRB Loan documents being in full force and effect and enforceable in accordance with their terms, subject to bankruptcy and equitable principles only;

d. That Borrower and the subject development are in compliance with all Laws and Regulations applicable to the construction, development and operation of the subject development, and that all Permits and Approvals required for construction, rehabilitation and operation of the subject development and any improvements related thereto have been obtained and are in full force and effect;

e. Borrower’s and Corporate Guarantor’s execution, delivery and performance of the MMRB Loan documents shall not result in a violation of, or conflict with any Judgments, Orders, Contracts, Mortgages, Security Agreements or Leases to which Borrower is a party, or to which the subject development is subject to Borrower’s Partnership Agreement and;

f. Such other matters as FHFC or its Legal Counsel may require. 8. Evidence of compliance with local concurrency laws prior to closing of the MMRB First

Mortgage Loan. 9. Other Assignments, Affidavits, Certificates, Financial Statements, Closing Statements and

other Documents as may be reasonably requested by FHFC or its Legal Counsel, in form and substance acceptable to FHFC or its Legal Counsel, in connection with the MMRB First Mortgage Loan.

10. Any other reasonable conditions established by FHFC and its Legal Counsel.

Seltzer’s recommendation is also contingent upon satisfaction of the following additional conditions: 1. Compliance with all provisions of Sections 420.507(22) and 420.5087, Florida Statutes and

Rule Chapter 67-48, F.A.C.



JULY 18, 2003

2. Acceptance by Borrower and execution of all Documents evidencing and securing the First Mortgage Loan in form and substance satisfactory to FHFC, including but not limited to the Promissory Note, the Loan Agreement, the Mortgage and Security Agreement and the Land Use Restriction Agreement (“LURA”).

3. All amounts necessary to complete construction shall be deposited with the Bond Trustee prior to FHFC Mortgage and MMRB Loan closing, or any phased pay-in amounts necessary to complete construction shall be contingent upon an unconditional obligation of the entity providing HC Equity (and evidence that 100% of such amount is on deposit with such entity at FHFC Mortgage and MMRB loan closing) to pay regardless of any default under any documents relating to the HC, as long as the First Mortgage continues to be funded. Notwithstanding the foregoing, at least 50% of all HC Equity (but not less than provided for in the Syndication Agreement or higher amount as recommended by the Credit Underwriter) required to complete construction shall be deposited with the Bond Trustee by FHFC Mortgage and MRMB Loan closings.

4. Standard FHFC Construction Completion Guarantees from Borrower, Cornerstone Bristol Bay, L.L.C., Cornerstone Group Development, L.L.C., Cornerstone Group Development Corp., and the Principals, Mr. Lopez, Mr. Meyers, Mr. Wolfe and Ms. Mades.

5. Standard FHFC Operating Deficit Guarantees from Borrower, Cornerstone Bristol Bay, L.L.C., Cornerstone Group Development, L.L.C., Cornerstone Group Development Corp., and the Principals, Mr. Lopez, Mr. Meyers, Mr. Wolfe and Ms. Mades, to be released upon achievement of a 1.15 DSC for the MMRB First Mortgage Loan, 90% Occupancy and 90% of Gross Potential Rental Income, all for six consecutive months as certified by an independent Certified Public Accountant.

6. Standard FHFC Environmental Indemnity Guarantees from Borrower, Cornerstone Bristol Bay, L.L.C., Cornerstone Group Development, L.L.C., Cornerstone Group Development Corp., and the Principals, Mr. Lopez, Mr. Meyers, Mr. Wolfe and Ms. Mades.

7. Standard FHFC Recourse Obligations Guarantees from Borrower, Cornerstone Bristol Bay, L.L.C., Cornerstone Group Development, L.L.C., Cornerstone Group Development Corp., and the Principals, Mr. Lopez, Mr. Meyers, Mr. Wolfe and Ms. Mades.

8. Compliance with HUD Environmental Criteria and Standard contained in 24CFR, Part 51, and Handbook 4590.01, Rev-1, Housing Finance Risk Sharing Regulations and receipt of the HUD firm approval letter.

9. Consultech to act as Florida Housing’s inspector during the construction phase. 10. A Mortgagee Title Insurance Policy naming FHFC as insured, in the amount of the MMRB

First Mortgage Loan and to be issued immediately after MMRB Loan Closing. Any exceptions to the Title Insurance Policy must be acceptable to FHFC and/or its Legal Counsels.

11. Property Tax and Hazard Insurance Escrow to be established and maintained by the Bond Trustee.

12. Applicant elected to prepay $60,000 (representing one-half the required Replacement Reserves for Years One and Two) for deposit at MMRB Loan closing. Replacement Reserves in the amount of $100 per unit per year paid monthly from operations for Years One and Two will be required, with $200 per unit per year thereafter. An inflation factor



JULY 18, 2003

based upon the Consumer Price Index will be applied to the Replacement Reserve deposit beginning in Year Seven, unless waived or reduced in the event Obligor provides a Physical Needs Study prepared by an independent third party acceptable to Florida Housing’s Guarantee Program ("Guarantee Program”) that evidences an increase in the deposit is excessive or unnecessary.

13. A 10% Retainage Holdback on all Construction Draws until the subject development is 50% complete, with none thereafter. Retainage will not be released until successful completion of construction and issuance of all C/O’s.

14. Satisfactory completion of a Pre-MMRB Loan Closing Compliance Audit conducted by FHFC or the Servicer, if applicable.

15. Any other reasonable requirements of the Servicer, FHFC and its Legal Counsel.



JULY 18, 2003

Housing Credit Allocation Recommendation SMG recommends an annual HC Allocation up to $766,325 based upon Qualified Basis. Please see the HC Allocation Calculation in Exhibit 6 of this Credit Underwriting Report for further details.

Contingencies The HC Allocation recommendation is contingent upon receipt and satisfactory review of the following items by SMG and FHFC by the deadline established in the Preliminary Determination. Failure to submit these items within this timeframe may result in forfeiture of the HC Allocation. 1. Closing of the MMRB First Mortgage Loan consistent with the assumptions of this Credit

Underwriting Report. 2. Purchase of the HC by LLREI under terms consistent with the assumptions of this Credit

Underwriting Report. 3. Any other reasonable requirements of FHFC or SMG.


BRISTOL BAY APARTMENTS EXHIBIT 6, PAGE 1

JULY 18, 2003

HC Allocation Calculation

Notes to the Eligible Basis Calculation:

1. Other Ineligible Costs are as shown in the HC Ineligible Costs column of the Uses of Funds schedules within Section A of this Credit Underwriting Report.

2. The development has a 100% set-aside; the Applicable Fraction is therefore 100.00%. 3. This development is not located in a Difficult Development Area (“DDA”) or a Qualified

Census Tract (“QCT”). The DDA/QCT Basis Credit is therefore 100.00%. 4. The Eligible Basis Calculation, above, does not take into consideration recent Internal

Revenue Service “TAMS” regarding the calculation of Eligible Basis. Inclusion of such IRS guidance could affect the HC Allocation.

Notes to the Gap Calculation:

$24,259,143Less Land Cost ($752,650)Less Federal Funds $0Less Other Ineligible Cost ($1,735,906)Less Disproportionate Standard $0

$21,770,589100.00%100.00%

$21,770,5893.52%

$766,325

Section I: Qualified Basis Calculation

Development Cost

Total Eligible BasisApplicable FractionDDA/QCT Basis CreditQualified BasisHousing Credit Percentage Annual Housing Credit Allocation

$24,259,143

Less Loans/Mortgages ($16,960,000)Less Grants $0

$7,299,143

99.99%$0.8200

$8,902,021$890,202

Section II: Gap Calculation

Total Development Cost (Including Land and Ineligible

Equity Gap

Percentage to Investment PartnershipHC Syndication PricingHC Required to Meet GapAnnual HC Required


BRISTOL BAY APARTMENTS EXHIBIT 6, PAGE 2

JULY 18, 2003

1. The sole Loan/Mortgage is the recommended $16,210,000 MMRB Loan, consisting entirely of Tax-Exempt Bonds.

2. Percentage to Investment Partnership and HC Syndication Pricing are based upon a November 20, 2002, Commitment Letter from Lend Lease Real Estate Investments, Boston, MA. See the “Syndicator Information” portion of Section C within this Credit Underwriting Report for complete information.

Notes to 50% Test:

1. SMG estimates the tax-exempt portion of the MMRB Loan to be 71.970% of the Depreciable Development Costs plus Land Acquisition Costs. If the tax-exempt bond amount is less than 50% at the time of Final Cost Certification, Developer Fees would have to be reduced by an amount to ensure compliance with the 50% Test. That may, in turn, result in a reduction to HC Equity.

Notes to the Summary:

The Annual HC Recommendation is limited by the Qualified Basis Calculation.

$21,770,588Plus Land Cost $752,650

$22,523,238

$16,210,000Less Debt Service Reserve $0Less Proceeds Used for Costs of Issuance $0

$16,210,000

71.970%Proceeds Divided by Aggregate Basis

Tax-Exempt Bond Amount

Tax-Exempt Proceeds Used for Building and Land

Section III: Tax-Exempt Bond 50% Test

Total Depreciable Cost

Aggregate Basis

$766,325$890,202

$766,325

HC per Qualified BasisHC per Gap Calculation

Section IV: Summary

Annual HC Recommended

Exhibit 1Bristol Bay Apartments

Capitalized Interest Schedule

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 TOTAL

Net MFMRB Loan $16,210,000 $16,210,000 $16,210,000 $16,210,000 $16,210,000 $16,210,000 $16,210,000 $16,210,000 $16,210,000 $16,210,000 $16,210,000 $16,210,000 $16,210,000 $16,210,000 $16,210,000 Average Balance Construction Loan $515,211 $1,400,343 $2,199,869 $3,131,584 $4,195,798 $5,447,512 $6,283,814 $7,172,616 $8,606,830 $9,953,544 $11,225,259 $12,421,973 $13,005,775 $13,509,577 $15,109,592Invested Funds $15,694,789 $14,809,657 $14,010,131 $13,078,416 $12,014,202 $10,762,488 $9,926,186 $9,037,384 $7,603,170 $6,256,456 $4,984,741 $3,788,027 $3,204,225 $2,700,423 $1,100,408

Total MFMRB Interest (including DSR) $66,191 $66,191 $66,191 $66,191 $66,191 $66,191 $66,191 $66,191 $66,191 $66,191 $66,191 $66,191 $66,191 $66,191 $66,191 $992,863Other Bond Fees $4,728 $4,728 $4,728 $4,728 $4,728 $4,728 $4,728 $4,728 $4,728 $4,728 $4,728 $4,728 $4,728 $4,728 $4,728 $70,919GIC Earning - DSR $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0GIC Earnings - Project Fund ($16,349) ($15,427) ($14,594) ($13,623) ($12,515) ($11,211) ($10,340) ($9,414) ($7,920) ($6,517) ($5,192) ($3,946) ($3,338) ($2,813) ($1,146) ($134,344) Net Interest Expense $54,570 $55,492 $56,325 $57,295 $58,404 $59,708 $60,579 $61,505 $62,999 $64,402 $65,726 $66,973 $67,581 $68,106 $69,772 $929,437

Total MFMRB Interest - Completion thru 95% occupancy $264,763Other Bond Fees - Completion thru 95% occupancy $18,912GIC Earnings - DSR, Completion thru 95% occupancy $0

NOI (50%) thru 90% occupancy n/a Capitalized Interest Deposit $1,213,112

Seltzer Management Group, Inc. Page 1 of 1 July 18, 2003

Exhibit 2

Bristol Bay ApartmentsCredit Underwriting Report

MMRB Loan Amounts* for Varying Interest Rates and Amortization Periods

Amort. Period (Yrs) 6.00% 6.25% 6.50% 6.75% 7.00% 7.25% 7.50% 7.75% 8.00%

15 $10,345,598 $10,181,911 $10,021,960 $9,865,646 $9,712,871 $9,563,543 $9,417,569 $9,274,862 $9,135,33620 $12,185,685 $11,943,995 $11,709,385 $11,481,610 $11,260,435 $11,045,633 $10,836,987 $10,634,288 $10,437,33325 $13,549,875 $13,234,210 $12,929,666 $12,635,776 $12,352,094 $12,078,196 $11,813,677 $11,558,150 $11,311,24630 $14,561,247 $14,178,917 $13,812,126 $13,460,112 $13,122,156 $12,797,576 $12,485,729 $12,186,005 $11,897,82635 $15,311,050 $14,870,640 $14,450,287 $14,048,876 $13,665,362 $13,298,764 $12,948,163 $12,612,694 $12,291,544

38.5 $15,717,260 $15,241,385 $14,788,671 $14,357,731 $13,947,273 $13,556,088 $13,183,050 $12,827,106 $12,487,27140 $15,866,933 $15,377,126 $14,911,780 $14,469,386 $14,048,542 $13,647,939 $13,266,360 $12,902,671 $12,555,812

Interest Rate

*All MMRB First Mortgage Loan amounts shown in the table above are total MMRB Loan amounts (all of which are Tax-Exempt Bonds). The MMRB Loan amounts are based on a 1.15 Debt Service Coverage ratio. There is no Debt Service Reserve, therefore there is no negative arbitrage on the Debt Service Reserve.


Exhibit 3Bristol Bay Apartments

Occupancy Comparisons

Property Cypress Trace* Lakewood Shores* Windermere I* Windemere II* Average Appraisal FHFC SMG***741 Providence Trace 1722 Lakewood 9474 Windermere Lake 9474 Windermere Lake Realvest** Compliance Reports*

Circle Shores Lane Drive Drive Brandon, FL 33511 Brandon, FL 33511 Riverview, FL 33569 Riverview, FL 33569

County Hillsborough Hillsborough Hillsborough Hillsborough# of Units 348 184 352 252 Owner/Developer Cornerstone CED Wilson Wilson

Brandon Brandon SE Tampa SE Tampa

Occupancy Oct-02 97% 100% 93% 86% 94.0%Nov-02 97% 99% 92% 93% 95.3%Dec-02 97% 100% 93% 94% 96.0%Jan-03 97% 99% 92% 96% 96.0%Feb-03 97% 98% 95% 94% 96.0%Mar-03 97% 98% 96% 93% 96.0%Apr-03 96% 95% 96% 94% 95.3%

96.9% 98.4% 93.9% 92.9% 95.5%

Appraisal HC Comparables:Mariner's Cove n/a n/a n/aWindermere I 95.0% 96.0% 92%Windermere II 96.0% 93.0% 93%Bayou Crossing 98.0% 90.0% 92%Clipper Cove 95.0% 98.0% 92%Summer Palms 85.0% 97.0% 90%Cypress Trace 95.0% 97.0% 96%

Average 94.0% 95.2% 92.5%

Reconciled ReconciledReconciled Appraisal and SMG Assumption for Credit Underwriting purposes. Figures do not include 1% Collection Loss. 95.0% 95.0%

* Per FHFC Compliance Reports; Occupancy for Windermere I and II directly from the Wilson Company** Per May 16, 2003, Update to an Appraisal by Robert Von/Realvest

*** Occupancy per Seltzer's survey of Rental Offices for its November 1, 2002, Site Inspection


Exhibit 4Bristol Bay Apartments Expense Comparisons

Comparative Data from 12/31/02 Financial Monitoring Files

Cypress TraceHarbor Walk &

Sandstone Lakewood Shores Williams Landing SMG Appraisal Developer SubjectFinancial Pro Forma

741 Providence Trace

Circle 6102 Webb Road 1722 Lakewood

Shores Lane3730 Williams Landing Circle

Monitoring Comps

AverageBrandon, FL 33511 Tampa, FL 33615 Brandon, FL 33510 Tampa, FL 33610

Distance to Subject 10.4 miles 16 miles 8.7 miles 7.9 milesDirection to Subject NW SE E NE# of Units 348 400 184 144Leasing Commenced July '99 1996 (Refinance) May '01 Sep '00 Robert VonOwner/Developer Cornerstone Schofield CED Gatehouse Group Realvest Cornerstone SMG

April 26, 2003 April 24, 2003

Expenses per unit $4,270 $3,534 $4,371 $3,625 $3,950 $3,574 $3,647 $3,743

Property Taxes $594 $603 $654 $318 $542 $650 $650 $650 Per Developer, supported by AppraisalProperty Insurance $469 $400 $222 $251 $336 $400 $315 $340 Per SMG Financial Monitoring Comps and 06/03 Cypress Trace renewalManagement Fees $372 $328 $441 $300 $360 $394 $387 $388 5% of Gross Revenues per Management AgreementGeneral & Administrative $178 $141 $346 $496 $290 $175 $220 $290 Per SMG Financial Monitoring CompsPayroll $729 $745 $1,065 $1,246 $946 $675 $945 $945 Per Developer, supported by SMG Financial Monitoring CompsUtilities $889 $455 $945 $338 $657 $450 $470 $470 Per Developer, supported by AppraisalMarketing & Advertising $82 $64 $176 $89 $103 $100 $100 $100 Per Developer, supported by Appraisal & SMG Financial Monitoring CompsMaintenance & Repairs $468 $499 $167 $165 $325 $275 $270 $270 Per SMG Financial Monitoring Comps less 17% new property discountContract Services $279 $98 $151 $222 $188 $255 $190 $190 Per Developer, supported by SMG Financial Monitoring CompsReplacement Reserves* $212 $200 $202 $200 $204 $200 $100 $100 Reflects Prepaid Reserves Total $4,270 $3,534 $4,371 $3,625 $3,950 $3,574 $3,647 $3,743

Cypress TraceHarbor Walk &

Sandstone Average Appraisal Developer SMGExpenses Per Unit $4,270 $3,534 $4,371 $3,625 $3,950 $3,574 $3,647 $3,743Less:Property Taxes $594 $603 $654 $318 $542 $650 $650 $650Property Insurance $469 $400 $222 $251 $336 $400 $315 $340Management Fees $372 $328 $441 $300 $360 $394 $387 $388Utilities $889 $455 $945 $338 $657 $450 $470 $470Replacement Reserves* $212 $200 $202 $200 $204 $200 $100 $100 Comparable Expenses $1,735 $1,548 $1,907 $2,218 $1,852 $1,480 $1,725 $1,795

* Replacement Reserves not reflected in Harbor Walk/Sandstone's Actual vs. Budget Report for Year 2002--SMG assumes $200 per unit per month


Exhibit 5

Bristol Bay Apartments Final Review Report 15 Year Income and Expense Projection

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15

$2,282,544 $2,351,020 $2,421,551 $2,494,197 $2,569,023 $2,646,094 $2,725,477 $2,807,241 $2,891,458 $2,978,202 $3,067,548 $3,159,575 $3,254,362 $3,351,993 $3,452,553

$100,800 $103,824 $106,939 $110,147 $113,451 $116,855 $120,360 $123,971 $127,690 $131,521 $135,467 $139,531 $143,717 $148,028 $152,469$38,880 $40,046 $41,248 $42,485 $43,760 $45,073 $46,425 $47,817 $49,252 $50,730 $52,251 $53,819 $55,434 $57,097 $58,809$54,000 $55,620 $57,289 $59,007 $60,777 $62,601 $64,479 $66,413 $68,406 $70,458 $72,571 $74,749 $76,991 $79,301 $81,680

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0$2,476,224 $2,550,511 $2,627,026 $2,705,837 $2,787,012 $2,870,622 $2,956,741 $3,045,443 $3,136,806 $3,230,911 $3,327,838 $3,427,673 $3,530,503 $3,636,418 $3,745,511

Vacancy Loss - 5.0% ($123,811) ($127,526) ($131,351) ($135,292) ($139,351) ($143,531) ($147,837) ($152,272) ($156,840) ($161,546) ($166,392) ($171,384) ($176,525) ($181,821) ($187,276)Collection Loss - 1.0% ($24,762) ($25,505) ($26,270) ($27,058) ($27,870) ($28,706) ($29,567) ($30,454) ($31,368) ($32,309) ($33,278) ($34,277) ($35,305) ($36,364) ($37,455)

$2,327,651 $2,397,480 $2,469,404 $2,543,487 $2,619,791 $2,698,385 $2,779,336 $2,862,717 $2,948,598 $3,037,056 $3,128,168 $3,222,013 $3,318,673 $3,418,233 $3,520,780

$195,000 $202,800 $210,912 $219,348 $228,122 $237,247 $246,737 $256,607 $266,871 $277,546 $288,648 $300,194 $312,201 $324,689 $337,677$102,000 $106,080 $110,323 $114,736 $119,326 $124,099 $129,063 $134,225 $139,594 $145,178 $150,985 $157,024 $163,305 $169,837 $176,631

Management Fees - 5.0% $116,383 $119,874 $123,470 $127,174 $130,990 $134,919 $138,967 $143,136 $147,430 $151,853 $156,408 $161,101 $165,934 $170,912 $176,039$87,000 $90,480 $94,099 $97,863 $101,778 $105,849 $110,083 $114,486 $119,066 $123,828 $128,781 $133,933 $139,290 $144,861 $150,656

$283,500 $294,840 $306,634 $318,899 $331,655 $344,921 $358,718 $373,067 $387,989 $403,509 $419,649 $436,435 $453,893 $472,048 $490,930$141,000 $146,640 $152,506 $158,606 $164,950 $171,548 $178,410 $185,546 $192,968 $200,687 $208,714 $217,063 $225,746 $234,775 $244,166

$30,000 $31,200 $32,448 $33,746 $35,096 $36,500 $37,960 $39,478 $41,057 $42,699 $44,407 $46,184 $48,031 $49,952 $51,950$81,000 $84,240 $87,610 $91,114 $94,759 $98,549 $102,491 $106,590 $110,854 $115,288 $119,900 $124,696 $129,684 $134,871 $140,266

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

$30,000 $30,000 $60,000 $60,000 $60,000 $60,000 $62,400 $64,896 $67,492 $70,192 $72,999 $75,919 $78,956 $82,114 $85,399$57,000 $59,280 $61,651 $64,117 $66,682 $69,349 $72,123 $75,008 $78,008 $81,129 $84,374 $87,749 $91,259 $94,909 $98,706

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0$1,122,883 $1,165,434 $1,239,653 $1,285,604 $1,333,356 $1,382,981 $1,436,951 $1,493,039 $1,551,329 $1,611,908 $1,674,866 $1,740,297 $1,808,298 $1,878,970 $1,952,420

$1,204,768 $1,232,046 $1,229,752 $1,257,883 $1,286,435 $1,315,404 $1,342,386 $1,369,677 $1,397,269 $1,425,148 $1,453,302 $1,481,716 $1,510,376 $1,539,263 $1,568,361

$1,047,624 $1,047,624 $1,047,624 $1,047,624 $1,047,624 $1,047,624 $1,047,624 $1,047,624 $1,047,624 $1,047,624 $1,047,624 $1,047,624 $1,047,624 $1,047,624 $1,047,624$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0$0 $0 $0 $0 $0 $3,910 $3,910 $3,910 $3,910 $3,910 $21,578 $21,578 $21,578 $21,578 $21,578$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

$1,047,624 $1,047,624 $1,047,624 $1,047,624 $1,047,624 $1,051,534 $1,051,534 $1,051,534 $1,051,534 $1,051,534 $1,069,202 $1,069,202 $1,069,202 $1,069,202 $1,069,202

$157,144 $184,422 $182,127 $210,258 $238,810 $263,870 $290,851 $318,143 $345,734 $373,613 $384,099 $412,514 $441,173 $470,061 $499,158

1.150 1.176 1.174 1.201 1.228 1.251 1.277 1.303 1.329 1.355 1.359 1.386 1.413 1.440 1.4671.150 1.176 1.174 1.201 1.228 1.251 1.277 1.303 1.329 1.355 1.359 1.386 1.413 1.440 1.4671.150 1.176 1.174 1.201 1.228 1.251 1.277 1.303 1.329 1.355 1.359 1.386 1.413 1.440 1.4671.150 1.176 1.174 1.201 1.228 1.251 1.277 1.303 1.329 1.355 1.359 1.386 1.413 1.440 1.467

48.2% 48.6% 50.2% 50.5% 50.9% 51.3% 51.7% 52.2% 52.6% 53.1% 53.5% 54.0% 54.5% 55.0% 55.5%87.7% 86.8% 87.1% 86.2% 85.4% 84.8% 84.2% 83.6% 83.0% 82.4% 82.5% 82.0% 81.5% 81.1% 80.7%

Other Income:Washer/Dryer RentalsCable Television Income

DESCRIPTIONRevenue

Gross Potential Rental Revenue

Miscellaneous IncomeInterest Income

Total Effective Gross Revenue

Expenses

Gross Potential IncomeLess:

Fixed:TaxesInsurance

Variable:

General and AdministrativePayroll ExpensesUtilitiesMarketing and AdvertisingMaintenance and RepairsGrounds Maintenance and LandscapingSecurityReplacement ReserveContract Services (Trash Removal, Pool Maintenance, Security, etc.)Other:

Total Expenses

Net Operating Income

Other Fees - Letter of Credit/GuaranteeOther Fees - Agency/Trustee/Servicer

Total Debt Service Payments

Debt Service PaymentsFirst MortgageSecond MortgageThird Mortgage

Break-Even Ratio

Debt Service Coverage RatiosDebt Service Coverage - First Only (incl. Negative Arbitrage)Debt Service Coverage - First and SecondDebt Service Coverage - All Mortgages

Operating Income After Debt Service - Before Tax Cash Flow

Debt Service Coverage - All Mortgages and Fees

Financial RatiosOperating Expense Ratio


BRISTOL BAY APARTMENTS Features and Amenities

Exhibit 7

Seltzer management Group, Inc. July 18, 2003 1


Exhibit 7



Exhibit 7



Exhibit 7


BRISTOL BAY APARTMENTS Qualified Resident Programs

Exhibit 8

Seltzer Management Group, Inc. July 18, 2003

1

BRISTOL BAY APARTMENTS Qualified Resident Programs

Exhibit 8

Seltzer Management Group, Inc. July 18, 2003

2

Exhbit 9aJorge Lopez

Schedule of Contingent LiabilitiesMay 14, 2003

Annual ReleaseProject No. Of Comp. Current First Second Debt Deficit Type Of Date OfName Location Units Date Occup. Mortgage Mortgage Service Funding Guaranty Guaranty

Siesta Pointe Miami 392 Jan-99 99% $13,305,000 $600,000 $1,177,860 $0.00 100% Apr-03

Cypress Trace Brandon 348 Dec-99 97% $16,865,000 $0 $1,225,000 $0.00 100% Jun-03

Heron Pointe Miramar 200 Dec-99 99% $9,200,000 $0 $518,785 $0.00 100% Oct-03

Villa Esperanza Miami 192 Dec-99 100% $8,465,000 $600,000 $522,606 $0.00 100% Jan-03

Cross Key Broward 240 Sep-99 98% $16,970,000 $380,680 $1,150,037 $0.00 100% May-03

Doral Terrace Miami 256 Apr-00 99% $20,317,500 $650,000 $1,015,620 $0.00 100% Aug-04

Eagles Landings Miami 321 Oct-00 99% $8,250,461 $0 $708,521 $0.00 100% Nov-04

Hidden Cove Miami 144 Jun-00 99% $3,041,306 $780,116 $280,452 $0.00 100% May-04

Crossings Miami 320 May-00 100% $13,305,000 $0 $843,627 $0.00 100% Feb-04

Logans Jacksonville 248 Sep-00 97% $12,552,364 $200,000 $860,329 $0.00 100% Jun-04

Banyan Broward 300 Jun-01 100% $17,605,000 $0 $1,193,145 $0.00 100% Mar-05

Clipper Tampa 176 Mar-01 95% $7,685,000 $0 $607,068 $0.00 100% Sep-05

Bridgewater Broward 312 Dec-01 99% $19,675,000 $0 $1,214,891 $0.00 100% Jul-04

88%Bernwood Ft. Myers 340 Nov-00 $16,394,417 $0 $1,096,142 $0.00 100% Dec-04

Sabal St. Lucie 340 Aug-01 91% $16,064,949 $0 $1,138,182 $0.00 100% May-05

Marbrisa Miami 368 Aug-01 98% $17,060,000 $0 $1,149,523 $0.00 100% Feb-06

Sundance Jacksonville 288 Dec-01 86% $16,285,000 $0 $1,109,465 $0.00 100% Aug-06

Monterey Homestead 340 Under 99% $14,602,825 $0 Under Under 100% May-06Construction Construction Construction

Mission Bay Melbourne 360 Under 95% $15,740,000 $0 Under Under 100% Jul-07Construction Construction Construction

Hunters Run Clay County 304 Under 57% $10,080,000 $0 Under Under 100% Mar-07Construction Construction Construction

Mallards Jacksonville 388 Under 0% $16,730,000 $0 Under Under 100% May-07Construction Construction Construction

Indian Trace Riveira Beach 330 Under 13% $23,770,000 $0 Under Under 100% Jun-08Construction Construction Construction

Exhbit 9aJorge Lopez


St. Croix Broward County 246 Under 0% $18,095,000 $0 Under Under 100% Oct-08Construction Construction Construction

San Marco Ormond Beach 260 Under 45% $14,100,000 $0 Under Under 100% Feb-08Construction Construction Construction

Laguna pointe Broward County 188 Under 0% $13,300,000 $0 Under Under 100% Apr-06Construction Construction Construction

Mariners Cove Tampa 208 Under 28% $11,715,000 $0 Under Under 100% Jun-07Construction Construction Construction

San Marino At Naples Naples 350 May-02 93% $23,000,000 $3,000,000 $1,871,800 $0.00 100% Sep-03

San Marino At Bear Lakes West Palm Beach 355 Under 75% $26,500,000 $0 Under Under 100% May-04

Construction Construction Construction

Villa del Sol Boyton Beach 312 Under 85% $22,300,000 $0 Under Under 100% Jun-04Construction Construction Construction

Portofino West Palm Beach 270 Under 0% $20,020,000 $0 Under Under 100% Sep-06Construction Construction Construction

Baywinds Miami 204 Under 20% $9,670,000 $1,000,000 Under Under 100% Sep-05Construction Construction Construction

Eagle Pointe Broward 192 Under 0% $12,285,000 $0 Under Under 100% Oct-06Construction Construction Construction

Captiva Club Miami 136 Under 0% $6,820,000 $1,000,000 Under Under 100% Sep-05Construction Construction Construction

Renaissance West Palm Beach 344 Under 0% $24,375,000 $0 Under Under 100% Nov-06Construction Construction Construction

Carolina Daytona 224 Jun-02 97% $10,910,000 $2,000,000 $845,622 $0.00 100% Feb-06

Certification: I hereby certify that this statement is a complete and accurate representation of the cash flows and contingent liabilities as of the date of this statement

Jorge Lopez May 14, 2003Signature: Date:

Exhibit 9bStuart I. Meyers



Siesta Pointe Miami 392 Jan-99 99% $13,305,000 $600,000 $1,177,860 $0.00 100% Apr-03

Cypress Trace Brandon 348 Dec-99 97% $16,865,000 $0 $1,225,000 $0.00 100% Jun-03

Heron Pointe Miramar 200 Dec-99 99% $9,200,000 $0 $518,785 $0.00 100% Oct-03

Villa Esperanza Miami 192 Dec-99 100% $8,465,000 $600,000 $522,606 $0.00 100% Jan-03

Cross Key Broward 240 Sep-99 98% $16,970,000 $380,680 $1,150,037 $0.00 100% May-03

Doral Terrace Miami 256 Apr-00 99% $20,317,500 $650,000 $1,015,620 $0.00 100% Aug-04

Eagles Landings Miami 321 Oct-00 99% $8,250,461 $0 $708,521 $0.00 100% Nov-04

Hidden Cove Miami 144 Jun-00 99% $3,041,306 $780,116 $280,452 $0.00 100% May-04

Crossings Miami 320 May-00 100% $13,305,000 $0 $843,627 $0.00 100% Feb-04

Logans Jacksonville 248 Sep-00 97% $12,552,364 $200,000 $860,329 $0.00 100% Jun-04

Banyan Broward 300 Jun-01 100% $17,605,000 $0 $1,193,145 $0.00 100% Mar-05

Clipper Tampa 176 Mar-01 95% $7,685,000 $0 $607,068 $0.00 100% Sep-05

Bridgewater Broward 312 Dec-01 99% $19,675,000 $0 $1,214,891 $0.00 100% Jul-04

88%Bernwood Ft. Myers 340 Nov-00 $16,394,417 $0 $1,096,142 $0.00 100% Dec-04

Sabal St. Lucie 340 Aug-01 91% $16,064,949 $0 $1,138,182 $0.00 100% May-05

Marbrisa Miami 368 Aug-01 98% $17,060,000 $0 $1,149,523 $0.00 100% Feb-06

Sundance Jacksonville 288 Dec-01 86% $16,285,000 $0 $1,109,465 $0.00 100% Aug-06

Monterey Homestead 340 Under 99% $14,602,825 $0 Under Under 100% May-06Construction Construction Construction

Mission Bay Melbourne 360 Under 95% $15,740,000 $0 Under Under 100% Jul-07Construction Construction Construction

Hunters Run Clay County 304 Under 57% $10,080,000 $0 Under Under 100% Mar-07Construction Construction Construction

Mallards Jacksonville 388 Under 0% $16,730,000 $0 Under Under 100% May-07Construction Construction Construction



San Marco Ormond Beach 260 Under 45% $14,100,000 $0 Under Under 100% Feb-08

Exhibit 9bStuart I. Meyers





San Marino At Naples Naples 350 May-02 93% $23,000,000 $3,000,000 $1,871,800 $0.00 100% Sep-03

San Marino At Bear Lakes West Palm Beach 355 Under 75% $26,500,000 $0 Under Under 100% May-04


Villa del Sol Boyton Beach 312 Under 85% $22,300,000 $0 Under Under 100% Jun-04Construction Construction Construction





Renaissance West Palm Beach 344 Under 0% $24,375,000 $0 Under 100% Nov-06Construction Construction Construction

Carolina Daytona 224 Jun-02 97% $10,910,000 $2,000,000 $845,622 $0.00 100% Feb-06


Stuart Meyers May 14, 2003Signature: Date:

Exhibit 9cLeon J. Wolfe














Leon J. Wolfe May 14, 2003Signature: Date:

Exhibit 9dMara S. Mades














Mara S. Mades May 14, 2003Signature: Date:

Exhibit 9eCornerstone Group Development, L.L.C.














Leon J. Wolfe, President of Cornerstone Group Development, LLCMay 14, 2003Signature: Date: