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This workbook was designed specifically for the Houston, Texas seminar held on December 3, 2009.
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TEXAS AFFILIATION OF AFFORDABLE HOUSING PROVIDERS
814 San Jacinto Blvd., Ste. 480, Austin, TX, 78701 l Tel: 512.476.9901 l Fax: 512-476-9903 l www.taahp.prg l www.texashousingconference.org
December 1, 2009 Welcome to the Texas Affiliation of Affordable Housing Providers (TAAHP) 4th Quarter Executive Management Series on housing production. TAAHP is pleased to have the opportunity of providing you with a comprehensive look at financing today. As our industry struggles to secure a financing product in today’s market, the US Department of Housing and Urban Development (HUD) and the Texas Department of Housing and Community Affairs (TDHCA) will present viable options in helping you meet your business plan. The TAAHP 4th Quarter Executive Management Series is supported and underwritten by our following partners: Coats Rose, Davis-Penn Mortgage Co., Dougherty Mortgage, LLC, Gardere, and Shackelford, Melton & McKinley Attorneys and Counselors. The TAAHP Executive Management Series provides informative and “how to” educational sessions to the housing industry throughout the year. We encourage you to take a few minutes and go to our website www.taahp.org for a general overview of our member services as well as www.taahp.org/education.html for future Executive Management Series and scheduling. You can help us improve on our Series by sharing your comments regarding the 4th quarter sessions or inquiries into future educational needs at [email protected] or tell us while at www.taahp.org . We hope you will mark your calendars for the State’s premier 2010 Texas Housing Conference, July 26 – 28, 2010, Four Seasons Hotel, Austin, Texas. The Summer Executive Management Educational Series and networking with fellow “housers”, suppliers, vendors and professional services providers will provide unlimited opportunities to enhance your bottom line. We look forward to seeing you again soon and at the Texas Housing Conference in July. Best Regards,
Jim T. Brown Executive Director
OFFICERS: PRESIDENT: LINDA MCMAHON NEIGHBORHOOD STRATEGIES, LLC IMMEDIATE PAST PRESIDENT: MIKE SUGRUE SOLUTIONS PLUS! PRESIDENT-ELECT: DAN MARKSON THE NRP GROUP VICE PRESIDENT: TONI JACKSON COATS ROSE VICE PRESIDENT: BARRY KAHN HETTIG-KAHN TREASURER: GEORGE LITTLEJOHN NOVOGRADAC & CO. LLP SECRETARY: NICOLE FLORES PNC MULTIFAMILY
CAPITAL DIRECTORS: MAHESH AIYER WELLS FARGO BANK SARAH ANDERSON S. ANDERSON
CONSULTING SALLY GASKIN SGI VENTURES, INC. DENNIS HOOVER HAMILTON VALLEY MANAGEMENT, INC. ROBERT JOHNSTON NATIONAL EQUITY FUND MARK MAYFIELD TEXAS HOUSING
FOUNDATION JEFFREY SPICER STATE STREET HOUSING ADVISORS, L.P. RON WILLIAMS SOUTHEAST TEXAS
HOUSING FINANCE CORPORATION JERRY WRIGHT DOUGHERTY & COMPANY, LLC EXECUTIVE DIRECTOR: JIM T. BROWN
rev. - August 2009
O f f i c e r s President Linda McMahon (11) Neighborhood Strategies LLC 4460 St. Andrews Blvd Irving, TX 75038 T: (214) 596-9162 F: N/A [email protected] ---------------------------------------------- Immediate Past President Mike Sugrue (10) Solutions Plus 1302 South 3rd, Ste. 105 Mabank, TX 75147 T: (903) 887-4344 F: (903) 334-4355 [email protected] ---------------------------------------------- President Elect Dan Markson (10) The NRP Group 111 Soledad, Ste. 1220 San Antonio, TX 78205 T: (210) 487-7878 F: (210) 487-7880 [email protected] ---------------------------------------------- Vice President Toni Jackson (11) Coats Rose 3 Greenway, Ste. 2000 Houston, TX 77046 T: (713) 653-7392 F: (713) 890-3928 [email protected] ---------------------------------------------- Vice President Barry Kahn (10) Hettig-Kahn Development, Co. 5325 Katy Freeway, Ste. One Houston, TX 77007 T: (713) 871-0063 F: (713) 871-1916 [email protected] ----------------------------------------------
Treasurer George Littlejohn (10) Novogradac & Company LLP 11044 Research Blvd., Bldg. C, Ste. 400 Austin, TX 78759 T: (512) 340-0420 F: (512) 340-0421 george.littlejohn@ novoco.com ---------------------------------------------- Secretary Nicole Flores (12) PNC MultiFamily Capital 1717 W. 6th St., Ste. 262 Austin, TX 78703 T: (512) 391-9084 F: (512) 454-8021 [email protected] ----------------------------------------------
D i r e c t o r s Mahesh Aiyer (12) Wells Fargo Bank, N.A. 1000 Louisiana, Suite 1030 Houston, TX 77002 T: (713) 319-1489 F: (713) 319-1794 mahesh.aiyer@ wellsfargo.com Sarah Anderson (12) S. Anderson Consulting 1305 E. 6th, #12 Austin, TX 78702 T: (512) 554-4721 F: (512) 231-8580 sarah@ sarahandersonconsulting.com Mike Clark (10) Alpha-Barnes Real Estate Services 12720 Hillcrest, Ste. 400 Dallas, TX 75230 T: (972) 643-3205 F: (972) 503-7569 [email protected] Sally Gaskin (11) SGI Ventures, Inc. 1800 Bering Dr., Ste. 501 Houston, TX 77057 T: (713) 334-4911 F: (713) 334-5614 [email protected] Dennis Hoover (12) Hamilton Valley Mgmt., Inc. P.O. Box 190 Burnet, TX 78611 T: (512) 756-6809 F: (512) 756-9885 dennishoover@ hamiltonvalley.com
“Increasing the supply and quality of affordable housing for Texans with limited incomes and special needs”
Texas Affiliation of Affordable Housing Providers: Board of Directors: 2009 - 2010
rev. - August 2009
D i r e c t o r s Robert Johnston (11) National Equity Fund P.O. Box 835727 Richardson, TX 75083 T: (972) 342-6621 F: N/A [email protected] Mark Mayfield (10) Texas Housing Foundation 1110 Broadway Marble Falls, TX 78654 T: (830) 693-4521 F: (830) 693-5128 [email protected] Jeffrey Spicer (12) State Street Housing Advisors, L.P. 5843 Royal Crest Dr. Dallas, TX 75230 T: (214) 346-0707 F: (214) 346-0713 jspicer@ statestreethousing.com Ron Williams (11) Southeast Texas Housing Finance Corp. 11111 S. Sam Houston Pkwy. East Houston, TX 77089 T: (281) 484-4663 x108 F: (281) 484-1971 [email protected] Jerry Wright (11) Jerry L. Wright Dougherty & Company LLC 410 East 5th Street, Suite 112 Austin, TX 78701 T: (512) 708-1555 F: (612) 235-3356 JWright@ doughertymarkets.com
E x - O f f i c i o Edwina Carrington (1999) Reznick Group, P.C. 100 Congress Ave., Ste. 480 Austin, TX 78701 T: (512) 494-9100 F: (512) 494-9101 edwina.carrington@ reznickgroup.com JOT Couch (02) Texas Inter-Faith 3131 West Alabama, Ste. 300 Houston, TX 77089 T: (713) 526-6634 ext. 22 F: (713) 526-7019 [email protected] Dick Kilday (00) Kilday Realty Corp. 1717 Saint James Pl., Suite 150 Houston, TX 77056-3421 T: (713) 914-9400 F: (713) 914-9439 [email protected]
Mike Lankford (04) Lankford Interests, LLC 4900 Woodway, Ste. 750 Houston, TX 77056 T: (713) 626-9655 F: (713) 621-4947 mlankford@ lankfordinterests.com Granger MacDonald (07) MacDonald & Assoc., Inc. 2951 Fall Creek Kerrville, TX 78028 T: (830) 257-5323 F: (830) 251-3168 gmacdonald@ macdonald-companies.com Diana McIver (06) DMA Development Co., LLC 4101 Parkstone Heights Dr., Ste. 310 Austin, TX 78746 T: (512) 328-3232 ext. 65 F: (512) 328-4584 [email protected] John R. Pitts (09) John R. Pitts P.O. Box 27130 Houston, TX 77227 T: (713) 552-1854 F: N/A [email protected]
Past Presidents--- - - - - - - - - - - - - - - - - - - - - - - - - - 2008 - 2009: Mike Sugrue, Solutions Plus!
2007 - 2008: Mike Clark, Alpha-Barnes Real Estate Services
2006 - 2007: Granger MacDonald, MacDonald & Associates
2005 - 2006: Diana McIver, DMA Development Co., LLC
2004 - 2005: Jerry Wright, Dougherty & Company LLC
2003 - 2004: Mike Lankford, Lankford Interests, LLC
2002 - 2003: Chris Bergman, TCR Affordable Housing, Inc.
2001 - 2002: JOT Couch, Texas Inter-faith Supportive Services
2000 - 2001: Sally Gaskin, SGI Ventures, Inc.
1999 - 2000: Dick Kilday, Kilday Realty Corp
“TAAHP is the leading organization of affordable housing professionals representing the affordable housing industry in Texas.”
www.taahp.org
who we areThe Texas A� liation of A�ordable Housing Providers (TAAHP) is an organization of more than 180 state and national housing providers dedicated to ensuring everyone has a safe and a�ordable place to live. Our members include single and multifamily developers, builders and owners, property managers, investors, lenders, syndicators, architects, attorneys, market analysts, engineers, and nonpro�t organizations.
Through its government relations e�orts, TAAHP projects a powerful voice advocating the interests of the a�ordable housing industry in Texas. TAAHP addresses the e�ects of housing shortages on low income individuals ranging from school teachers, EMS personnel, �re�ghters, police o� cers, nurses, social service workers, and others whose income level falls between government assistance and market rate rental housing standards. Since 1997 TAAHP members have placed in service tens of thousands of a�ordable rental housing units across the state of Texas and the Nation.
what we do Build successful business relationships
Represent tens of thousands of a�ordable housing units
Work for laws, regulations, and programs necessary for the development of a viable a�ordable housing inventory in Texas
Support our members through various services ranging from merchandising to health care programs
community
taahp.org
taahp-pac
Your Voice and Vigilance in Austin
impact
legislative representation
“TAAHP is the leading organization of a�ordable housing professionals representing the a�ordable housing industry in Texas.”
health bene�tprogram
become a member today - see reverse side for detailsFor more information visit www.taahp.org or call (512) 476-9901.
American Express Discover MasterCard VISA
Check (make payable to
Credit Card #_______________________________________________
Expiration Date________________Veri�cation Number_____________
Name (as it appears on card)___________________________________
Signature___________________________________________________A 3% processing fee will be added to all credit card transactions.
Member Information
Date______________________________________________________________
Company/Organization__________________________________________
Name___________________________________________________________
Address_________________________________________________________
Tel________________________________________________________________
Fax_______________________________________________________________
State_____________________________Zip_____________________________
Website__________________________________________________________
Email ____________________________________________________________
Title_____________________________________________________________
City______________________________________________________________
Method of Investment
Voting Membership
Lifetime Membership - $10,000.00A member in this category shall have all privileges of an Active Member, and is entitled to this designation by paying a one-time membership dues fee as determined annually by the TAAHP Board of Directors. Member-ship services (excluding meeting registration fees) shall continue for the business entity’s lifetime, their resignation, or demise of the organization, whichever occurs �rst.
Active Membership - $550.00Any business, �rm, corporation, partnership, sole proprietorship, individual professional or other legal business entity which is involved in the a�ordable housing industry or provides services, supplies or equipment for the a�ordable housing industry and is directly interested in its welfare, complies with TAAHP Bylaws, pays current dues, and meets required membership quali�cations, is eligible for active membership in TAAHP and is entitled to one vote per membership, eligibility for service on the Board of Directors, and all committees following appointment.
Second Active Membership (non-voting)-$250.00
Third Active Membership (non-voting)-$100.00
Non-Voting Membership
Governmental / Regulatory Membership - $150.00Any individual associated with or responsible in any manner within the title of this category may join TAAHP after meeting the quali�ca-tions and paying dues determined by the Board of Directors.
Educators / Student Membership - $50.00Any individual directly associated with an institution of higher learning and whose �eld of study and expertise is related to the �eld of a�ordable housing may join the Organization by meeting the quali�cations and paying dues determined by the Board of Directors. Separate dues may be established for these two classi�cations: Educators and Student.
Federal Income Tax Notice: Membership Investments are not deductible as charitable contributions for federal incomes tax purposes; however, investments are deductible by members as an ordinary business expense. A portion of investments are not deductible as an ordinary business expense to the extent TAAHP engages in lobbying. The non-deductible portion of investments for 2010 is 10%.
_____________________________
______________________________________________________________
_________________________________________________________
_____________________________Zip_____________________________
______________________________________________________________
_________________________________________________________
_____________________________
______________________________________________________________
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Texas A� liation of A�ordable Housing Providers2010 Membership Investment Form
814 San Jacinto Blvd., Suite 408 Austin, TX 78701 512.476.991 512.476.9903 www.taahp.org
Send to: Mail 814 San Jacinto Blvd., Suite 408 Fax 512.476.9903 Online www.taahp.org
SAVETHE
DATE
2010 - A HOUSING ODYSSEY
texashous ing
conference
JOIN NAT IONAL &INTERNAT IONAL
AFFORDABLE HOUSING
INDUSTRY PROFESSIONALS IN
AUST IN, TX TO EXCHANGE
KNOWLEDGE, D ISCOVER
SOLUT IONS, AND NETWORK!
2009 PLAT INUM PARTNERS
WAS YOUR STATEAMONG THOSEREPRESENTEDIN 2009?
26 - 28, 2010FOUR SEASONS HOTEL
AUSTIN, TEXAS
www.texashous ingconference.org
Texas Housing Conference
QUICK FACTS
30%
23%9%
8%
6%
6%
6%
4%3%
3%2%
Developer/Owner
Investor/Lender/Syndicator
Government
Housing Finance Corporation/Market
Analysis/Professional Services
Property Management/Real Estate Services
Trade Associations/Others
Legal Services
Architects/Engineers/Construction
Vendor/Supplier
Local Public Housing
Utility Providers
www . t e xa shous i n gcon f e r e nce . o r g
Texas Housing ConferenceATTENDANCEBY SERVICE
2010 Marks the 12th anniversary of the Texas Housing Conference; Texas’ premier housing conference.
2010's Conference will be held at Austin’s magnificent Four Seasons Hotel located on Ladybird Lake in Austin’s cultural, central business and recreational district.
Expected attendance at the 2010 Texas Housing Conference is 500+.
Conference participants have helped provide over 300,000 affordable multifamily and single family housing units in Texas alone and more throughout the United States using USDA, HUD, and Tax Credit programs.
Regular attendance and participation of key Texas officials: Administrative and Legislative.
Regular support, attendance, and participation by the Governing Board and Executive Officers of the Texas Department of Housing and Community Affairs (TDHCA).
Conference partners range from affordable housing service providers to construction material and appliance suppliers.
Over 20 educational sessions addressing legislative policies, sustainable design, market issues, financing, equity, compliance and construction related issues will be offered.
Local, national, and international speakers.
ATAA TORNEYS & COUNSELORS
Texas Department of Housing and Community
Affairs
2010 Regional Allocation
Estimated State Credit Ceiling is $51 million
85% of the State Credit Ceiling to be divided
between the 13 State Service Regions and
further split into urban and rural areas
Statewide rural collapse (first) Statewide urban/rural collapse (second)
13 State Service Regions
2010 Regional Allocation
Region Geographic RegionRegional Amount
Regional %
Rural Amount Rural %
Urban Amount
Urban %
1 Lubbock $ 1,581,297 3.6% $ 614,986 38.9% $ 966,311 61.1%
2 Abilene $ 787,781 1.8% $ 556,545 70.6% $ 231,236 29.4%
3 Dallas/Ft Worth Metro $ 10,741,365 24.7% $ 1,123,991 10.5% $ 9,617,373 89.5%
4 Tyler $ 1,618,171 3.7% $ 908,883 56.2% $ 709,288 43.8%
5 Beaumont $ 1,189,640 2.7% $ 655,179 55.1% $ 534,460 44.9%
6 Houston Metro $ 9,455,772 21.8% $ 892,787 9.4% $ 8,562,985 90.6%
7 Austin Metro $ 2,942,660 6.8% $ 617,443 21.0% $ 2,325,216 79.0%
8 Waco $ 2,141,376 4.9% $ 594,798 27.8% $ 1,546,578 72.2%
9 San Antonio Metro $ 3,456,058 8.0% $ 631,952 18.3% $ 2,824,106 81.7%
10 Corpus Christi $ 1,495,468 3.4% $ 592,835 39.6% $ 902,633 60.4%
11 Brownsville/Harlingen $ 5,134,386 11.8% $ 1,877,986 36.6% $ 3,256,401 63.4%
12 San Angelo $ 889,167 2.0% $ 559,410 62.9% $ 329,757 37.1%
13 El Paso $ 1,990,508 4.6% $ 590,535 29.7% $ 1,399,973 70.3%
Total $ 43,423,648 100% $ 10,217,329 23.5% $ 33,206,319 76.5%
15% At-Risk development - $7,662,997
5% TRDO USDA - $2,554,332
20% Rural developments - $10,217, 329 ($500,000
in each region)
$14.9 Million Ike Affected Counties
2010 Allocation Set-Asides
At-Risk Set-Aside Requirements
Development must be at risk of losing all affordability from all of the financial benefits available on the Development.
Sections 221(d)(3) and (5), National Housing Act (12 U.S.C. §17151);Section 236, National Housing Act (12 U.S.C. §1715z-1);Section 202, Housing Act of 1959 (12 U.S.C. §1701q);Section 101, Housing and Urban Development Act of 1965 (12 U.S.C. §1701s);Section 8 Additional Assistance Program for housing Developments with HUD-Insured and HUD-Held Mortgages administered by the United States Department of Housing and Urban Development;Section 8 Housing Assistance Program for the Disposition of HUD- Owned Projects administered by the United States Department of Housing and Urban Development;Sections 514, 515, and 516, Housing Act of 1949 (§42 U.S.C. §§1484, 1485, and 1486); and/orSection 42, of the Internal Revenue Code of 1986 (26 U.S.C. §42)
One Mile / Three Year Rule One Mile / Three Year Rule Applies to counties over 1 million in populationApplies to counties over 1 million in populationDevelopments proposing new construction or Developments proposing new construction or Adaptive Reuse within one mile of another Adaptive Reuse within one mile of another development serving the same population that development serving the same population that received housing tax credits in the previous received housing tax credits in the previous three yearsthree yearsLocal ResolutionLocal Resolution§§2306.6703(a)(3) Texas Government Code2306.6703(a)(3) Texas Government Code
Texas Statutory LimitationsTexas Statutory Limitations
Texas Statutory LimitationsTexas Statutory Limitations
2 X Per Capita 2 X Per Capita Municipality or County that has twice the Municipality or County that has twice the state average of units per capita supported state average of units per capita supported by housing tax credits or private activity by housing tax credits or private activity bonds. bonds. Local ResolutionLocal Resolution§§2306.6703(a)(4) Texas Government Code2306.6703(a)(4) Texas Government Code
Texas Statutory LimitationsTexas Statutory Limitations
One Mile / Same Year Rule One Mile / Same Year Rule Applies to counties over 1 million in Applies to counties over 1 million in populationpopulationTwo applications being proposed in the Two applications being proposed in the same application round that are within one same application round that are within one mile of each othermile of each other§§2306.67021 Texas Government Code2306.67021 Texas Government Code
$2 million limitation$2 million limitation$2 million limitation to any applicant, developer, $2 million limitation to any applicant, developer, related party or guarantorrelated party or guarantor§§2306.67021 Texas Government Code2306.67021 Texas Government Code
Texas Statutory LimitationsTexas Statutory Limitations
Texas Development LimitationsTexas Development Limitations
Census tracts with >30% of the households Census tracts with >30% of the households served by Housing Tax Creditsserved by Housing Tax Credits
QCT tract with >40% of the households QCT tract with >40% of the households served by Housing tax credits are not served by Housing tax credits are not eligible for 30% increase in eligible basiseligible for 30% increase in eligible basis
16 Unit Minimum16 Unit Minimum 252 Unit Max with 200 LI Unit Max252 Unit Max with 200 LI Unit Max 80 Unit Max for Rural developments80 Unit Max for Rural developments
HousingTax CreditTimeline
12/08/200912/08/2009 2010 Application Acceptance 2010 Application Acceptance Period BeginsPeriod Begins
01/08/201001/08/2010 2010 Pre2010 Pre--Application DeadlineApplication Deadline
02/15/201002/15/2010 Experience Certification RequestExperience Certification Request
03/01/201003/01/2010 2010 Full Applications Due 2010 Full Applications Due
04/01/201004/01/2010 ThirdThird--Party Reports / Resolutions Party Reports / Resolutions DueDue
MidMid--MayMay Final Scoring Notices IssuedFinal Scoring Notices Issued
Late JuneLate June Release of Eligible Applications Release of Eligible Applications for Consideration for Award in for Consideration for Award in JulyJuly
2010 Housing Tax Credit Timeline2010 Housing Tax Credit Timeline
Late JulyLate July Final AwardsFinal Awards
MidMid--AugAug Commitments IssuedCommitments Issued
11/01/201011/01/2010 Carryover Documentation DueCarryover Documentation Due
06/30/201106/30/2011 10% Test Documentation10% Test Documentation
12/01/201112/01/2011 Documentation of Documentation of Commencement of Commencement of Substantial Construction Due Substantial Construction Due
12/31/201212/31/2012 Placement in ServicePlacement in Service
2010 Housing Tax Credit Timeline2010 Housing Tax Credit Timeline
Texas Bond Volume Cap
Approximately $481 million in 2010 regular volume cap for multifamily housing
TDHCA Set Aside is approximately $96 million
Application Materials
2010 Application Submission Procedures Manual (ASPM) 2010 Payment Receipt 2010 Uniform Application 2010 Intent to Request 2010 Competitive 9% HTC Pre-Application2010 Quantifiable Community Participation Packet
www.tdhca.state.tx.us/multifamily/Applications.htm
Application Reference Material
2010 HTC Reference Manual 2010 Final Qualified Allocation Plan and Rules (Will be provided when signed by Governor Rick Perry)www.tdhca.state.tx.us/multifamily/Applications.htm
2010 Multifamily Bond Rules2010 Multifamily Bond Pre-Applicationwww.tdhca.state.tx.us/multifamily/bond/index.htm
Common Mistakes
Application or Applicant is ineligible;
Documents were not correctly executed;
All deficiencies were not fully satisfied by the
deadline;
3rd Party Reports were not submitted by deadline;
Documents were not in the correct applicant name;
Inconsistent information in the Application; or
Age of documentation limit was exceeded.
Electronic Submission
The following information may be submitted directly on the TDHCA website: Application Third Party Reports Deficiencies Any large documents required to fulfill application
requirements Post Award Documentation
Regulations, Statues and RulesRegulations, Statues and Rules
oo §§§§42 and 142 of the Internal Revenue Code42 and 142 of the Internal Revenue Codeoo §§2306 of the Texas Government Code2306 of the Texas Government Codeoo §§1372 of the Texas Government Code1372 of the Texas Government Codeoo CFR 24 (Code of Federal Regulations) HOMECFR 24 (Code of Federal Regulations) HOMEoo 10 TAC 10 TAC §§50 Qualified Allocation Plan and Rules50 Qualified Allocation Plan and Rulesoo 10 TAC 10 TAC §§33 Multifamily Revenue Bond Rules33 Multifamily Revenue Bond Rulesoo 10 TAC 10 TAC §§§§1.311.31--1.37 Real Estate Analysis Rules1.37 Real Estate Analysis Rulesoo 10 TAC 10 TAC §§53 HOME Rules 53 HOME Rules oo 10 TAC 10 TAC §§51 Housing Trust Fund Rules51 Housing Trust Fund Rules
Texas Department of Housing and Community Affairs
Multifamily Contacts:
Robbye Meyer [email protected] of Multifamily Finance – (512) 475-2213
Teresa Morales [email protected] / 4% HTC Program Administrator – (512) 475-3344
Raquel Morales [email protected] HTC Program Administrator – (512) 475-1676
Teresa Shell [email protected] Program Exchange Administrator – (512) 936-7834
Lisa Fehr [email protected] Program Exchange Specialist – (512) 936-7833
Ben Sheppard [email protected] Housing Specialist, HTC Amendments – (512) 475-2122
Shannon Roth [email protected] Housing Specialist, Bond/ 4% – (512) 475-3929
Nicole Fisher [email protected] Housing Specialist, QCP – (512) 475-2201
Multifamily Contacts:
Kent Bedell [email protected] Housing Specialist, HTC Extensions, Bond/ 4% – (512) 475-3882
Elizabeth Henderson [email protected] Housing Specialist, HTC Ownership Transfer – (512) 475-9784
Valentin Deleon [email protected] Housing Specialist, Experience Certificates – (512) 475-3061
Liz Cline [email protected] Housing Specialist, IRS Reporting – (512) 475-3227
Jason Burr [email protected] Administrator- Application Technical Assistance – (512) 475-3986
Misael Arroyo [email protected] Executive Assistant – (512) 475-2596
Main Multifamily Telephone – (512) 475-3340Multifamily Facsimile – (512) 475-0764 or (512) 475-1895
Texas Department of Housing and Community Affairs
Real Estate Analysis Contacts:
Brent Stewart [email protected] of Real Estate Analysis, (512) 475-2973
Audrey Martin [email protected] of Real Estate Analysis, (512) 475-3872
Compliance and Asset Management Contacts:
Patricia Murphy [email protected] of Compliance and Asset Management, (512) 475-3140
Wendy Quackenbush [email protected] of Compliance, (512) 305-8860
Texas Department of Housing and Community Affairs
HOME and Tax Credit Assistance Program Contacts:
Cameron Dorsey [email protected] Program Manager – (512) 475-2669
Chris Law [email protected] Program Administrator – (512) 305-8854
Lisa Vecchietti [email protected] Credit Assistance Program Administrator – (512) 936-7791
Laura DeBellas [email protected] Credit Assistance Program Specialist – (512) 475-3821
Texas Department of Housing and Community Affairs
Doing Business with HUDDoing Business with HUD
MULTIFAMILY PROGRAMSMULTIFAMILY PROGRAMS
HOUSTON MULTIFAMILY HOUSING PROGRAM CENTER
WHAT CAN HUD DO FOR YOU ?1
Better terms than conventional financing, provides Better terms than conventional financing, provides mortgage insurance, non-recourse loan, and we want to shorten our timeframes.
Two Primary HUD Programs:
221(d)(4)
223(f)
MULTIFAMILY PROGRAMS
.
Section 221d(4) Section 221d(4)
New Construction or Substantial Rehabilitation
40-year term
90 percent loan 90 percent loan
major repairs or rehab
Section 223f.
• 35-year term• 35-year term
• 85 percent loan to value
• acquisition of existing property• acquisition of existing property
• refinance of existing property
• minor repairs• minor repairs
HUD’s Role.
• Review Lender’s Narrative Environmental Review
• Review Phase I ESA, Phase II ESA, and Remediation Proposal.
• Communication with Lender on Areas of Concern
• Develop Special Conditions and Requirements for p p qEasily Correctable Environmental Concerns
(continued)
HUD’s Role.
• Complete Eight-Step Decision Making Process for p g p gFloodplains and/or Wetlands
• Complete Noise Analysis
• Complete Acceptable Separation Distance Calculations based on Projected Traffic Counts
• Include Special Conditions and Requirements, if known with Invitation Letter
• Include Final Version of Special Conditions and Requirements for FIRM Commitment
(continued)
HUD’s Role.
Communicate with Various Agencies for Communicate with Various Agencies for
Response to Inquiries to SHPO, F&W, USACE, etc.
Compile environmental data and Phase I ESA and any Phase II ESA attachment to HUD-4128 along with Phase II ESA attachment to HUD 4128 along with SFNC as support for your conclusions.
HUD’s Role.
• Forward Copy of Entire Environmental Assessment pywith Backup Documentation to Project Manager with FIRM Commitment Processing Report along with any S i l R i t d C ditiSpecial Requirements and Conditions
• Forward HUD-4128 and Backup Documentation to h i l ffi f jthe Environmental Officer for Projects Over 200
Units for Approval
• Reject projects with significant impact(s)
TOP TEN--reasons that stall or impede processing can be summed up into . . .can be summed up into . . .
.
LOCATION
LOCATION
LOCATIONLOCATION
Once you find a site:y.
NEED POSITIVE MARKET STUDY
U.S. Department of Housing And Urban Development
Need an Environmentally CLEAN SITE
Phase I Environmental Site Assessment free of any recognized environmental concerns (RECs).
Prepared in accordance with the American Society of Testing Materials Standard E 1527–05.
No older than 180 days unless updated by an environmental professional.
HUD Funds cannot be committed prior to the completion of the Environmental Assessment
U.S. Department of Housing And Urban Development
Historic Preservation
CLEARANCE FROM STATE HISTORICAL PRESERVATION OFFICER (SHPO)
Free From Wetlands
HUD is concerned about both the Jurisdictional and HUD is concerned about both the Jurisdictional and Non-Jurisdictional or Isolated Wetlandso The existence of wetlands means compliance with Executive Order p
11990, also called the
Eight-Step Decision Making Process which
i i li d i f l d• Requires a specialist to determine extent of wetlands
• Requires examining alternative sites
• Requires publishing two noticesRequires publishing two notices
• May require mitigation plan
• Timely process
OUTSIDE OF 100-YEAR FLOOD PLAIN
Executive Order 11988 discourages Federal agencies from initiating or participating in new construction within areas having special flood hazards.
HUD discourages development of the floodplain HUD discourages development of the floodplain
Proposed sites should be outside the base 100-year floodplain whenever Federal assistance is requested for the project
---Critical actions, such as Assisted Living Facilities and Nursing Homes means 500 year floodplainand Nursing Homes, means 500-year floodplain
Any existing building accepted for mortgage insurance which is located within a FEMA mapped floodplain is required to carry flood insurance:
FREE FROM EXCESSIVE NOISE
Roadways within 1000 feet Roadways within 1000 feetTrigger Noise Analysis of Noise 10 years into the Future
Railroads within 3000 feet Railroads within 3000 feet
Airports within 5 miles Sites must be located outside 2,500 feet of a civil airport runway or outside 5 p y
8,000 feet of a military airfield runway
Noise levels between 66 and 75 decibels must be attenuated
Noise levels over 75 decibels are considered excessiveNoise levels over 75 decibels are considered excessive
and generally unacceptable
High Voltage Transmission Power Line Towersg g
Absolutely NO development allowed within the fall y pdistance of these towers
HIGH-PRESSURE PIPELINES
No development within 10 feet of the boundary of p ysuch a pipeline easement
Pipelines traversing your site can also lead to portions that cannot be used for development
lti i l dresulting in excess land.
FREE FROM ADVERSEHEALTH AND SAFETY ISSUESHEALTH AND SAFETY ISSUES
ib i f i i il d Vibration from proximity to railroads
Proximity to drill sites, slush pits, etc.
Proximity to above-ground storage tanks containing hazardous materialsg
FREE FROM HARM TO NEIGHBORHOOD MARKETABILITY
Be certain your site is free from impact of grosslyff i i h offensive nuisances such as:
unsightly land usest l t cement plants
junkyards kennels kennels truck warehouses sewage treatment plants sewage treatment plants industrial plants dilapidated abandoned boarded up properties dilapidated abandoned boarded up properties
The Endangered Species Act of 1973
requires protection of listed or proposed q p p pendangered or threatened species or critical habitats.
j h ff li d d d Projects that can affect listed endangered or threatened species or critical habitats require consultation with the Department of Interior in consultation with the Department of Interior in compliance with the procedure of Section 7 of the Endangered Species Act (ESA). Only for new construction and conversion
activities does the ESA authority apply.
Physical activities cannot begin until the Environmental Assessment is completeEnvironmental Assessment is complete
The site must be a CLEAN site The site must be a CLEAN site
FHA Insured Property
Environmentally Safe living for our leaders of tomorrow
Combining
Low Income Housing Tax Credits with
HUD Multifamily Programs
Houston Multifamily Housing Program Center
25
Th f thi t f th t ti i The purpose of this segment of the presentation is to provide a brief overview of the utilization of LIHTC funds with Multifamily Programs at HUD. M ltif il H i i f th j di i i Multifamily Housing is one of the major divisions in the Office of Housing.
Discuss program-specific issues relative to combining outside sources of funds with HUD mortgage insurancemortgage insurance.
26
Housing and Economic Development Recovery Act .
On July 30, 2008, the Housing and Economic Development Recovery Act of 2008 (HERA) b P bli L 8 Titl VIII f HERA became Public Law 110-289. Title VIII of HERA, in subtitle B, cited as the “Housing Tax Credit Coordination Act of 2008 ” made changes to the Coordination Act of 2008, made changes to the multifamily programs of the Federal Housing Administration (FHA) to facilitate the use of such programs with Low-Income Housing Tax Credits.
Housing and Economic Development Recovery Act
.
Expands the use of FHA programs with Low-Income Housing Tax CreditsIncome Housing Tax Credits
Administrative and procedural changes implemented to expedite approvals
M L 8 i i ff Mortgagee Letter 2008-19 remains in effect.
Departmental clearance is underway relative to a final Master Lease policy to facilitate the use of final Master Lease policy to facilitate the use of tax credits.
HERA requires the Secretary to consult with the HERA requires the Secretary to consult with the Commissioner of the Internal Revenue Service.
The Department has published a Federal The Department has published a Federal Register Notice soliciting recommendations from the public regarding further administrative and procedural changes that may be implemented to facilitate processing.
29
Section 202 and Section 811 Mixed Finance Program
.
•HOUSING FOR THE ELDERLY/DISABLED
•COMBINED WITH CAPITAL ADVANCE FUNDING
•NEW CONSTRUCTION
•DEVELOPER’S FEE( C F R 8 9 1 . 8 0 5 )
Section 202 and Section 811 Mixed Finance ProgramMixed Finance Program
.
The intent of the Mixed Finance Program is to: The intent of the Mixed-Finance Program is to:
Leverage private-sector participation by allowing for-profit participation in the Section 202 Supportive Housing Program for Elderly and the S i 8 S i H i P f P i h Di bili i Section 811 Supportive Housing Program for Persons with Disabilities
Leverage private and public capital
Expedite the production of this scarce housing
Expand the supply of supportive housing for the elderly or persons with disabilities
S S O AS A RESULT OF HERA:
.
THERE ARE CHANGES TO HUD’S PROCESSING OF HUD S PROCESSING OF
CERTAIN FHA MORTGAGE INSURANCE APPLICATIONSINSURANCE APPLICATIONS
Changes to the HUD’s Processing of Certain FHA Mortgage Insurance ApplicationsFHA Mortgage Insurance Applications
.
h i f i i i h hAt the time of Firm Commitment issuance, when the ratio of loan proceeds to the actual cost of such projects is less than 80 percent the mortgagor will projects is less than 80 percent, the mortgagor will not be required to certify actual costs to HUD. In cases that are exempt from cost certification, a Cost pCertification Audit Fee, line 66, Section G., Form HUD-92264 will not be applicable.
< 80% = No Cost Certification.
Section 221(d)(4)Form HUD 92264-A Criteria 11Form HUD 92264 A Criteria 11.
11. Amount Based on Deduction of Grants, Loans, Tax Credits and Gifts for Mortgageable Items:
Total Project Replacement Cost (from Section G. Form HUD 92264) $ 13,000,000LIHTCs for Mortgageable Items ………………………………………………………. 5,000,000Maximum Insurable Mortgage Amount……………………………..…………. ..$ 8,000,000
$ 8,000,000 / $13,000,000 = 62%.
In this example a cost certification is not required under HERA for a LIHTC li i h i f l d h fi i i d j application. The ratio of loan proceeds to the firm commitment estimated project
replacement cost is less than 80%
HERA Provides :.
If the project is to receive the benefit of equity from Low-Income Housing Tax Credits, the Department may not require the escrowing of any of such equity, or accept any form of security in place thereof, such as a letter of credit The Department is in the as a letter of credit. The Department is in the process of making a conforming rule change to 24 CFR 200.54 to implement this provision of HERA.54 p p
LIHTC EQUITY.
An equity contribution schedule, acceptable
to HUD, must be provided prior to Initial , p p
Endorsement.
LIHTC EQUITY.
HUD will require, however, that an appropriate q , , pp pamount of the LIHTC Equity be invested in the project and applied to HUD approved items at the ti f I iti l E d t time of Initial Endorsement.
The initial installment of LIHTC Equity should be an amount that is equal to or exceeds twenty percent amount that is equal to or exceeds twenty percent (20%) of the total LIHTC Equity that will be available for the project.p j
PROCESSING/ENDORSEMENTBARRIERSBARRIERS
.
Syndication Agreement /Letter of Intent inconsistent with Underwritingg
GAP Funding not evidenced
Sources and Uses not accurate
APPS/Previous Participation findings
TRADITIONALTRADITIONALREQUIREMENTS
.
Operating Deficit Escrows.
Where proceeds from the proposed sale of a project receiving LIHTCs are used to fund the project receiving LIHTCs are used to fund the operating deficit escrow,, "Escrow Agreement Additional Contribution by Sponsors," or its y pequivalent will be amended to reflect the following:
Operating Deficit Escrows.
“ IT IS UNDERSTOOD AND AGREED that at the expiration of the escrow period, or at such earlier date as the Commissioner determines that the project has achieved sustaining occupancy and income any balance remaining on deposit must be income, any balance remaining on deposit must be transferred to the project's Replacement Reserve account.”account.
Syndication and Partnership Agreements.
In the case of Low Income Housing Tax Credit transactions, the application may include a Letter of Commitment to fund the required equity from a tax credit syndicator or investor. This Letter of Commitment must specify the amount pay in Commitment must specify the amount, pay-in schedule and other matters so that HUD and the Lender can ensure sufficient equity in a manner q ywhich meets HUD's other requirements.
Syndication and Partnership Agreements.
Must recite:
Estimated Total Project Costs and Sources of Financing g
HUD-estimated replacement cost and mortgage debtb
LIHTC Allocation terms generally consistent with those the HCA and FO have committed to with those the HCA and FO have committed to (so investors are fully informed of all cost and financing terms)g )
THANK YOU!!
.
Houston Multifamily Housing Program Center
Name Raynold Richardson, Director
Phone Number 713-718-3137
Fax Number 713-718-3272
Email Address [email protected]
Production Branch Crystal D. Rienth, Chief, Multifamily Production Margaret Lewis, Program Assistant Project Managers Jerilyn Carr Steve Cuellar Betty Fleming Sandra Krchnak Mortgage Credit Analysts Elsa Anderson Russell Brandes Lanita Harris-Thomas Architectural, Engineering & Cost Steve Harris, Cost Analyst Kenneth Pugh, Construction Analyst Jerry Pursley, Construction Analyst Valuation Crystal D. Rienth, Appraiser Debbie Straitwell, Appraiser Trainee
713-718-3156 713-718-3155 713-718-3153 713-718-3148 713-718-3154 713-718-3152 713-718-3149 713-718-3144 713-718-3150 713-718-3146 713-718-3243 713-718-3147 713-718-3156 713-718-3161
713-718-3245 713-718-3245 713-718-3245 713-718-3245 713-718-3245 713-718-3245 713-718-3245 713-718-3245 713-718-3245 713-718-3245 713-718-3245 713-718-3245 713-718-3245 713-718-3245
[email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected]
Financing Affordable Rental Properties
Financing LIHTC Properties with HUDFinancing LIHTC Properties with HUD
• HUD 221(d)4 Program RequirementsHUD 221(d)4 Program Requirements– Amortization up to 40 years
• Interest only during constructionInterest only during construction
• Draw down loan
• Fully amortizing, no balloon paymentsy g, p y
– 1.11x Debt Service Coverage Ratio
– Permanent Loan is Rate Locked at Closinge a e oa s a e oc ed a os g
– No NOI/Stabilization Requirement for Permanent Loan Conversion
Financing LIHTC Properties with HUDFinancing LIHTC Properties with HUD
• HUD 221(d)4 Program RequirementsHUD 221(d)4 Program Requirements – Davis Bacon Wage Rules
General Contractor must supply one of the– General Contractor must supply one of the following: 1)Payment and Performance Bond or,2) Letter of Credit equal to 15% of the contractLetter of Credit equal to 15% of the contract
– Annual Audit is required
– Cash Distributions limited to Surplus CashCash Distributions limited to Surplus Cash
– Payment of Social Services
Financing LIHTC Properties with HUDFinancing LIHTC Properties with HUD
• The 221(d)4 Loan ProcessThe 221(d)4 Loan Process– Feasibility Package
• Market Study & NOI Analysis• Phase One ESA (avoid 100 year Flood Plains, Wetlands, Railroad tracks, Airports, Electrical Transmission Lines, Natural Gas Lines and Storage Tanks)Natural Gas Lines and Storage Tanks)
• Site , Floor and Interior Wall Section Plans, Elevations • Show Site Control, Development Team Resumes• Non‐profit owners
– Contract for Housing Consultant Services– Preliminary Determination as a Non‐profit Sponsor– Development Agreement
Financing LIHTC Properties with HUDFinancing LIHTC Properties with HUD
• HUD Processing – 45 DaysHUD Processing 45 Days– Rejection or Invitation Letter is Issued
– Invitation Letter allows for 120 days (with three 30‐Invitation Letter allows for 120 days (with three 30day extensions) to file for the Firm Application
Financing LIHTC Properties with HUDFinancing LIHTC Properties with HUD
• Firm Application Processingpp g– Who is a Principal
• Any GP, LPs with more than a 25% interest, Stockholders or members of a corporation or LLC with more than 10% ownership, p p,Officers of the Board of a non‐profit sponsor, General Contractor, Managing Agent
– What Principals must provide• Previous Participation Certification (2530), Financial Statements, Credit Report, Supplement listing credit references (92013), Listing of Other Business Concerns
Architectural and Engineering Drawings– Architectural and Engineering Drawings• Plans and Construction Contract to be reviewed by lender/HUD• HERA allows Firm Application filing subject to Plan and Cost ReviewReview
Financing LIHTC Properties with HUDFinancing LIHTC Properties with HUD• Firm Application Processing, continued
– Appraisal, approximately 30 dayspp , pp y y– Survey and Surveyor’s Report– Payment of HUD Examination Fee (0.30% of mortgage amount)amount)
– HUD Processing, approximately 45 days• If application rents and expenses are within 5% of the I it ti L tt Fi C it t h ld b i d lInvitation Letter a Firm Commitment should be issued unless
– A Principal has a Previous Participation issue– An undisclosed environmental condition has been discovered
Financing LIHTC Properties with HUDFinancing LIHTC Properties with HUD
• Issuance of HUD Commitment– Determination of Construction and Permanent Interest Rates
• Requires a Good Faith Deposit of 0 50%Requires a Good Faith Deposit of 0.50%• Lock out and prepayment provisions may vary according to market conditions
– May Require Lender to Reprocess Commitment atMay Require Lender to Reprocess Commitment at Locked Interest Rate (one week)
– Submit Closing Package to HUD LegalCl i f k f l ki i– Closing two to four weeks after locking interest rate
Financing LIHTC Properties with HUDFinancing LIHTC Properties with HUD
• Closingg– Held at the local HUD Office– Owner, General Contractor and Architect all sign plans and specs AND attend a pre construction conferenceand specs AND attend a pre‐construction conference
– HERA processing requires on 20% of LIHTC equity at closing
Financing LIHTC Properties with HUDFinancing LIHTC Properties with HUD
• Construction Phase– Monthly inspection attended by HUD inspector, GC and ArchitectDraw requests include construction interest– Draw requests include construction interest
– Change Orders require payment with the request– Construction Cut Off Date
• 100% completion• No additional funds other than 60 days of construction interest
– Cost Certification– Subsidy Layering
Financing LIHTC Properties with HUDFinancing LIHTC Properties with HUD
• Final Endorsement– No Income Stabilization Test Required– Cost Certification (HERA changes)
• Post Closing/Final EndorsementPost Closing/Final Endorsement– Regulatory Agreement– Annual Audit– Monthly Accounting ReportsMonthly Accounting Reports– HUD Approves Replacement Reserve Requests– REAC Inspections– Distribute Surplus Cash twice a year confirmed by audit– Distribute Surplus Cash twice a year, confirmed by audit– Monthly Escrows (Property Taxes, Insurance, Replacement Reserves and MIP)
Contact Information Ray Landry Davis-Penn Mortgage CO. 12650 N Featherwood, Suite 120 Houston, Texas 77034 (281) 481-2400 Phone (281) 414-0483 Mobile (281) 481-3250 Fax www.davispenn.com Carl W. Ogden Davis-Penn Mortgage CO. 12650 N Featherwood, Suite 120 Houston, Texas 77034 (281) 481-2400 Phone [email protected] www.davispenn.com
Putting the Construction Financing Puzzle Together
Presented by:Wayne YaffeeReuben RosofChristine MillerKhatidja Soofi
Possible Sources
•
Tax Credit Equity•
Soft Money–
HOME Loan/Grant (local or state)
–
CDBG Grant (local or state)
–
AHF Grant
–
Private Foundation Grant
•
Section 1602 Exchange (TCEP)•
TCAP Loan
•
Bank Funding
Structuring
•
Develop a preliminary project budget (“Uses”)•
Understand your sources–
When will each source fund?
–
Will the source be secured?
–
Is there a need for bank construction financing
Finding Your Construction Lender
•
Know the Players•
Know what the Lender will be looking for when you first apply–
General Description of the Project and preliminary numbers
–
Your level of experience in the particular market
–
Your financial capacity
What May Disqualify a Project?
•
Problematic background check on the developer•
Prior Bankruptcy of a principal
•
Location not good or not in the Lender’s CRA foot print
•
Developer lack of experience•
Lack of liquidity
Market comparables
Market study
If the Project Meets Preliminary Qualifications, What Items are Needed to Begin Underwriting?
Letter of Intent
What to look for in the Letter of Intent(See Appendix 1)
Deal Terms
Due Diligence Requirements
Due Diligence Checklist
What due diligence items are required?(See Appendix 2)
TitleSurveyOrganizational Documents InsurancePhase I Environmental Survey
Construction Loan Documentation
•
Know what will be part of your Construction Loan Documentation–
Contract of Construction Administration
–
First Lien
–
Recourse (Guaranty)
–
Subordination of other liens/debts
–
Evidence of Permanent Take-Out (Tri-Party Agreement)
–
Administration of construction draws
Wayne YaffeeTel: 713.276.5572E-mail: [email protected]
Reuben RosofTel: 713.276.5230E-mail: [email protected]
Christina MillerTel: 713.276.5345E-mail: [email protected]
Khatidja Soofi713.276.5412E-mail: [email protected]
Gardere Houston Office
Gardere Wynne Sewell LLP
Austin Office:
One American Center, Suite 3000600 Congress AvenueAustin, Texas 78701-2978Phone: 512.542.7000Fax: 512.542.7100
Dallas Office:
1601 Elm StreetSuite 3000Dallas, Texas 75201Phone: 214.999.3000Fax: 214.999.4667
Gardere Wynne Sewell LLP
Houston Office:1000 LouisianaSuite 3400Houston, Texas 77002-5011Phone: 713.276.5500Fax: 713.276.5555
Mexico City Office:Torre Esmeralda II, Blvd. Manuel A. Camacho No. 36-
1802Lomas de ChapultepecMexico, D.F. 11000Phone: 011(52)55 5-284-8540Fax: 011(52)55 5-284-8569
APPENDIX 1
FORM LOI
December __, 2009
Mr. Smith ABC Corporation 1234 Xyz Street Houston, Texas 77002 Re: [Project description] Construction/Permanent Financing Dear Mr. Smith: On behalf of [Bank], I am pleased to present for your consideration a financing proposal for [Project]. This letter contains an outline of suggested terms. Borrower: Project Address: Purpose: Finance land acquisition and new construction. Type of Loans: Project Description: Project will have ____ units, all are monthly rents shown net of the
Housing Authority utility allowance:
AMI or Market # of Units Type Rents 30% AMI 40% AMI 50% AMI 60% AMI TOTAL
[bedroom square footage listed]
APPENDIX 1
Amount: [Construction Loan Amount, Permanent Loan Amount, if applicable, and other types of Loan Amounts, if applicable]
Rate: (a) During Construction Loan, a variable rate based on a spread over one-
month LIBOR, included an interest rate floor at ____. (b) During Permanent Loan, a fixed rate determined by a ___ month rate
lock. Fees: (a) Fee on Construction Loan. (b) Fee on extension of the Construction Loan. (c) Fee on the Permanent Loan. (d) Prepayment penalty fee. (e) Exit fee for failing to convert to the permanent phase. Maturity: (a) Construction Loan maturity and extension details, if applicable. (b) Permanent Loan details. Payment/ During construction, interest is due ____. Amortization: Construction Construction shall commence ____ days after funding. Commencement: Construction Construction completion shall occur within ______ of closing, subject to Completion Date: force majeure. Guarantees of (a) List of Guarantors during construction and whether guaranteeing Payment and payment and completion or just completion. Completion:
(b) Guarantors limited to non-recourse carve-outs acceptable to Bank.
APPENDIX 1
Recourse: During construction, the Loan is full recourse. Environmental Indemnification: Borrower and Guarantor will jointly and severally provide environmental
indemnification during the full term of the construction and permanent loan.
Collateral:
• 1st lien deed of trust covering Borrower’s interest in the land and improvements comprising of the Project
• Assignments and/or first security interest in: o Rents and leases o General construction contract (if applicable) o Architect’s contract (if applicable) o Management contract o Development Agreement o Social Service contract (if applicable and assignable) o FF&E o All escrow, reserve, operating accounts, and other accounts of
Borrower. Due on Sale Provisions: Loan will become due upon sale or refinance of any debt on the property. Equity Requirement: ________________ (the “Investor”) shall provide tax credit equity of at
$______.00 Except for certain costs approved by Bank to be paid at closing of the
Loan from equity, the Investor shall deposit the Equity in an account of Borrower located at Bank in a manner satisfactory to Bank. The proceeds of that account will be disbursed by Bank to pay for budgeted items of the Project (and/or applied to the Loan if required by the Bank’s loan documents) and then after completion of construction to pay the Loan down to the amount of the Permanent Loan. Bank will have no obligation to make an advance of the Loan unless and until Bank has disbursed all of any installment of Equity then on deposit with Bank (as will be more particularly provided for in the applicable loan documents).
Appraisal: The obligation of the Bank to close the Loan will be subject to its receipt,
review and approval of an appraisal of the Project.
APPENDIX 1
Business Conditions Precedent to Closing: The Bank's loan documents will provide that, in addition to the other terms
of this letter, there will be certain conditions to its obligation to close the Loan, which will include Bank's receipt, review, and approval of the items listed in Schedule I (which all must be satisfactory in form and substance to Bank's counsel, and any third parties contracted to review those items (who include Bank's third party construction inspector).
General Contractor: As a condition to the closing of the Loan, the Contractor shall be approved by Bank and Bank shall have received and approved those payment and performance bonds or a letter of credit equal to _____% of the construction contract. The surety must be AM Best rated B+ or higher. The Letter of Credit must be from a Bank with Fitch rating of B or higher. If Bank is not rated by Fitch, then S&P rating of A or higher or Moody's rating of A1 or higher.
Advances: Construction Loan funding will be made no more frequently than monthly,
based on the percentage-of-completion for actual work-in-place as approved by the Bank and its construction consultant. Funds will be deposited into a construction account held by the Bank. If requested, funds may be wired from that account, however, scheduled wire charges will apply. Retainage of ___% will be withheld from each advance. Standard Bank legal documents allow __business days from receipt of draw to funding. However, Bank's Loan Administration team typically can process by _____ days if the package to 100% complete and the inspection report to on time. Bank Officer will arrange a conference call with the Bank's Loan Administration team.
Conditions Subsequent to Closing: The Bank loan documents will provide for covenants which are normal
and customary for similar transactions, including but not limited to:
• Financial statements, tax returns, operating statements, rent rolls etc. for the property, the Borrower and the Guarantors including audited year end financial statements from the Borrower.
• Bank approval of all change orders and budget reallocation requests.
• All net operating income generated prior to conversion to be utilized to pay interest prior to utilization of the interest reserve.
• Prohibition on additional debt secured by the property. • Maintenance of agreed upon levels of insurance.
APPENDIX 1
• Bank's third party construction inspector will approve all draw requests as a condition to the funding of that draw.
• Prior to closing, Borrower will secure additional funds or construction cost savings so as to evidence that at least __% of the Developer Fee can be paid from debt or tax credit equity sources available on or prior to permanent loan conversion.
Property Management: ___________________________________ Consulting Engineer: ___________________________________ Cash Flow: During the construction phase, excess cash flow shall be used first to pay
unpaid and accrued interest on the Loan and then shall be deposited with Bank to first, if required by Bank, add to the budgeted interest reserve and then added to the budgeted soft cost contingency (upon conversion to the permanent phase, any such amounts then on deposit with Bank will be paid to Borrower).
Developer Fees: Developer fee may be paid from Equity if and to the extent as will be
provided for in the Bank's loan documents. Builder’s Risk or All Risk & Hazard Insurance: Insurance requirements will be provided under separate cover and will
conform to Bank's standard insurance requirements. Liquidity Covenant: Borrower agrees to maintain a minimum of $______.00 in cash during the
term of the Construction Loan. Good Faith Deposit: Borrower to provide the Bank with a Good Faith Deposit in the amount of
$_______.00 upon its execution and return of this letter. The Bank acknowledges that an existing appraisal, ESA, and Plan / Cost review may be available and are subject to Bank review / acceptance. If new, updated or modified third-party reports are required, and/or if legal fees are incurred, then the cost of these items will be paid from the deposit. The deposit is nonrefundable, whether or not the loan closes, except for unused portions of the deposit. If the deposit is not sufficient to cover the costs, as described, then Borrower is responsible for all of the additional costs not covered by the deposit.
Lender Legal
APPENDIX 1
Counsel: Gardere Wynne Sewell LLP Borrower Legal Counsel: ___________________________________ Underwriting/ Closing: Bank acknowledges that this transaction must close no later than
____________ , 2009 given the proposed 60-day extension with the land owner. Upon execution, Bank will begin its underwriting, and would target credit review date approximately three weeks from receipt of the good faith deposit and the initial items on the due diligence list. Both Borrower and Bank agree that all due diligence information should be in final form to avoid more than one credit submission. Attached is Schedule III indicating Bank's standard due diligence list which may be simplified or modified based on the unique requirements of the subject transaction. If there are material changes to the plans, unit mix, budget estimates, or related information that is fundamental to-this transaction, then Bank will work with Borrower to prepare a revised schedule. Bank will sponsor a grant application by _______________ (Sponsor) with the ________________, which, if approved, will be funded to Borrower through the Sponsor. The Borrower and Sponsor acknowledge that the grant awards are decided solely by the _____________ and the Bank has no influence over this decision. A non-award of the grant will have no effect on the subject loan application with Bank.
This letter contains an outline of suggested terms only, and it does not represent a commitment by Bank or create any obligation whatsoever on Bank's part. It is for discussion purposes only, and the outlined terms have not received final approval by the appropriate lending authorities. Borrower and Guarantors acknowledge that this letter is issued at a time when Bank has not completed a full analysis of Borrower and Guarantors and of the transaction contemplated by this letter. As the provider of the proposed loan, Bank is the sole judge (which judgment may ultimately be made after the approval of this proposal by lender's requisite committees and persons) of what is an impediment to closing of the transaction described herein and whether the impediment is so serious as to preclude closing or as to require restructuring of the transaction described in this letter relating to the loan to be provided by lender. The terms discussed above are based upon assumptions and projections provided by the developer as of the date of this letter. Subsequent changes to those assumptions could have a material effect on the ability of the Bank to consider formal credit approval of the terms as
APPENDIX 1
presented. This proposal is provided solely for the convenience of the Borrower and should not be relied upon by any third party in any manner or for any reason whatsoever. This letter shall be accepted by Borrower by _________________, 2009, it shall become null and void at Bank's option. Acceptance is to be indicated by the return of a fully executed counterpart of this letter to Bank and the payment of the good faith deposit provided for above. It is my sincere pleasure to make this financing proposal to you. I look forward to your acceptance and moving forward to underwrite and close this proposed construction loan, subject to credit approval. Sincerely, BANK By:_________________________ Agreed and Accepted on ____________________, 2009 By:_________________________ Name:_______________________ Title:________________________
APPENDIX 1
SCHEDULE I
CONDITIONS TO CLOSING
APPENDIX 1
SCHEDULE II
CONDITIONS TO CONVERSION
APPENDIX 1
SCHEDULE III
UNDERWRITING DUE DILIGENCE REQUEST LIST
APPENDIX 2 – DUE DILIGENCE CHECKLIST
(Lender) Date: (Borrower) Updated by:
PROJECT NAME
DUE DILIGENCE CHECKLIST
A. FINANCIAL & REFERENCE INFORMATION A.1. BORROWER: 1. Organizational structure of
Borrower B X __ __
2. Current Financial Statement to
include cash flow, contingent liabilities
B X __ __
3. 2 years historical financial
statements B X __ __
4. Projected cash flow for one year B X __ __ 5. List of references including financial
institution references B X __ __
6. For individuals, 2 years tax returns B X __ __ 7. Current ongoing projects plus any
future contemplated projects B X __ __
8. Status of current projects B X __ __ 9. List and profiles of Project Team B X __ __ 10. Tax ID Number or Social Security
Number B X __ __
A. 2. PRINCIPALS/GUARANTORS 1. Current Financial Statement to
include cash flow, contingent liabilities & statement of real estate owned (signed)
B X __ __
Requested/ Received/ Received/ Approved/
Responsibility Required Drafted Executed In order for an item to be complete each column must be checked (X)
Page 2 of 7
2. 2 years historical financial statements B X __ __ 3. Projected cash flow for one year B X __ __ 4. List of references including financial
institution references B X __ __
5. For individuals, 2 years tax returns B X __ __ 6. Current ongoing projects plus any
future contemplated projects B X __ __
7. Status of current projects B X __ __ 8. Tax ID Number or Social Security
Number B X __ ___
B. DEVELOPER/CONSULTANT 1. Profile including past projects B X __ __ 2. Development Agreement B X __ __ 3. References B X __ __ C. CONTRACTOR 1. Profile including past projects B X __ __ 2. Bonding agency B X __ __ D. PROPERTY MANAGER 1. Property Management Agreement
including management plan B X __ __
2. History of state and federal audits on
projects under management B X __ __
3. Samples of property management
reports and tenant leases B X __ __
4. Sample Lease form B X __ __
Requested/ Received/ Received/ Approved/
Responsibility Required Drafted Executed In order for an item to be complete each column must be checked (X)
Page 3 of 7
E. NONPROFIT INVOLVEMENT
(IF APPLICABLE)
1 Resume of nonprofit partner B X __ __ 2. Description of previous and uture
project involvement B X __ __
3. Organizational documents B X __ __ 4. IRS Determination Letter B X __ __ 5. Financial Statements B X __ __
F. SUBSEQUENT DUE DILIGENCE 1. Appraisal L X __ __ 2. Review of Appraisal by Lender L X __ __ 3. Approved Budget (initial), Hard cost
breakdown and projected draw schedule
B X __ __
4. Plans & Specs (2 sets) B X __ __ 5. Review of Plans, Specs & Budget by
Lender L X __ __
6. Contact at Architect’s Office B X __ __ 7. Soils/Geotechnical Report B X __ __ 8. Phase I Environmental Survey
(includes soils report and wetlands study)
B X __ __
9. Review of Phase I by Lender L X __ __ 10. General Construction Contract B X __ __ 11. List of Major Subcontractors B X __ __
Requested/ Received/ Received/ Approved/
Responsibility Required Drafted Executed In order for an item to be complete each column must be checked (X)
Page 4 of 7
12. Evidence of Low-Income Housing
Credit Allocation a. Commitment Notice b. Carryover Allocation Form
signed
B X __ __
13. Equity Commitment, Timing and
Conditions of Investment B X __ __
14. Evidence of Permanent Take Out B X __ __ 15. Aerial photographs of site and
surrounding areaB X __ __
16. Copy of federal, state and local rent,
occupancy and /or resale restrictive covenants
B X __ __
17. Survey (4) certified to Lender
against title commitment B X __ __
18. Lender’s signed Commitment Letter
and payment of Commitment feeB X __ __
G. ITEMS TO BE DELIVERED PRIOR TO CLOSING
G.1.
MISC. DOCUMENTATION
1. Architect's Contract B X __ __ 2. a. Lender’s Title Commitment and
Accompanying Documents including copies of Schedule B items (title co. must send to Lender)
B X __ __
2. b. Property Tax Certificate
(w/Property I. D. number/s) B X __ __
3. a. Flood Determination L X __ __ 3. b. Flood Notice (if applicable) L X __ __
Requested/ Received/ Received/ Approved/
Responsibility Required Drafted Executed In order for an item to be complete each column must be checked (X)
Page 5 of 7
4. Insurance Certificates with Lender
as Mortgagee* B X __ __
a. Fire (at completion on new const.) X __ __ b. Hazard (at completion on new const.) X __ __ c. Comprehensive general ability
and excess liability (*Lender as additionally insured)
X __ __
d. All-Risk builder’s risk X __ __ e. Workman’s Comp. X __ __ f. Flood (if applicable) X __ __ 5. Utility Availability Letters B X __ __ a. Wastewater/Sewer X __ __ b. Water X __ __ c. Storm drainage X __ __ d. Electric X __ __ e. Telephone X __ __ f. Gas X __ __ 6. UCC Search L X __ __ 7. Evidence Plans and Specifications
submitted to appropriate State Agency for architectural barrier compliance
B X __ __
8. Land Purchase Option (or executed
land purchase contract including closing/settlement statement, if applicable)
B X __ __
9. Evidence of Zoning compliance B X __ __ 10. Building Permits (post closing) B X __ __ 11. Payment and Performance Bonds B X __ __ AUTHORITY DOCUMENTS G.2. BORROWER: Corporation
Requested/ Received/ Received/ Approved/
Responsibility Required Drafted Executed In order for an item to be complete each column must be checked (X)
Page 6 of 7
1. Articles B X __ __ 2. Bylaws B X __ __ 3. Certificate of Good Standing B X __ __ 4. Certificate of Existence B X __ __ 5. Certificate of Authority (If
incorporated in one state doing business in another)
B X __ __
Limited Partnership
1. Partnership Agreement B X __ __ 2. Certificate of Limited Partnership B X __ __ 3. Amended Partnership Agreement B X __ __ 4. Certificate of Existence B X __ __ Limited Liability Company
1. Articles of Orgnaization B X __ __ 2. Regulations/Operating Agreement B X __ __ 3. Certificate of LLC B X __ __ 4. Certificate of Good Standing B X __ __ 5. Certificate of Existence B X __ __ 6. Certificate of Authority (If
incorporated in one state doing business in another)
B X __ __
G.3. GENERAL PARTNER/(S): Corporation
1. Articles B X __ __ 2. Bylaws B X __ __
Requested/ Received/ Received/ Approved/
Responsibility Required Drafted Executed In order for an item to be complete each column must be checked (X)
Page 7 of 7
3. Certificate of Good Standing B X __ __ 4. Certificate of Existence B X __ __ 5. Certificate of Authority (If
incorporated in one state doing business in another)
B X __ __
Limited Partnership
1. Partnership Agreement B X __ __ 2. Certificate of Limited Partnership B X __ __ 3. Certificate of Existence B X __ __ G.4. GUARANTOR/(S): Corporation
1. Articles B X __ __ 2. Bylaws B X __ __ 3. Certificate of Good Standing B X __ __ 4. Certificate of Existence B X __ __ 5. Certificate of Authority (If
incorporated in one state doing business in another)
B X __ __
Limited Partnership
1. Partnership Agreement B X __ __ 2. Certificate of Limited Partnership B X __ __ 3. Certificate of Existence B X __ __