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Home My WebLink About2. Workforce Housing Checklist 10.26.21-REV 20211202 “Workforce Housing” Checklist Applicant: _______________________________Project:_______________________________________ Page 1 of 4 Please note this is a preliminary list of requested information. The City reserves rights to request additional information or clarifications. Noncompliance with the request may deem an application incomplete. Upfront funds requested for due diligence of any application does not guarantee project approval. Check if Provided Requested Item Location of Information Additional Information & if not provided why Building Affordable Housing Application To the greatest extent possible, complete the City’s Affordable Housing Application: https://www.chulavistaca.gov/departments/development- services/housing/building-affordable-housing Sponsorship Team Narrative profile of sponsor, bond underwriter, bond counsel and property manager, including recent experience on comparable workforce housing developments. Additional information: ___________________________________ Property Profile Narrative of property, including but not limited to acreage, number of units & buildings, and amenities, year built, and identity of seller Any existing Regulatory Agreements and/or Deed Restrictions on the property Property sales/market history Copies of current property tax bills for all project parcels showing the general tax levy, voter-approved indebtedness and direct assessments Prior 5 years of revenue and expenses, by customary line items Existing debt obligation and capital improvement reserves For official City use only: Date application received: _________________ Deposit Amount: ____________ Deposit Account #: _____________ CSCDA/Opportunity Housing Group CasaLago Eastlake See Dropbox. See Appendix- attached to this PDFA-1 See Appendix.A-2 There are none See Appraisal (in Dropbox) for market history. See Dropbox. See appraisal (pdf starting p. 120) There is no existing debt on the property. Capital reserves are shown in proforma and described in Appendix. A-3 Green references refer to narrative responses included in Appendix. “Workforce Housing” Checklist Applicant: _______________________________Project:_______________________________________ Page 2 of 4 Property inspection with identified needed improvements Additional information: ___________________________________ Current Tenancy Current Rent Roll (including term of leases) Property vacancy and turnover rate Qualification criteria for new tenants Income/Employment profile of existing tenants Additional information: ___________________________________ Project Affordability Bond Policy for Middle Income, inclusive of formula or schedule for calculating moderate-income rents are each proposed household income level Draft Public Benefit Agreement as applicable Draft Partnership Agreement between the proposed bond-Issuing authority and the Sponsor as Project Administrator/Asset Manager as applicable Draft Project Management Agreement between the Sponsor and the proposed Property Management Company as applicable Bond documents from a recent similar transaction prepared by the Project’s proposed bond underwriter Relevant sections of the Regulatory Agreement between the City and Sponsor as it related to the Project’s housing development Proposed Bonds with terms and expected payoff date(s) Proposed tenant rents by unit type and AMI level including the assumed percent of household income to be paid in rent, net of landlord-provide utilities, and projected rent savings by unit type and AMI level going forward Annual rental increase formula and maximums See PCR in Dropbox See appraisal (pdf. p. 136) Current vacancy = 3.3%, turnover = 30% See AppendixA-4 A-5 See Appendix. See Regulatory Agreement in Dropbox. In Dropbox. See example provided in Dropbox from Acacia transaction (closing 10/21). This is the form that will be used for CasaLago. See form from Acacia in Dropbox. This is same form as for CasaLago. See Limited Offering Memorandum for Acacia in dropbox. See draft Regulatory Agreement for CasaLago in dropbox. See Proforma in Dropbox. See Proforma for projected rents and rent savings. See Appendix for assumed % of Income paid as rent A-6 Lesser of 4% and AMI growth. See Regulatory Agreement. Proforma assumes 3% annual increase. “Workforce Housing” Checklist Applicant: _______________________________Project:_______________________________________ Page 3 of 4 Any apartment market studies if available Additional information:_________________________________ Proposed Financial Structure Full Pro Forma (A live financial pro forma in Excel reflecting the construction, financing, projected income and expenses, debt, reserves and annual debt coverage ratios of the Project along with notes on all key assumptions) Replacement and Operating reserves- provide amount(s) that is being set aside to ensure that the property has sufficient funds to maintain its existing class A condition, including a long-term capital improvement and operations plan over the 30 years that contemplates replacement/renovation of major systems and unit level renovations Projected net sale proceeds to City at end of 15-year period, and basis for estimate Any proposed payment of city property tax and city monitoring fee during the bond financing period Public Offering List with risk disclosures Fee breakdown – type/purpose, amount and how paid Additional information: ___________________________________ Purchase Information Current appraisal of the property Assessment of other tax impacts to city and other property tax receiving entities Purchase & Sale Agreement and Property Sales Price Additional information: ___________________________________ Notification Process Provide a description or documentation that outlines the notification process and documentation that would be provided to residents Not available. We do not prepare this until we prepare bond offering documents. See Dropbox. See Appendix A-3 & Proforma. PCR includes 12-year projection for capital items. We will work with the consultant to expand this and submit separately. See Appendix.A-7 A-8 This is part of the bond offering and is not prepared until after City Approval. See example Acacia on Santa Rosa Creek for a recent example. A-9 See Dropbox. A-10 Purchase price is $275,900,000. Complete PSA cannot be summited due to confidentiality, but if there are specific questions, redactions of relevant sections can potentially be provided. See AppendixA-11 “Workforce Housing” Checklist Applicant: _______________________________Project:_______________________________________ Page 4 of 4 Additional Requirements Additional Highlights of your program: ______________________________________________________________________________________________________________________ ______________________________________________________________________________________________________________________ ______________________________________________________________________________________________________________________ ______________________________________________________________________________________________________________________ Appendix to Workforce Housing Checklist Updated 12/3/21 See below for additional items referenced in the checklist. A‐1: Sponsorship Team California Statewide Communities Development Authority (Bond Issuer) The California Statewide Communities Development Authority (“CSCDA”) was created in 1988 by the League of California Cities and California State Association of Counties, under California’s Joint Exercise of Powers Act, to provide California’s local governments with an effective tool for the timely financing of community‐based public benefit projects. Today, 533 cities, counties and special districts are members of CSCDA, including the City of Chula Vista, which has been a member since 1996 and has utilized a wide variety of CSCDA bond financing programs. CSCDA launched its Workforce Housing Program (the “WHP”) in late 2020 as a tool for cities to easily and quickly create rent‐restricted middle‐income housing by converting existing market‐rate multifamily projects. Since December 2020, CSCDA has closed $3.2 billion in workforce housing projects across California totaling over 5,600 units. Opportunity Housing Group (Project Administrator/Sponsor) CSCDA works with Opportunity Housing Group (“OHG”) as its Project Administrator. In this role, OHG acts as the asset manager over the term of the workforce housing transaction, responsible for overseeing the property manager, setting capital budgets, ensuring proper management of the asset, compliance with the regulatory agreement and other terms of the bond offering. The principals of OHG have a proven track record in all aspects of multifamily housing, including acquisitions, operations, entitlement and development. The principals have led the acquisition of over $1.8 billion in multifamily real estate over their careers, including over 7,200 multifamily units, and the development of over $4.8 billion, including 7,750 multifamily units, extended stay hotels, retail and for sale homes throughout California and the western states. Greystar (Property Manager) Greystar would act as the Property Manager of the asset following acquisition by CSCDA. Greystar is the largest apartment property manager in California with a long history in San Diego County. Greystar is also the Property Manager for the majority of CSCDA’s workforce housing portfolio. Greystar has excellent procedures for maintenance, capital improvements and tenant relations in all of its assets. Citigroup Global Markets (Bond Underwriter) Citigroup is the #1 municipal bond underwriter nationally and in California over the past four decades. Citi has financed more housing transactions (middle income, affordable, permanent supportive and student segments) than any other firm, including over $10 billion in affordable projects in California over the past decade. Orrick, Herrington & Sutcliffe (Bond Counsel) Orrick is nation’s leading public finance law firm and the dominant public finance firm in California. Orrick handles all types of financings for governmental entities, including municipal bonds, notes, and other obligations, tax exempt and taxable. Orrick handles over 500 bond issuances per year, including 100% of the 30+ Workforce Housing Issuances by CSCDA and CalCHA since the inception of Workforce Housing Programs in 2019. Program Prior Experience: Since December 2020, CSCDA’s Workforce Housing Program has closed on $3.2 billion in bond issuances and over 5,600 units in California cities including: CSCDA is scheduled to add over 1,000 additional units to the Program by the end of 2021. The Workforce Housing Program has been extremely successful to date in achieving its affordability goals. Projects are ahead of schedule to convert to income‐restricted rents and Teachers, government employees, first responders, construction workers, healthcare workers and others have been able to move into the properties and are benefiting from the rent reductions. A‐2 Narrative of Property: See Affordable Housing Application for details.  Acreage: 30.2  # Units: 427  # Buildings: 86  Year Built: 2013  Seller: John Hancock Life Insurance Co. A‐3 Capital Improvement Reserves: See Project Proforma. The project is funded with an initial capital reserve of $2.4 million. Of this amount $1.9 million is allocated for specific up‐front improvements identified in the Property Condition Report (“PCR”) and by OHG. These include exterior painting for all buildings, resurfacing of pool decks and some sitework improvements. An additional $500,000 is unallocated reserve which is available for any unforeseen items. Additionally, the ongoing budget includes $800/unit/year in capital reserve deposits ($341,600/year). This number was established based on the projection in the PCR to cover ongoing requirements to keep the asset in a Class A condition. CSCDA Workforce Housing Transaction Closings to Date City # Units Bond Issuance Closing Date City # Units Bond Issuance Closing Date Carson 150 $70,675,000 Dec-20 CONTINUED… Anaheim 231 $116,825,000 Dec-20 Dublin 390 $236,565,000 Aug-21 Anaheim 386 $181,010,000 Feb-21 Fairfield 180 $84,275,000 Sep-21 Anaheim 400 $195,965,000 Feb-21 Orange 356 $240,010,000 Sep-21 Long Beach 216 $135,730,000 Mar-21 Anaheim 265 $157,390,000 Oct-21 Monrovia 261 $117,955,000 Apr-21 Santa Rosa 277 $130,400,000 Oct-21 Glendale 507 $339,400,000 Apr-21 Santa Rosa 180 $86,430,000 Oct-21 Carson 357 $215,685,000 Jun-21 Pasadena 105 $81,065,000 Nov-21 Pasadena 513 $385,985,000 Jun-21 Pomona 472 $197,675,000 Nov-21 Glendale 143 $95,545,000 Jun-21 Hawthorne 230 $188,160,000 Dec-21 TOTAL CLOSED 5,619 $3,256,745,000 A‐4 Qualification Criteria for New Tenants: Under the WHP, a Regulatory Agreement is recorded against the property at closing. A copy of this document is included with this submittal. The Regulatory Agreement requires that new tenants and, for existing tenants, at lease renewal, complete an income verification process to determine eligibility for Low, Middle or Moderate income rent pricing. For existing tenants, if they qualify they are offered the according discounted rent. If they do not qualify, they may remain at market rents. This avoids any issues with displacement of current residents. All new tenants must have qualified incomes in one of these categories. The property is allocated such that 1/3 of units (143 units) are reserved for Low Income residents, 1/3 (142 units) are for Middle Income residents and 1/3 (142 units) for Moderate Income residents. Rents are set not to exceed 35% of annual income and rent growth is capped at the lower of (i) AMI growth and (ii) 4%. See below for a table of income limits based on household size. A‐5 Income/Employment Profile of Existing Residents: Based on the current data we have on the existing residents, 72% of current renters will income‐ qualify for the program. A‐6 Percent of Income Paid as Rent: See below table for percentage of household income to be paid in rent by unit type and AMI level: A‐7 Projected Net Sale Proceeds at end of Year 15 and basis for estimate: Projected disposition proceeds to the City for the asset are as follows: Low Income Middle Income Moderate Income Household Size (persons) 80% 100% 120% 1 67,872$ 84,840$ 101,808$ 2 77,568$ 96,960$ 116,352$ 3 87,264$ 109,080$ 130,896$ 4 96,960$ 121,200$ 145,440$ 5 104,717$ 130,896$ 157,075$ Income Limits Estimated % of Income Paid as Rent‐ CasaLago Proposal # Units Low Middle Moderate One Bed 79 32% 26% 22% Two Bed 183 35% 30% 25% Three Bed 165 35% 29% 25% 34.5% 29.1% 24.3%  Sale in Year 15: $61,688,935  Sale in Year 30: $424,647,526  Sale in Year 35 (shown in proforma): $625,287,573 These projections assume: Middle‐income affordability remains in place at sale, 3% annual rent growth for restricted rents, 5.00% exit cap rate. Note, the reason for the significant difference is that the majority of the bond balance gets paid down between years 15 and 35, so there is minimal remaining balance at the end of 30 years and no balance at the end of 35 years. A‐8 Proposed Payment of City Property Tax and City Monitoring Fee The Project will pay the City of Chula Vista a Host City Charge of $200,000/year escalating annually at 2%. The City’s foregone property tax from the project would be $196,000. Thus, the Host City Charge makes the program entirely revenue neutral for the City. The City of Chula Vista can be reimbursed for any staff time and/or costs incurred in its review of the Program, inclusive of any consultant costs. This would be payable at the closing of the transaction. In addition, the Project will pay the City of Chula Vista an annual Monitoring Fee of $27,755 with annual increases of 3%. A‐9 Fee Breakdown Fees in the program are designed to incentivize conversion of market rate assets to workforce housing as well as long‐term alignment of interest for the Project Administrator (OHG) and CSCDA. These fees are consistent across all Workforce Housing projects and in‐line with other complex, asset‐secured bond issuances of this type: Fees paid at Closing: • At Closing Fees are paid to the participants as follows: • $3,000,000 to the Project Administrator • 1% of Bond Issuance to CSCDA (estimated at $3.2 million) Ongoing Fees: [All ongoing compensation is subordinate to operating expenses and Series A Debt Service] • To Project Administrator • Project Administration Fee: $500/unit/year ($213,500) with 3% annual increases. This fee covers Project Administrator’s staff cost for administration of the asset including preparation of all reporting, oversight of the property manager and regulatory agreement, compliance with all terms of the indenture, etc. • Subordinated B‐Bond: A $6.9 million B Bond is granted to the Project Administrator in exchange for assignment of its market‐rate Purchase and Sale Agreement for the asset to CSCDA. This is meant to replicate developer equity that would exist in a typical affordable structure, but is not allowed in this type of financing. The B‐Bond creates long‐term alignment for the sponsor to manage the asset properly and generate cash flow so that senior bonds can be paid. The interest on this bond is subordinated and deferred during the first few years of property operations as shown in the cash flow and the principal is not paid until all Series A bonds have been repaid. • To CSCDA • Annual fee of $150,000 annually. A‐10 Assessment of other Taxing Impacts: The current assessed value of the asset is $155,854,147. The 1% Ad Valorem total tax is $1,558,541. Of this, the City of Chula Vista receives 12.6% (per City of Chula Vista 2021‐22 Budget), which equates to $196,376 (0.04% of 2021‐22 General Fund Revenue). Application of the Host City Charge of $200,000 per year with 2% annual escalation entirely offsets the City’s foregone property tax. Other taxing entities may or may not be impacted by the removal of the property from the tax roll. OHG and CSCDA have checked with counsel (Meyers Nave) and confirmed that none of the school districts will be impacted because they are funded via the state’s Local Control Funding Formula (No impact to Chula Vista Elementary School District, Sweetwater Union High School District or Southwestern Community College District). For other taxing entities that may be impacted, the City may expect to distribute the proceeds of the City’s sale proceeds under the Public Benefit Agreement to make them whole for lost property tax (see above item #A‐7 for detail on projected disposition proceeds. A‐11 Notification Process to Tenants: Resident notification and qualification occurs for existing residents at lease renewal. Tenants will be asked to provide documentation of income and have rents adjusted accordingly as described above. For new tenants, they will be income qualified up‐front by property staff. If desired, we can coordinate with the City to advertise discounted rents via the Housing Authority or otherwise. The City of Chula Vista may also opt to give a priority in the Regulatory Agreement to local healthcare workers, policemen, firemen, teachers, government employees, or local public‐school graduates etc.