TEXAS AFFILIATION OF AFFORDABLE HOUSING PROVIDERS 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.
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 education@taahp.org 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,
RON WILLIAMS SOUTHEAST TEXAS HOUSING FINANCE CORPORATION JERRY WRIGHT DOUGHERTY & COMPANY, LLC EXECUTIVE DIRECTOR: JIM T. BROWN
Jim T. Brown Executive Director
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
Texas Affiliation of Affordable Housing Providers: Board of Directors: 2009 - 2010 Officers President Linda McMahon (11) Neighborhood Strategies LLC 4460 St. Andrews Blvd Irving, TX 75038 T: (214) 596-9162 F: N/A lindasmcmahon@gmail.com ---------------------------------------------Immediate Past President Mike Sugrue (10) Solutions Plus 1302 South 3rd, Ste. 105 Mabank, TX 75147 T: (903) 887-4344 F: (903) 334-4355 msugrue@hotmail.com ---------------------------------------------President Elect Dan Markson (10) The NRP Group 111 Soledad, Ste. 1220 San Antonio, TX 78205 T: (210) 487-7878 F: (210) 487-7880 dmarkson@nrpgroup.com ---------------------------------------------Vice President Toni Jackson (11) Coats Rose 3 Greenway, Ste. 2000 Houston, TX 77046 T: (713) 653-7392 F: (713) 890-3928 tjackson@coatsrose.com ---------------------------------------------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 bkahn@hettig-kahn.com ----------------------------------------------
Directors 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 nicole.flores@pnc.com ----------------------------------------------
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 mclark@alpha-barnes.com Sally Gaskin (11) SGI Ventures, Inc. 1800 Bering Dr., Ste. 501 Houston, TX 77057 T: (713) 334-4911 F: (713) 334-5614 sally@sgiventures.net 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” rev. - August 2009
Directors Robert Johnston (11) National Equity Fund P.O. Box 835727 Richardson, TX 75083 T: (972) 342-6621 F: N/A rjohnston@nefinc.org Mark Mayfield (10) Texas Housing Foundation 1110 Broadway Marble Falls, TX 78654 T: (830) 693-4521 F: (830) 693-5128 mmayfield@txhf.org 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 rwilliams@sethfc.com 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
Ex - Officio
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 jcouch@ti-f.org Dick Kilday (00) Kilday Realty Corp. 1717 Saint James Pl., Suite 150 Houston, TX 77056-3421 T: (713) 914-9400 F: (713) 914-9439 rrkilday@kildayrealtycorp.net
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
www.taahp.org
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 diana@mciver.com John R. Pitts (09) John R. Pitts P.O. Box 27130 Houston, TX 77227 T: (713) 552-1854 F: N/A john@johnrpitts.com
“TAAHP is the leading organization of affordable housing professionals representing the affordable housing industry in Texas.”
rev. - August 2009
who we are The Texas Affi liation of Affordable Housing Providers (TAAHP) is an organization of more than 180 state and national housing providers dedicated to ensuring everyone has a safe and affordable place to live. Our members include single and multifamily developers, builders and owners, property managers, investors, lenders, syndicators, architects, attorneys, market analysts, engineers, and nonprofit organizations.
legislative representation
taahp-pac
Through its government relations efforts, TAAHP projects a powerful voice advocating the interests of the affordable housing industry in Texas. TAAHP addresses the effects of housing shortages on low income individuals ranging from school teachers, EMS personnel, firefighters, police offi 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 affordable rental housing units across the state of Texas and the Nation.
what we do
Build successful business relationships Represent tens of thousands of affordable housing units Work for laws, regulations, and programs necessary for the development of a viable affordable housing inventory in Texas Support our members through various services ranging from merchandising to health care programs
taahp.org
i m p a c t
community Your Voice and Vigilance in Austin
“TAAHP is the leading organization of affordable housing professionals representing the affordable housing industry in Texas.”
health benefit program
become a member today - see reverse side for details For more information visit www.taahp.org or call (512) 476-9901.
Texas Affi liation of Affordable Housing Providers 2010 Membership Investment Form
Voting Membership Lifetime Membership - $10,000.00
Member Information Date______________________________________________________________ Company/Organization__________________________________________ Name___________________________________________________________ Title_____________________________________________________________ Address_________________________________________________________ City______________________________________________________________ State_____________________________Zip_____________________________ Tel________________________________________________________________ Fax_______________________________________________________________ Email ____________________________________________________________ Website__________________________________________________________
A 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. Membership services (excluding meeting registration fees) shall continue for the business entity’s lifetime, their resignation, or demise of the organization, whichever occurs first.
Active Membership - $550.00
Any business, firm, corporation, partnership, sole proprietorship, individual professional or other legal business entity which is involved in the affordable housing industry or provides services, supplies or equipment for the affordable housing industry and is directly interested in its welfare, complies with TAAHP Bylaws, pays current dues, and meets required membership qualifications, 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
Method of Investment
Non-Voting Membership
Check (make payable to American Express
Discover
MasterCard
VISA
Credit Card #_______________________________________________ Expiration Date________________Verification Number_____________ Name (as it appears on card)___________________________________ Signature___________________________________________________ A 3% processing fee will be added to all credit card transactions.
Send to:
Mail 814 San Jacinto Blvd., Suite 408 Fax 512.476.9903 Online www.taahp.org
814 San Jacinto Blvd., Suite 408 Austin, TX 78701 512.476.991 512.476.9903 www.taahp.org
Governmental / Regulatory Membership - $150.00
Any individual associated with or responsible in any manner within the title of this category may join TAAHP after meeting the qualifications and paying dues determined by the Board of Directors.
Educators / Student Membership - $50.00
Any individual directly associated with an institution of higher learning and whose field of study and expertise is related to the field of affordable housing may join the Organization by meeting the qualifications and paying dues determined by the Board of Directors. Separate dues may be established for these two classifications: 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%.
SAVETHE
DATE
26 - 28, 2010 F OUR S EASONS H OTEL A USTIN, T EXAS
texas housing conference 2 0 1 0 - A H OUSING O DYSSEY J OIN
NATIONAL
&
INTERNATIONAL AFFORDABLE HOUSING INDUSTRY PROFESSIONALS IN
A USTIN, T X
TO EXCHANGE
KNOWLEDGE, DISCOVER SOLUTIONS, AND NETWORK!
2009 PLATINUM PARTNERS WAS YOUR STATE AMONG THOSE REPRESENTED IN 2 0 0 9 ?
ww w . t e x a s h ousingconference.org
Texas Housing Conference
QUICK FACTS
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.
3% 2% 3% 4% 30%
6% 6%
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.
6% 8% 23%
9%
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).
Developer/Owner Investor/Lender/Syndicator Government Housing Finance Corporation/Market Analysis/Professional Services Property Management/Real Estate Services
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.
Trade Associations/Others Legal Services
www.texashousingconference.org
Architects/Engineers/Construction Vendor/Supplier Local Public Housing Utility Providers
Texas Housing Conference ATTENDANCE BY SERVICE
A TORNEYS & COUNSELORS AT
Texas Department of Housing and Community Affairs
2010 Regional Allocation z
Estimated State Credit Ceiling is $51 million
z
85% of the State Credit Ceiling to be divided between the 13 State Service Regions and further split into urban and rural areas
z z
Statewide rural collapse (first) Statewide urban/rural collapse (second)
13 State Service Regions
2010 Regional Allocation
Region
Regional Amount
Geographic Region
Regional %
Rural Amount
Urban Amount
Rural %
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%
2010 Allocation Set-Asides 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
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 HUDOwned 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/or Section 42, of the Internal Revenue Code of 1986 (26 U.S.C. §42)
Texas Statutory Limitations One Mile / Three Year Rule Applies to counties over 1 million in population Developments proposing new construction or Adaptive Reuse within one mile of another development serving the same population that received housing tax credits in the previous three years Local Resolution ยง2306.6703(a)(3) Texas Government Code
Texas Statutory Limitations 2 X Per Capita Municipality or County that has twice the state average of units per capita supported by housing tax credits or private activity bonds. Local Resolution ยง2306.6703(a)(4) Texas Government Code
Texas Statutory Limitations One Mile / Same Year Rule Applies to counties over 1 million in population Two applications being proposed in the same application round that are within one mile of each other ยง2306.67021 Texas Government Code
Texas Statutory Limitations $2 million limitation $2 million limitation to any applicant, developer, related party or guarantor ยง2306.67021 Texas Government Code
Texas Development Limitations
Census tracts with >30% of the households served by Housing Tax Credits QCT tract with >40% of the households served by Housing tax credits are not eligible for 30% increase in eligible basis 16 Unit Minimum 252 Unit Max with 200 LI Unit Max 80 Unit Max for Rural developments
Housing Tax Credit Timeline
2010 Housing Tax Credit Timeline
12/08/2009 2010 Application Acceptance Period Begins
01/08/2010 2010 Pre-Application Deadline
02/15/2010 Experience Certification Request
03/01/2010 2010 Full Applications Due
04/01/2010 Third-Party Reports / Resolutions Due
Mid-May
Final Scoring Notices Issued
Late June
Release of Eligible Applications for Consideration for Award in July
2010 Housing Tax Credit Timeline
Late July
Final Awards
Mid-Aug
Commitments Issued
11/01/2010 Carryover Documentation Due
06/30/2011 10% Test Documentation
12/01/2011 Documentation of Commencement of Substantial Construction Due
12/31/2012 Placement in Service
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-Application 2010 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 Rules 2010 Multifamily Bond Pre-Application www.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: 9 9 9 9 9
Application Third Party Reports Deficiencies Any large documents required to fulfill application requirements Post Award Documentation
Regulations, Statues and Rules o o o o o o o o o
§§42 and 142 of the Internal Revenue Code §2306 of the Texas Government Code §1372 of the Texas Government Code CFR 24 (Code of Federal Regulations) HOME 10 TAC §50 Qualified Allocation Plan and Rules 10 TAC §33 Multifamily Revenue Bond Rules 10 TAC §§1.31-1.37 Real Estate Analysis Rules 10 TAC §53 HOME Rules 10 TAC §51 Housing Trust Fund Rules
Texas Department of Housing and Community Affairs Multifamily Contacts:
Robbye Meyer robbye.meyer@tdhca.state.tx.us Director of Multifamily Finance – (512) 475-2213 Teresa Morales teresa.morales@tdhca.state.tx.us Bond / 4% HTC Program Administrator – (512) 475-3344 Raquel Morales raquel.morales@tdhca.state.tx.us Competitive HTC Program Administrator – (512) 475-1676 Teresa Shell teresa.shell@tdhca.state.tx.us HTC Program Exchange Administrator – (512) 936-7834 Lisa Fehr lisa.fehr@tdhca.state.tx.us HTC Program Exchange Specialist – (512) 936-7833 Ben Sheppard ben.sheppard@tdhca.state.tx.us Multifamily Housing Specialist, HTC Amendments – (512) 475-2122 Shannon Roth shannon.roth@tdhca.state.tx.us Multifamily Housing Specialist, Bond/ 4% – (512) 475-3929 Nicole Fisher nicole.fisher@tdhca.state.tx.us Multifamily Housing Specialist, QCP – (512) 475-2201
Texas Department of Housing and Community Affairs Multifamily Contacts:
Kent Bedell kent.bedell@tdhca.state.tx.us Multifamily Housing Specialist, HTC Extensions, Bond/ 4% – (512) 475-3882 Elizabeth Henderson elizabeth.henderson@tdhca.state.tx.us Multifamily Housing Specialist, HTC Ownership Transfer – (512) 475-9784 Valentin Deleon valentin.deleon@tdhca.state.tx.us Multifamily Housing Specialist, Experience Certificates – (512) 475-3061 Liz Cline liz.cline@tdhca.state.tx.us Multifamily Housing Specialist, IRS Reporting – (512) 475-3227 Jason Burr jason.burr@tdhca.state.tx.us Database Administrator- Application Technical Assistance – (512) 475-3986 Misael Arroyo misael.arroyo@tdhca.state.tx.us Multifamily Executive Assistant – (512) 475-2596
Main Multifamily Telephone – (512) 475-3340 Multifamily Facsimile – (512) 475-0764 or (512) 475-1895
Texas Department of Housing and Community Affairs Real Estate Analysis Contacts:
Brent Stewart brent.stewart@tdhca.state.tx.us Director of Real Estate Analysis, (512) 475-2973 Audrey Martin audrey.martin@tdhca.state.tx.us Manager of Real Estate Analysis, (512) 475-3872
Compliance and Asset Management Contacts:
Patricia Murphy patricia.murphy@tdhca.state.tx.us Chief of Compliance and Asset Management, (512) 475-3140 Wendy Quackenbush wendy.quackenbush@tdhca.state.tx.us Manager of Compliance, (512) 305-8860
Texas Department of Housing and Community Affairs
HOME and Tax Credit Assistance Program Contacts:
Cameron Dorsey cameron.dorsey@tdhca.state.tx.us HOME Program Manager – (512) 475-2669 Chris Law chris.law@tdhca.state.tx.us HOME Program Administrator – (512) 305-8854 Lisa Vecchietti lisa.vecchietti@tdhca.state.tx.us Tax Credit Assistance Program Administrator – (512) 936-7791 Laura DeBellas laura.debellas@tdhca.state.tx.us Tax Credit Assistance Program Specialist – (512) 475-3821
Doing Business with HUD
MULTIFAMILY PROGRAMS HOUSTON MULTIFAMILY HOUSING PROGRAM CENTER
WHAT CAN HUD
DO FOR YOU ? 1
y Better terms than conventional financing, provides
mortgage insurance, non-recourse loan, and we want to shorten our timeframes. y Two Primary HUD Programs: 221(d)(4) 223(f)
MULTIFAMILY PROGRAMS .
Section 221d(4)
New Construction or Substantial Rehabilitation 40-year term 90 percent loan major repairs or rehab
Section 223f .
• 35-year term • 85 percent loan to value • acquisition of existing property • refinance of existing property • 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 p Special p Conditions and Requirements q for Easily Correctable Environmental Concerns (continued)
HUD’s Role .
• Complete p Eight-Step g p Decision Making g Process for
Floodplains 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 .
y Communicate with Various Agencies for
Response to Inquiries to SHPO, F&W, USACE, etc. y Compile environmental data and Phase I ESA and any
Phase II ESA attachment to HUD HUD-4128 4128 along with SFNC as support for your conclusions.
HUD’s Role .
• Forward Copy py of Entire Environmental Assessment
with Backup Documentation to Project Manager with FIRM Commitment Processing Report along with any S Special i l Requirements R i t and dC Conditions diti • Forward HUD-4128 and Backup Documentation to
the h Environmental i l Officer ffi ffor Projects j Over 200 Units for Approval • Reject projects with significant impact(s)
TOP TEN--reasons that stall or impede processing can be summed up into . . . .
LOCATION
LOCATION
LOCATION
Once you find a site: y .
NEED POSITIVE MARKET STUDY
U.S. Department of Housing And Urban Development
Need an Environmentally CLEAN SITE
y Phase I Environmental Site Assessment free of
any recognized environmental concerns (RECs). y Prepared in accordance with the American Society of Testing Materials Standard E 1527–05. y No older than 180 days unless updated by an environmental professional. y 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
Non-Jurisdictional or Isolated Wetlands o
• • • • •
The existence of wetlands means compliance p with Executive Order 11990, also called the Eight-Step Decision Making Process which Requires i a specialist i li to d determine i extent off wetlands l d Requires examining alternative sites Requires publishing two notices May require mitigation plan Timely process
OUTSIDE OF 100-YEAR FLOOD PLAIN y Executive Order 11988 discourages Federal agencies from
initiating or participating in new construction within areas having special flood hazards. y HUD discourages development of the floodplain y 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, Homes means 500 500-year year floodplain 他 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 y Roadways within 1000 feet
Trigger Noise Analysis of Noise 10 years into the Future y Railroads within 3000 feet y Airports within 5 miles {
Sites must be located outside 2,500 5 feet of a civil airport p runwayy or outside 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 excessive and generally unacceptable
High g Voltage g Transmission Power Line Towers Absolutelyy NO development p allowed within the fall distance of these towers
HIGH-PRESSURE PIPELINES y No development p within 10 feet of the boundaryy of
such a pipeline easement y Pipelines traversing your site can also lead to
portions that cannot be used for development resulting lti iin excess lland. d
FREE FROM ADVERSE HEALTH AND SAFETY ISSUES y Vibration ib i ffrom proximity i i to railroads il d y Proximity to drill sites, slush pits, etc. y Proximity to above-ground storage tanks
g hazardous materials containing
FREE FROM HARM TO NEIGHBORHOOD MARKETABILITY y Be certain your site is free from impact of grossly
offensive ff i nuisances i such h as: y unsightly land uses y cementt plants l t y junkyards y kennels y truck warehouses y sewage treatment plants y industrial plants y dilapidated abandoned boarded up properties
The Endangered Species Act of 1973 y requires q protection p of listed or proposed p p
endangered or threatened species or critical habitats. y Projects j that h can affect ff li listed d endangered d d or threatened species or critical habitats require consultation with the Department of Interior in compliance with the procedure of Section 7 of the Endangered Species Act (ESA). y Only for new construction and conversion activities does the ESA authority apply.
Physical activities cannot begin until the Environmental Assessment is complete
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 y Houston Multifamily
Housing Program Center
25
™
The purpose off this Th thi segmentt off th the presentation t ti iis to provide a brief overview of the utilization of LIHTC funds with Multifamily Programs at HUD. M ltif il Housing Multifamily H i is i one off th the major j di divisions i i in the Office of Housing.
™
Discuss program-specific issues relative to combining outside sources of funds with HUD mortgage insurance. insurance
26
Housing and Economic Development Recovery Act .
On July 30, 2008, the Housing and Economic
Development Recovery Act of 2008 (HERA) b became P Public bli L Law 110-289. 8 Titl Title VIII off HERA, HERA in subtitle B, cited as the “Housing Tax Credit Coordination Act of 2008, 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 .
y Expands the use of FHA programs with Low-
Income Housing Tax Credits y Administrative and procedural changes
implemented to expedite approvals
y Mortgagee M L Letter 2008-19 8 remains i in i effect. ff y Departmental clearance is underway relative to a
final Master Lease policy to facilitate the use of tax credits. y HERA requires the Secretary to consult with the Commissioner of the Internal Revenue Service. y 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 (CFR 891.805)
Section 202 and Section 811 Mixed Finance Program .
The intent of the Mixed-Finance Mixed Finance Program is to: y Leverage private-sector participation by allowing for-profit participation
in the Section 202 Supportive Housing Program for Elderly and the S i 811 Section 8 S Supportive i Housing H i Program P for f P Persons with i h Disabilities Di bili i
y Leverage private and public capital y Expedite the production of this scarce housing y Expand the supply of supportive housing for the elderly or persons with
disabilities
AS S A RESULT S O OF HERA: .
THERE ARE CHANGES TO HUD’S HUD S PROCESSING OF CERTAIN FHA MORTGAGE INSURANCE APPLICATIONS
Changes to the HUD’s Processing of Certain FHA Mortgage Insurance Applications .
™ At the h time i off Firm i Commitment i i issuance, when h the h
ratio of loan proceeds to the actual cost of such projects is less than 80 percent percent, the mortgagor will not be required to certify actual costs to HUD. In cases that are exempt p from cost certification, a Cost Certification Audit Fee, line 66, Section G., Form HUD-92264 will not be applicable.
< 80% = No Cost Certification .
Section 221(d)(4) Form HUD 92264 92264-A A Criteria 11. 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) $ 13,000,000 LIHTCs for Mortgageable Items ………………………………………………………. 5,000,000 Maximum 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 application. li i The h ratio i off lloan proceeds d to the h fi firm commitment i estimated i d project j replacement cost is less than 80%
HERA Provides : .
Â&#x2122; 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. credit The Department is in the process of making a conforming rule change to 24 CFR 200.54 54 to implement p this p provision of HERA.
LIHTC EQUITY .
An equity contribution schedule, acceptable p prior p to Initial to HUD,, must be provided Endorsement.
LIHTC EQUITY .
y HUD will require, q , however,, that an appropriate pp p
amount of the LIHTC Equity be invested in the project and applied to HUD approved items at the ti time off Initial I iti l E Endorsement. d t y The initial installment of LIHTC Equity should be an 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/ENDORSEMENT BARRIERS .
y Syndication Agreement /Letter of Intent
inconsistent with Underwriting g y GAP Funding not evidenced y Sources and Uses not accurate y APPS/Previous Participation findings
TRADITIONAL REQUIREMENTS .
Operating Deficit Escrows .
Â&#x2122;
Where proceeds from the proposed sale of a project receiving LIHTCs are used to fund the operating deficit escrow,, "Escrow Agreement Additional Contribution byy Sponsors," p or its equivalent will be amended to reflect the following:
Operating Deficit Escrows .
â&#x20AC;&#x153; 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, transferred to the project's Replacement Reserve account. account.â&#x20AC;?
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 amount, pay pay-in in schedule and other matters so that HUD and the Lender can ensure sufficient equity q y in a manner which meets HUD's other requirements.
Syndication and Partnership Agreements .
Must recite: y Estimated Total Project Costs and Sources of
g Financing y HUD-estimated replacement cost and mortgage debt b y LIHTC Allocation terms generally consistent with those the HCA and FO have committed to (so investors are fully informed of all cost and g terms)) financing
THANK YOU!! .
Houston Multifamily Housing Program Center
Name
Phone Number
Fax Number
Email Address
Raynold Richardson, Director
713-718-3137
713-718-3272
raynold.richardson@hud.gov
Production Branch Crystal D. Rienth, Chief, Multifamily Production Margaret Lewis, Program Assistant
713-718-3156 713-718-3155
713-718-3245 713-718-3245
crystal.rienth@hud.gov margaret.lewis@hud.gov
Project Managers Jerilyn Carr Steve Cuellar Betty Fleming Sandra Krchnak
713-718-3153 713-718-3148 713-718-3154 713-718-3152
713-718-3245 713-718-3245 713-718-3245 713-718-3245
jerilyn.carr@hud.gov steve.cuellar@hud.gov betty.fleming@hud.gov sandra.d.krchnak@hud.gov
Mortgage Credit Analysts Elsa Anderson Russell Brandes Lanita Harris-Thomas
713-718-3149 713-718-3144 713-718-3150
713-718-3245 713-718-3245 713-718-3245
elsa.c.anderson@hud.gov russell.w.brandes@hud.gov lanita.l.harris-thomas@hud.gov
Architectural, Engineering & Cost Steve Harris, Cost Analyst Kenneth Pugh, Construction Analyst Jerry Pursley, Construction Analyst
713-718-3146 713-718-3243 713-718-3147
713-718-3245 713-718-3245 713-718-3245
steve.harris@hud.gov kenneth.pugh@hud.gov jerry.pursley@hud.gov
Valuation Crystal D. Rienth, Appraiser Debbie Straitwell, Appraiser Trainee
713-718-3156 713-718-3161
713-718-3245 713-718-3245
crystal.rienth@hud.gov deborahann.straitwell@hud.gov
Financing Affordable Rental Properties
Financing LIHTC Properties with HUD Financing LIHTC Properties with HUD • HUD 221(d)4 Program Requirements HUD 221(d)4 Program Requirements – Amortization up to 40 years • Interest Interest only during construction only during construction • Draw down loan • Fully amortizing, no balloon payments y g, p y
– 1.11x Debt Service Coverage Ratio – Permanent Loan is Rate Locked at Closing e a e oa s a e oc ed a os g – No NOI/Stabilization Requirement for Permanent Loan Conversion
Financing LIHTC Properties with HUD Financing LIHTC Properties with HUD • HUD 221(d)4 Program Requirements HUD 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 contract Letter of Credit equal to 15% of the contract – Annual Audit is required – Cash Distributions limited to Surplus Cash Cash Distributions limited to Surplus Cash – Payment of Social Services
Financing LIHTC Properties with HUD Financing LIHTC Properties with HUD • The 221(d)4 Loan Process The 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 HUD Financing LIHTC Properties with HUD • HUD Processing HUD Processing – 45 Days 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 30‐ day extensions) to file for the Firm Application
Financing LIHTC Properties with HUD Financing LIHTC Properties with HUD • Firm Application Processing pp g – Who is a Principal • Any GP, LPs with more than a 25% interest, Stockholders or p p, members of a corporation or LLC with more than 10% ownership, 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 Review
Financing LIHTC Properties with HUD Financing LIHTC Properties with HUD • Firm Application Processing, continued – Appraisal, approximately 30 days pp , pp y y – Survey and Surveyor’s Report – Payment of HUD Examination Fee (0.30% of mortgage amount) – HUD Processing, approximately 45 days • If application rents and expenses are within 5% of the I it ti L tt Invitation Letter a Firm Commitment should be issued unless Fi C it t h ld b i d l – A Principal has a Previous Participation issue – An undisclosed environmental condition has been discovered
Financing LIHTC Properties with HUD Financing LIHTC Properties with HUD • Issuance of HUD Commitment – Determination of Construction and Permanent Interest Rates • Requires Requires a Good Faith Deposit of 0.50% a Good Faith Deposit of 0 50% • Lock out and prepayment provisions may vary according to market conditions
– May May Require Lender to Reprocess Commitment at Require Lender to Reprocess Commitment at Locked Interest Rate (one week) – Submit Closing Package to HUD Legal – Closing two to four weeks after locking interest rate Cl i f k f l ki i
Financing LIHTC Properties with HUD Financing 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 conference and specs AND attend a pre‐construction conference – HERA processing requires on 20% of LIHTC equity at closing
Financing LIHTC Properties with HUD Financing LIHTC Properties with HUD • Construction Phase – Monthly inspection attended by HUD inspector, GC and Architect – Draw 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 HUD Financing LIHTC Properties with HUD • Final Endorsement – No Income Stabilization Test Required – Cost Certification (HERA changes)
• Post Closing/Final Endorsement Post Closing/Final Endorsement – – – – – –
Regulatory Agreement Annual Audit Monthly Accounting Reports Monthly 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 carlo@davispenn.com www.davispenn.com Â
Putting the Construction Financing Puzzle Together
Presented by: Wayne Yaffee Reuben Rosof Christine Miller Khatidja 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
If the Project Meets Preliminary Qualifications, What Items are Needed to Begin Underwriting?
9 Market comparables 9Market study
Letter of Intent What to look for in the Letter of Intent (See Appendix 1) 9 Deal Terms 9 Due Diligence Requirements
Due Diligence Checklist What due diligence items are required? (See Appendix 2) 9 Title 9 Survey 9 Organizational Documents 9 Insurance 9 Phase 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
Gardere Houston Office Wayne Yaffee Tel: 713.276.5572 E-mail: wyaffee@gardere.com Reuben Rosof Tel: 713.276.5230 E-mail: rrosof@gardere.com Christina Miller Tel: 713.276.5345 E-mail: cmiller@gardere.com Khatidja Soofi 713.276.5412 E-mail: ksoofi@gardere.com
Gardere Wynne Sewell LLP
Gardere Wynne Sewell LLP
Austin Office: One American Center, Suite 3000 600 Congress Avenue Austin, Texas 78701-2978 Phone: 512.542.7000 Fax: 512.542.7100 Dallas Office: 1601 Elm Street Suite 3000 Dallas, Texas 75201 Phone: 214.999.3000 Fax: 214.999.4667
Houston Office: 1000 Louisiana Suite 3400 Houston, Texas 77002-5011 Phone: 713.276.5500 Fax: 713.276.5555 Mexico City Office: Torre Esmeralda II, Blvd. Manuel A. Camacho No. 361802 Lomas de Chapultepec Mexico, D.F. 11000 Phone: 011(52)55 5-284-8540 Fax: 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 30% AMI 40% AMI 50% AMI 60% AMI TOTAL
# of Units
Type
[bedroom square footage listed]
Rents
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 onemonth 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/ Amortization:
During construction, interest is due ____.
Construction Commencement:
Construction shall commence ____ days after funding.
Construction Completion Date:
Construction completion shall occur within ______ of closing, subject to force majeure.
Guarantees of Payment and Completion:
(a) List of Guarantors during construction and whether guaranteeing payment and completion or just completion. (b) Guarantors limited to non-recourse carve-outs acceptable to Bank.
APPENDIX 1
Recourse:
Environmental Indemnification:
During construction, the Loan is full recourse.
Borrower and Guarantor will jointly and severally provide environmental indemnification during the full term of the construction and permanent loan.
Collateral: • •
Due on Sale Provisions:
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.
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:
Conditions Subsequent to Closing:
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.
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 â&#x20AC;&#x201C; DUE DILIGENCE CHECKLIST Date: Updated by:
(Lender) (Borrower) PROJECT NAME DUE DILIGENCE CHECKLIST A.
A.1.
FINANCIAL & REFERENCE INFORMATION
BORROWER: 1.
B
X
__
__
B
X
__
__
B
X
__
__
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
__
__
B
X
__
__
2.
A. 2.
Organizational structure of Borrower Current Financial Statement to include cash flow, contingent liabilities
3.
2 years statements
historical
financial
4.
Projected cash flow for one year
PRINCIPALS/GUARANTORS 1.
Current Financial Statement to include cash flow, contingent liabilities & statement of real estate owned (signed)
Responsibility
Required
Requested/ Received/ Drafted
Received/ Approved/ Executed
In order for an item to be complete each column must be checked (X)
B.
C.
D.
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
__
___
DEVELOPER/CONSULTANT 1.
Profile including past projects
B
X
__
__
2.
Development Agreement
B
X
__
__
3.
References
B
X
__
__
CONTRACTOR 1.
Profile including past projects
B
X
__
__
2.
Bonding agency
B
X
__
__
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.
B
X
__
__
PROPERTY MANAGER
Sample Lease form
Page 2 of 7
Responsibility
Required
Requested/ Received/ Drafted
Received/ Approved/ Executed
In order for an item to be complete each column must be checked (X)
E.
NONPROFIT INVOLVEMENT (IF APPLICABLE)
1
F.
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
__
__
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 Architectâ&#x20AC;&#x2122;s Office
B
X
__
__
7.
Soils/Geotechnical Report
B
X
__
__
8.
Phase I Environmental Survey (includes soils report and wetlands study)
B
X
__
__
L
X
__
__
10. General Construction Contract
B
X
__
__
11. List of Major Subcontractors
B
X
__
__
9.
Review of Phase I by Lender
Page 3 of 7
Responsibility
Required
Requested/ Received/ Drafted
Received/ Approved/ Executed
In order for an item to be complete each column must be checked (X)
G. G.1.
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 area
B
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. Lenderâ&#x20AC;&#x2122;s signed Commitment Letter and payment of Commitment fee
B
X
__
__
B
X
__
__
2. a. Lenderâ&#x20AC;&#x2122;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
__
__
ITEMS TO BE DELIVERED PRIOR TO CLOSING MISC. DOCUMENTATION 1.
Architect's Contract
Page 4 of 7
Responsibility
Required
Requested/ Received/ Drafted
Received/ Approved/ Executed
In order for an item to be complete each column must be checked (X)
4.
Insurance Certificates with Lender as Mortgagee*
B
a. Fire (at completion on new const.) b. Hazard (at completion on new const.) c. Comprehensive general ability and excess liability (*Lender as
X
__
__
X X X
__ __ __
__ __ __
X X X
__ __ __
__ __ __
X
__
__
X X X X X X
__ __ __ __ __ __
__ __ __ __ __ __
additionally insured)
d. All-Risk builderâ&#x20AC;&#x2122;s risk e. Workmanâ&#x20AC;&#x2122;s Comp. f. Flood (if applicable) 5.
Utility Availability Letters
B
a. Wastewater/Sewer b. Water c. Storm drainage d. Electric e. Telephone f. Gas 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
Page 5 of 7
Responsibility
Required
Requested/ Received/ Drafted
Received/ Approved/ Executed
In order for an item to be complete each column must be checked (X)
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
G.3.
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
__
__
GENERAL PARTNER/(S): Corporation 1.
Articles
B
X
__
__
2.
Bylaws
B
X
__
__
Page 6 of 7
Responsibility
Required
Requested/ Received/ Drafted
Received/ Approved/ Executed
In order for an item to be complete each column must be checked (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
G.4.
1.
Partnership Agreement
B
X
__
__
2.
Certificate of Limited Partnership
B
X
__
__
3.
Certificate of Existence
B
X
__
__
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
__
__
Page 7 of 7