Loading...
HomeMy WebLinkAboutagenda.council.worksession.20161101 CITY COUNCIL WORK SESSION November 01, 2016 4:00 PM, City Council Chambers MEETING AGENDA I. Budget Work Session - Housing Development; Truscott and Marolt Funds; APCHA Fund; ACI Fund; Budget Wrap-up P1 Page 1 of 1 MEMORANDUM TO: Mayor and City Council FROM: Chris Everson, Affordable Housing Project Manager THRU: Barry Crook, Assistant City Manager DATE OF MEMO: October 28, 2016 MEETING DATE: November 1, 2016 RE: RFP Public Private Partnership Affordable Housing Development REQUEST OF COUNCIL: Staff seeks direction on affordable rental housing development. PREVIOUS COUNCIL ACTION: At a work session on November 16, 2015, staff was directed to release an RFP to seek Public Private Partnership (PPP) proposals for development of affordable rental housing. At a work session on August 2, 2016, staff presented the findings of the RFP process and recommended further vetting of the “Aspen Housing Partners” (AHP) team for consideration of selection. Council agreed staff should return to Council after (1) using a third party expert to complete further vetting of AHP and their proposal, (2) for comparison, prepare an alternate development scenario, where the City would act as the developer , and (3) prepare a draft agreement with AHP for Council review and potential approval. DISCUSSION: The City is utilizing consulting services from KD Housing Partners, who have delivered some 4,000 housing units through the Low Income Housing Tax Credit (LIHTC) program and is currently working with the City on refinancing Aspen Country Inn and Truscott Phase II under the LIHTC program. Findings from KD Housing Partners related to AHP are attached in Exhibit C. Staff has also included Exhibit B, which compares an alternate scenario where the City would act as the developer. Exhibit A is a summary of agreement terms which staff and AHP have agreed to. The summary o f terms was negotiated between the staff, with the help of KD Housing Partners, and AHP, and with agreement from Council would be worked into a detailed development agreement. Staff has invited AHP to the work session to discuss the agreement summary and a ny other elements of the project which Council wishes to discuss. FINANCIAL/BUDGET IMPACTS: Per 2016 and 2017 in the 150 Fund LRP from tonight’s work session. RECOMMENDED ACTION: Based on the findings presented, staff recommends that Council verify the selection of AHP by agreeing to the attached summary of terms shown in Exhibit A, and staff will return to Council in late November to discuss the project timeline, zoning considerations and the community outreach program, all of which are necessary components for a final detailed agreement , which will be pursued upon Council agreement of the summary of terms in Exhibit A. CITY MANAGER COMMENTS: ATTACHMENTS: Exhibit A: Summary of Agreement Terms between City of Aspen and Aspen Housing Partners Exhibit B: Staff Comparison of PPP versus Public Delivery Exhibit C: KD Housing Partners, vetting AHP and its proposal P2 I. 10.28.16 {A0088183 / 3 } 1 138976.5 CITY OF ASPEN - ASPEN HOUSING PARTNERS, LLC SUMMARY OF TERMS FOR DEVELOPMENT AGREEMENT FOR AFFORDABLE HOUSING This Summary of Terms is presented by Aspen Housing Partners, LLC, a Colorado limited liability company (“AHP”), to serve as a non-binding proposal describing the basic terms upon which AHP would consider entering into a development agreement with the City of Aspen, Colorado (the “City”) for the ground lease and development of the three Properties described below for rental affordable housing purposes (the “Project”). The purpose of this Summary of Terms is to provide sufficient detail as to the terms of a proposed development agreement between AHP and the City to enable the City Council to authorize its staff (with the assistance of outside consultants) to proceed with negotiation of a detailed agreement that would then be subject to final approval by the City Council and AHP prior to final execution. Neither AHB nor the City will have any duties, obligations, liabilities or rights with respect to each other concerning the Project unless or until a formal development agreement is executed and delivered by AHP and the City (the “Final Agreement”). 1. Overall Transaction Struct ure and Terms. a. Basic Purpose. The basic purpose of this transaction will be for the City to make use of the land available to the Project at no upfront cost and provide some funding, and for AHP to develop, three affordable housing rental projects within the municipal boundaries of the City. This multi- site Project will qualify for federal Low Income Housing Tax Credits (“LIHTC”) pursuant to the LIHTC program administered by the Colorado Housing Finance Authority (“CHFA”) as the designated state allocating agency for Colorado pursuant to Section 42 of the Internal Revenue Code. The Properties will also be perpetually deed restricted as affordable housing according to the guidelines of the Aspen/Pitkin County Affordable Housing Authority (“APCHA”). b. Propert ies. The City is the owner of three properties generally described as follows that would be used for this transaction (the “Properties”): i. 802 West Main Street . This property is a 9,000 square foot parcel of land located at 802 W. Main Street at the “s-curves” entrance to the City at the northwest corner of 7th Street and Main Street (Hwy. 82). There is an existing single-family residence on this property. This property is currently zoned R-15, Moderate-Density Residential. ii. 517 Park Circle. This propert y is a vacant 14,458 square foot parcel of land located near the top of the hill at 517 Park Circle near the north-east boundary of the City. This property is near the curve at the base of Smuggler Mountain. This property is currently zoned R -15, Moderate- Density Residential. EXHIBIT A P3 I. 10.28.16 {A0088183 / 3 } 2 138976.5 iii. 488 Castle Creek Road. This is a 35,895 square foot parcel of land located on Castle Creek Road south of the round-a-bout at the entrance to the City. This property is currently subdivided into two lots and is zoned R-15, Moderate-Density Residential. c. Project Entity. AHP will form a new limited partnership or limited liability company to act as the owner of the Project (the “Project Entity”). AHP will be the general partner or manager of the Project Entity and will contro l and operate the entity (subject to limitations that are standard for LIHTC deals), but will hold only a de minimus ownership interest in the Project Entity. The LIHTC tax credit investor will be a limited partner or member of the Project Entity and will hold almost all of the ownership interest. At the City’s request, APCHA will be included as a limited partner or member of the Project Entity. Given the magnitude of the City’s investment in the Project, the City will be a special limited partner or member in the Project Entity with the right to remove and replace the general partner or manager and/or to cure defaults by the Project Entity under the Project’s loan documents, Equity Documents or lease terms. d. City Financial Contribution. The City will make a so-called “soft loan” to the Project Entity to provide the “gap” funds necessary to develop the Project in excess of the equity generated through the LIHTC program and other sources (the “City Loan”). The loan amount required from the City will depend on the actual LIHTC program the City and AHP decide to pursue and is addressed in more detail later in this Summary of Terms. The City will not be responsible for funding any cost overruns in excess of those costs detailed in the approved Project budget. The Final Agreement will include a preliminary Project budget that will be updated with the City’s approval at agreed-upon milestones as the predevelopment phase of the Project progresses, with a final budget being agreed by the parties upon as a condition to commencing construction. The Project budget will include detailed operating expense line items. All expenses will be tracked on an “open book” basis with the City having access to all Project accounting . City shall have the opportunity to approve expenditures. During the Entitlement / Financing Application Process, AHP will twice annually (or more frequently at the City’s request) provide updates is this the deal, to the project budget, financing sources and CoA subsidy. At the time of each update, the Project Budget should be reviewed with City Council at a City Council work session so that City Council may provide direction to continue with the project. Timing of updates will be agreed by City and AHP. The City Loan will have the following basic terms: i. Term of 50 years or other commercially available term agreed to by the parties. ii. Interest rate set at the “applicable federal rate” (the “AFR”) published by the IRS (i.e., the lowest rate permitted by the IRS) or another rate agreed to by the parties. If the Project cash flows will not support an interest rate at the AFR, then interest rate will be set at the highest rate that allows a “true debt”/“residual value” analysis to show reasonable repayment. iii. Secured by a leasehold deed of trust on the Project Entity’s “Ground Leases” on the Properties described below. The City’s deed of trust securing the City Loan will be in a second position junior to the leasehold deed of trust for the construction and permanent financing for the Project. As the holder o f a second position deed of trust, the City will be required to enter into a commercially reasonable inter-creditor agreement with the senior lender detailing the relative rights of the lenders and confirming the City’s junior position, along with its notice and cure rights and other rights to take over the Project for the purpose of protecting the City’s investment. EXHIBIT A P4 I. 10.28.16 {A0088183 / 3 } 3 138976.5 iv. The City Loan will be non-recourse to the Project Entity and will be payable from 75% of the excess cash flow (i.e., after payment of all project operating expenses, senior debt service, the asset management fee, and any deferred “Development Fee” (as defined below)), if any, generated by the Project. To the extent cash flow is not sufficient to fully service the City Loan payments, the City Lo an debt service obligation will accrue and be repaid from cash flow when and if it becomes available. Payments shall be applied first to accrued interest and then to principal. If in any year, the City Loan accrued obligation is paid current surplus cash flow will be distributed per the cash flow distribution “waterfall”. e. Funding of City Loan. The manner in which the City Loan is actually funded into the Project will need to be discussed and agreed upon. The senior construction lender and AHP will need to be able to verify the availability of the City Loan funds and the payment of the funds in a manner that does not delay to the Project. The City Loan funds will need to be committed to the Project such that they are not subject to annual appropriation or the voter approval limitations imposed by the Colorado Tax Payer Bill of Rights. Subject to these considerations and the requirements of the construction lender, AHP understands the City may expect to fund the City Loan contributions as monthly construction draws after all other equity and debt sources are fully funded based on the City’s review of the progress of construction and monthly applications for payment per standard construction industry practices. The parties acknowledge some flexibility will be needed in determining how and when the City Loan funds are contributed to the Project over the course of construction. The Final Agreement will provide for a mechanism by which all verified savings in the total Project costs can be refunded to the Cit y. f. Ground Leases. The transaction will be structured with long-term ground leases by which the City will lease each of the three Properties to the Project Entity (the “Ground Leases”). The preliminary form of the Ground Leases (subject to final lender approval) will be attached as an exhibit to the Final Agreement. The basic terms of each of the Ground Leases will be as follows: i. Commencement date of the Ground Lease will occur at the “Project Closing” (as defined below) after all LIHTC and local approva ls for the project have been obtained and the construction is ready to commence. ii. Initial term of 40 years with an option for the Project Entity to extend the term by an additional 10 years. iii. Nominal rent of $10.00 per year. iv. The Project Entity, as the tenant under the Ground Leases, will be the owner of all the improvements existing or constructed on the Properties. v. The Project Entity, as the tenant, will be responsible for all operating and ownership costs for the three Properties. vi. The City will have an option to purchase the Project from the Project Entity and a right of first refusal (ROFR) in compliance with LIHTC program requirements. The option and ROFR will arise at the end of the initial 15-year compliance period under the LIHTC program. The purchase price under the ROFR will be equal to the sum of: (a) all outstanding indebtedness and accrued but unpaid interest owed to the senior lender for the Project; (b) any amount owed to the City as EXHIBIT A P5 I. 10.28.16 {A0088183 / 3 } 4 138976.5 the junior lender pursuant to the City Loan and any other junior secured debt; plus (c) the amount of all so -called “exit tax” obligations that will be incurred by the Project Entity and its participants as a result of the City exercising the option. The Project Entity and AHP will use commercially reasonable efforts (with no guaranty) to prevent the participants in the Project Entity from having negative capital account balances that would increase the exit tax obligations. The capital accounts will be monitored. The parties will consider a provision in the operating agreement or partnership agreement for the Project Entity by which losses that create negative capital accounts can be flipped to the City as a special limited partner/member in the Project Entity and thereby reduce any exit tax obligations. AHP w ill produce downstream capital account projections as part of the budgeting process for the Project. vii. To the extent feasible given the requirements of the senior lender, the City will be given notice and cure rights with respect to any defaults by the Project Entity under its loan from the senior lender for the Project. The City will also have curative rights as the special limited partner/member in the Project Entity in order to prevent defaults from occurring under the senior loan. The terms of the senio r loan will be subject to the City’s approval in its discretion. The City and AHP acknowledge that the senior lender (for the construction phase and permanent financing phase) and/or any loan insurer such as HUD (per its §°221(d)(4) program) will have its own requirements with respect to the Ground Leases to protect its interests in the event of a default by the Project Entity as the tenant, but the City will not be required to accept such requirements. g. Role of APCHA. i. LIHTC Application Support. The City will facilitate APCHA support for any LIHTC application. ii. Real Estate Taxes. It may be possible for the three Properties, even with the Ground Lease being to a private party, to be exempt from real estate taxes if APCHA is a participant in the Project Ent ity. The parties will evaluate this option and the competing costs and benefits of obtaining exemption from real estate taxes. AHP will generate property tax projections, including projections of the resulting reduction in operating expenses and gain in projected permanent debt proceeds if the Project were exempt from real estate taxes. iii. Project Management . The developed Properties will be managed by a management company approved by CHFA and the City with expertise in managing LIHTC projects and insuring compliance with all LIHTC program requirements. The parties, in consultation with APCHA, will discuss the role APCHA will play in the management of the Properties, for example by being involved in the vetting and qualification of prospective tenants. APCHA approval of all tenants will be required in accordance with APCHA guidelines. A combined application meeting both CHFA and APCHA requirements will be developed for the Project. The Final Agreement will provide additional detail regarding the management role of APCHA for the Project and any compensation to be paid to APCHA for its management functions. h. Development Fee. AHP will earn and be paid a development fee of 12% of the “eligible basis” costs for the Project according to the CHFA guidelines (the “Development Fee”). Subject to terms required by the tax credit investor and senior lender, 20% of the Development Fee will be earned by AHP for the work it does within the Entitlement/Feasibility Period and will be paid to AHP EXHIBIT A P6 I. 10.28.16 {A0088183 / 3 } 5 138976.5 concurrently with the “Project Closing” (as defined below). The remainder of the Development Fee will be paid to AHP over the course of the construction and leasing process for the Project according to a payment schedule approved by the City, subject to commercially reasonable term s for potential deferment of portions of the Development Fee , including deferrals arising from unanticipated cost overruns. i. Cash Flow Waterfall. The net cash flow generated from rental of the completed Project after the payment of operating expenses and debt service to the senior lender will be distributed in the following order: i. To the payment of an asset management fee according to the final approved Project budget; Not to exceed $3,000 unless otherwise agreed by City of Aspen. ii. To the payment of any unpa id balance of the deferred Development Fee spread over 12 years, or on a schedule otherwise agreed by all parties; iii. fund any Replacement reserve account to a minimum per a “to be agreed upon schedule” iv. To the payment of the City Loan from up to 75% of cash flow; v. Of the balance, either (i) 90% to the general partner/manager of the Project Entity in payment of a Project Entity management fee or (ii) 50% to AHP and 50% to APCHA, as negotiated in connection with the final approved Project budget . At the time of the final agreement, this will be decided based on APCHA’s involvement in the tenant qualification process, which shall be further detailed finalized in the final agreement. vi. The balance, if any, to the partners/members of the Project Entity, pro rata, in accordance with their percentage interests in the Project Entity. j. Affordable Housing Restrictions. The three Properties will be made subject to the following restrictions recorded in the real estate records of Pitkin County in forms approved by the City: i. The Land Use Restriction Agreement (the “LURA”) required by CHFA in order to comply with the LIHTC program requirements. The LURA will impose income and rent restrictions for a 15-year compliance period and an additional extended-use period of at least 15 years in accordance with the requirements of CHFA for a total term of at least 30 years (or whatever is required by CHFA to comply with the particular LIHTC program used for the Project). ii. A perpetual “Occupancy Deed Restriction and Agreement” for the benefit of APCHA and the City based on the form used by APCHA, but with some special provisions to avoid conflicts with the terms of the LURA. This deed restriction will be non-subordinated and will not be subject to termination as the result of any foreclosure by any le nder for the Project. k. For Sale Conversion. The Properties will be developed initially as affordable rental housing. AHP acknowledges that the City (potentially acting through APCHA) may want to convert one or more of the Properties into for-sale affordable housing after the expiration of the LURA if the City exercises its right of first refusal or purchase option or after expiration of the Ground Lease. The EXHIBIT A P7 I. 10.28.16 {A0088183 / 3 } 6 138976.5 City’s intent in this regard will be incorporated into the LIHTC application with CHFA in accordance with CHFA’s requirements. l. Closing. The closing at which the City and the Project Entity enter into the Ground Leases and the City makes the City Loan to the Project Entity will occur concurrently with the closing of the LIHTC transaction with CHFA, the tax credit investor, and the construction lender for the Project (the “Project Closing ”). The Final Agreement will detail the conditions that need to be satisfied before the Project Closing occurs, which will include such things as: i. That all final zoning approvals have been obtained and building permits have been issued (i.e., the Project is “shovel ready”). ii. CHFA has awarded LIHTC tax credits for the Project. iii. The Project Entity has entered into a construction contract with a qualified general contractor meeting all CHFA and LIHTC program requirements. iv. All construction loan terms have been agreed to and the construction lender is prepared to begin advancing construction loan proceeds for development of the Properties per the terms of the construction loan. v. The tax credit investor under the LIHTC program has approved the transaction and is committed to fund its investment. vi. The City Loan funds are adequately appropriated and committed to the Project. vii. Stewart Title has issued pro forma policies acceptable to all parties and is irrevocably committed to issue leasehold title insurance policies to the Project Entity (as the tenant), the construction lender with respect to its first position deed of trust on the Ground Leases, and the City with respect to its second position deed of trust on the Ground Leases to secure the City Loan. m. Elimination of Properties. If the parties determine during the due diligence or entitlement phases of the Project that the Project should proceed with less than all three Properties, th en one or two of the Properties may be eliminated from the Project with the approval of the City and AHP. n. Good Faith and Diligence. The parties acknowledge that it will be important for Project to proceed in a time-efficient manner and that significant cooperation between AHP and the City will be needed if the Project is to succeed. AHP and the City will each agree to work in good faith with each other and act in a timely manner when information, input or decisions are needed from the other party. 2. Due Diligence Period. AHP will have a 120-day due diligence period after execution of the Final Agreement to evaluate the three Properties for development suitability purposes (the “DD Period”). Prior to execution of the Final Agreement, AHP intends to commenc e certain due diligence activities at AHP’s expense, subject to such expenses being included as Project expenses if the Project progresses, as more fully described below. EXHIBIT A P8 I. 10.28.16 {A0088183 / 3 } 7 138976.5 a. Title and Survey. i. AHP is coordinating with Stewart Title to deliver preliminary title insurance commitments for each of the Properties, which commitments will be updated from time to time and will be converted into title insurance commitments for the Ground Leases as the predevelopment phase of the Project progresses. ii. AHP is obtaining current surveys of each of the Properties prepared by a licensed surveyor in accordance with the 2016 Minimum Standard Detail Requirements for ALTA/NSPS Land Title Surveys, including the items on Table A thereof reasonably required by AHP and any lender. b. Inspections and Investigations. During the DD Period, AHP and its consultants will have the right to access the properties to perform investigations to determine the suitability of the Properties for development of the Project. These investigations may include, without limitation, geotechnical investigations and soil borings and will include Phase I Environmental Site Assessments of each Property. If a Phase II Environmental Site Assessment is warranted based on the recommendations AHP’s environmental co nsultant, then AHP may reasonably extend the DD Period as necessary to obtain the Phase II Environmental Site Assessment. c. Termination. AHP will have the right to terminate the Final Agreement at any time prior to the end of the DD Period if it is dissatis fied with any of the Properties for any reason, including without limitation reasons related to title matters, survey matters, environmental conditions, soils conditions, access, availability of utilities, or any other factors that may affect the ability t o develop the Properties for the Project. AHP will not be entitled to receive any of the Development Fee if it exercises this termination option. Upon any termination, including termination under paragraph 3(g) “Failure of Conditions” below, all studies, reports, designs and other materials generated in the due diligence, entitlement and planning process will be transferred to the City. d. Environmental Conditions. AHP’s proposal for development of the Properties assumes “clean” sites. If AHP’s investigations reveal the existence of environmental conditions that will require remediation work on any of the Properties in order to create a clean site that is development -ready for residential development purposes, then the City may in its discretion remove the subject Property from the Project, terminate the Final Agreement altogether with respect to the entire Project, or complete the required remediation work prior to the Project Closing. If remediation is required, and if the City agrees to go forward with the remediation, then it should be pursued as a project cost. 3. Entitlement/Feasibility Period. There will be a two -year period beginning upon execution of the Final Agreement for AHP to obtain all zoning and subdivision entitlements and third -party financing necessary to proceed with development of the Project (the “Entitlement/Feasibility Period”). The Entitlement/Feasibility Period will encompass and be subject to the following: a. Design. AHP will, in consultation with the City and based on input of planning consultations, architects, landscape designers, and engineers, develop the development plans for the three Properties. The development plans will also take into consideration community-wide, neighborhood and stakeholder feedback based on a public outreach effort that will be led by AHP. The public outreach effort will be detailed in the Final Agreement. The development plans will EXHIBIT A P9 I. 10.28.16 {A0088183 / 3 } 8 138976.5 be subject to the approval of the City’s staff at agreed upon milestones as the pre -development phase of the Project progresses. The Final Agreement will provide for reasonable “target” turn- around times for input, decisions and revised plans to ensure the process is efficient in terms of both time and expense. b. Public Outreach Process. The Final Agreement will detail the public outreach process to be led by AHP to seek community input on the proposed Project. AHP will commence the public outreach process on December 1, 2016 (prior to the time the Final Agreement is entered into) with a target completion date of April 1, 2017. The public outreach process will be used to further develop the plans and projections for the Project, such as the proposed designs for development of the Properties, the proposed Project budget, the affordable housing/market -rate unit mixes, and the APCHA rental categories for the affordable housing units. Work product delivered from the public outreach process will also include detailed community input received at public outreach events in a transparent format and including executive summary of same. c. Entitlement Process. Based on conceptual plans developed in response to the public outreach effort and approved by the City, AHP will proceed with submitting applications for all necessary zoning and subdivision approvals for the three Properties the City’s Community Development Department. The parties acknowledge that each of the Properties will require a rezoning to proceed with the Project. The parties agree that AHP will apply to rezone each of the Properties to an appropriate zone district to be ide ntified in the Final Agreement based on input from the City Council. Beginning at the submittal of entitlement/development applications for the Properties to the Community Development Department (the “Submittal Date”), AHP will begin earning/accruing a mo nthly Project management fee of $20,000 per month that will be payable in certain circumstances if the Project is abandoned as provided below. d. No Guaranty of City Approval. The Final Agreement will acknowledge that the City Council has no authority to obligate the City to approve a future zoning or subdivision application and that the entitlement applications submitted by AHP will be subject to all applicable requirements of the City’s Land Use Code. The discretion of the City Council to approve, appro ve with conditions, or deny a land use application in accordance with the standards of the Land Use Code will be preserved. e. Debt Financing. As the entitlement process progresses, AHP will pursue appropriate debt financing for a construction loan and perma nent loan following completion of construction. The debt financing may be pursued as a HUD-insured loan under the HUD § 221(d)(4) program by which the federal Department of Housing and Urban Development insures a combined construction/permanent loan facility that is provided by a private commercial lender. AHP agrees to pursue financing such that the terms, conditions and net proceeds are competitive so as to require to the lowest City Loan amount reasonably achievable to complete the Project. f. Equity Financing. AHP will solicit three competitive bids for providing equity to the Project Entity from nationally recognized equity providers for LIHTC projects to substantiate the pricing being utilized by AHP and the Project Entity. It will incumbent on AHP to structure the financing to develop the Project using the lowest City Loan amount reasonably achievable by minimizing development and construction costs and maximizing all debt and equity sources. EXHIBIT A P10 I. 10.28.16 {A0088183 / 3 } 9 138976.5 g. Failure of Conditions. i. Termination Prior to the Submittal Date. As a result of the public outreach process or any due diligence performed by AHP prior to the Submittal Date, either party may choose to abandon the Project. If the Project is abandoned prior to the Submittal Date, then AHP will not be en titled to receive any Development Fee or Project management fee but will be reimbursed for the actual out - of-pocket third party expenses it has incurred to pursue the Project. ii. Termination by City after the Submittal Date. The City may choose to abandon the Project and terminate the Final Agreement at any time after the Submittal Date and continuing until the Project Closing. In addition, if all necessary zoning and subdivision approvals for all three Properties are not obtained by the end of the Entitleme nt/Feasibility Period, then the Final Agreement will terminate unless (a) AHP and the City mutually agree to extend the Entitlement/Feasibility Period; or (b) elect to proceed with the Project with less than all three of the Properties based on final appro vals being obtain for just one or two of the Properties. If the Final Agreement terminates for any of these reasons after the Submittal Date, then the City will reimburse AHP for all actual out -of-pocket third party expenses AHP has incurred in pursuit of the Project since commencement of AHP’s efforts plus pay AHP a management fee of $20,000 per month for the efforts of AHP in pursuit of the Project since the Submittal Date. If the Project Closing occurs, then these accrued management fees will be waived in lieu of the AHP being entitled to receive the 12% Development Fee, the first installment of which will be paid at the Project Closing. The Project management fees that may be paid to AHP as provided above will be capped at 20% of the 12% Development Fee (as determined based on the approved Project budget in effect as of the termination date) or $500,000, whichever is less. iii. No Financing. If AHP is not able to secure construction loan financing for the Project (as finally approved) within the Entitlement /Feasibility Period, then the Final Agreement will terminate unless AHP and the City mutually agree to extend the Entitlement/Feasibility Period. If the Final Agreement terminates for this reason, then AHP will not be reimbursed for any of its out - of-pocket expenses and will not be paid any portion of the Development Fee or the monthly accrued management fee. 4. LIHTC Program Selection. a. Timing. At the time that the entitlement process is completed, AHP and the City will agree to pursue a competitive 9% or a 4% + State Credits LIHTC application option that requires the City contribution to be as low as possible while having a reasonable probability of being successful. In the event that a competitive application is denied, the City and AHP may agree to pursue a non-competitive 4% LIHTC application. Or the City could choose to forego a competitive application and instead initially pursue a non-competitive 4% LIHTC application. b. Proceeding with Project . Once all necessary entitlements have been obtained and City Council has agreed to proceed, AHP will proceed with submitting a LIHTC application to CHFA for the tax credit program determined according to the preceding process. In conjunction with such process, AHP will proceed with satisfying all other Project Clos ing conditions. EXHIBIT A P11 I. 10.28.16 {A0088183 / 3 } 10 138976.5 5. No Real Estate Commissions. Neither AHP nor the City are utilizing the services of a real estate broker with respect to this proposed transaction. The Final Agreement will contain customary reciprocal representations and indemnities by the parties confirming that neither party will be responsible for paying any real estate commissions. EXHIBIT A P12 I. 10/28/2016 Page 1 of 5 Development of Affordable Rental Housing at City-Owned Properties Staff Comparison of PPP vs. City Development BACKGROUND In recent projects, the City of Aspen has utilized a public delivery methodology where preconstruction activity occurred via the use of an Integrated Project Delivery (IPD) method and construction activities have occurred using a traditional design, bid, build model. In such cases, the City acts as the sole developer of housing facilities and bears the full responsibility and risk for all areas of development as well as community outcomes. Those recent scenarios have primarily been utilized to create homeownership opportunities for local workforce. Considering the opportunity to fulfill an ongoing need for additional affordable rental facilities, there is an opportunity to duplicate - or duplicate as nearly as possible - a model by which most of the existing affordable rental facilities in Aspen and Pitkin County operate: as privately owned and operated facilities which qualify tenants under the Guidelines of the Aspen / Pitkin County Housing A uthority and with no further involvement from government entities. For the creation of affordable rental housing, there exists a federal financing program called Low Income Housing Tax Credits (LIHTC). The LIHTC program accounts for most affordable rental housing created in the United States today, and there are many companies which specialize in LI HTC financing and in the development and operation of LIHTC-financed affordable rental housing facilities. DISCUSSION A 2015 briefing paper by the Bay Area Council Economic Institute suggests that public-private partnerships (PPPs or P3s) should not be judged solely on differences in financing costs. It is important that communities consider the efficiencies and expertise offered by public -private partnerships as reflected in the overall lifecycle savings and benefits of a project, to ensure that capital projects are delivered and managed in a manner that maximizes the value of scarce resources. A 2012 study by the National Council for Public-Private Partnerships supports this assertion as follows, “Financing costs may be higher for PPPs; however, the Full Life Cycle analysis shows savings over time due to the reduced costs associated with risk allocation, design, construction, and long -term O&M.” This suggests that it may be important to evaluate P3 opportunities on additional criteria as well as overall cost, such as risk transfer and opportunity costs related to scarce resources such as staff hours available. The Aspen / Pitkin County and larger Roaring Fork Valley community needs additional affordable rental housing. The City confirmed this through community outreach performed during the summer of 2015. There is a public group on Facebook called “Roaring Fork Rentals and Roommates” which provides a forum for the exchange of rental and roommate opportunities primarily in the Roaring Fork Valley. The group currently has over 6,800 members. The posts for available rental housing typically occur daily, and EXHIBIT B P13 I. 10/28/2016 Page 2 of 5 most consist of rooms for rent and roommate situations, and mostly in Carbondale and Glenwood Springs with some in Basalt, Snowmass and Aspen. Rooms for rent and roommate situations in Carbondale and Glenwood Springs tend to draw some attention, but the most attention is typically drawn by roommate opportunities in Aspen and studio and 1-bedroom apartments up and down the Valley. Rooms for rent and roommate situations are a decent stopgap style of housing for young people living the Aspen lifestyle. These housing situations often facilitate positive social interaction among young people, although one of the main drawbacks is the temporary nature of these situations. Rooms for rent and roommate situations often require moving every year or two which contributes to housing instability and nurtures transience whereas increased availability of affordable long -term rental housing instead nurtures stability and a greater potential for family-building among young couples. And yet we often hear anecdotally that rooms for rent and roommate opportunities are less frequent in Aspen due to increased use of online exchanges such as VRBO, Airbnb and the like. These stories and the recent articles published in the Aspen Times about overall housing struggles in the RFV are further evidence that there is urgency to the need for more affordable rental housing in the upper valley. When evaluating based on criteria other overall cost, it may be helpful to consider the chart below which suggests that when urgency is high and staffing resources are scarce , there may be greater justification for P3 project delivery for the purpose of minimizing time to market for urgently needed services: EXHIBIT B P14 I. 10/28/2016 Page 3 of 5 OVERALL COST There is no doubt that cost is a factor in deciding to utilize a public project delivery methodology or a public/private partnership delivery model. In this case, a brief look the Aspen Housing Partners proposal suggests that the developer fee (a standard and regulated part of a LIHTC -financed rental housing delivery model) would cause the PPP approach in this case to cost the City of Aspen approximately $2.6 million more than if the City were to self-perform the development. But the apples to apples comparison contained within the Aspen Housing Partners proposal should be modified to consider lower legal and financing costs plus a likely need for the City to hire professional consulting services in order to appropriately support a City-development project scenario. And based on the modified chart below, this would suggest that the total cost of the PPP approach would be about three-quarters of a million more than a City -development approach. A developer fee would then be returned to the City at closing, which would make the net difference between the two approaches closer to $2.3 million. Cost Area City Development PPP Construction costs $16,500,000 $16,500,000 Building Fees $1,200,000 $1,200,000 Design, arch, engineering, services $1,500,000 $1,500,000 Financing costs/fees $250,000 $700,000 Legal $120,000 $350,000 Project management consulting $1,300,000 $0 Staff $250,000 $250,000 Soft costs $250,000 $250,000 Reserves $350,000 $450,000 Interest $150,000 $420,000 Developer Fee $1,600,000 $2,542,000 Total Project Cost $23,470,000 $24,162,000 City Contribution Under 4% Scenario: Approximately $9,400,000 Approximately $11,600,000 % of Total Project Cost Paid by City: 40% 48% THESE ARE ALL ESTIMATES AND THE PROJECT PROFORMA WILL BE FURTHER VETTED IN THE FINAL AGREEMENT In 2015, City and APCHA staff worked together on a comprehensive study of various fee in lieu of housing mitigation alternatives and used a development cost estimating model based upon recent City development experience. Using that model, the total cost proposed by AHP appears to be conservative. EXHIBIT B P15 I. 10/28/2016 Page 4 of 5 RISK TRANSFER One additional key evaluation factor is effective transfer of risk. The table below suggests responsibility for risk under each scenario. Area of Risk City Development Scenario Public/Private Partnership Scenario Design Risks Scope City of Aspen Aspen Housing Partners Errors and Omissions City of Aspen Aspen Housing Partners Coordination Errors City of Aspen Aspen Housing Partners Life Cycle City of Aspen Aspen Housing Partners Construction Risks Performance City of Aspen Aspen Housing Partners Schedule City of Aspen Aspen Housing Partners Cost Overruns City of Aspen Aspen Housing Partners Defective Materials or Work City of Aspen Aspen Housing Partners Changes in Scope City of Aspen Aspen Housing Partners Financing Risks Schedule Slippage City of Aspen Shared Interest Rates City of Aspen Shared Maintenance and Life Cycle Maintenance Level City of Aspen Shared Deferred Maintenance City of Aspen Shared Defective Materials or Work City of Aspen Shared Operational Risk Revenue Shortfalls City of Aspen Aspen Housing Partners Service Level/Quality City of Aspen Shared Other Political Risk City of Aspen City of Aspen The City of Aspen will typically retain political risk, but all other risk areas are improved at least to some degree. Even issues of long term construction quality and deferred maintenance become at least shared risks. Unfortunately, political risk may tend to be the lowest common denominator and thus make t he City ultimately responsible for all aspects of the development under any scenario. Although this may be unavoidable, the PPP scenario at least provides more of an arm’s length level or buffering of responsibility on the part of the City, even if ultimat e responsibility remains with the City under any scenario. EXHIBIT B P16 I. 10/28/2016 Page 5 of 5 STAFF EFFORT Another key evaluation factor is availability of scarce resources. Funding is of course valuable and scarce , and staff resources are also limited. Stretching of staff creates opportunity costs related to the City’s ability to deliver other services and can also contribute to quality risks on other projects. Staff time can be supplemented by hiring consultants, and qualified consultants are typically very expensive . Estimated Staff Hours (3 Years through lease-up) City Development Scenario Public/Private Partnership Scenario Administration 6,480 1,920 Public Process 1,920 560 Design 2,40 80 Construction 4,400 1,464 Operations/ Operation and maintenance have been omitted for simplicity considering those functions could be hired out long term. Maintenance Total 13,040 4,024 FTE / 3 Years 2.2 0.7 Although the long term operation and maintenance functions could be hired out to private companies, procurement, contracting and oversight of those services would be an ongoing area of effort. Pursuing the development under the PPP with AHP will alleviate these staff effort issues for the City. CONCLUSIONS Considering community goals and priorities is essential in drawing conclusions as to which project delivery model to choose. If overall cost is the community’s highest priori ty and no other priority or group of priorities add up to the same level of priority as overall cost, then it could be considered prudent to pursue the City Development Scenario. If instead, time to market urgency and scarcity of staff resources and transfer of risk are issues which are equally important to City Council, then the PPP model may be justified. EXHIBIT B P17 I. Analysis of AHP Financial Proforma for Tax Credit Proposals We have been requested to analyze the AHP proposed Tax Credit proforma as to their accuracy in methodology, financing structure and costs related to the financing structure. We have utilized the AHP assumptions, as presented in the AHP RFP response, for Project costs and financial terms, in our modeling and analysis to verify their proforma results. We have reviewed all three of the AHP proforma Tax Credit Proposals. We have utilized one of our internal worksheets to model and validate the AHP proforma results for the 4% with no state credits and the 9% scenarios. W e have verified the AHP proforma and concur with the concept and methodology AHP utilized in creating the LIHTC financial analysis. W e also generally agree with the costs and their resulting proforma. Please note these types of proforma utilize multiple dependent variables, the values for many of wh ich are only preliminary estimates at this time. This could result in significant changes to the proforma by the time the project acquires all development approvals and closes all required financing. This would be the case in any development scenario, with proforma being developed this early in the process , whether managed by the City or a 3rd Party Developer. As a mitigation measure, AHP will be required to provide an updated proforma prior to execution of the Development Agreement and per the agreement will required to provide periodic proforma updates. These updates will note any changes to proforma values, financing terms and the required City loan contribution thereby allowing the City to assess all values as the project progresses. With respect to the assumptions contained in the current AHP proforma, although preliminary, we feel there are some areas that should be brought to your attention and should solicit further discussion and clarification with AHP. These items are addressed in the following sections. Financing Proforma financing assumptions projected 2 years into the future are, at best, a guess. No one can predict what interest rates will be at closing in late 2018 to early 2019. If interest rates increase the costs for construction debt will increase, the pricing for Tax Credits will decrease and the net amount on any permanent loan will decrease. Interest rates rising have a negative impact on all sources of financing. AHP, per the terms of the Development Agreement, will be required to maximize all available sources of financing in order to minimize the City contribution. For all the following items further clarification and revision will occur prior to execution of the Development Agreement and prior to closing. Our comments are based on the AHP proforma assumptions contained in the RFP response. For all financing parameters, the City would have the same risk if they were the developer. Permanent Debt; The proforma interest rate being used is 5%. This is a reasonable assumption for a possible late 2018 to early 2019 closing. Current long term rates are much lower and have been stable for some time but the Fed continues to threaten rate increases as inevitable. The AHP proforma income/expense statement supporting the EXHIBIT C P18 I. proforma NOI and the resulting AHP permanent loan amount may be understated for two reasons. There appears to be a higher than required utility allowance, and a lack of trending in the rent structures, resulting in lower net rent, thereby lower NOI. Although the AHP proforma represents a conservative approach, this should be discussed for the first budget revision. Tax Credit Equity; Tax Credit Equity is being assumed at 95 cents per Tax Credit dollar. Current pricing is 1.05 or better (ACI received 1.07). We believe the 95 cents is a conservative estimate for a late 2018 to early 2019 closing. If pricing maintains at 1.05 the project would benefit from approximately $743,000 in additional equity for a 4% project and approximately $1,250,000 in additional sources of equity to a 9% project. AHP will be required to provide 3 bids from qualified syndicators , prior to closing, to guarantee the most favorable pricing. City Subsidy; Based upon AHP assumptions for project costs and financing, we concur with their estimated required City subsidy amount. This amount is going to be recalculated and reassessed, at specific times during the process and at the closing of equity and debt. At closing this amount will be equal to the final project shortfall or “GAP” amount. The risk of the projected City subsidy amount changing substantially by the time the deal closes is real and would be the same if the City developed the project . However, the City will retain the right to terminate the deal until the final closing. Project Detailed Costs and Assumptions Operating Underwriting Assumptions Comments below are based upon the proforma submitted by AHP with the RFP. These items should be discussed with AHP, revised accordingly and presented in a revised project budget prior to execution of the Development Agreement. Rents; AHP LIHTC Rents appear to be consistent with allowable tax credit rents for 2016. At this point rent categories and units in each category is only a guess based upon a “probable” unit and affordability assumption. The rents do not appear to be trended out to late 2018 making this a conservative approach. However, our analysis indicates they may be overstating the utility allowance amounts. If the allowance is lowered the net rents will increase resulting in an increase in the amount of supportable perm loan. Rents should be discussed with AHP. Operating Expenses; AHP expenses, although high, are within the range of the other Aspen projects we are aware of, especially in consideration of the scattered site nature of this project. Of note; the Management Fee is 7%, this is high. Most management companies will charge 4-6% even in the Aspen market. This should be discussed with AHP. This cost would be equivalent if the City developed and managed the property. Vacancy; AHP has underwritten vacancy at 5%. CHFA has a minimum requirement of 7% for their Tax Credit applications. This may be waived with a special waiver request and approval from CHFA but it is unwise to assume 5% vacancy prior to the waiver request being granted. We recommend AHP seek this waiver as soon as practicable. Because the actual demand for affordable workforce housing in Aspen remains great, a 5% vacancy is actually conservative and a waiver would likely be granted. The City would also have to apply for this waiver if they developed the project. EXHIBIT C P19 I. Debt Coverage Ratio; AHP appears to proforma DCR at 115%. This is acceptable in most financial markets and the allowable DCR for the HUD financing proposed. Replacement Reserves; AHP proforma replacement reserve is $300 per unit per year. This is consistent with the market requirements at present. This amount should be discussed with AHP as to its adequacy and reserve amounts should be established such that the Project has adequate replacement reserves for the next 15 years until the City takes it back. Development Costs Comments below are based upon the preliminary proforma submitted by AHP with the RFP. These are to be discussed with AHP and revised accordingly for the proforma revision due prior to execution of the Development Agreement Assumptions in many of the proforma cost categories are very difficult to assess prior to conducting site environmental assessments and having preliminary planning app roval as to number of units and unit type. We have listed those categories which seem inconsistent with what would be typical for a deal of this type or seem to require some additional clarification. We would recommend the City request a more detailed explanation from AHP for all cost categories, not just those listed below, and perform an in depth review to assess appropriateness for each cost. Construction Costs; This is the largest project line item in any development budget and at this point is only an educated guess. At present AHP has assumed a “probable” scenario, one that may change throughout the entitlement process prior to final disposition of the project. We assume SHAW construction has provided summary construction cost estimates for the proposed unit counts at current pricing and per the specific AHP proposal for specification level, unit mix and rough design. AHP should be asked if the SHAW estimates were trended forward to 2018-2019. Site Work; We assume SHAW construction has provided summary construction cost estimates used to establish this number. Site work costs may include environmental remediation and it is our understanding that there are no environmental studies for any parcel. This could harbor a significant budget impact and should be evaluated. We recommend Phase 1 environmental studies should be completed as soon as practicable. Impact Fees; This cost should be estimable based on an AHP detailed fee study. Once completed it may be distilled into a general per unit cost which will be applicable if proforma unit counts change. We recommend you request AHP to provide a detailed fee study. Land Use / Zoning; This seems to be a significant amount of money for land use approval processing especially since this is in addition to the A & E fees. We recommend you ask for more detail on their anticipated cost for this item. Survey; ALTA surveys in the Aspen area have recently run apx$10K-$12K in total for the Initial and the “as built” update with all required lender and investor certifications. EXHIBIT C P20 I. With 3 ALTA surveys this would total $30-$36K or more depending on the City and Lender compliance levels and requirements. This item should be discussed with AHP. Legal; The AHP proforma has 4 legal categories totaling $350,000. We believe this amount is high for the scope of this deal based on similar deals we have been a party to. This is especially true in light of the fact that the equity provider is also a development partner and thereby the partnership agreements should require less negotiation. We recommend you request more detail on their anticipated cost for this item. Bridge Loan Fees; It is difficult to assess what this cost is for. With the City providing construction loan funding in conjunction with the construction lender project cash flow requirements should not require a brid ge loan. We recommend you request more detail on their anticipated cost and reasoning. Construction Loan and Bond Fees; AHP proforma costs look to be consistent for a project this size and the proposed HUD 221(d) 4 financing. We recommend a discussion with AHP on the detailed financing methodology. Real estate taxes; It may be very advantageous to have APCHA as a member/partner to achieve a Property tax abatement. At an assumed 5% rate and 40yr amortization every $25,000 of operating expenses (taxes) saved would increase the permanent loan funding approximately $360,000. We recommend you have AHP provide an assessment of the taxes during construction and upon completion to estimate the possible savings. Marketing; In consideration of the Aspen Rental Market and extremely high demand for affordable rental properties allocating $50,000 to marketing costs seems high. However, CAT 4 rents are pushing close to market and with those units being mixed in with lower income units the project may require some marketing efforts. We recommend you request more detail on their anticipated cost and reasoning. Construction Loan Interest; This amount looks to be consistent for a project this size and duration. We recommend a discussion with AHP on the detailed financing methodology. Conclusions/recommendations are as follows We have reviewed all three of the AHP proforma Tax Credit Proposals. We have subjected their proforma to our internal worksheets to model and validate the AHP proforma results for the 4% with no state credits and the 9% scenarios. We have verified the AHP proforma results and concur with the concept and methodology AHP has utilized in creating the LIHTC financial analysis. We also generally agree with the individual project costs as they relate to a Tax Credit deal, AHP’s resulting proforma , and their projected City contribution. We believe that the proforma presented are as accurate as can be expected at this point in time. EXHIBIT C P21 I. We recommend that you require AHP to get competitive bids for Debt financing and Equity to guarantee that the net financing amounts are as high as possible thereby keeping the City subsidy as low as possible. We understand that this requirement is in the proposed agreement. Some AHP assumptions as to costs and CHFA requirements may be inaccurate and require discussion, clarification and possible correction in their models. Further explanation and investigation of specific cost categories would provide the existing proforma and future proforma with more accuracy. We would suggest you get the cost category clarifications and a revised Project Budget/Proforma prior to finalizing and executing the “Final” Development Agreement. This will allow the Project Budget/Proforma to be as accurate as possible and be attached as an exhibit to the agreement. The proposed proforma indicating financing and subsidy amounts should be reevaluated, at designated points in time during the entitlement process and as new information becomes available. These periodic revisions will require updated project budgets/proforma and a reassessment of the required City contribution amounts. We understand that this requirement is in the proposed agreement. EXHIBIT C P22 I. Co m p a r i s o n o f A H P p r o j e c t c o s t s t o a n t i c i p a t e d c o s t s i f s a m e p r o j e c t D e v e l o p e d b y C i t y Al l c o s t d i f f e r e n c e s a r e b a s e d u p o n t h e A H P p r o f o r m a b u d g e t e d l i n e i t e m s r e g a r d l e s s o f t h e a c c e p t e d a c c u r a c y o f t h e l i n e i t e m Ci t y D e v e l o p m e n t c o s t s a n d f i n a n c i n g m e t h o d o l o g y i s b a s e d u p o n r e c e n t T a x C r e d i t a n d F i n a n c i a l s t r u c t u r e u s e d f o r A C I Pr o p o s e d As s u m e d Pr o p o s e d AH P Ci t y Sa v i n g s i f C i t y Bu d g e t Bu d g e t De v e l o p s No t e s t o C i t y B u d g e t Ha r d C o n s t r u c t i o n C o s t s 10 , 7 7 2 , 1 1 5 1 0 , 7 7 2 , 1 1 5 - A s s u m e d C i t y t o h a v e s a m e c o s t s Bu i l d e r s P r o f i t ( 6 % ) 79 7 , 9 3 4 79 7 , 9 3 4 - As s u m e d C i t y t o h a v e s a m e c o s t s Ge n e r a l R e q u i r e m e n t s ( 6 % ) 79 7 , 9 3 4 79 7 , 9 3 4 - As s u m e d C i t y t o h a v e s a m e c o s t s Ov e r h e a d ( 2 % ) 26 5 , 9 7 8 26 5 , 9 7 8 - As s u m e d C i t y t o h a v e s a m e c o s t s Co n s t r u c t i o n C o n t i n g e n c y ( 5 % ) 66 4 , 9 4 5 66 4 , 9 4 5 - As s u m e d C i t y t o h a v e s a m e c o s t s FF & E 30 5 , 7 4 4 30 5 , 7 4 4 - As s u m e d C i t y t o h a v e s a m e c o s t s Si t e W o r k 2, 9 3 3 , 5 5 1 2, 9 3 3 , 5 5 1 - As s u m e d C i t y t o h a v e s a m e c o s t s Im p a c t / T a p F e e s 1, 2 0 0 , 0 0 0 1 , 2 0 0 , 0 0 0 - A s s u m e d C i t y t o h a v e s a m e c o s t s S h o u l d h a v e a s p e c i f i c f e e s t u d y A& E D e s i g n ( 3 . 5 % ) 57 8 , 8 3 7 57 8 , 8 3 7 - As s u m e d C i t y t o h a v e s a m e c o s t s Ne e d l o c a l q u o t e s n o t % a g e A& E S u p e r v i s i o n ( 1 % ) 16 5 , 3 8 2 16 5 , 3 8 2 - As s u m e d C i t y t o h a v e s a m e c o s t s Ne e d l o c a l q u o t e s n o t % a g e La n d u s e / Z o n i n g / L a n d s c a p e / e t c . ( 4 % ) 66 1 , 5 2 8 66 1 , 5 2 8 - As s u m e d C i t y t o h a v e s a m e c o s t s Ne e d l o c a l q u o t e s n o t % a g e En v i r o n m e n t a l / S o i l / E n e r g y R e p o r t s 30 , 0 0 0 30 , 0 0 0 - As s u m e d C i t y t o h a v e s a m e c o s t s Co n s i s t e n t w i t h o t h e r d e a l s Ma r k e t S t u d y / A p p r a i s a l 20 , 0 0 0 20 , 0 0 0 - As s u m e d C i t y t o h a v e s a m e c o s t s Co n s i s t e n t w i t h o t h e r d e a l s PC N A / C o s t R e v i e w 20 , 0 0 0 2 0 , 0 0 0 - A s s u m e d C i t y t o h a v e s a m e c o s t s C o n s i s t e n t w i t h o t h e r d e a l s Su r v e y 10 , 0 0 0 10 , 0 0 0 - As s u m e d C i t y t o h a v e s a m e c o s t s Th i s a p p e a r s t o o l o w Le g a l - R e a l E s t a t e 17 5 , 0 0 0 40 , 0 0 0 13 5 , 0 0 0 Re d u c t i o n b a s e d o n r e c e n t s t r u c t u r e Le g a l - L e n d e r 75 , 0 0 0 40 , 0 0 0 35 , 0 0 0 Re d u c t i o n b a s e d o n r e c e n t s t r u c t u r e Le g a l - O r g a n i z a t i o n a l 50 , 0 0 0 30 , 0 0 0 20 , 0 0 0 Re d u c t i o n b a s e d o n r e c e n t s t r u c t u r e Le g a l - T C E q u i t y 50 , 0 0 0 20 , 0 0 0 30 , 0 0 0 Re d u c t i o n b a s e d o n r e c e n t s t r u c t u r e Co s t / P e r m L o a n F e e s - 2 2 1 ( d ) 4 22 2 , 2 8 1 60 , 0 0 0 16 2 , 2 8 1 Re d u c t i o n b a s e d o n r e c e n t s t r u c t u r e Br i d g e L o a n F e e s / I n t e r e s t 16 3 , 7 5 0 - 16 3 , 7 5 0 Wo u l d n o t b e r e q u i r e d Bo n d F e e s 24 0 , 0 0 0 67 , 5 0 0 17 2 , 5 0 0 Re d u c t i o n b a s e d o n r e c e n t s t r u c t u r e Bo n d L e g a l & C H F A I s s u a n c e CH F A T a x C r e d i t F e e s ( F e d ) 47 , 7 4 2 47 , 7 4 2 - As s u m e d C i t y t o h a v e s a m e c o s t s A f u n c t i o n o f B a s i s - Ti t l e / R e c o r d i n g 40 , 0 0 0 40 , 0 0 0 - As s u m e d C i t y t o h a v e s a m e c o s t s Th i s i s t o o l o w Re a l E s t a t e T a x e s 12 0 , 0 0 0 - 12 0 , 0 0 0 Ci t y o w n e d n o t a x l i a b i l i t y AH P c o u l d a l s o h a v e z e r o t a x w i t h A P C H A i n d e a l Pr o p e r t y I n s u r a n c e 70 , 0 0 0 70 , 0 0 0 - As s u m e d C i t y t o h a v e s a m e c o s t s CI R S A s h o u l d b e l e s s Ac c o u n t i n g / C o s t C e r t 30 , 0 0 0 3 0 , 0 0 0 - A s s u m e d C i t y t o h a v e s a m e c o s t s C o n s i s t e n t w i t h o t h e r d e a l s Ma r k e t i n g 50 , 0 0 0 10 , 0 0 0 40 , 0 0 0 Ma r k e t i n g s h o u l d b e m i n i m a l f o r A P C H A So f t C o s t C o n t i n g e n c y 15 0 , 0 0 0 15 0 , 0 0 0 - As s u m e d C i t y t o h a v e s a m e c o s t s Co n s i s t e n t w i t h o t h e r d e a l s Le a s e - u p R e s e r v e 10 0 , 0 0 0 1 0 0 , 0 0 0 - A s s u m e d C i t y t o h a v e s a m e c o s t s T h i s m a y b e u n n e c e s s a r y Op e r a t i n g D e f i c i t R e s e r v e 31 3 , 5 8 3 31 3 , 5 8 3 - De p e n d e n t o n e x p e n s e s a n d f i n a n c i n g Re p l a c e m e n t R e s e r v e s 14 , 4 0 0 - 14 , 4 0 0 Wo u l d n o t n e e d t o b e c a p i t a l i z e d u p f r o n t FH A W o r k i n g C a p i t a l R e s e r v e 11 1 , 1 4 1 - 11 1 , 1 4 1 Wo u l d n o t b e r e q u i r e d Ne g a t i v e A r b i t r a g e 12 0 , 0 0 0 - 12 0 , 0 0 0 Wo u l d n o t b e r e q u i r e d Co n s t r u c t i o n L o a n I n t e r e s t 24 9 , 9 9 3 13 0 , 0 0 0 11 9 , 9 9 3 Wi l l e x i s t b u t b e p a i d t o t h e C i t y a s c o n s t l e n d e r De v e l o p e r F e e 2, 5 4 2 , 6 6 3 1, 6 0 0 , 0 0 0 94 2 , 6 6 3 Ci t y D e v l o p m e n t a n d F i n a n c i a l M g m t f e e s Ad d i t i o n a l D e v e l o p e r f e e e a r n e d b y C i t y 50 0 , 0 0 0 50 0 , 0 0 0 Ea r n e d p e r C H F A 1 5 % f e e a l l o w e d Ci t y w o u l d c o l l e c t t h e f u l l 1 5 % f e e - Pr o j e c t T o t a l s 24 , 1 5 9 , 5 0 1 2 2 , 4 7 2 , 7 7 3 2 , 6 8 6 , 7 2 8 Re q u i r e d C i t y S u b s i d y / L o a n 11 , 6 2 5 , 0 0 0 9, 0 2 5 , 7 9 1 Su b s i d y / L o a n S a v i n g s 2, 5 9 9 , 2 0 9 Th e d i f f e r e n c e t o t o t a l s a v i n g s i s d u e l o s t b a s i s a n d l o s t c r e d i t e q u i t y AH P t o C i t y C o m p a r i s o n 1 0 . 2 7 . 1 6 . x l s x EX H I B I T C P23I.