SUPPORTIVE HOUSING CONFERENCE: June 9, 2011

DEMYSTIFYING BOND FINANCING TO BUILD SUPPORTIVE HOUSING

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Three models of Bond Financing:

Schermerhorn- 100% supportive housing units

Urban Pathways -100% supportive housing units with NYS OMH funds

Lindeguild Hall - Integrated - 'mixed income' market rate with middle, low income, and supportive

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Schermerhorn House: 160 Schermerhorn St., Brooklyn

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Schermerhorn House: Studio Apartment

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Schermerhorn House: Green Roof

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Schermerhorn House: Common Space

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Schermerhorn House: Accessory Community Space – Brooklyn Ballet

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Project Financing Capital Structure - Schemerhorn

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Urban Pathways – Hughes House

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New York State Housing Finance Agency

Urban Pathways

       

    Sources & Uses          

    Hughes House (Urban Pathways)       Gross sqft.  

    Bronx, New York       35,421  Sources of Funds - Construction

Amount Amount Per UnitPercent of Total

Development Cost

             

    OMH Construction Loan $10,156,885 $184,671 59.1%  -$893,115

    Letter of Credit   $847,167 $15,403 4.9%  

    Federal Low Income Tax Credits   $4,041,457 $73,481 23.5%

  $11,050,000

    Federal Home Loan Bank   $710,587 $12,920 4.1%  

    OMH Grant   $192,500 $3,500 1.1%  100.00%

  Developer's Equity/Deferred Fee $1,235,034 $22,455 7.2% 

    Total Sources of Funds - Construction   $17,183,629 $312,430 100.0%  

    First Mortgage & DSRF as a % of Aggregate Basis 65.11%     

               

    Sources of Funds - Permanent        

    HFA Bonds   $11,050,000 $200,909 64.3%  

    Federal Low Income Tax Credits   $4,662,057 $84,765 27.1%  

    Federal Home Loan Bank   $710,587 $12,920 4.1%  

    OMH Grant   $192,500 $3,500 1.1%  

    Developer's Equity/Deferred Fee   $568,485 $10,336 3.3%  

    Total Sources   $17,183,629 $312,430 100.0%  

    Uses of Funds          

    Land and Other Acquisition Costs   $1,238,027 $22,510 7.2%  

    Hard Construction Costs   $10,912,804 $198,415 63.5%  

    Soft Costs   $2,900,043 $52,728 16.9%  

    Reserves and Escrows   $0 $0 0.0%  

    Developer Fee   $2,132,755 $38,777 12.4%  

    Total Uses   $17,183,629 $312,430 100.0%  

               

    Developer Fee Paid During Construction   $897,721      

    Deferred Developer Fee   $568,485      

    Total Developer Fee Paid During Conversion   $1,564,270      

    Total Developer Fee   $2,132,755      

        $1,564,270      17,183,629

      Paid Developer Fee $1,564,270      17,201,054

      Unrestricted Fee ($7,500/unit x 55 units) $412,500      17,425

      Restricted Fee to be put into reserve acccounts $1,151,770      4,679,482

                4,662,057

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LINDENGUILD HALL

• 104 unit new construction project developed by the Lantern Group

• Closing anticipated in June 2011

• Mixed Population•52 studio units with DOHMH rental subsidies thru NY/NY III paying 60% ami rents and services—targeted to homeless veterans

•51 two-bedroom units to be rented to low income households via HDC-supervised lottery

• On-site supportive services

• LEED Silver with NYSERDA Energy Award16

LINDENGUILD HALL FINANCINGSOURCES AND USESConstruction Sources per DU % of totalHDC First Mortgage $17,700,000 $170,192 51.47%HDC Second Mortgage $04,694,060 $045,135 13.65%HPD Third Mortgage - SHLP $05,800,000 $055,769 16.87%FHLB AHP $01,398,790 $013,450 4.07%NYSERDA Energy Award $00,229,000 $002,202 0.67%Tax Credit Equity $00,662,225 $006,368 1.93%Deferred Developer's Fee $03,903,977 $037,538 11.35%GAP(SURPLUS) $000000000 $00000,0 0.00%

TOTAL SOURCES $34,388,052 $330,654 100.00% Permanent Sources HDC First Mortgage $04,220,000 $040,577 12.27%HDC Second Mortgage $06,760,000 $065,000 19.66%HPD Third Mortgage - SHLP $05,800,000 $055,769 16.87%FHLB AHP $01,398,790 $013,450 4.07%NYSERDA Energy Award $00,229,000 $002,202 0.67%Tax Credit Equity $13,500,523 $129,813 39.26%Deferred Developer Fee/Sponsor Loan $02,479,739 $023,844 7.21%GAP(SURPLUS) $000000000 $00000,0 0.00%

TOTAL SOURCES $34,388,052 $330,654 100.00%

Uses Acquisition Cost $01,786,743 $017,180 5.20% Construction Cost $23,100,000 $222,115 67.17% Soft Cost $05,933,165 $057,050 17.25% Developer's Fee $03,568,143 $034,309 10.38% TOTAL USES $34,388,052 $330,654 100.00%

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CURRENT SITE

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ARCHITECTURAL RENDERING

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What Are Tax Exempt Bonds What are the benefits of financing?

What types of housing can be built with tax exempt bonds, qualified rental housing?

In terms of financing tools, how should the development community think about the differences between 9% and 4% credits?

Who can issue bonds?

Who are the parties in a bond transaction?

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What Are Tax Exempt Bonds Cont’

What are the obligations of the sponsor/developer with respect to the bonds?

What special rules apply to a 501(c)(3) sponsor?

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TAX-EXEMPT BOND REQUIREMENTS

• 50% Test—volume cap required for private activity bonds

• 95/5 Cost Certification

• TEFRA Notice and Hearing• Low Income election – typically 100% of units are tax credit eligible low

income units; minimum is 20% of units at 50% ami or 25% of units at 60% AMI

• Regulatory Agreement to obligate compliance with affordability and rent restrictions

• Tax credit application to allocating agency (HPD); DOCE letter required prior to closing

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HDC BOND FINANCED SUPPORTIVE HOUSING

Generally follows Low Income Affordable Marketplace Program(LAMP)

Tax exempt private activity bonds to meet 50% test

As of right 4% Federal Low Income Housing Tax Credits

Construction Loans—fully enhanced by bank to insulate bondholders from real estate risk

Permanent Loans – sized to project NOI, insured or credit enhanced for term

Rental assistance and supportive services contract required for all supportive units

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BUDGET CONSIDERATIONS FOR BOND DEALS Bond Costs of Issuance (1.5% of Construction bond)

Negative Arbitrage (interest paid on fully funded construction bond amount)

NYS Bond Issuance Charge

Credit Enhancement Fees

Type and amount of rental assistance for supportive units

Supportive services on budget or off budget.

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How To Apply for Funds

How does a project apply?

Why would you apply to HFA vs. HDC ?

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Credit Enhancement—and role of private lender

What is the role of bank in bond financing?

How does bank analyzing a supportive housing transaction? Underwriting concerns?

What impact does the equity investor have on how a bank underwrites the deal?

What are the typical costs of Letter of Credit?

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OMH Transactions- Alternative to Letter of Credit – OMH Letter of Credit

What are the challenges to financing OMH deals?

What is a quick draw letter of Credit?

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FUTURE

What steps are state and city taking to increase access to bond financing for supportive housing and integrated housing?

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SUPPORTIVE HOUSING DEVELOPMENT LISTDevelopment Name Units Borough Close DateWashington Avenue 100 Bronx 07/17/03600 Concord Avenue 83 Bronx 12/22/03

Claremont Park Apartments 98 Bronx 07/22/04Casa del Sol Apartments 114 Bronx 06/23/05

15 East Clarke Place 102 Bronx 06/29/05Urban Horizons II 128 Bronx 11/30/05

30% of Units Prospect Avenue 124 Bronx 12/28/05for 45 Malta St. 48 Brooklyn 12/28/05

Formerly 1068 Gerard Avenue 82 Bronx 12/28/05Homeless Morrisania Terrace 42 Bronx 12/28/05

830 Fox Street 58 Bronx 06/29/06St. Peter's Avenue Apartments 58 Bronx 06/29/06

1211 Southern Blvd 127 Bronx 06/29/06East Tremont Ave Apts 73 Bronx 06/29/06

West 153rd Street 85 Manhattan 06/30/06St. Ann's Terrace CDE 314 Bronx 06/25/09

Supportive Schermerhorn, L.P. 217 Brooklyn 12/14/05Housing Pitt Street Development 263 Manhattan 12/28/06

Silverleaf 118 Bronx 06/29/04Cedars Project 95 Bronx 11/01/06

Integrated Pitt Street Development 263 Manhattan 12/28/06Housing 1825 Atlantic Avenue 150 Brooklyn 06/28/07

Serviam Towers 160 Bronx 12/23/08Lindenguild Hall 104 Bronx ACTIVE

Kings County Senior Residence 173 Brooklyn 06/30/05Serviam Towers 160 Bronx 12/23/08

Riverway Apartments 115 Brooklyn ACTIVESenior Housing Astoria Senior Residence 184 Queens 12/22/06

with Rental Crown Heights Senior Residence 144 Brooklyn 12/20/07Assistance and/or Services Council Towers VI 78 Queens 06/29/10

Self Help KVII 92 Queens 12/22/10

Questions and Answers

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