SFHA RAD CONVERSION PLAN Program Structure Financing Summary Schedule Update
SFHA RAD Conversion: Update & Preview of May 2015 Action Items May Presentation / Requests: Purchase & Sale Agreement Approval Ground Lease Approval Seller Carryback Note Approval ESCO Loan Agreement: MOHCD-SFHA
SFHA RAD Conversion: Update 2014 RAD Activities: Closed negotiations with HUD on financing terms Issued predevelopment loans to Phase 1 development teams ($11 million +) Established construction scopes of work Provided $500,000 for services and tenant engagement Convened developer-mohcd-sfha working groups to plan implementation
SFHA RAD Conversion: Update 2015 RAD Activities: Issued Phase 1 lender/investor RFP (March 2015) Negotiated the Project Labor Agreement Terms Kicked off HUD Closing Transaction Meetings Negotiated a Form of Rent Repayment Agreement and Form of Abatement Agreement with Tenant Advocates
SFHA RAD Conversion: Update Next Steps! Predevelopment loans for Phase 2 ($32 million) Pay off ESCO debt Finalize relocation plan Conclude Phase 1 construction scopes Apply for tax credits and bond financing Close Phase 1 construction loans PBV Awards (non-rad) to Phase 1 Projects CONVERT TO RAD & START CONSTRUCTION!
SFHA RAD Conversion: Financing Sources of Funds: 4% low income housing tax credits Tax-exempt bonds: construction and permanent debt MOHCD soft loans SFHA seller carryback loans
SFHA RAD Conversion: Financing March 2015 Portfolio Sources of Funds Permanent Debt: $250 million (1 lender/phase) Tax Credits: $538 million (1 investor/phase) MOHCD Debt: $65 million (plus contingencies) Deferred Developer Fee: $14 million Seller Carry-back Loans: $600 million Supports over $500 million in rehab hard costs TOTAL DEVELOPMENT COST: $1.467 BILLION
SFHA RAD Conversion: Financing Purchase & Sale Agreement For the buildings ( Improvements ) only SFHA retains ownership of the land Appraisals will determine values for each building Executed in advance of construction loan closings
SFHA RAD Conversion: Financing SFHA Seller Carryback Loans: Each developer will purchase their buildings (the Improvements ) from SFHA for appraised value SFHA will re-loan the value of the building to the new owner as seller carry-back financing The new owners will make payments to SFHA every year from excess project cash flow For tax reasons, new owners will provide a small portion of cash to SFHA at construction loan closing, which SFHA will hold in escrow until construction is complete, then provide the funds to repay the construction lender
SFHA RAD Conversion: Financing SFHA Seller Carryback Loans: The Seller Carryback Note will include the appraised value of the land, as a lump sum capitalized ground rent payment $15,000 payments to SFHA for every building will be treated like hard debt SFHA will split remaining excess cash flow with MOHCD, in proportion to their loan amounts
SFHA RAD Conversion: Financing Seller Carryback Loans Seller Carryback Loans, Phase 1: $251 million Portion held in escrow until construction completes: $24 million Term: 55 years Rate: Long-Term Applicable Federal Rate (AFR) this rate is required by federal tax code for relatedparty transactions
SFHA RAD Conversion: Ground Lease SFHA will continue to own the land Owners will lease the buildings through 99-year ground leases For each project, the value of the land will be capitalized and added to SFHA s seller carryback loan Rather than receiving a $15,000/year ground lease payment, as was the case for HOPE SF deals, SFHA will receive a $15,000 priority payment on its loan
SFHA RAD Conversion: ESCO Debt SFHA incurred ~ $31 million in Energy Performance Contract debt in 2010 for the installation of energy efficiency improvements SFHA must pay off this debt in order to secure new financing and convert to RAD MOHCD will loan SFHA the money to pay off the debt; SFHA will use purchase proceeds to pay MOHCD back MOHCD will re-loan the money to the owners at the RAD conversions
SFHA RAD Conversion: ESCO Debt Continued: MOHCD SFHA New Owners SFHA MOHCD $$ to SFHA for ESCO $$ to bond holders $$ to SFHA for acquisitions $$ reimburses MOHCD $$ includes ESCO repayment funds, as necessary, in permanent soft loans to owners
SFHA RAD Conversion: Commission Approvals SFHA Commission approvals are needed for: Form of Purchase & Sale Agreement Form of Ground Lease Form of Seller Carry-back Note MOHCD-SFHA Loan Agreement for ESCO repayment Portfolio-Wide Relocation Plan Due to scope and volume of work, Commission delegation of execution rights to Executive Director for individual transactions is required
SFHA RAD Conversion: Onward!