Item 4 - CA-18-721 - 3/21/2018

CA-18-721 1 March 21, 2018

Project Number

CA-18-721

Project Name

Claremont Village Apartments

Site Address: 965 West Arrow Highway

Claremont, CA 91711 County: Los Angeles

Census Tract:

Tax Credit Amounts Federal/Annual State/Total

Requested:

Recommended:

Applicant Information

Applicant: Claremont Village Venture LP

Contact: Cathy Coler

Address: 2711 N. Sepulveda Blvd #526

Manhattan Beach, CA 90266

Phone:

Email: ccoler@mrkpartners.com

General Partner(s) or Principal Owner(s): Claremont Village DE GP LLC

AOF Claremont LLC

General Partner Type: Joint Venture

Parent Company(ies): MRK Partners

AOF/Pacific Affordable Housing Corporation

Developer: MRK Partners

Investor/Consultant: R4 Capital LLC

Management Agent: Apartment Management Consultants, LLC

CALIFORNIA TAX CREDIT ALLOCATION COMMITTEE

Project Staff Report

Tax-Exempt Bond Project

March 21, 2018

4020.01

$2,364,557

Claremont Village Apartments, located at 965 West Arrow Highway in Claremont, requested and is being

recommended for a reservation of $2,364,557 in annual federal tax credits to finance the acquisition and

rehabilitation of 149 units of housing serving tenants with rents affordable to households earning 50-60%

of area median income (AMI). The project will be developed by MRK Partners and is located in Senate

District 25 and Assembly District 41.

Claremont Village Apartments is a re-syndication of an existing Low Income Housing Tax Credit

(LIHTC) project, Claremont Village Apartments (CA-2000-901). See Resyndication and

Resyndication Transfer Event below for additional information. The project will be receiving rental

assistance in the form of HUD Section 8 Project-based Contract.

$2,364,557

(424) 999-4580

CA-18-721 2 March 21, 2018

Project Information

Construction Type:

otal # Residential Buildings: 15

Total # of Units:

No. / % of Low Income Units:

Federal Set-Aside Elected: 40%/60%

ederal Subsidy: Tax-Exempt

HUD Section 8 Project-based Contract (148 Units - 99%)

Bond Information

Issuer:

Expected Date of Issuance:

Information

Housing Type:

Geographic Area:

TCAC Project Analyst:

55-Year Use / Affordability

50% AMI:

60% AMI:

Unit Mix

96 2-Bedroom Units

54 3-Bedroom Units

150 Total Units

35 2 Bedrooms

60 2 Bedrooms

20 3 Bedrooms

33 3 Bedrooms

1 2 Bedrooms

1 3 Bedrooms

TCAC-confirmed Projected Lifetime Rent Benefit:

$39,185,520

Unit Type

& Number

Balance of Los Angeles County

$1,013

Proposed

Rent

(including

utilities)

April 30, 2018

$1,216

2017 Rents Actual

% of Area Median

Income

$1,216

60%

50%

2017 Rents

Targeted % of

Area Median

Income

50%

60%

Manager’s Unit

60%

$1,171

$1,406

50%

60%

Manager’s Unit

Acquisition & Rehabilitation

150

149

100.00%

California Statewide Communities Development Authority

50%

Non-Targeted

Zhuo Chen

Aggregate Targeting

Number of Units

Percentage of

Affordable

Units

37%

63%

CA-18-721 3 March 21, 2018

Project Cost Summary at Application

Land and Acquisition

Construction Costs

Rehabilitation Costs

Construction Contingency

Relocation

Architectural/Engineering

Const. Interest, Perm. Financing

Legal Fees, Appraisals

Reserves

Other Costs

Developer Fee

Commercial Costs

Total

Residential

Construction Cost Per Square Foot: $65

Per Unit Cost: $524,471

True Cash Per Unit Cost*: $466,561

Source Source

CBRE Capital Markets-T.E. Bonds CBRE - T.E. Bonds

Seller Carryback - T.E. Bonds Seller Carryback - T.E. Bonds

Net Operating Income Net Operating Income

Existing Replacement Reserve Existing Replacement Reserve

Deferred Developer Fee Deferred Developer Fee

Tax Credit Equity Tax Credit Equity

TOTAL

*Less Fee Waivers, Seller Carryback Loans, and Deferred Developer Fee

Determination of Credit Amount(s)

Requested Eligible Basis (Rehabilitation):

130% High Cost Adjustment:

Requested Eligible Basis (Acquisition):

Applicable Fraction:

Qualified Basis (Rehabilitation):

Qualified Basis (Acquisition):

Applicable Rate:

Maximum Annual Federal Credit, Rehabilitation:

Maximum Annual Federal Credit, Acquisition:

Total Maximum Annual Federal Credit:

Approved Developer Fee (in Project Cost & Eligible Basis):

Investor/Consultant: R4 Capital LLC

Federal Tax Credit Factor:

$854,793

$57,302,996

$480,000

$12,154,988

$9,059,737

$1,843,737

$22,463,294

Yes

$0.95000

$8,872,982

$44,822,343

$22,463,294

$2,500,000

$6,186,524

$870,830

$78,670,690

$54,654,793

$760,976

$854,793

$15,801,484

Amount

$2,364,557

$1,843,737

3.27%

$1,873,808

$490,749

$155,000

$57,302,996

$2,444,001

100.00%

$78,670,690

Permanent Financing

$9,059,737

Amount

$2,500,000

$6,186,524

$44,822,343

$25,000

Construction Financing

$1,347,372

CA-18-721 4 March 21, 2018

Eligible Basis and Basis Limit

Requested Unadjusted Eligible Basis:

Actual Eligible Basis:

Unadjusted Threshold Basis Limit:

Total Adjusted Threshold Basis Limit:

Adjustments to Basis Limit

55-Year Use/Affordability Restriction – 1% for Each 1% of Low-Income Units are Income Targeted

between 50% AMI & 36% AMI: 36%

Cost Analysis and Line Item Review

$69,457,984

$51,121,152

Per Regulation Section 10327(c)(2)(C), once established at the initial funded application, the developer

fee cannot be increased, but may be decreased, in the event of a modification in basis.

Staff analysis of project costs to determine reasonableness found all fees to be within TCAC’s

underwriting guidelines and TCAC limitations. Annual operating expenses meet the minimum operating

expenses established in the Regulations, and the project pro forma shows a positive cash flow from year

one. Staff has calculated federal tax credits based on 3.27% of the qualified basis. Applicants are

cautioned to consider the expected federal rate when negotiating with investors. TCAC's financial

evaluation at project completion will determine the final allocation.

Prior to closing, the applicant or its assignee shall obtain TCAC's consent to assign and assume the

existing Regulatory Agreement (CA-2000-901). To be eligible for a new award of tax credits, the owner

must provide documentation with the Form 8609 request (the placed in service submission) that the

acquisition date and the placed in service date both occurred after the existing federal 15 year compliance

period was completed.

The newly resyndicated project shall continue to meet the rents and income targeting levels in the existing

regulatory agreement(s) and any deeper targeting levels in the new regulatory agreement(s) for the

duration of the new regulatory agreement(s). Existing households determined to be income-qualified for

purposes of IRC §42 credit during the 15-year compliance period are concurrently income-qualified

households for purposes of the extended use agreement. As a result, any household determined to be

income qualified at the time of move-in under the existing regulatory agreement (CA-2000-901) is a

qualified low-income household for the subsequent allocation (existing household eligibility is

“grandfathered”).

Resyndication and Resyndication Transfer Event

Per Regulation Section 10327(c)(6), the “as if vacant” land value and the existing improvement value

established at application, as well as the eligible basis amount derived from those values, will be used

during all subsequent reviews including the placed in service review, for the purpose of determining the

final award of Tax Credits.

Significant Information / Additional Conditions: None.

$69,457,984

$69,524,767

CA-18-721 5 March 21, 2018

Local Reviewing Agency

Standard Conditions

If applicant is receiving tax-exempt bond financing from other than CalHFA, the applicant shall apply for

a bond allocation from the California Debt Limit Allocation Committee’s next scheduled meeting, if not

previously granted an allocation; shall have received an allocation from CDLAC; and, shall issue bonds

within time limits specified by CDLAC.

The applicant anticipates financing more than 50% of the project aggregate basis with tax-exempt bond

proceeds as calculated by the project tax professional. Therefore, the federal credit reserved for this

project will not count against the annual ceiling.

The IRS has advised TCAC that the amount of tax-exempt bonds issued, equivalent to at least 50% of

aggregate basis, must remain in place through the first year of the credit period or until eligible basis is

finally determined.

As project costs are preliminary estimates only, staff recommends that a reservation be made in the

amount of federal credit and state credit shown above on condition that the final project costs be

supported by itemized lender approved costs and certified costs after the buildings are placed in service.

All fees charged to the project must be within TCAC limitations. Fees in excess of these limitations will

not be considered when determining the amount of credit when the project is placed-in-service.

TCAC makes the preliminary reservation only for the project specified above in the form presented, and

involving the parties referred to in the application. No changes in the development team or the project as

presented will be permitted without the express approval of TCAC.

The Local Reviewing Agency, the City of Claremont, has completed a site review of this project and

strongly supports this project.

The project is a resyndication occurring concurrently with a Transfer Event with distribution of Net

Project Equity. The rehabilitation scope of work shall include all of the Short Term Work in the amount

of $755,178. The purchase price of $53,800,000 is less than the appraised value of $55,200,000. The

$1,400,000 difference between the purchase price and the appraisal value is deemed a seller discount.

Since the seller discount is greater than the short term work amount, the project is allowed to receive

eligible basis for the entire Short Term Work amount of $755,178.

The applicant must pay TCAC a reservation fee calculated in accordance with regulation. Additionally,

TCAC requires the project owner to pay a monitoring fee before issuance of tax forms.

All unexpended funds in reserve accounts established for the project must remain with the project to be

used for the benefit of the property and/or its residents, except for the portion of any accounts funded with

deferred developer fees.

CA-18-721 6 March 21, 2018

•

Credit awards are contingent upon applicant's acceptance of any revised total project cost, qualified basis

and tax credit amount determined by TCAC in its final feasibility analysis.

The applicant/owner shall be subject to underwriting criteria set forth in Section 10327 of the regulations

through the final feasibility analysis performed by TCAC at placed-in-service.

The rehabilitation project commits to improve energy efficiency above the modeled energy

consumption of the building(s) by a 15% decrease, based on an estimated annual energy use, in the

buildings Home Energy Rating System II (HERS II) post rehabilitation.

The applicant/owner is required to complete the following sustainable building methods in accordance

with the bond allocation from CDLAC and provide the applicable certifications and documentation when

the TCAC placed-in-service application is submitted:

CDLAC Additional Conditions