HomeMy WebLinkAboutItem 14 - Pre -Commitment of Affordable Housing Funds for Illumination FoundationCommunity Development Agency
www.santa-ana.org/community-development
ffn71fll Item # 14
City of Santa Ana
20 Civic Center Plaza, Santa Ana, CA 92701
Staff Report
July 18, 2023
TOPIC: Pre -Commitment of Affordable Housing Funds for Illumination Foundation
AGENDA TITLE
Approve apre-commitment of $2,021,319 in Homeless Housing, Assistance and
Prevention funds, and eight (8) project -based vouchers for Illumination Foundation for
the development of the Intergenerational Housing Project located at 918 N. Bewley
Street (Contingent upon approval of Housing Authority)
RECOMMENDED ACTION
CITY COUNCIL
Authorize the City Manager to execute a pre -commitment letter with the Illumination
Foundation for $2,021,319 in Homeless Housing, Assistance and Prevention funds and
eight (8) project -based vouchers for the development of the Intergenerational Housing
Project located at 918 N. Bewley Street, Santa Ana, CA 92703, (APN 198-231-10),
subject to non -substantive changes approved by the City Manager and City Attorney.
COMMUNITY DEVELOPMENT COMMISSION RECOMMENDATION
At its regular meeting on June 28, 2023, the Community Development Commission
recommended approval of Recommended Action # 1 for City Council and Recommended
Action # 1 for the Housing Authority, by a vote of 6:0 with 1 vacant seat.
DISCUSSION
On October 25, 2022, the Community Development Agency (CDA) released a Request
for Proposals (RFP # 22-119) to develop an affordable housing project for homeless
transitional age youth in the City of Santa Ana with available funds from the Homeless
Housing, Assistance and Prevention (HHAP) Program and Project -Based Voucher
Program. The State Department of Housing and Community Development requires that
the HHAP Round 1, 2, and 3 funds made available in this Request for Proposal (RFP)
be used for transitional age youth, so, the RFP required that a portion of the units be
designated for homeless transitional age youth (TAY) aged 18 to 24 years old. The
project -based vouchers were included in the RFP to supplement the HHAP funds in
order to successfully finance a project with supportive services.
The RFP was prepared in compliance with the City's Affordable Housing Funds Policies
and Procedures, published on the City's website and Planet Bids, and emailed to
nonprofit organizations who had previously expressed an interest in developing housing
for youth experiencing homelessness in Orange County. The City received one (1)
Pre -Commitment of Affordable Housing Funds for Illumination Foundation
July 18, 2023
Page 2
eligible proposal from Illumination Foundation prior to the deadline of November 22,
2022 at 4:00 p.m.
A Review Panel that consisted of the Homeless Services Division Manager, the
Housing Division Manager, a Housing Programs Analyst, the Residential Construction
Specialist, and a Senior Planner ensured compliance with the RFP requirements, used
the proposal Scoring and Selection Criteria from the RFP, and reviewed the proposed
project design for appropriateness for the proposed target population of TAY,
compatibility with surrounding uses, cost effectiveness of construction, and
appropriateness of the design and construction for low maintenance and long-term
durability.
The Review Panel recommends the following award for this project:
Developer: Illumination Foundation
Project Name: Intergenerational Housing Project
Award Recommendation:
HHAP -Homeless Housing, Assistance and
$2,021,319
Prevention Program Round 1, 2 and 3 Funds
Project -Based Vouchers
Eight (8)
The pre -commitment letter for Illumination Foundation provides the enforceable funding
commitment from the City for $2,021,319 in HHAP funds and eight (8) project -based
vouchers for the development of the Intergenerational Housing Project located at 918 N.
Bewley Street, Santa Ana, CA 92703 (APN 198-231-10) (Exhibit 1) (the "Project").
Among various other conditions in the pre -commitment letter, one of the primary
conditions is that the developer must provide verification that it has secured all of its
remaining financing for the development of the project. This should be in the form of
other enforceable funding commitments in the project's capital stack, which may include
fundraising amounts currently committed by the developer, a commitment of affordable
housing funds from the County of Orange, Orange County Housing Finance Trust,
CalOptima Health, or any other funding source needed in the project's capital stack to
develop the Project and close on the financing. The pre -commitment letter is also
conditional on the developer securing any and all permits and discretionary approvals
that may be required for the project by the City. The pre -commitment does not obligate
the City or any department thereof to approve any application or request for or take any
other action in connection with any planning approval, permit, or other action necessary
for the construction of the project. This will need to be completed before staff will return
to the City Council for consideration of the Grant Agreement for this project.
In compliance with the City's Affordable Housing Funds Policies and Procedures,
Keyser Marston Associates (KMA) conducted a preliminary financial gap analysis to
confirm the project's underwriting, the financial gap, and other programmatic
requirements related to the funding sources (Exhibit 2). KMA reviewed the developer's
Pre -Commitment of Affordable Housing Funds for Illumination Foundation
July 18, 2023
Page 3
estimates and projections of rents, expenses, reserves, and development costs in
accordance with industry -standard underwriting guidelines.
Developer Background
Illumination Foundation is a 501(c)(3) organization that was founded in 2008 with the
mission of disrupting the cycle of homelessness in Orange County. They are a dynamic
organization with the experience and capacity to acquire, develop, and operate
affordable and permanent supportive housing. Illumination Foundation's experience
consists of property acquisition, rehabilitation, conversion, design, and facility operation.
Their ability to develop new projects is reinforced by their ability to conduct operations
for completed projects and implement successful programs within them. Their shelters
and permanent housing operations involve complex logistics, contract management,
accessibility compliance, facility maintenance, and high -quality service delivery.
In addition to development projects, Illumination Foundation operates extensively
across several Southern California counties and is frequently called upon to assist
communities with urgent needs, such as during the COVID-19 pandemic. During the
pandemic, Illumination Foundation took an active role in the implementation of Project
Roomkey in Orange County, providing support to converted sites that were created to
mitigate the risks of COVID-19 to the most vulnerable.
Besides currently providing the operation of the City's Navigation Center, Illumination
Foundation has additionally completed several developments including the Fullerton
Navigation Center (a 150-bed facility), the Riverside Recuperative Care (a 50-bed
facility), and four family emergency shelters in the cities of Stanton and Anaheim.
Illumination Foundation also has experience in purchasing a motel for conversion to
recuperative care and has partnered with LifeArk to utilize an innovative modular
building system to develop an 18-unit prefabricated permanent supportive housing
project in El Monte.
Illumination Foundation is a fiscally responsible and financially stable organization. In
2019, they experienced a 24% increase in revenue; in 2020, a 40% increase and more
than a 50% growth in 2021. They transitioned from 90% reliance on non -recurring
grants and limited donations in their earlier years to more than 80% of revenue from
recurring government contracts and program fees as the organization has grown.
Illumination Foundation has additionally invested in ways to engage and retain
individual donors.
Illumination Foundation has formed a qualified team of internal staff and developer
partners to design a Project that supports the ongoing mission of the property. This
includes Westgroup Designs as the architect and JLC Associates as one of three
potential contractors who will bid on the project.
Westgroup Designs is known for providing exceptional design solutions for their clients
and has an extensive portfolio of outstanding projects including Google's Orange
County headquarters. Their expertise in creating distinctive and effective residential
communities, especially for the seniors, will be a great asset for this project.
Pre -Commitment of Affordable Housing Funds for Illumination Foundation
July 18, 2023
Page 4
Founded in 1996, JLC Associates is a full -service Commercial General Contractor
specializing in tenant improvement construction. They take pride in delivering
successful, on time, in budget, high quality completion on each project. Easter Seals of
Southern California, Memorial Care Health systems, Experian, and Ingram Micro are a
few of their clients.
Project Site
Illumination Foundation is proposing to develop a site formerly used by The Lovers of
the Holy Cross Sisters as a convent and preschool. Illumination Foundation acquired
the site for $3.9 million. With a total lot area of 38,281 square feet (SF), the Project site
is located along Bewley Street, between Hazard Avenue and W. 11 t" Street. The current
property is comprised of two (2) two-story residential units nestled in the back totaling
77032 SF; a 1,230 SF preschool building facing Bewley Street with an adjacent 586 SF
shaded play area; and two storage sheds, each 148 SF connected by a 145 SF covered
patio. The premises also boasts a luscious garden graced by numerous varieties of fruit
trees. The proposed Project is within one half mile from multiple bus stops.
The property is located within the Garden Grove Unified School District boundaries.
The Planning and Building Agency conducted a preliminary assessment of the site and
Project. The proposed site was originally developed as an eleven -unit apartment
complex, which was modified to accommodate and be occupied by The Lovers of the
Holy Cross Sisters. Illumination Foundation proposes interior renovations of the two
existing apartment buildings, along with minor exterior alterations and new entry stairs,
in order to rehabilitate the units and convert them back to multi -family residential with a
total of eleven units. As proposed, there is no enlargement of the apartment buildings
and no increase in the number of units as originally constructed. Moreover, the overall
scope of work includes the proposed conversion of an existing storage shed into an
Accessory Dwelling Unit (ADU) with two bedrooms. The Project is subject to additional
administrative review and approval by the Planning and Building Agency through the
City's building plan check and permitting process. Staff understands that the Project as
proposed is administrative and does not require discretionary entitlement approvals,
and that it is not subject to additional off street parking due to its proximity to public
transit.
Proposed Project
The proposed Project includes 11 units comprised of two (1) one -bedroom units, seven
(7) two -bedroom units, and two (2) three -bedroom units; an ADU; and a preschool.
Illumination Foundation's intergenerational campus will provide housing for homeless
seniors and youth (TAY) with young children and preferential entry at the preschool for
the young children to create a mutually supportive community. The proposed site plan
includes 29 parking spaces with 20 spaces for the tenants and the ADU, and 9 spaces
for the preschool including one accessible space and one loading parking stall. This
village concept is expected to garner substantial synergistic benefits:
• Reduce social isolation for seniors.
• Encourage employment for parents deterred by childcare worries.
• Provide high quality early education to children.
Pre -Commitment of Affordable Housing Funds for Illumination Foundation
July 18, 2023
Page 5
Unit Mix
The target population for the Intergenerational Housing Project includes individuals
experiencing chronic homelessness with a local preference for residents of the Santa
Ana community. Eight (8) permanent supportive housing (PSH) units will be restricted to
TAY families, two (2) shared housing PSH units will house senior citizens, and one unit
will be reserved for an on -site manager. The ADU will be used as the Manager's Unit
and offices for programming. The proposed unit mix and rent restrictions are as follows:
Bedroom Size
30% AMI
PSH
50% AMI
PSH
Manager's
Unit
Total Units
One -Bedroom (TAY)
2
Two -Bedroom (TAY)
6
Two -Bedroom
1
Three -Bedroom Senior
2
TOTAL
18
12
1 1
111
Resident Services
Illumination Foundation will coordinate the delivery of all resident support services for
the intergenerational campus. A comprehensive array of wraparound services will be
provided by Illumination Foundation staff to ensure residents achieve healthy,
independent, and fulfilling lives. Utilizing staff trained in best practices ranging from
trauma informed care and critical time interventions to housing first, Illumination
Foundation will ensure all residents have access to the services they need to thrive.
All residents of the intergenerational campus will receive access to case management
services that will assess their needs and craft individualized care plans that utilize
resident self -stated goals in accordance with a strength -based and client -centered
model. Services related to these goals include income development and financial
literacy, tenancy and other life skills, connections to appropriate mental health and
medical services and substance use treatment, and transportation.
Illumination Foundation is positioned to provide high quality services because of strong
partnerships with affiliated organizations and community partners. Residents will have
the opportunity to be referred to the Illumination Foundation Medical Group for
behavioral and physical health services; to a subcontractor, Straight Talk, for behavioral
health group sessions; on -site medical coordination through nursing student interns;
and parenting classes through The Priority Center and Olive Crest.
In addition to a range of community partners, Illumination Foundation will utilize
innovative funding through CalAIM to provide programming like day habilitation courses
covering topics such as budgeting, credit recovery, meal planning, anger management,
and self-esteem building. Along with access to day habilitation courses, residents will
also have access to enhanced care management. As part of the Enhanced Care
Management program, enrolled residents will be assigned a lead care manager that will
work with their insurance provider and personal care coordinator to facilitate clinical
care.
Pre -Commitment of Affordable Housing Funds for Illumination Foundation
July 18, 2023
Page 6
Beyond those services provided to all residents, children will be assigned a Children
and Family Program Navigator who is responsible for overseeing the specific needs of
children. Developmental screeners will be completed to ensure children are meeting
important developmental benchmarks and staff will have access to a clinician to
determine appropriate interventions when benchmarks are not met. The navigator will
coordinate care for the children, such as referrals to internal and external resources, like
regional center, literacy development, and children vision and dental clinics. Through
our partnership with Children's Hospital of Orange County (CHOC), children are able to
receive priority appointments to address their health needs.
Lastly, the unique characteristics of this development will present important service
opportunities. The on -site preschool operated by Head Start will ensure that
appropriately aged children will receive access to schooling and daycare. An on -site
garden and chicken coop will allow for the development of community and wellness
among residents. The intergenerational nature of the campus will allow for Illumination
Foundation to cultivate peer mentorships between senior residents and transitional age
youth or single parent residents. These onsite community activities help target the social
isolation that can occur with senior populations.
Illumination Foundation has provided services to people experiencing homelessness in
the Orange County area for 15 years and currently operates the City of Santa Ana's
Carnegie Navigation Center. This experience and strong working relationship with the
City of Santa Ana positions Illumination Foundation to provide the exceptional services
the residents of the intergenerational campus deserve.
Community Inclusion
The need for affordable housing opportunities for TAY and seniors experiencing
homelessness has become critical. For projects to be successful both in terms of
design, development, and implementation, community engagement must be an integral
part of each phase of the process. Illumination Foundation has a demonstrated history
of working cooperatively with surrounding neighborhoods in all phases of project
development, as evidenced, for one example, by the development and planning of the
Fullerton Navigation Center. The process involved months of extensive community
outreach, as well as partnering with local community groups and organizations in order
to address the concerns of Fullerton residents and businesses.
Illumination Foundation will take a reflective and strategic approach to community
engagement. This begins with an in-depth understanding of the needs of the
community, including the growing need for housing resources and the increasing
number of people experiencing homelessness in Orange County. Throughout every
step of the development process, Illumination Foundation, along with its development
partners, will make active and concerted efforts to identify and reach out to all
stakeholders relevant to the project.
In the early phase of development, this will include attending City Council meetings,
scheduling town halls, and creating questionnaires and informative flyers to distribute to
Pre -Commitment of Affordable Housing Funds for Illumination Foundation
July 18, 2023
Page 7
stakeholders and community members. Forays into the surrounding community will be
made to canvass residents, neighborhood associations, community groups, and nearby
businesses to provide information and allay concerns that stakeholders may have. Once
the surrounding neighborhood has been canvassed, Illumination Foundation will
facilitate town hall meetings, including both virtual and in -person. This will ensure
accessibility and ample opportunities for stakeholder voices to be heard. Letters of
support from stakeholders will be gathered as needed. Opportunities for focus groups
and to answer questionnaires will be made available to individuals with lived experience
of homelessness to provide their insight and inform the project. Frontline staff with
experience working directly with clients will be afforded opportunities to provide
feedback and engage in the program design and Project development process, as
Illumination Foundation recognizes the critical importance of their perspective.
Throughout all stages of this Project, Illumination Foundation will seek input and
establish collaborative efforts with agencies and nonprofits operating in and near the
project, such as Mercy House Living Centers, Fresh Beginnings, and CityNet, among
others. Along with development partners, Illumination Foundation will seek to allay any
community concerns and incorporate critical feedback into the design and
implementation that augments and strengthens their ability to serve the needs of the
community. Through a partnership with Head Start, an affordable preschool resource
will be available to the surrounding community.
Illumination Foundation will actively consider barriers that stakeholders may experience
to attending scheduled town halls and other community engagement efforts, providing
accommodations such as coordination of childcare, coordinating transportation,
providing meeting locations that are convenient for stakeholders, and providing video or
phone conferencing. To best reach all stakeholders, informative flyers will be produced
in both English and Spanish, and additional linguistic accommodations will be made as
needed. By utilizing direct outreach, social media, and newsletter marketing strategies,
leveraging existing relationships and creating new ones, actively involving stakeholders
in discussions, and implementing a Good Neighbor Plan, Illumination Foundation will
ensure the level of community engagement necessary for a successful Project that
benefits the target population and integrates seamlessly into the broader community.
ENVIRONMENTAL IMPACT
Pursuant to the Adaptive Reuse Ordinance (Ordinance No. NS-2874), the proposed
project is found and determined to be consistent with the General Plan of the City of
Santa Ana. Therefore, in accordance with the California Environmental Quality Act, the
recommended action is exempt from further review under Section 15194 (Affordable
Housing Exemption), as this project meets all the required criteria as a 100-percent
affordable/permanent supportive housing development.
FISCAL IMPACT
The various agreements, including the grant agreement, is estimated to be finalized for
City Council approval in FY 2023-24. Upon future approval of the grant agreement,
funds will be budgeted and available as shown below. The Homeless, Housing
Assistance and Prevention (HHAP) — Round 1 funds will be part of the proposed
Pre -Commitment of Affordable Housing Funds for Illumination Foundation
July 18, 2023
Page 8
carryover of unspent funds which will be presented to City Council in September 2023
for part of this agreement.
Fiscal
Accounting Unit
Fund Description
Accounting Unit,
Amount
Year
— Account #
Account Description
Homeless Housing,
FY 23-24
12218715-69152
Assistance and Prevention
Loans & Grants
$673,773.03
funds Round 1
Homeless Housing,
FY 23-24
12218716-69152
Assistance and Prevention
Loans & Grants
$3187510.90
funds Round 2
Homeless Housing,
FY 23-24
12218717-69152
Assistance and Prevention
Loans & Grants
$1,0293035.17
funds Round 3
Total Grants
$2,021,319.10
EXHIBIT
1. Pre -Commitment Letter for Illumination Foundation
2. Preliminary Financial Gap Analysis by Keyser Marston Associates
Submitted By: Michael L. Garcia, Executive Director of Community Development
Approved By: Kristine Ridge, City Manager
MAYOR
Valerie Amezcua
MAYOR PRO TEM
Jessie Lopez
COUNCILMEMBERS
Phil Bacerra
Johnathan Ryan Hernandez
David Penaloza
Thai Viet Phan
Benjamin Vazquez
CITY OF SANTA ANA
COMMUNITY DEVELOPMENT AGENCY
20 Civic Center Plaza — M25
Santa Ana, California 92702
www.santa-ana.org
July 18, 2023
Pooja Bhalla, DNP, RN
Chief Executive Officer
Illumination Foundation
CITY MANAGER
Kristine Ridge
CITY ATTORNEY
Sonia R. Carvalho
CITY CLERK
Jennifer L. Hall
Sent via E-mail
Re: Bewley Street - Intergenerational Affordable Housing Project
918 North Bewley Street, Santa Ana, CA 92703
Pre -Commitment Letter for a Grant of Homeless Housing, Assistance and
Prevention Grant funds, and Eight (8) Project -Based Vouchers
Dear Ms. Bhalla,
Illumination Foundation ("Developer") requested financial assistance in connection with
the proposed development of an eleven (11) unit intergenerational affordable housing
project, with eight (8) units restricted to homeless transitional age youth (TAY) and two
(2) units restricted to homeless senior citizens (the "Project"). The Project is to be located
at 918 North Bewley Street, Santa Ana, CA 92703 (APN 198-231-10) (the "Site").
The Project includes the rehabilitation of 2 two-story residential buildings that were
previously utilized by The Lovers of the Holy Cross Sisters as a convent and preschool.
The Developer will convert the two residential buildings into eleven (11) rental units
comprised of two (2) one -bedroom units, seven (7) two -bedroom units, and two (2) three -
bedroom units. Two (2) one -bedroom units and six (6) two -bedroom units will be restricted
to homeless TAY at or below 30% of the Area Median Income ("AMI"). The two (2) three -
bedroom units will be structured as shared housing for homeless senior citizens at or
below 50% of the AMI. One (1) two -bedroom unit will be unrestricted. The Project's unit
mix and rent restrictions are as follows:
SANTA ANA CITY COUNCIL
Valerie Amezcua Jessie Lopez Thai Viet Phan Benjamin Vazquez Phil Bacerra Johnathan Ryan Hernandez David Penaloza
Mayor Mayor Pro Tem, Ward 3 Ward 1 Ward 2 Ward 4 Ward 5 Ward 6
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Page 12
Bedroom Size
30% AMI
(PSH)
50% AMI
Manager's
Unit
Total Units
One -Bedroom (TAY)
2
Two -Bedroom (TAY)
6
Two -Bedroom
1
Three -Bedroom Senior
2
TOTAL
8
2
1
11
The Developer proposes to construct an Accessory Dwelling Unit ("ADU") on the Site.
The ADU will be used as office space for supportive services and programming functions.
An existing preschool building is also located on the Site. The Developer proposes to
work with Head Start to renovate and operate the preschool space.
As proposed, there is no enlargement of the apartment buildings and no increase in the
number of units as originally constructed. Moreover, the overall scope of work includes
the proposed conversion of an existing storage shed into an ADU with two bedrooms.
The Project is subject to additional administrative review and approval by the Planning
and Building Agency through the City's building plan check and permitting process. Staff
understands that the Project as proposed is administrative and does not require
discretionary entitlement approvals, and that it is not subject to additional off street
parking due to its proximity to public transit.
The City of Santa Ana ("City") and the Housing Authority of the City of Santa Ana
("Housing Authority") have reviewed the Developer's request for assistance, and at the
City Council / Special Housing Authority meeting on July 18, 2023, the City Council and
Housing Authority Board authorized and approved issuance of this pre -commitment letter
evidencing the preliminary award of (collectively, the "City Assistance"):
- A grant in the maximum amount of $2,021,319 funded from Homeless Housing,
Assistance and Prevention ("HHAP") funds held by the City of Santa Ana for
the Project ("HHAP Grant"); and
- Eight (8) U.S. Department of Housing and Urban Development Project -Based
Vouchers ("PBV") from the Housing Authority of the City of Santa Ana.
This letter shall evidence the City's pre -commitment of the City Assistance to the
Developer for the Project subject to the conditions described below.
City Assistance:
The amount of the proposed City Assistance has been determined based upon the City's
review of the Developer's request for the receipt of the City Assistance and the
development proforma and projected cash flows for the Project submitted by the
Developer to the City ("Proforma"). The City Manager has authority to approve revised
development proformas and projected cash flows for the Project; provided, however, that
the City Assistance is not increased or extended.
Page 13
The City Assistance shall include the following general terms:
• The HHAP Grant shall be for a maximum amount of $2,021,319, or as much
thereof as is disbursed for hard and soft costs in constructing the Project, provided
from the HHAP funds.
• The provision of HHAP funds will be structured as a grant; therefore, no repayment
is due to the City unless the Project is in default.
• Cost savings from the Project, if any, will be applied first to repay the City
Assistance, as applicable.
• All other funding sources must be secured through enforceable funding
commitments prior to disbursement of any of the HHAP Grant funds.
• An environmental review in compliance with the National Environmental Policy Act
is required prior to entering into an Agreement to Enter into a Project -Based
Vouchers Housing Assistance Payments Contract for the PBVs committed to the
Project.
Project -Based Vouchers:
The basic terms of the award are as follows:
• Funding Source: The eight (8) PBVs will be funded exclusively out of the tenant -
based voucher program annual budget authority received by the Housing Authority
from the U.S. Department of Housing and Urban Development ("HUD").
• Rents: The PBV Housing Assistance Payments ("HAP") Contract rents below are
preliminary and contingent upon a reasonable rent determination to be conducted by
the Housing Authority at the time of execution of the HAP Contract:
o One -Bedroom: $2)219
o Two -Bedroom: $2)665
In accordance with HUD regulations and SAHA's Administrative Plan, these rents
are subject to review prior to the execution of a HAP contract.
• Annual Amount: The Project will receive PBVs for the eight (8) TAY units:
30% AM
Unit Size
Proposed HAP
No. Units
Contract Rent
One -Bedroom
2
$27219
Two -Bedroom
6
$205
Page 14
The estimated maximum annual amount received under this award is $245,136.
These estimates assume 100% occupancy of the units over the twelve-month period
with contract rent amounts limited to the current applicable Santa Ana Housing
Authority Payment Standard.
• Term: The HAP Contract will have a term of twenty (20) years. Any time before the
expiration of the HAP Contract, the Developer may request an additional twenty (20)
years, subject to a determination by the Housing Authority that it is appropriate to
continue providing permanent supportive housing for homeless TAY or to expand
housing opportunities and HUD funding. Subsequent extensions are subject to the
same requirements.
• Units Receiving Assistance: The maximum number of units receiving PBV
assistance will be the eight (8) TAY units. The PBVs may not be utilized for the two
(2) shared housing units.
• Local Preference: All individuals and families shall be homeless individuals with a
preference for local residents from the City of Santa Ana based on the City's local
residency screening criteria, subject to compliance with applicable fair housing laws.
General Provisions:
The City's obligation to provide the City Assistance to the Project is subject to each of the
following conditions:
• Developer must provide proof that it has secured all of its remaining financing for
the development of the Project, in particular the fundraising amounts currently
committed by the Developer, in the form of enforceable funding commitments to
develop the Project before staff will return to the City Council for consideration of
the H HAP Grant Agreement.
• 100% of the affordable units (less one (1) manager's unit) in the Project will be
restricted to homeless households as follows:
o The eight (8) TAY units will be restricted to homeless TAY households
earning no more than 30% of the Area Median Income ("AMI"); and
o Each bedroom in the two (2) shared housing units will be restricted to
homeless senior citizen households earning no more than 50% AMI.
• The Project consists of ten (10) permanent supportive housing units for homeless
individuals and families. All individuals and families shall be referred from the
Orange County Coordinated Entry System with a preference for local residents
from the City of Santa Ana based on the City's local residency screening criteria,
subject to compliance with applicable fair housing laws.
Page 15
• The rent standards for the Project must comply with the strictest of the standards
imposed by the funding sources contributed to the Project, as applicable. The
H HAP rent standards are set forth as follows:
o The maximum affordable rent for the eight (8) TAY units will be set at the
30% AMI rent limit as published by the California Department of Housing
and Community Development ("HCD") for the Multifamily Tax Subsidy
Programs ("MTSP"); and
o For the three -bedroom shared housing units, the total rent payments must
not exceed the 50% MTSP AMI rent limit for a three -bedroom unit.
Additionally, each tenant's rent must not exceed the lesser of:
■ One-third (1/3) of the 50% MTSP AMI rent for a three -bedroom unit;
or
■ Thirty percent (30%) of the household's actual income (inclusive of
Supplemental Security Income /State Supplementary Payment
payments.
• Illumination Foundation will provide/pay for case management / social service
expenses outside of the Project's operating budget.
• Illumination Foundation will cover any operating losses during the City's 55-year
affordability period.
• Given that Illumination Foundation is proposing to provide a loan to the Project
from one of its affiliated entities, Illumination Foundation will incorporate a standstill
provision that prohibits Illumination Foundation from foreclosing on the Project
• All provided funding and Project requirements shall conform to the City's most
recently adopted Affordable Housing Funds Policies and Procedures, unless
alternative requirements are expressly provided in the executed Grant Agreement
for the City Assistance or any other documents related to the development of the
Project.
• Approval of all required entitlements and discretionary actions to allow the adaptive
reuse and construction (as applicable) of an eleven (11) unit affordable housing
complex, with ten (10) units restricted for homeless households, to be located at
918 N. Bewley Street, Santa Ana, CA 92703 (APN 198-231-10).
• The City's obligation to provide the City Assistance is and shall remain subject to
all covenants, conditions, and restrictions set forth in the Grant Agreement, and in
particular the City's analysis of the available funding sources and development and
operating costs of the Project and the overall economic feasibility of the Project.
Page 16
• Review and approval of the Grant documents evidencing the City Assistance by
the City Council including the Grant Agreement, Affordability Restrictions and
Deed(s) of Trust, as reasonably necessary.
• Developer must provide proof that it has received and reviewed three general
contractor bids, and that all subcontractors are competitively bid out. Specifically, the
Developer must obtain three general contractor bids; all subcontractors must be
competitively bid out; and the City must review and approve the final general
contractor's contract. The Project will be subject to State of California prevailing
wage requirements.
• Execution of the HAP Contract and all necessary documents for the PBV's.
• Compliance with applicable federal regulations set forth in 24 Code of Federal
Regulations (CFR) Part 983, and all other federal, state, and local laws and
regulations.
Developer, at its sole cost and expense, will be responsible for securing any and all
permits and discretionary approvals that may be required for the Project by the City or
any other federal, state, or local governmental entity having jurisdiction over the Property
or Project. Notably, this pre -commitment letter shall not obligate the City or any
department thereof to approve any application or request for or take any other action in
connection with any planning approval, permit or other action necessary for the
construction, rehabilitation, installation or operation of the Project.
This pre -commitment letter for the Project will expire on July 18, 2025.
If you have any questions or require any additional information regarding this pre -
commitment letter, please contact Judson Brown, Housing Division Manager, by
telephone at (714) 667-2241 or by e-mail at jbrown (a�santa-ana.org or Terri Eggers,
Homeless Services Manager, by telephone at (714) 647-5378 or by e-mail at
teggers(a_santa-ana.
Sincerely,
On behalf of the City of Santa Ana:
Kristine Ridge
City Manager
Attest:
Jennifer L. Hall
Clerk of the Council / Recording Secretary
On behalf of the Housing Authority of
the City of Santa Ana:
Michael L. Garcia
Executive Director
Page 17
APPROVED AS TO FORM
Sonia R. Carval ho
City Attorney and Authority General Counsel
By: Matthew Cody
Best, Best & Krieger
Special Counsel for the City and Housing Authority
R A
"r,
KEYSER MARSTON ASSOCIATES
MEMORANDUM
ADVISORS IN:
Real Estate To:
Terri Eggers, Homeless Services Division Manager
Affordable Housing
Economic Development
Judson Brown, Housing Division Manager
13ERKELEY
City of Santa Ana
A. Jerry Keyser
Timothy C. Kelly
Debbie M. Kern From:
Tim Bretz
David Doezema
'Los ANGELES
Date: June 221 2023
Kathleen H. Head
James A. Rabe
Gregory D. Soo-Hoo
Subject: BewleyStreet— Preliminary Financial Gap Analysis
Kevin E. Engstrom
Julie L. Romey
Tim R. Bretz
At your request, Keyser Marston Associates, Inc. (KMA) prepared a preliminary financial
SAN DIEGO
gap analysis for the project proposed to be developed at 918 North Bewley Street (Site)
Paul C. Marra
Linnie A. Gavino
by Illumination Foundation (Developer). The Site is currently comprised of two
residential buildings totaling 7,032 square feet of gross building area (GBA), a 1,230
square foot preschool building, and two storage sheds. The Developer proposes to
rehabilitate the existing residential buildings and construct a new accessory dwelling
unit on the Site. The Developer proposes to create a total of eleven (11) permanent
supportive housing (PSH) units on the Site for the following purposes:
1. Eight (8) units restricted to homeless Transition Age Youth (TAY);
2. Two (2)three-bedroom units structured as shared housing and restricted to
homeless senior citizens households; and
3. One (1) unrestricted unit for an on -site manager (Project).
The Developer is requesting financial assistance from the City of Santa Ana (City) for the
purposes of developing the Project. The purpose of this KMA analysis is to provide a
preliminary evaluation of the Developer's request for assistance from the City.
777 SOUTH FIGUEROA STREET, SUITE 2555 LOS ANGELES, CALIFORNIA 90017 ➢ PHONE 213.622.8095
WWW.KEYSERMARSTON.COM
2306002v3.SA.TRB
19090.018.028
EXHIBIT 2
Terri Eggers /Judson Brown, City of Santa Ana June 221 2023
Bewley Street —Preliminary Financial Gap Analysis Page 2
EXECUTIVE SUMMARY
Estimated Financial Gap
The results of the KMA preliminary financial gap analysis are compared to the
Developer's financial assistance request in the following table:
KMA Developer Difference
Total Development Costs $7,339,000 $7,290,900 ($481200)
(Less) Outside Funding Sources (51269.,500) (5.,269,500) -0-
Financial Gap $2,069,500 $21021,300 $48,,200
As shown in the preceding table, KMA estimates the Project's financial gap at $2.07
million, which is $48,200, or less than 3% higher than the Developer's financial gap
estimate. This differential can be considered inconsequential for a Project of this
magnitude.
Operating Feasibility
The Developer estimates the Project's stabilized net operating income (NOI) at
approximately $37,000 in the Project's first stabilized year of operation. In contrast,
KMA estimates the Project's stabilized NOI at negative $37,000 in Year 1 and not
becoming positive until Year 10. Per discussions with the Developer, the Developer will
cover any cash flow losses. This should be included as a provision in the City's grant
agreement and/or regulatory agreement.
Proposed Funding Sources
The following summarizes the proposed funding sources for the Project:
1. The Santa Ana Housing Authority (Housing Authority) proposes to provide eight
(8) Section 8 Project -Based Vouchers (PBVs) that are allocated to the Housing
Authority by the United States Department of Housing and Urban Development
(HUD). The PBVs will be overlayed on the 8 TAY units —and cannot be utilized for
the two shared housing units.
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EXHIBIT 2
Terri Eggers /Judson Brown, City of Santa Ana June 221 2023
Bewley Street —Preliminary Financial Gap Analysis Page 3
2. The Developer has secured $1 million in fundraising dollars.
3. The Developer has committed to securing at least $1.50 million in additional
fundraising dollars for the Project.
4. Illumination Foundation, or one of it's affiliated legal entities, proposes to
provide an approximately $2.77 million loan to the Project.
PROJECT 01-St WIP I 1
The Developer currently owns the Site. The Site was formerly used by the Sisters of Holy
Cross as a convent and preschool. The Site is improved with the following uses:
1. Two (2) two-story residential buildings totaling 7,032 square feet of GBA;
2. A 1,230 square foot preschool building; and
3. Multiple storage sheds and a covered patio.
The Developer proposes to complete the following scope of development:
1. Convert the two residential buildings into eleven rental units comprised of the
following unit mix:
a. Two (2) one -bedroom units;
b. Seven (7) two -bedroom units; and
C. Two (2)three-bedroom units.
2. Construct an accessory dwelling unit (ADU) to be used as offices for
programming.
3. Renovate the existing preschool building to continue as a preschool use.'
1 Per the Developer, Head Start will be responsible for any costs associated with the preschool operation.
It is KMA's understanding that costs for the preschool space were not included in the development
budget information provided by the Developer.
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Terri Eggers / Judson Brown, City of Santa Ana June 221 2023
BewleyStreet— Preliminary Financial Gap Analysis Page
4. The Project's residential GBA is estimated at 7,473 square feet, inclusive of the
new ADU space.
5. Twenty-nine (29) surface parking spaces will be provided consisting of:
a. Twenty (20) parking spaces for the residential component; and
b. Nine (9) parking spaces for the preschool component.
6. The Project"s proposed affordability mix is as follows:
a. Two (2) one -bedroom units and six (6) two -bedroom units will be
restricted to homeless TAY households that earn no more than 30% of
the Area Median Income (AMI) as published by the California Department
of Housing and Community Development (HCD) for Multifamily Tax
Subsidy Programs (MTSp); 2
b. Two (2) three -bedroom units will be structured as shared housing for
homeless senior citizens that earn no more than 50% MTSP AMI; and
C. One two -bedroom unit will be unrestricted and reserved for an on -site
manager.
FINANCIAL GAP ANALYSIS
KMA prepared a pro forma analysis to assist in evaluating the Developer's proposal. The
analysis is located at the end of this memorandum, and is organized as follows:
Table 1: Estimated Development Costs
Table 2: Stabilized Net Operating Income
Table 3: Financial Gap Calculation
Table 4: Cash Flow Analysis
2 Although the Project's financing does not utilize Tax Credits, the City has elected to utilize the MTSP
income and rent limits published by HCD.
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19090.018.028
EXHIBIT 2
Terri Eggers /Judson Brown, City of Santa Ana June 221 2023
Bewley Street —Preliminary Financial Gap Analysis Page 5
Estimated Development Costs (Table 1)
KMA reviewed the Developer's development cost estimates, and then independently
prepared a pro forma analysis for the Project. The resulting development costs are
estimated as follows:
PROPERTY ASSEMBLAGE COSTS
The Developer purchased the Site for $3.90 million. The Developer did not provide an
appraisal for review. The City may want to require the Developer to provide an appraisal
to ensure that the purchase price is consistent with the appraised value.
The Developer was required to pay the Seller's broker fees, which were set at $156,000,
or 4% of the purchase price. The total property assemblage costs are estimated at $4.06
million.
DIRECT COSTS
The direct cost estimates assume that the Project will be subject to State of California
prevailing wage requirements. The direct costs applied in this analysis are based on
estimates provided by the Developer and can be summarized as follows:
1. The demolition costs are estimated at $71,000.
2. The site improvement costs are estimated at $71,000.
3. The rehabilitation and new construction costs for the ADU are estimated at
$2.09 million, or approximately $190,400 per unit.
4. The general conditions and contractor fee costs are estimated at $240,000, or
11% of construction costs.
5. The insurance costs are estimated at 1% of construction costs.
6. A direct cost contingency allowance equal to 15% of direct costs is provided,
which is reasonable given the proposed scope of development.
KMA estimates the total direct costs at $2.88 million, or $261,400 per unit.
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EXHIBIT 2
Terri Eggers /Judson Brown, City of Santa Ana June 221 2023
Bewley Street —Preliminary Financial Gap Analysis Page 6
INDIRECT COSTS
1. The architecture, engineering and consulting costs are estimated at 3.5% of
direct costs.
2. The Developer estimates the public permits and fees costs at $61,900, or
approximately $5,600 per unit.
3. The taxes, insurance, legal and accounting costs are estimated at 1.5% of direct
costs.
4. The Developer did not include an allowance for marketing and leasing costs.
5. The Developer Fee is set at $183,000, which is equal to 3% of net development
costs (total development costs less the developer fee). This estimate is less than
typical developer fee amounts for affordable housing projects.
6. KMA included an indirect cost contingency allowance equal to 5% of other
indirect costs. The Developer did not include a separate indirect cost
contingency allowance in their development budget.
KMA estimates the total indirect costs at $407,600.
FINANCING COSTS
The Developer intends to utilize the City's financial assistance and other
fundraising/grant funds to cover the Project's construction costs. As such, the Developer
assumes that the Project will not be subject to construction loan interest and/or
construction loan fees during the construction period. KMA utilized this assumption in
the pro forma analysis, and did not include any financing costs. If this assumption
changes, the KMA analysis may need to be revised accordingly.
TOTAL DEVELOPMENT COSTS
As shown in Table 11 KMA estimates the total development costs at $7.34 million, which
equates to approximately $667,200 per unit. This estimate is approximately $48,200, or
less than 1% higher than the Developer's estimate. This differential is primarily
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EXHIBIT 2
Terri Eggers /Judson Brown, City of Santa Ana June 221 2023
Bewley Street —Preliminary Financial Gap Analysis Page 7
attributed to KMA including higher indirect costs, including an indirect cost contingency
allowance, in the KMA pro forma analysis.
Stabilized Net Operating Income (Table 2)
The Project's funding sources include a loan provided by the Developer, and
fundraising/grant funds secured by the Developer. In addition, the City intends to utilize
Homeless Housing, Assistance and Prevention (HHAP) grant funds allocated to the City
by HCD. To that end, the City will impose the following affordability requirements on the
Project:
INCOME RESTRICTIONS
1. The eight (8) TAY units will be restricted to homeless TAY households earning no
more than the 30% MTSP AMI income limits as published by HCD.
2. For the three -bedroom shared housing units, each bedroom shall be restricted
to a homeless senior citizen household earning up to the 50% MTSP AMI income
limit.
RENT RESTRICTIONS
1. The maximum affordable rent for the eight TAY units will be set at the 30% MTSP
AMI rent as published annually by HCD.3
2. For the three -bedroom shared housing units, the total rent payments must not
exceed the 50% MTSP AMI rent for a three -bedroom unit. Additionally, each
tenant's rent must not exceed the lesser of:
a. One-third (1/3) of the 50% MTSP AMI rent for athree-bedroom unit; or
b. 30% of the household's actual income (inclusive of Supplemental Security
Income (SSI) /State Supplementary Payment (SSP) payments.
3 Each of the TAY units will have a PBV, and thus, each TAY tenant can pay no more than 30% of their
income towards rent. For underwriting purposes, KMA set the TAY tenant payments at 30% SSI.
2306002v3.SA.TRB
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Terri Eggers /Judson Brown, City of Santa Ana
Bewley Street —Preliminary Financial Gap Analysis
ACHIEVABLE RENTAL INCOME
EXHIBIT 2
June 221 2023
Page 8
The Project's rents must adhere to the most restrictive of the requirements imposed by
the funding sources. The rents in this analysis are based on 2022 information published
by HUD and HCD. The maximum allowable rents, net of the appropriate utility
allowances, are estimated as follows:'
1- 2-
Bedroom Bedroom
Rent Restriction — TAY Units Units Units
30% MTSP AMI / 30% SSI (PSH)
Number of Units
2
6
30% MTSP AMI Rent
$728
$864
30% SSI Rent
$306
$289
Applicable Rent
$306
$289
3-
Bedroom
Rent Restriction — Shared Housing Senior Units Units
50% MTSP AMI / 30% SSI (PSH)
Number of Units
2
50% MTSP AMI Rent — Three -Bedroom Unit
$1,694
1/3 of 50% MTSP AMI Rent
$565
30% of SSI for Studio Unit
$313
Applicable Rent
Per Bedroom
$313
Per Three -Bedroom Unit
$939
4 Per the Developer, tenants will only pay for electricity. The basic electric utility charge as published by
the Housing Authority on October 1, 2022 is estimated at: $27 for shared housing bedrooms; $34 for one -
bedroom units; and $51 for two -bedroom units.
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EXHIBIT 2
Terri Eggers /Judson Brown, City of Santa Ana June 221 2023
Bewley Street —Preliminary Financial Gap Analysis Page 9
ESTIMATED EFFECTIVE GROSS RESIDENTIAL INCOME
KMA estimates the residential effective gross income (EGI) at approximately $239,000
based on the following assumptions:
1. The gross rental income is estimated at $50,600.
2. The PBV subsidy overhang income is estimated at $215,000 based on the
following payment standards:
a. $2,219 for one -bedroom units; and
b. $2,665 for two -bedroom units.
3. A vacancy and collection allowance equal to 10% of gross rental income is
assumed, which equates to $26,600.
ESTIMATED RESIDENTIAL OPERATING EXPENSES
KMA estimates the Project's residential operating expenses at approximately $107,200
based on the following assumptions:
1. The general operating expenses are estimated at $9,200 per unit per year. This is
within the range for similar small affordable housing projects.
2. KMA assumes the Developer will apply for the property tax abatement that is
accorded to non-profit housing organizations that own and operate apartment
units that are restricted to households earning less than 80% of the Area Median
Income. The Developer assumes that the Project will not be subject to any
property tax assessment override cost.
3. The Developer did not include supportive services costs in their pro forma. Per
discussions with the Developer, the Developer will provide / pay for supportive
services expenses outside of the Project's operating budget. The Developer
estimates these costs at $120,,000 per year; however, the City should
memorialize this concept in the City's grant agreement and/or regulatory
agreement.
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EXHIBIT 2
Terri Eggers /Judson Brown, City of Santa Ana June 221 2023
Bewley Street —Preliminary Financial Gap Analysis Page 10
4. The Developer provided an allowance for replacement reserve deposits at $545
per unit per year. This is a reasonable allowance given the small size of the
Project.
RESIDENTIAL STABILIZED NET OPERATING INCOME
The Project's residential EGI is estimated at $239,000, and the operating expenses are
estimated at $107,200. This results in an estimated residential stabilized NOI of
$131,800.
TOTAL PROJECT STABILIZED NET OPERATING INCOME
In addition to the $131,800 in residential NOI, the Developer intends to lease the
preschool space to Head Start. The Developer estimates the preschool lease payments
at $5,000 per month, or $60,000 per year. When the preschool lease payments are
added to the residential NOI, KMA estimates the Project's total NOI at $191,800.
Financial Gap Calculation
The financial gap is estimated by deducting the available outside funding sources from
the Project's total development costs. The outside funding sources anticipated to be
received by the Project are described below.
AVAILABLE FUNDING SOURCES
Illumination Foundation Loan
The Developer, or one of its affiliated legal entities, proposes to provide a loan to the
Project. The proposed terms of the Illumination Foundation Loan include the following:
1. Interest -only payments based on a variable interest rate set at the Wall Street
Journal (WSJ) Prime Rate. The WSJ Prime Rate is currently set at 8.25%.
2. The Developer anticipates repaying this loan through a capital campaign.
Therefore, no repayment term was specified. However, the Developer did not
provide the loan documents for review.
2306002v3.SA.TRB
19090.018.028
EXHIBIT 2
Terri Eggers /Judson Brown, City of Santa Ana June 221 2023
Bewley Street —Preliminary Financial Gap Analysis Page 11
KMA estimates the Developer will need to provide a $2.77 million loan to the Project.
Based on an 8.25% interest rate, the annual interest rate payments would equate to
$228,500 per year.
Fundraising /Grant Funric
The Developer proposes to utilize the following additional funding sources for the
Project:
1. The Developer has secured $1 million in fundraising dollars.
2. The Developer has committed to securing at least $1.50 million in additional
fundraising dollars for the Project.
TOTAL AVAILABLE FUNDING SOURCES
As shown in Table 3, KMA estimates the outside funding sources available to the Project
at $5.27 million.
ESTIMATED FINANCIAL GAP
Based on the preceding analysis, KMA estimates the Project's financial gap as follows:
Total Development Costs $7,339,00
(Less) Total Available Outside Funding Sources (51269,500)
Financial Gap $2,0691500
Per Unit $188,100
As shown in the table above, KMA estimates that the Project exhibits a $2.07 million
financial gap. In comparison, the Developer is requesting $2.02 million in financial
assistance from the City. This represents a $48.,200,. or less than 3% differential, which
can be considered inconsequential for a Project of this scope.
2306002v3.SA.TRB
19090.018.028
EXHIBIT 2
Terri Eggers /Judson Brown, City of Santa Ana June 221 2023
Bewley Street —Preliminary Financial Gap Analysis Page 12
CASH FLOW ANALSYIS
KMA also conducted a cash flow analysis to evaluate the Project's operating feasibility
during the City's 55-year affordability period.
The following describes the basic cash flow assumptions:
1. Year 1 is based on the pro forma rent and expense assumptions presented in the
stabilized NOI analysis (Table 2).
2. Additional revenue and expense assumptions are as follows:
a. The affordable rental income and PBV subsidy income are escalated at
2.5% per year.
b. The general operating expenses and replacement reserve deposits are
escalated at 3.5% per year.
C. The property taxes are escalated at 2.0% per year.
d. The preschool lease revenue is escalated at 3.0% per year.
3. KMA set the interest -only payments on the Illumination Foundation Loan at
$228,500 per year.
As shown in Table 4, the Project's cash flow after debt service is negative in Years 1- 9.
KMA estimates that the operating deficits during this initial 9-year period total
approximately $180,000. In comparison, the Developer's cash flow assumes that the
Project's net cash flow remains positive after the Project reaches stabilization in Year 2.
Per discussions with the Developer, the Developer will cover any cash flow losses. This
should be included as a provision in the City's grant agreement and/or regulatory
agreement.
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19090.018.028
EXHIBIT 2
Terri Eggers /Judson Brown, City of Santa Ana June 221 2023
Bewley Street —Preliminary Financial Gap Analysis Page 13
CONCLUSIONS /RECOMMENDATIONS
The following summarizes the conclusions of the KMA analysis:
1. Based on the currently available information, it is the KMA conclusion that that
Developer's request for $2.02 million in financial assistance from the City is
supported by the Project's economics.
2. If the Developer secures additional outside funding sources not envisioned in
this analysis, the City's financial assistance amount should be decreased
commensurately.
3. The Developer did not include case management /social services expenses in
their pro forma submittal. As such, KMA assumes that the Developer will
provide/pay for these services outside of the Project's operating budget. The City
should memorialize this concept as a provision in the City's grant agreement
and/or regulatory agreement.
4. KMA estimates that the Project's net cash flow may be negative during the first
nine years of operations. Per discussions with the Developer, the Developer will
cover any operating losses during the City's 55-year affordability period. This
concept should be included as a provision in the City's grant agreement and/or
regulatory agreement.
5. Given that the Developer is proposing to provide a loan to the Project from one
of its affiliated legal entities, the City may want to require the Developer to
incorporate a standstill provision in the Illumination Foundation Loan documents
that prohibits the Illumination Foundation from foreclosing on the Project.
6. The Project may generate significant cash flow after the Illumination Foundation
Loan is repaid. The Housing Authority may want to review the Project's
operating information prior to renewing the PBV contract at the end of the initial
PBV term to ensure that eight (8) PBVs are still required by the Project.
7. The Developer did not provide an appraisal for review. The City may want to
require the Developer to provide an appraisal to ensure that the purchase price
is consistent with the appraised value.
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19090.018.028
VMmI:31WA
TABLE 1
ESTIMATED DEVELOPMENT COSTS
BEWLEY STREET PSH PROJECT
SANTA ANA, CALIFORNIA
Property Assemblage Costs
Property Acquisition Costs
Seller Broker Fees
Total Property Assemblage Costs
Direct Costs
Demolition
Site Improvements
Rehabilitation & New Construction Costs
General Conditions / Profit
Insurance
Direct Cost Contingency
Total Direct Costs
Indirect Costs
Architecture, Engineering & Consulting
Public Permits & Fees
Taxes, Insurance, Legal & Accounting
Marketing/Leasing
Developer Fee
Soft Cost Contingency Allowance
Total Indirect Costs
IV. Total Financing Costs
V.
11
4.0% Purchase Price
2
3 11 Units $190,400 /Unit
11% Construction Costs
1% Construction Costs
15% Other Direct Costs
11 Units $261,400 /Unit
$3,900,000
156,000
$71,000
71,000
21094,400
240,000
24,000
3751000
3.5% Direct Costs $100,600
4 11 Units $5,630 /Unit 61,900
1.5 % Direct Costs 43,100
11 Units $0 /Unit 0
5 3% Net Dev. Costs (Exc. Developer Fee) 183,000
5% Other Indirect Costs 19,000
6
$4,056,000
$2,875,400
$407,600
$0
Total Rehabilitation & New Const Costs 11 Units $312,600 /Unit $3,439,000
Total Development Costs 11 Units $667,200 /Unit $7,3391000
1 Based on Developer estimate. An appraisal was not provided for review.
2 Based on Developer's estimates. The estimates assume that prevailing wage requirements will be imposed on the Project.
3 Based on Developer estimate. Includes the costs to rehabilitate the existing residential buildings and to newly construct an ADU on the Site.
Per Developer, Head Start will be responsible for any costs associated with the preschool building.
4 Based on Developer estimate. City staff should verify the accuracy of this estimate.
5 Based on Developer estimate.
6 The Developer did not include any financing costs in their development budget. If the Illumination Foundation Loan accrues interest during
the development period, the addition of these interest costs (estimated at $228,500/year) may increase the Project's financial gap.
Prepared by: Keyser Marston Associates, Inc.
File name: Bewley Street_6 6 23; Pf; trb
VMmI:31WA
TABLE 2
STABILIZED NET OPERATING INCOME
BEWLEY STREET PSH PROJECT
SANTA ANA, CALIFORNIA
I. Effective Gross Residential Income 1
2-Bedroom Manager's Unit
1
Unit @
$0
/Month
$0
1-Bedroom Units (TAY PSH) - PBV 2
2
Units @
$306
/Month
71300
2-Bedroom Units (TAY PSH) - PBV 2
6
Units @
$289
/Month
20,800
3-Bedroom Units (Senior PSH - Shared Hsg) 3
2
Units @
$939
/Month
22,500
Section 8 Subsidy
1-Bedroom Units (TAY PSH) - PBV
2
Units @
$1,906
/Month
45,700
2-Bedroom Units (TAY PSH) - PBV
6
Units @
$2,352
/Month
169,300
(Less) Vacancy and Collection 10.0% Gross Income
Total Effective Gross Residential Income
(26,600)
$239,000
II. Residential Operating Expenses
General Operating Expenses 11 Units @ $9,200 /Unit $101,200
Property Taxes 4 0
Supportive Services 5 11 Units @ $0 /Unit 0
Replacement Reserve 11 Units @ $545 /Unit 61000
Total Residential Operating Expenses 11 Units @ $9,700 /Unit ($107,200)
III. Residential Stabilized Net Operating Income $131,800
IV. Preschool Income 6 $60,000
V. ITotal Project Stabilized Net Operating Income $191,800
1 Per Developer, tenants will only pay for electricity. KMA deducted a utility allowance for Basic Electricity based on the utilility allowance
schedule published by the Santa Ana Housing Authority on October 1, 2022: $27 for shared housing bedrooms; $34 for one -bedroom units;
and $51 for two -bedroom units.
2 Based on Orange County 2022 Incomes distributed by HUD. As pertinent, the rents are based on rents published in 2022 by HCD for MTSP
programs and 30% CA SSI.
3 The two 3-bedroom units will be structured as shared housing for senior citizens. KMA assumes that the City will restrict each bedroom's
rent to the lesser of: 1/3 of the 50% MTSP AMI rent for a 3-bdrm unit or 30% of each household's income.
4 Assumes the Developer will apply for the property tax welfare exemption accorded to non-profit housing organizations that own and
operate apartment units restricted to households earning no more than 80% AMI.
5 The Developer did not include any supportive service costs in the pro forma. KMA assumes the Developer will provide/pay for case
management/social services outside of the Project's operating expenses.
6 Based on Developer estimate.
Prepared by: Keyser Marston Associates, Inc.
File name: Bewley Street_6 6 23; Pf; trb
TABLE 3
VMmI:31WA
FINANCIAL GAP CALCULATION
BEWLEY STREET PSH PROJECT
SANTA ANA, CALIFORNIA
I. Available Funding Sources
Illumination Foundation Loan Amount
Developer - Committed Fundraising
Developer - Additional Fundraising
Total Available Funding Sources
II. Financial Gap Calculation
Total Development Costs
(Less) Total Available Funding Sources
11
See TABLE 1
$2,769,500
$1, 000, 000
$1,500,000
$7,339,000
(51269,500)
$5,269,500
Total Financial Gap 11 Units $188,100 /Unit $2,069,500
1 Based on Developer estimate.
Prepared by: Keyser Marston Associates, Inc.
File name: Bewley Street_6 6 23; Pf; trb
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