Charles Apts & Cypress Gardens Income Averaging Case Study AHIC – October 23, 2018

201 unit, multi-site first time syndication Marina, California – just north of Monterey Two of 40 properties transferred to Eden Housing in 2015/2016 as part of the wind-down of South County Housing, a nonprofit developer/owner based in the Monterey Bay region.

Charles Apartments 105 family units – 2, 3, 4, 5 BR, 36 buildings

Cypress Gardens 96 family units – 1, 2 BR, 12 buildings

Challenges Too many uses, not enough sources Significant deferred maintenance Rental income constrained, limiting leverage No project-based vouchers to support low income units Basis constrained by over-income residents No “grandfathering” HUD Section 236 Use Agreement, with no rental assistance Households with relatively high incomes Rents still restricted per HUD under LIHTC rent max Significantly under market so over income residents stayed

Solutions Luck, Time, Lots of Work Change in State Allocating Agency Regulations Lift on limits to developer fees (allowing us to increase basis) Fee incentives for larger projects Clarification of rules on multi-site syndication Phased rent increases over two years Work to change project factors Voluntary Relocation Packages all households over 80% AMI Limited new Project-Based Section 8 Income-averaging, helping to offset reduced equity pricing post federal corporate income tax reduction

Scope of Rehab Work $137,000 per unit Replace roofs and windows; Repair/replacement of selective siding locations Seismic retrofits of soft story conditions Upgrade HVAC, mechanical, plumbing and electrical systems Solar PV system, offsetting 90% of common area load Retrofit irrigation systems, replace landscaping with drought resistant Upgrade site amenities, including community building and tot lots Repair/replace hardscape parking and sidewalk areas Repair/replace fencing and install new security system Convert required number of units for ADA; ADA path of travel Replace interior finishes (lighting, flooring, cabinets/counters, appliances Remediation of asbestos and lead paint

Project Financing US Bank CDC - Equity 4% Credits, Tax Exempt Bonds US Bank CDC - Equity JP Morgan Chase - Construction and Portfolio Perm Housing Authority of County of Monterey – Project-Based Section 8

Construction Period Sources

Permanent Period Sources

Project Uses Of the $10,894,883 developer fee, $8,894,883 will be deferred or contributed to the project

Income Averaging 33 units between 60% and 80% AMI California allows IA at 59% AMI 10 units over 80% AMI All units identified as over 80% AMI will be rent restricted at 80% AMI Income targeting at 50%, 60%, 70% and 80% AMI levels Average affordability of the Project is at 57.4%