1. OVERVIEW OF THE AFFORDABLE MULTIFAMILY HOUSING DEVELOPMENT PROCESS

2. The Affordable Multi-Family Development Process All housing development is nonlinear and complicated – especially when using financing with rigorous timelines and legal requirements (like 9% and 4% LIHTCs!) Takes 2-5 Years to take a Project from an “idea” through lease-up depending on the financing, project scale and typical (and unforeseen) challenges 2

3. Multi Family Development Process To control the chaotic nature of development, developer’s break it down into 5 stages – a “Process” – Planning, Design, Closing the Deal, Construction and Operations Each stage has specific tasks, products, and decisions related to the market, site, finance, and development team – the Process Steps Decisions to “go or no go” forward will be made at each stage The stages make sure key elements – financing, construction, ”ready” renters – are sequencing, tracking correctly 3

4. 1. Planning – Write the Project Narrative ( a description of the core idea of what you intend to do) 1.A specific use (e.g., rental, tenant conversion, supportive housing, mixed use0 2.Of a designated site (e.g., location, acquisition and size of land and/or buildings, what are the green and other features) 3.For a particular market (e.g., how many units at market,40%, 50% 60% and 80%, 120%, etc. 4.By particular development team (e.g., developer/co-developer, general partner (s), GC, PM, and consultants) 5.With a detailed financial program (e.g., construction and permanent: LIHTC, bank, HOME, IHBG, ICDBG, Program Income, NAHASDA) AND 6.Why it is important! 4

5. 1. Planning Tasks Market: – Conduct program planning (e.g., focus groups; preliminary market analysis (e.g., desire for rental project at the income levels to be served) subsidy needs for for tenants Site: – Who owns it and what is its value; learn what approvals are needed to acquire it; obtain/review preliminary EA; prepare schematic site plans 5

6. 1. Planning Tasks, cont’d. Financing: – Projected sources and rough estimate of project cost – the preliminary pro-forma; verify eligibility and availability and application (s) timeline Team: – Assess skills needed, skills in place and what you need others to do. Who will be Project Manager? Will we partner with other developers, entities? 6

7. 1. Planning - Decisions Go, e.g., if the Project “pencils out”, apply for pre- development financing Go-Back, e.g., if the Project financing application timeline or scoring would not result in funding, perhaps re-design the sources, size of Project or put Project on the shelf No Go (maybe), e.g., if the community opposition is strong and un-wavering 7

8. 2. Feasibility: Testing Assumptions with Facts Market – Full market study, devise the subsidy plan Site – Environmental review (clearance for planning funds), initiate/obtain tribal/public approvals for zoning or acquisition, appraisal (if old or not provided by seller) 8

9. 2. Feasibility: Testing Assumptions with Facts, cont’d. Finance – Update pro-formas, apply for some construction financing and obtain preliminary financing commitments Team – Hire EA, market analyst, construction estimator, architect/engineer, legal, as required, identify service providers, devise project schedule and legal structure (s) 9

10. 2. Feasibility: Decisions Go Accept feasibility analysis and continue » OR Go-Back Make modifications to concept, design & costs (“Design Loop”), revise unit mix, income targeting, projected hard debt, subsidy sources - No Go – e.g., Environment conditions that prohibit development, market study shows no demand – or lower rents than we need to collect 10

11. 3. Negotiating and Closing the Deal Market: – Develop/initiate marketing plan, execute PBRA agreements, Site: – obtain site control (purchase/option/lease), finalize design and prepare construction documents; plan review, acquire site/property 11

12. 3. Negotiating and Closing the Deal, cont’d Financing: – Final pro-formas, negotiate and obtain required financing commitments/resolutions, legal review/preparation of loan documents and close on construction financing, finalize cost allocation and draw down schedules Team: – Hire construction team – GC or CM – and, if not hired before, property manager 12

13. Closing the Deal: Decisions Go – Approve management and marketing plan – Approve lenders’ terms, amount – Accept financing package Maybe, if I have a plan B – Unforeseen funding gaps, such as lower LIHTC equity pricing or appetite, interest rate increases, or funds are no longer available – Increase in construction costs No-Go – Loss of critical rental subsidy or financing that cannot be filled by other sources or restructuring, or loss of site control 13

14. 4. Construction – Build/Rehabilitate Market – Update lease-up schedule; ongoing marketing and tenant services Site – Complete infrastructure, construction/rehab of units and monitor progress, quality and compliance with plans/codes & budget 14

15. 4. Construction – Build/Rehabilitate, cont’d. Financing – Request funds per cost allocation/draw down plan, monitor project financing, including subsidy and cost allocation plan; if required, meet financing tests (10%, e.g.,) prepare for closing on permanent financing Team – Manage construction/design team 15

16. Construction: Decisions Go – Changes/change order to design/construction work within my contingency Maybe – Changes/change order outside my contingency or the approved standards (e.g., green commitments), and find new sources No-go – Must be dire, e.g., contractor default 16

17. 5. Operations Market – Complete lease-up, move-ins and evictions; provide enrichment resident services Site – Maintain and repair units, operating and rental reserves, warranty and other inspections, investor and other reports, financial and other audits 17

18. 5. Operations Financing – Close on permanent financing; monitor project financing performance/reports and Team – Monitor property manager/management and sales team 18

19. 5. Operations: Decisions Go – Approve final budgets, lease units to tenants Go Back – Update lease-up plan or subsidy amounts that do not create gaps or compliance issues – If high vacancy, survey and lower rents, incentives – No-go – Major employer base loss, catastrophic events not covered by insurance 19

20. Questions? 20