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

2. 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.

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

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

5. 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

6. 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

7. 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

8. 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

9. Construction Period Sources

10. Permanent Period Sources

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

12. 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%