mhp finance committee agenda 9-28-10 - mhpartners€¦ · mhp management letter 6. mhp surplus cash...

MHP Finance Committee Agenda September 28, 2010

1. Parkview Towers Update 2. Bealls Grant Update

3. Edinburgh House HUD 2530 Application 4. MHP Budget Assumptions

5. MHP Management Letter

6. MHP Surplus Cash Payments

7. Quarterly Asset Management Report

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MHP Board Memorandum

September 28, 2010 Project Name: Parkview Towers Apartments Location: 7667 Maple Avenue, Takoma Park, MD 20912

(Lot size: 2.8 acres; Zoned: R-10; Built in 1964) Owner: James Abell: Parkview Towers, LLC

Project Type: Acquisition and Rehab of Property Unit Mix: 125 units total; 10 are 3 bedroom, 1.5 bath, 53 are 2 bedroom, 1.5

bath; 61 are 1 bedroom, 1 bath and 1 is a studio; average size: 850 square feet; currently 97% occupied & average rent of $1,052/mo.;

no affordability restrictions, however, Takoma Park has rent control, but waived if MHP is owner.

Purchase Price: $6,895,000 or $55,160/unit Total Project Cost: $8,390,000 or $67,100/unit Building Type & Construction: 11-story, high-rise, elevator building; steel framing, brick exterior;

flat roof; asphalt parking lot with 146 spaces. Utilities: Central boiler for heat; central domestic hot water system; central

chiller for air conditioning; owner pays for all utilities: heat and hot water, electric and gas for cooking.

Purpose of Report: Montgomery Housing Partnership, Inc. (MHP) put this 125-unit apartment community under contract on August 3, 2010. It has been on the market since early spring. We have until October 1, 2010 to complete feasibility studies, until November 1, 2010 to obtain final financing commitments and until December 15, 2010 to close on the property. We believe the seller needs to refinance or sell the property by the end of this year or will lose it.

The property is located on Maple Avenue in Takoma Park, MD, approximately one block from MHP’s Maple Tower property (36 units currently under major renovation) and three blocks from MHP’s Edinburgh House property with 45 units. MHP is seeking to purchase this property for several reasons: 1) improve the quality of affordable housing in Takoma Park, 2) project large enough to create “operating” economies of scale, 3) attractive purchase price, 4) residents could feed MHP’s community life programs at nearby Maple Towers property creating “programmatic” economies of scale and 5)

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desirable location—good community and served by mass transit.

MHP staff had two calls with the Finance Committee regarding the property. The first call was on July 23rd in which staff described the project, outlined the purchase agreement terms and its strategy for the property and requested approval to spend up to $25,000 for due-diligence work. The second call was on September 8th in which staff solicited comments from the committee on two potential financing schemes staff was considering.

The purpose of this report is to 1) summarize the findings of the due-diligence investigations, 2) discuss the status of the financing, 3) provide staff’s recommendations for moving forward and 4) obtain the Board’s concurrence with staff’s recommendations. Summary of Key Purchase Agreement Terms

• Price: $6,895,000 ($55,160/unit) • Deposit: $50,000 initially; additional $25,000 at end of Feasibility Period;

additional $25,000 at end of Financing Contingency Period. First two deposits fully refundable if we decide to cancel the agreement at the end of each period.

• Feasibility Period: approx. 60 days (until 10/1/10) • Financing Contingency Period: approx. 90 days (until 11/1/10) • Closing: December 15, 2010, but no earlier than 30 days after Tenant Opportunity

to Purchase has expired • Other: If the tenant’s exercise their right to purchase the property, Seller will

reimburse us our due-diligence costs up to $25,000. Property Condition As part of the due-diligence investigations, staff initiated the following studies: 1) title search, 2) property survey, 3) building condition report (excluding major mechanical systems) by Building Consultants, Inc. (BCI), 4) major mechanical systems by Ted Ross Consulting, Inc., 5) Phase I Environmental Site Assessment by BCI, 6) lead, asbestos and radon testing by BCI and 7) domestic water pipe integrity by Curaflow Mid Atlantic.

Title and Survey: No major issues. Building Condition Report: BCI noted that the building and site improvements were in “fair condition.” The building seemed structurally sound. The major items requiring immediate need were 1) repaving of parking and driveways, 2) repairing or replacing broken exterior light fixtures, 3) inspect sanitary lines to determine their adequacy. We have budgeted $45,000 for this work. While old or likely nearing the end of their useful life or energy inefficient, many of the systems (windows, appliances, plumbing, electrical, mechanical, elevator upgrades, roof, etc.) did not have to be replaced until we did a major renovation in 5 or so years. They also felt that while the building did not meet current regulations for ADA for new structures (e.g., handicapped accessible units, ADA bath rooms in common areas, accessible slopes on exterior walkways and parking areas), we would not have to make any changes until we made major renovations. Major Mechanical, Electrical, Plumbing Systems: Ted Ross Consulting, LLC also felt that these systems were generally in “fair condition” given their age. Their suggested

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immediate needs items were 1) install two rooftop HVAC units to provide fresh, conditioned air to the corridors, 2) repair inoperable rooftop exhaust fans, 3) replace missing hot water circulation pump, 4) repair communication system for central plant and 5) equipment testing and preventative maintenance (main electrical panels, chiller tube bundles, piping condition). We have budgeted $60,000 for this near-term work, excluding the two rooftop HVAC units. We would install the rooftop units at the time of the major renovation as they are not essential to the operation of the building. Phase I Environmental: No issues (one 10,000 gal former oil tank that was abandoned in place and have MDE closure letter.) Phase II Environmental Testing: Lead Based Paint: none on interior; only found on exterior balcony door metal lintels, floor framing and vertical support columns and window metal lintels.; Radon: none detected; Asbestos: only in floor tile and mastic in 9th floor trash shoot and employee break room, but non-friable. (There is no need to remove the asbestos at this time. It can be removed at the time of the major renovation.) Water Consumption Investigation: Curaflow performed an initial investigation of water usage and integrity of existing copper piping. This was prompted by the high water/sewer bills (over $1,200 per unit in 2009). Their findings are as follows: 1) water consumption is high due to old, high-flow fixtures, missing hot water recirculation pump and possibly some overcrowding. Over a 24-month period, the water usage was 285 gallons per day per unit; they felt the average should be in the 180 to 200 range. Water bills are based on two factors—consumption and rate range. Therefore, if we could bring down the consumption we would also bring down the rate—allowing for up to a 40% combined savings in the water/sewer bills. 2) The copper piping is experiencing pinhole leaks based on seeing exposed areas where clamps were on the piping. They estimated it would cost $400,000 to repair the pinhole leaks. They would line all the pipes with a coating that would last over 30 years. We used the same method at our Edinburgh House property several years ago and it worked well. Also, with respect to the electric and gas bills, Equity Management, who we would use to manage this property, believes they would be able to obtain electric and gas rates 10% and 20% lower, respectively, than what the property is currently getting due to bulk purchasing of utilities. We have assumed a 12.5% decrease in current utility costs starting in the second year, which we believe is conservative. Cost Estimate for Immediate Needs Work Item Estimated Cost General Building/Site $45,000 General MEP $60,000 Pipe Lining $400,000 Low Flow Fixtures $50,000 Total $555,000 Development Strategy We plan to acquire the property with three- to five-year acquisition financing. During that period we would implement the most pressing deferred maintenance items identified during the due diligence studies. We would also be lining up the permanent financing, so

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that by the end of this period we would be in a position to implement the long-term rehab/permanent financing plan. Long-term, as part of a major rehab, we would expect to at least upgrade the mechanical systems, provide new kitchens and baths and windows, update the lobbies and amenity areas, separately meter as many of the utilities as possible and improve the landscaping. It is difficult to acquire the property with permanent financing today because our typical source of gap/soft (and low-cost) financing (Montgomery County DHCA) is not available today, but should be available three to five years from now. Pre-Development Budget SOURCES NRC Revolver Funds $147,800

Total $147,800 USES Engineering Reports $25,000 Appraisal $5,300 MHP Attorney, title, etc. $2,500 Other Consultants $5,000 Deposit (initial) $50,000 Deposit (additional 2) $50,000 Contingency $10,000

Total $147,800 To date MHP has spent $75,000 on the project--$50,000 for the initial (refundable) deposit and $25,000 for due-diligence studies Acquisition Financing (Preliminary Plan)

• Term: 5 years • First Debt ($5.175 million) w/M&T Bank: Interest only based on libor plus 350bp

but floor of 4.5%.; years 2-5 must also pay principal of $5,000 per month.; max 75% loan to value; debt service coverage of min. 1.25 assuming 30-yr amortization and 7% loan; MHP guarantee of top 25% of loan or $1.3 million. (We have a term sheet from M&T with the above terms. Once term sheet signed and appraisal final, M&T will go to loan committee and issue a formal commitment letter.)

• Second Debt (about $2 million) w/Partnership between Open Door and Mercy Housing Fund: Interest only loan at 5.5%. They are currently preparing their underwriting and will go to their respective loan committees by the end of September. The loan will likely be recourse to MHP. These organizations are both Community Development Finance Institutes (CDFI). MHP has had loans with Open Door in the past.

• Other Soft Subordinate Debt (up to $1.5 million) w/ MD-BRAC Preservation Loan Fund: Interest only loan at 5% from the State of Maryland. This is a new fund for BRAC areas and we were the first to apply. The County has to give their

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initial approval, which they did, as they also put money in the fund. We expect to hear from the State by the end of September.

• Other: 1) As a backup plan for the soft and subordinate debt, we will contact the seller to explore seller financing. 2) M&T received a draft of the appraisal; it is being reviewed internally before it is final and released. However, we understand that it supports the purchase price. 3) We considered longer term FHA financing (like HUD 223F) and reviewed this with the Finance Committee, but the gap in financing was over $1.5 million, which seemed too large to fill at this time.

• See attached proforma Estimated Acquisition Sources and Uses: SOURCES First Debt $5,175,000 Second Debt $1,715,000 State Loan $1,500,000

Total $8,390,000 USES Purchase Price $6,895,000 Title, Recording, Etc. $143,000 Construction Costs $555,000 Soft Costs & Supervision $137,000 Developer Fee $100,000 Financing Costs $115,000 Reserves/Misc. $445,000

Total $8,390,000 Permanent Financing In 3 to 5 years we believe the tax credit, debt and soft fund (County, NeighborWorks and others) markets will likely be more conducive for permanent financing. We have looked at several strategies for permanent financing that range from a nominal rehab financed through bond or FHA financing to substantial rehab financed through 9% Low Income Housing Tax Credits. Our goal is to first increase the property’s net operating income. We (as well as our lenders) believe there are opportunities to substantially reduce the property’s current expenses—especially utility and repair and maintenance expenses—within three or so years. This would greatly increase our ability to obtain a long-term, amortizing mortgage and therefore take-out the acquisition financing, including the MD-BRAC loan. Given the amount of further rehab we need or want to do, we could also apply for 4% or 9% tax credits. While we have no firm commitment from the County for soft funds, we believe they may be able to provide up to $1.5 million at the time of permanent financing.

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Risks Repair Costs: Once we obtain the property, the costs for deferred maintenance may be higher that currently estimated. However, we believe we have done thorough investigations during the due diligence process and set aside enough for the work, including reserves. Also, a backup is to hire companies that will front the cost of some of the work, like installing water saving features, as long as they get a major cut of the savings. Permanent Financing: We believe that by going out to 5 years on the acquisition financing we give ourselves enough time obtain permanent financing. As mentioned earlier, either we get the property to throw off enough cash flow to support a FHA loan or we obtain enough soft funds from the County and others to make a 4% or 9% tax credit deal work. Recommendations Staff recommends that the Board approve the following:

1. Going hard on the due-diligence deposit of $50,000 provided we have signed commitment letters from the lenders. If we don’t have the commitment letters by October 1st we will request a 30-day extension from the seller.

2. The pre-development budget. Attachments: Acquisition Proforma Map & Photos

Parkview Towers, Takoma Park, MD SOURCES AND USES OF FUNDS DATE:

Non- Related First Must Pay (M) or No. of Pmts. Monthly Annual Recourse? Party? Mortgage?

SOURCES OF FUNDS Rate Amortization Term Amount % Per Unit Loan Type Contingent (C) Start Date First Year Payment Payment (1=Y, 0=N) (1=Y, 0=N) (1=Y, 0=N)M&T (Libor + 3.5%; 4.5% today w/floor) 5.00% 25 5 5,175,000 62% 41,400 2 M 12 21,562.50 258,750 1 0 1 (interest only first year) - - - - - - 1 0 0

- M - - - Second Debt (Open Door) 5.50% - 5 1,714,900 20% 13,719 2 M 12 7,859.96 94,320 0 0 0MD-BRAC Preservation Loan Fund 5.00% - 5 1,500,000 18% 12,000 2 M 12 6,250.00 75,000 0 0 0

- - - 1=Amortizing M=Must-Pay

LP Capital Contribution - 2=Interest-only C=Cash Flow- 3=Accruing Contingent

TOTAL SOURCES OF FUNDS 8,389,900 100% 67,119 4=Cash Flow Funding Surplus: 0

Total Historic Commercial9.00% Credit 3.45% Credit Non Tax Credit 0.0%

Total Historic Commercial9.00% Credit 3.45% Credit Non Tax Credit 0.0%

Parkview Towers, Takoma Park, MD RENT, EXPENSE AND TIMING ASSUMPTIONS

RESIDENTIAL RENTAL INCOME ASSUMPTIONSIncome Percent Monthly Monthly Annual Required Maximum

Restriction Number of Number Utility Unit Sq. Market Below Rent per Rental Rental Rental Tenant Restricted Percent ofUNIT DESCRIPTION (% of AMI) Bedrooms of Units Allowance Net Rent Footage Rents Market Sq. Foot Allowance Income Income Income Rent (Net) MedianStudio 60% 1 1 $0 $753 420 847 11.10% 1.793 753 753 9,036 30,120 1,078 41.90%1 BR/1 Bth 60% 1 61 $0 $890 645 1,106 19.53% 1.381 890 54,290 651,480 35,600 1,155 46.22%2 BR/1 Bth 60% 2 53 $0 $1,175 896 1,306 10.03% 1.311 1,175 62,275 747,300 47,000 1,386 50.85%3 BR/2 Bth 60% 3 10 $0 $1,300 1,201 1,400 7.14% 1.082 1,300 13,000 156,000 52,000 1,602 48.69%

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

TOTAL 125 $1,043 99,233 151,531 130,318 1,563,816 $41,702 48.34%

RENTAL ASSUMPTIONS: Residential Commercial 2,010 Total Per UnitAccounting -

No. Months of Rent in Year 1 12 12 Legal 0 - No. Months of Expenses in Year 1 12 12 Total Professional Fees 12,500 100 No. Months Depreciation in Year 1 12 12 Office Rent and Expenses - Annual Rent Increase 2.0% 2.0% Payroll and Payroll Taxes - Annual Rent Increase (Year 1 - 2 only) 2.0% 2.0% Workmen's Comp & Emp Benefits - Annual Expense Increase 3.0% 3.0% Misc. Administrative Expenses - Annual Expense Increase (Year 1 - 2 only) 3.0% 3.0% Total Administrative 103,750 830 Vacancy Loss, Year 1 5.0% 5.0% Gas/Oil - Vacancy Loss Years 2-16 5.0% 5.0% Electricity - Property Management Fee Water/Sewer - Replacement Reserve 250 Other -Other Income Laundry, etc 75% 17,144 Total Utilities first yr 392,653 343,625 2,749 Interest on Reserve Accounts 2.0% Extermination - Median Income--Year--County/MSA $102,700 2009 Trash Removal - HUD Statistical Area (MSA, PSA, County): DC Security -

Janitorial Supplies & Salaries - Repair Contracts/Work -

TAX CREDIT ASSUMPTIONS Painting/Decorating - Grounds Maintenance -

Year of Credits Allocation: 2002 Snow RemovalTax Credit Rate Lock Date: Locked Sept. 2002 Elevator

RATE Total Repairs and Maintenance 231,875 1,855 Acquisition Credit Rate: 3.45% Total Marketing and Leasing 14,375 115 New Construction/Rehab Rate: 9.00% Total Real Estate Taxes 25,000 200

Total Insurance 50,625 405 DDA/QCT Basis Boost 100.00% Total Property Management Fee 75,096 601 5%Applicable Fraction (% TC Units) 93.87% Partnership Management Fee (Must Pay) -

Acquition Basis - 4% 0 Investor Services Fee (Must Pay) - New Construction/Rehab Basis - 9% 0 Other Fees (Must Pay) Asst Mgt. 60,076 481 4%

Max. Proposed Credits $0 Total Other Fees 60,076 481 Tax Credit Allocation Misc. Expense - - Equity Price 0.81$ Misc. Expense - Tax Credit Equity $0 Total Miscellaneous Expenses -

Total Operating Expenses/Unit 916,922 7,335 Total Net of Other Fees 916,922 7,335Total Net of Other Fees and Property Taxes 916,922 7,335

9/21/2010 Parkview Towers Acquisition 9-16-10Board.xls

Parkview Towers, Takoma Park, MD

1 2 3 4 5RENTAL INCOME Year: 2010 2011 2012 2013 2014

Yr. 1 Vacancy InflatorGross Rental Income - Residential 102% 1,563,816 1,595,092 1,626,994 1,659,534 1,692,725Other Income - Residential 102% 17,144 17,487 17,837 18,194 18,557 Less Vacancy (Year 1/Years 2-16) 5.0% 5.0% 79,048 80,629 82,242 83,886 85,564Gross Rental Income - Commercial 102% 0 0 0 0 0Other Income - Commercial 102% 0 0 0 0 0 Less Vacancy (Year 1/Years 2-16) 5.0% 5.0% 0 0 0 0 0

NET RENTAL INCOME 1,501,912 1,531,950 1,562,589 1,593,842 1,625,718

EXPENSESInflator

Total Professional Fees 103% 12,500 12,875 13,261 13,659 14,069Total Administrative 103% 103,750 106,863 110,068 113,370 116,771Total Utilities 103% 392,653 343,625 353,934 364,552 375,488Total Repairs and Maintenance 103% 231,875 238,831 245,996 253,376 260,977Total Marketing and Leasing 103% 14,375 14,806 15,250 15,708 16,179Total Real Estate Taxes 103% 25,000 25,750 26,523 27,319 28,139Total Insurance 103% 50,625 52,144 53,708 55,319 56,979Total Property Management Fee 103% 75,096 77,348 79,668 82,058 84,520Total Other Fees 103% 60,076 61,879 63,735 65,647 67,616Total Miscellaneous Expenses 103% 0 0 0 0 0

TOTAL EXPENSES: 965,950 934,121 962,143 991,008 1,020,738

NET OPERATING INCOME 535,962 597,830 600,446 602,834 604,980Operating Reserve 103% 0 0 0 0 0Replacement Reserve 102% 31,875 31,875 32,513 33,163 33,826NOI ADJUSTED FOR RESERVES 504,087 565,955 567,934 569,671 571,154

DEBT SERVICE 1 2 3 4 5

M&T (Libor + 3.5%; 4.5% today w/floor) 12 12 12 12 12 Loan Balance 5,175,000 5,175,000 5,115,000 5,055,000 4,995,000 4,935,000 Principal Paid 0 60,000 60,000 60,000 60,000 Interest Accrued Interest-Paid 5.00% 258,750 258,750 258,750 258,750 258,750Total 258,750 318,750 318,750 318,750 318,750

DSC Ratio-1st Mortgage 1.95 1.78 1.78 1.79 1.79 LTV 75.1%Purchase price (Value) 6,895,000Cash Balance 245,337 247,205 249,184 250,921 252,404

Second Loan Amount 1,714,900SECOND LOAN (interest only) 5.5% 94,320 94,320 94,320 94,320 94,320

DSC Ratio-w/2nd Mortgage 1.43 1.37 1.37 1.38 1.38 LTV 100%Cash Balance 151,018 152,885 154,864 156,602 158,084

Third Loan Amount 1,500,000MD-BRAC LOAN (interest only) 5% 82,500 82,500 82,500 82,500 82,500

DSC Ratio-w/2nd Mortgage 1.16 1.14 1.15 1.15 1.15 LTV 122%Cash Balance 68,518 70,385 72,364 74,102 75,584

LOCAL MAP

REGIONAL MAP

PARKVIEW TOWERSTAKOMA PARK, MD

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed orimplied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify theinformation and bears all risk for any inaccuracies. Marcus & Millichap Real Estate Investment Services is a service mark of Marcus& Millichap Real Estate Investment Services of Washington, D.C. © 2010 Marcus & Millichap R0270041

PROPERTY D

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Area Maps



PROPERTY D

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Property Photos



PROPERTY D

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Property Photos



PROPERTY D

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Interior Photos

Memorandum to MHP Board September 28, 2010

Project Name: Beall’s Grant II Location: Beall’s Avenue & N. Washington St., Rockville, MD Project Type: New 74‐unit, mixed‐income apartment community

adjacent to MHP’s existing Beall’s Grant I (60‐unit) community.

Purpose of Memo: To provide a brief update on the project and options for

next steps Project Update In late August, the Maryland Court of Special Appeals ruled in favor of the appellant. They stated that the City of Rockville did not properly follow the Adequate Public Facilities Ordinance (APFO) when issuing its approval for the project and the Planning Commission did not issue proper findings with its approval. Therefore, MHP’s 109‐unit Use Permit is no longer valid. Consequently, the 74‐unit Use Permit that was approved by the Planning Commission this past April, amending the 109‐unit Use Permit, is no longer valid. MHP is considering the following options for the project:

1. Appeal the Ruling: While The City of Rockville still believes they interpreted the APFO correctly when they ruled to grant the project a 109‐unit use permit, they have decided not to appeal the recent Court of Special Appeals ruling. However, MHP can also separately appeal the ruling. (MHP would have 15 days from the date the court mandate is released to appeal. The mandate is expected to come out on September 25th, so the final day to appeal would be October 10th.)

This option will likely be time intensive and costly. Also the likelihood of winning, according to our attorney (Holland and Knight) is low, especially given the schools are currently over capacity.

2. Work to get the APFO amended: One of the Rockville Councilmembers has approached us about amending the APFO to allow affordable housing as an exception to schools test. He has spoken to 2 other Councilmembers and feels that there is some support for this. It is difficult to gauge how definite those votes are. If action happened, it would probably take until the end of December to approve.

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3. Wait until there is adequate APFO Capacity: We could land bank the property and reapply for a use permit when there is adequate APFO capacity. Given the current state of school overcrowding and limited county funds to build new schools, it could be several years before there is APFO capacity. We are trying to better understand where Beall Elementary stands in terms of getting additional school capacity. The county has an outstanding loan on the property for $350,000 – we would have to see if they would be willing to extend the loan to allow us to land bank it or we could pay the county off and just hold the property.

4. Develop as Senior Rental Community: The project could likely get approved as a

senior facility as a senior facility would not require any school capacity. That being said, another senior project is already ahead of us in Rockville in the approval queue and the County DHCA would prefer that this project move through the approval and construction process before they provide soft funding another senior project. Also, senior housing is currently not a product type that MHP develops, although we are considering it as part of the strategic planning process. This property, though, would be a great location for senior housing in that it is across the street from downtown Rockville and close to the Metro.

5. Renovate the existing 14‐unit building: MHP currently owns an empty, 14‐unit

building on a portion of the Bealls I property. This building would have been demolished as part of the Bealls II project. MHP is considering remodeling this building (essentially a gut rehab) instead of demolishing it. The county also recently asked us to provide a cost estimate to rehab this building, so they may be willing to provide some financial assistance. We will meet with them on October 6th to discuss all of the options. If this is a viable option due to available county financing, we will also push for financing to renovate Bealls I (60 units). (We have asked Bozzuto Construction Company to provide preliminary cost estimates to renovate the 14‐ and 60‐unit buildings.)

The question is does it make sense to renovate this building if we are planning to redevelop the property and demolish the 14‐unit building. If we chose an option above that will result in a redevelopment in the short‐term, it probably doesn’t make sense to make the investment to renovate the building. If we choose an option that involves giving up on the redevelopment or redeveloping it over a longer term, it may make sense to renovate the 14‐unit building.

6. Sell the Property: We could sell the vacant lot that we obtained to develop Bealls

II. We could do this independently of Option 5. However, this is not a good time to sell land and we would want to make sure that we had no future use for the land. (If we did sell the land, the adjacent funeral home could be a likely buyer.) Other than the funeral home, it is not clear what other uses would make sense in that the property is relatively small. The property is zoned for

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residential and/or commercial uses – since there is a moratorium on the residential, a commercial use is the only likely use for a buyer. In terms of selling the property, we could sell just the new parcel that we purchased or we could sell the new parcel and the 14‐unit building – making for a larger parcel for a potential buyer. It may be difficult to sell the 14‐unit building since we would probably need the state’s approval to do so. (The current taxes on the vacant lot are $2,300 per year, including the County pilot.)

Over the next 30‐days we will flush out these options in greater detail and report back to the board with an update at the October board meeting. We will be having a meeting with the County to discuss these options on October 6th and welcome feedback from the Board in preparation for that meeting. A current sources and uses table is attached.

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Sources and Uses to Date‐‐Bealls Grant II September 2010

SOURCES

County Acquisition Loan $310,000

MHP loan for land acquisition $315,000

County Pre‐Dev Loan

$550,000

MAHT Grant $100,000

NW Grant $125,000

NW Revolver Account $70,000

Total Sources $1,470,000

USES

Land Acquisition $527,000

Architecture & Engineering $482,000

Legal $221,000

Consultants $107,500

Interest/Other $132,500

Total Uses $1,470,000

Approximately $15,000 in bills remain to be paid from NW Revolver account

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To: Montgomery Housing Partnership’s Board From: MHP’s Real Estate Department Date: September 28, 2010 Re: Preparation of HUD 2530 for Edinburgh House

Edinburgh House is a 9-story, 45-unit masonry building with two elevators, built in

1964. MHP purchased the building in 1995 and conducted minimal rehabilitation at the time. We are currently proposing to refinance the property in order to do a moderate rehab and to pay back a Sandy Spring (recourse) loan that is expiring. Additionally Edinburgh House is the only property where tenants don’t pay their utilities. Therefore, it is important for MHP to upgrade the current utility structure to a more energy efficient one.

MHP had applied for New Issue Bond Program (NIBP) financing from The Maryland

Community Development Administration (CDA) in May 2010. We received notification that we received the funding in July, 2010. One of the many requirements under NIBP is preparation of HUD 2530 for all MHP board members. The HUD 2530 is process whereby HUD asks participants (including their board members) to disclose any history of involvement with HUD loans. HUD will not assign a project number to Edinburgh House (our project) without a HUD 2530 clearance.

To prepare forms required for HUD 2530, MHP has hired Denise Murphy from

Murphy Consulting. Denise was referred to us by CDA. She is well known and well respected in the industry and has prepared HUD 2530s for various projects over the years. Denise has prepared a form for all the board members to fill out with their respective information (see attached). She will be the only one who will access to all the information submitted to her. Denise will fill in all the information submitted to her in an online HUD 220 form and will submit the preliminary draft to CDA to make sure everything is in order. It is important to have a HUD assigned number for the project before closing.

We will need to start the process as soon as possible to avoid delays. Denise will be

contacting you to provide you with the forms that will need to be filled out.

Non-Profit Board Orientation - HUD 2530 Clearance

HUD requires all principal participants in projects proposing the use of HUD insured ordirect mortgage loans, and/or HUD subsidies, to receive previous participation approvalvia a HUD 2530 Previous Participation Certification for all principal participants.HUD considers each governing member of the board of a non-profit owner, developer,and/or sponsor to be a principal participant.

Please complete the attached documents which will provide the information necessaryto meet HUD’s 2530 reporting requirements. (steps outlined below)

Step 1: Registration of the Board Member

Requires full legal name, address, contact phone number, contact e-mail, full social securitynumber and your start date on the board

Step 2: Activation of Coordinator to report for Participant in the HUD Secure System

Board member must complete a Request to HUD for Manual Activation of Coordinator and forwardto Coordinator, who will process it with HUD. This will serve as authorization that you approved theCoordinator to report for you in the APPS system.

If you already have an active APPS Coordinator, please provide that person’s name, phone # andWASS ID#

Step 3: Disclosure of individual’s past participation (Schedule A)

Previous Participation includes participating as an executive, officer, board member, owner orprincipal of a management company, developer, owner, sponsor and/or general contractor withany history of involvement in any HUD or state/local loan funded projects during your tenure.

a Schedule A identifying participation related this non-profit will be provided and confirmed by theOfficers; You need only identify any ADDITIONAL participation that applies to you personally, orsimply state “none”

Step 4: Completion of Certification Statement

HUD requires certain Certifications from each principal participant; Your Coordinator will certify onyour behalf in the electronic system and will report only as you have indicated that he/she respond.

A Certification Statement is provided for you to indicate your responses. Please explain anyanswers of “False.”

This statement contains additional language added by the Coordinator which entrusts you to notifyyour non-profit and/or the Coordinator if your certification responses change in the future.

Step 5: Signature on the HUD 2530 Submission Package (may be required)

If you have additional participation outside this non-profit or if HUD chooses to request yoursignature, you will be asked to execute an original copy of the final 2530 Previous Participationsubmission package before it is sent to HUD for processing.

If you have any questions, do not hesitate to contact Denise Murphy at (410) 821-6953

Board Member Information(please PRINT clearly)

Full Legal Name: _________________________________________

Address: ____________________________________________

____________________________________________

Social Security Number: __ __ __ - __ __ - __ __ __ __

e-mail address: __________________________________________

Phone Number: __________________________________________

Start Date on the Board _____________________

U. S. Department of HUDWashington, DC

RE: REQUEST FOR HUD DIRECT MANUAL ACTIVATION

I , ________________________ (last four digits of Social Security Number __ __ __ __ )request the direct manual activation of:

Denise MurphyWASS ID # MS8360

as a Secure Connection Coordinator on my behalf. A Business Partner Relationshiprequest was placed in WASS by the above Coordinator, but I have not received theaccess key letter.

If you need additional information or have any questions, please call me directly at thisphone number: ________________________

Thank you in advance for processing the above request at your earliest convenience.

Sincerely,

Signature: ______________________________

Print Name: ___________________________

Schedule A: List of Previous Projects and Section 8 Contracts. By my name below is the complete list of my previous projects and my participation history as a principal; inMultifamily Housing programs of HUD/FmHA, State, and Local Housing Finance Agencies. Note: Read and follow the instruction sheet carefully. Abbreviate where possible. Makefull disclosure. Add extra sheets if you need more space. Double check for accuracy. If you have no previous projects write, by your name, "No previous participation, FirstExperience."

1. List each Principal's Name 2. List Previous Projects 3. List Principals' Role(s) 4. Status of Loan 5. Was Project ever in Default, 6. Last Mgmt.

(list in alphabetical order,(give the ID number, project name, city location,

& government agency involved (indicate dates participated, and(current, defaulted,

assigned, orduring your participation? and/or

Physical Inspctnlast name first) if other than HUD) if fee or identity of interest participant) foreclosed) Yes No If *Yes,* explain Rating

LIST ANY PARTICIPATION YOUHAVE INDIVIDUALLY OUTSIDEYOUR PARTICIPATION ON THEBOARD.

IF "NONE", PLEASE STATE.

Part II - For HUD Internal Processing OnlyReceived and checked by me for accuracy and completeness; recommend approval or transferral to Headquarters as checked below:Date (mm/dd/yyyy) Telephone Number and Area Code A. No adverse information; form HUD-2530 C. Disclosure or Certification problem

HUD 2530 Previous Participation Certification

Page 1 of 2

I certify that all statements made by me are true, complete and correct to the best of myknowledge and belief and are made in good faith, including the data contained inSchedule A and Exhibits signed by me and attached to this form. Warning: HUD willprosecute false claims and statements. Conviction may result in criminal and/or civilpenalties. (18 U.S.C 1001, 1010, 1012;31 U.S.C 3729,3802)

I further certify that:

1. Schedule A contains a listing of every assisted or insured project of HUD, USDA-FmHA and State and local government housing finance agencies in which I have been oram now a principal.

True False

2. For the period beginning 10 years prior to the date of this certification, and except asshown by me on the certification.a. No mortgage on a project listed by me has ever been in default, assigned to theGovernment or foreclosed, nor has mortgage relief by the mortgagee been given;

True False

b. I have not experienced defaults or noncompliances under any Conventional Contract orTurnkey Contract of Sale in connection with a public housing project;

True False

c. To the best of my knowledge, there are no unresolved findings raised as a result ofHUD audits, management reviews or other Governmental investigations concerning meor my projects;

True False

d. There has not been a suspension or termination of payments under any HUD assistancecontract in which I have had a legal or beneficial interest;

True False

e. I have not been convicted of a felony and am not presently to my knowledge, thesubject of a complaint or indictment charging a felony. (A felony is defined as anyoffense punishable by imprisonment for a term exceeding one year, but does not includeany offense classified as a misdemeanor under the laws of a State and punishable byimprisonment by two years or less);

True False

f. I have not been suspended, debarred or otherwise restricted by any Department orAgency of the Federal Government or of a State Government from doing business withsuch Department or Agency.

True False

HUD 2530 Previous Participation Certification

Page 2 of 2

g. I have not defaulted on an obligation covered by a surety or performance bond andhave not been the subject of a claim under an employee fidelity bond.

True False

3. All the names of the parties, known to me to be principals in this project(s) in which Ipropose to participate, are listed above.

True False

4. I am not a HUD/FmHA employee or a member of a HUD/FmHA employee'simmediate household as defined in Standards of Ethical Conduct for Employees of theExecutive Branch in 5 C.F.R. Part 2635 (57 FR 35006) and HUD's Standard of Conductin 24 C.F.R. Part O an USDA's Standard of Conduct in 7 C.F.R. Part O Subpart B.

True False

5. I am not a principal participant in an assisted or insured project as of this date on whichconstruction has stopped for a period in excess of 20 days or which has been substantiallycompleted for more than 90 days and documents for closing, including final costcertification have not been filed with HUD or FmHA.

True False

6. To my knowledge I have not been found by HUD or FmHA to be in noncompliancewith any applicable civil rights laws.

True False

7. I am not a Member of Congress or a Resident Commissioner nor otherwise prohibitedor limited by law from contracting with the Government of the United States of America.

True False

I have read the above Certification Statements and agree the correctresponse, for myself individually, is “True,” unless otherwise noted above.

I direct my HUD Secure System Coordinator to complete the Certifications,for myself individually, on any future APPS electronic HUD 2530submissions as noted above. Should my answers to these CertificationStatements change at any time, I will immediately notify the Board and myHUD Secure System Coordinator.

________________________________________________________Signature Date

Print Name ____________________________

YEAR 2011 Budget Assumptions Montgomery Housing Partnership, Inc.

REVENUES

Asset Mngmnt Fees from Affiliates: Will project from Property Budgets of 2011 when completeResidential Fees from Affiliates: Will project from Property Budgets of 2011 when completeIncentive Mngmnt. Fees from Affiliates: Initially will use amounts from 2010, later use amounts from the

individual properties' budgetsSome cash surplus for Comm. Life will be projected

Donations (including grants) Initially will use amounts from 2010, later use amounts from theFundraising Department's projections

Contract Revenues: Will assume cost reimbursable contracts will continue into Year 2011 at the same level of revenue and costs as in 2010 continuing contracts

Special Events - Golf Event Will project revenues and costs as in 2010 with a small increase GALA has been eliminated from 2011, no other event is planned at this time

Development Fees:The following properties are in our pipeline for rehab

Flower Maple (Gilbert's )Maple TowersEdinburghBealls' II

The real estate development staff will provide fee estimates and time tables of receipts

MPDUs will project a nominal increase in activity to the prior year's levels

Other RevenueInterest / investment income to follow amounts earned in the prior year

Community Life: No County funding will be projected per prior HIF funding.New County funding may be forthcoming.Additional Foundation funding will be expected per Fundraising's projection

EXPENSES

Labor: Will project all identified positions (after 2010 staff reductions) continuing into 2011 An increase of 2.% to 3% will be projected as an increase effective July 1 An increase will be projected in an accounting position from part-time to full time A nominal amount of bonus will be projected

Benefits Follow example of prior year's actual costs with projected change in costs of health insurance

Office / Facilitiy / Overhead

Will project current rental costs with known escalation factor

Will assume other costs near the amounts of 2010, with individual line items a plus or minus for nominal amounts as determined by circumstances

Contract Costs: Will project the CHDO at the same levels as in 2010Will project the Neighborhoods contract to have a higher level per the new contract

AAP has been deleted

MONTGOMERY HOUSING PARTNERSHIP, INC. FUNDING SOURCES

Future Years Projections of Revenues and Expenses

Source of Revenue (Income) Budget Projection Projection Projection Projection

F Y 2 0 1 0 F Y 2 0 1 0 F Y 2 0 1 1 F Y 2 0 1 2 F Y 2 0 1 3

Development Fees Receivable 919,000$ 663,000$ 949,000$ 533,000$ 1,040,000$

Development Fees Deferred 137,000$ 500,000$ 335,000$ 400,000$

Fees from Properties 1,379,000$ 1,379,000$ 1,320,000$ 1,340,000$ 1,360,000$

Donations Individuals 39,000$ 40,000$ 38,000$ 40,000$ 40,800$

Donations Foundations 257,000$ 278,000$ 255,000$ 260,000$ 265,200$

Donations Corporate 35,000$ 35,000$ 35,000$ 35,000$ 35,700$

Donations InKind 40,000$ 40,000$ 40,000$ 40,000$ 40,200$

Donations Organizations 8,000$ 8,000$ 7,000$ 8,000$ 8,100$

Donations Special Event 132,000$ 232,000$ 30,000$ 30,000$ 30,000$

County Funding 454,000$ 404,000$ 393,000$ 226,000$ 226,000$ Includes $180K debt forgv'n

Other 80,000$ 80,000$ 68,000$ 70,000$ 72,000$

Total Revenue 3,343,000$ 3,296,000$ 3,635,000$ 2,917,000$ 3,518,000$

Total Expenses 2,939,257$ 2,741,457$ 2,545,250$ 2,614,040$ 2,681,385$

Surplus (/Deficit) - ACCRUAL BASIS 403,743$ 554,543$ 1,089,750$ 302,960$ 836,615$

NON-CASH ITEMS Depreciation + Amortization 6,500 11,000 10,000 8,000 7,000 Current fees recvable Payable in Next Year (408,000) (61,000) (434,000) (80,000) Receipt of Prior Years Fees' Receivable 61,000 434,000 80,000 County Loan for Comm. Life 180,000 County Debt forgiven (rec'd. prior year) (180,000) (180,000) Prior Deferred Devel. Fee Rec'vd. 64,000 Deferred Devel.Fee (Payable in Future) (137,000)$ (500,000)$ (335,000)$ (400,000)$

Net Cash Revenues over Expenses 2,243$ 431,543$ 46,750$ 329,960$ 523,615$

Funding Sources

Source of Revenue (Income)

% Of Increase

% Of Increase

Comments

(Decrease) 2005 to 2009

(Decrease) 2008 to 2009

Such as regarding changes in funding from one year to next

Development Fees 1,214,508$ 243,904$ 208,739$ 267,722$ 1,404,935$ 185,650$ ‐84.7% ‐86.8% 919,000$ $638,000 - 5.5 Year Avg.

Fees from Properties 391,891$ 545,129$ 930,547$ 245,622$ 846,517$ 1,370,601$ 249.7% 61.9% 1,379,000$

Donations Individuals 29,599$ 31,793$ 30,201$ 39,344$ 44,954$ 49,432$ 67.0% 10.0% 39,000$

Donations Foundations 275,308$ 271,793$ 405,079$ 112,500$ 310,097$ 268,352$ ‐2.5% ‐13.5% 257,000$ In Addition in 2009 a $175K NW Capital Grant Rec'd, Restrict'n removed

Donations Corporate 7,650$ 49,870$ 32,550$ 9,120$ 34,120$ 30,800$ 302.6% ‐9.7% 35,000$

Donations InKind 35,023$ ‐$ ‐$ 56,423$ 31,338$ ‐10.5% ‐44.5% 40,000$ Reznick Audit fee Each Yr./ Plus In 2005 Comcast/Gazette $35K

Donations Organizations 3,484$ 11,594$ 23,888$ 3,950$ 8,162$ 6,640$ 90.6% ‐18.6% 8,000$

Donations Special Event 92,011$ 48,886$ 58,910$ 400$ 60,793$ 64,318$ ‐30.1% 5.8% 232,000$ Annual Golf + in 2005 Olney Theater

County Funding 497,586$ 409,313$ 379,163$ 244,398$ 366,211$ 591,146$ 18.8% 61.4% 454,000$ Yr 2008 $60K Shorted in Contract Renewal Yr 2009 Extra Qtr Billing allowed $28K

Loss of $280K C L & AAP Fund'g

Other 36,146$ 68,105$ 168,376$ 90,878$ 129,819$ 94,035$ 160.2% ‐27.6% 80,000$

Total Revenue 2,583,206$ 1,680,387$ 2,237,453$ 1,013,934$ 3,262,031$ 2,692,312$ 4.2% ‐17.5% 3,443,000$ Projected revenue: $2,920,000

Total Expenses 1,730,126$ 1,721,448$ 1,836,774$ 1,150,012$ 2,407,182$ 2,722,435$ 57.4% 13.1% 2,939,257$ Less 2 positions + AAP costsProjected expenses: $2,576,000

Surplus (/Deficit) 853,080$ (41,061)$ 400,679$ (136,078)$ 854,849$ (30,123)$ 503,743$

This worksheet displays your nonprofit’s sources of revenue. This will help you review recent trends in funding (past and current fiscal years), and consider whether you nonprofit has sufficient diversity of funding. Additionally, by identifying which sources of funding are stable, and what new sources of funding you might attract in the coming fiscal year(s), you will get a sense of your nonprofit’s overall financial stability. The worksheet also asks you to enter your nonprofit’s total revenue and expenses for the fiscal year, and to indicate whether you had a surplus, deficit, or neither.

Revenue $$ FYE 6/30/05



Revenue $$ Budget, FY2010



Revenue$$ 6 Mos 12/31/07

Comments regarding next fiscal

year

Property Performance Within the PortfolioNWO Quarterly Report - Montgomery Housing Partnership

Debt Service Coverage - GOAL 1.15

Property Num. Units DSC

Vacancy Loss, Annualized - GOAL

Property Performance Within the PortfolioNWO Quarterly Report - Montgomery Housing Partnership

Average Days Vacant - GOAL 15-30

Property Num. Units Days Vacant

Greenwood Terrace 50 20 40.0%Blair Park Apartments 52 16 30.8%Edinburgh House 45 12 26.7%TPP 75 14 18.6%Drings Reach 105 16 15.2%Parkview Manor 53 8 15.1%Pembridge Square 133 20 15.0%Great Hope Homes 104 8 7.7%Amherst Square Apartments 125 8 6.4%MHP SSI 230 24 5.2%Bealls Grant 74 0 0.0%

Bealls Grant 74 75Pembridge Square 133 66TPP 75 47Halpine Hamlet 67 45Drings Reach 105 35Amherst Square Apartments 125 25Edinburgh House 45 23Greenwood Terrace 50 21Blair Park Apartments 52 18MHP SSI 230 16Great Hope Homes 104 14Parkview Manor 53 0

Period ending June 30, 2010

Debt Service Coverage – Goal 1.15 Halpine Hamlet

- Insurance- Property insurance payment of $14,105 was paid, but the escrow to cover the payment was not transferred over to the Operating Account until July.

- Utilities- There was a payment to Washington gas for $39,395. This was the first bill received from Washington Gas since MHP purchased the property. There were issues with the account transfer from the prior owner that finally were resolved.

- Snow Removal- The snow removal expenses due to the blizzards that we had this year were a major factor. We spent almost $12,000 on just the snow contractor in order to clean and remove the snow off the parking lot.

TPP

- Much higher than anticipated snow removal expenses - Merrimac unit 1005-A1 (down due to moisture penetration) produced a significant

loss of revenue for the entire period - Significant expense was incurred to install moisture management equipment &

insulate all the exterior walls in Merrimac unit 1005-A1 - Significant repairs to vandalized/damaged fire & security systems at Sligo - NOTE: Some of this is also a function of how CT provides information on their

financial reports that doesn’t match how data gets inputted into the MFI database that MHP uses to generate the quarterly reports. Jill met with CT’s VP of Finance at the end of August to try to resolve this discrepancy in future reports.

Vacancy Loss, Annualized – Goal

Parkview Manor

- At the end of the quarter, five households were delinquent. Only two owed a full month’s rent and the others had reduced their balances significantly.

Great Hope Homes

- Legal action that was taken against 5 households simultaneously in the spring of 2010 as a result of an assault & battery that occurred on the property resulted in several households vacating their residences without paying multiple months of rents, and this was followed, briefly, by a period of higher-than-usual vacancy on the property.

Quarterly Turnover-Goal

Dring’s Reach - One bedroom units and Market units tend to sit longer. We had 5 one bedrooms that

vacated and had difficulty finding renters. - NOTE: AS OF SEPTEMBER 20, THERE ARE THREE VACANT UNITS AND

TWO ARE RENTED TPP

- Like the rest of the portfolio, there were a number of one-bedroom units that were difficult to lease. Several applicants denied because they did not meet leasing guidelines.

- Merrimac Apartments – Merrimac Apts. Unit 1005-A1 has been vacant for one year due to water intrusion and high humidity levels. Management made repairs to the unit, including installation of a dehumidifier system and fans and the unit was occupied during the summer.

- Sligo View Apartments – Unit 641-302 was vacant for 118 days. Prior resident had a dog that damaged the floor, which required more repair to unit than normal turnover. A few applicants did not qualify delaying leasing.

Beall’s

- The economy has played a role in units sitting much longer and that applies to all locations. There were two handicap accessible units that took longer to rent. We also had a skip and that unit took longer to rent as well due to the condition of the unit.

Reasons for move-out’s (Equity):

Financial Problems 24.30%Employment Relocation 8.11%

Unit Transfer 6.76%Eviction 4.06%

Rent Increase 1.36%Purchase Home 18.90%Personal Reasons 16.20%Failure to Recertify 1.36%

Unknown 1.36%Skip 6.76%

Theft on Property 1.36%Lease Violations 2.71%

Death 1.36%Late Payment History 4.06%Moved to Senior

Housing 1.36%

mhp finance committee agenda 9-28-10 - mhpartners€¦ · mhp management letter 6. mhp surplus cash...

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