Richard C. Gentry

President & CEO

San Diego Housing Commission

San Diego Housing Commission

Transition of Assets from a Public Housing Model March 6, 2013

2005:

• Federal subsidies were decreasing and dependency on housing programs were not sustainable

• Difficult to set aside adequate funds for on-going maintenance and future capital improvement

needs (aging portfolio)

• Traditional public housing model was not sustainable for this large portfolio

(1,366 units in 137 properties)

Action:

• In the FY2006-2008 Business Plan, SDHC committed to reducing its dependency on Federal

subsidy and housing programs through asset development and enhancement of alternative

financial resources

• SDHC application submitted to the U.S. Department of Housing & Urban Development (HUD)

November 2006

• HUD approval in September 2007—landmark agreement, largest public housing conversion at

the time

SDHC Background

2

SDHC requested and HUD Approved:

• SDHC to own and operate 1,366 units of Public Housing

• Rents at or below 80% AMI for Families and 50% AMI for Seniors

• Housing Choice Vouchers awarded to all tenants with an option to relocate

• SDHC to leverage equity in former Public Housing (PH) portfolio (1,366 units)

• Create a minimum of 350 additional affordable workforce housing units

• rents at or below 80% AMI

• affordable for 55 years

• Sale Price of $1.00/unit = $1,366

SDHC Background – HUD Approval

3

Phase 1

• Withdraw approximately $100 mil. in equity from former PH portfolio

• Former PH portfolio to support debt service

• Acquire/Invest in new affordable rental units

Phase 2

• Refinance new acquisitions to acquire more affordable housing

Critical Aspect of Plan - minimal risk and diversification

• Minimal Financial Risk (low LTV, several lenders, high DSC, etc.)

• Acquisitions/Investments (type, location, age, size, etc.)

SDHC Finance Plan

4

Loans proceeds to be spent on Public/Private partnerships

• Approximately 40% of total capital funds

• Good vehicle for SDHC Investments in Tax Credit transactions

Loans proceeds to be used on Publically Owned acquisitions

• Approximately 60% of total capital funds

• 100% SDHC or in partnership with another municipal agency

• Also utilized BAB’s funds (Build America Bonds)

Meetings:

• Real Estate Developers (Nonprofit and For Profit)

• Public/Neighborhood Groups and the Business Community

• Appointed and Elected Officials (HC, HA, IBA, LU&H)

SDHC Finance Plan - continued

5

Loan Underwriting – Risk Averse

• FHA/Fannie Mae

• 70 - 75% LTV

• 1.37 DCR

• Fixed interest rate, 30 year vs. 10 year

• Reserve Accounts established

Loans Closed - $95 Million Raised in Total

• Fannie Mae – December 30, 2009

• $37,140,000, 30 year amortized, 7.32% interest rate

• FHA - August 31, 2010

• $58,243,400, 35 year amortized, 3.76% interest rate

• Effective interest rate of 2.44% with BABs rebate

SDHC Due Diligence for Financing

6

SDHC Partnership Investments

Partnerships # of

Units (incl.

Mgr’s Units)

# of

Affordable

Units

Type SDHC Investment

SDHC

Investment per

Affordable Unit

Acquisition/Rehab

Arbor Village Apartments 112 111 Family $7,980,976 $71,901

Vista Grande Apartments 49 48 Family $3,851,025 $80,230

New Construction

Riverwalk Apartments 50 49 Family $4,525,391 $92,355

Estrella del Mercado Apartments 92 91 Family $7,111,224 $78,145

Mission Apartments 85 84 Family $6,027,000 $71,750

Park Terramar Apartments 21 20 Family $2,151,699 $107,585

Total 409 403 $31,647,315

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SDHC Owned Investments

Property

# of

Units (incl. Mgr’s

Units)

# of

Affordable

Units

Type SDHC

Investment

SDHC

Investment per

Affordable Unit

Acquisition/Rehab

Hotel Sandford 130 129 Senior $6,460,700 $50,083

Mariner's Village Apartments 172 171 Family $34,819,289 $203,622

Courtyard Apartments* 37 37 Family $7,851,633 $212,206

Park Crest Apartments 71 70 Senior $8,915,520 $125,571

Total 410 407 $58,047,142

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*No Manager’s Unit

SDHC Total Investments # of

Units (incl. Mgr’s

Units)

# of Affordable

Units

SDHC

Investment

Total 819 810 $89,694,457

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SDHC Owned Investments

• 129 Affordable Units (Seniors) and 1 Manager Unit • Acquisition/Rehabilitation (Occupied) • SDHC Investment: $6.4 million ($50,083/unit) • Remains affordable for 99 years • To be completed: Early 2013 • Transit-oriented development • Historic

• 171 Affordable Units and 1 Manager Unit

• Acquisition/Rehabilitation (Occupied)

• SDHC Investment: $34.8 million ($203,622/unit)

• Remains affordable for 55 years • Renovations of nine units to ADA • Transit-oriented development

10

Hotel Sandford Mariner’s Village Apartments

SDHC Owned Investments

• 37 Affordable Units • Acquisition (Occupied) • SDHC Investment: $7.8 million ($212,206/unit) • Remains affordable for 55 years • Foreclosure • Transit-oriented development

11

• 70 Affordable Units (Seniors) and 1 Manager Unit • Acquisition/Rehabilitation (Occupied) • SDHC Investment: $8.9 million ($125,571/unit) • Remains affordable for 55 years • Transit-oriented development

Courtyard Apartments Park Crest Apartments

SDHC Partnerships: Acquisition/Rehab

• 111 Affordable Units and 1 Manager Unit • Acquisition/Rehabilitation (Occupied) • SDHC Investment: $7.9 million ($71,901/unit) • Total Cost: $24 million • Remains affordable for 55 years • Transit-oriented development

• 48 Affordable Units and 1 Manager Unit • Acquisition/Rehabilitation (Occupied) • SDHC Investment: $3.8 million ($80,230/unit) • Total Cost: $15.1 million • Remains affordable for 55 years • Transit-oriented development

Arbor Village Apartments Vista Grande Apartments

12

SDHC Partnerships: New Construction

Riverwalk Apartments Park Terramar Apartments

• 49 Affordable Units and 1 Manager Unit • SDHC Investment: $4.52 million ($92,355/unit) • Total Cost: $14.1 million • Remains affordable for 55 years • Transit-oriented development

• 20 Affordable Units and 1 Manager Unit • SDHC Investment: $2.15 million ($107,585/unit) • Total Cost: $7.6 million • Remains affordable for 55 years

13

Estrella del Mercado Apartments Mission Apartments

• 91 Affordable Units and 1 Manager Unit • SDHC Investment: $7.1 million ($78,145/unit) • Total Cost: $43 million • Remains affordable for 99 years • Transit-oriented development

• 84 Affordable Units and 1 Manager Unit • SDHC Investment: $6.02 million ($71,750/unit) • Total Cost: $25.9 million • Remains affordable for 55 years • Transit-oriented development

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SDHC Partnerships: New Construction

SDHC Real Estate Property Investments –

Locations www.sdhc.org

15

• Individual property statements generated

• Utilization of new property specific documentation

• Strategic use of procurement processes = expeditious due diligence

• Creation of TOD Plan and energy sustainability guidelines ongoing at same time

• Performed capital improvements on properties to improve marketability to lenders

• Improved efficiency of operations via implementation of private sector

methodologies (enhanced Property Management approach)

SDHC Beneficial Outcomes and Results

16

Creation of Portfolio Management Department

• Creation of Risk Rating system to identify portfolio concerns

• Managing on-going lender requirements

Replacement reserves

• Strategic plan for accumulating adequate reserves

(Physical Needs Assessment) and capital budgeting needs

• Establishment of reserve accounts - year 15 acquisition options

Continuous and integral collaboration for reporting requirements

• All business units

• Regular updates to SDHC Board of Commissioners and Housing Authority of the City of

San Diego

SDHC Beneficial Outcomes and Results

17

SDHC Next Steps

Continue actively monitoring portfolio • Physical Needs Assessment

• Reserve Analysis

• Routine Reviews (HA/HC and Project Status Meeting)

Conduct analysis for potential Phase 2 of acquisitions • Equity refinance of Mariner’s Village, Courtyard and Park Crest

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SDHC Timeline

HUD

Application

2006

HUD

Application

Approved

2007

Collection of Section 8 vouchers &

Development of the Finance Plan

Finance Plan

HC/HA

Approval

2009

Due Diligence

Critical / Non Critical Repair

Loan Underwriting / Closing

LLC Formation

Project Selection

Acquisition / Investment

Time

Project Underwriting

Project Approval

Project Due Diligence

Project Construction, Monitoring, Portfolio Management

Oversight, Financial Analysis, Ongoing Update Reports

Fannie Mae

Loan Closing

Dec 2009

First Acquisition

Hotel Sandford

March 2010

FHA

Loan Closing

August 2010

Phase II - Refinance of newly acquired assets

2006 2013

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