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9 - Development Report MEMORANDUM TO: Board of Commissioners FROM: Betsey Martens, Executive Director Stuart Grogan, Director of Development Shannon Cox Baker, Project Manager Kevin Knapp, Project Manager Liz Wolfei-t, Project Assistant Lindsey Moss, Project Assistant SUBJECT: Development Report DATE: February 2, 2011 This month's development report includes: Consent: No items at this tune. Action/Discussion: No items at tlus time. Updates: High Mar Redevelopment Red Oak Park Lee Hill Housing Broadway West Attachments: Project Tracking Form and Timeline CONSENT ITEMS No items at this time. ACTION/ DISCUSSION ITEMS No items at this time. AAP UPDATE ITEMS HIGH MAR REDEVELOPMENT Previous Board Meeting: At the last meeting, we provided the following information: • An update on the site review process, specifically, that we anticipated receiving the Notice of Disposition the week of December 13, 2010; • An update on the 2011 City grant process, specifically, that City Housing and Human Services (HHS) staff and the Technical Review Group (TRG) declined to award High Mar $450,000 in predevelopment grant funds on the basis that a low income housing tax credit (LIHTC) reservation was necessary before additional funds could be awarded to the project; and • A report that total development costs for the project were $12.8 million, but a schematic design cost estimate was underway and would be completed by early January. Progress since Previous Board Meeting: Site Review Application: We received the Notice of Disposition from the Planning Department on January 4, 2011. Planning Board reviewed the project on January 6, 2011 and decided not to call up the project for further review. Nobody from the public called up the project during the mandatory two week call-up period. As of January 18, the project has received Site Review approval and is officially entitled. We will be working with City staff to submit the final mylar sets of drawings and execute the Development Agreement to complete the process. Design Schedule: The design team will complete Design Development (a more detailed set of drawings than Schematics that will inform the final Construction drawings) by the end of March. We anticipate submitting Technical Documents to the City Engineering Department for a first round Tech Doe review in mid-February. We estimate the design team will complete the Tech Doc process in 4-6 weeks and will begin on Construction Documents (CDs) in April. The project will be building-pen-nit ready by July, 2011. City Funding: In December, we appealed the HHS staff's decision to deny High Mar's request for a 2011 grant for additional predevelopment funding. After several discussions between BHP and HHS, we sent a letter to HHS on January 13, 2011 requesting them to amend our grant application as follows: that the grant amount be reduced to $350,000; the funds be used to close the financial gap between total development costs and the available sources of funds (not for predevelopment activities as we originally requested); and HHS provide us with a letter of intent to commit the funds to the project once a LIHTC reservation is secured. In the letter, we agreed to not request any additional funds from HHS for High Mar except in the event of dramatic or unforeseen changes in the L11-ITC market, debt financing, construction costs, or a related event. We anticipate a response from HHS by early February. 2 W` Cost Estimate: The Schematic Design cost estimate is in line with our original expectations. At the project's outset, we set a hard cost goal (vertical construction, only) of $110 per square foot (sf). The project as currently designed betters our original expectations and is achieving $98/sf ($102,477/unit). Total all-in development costs (includes: soft costs, site work, horizontal construction, contingencies and reserves, and developer fee) are $190/sf, or $199,431/unit. Per the table below, High Mar is within or below the Division of Housing's financial benclunarks in every category. HIGH MAR FINANCIAL BENCHMARKS CDOH RANGE HIGH MAR Total Development Cost*/SF $135 to $205 $190 Hard Cost/SF (inc. dev. fee) $105 to $160 $117 Soft Cost/SF $25 to $40 $24 Land Cost/Unit $10,000 to $18,000 $7,492 PUPA w/o reserves $3,700 to $4,700 $4,122 Replacement Reserves/Unit $250 (senior properties) $300 Debt Coverage Ratio (yr I.10 to 1.20 1.20 Debt Coverage Ratio (yr 15) 1.10 to 1.20 1.15 Capitalized Operating Reserve 4 months debt, op. costs 6 months CDO14 investement/Unit $4,000 to $10,000 $7,500 Consultant Team: We procured the law firm of Winthrop & Weinstine (specifically, attorney Jon Peterson, who worked on the Red Oak Park closing) to represent both High Mar and Lee Hill throughout the LIHTC and development processes. LIHTC Schedule: We are on track to submit a LIHTC application on March 1; the first of two application cycles in 2011. We believe High Mar is very competitive under the criteria published by the Colorado Housing Finance Authority's (CHFA) Qualified Allocation Plan (QAP) including site control, team experience and energy efficiency. High Mar is also competitive under the "readiness to proceed" criterion which includes demonstrating the ability to implement the project within twelve months, zoning approval, no environmental issues, schematic drawings and a general contractor prepared estimate. We further believe that under the final threshold, market study, there is sufficient demand under several measures that High Mar will lease up quickly. However, the QAP states that recently approved projects must be afforded the opportunity to lease-up without direct competition from another tax credit project. CHFA has expressed concern that High Mar will create competition with, and potentially negatively impact Boulder County Housing Authority's recently approved senior housing project, Josephine Commons, which is located in Lafayette. We and our market analyst do not share that concern. As part of our application, we will provide CHFA with data that explains why we do not believe either project will be negatively impacted if both are able to move forward. 417 If a 2011 LIHTC Preliminary Reservation is secured during this LIHTC round, construction could commence as early as July 2011. If a second application is required, we will re-submit in July 2011. This will delay the commencement of construction until September, 2011 at the earliest. Next steps: • Proceed through the Tee Doc design phase and continue to refine the unit plans and building elevations; • Refine the cost estimate and conduct a first-round value engineering exercise; • Finalize the appeal process for 2011 grant finding; and • Complete the LIHTC application and submit by March 1. RED OAK PARK Previous Board Meeting: At the last meeting, we provided the following information: • The project's fifth draw request was funded, which increased total project expenditures to date to 37% of budget; • A construction update highlighting a concern that three duplexes in the Phase I were behind schedule; • An update on the street installation, specifically that the first layer of asphalt throughout the site as well as much of the curb and gutter had been installed; and • An underground storm sewer update, which anticipated the completion of the system in spring 2011. Progress since the Previous Board Meeting: Budget Update: Our seventh draw was funded on January 251'' which increased the amount of expended funds to almost $6.2 million. In last month's sixth draw, we crossed the half-way benchmark as 54% our project budget had been spent. We remain in a comfortable financial position as much of our contingency funds remain unobligated. Construction and Leasing Update: Construction activities at Red Oak Park continue to progress at a rapid pace. Currently, the construction team is preparing to deliver the first ten units to BHP on February 1, the originally scheduled date. The leasing team reports significant interest in Red Oak Park by potential residents. The current plan is to have the first four homes occupied on February 1. These four move-ins will fulfill our lease-up commitment to our tax credit investor for the entire month of February. Some of these first families are former residents of the mobile homes at Boulder Mobile Manor. 4 We expect fifteen more residential units to become available throughout the month of February, which will exceed our investors' expectations and give us an early start on the lease-up schedule we conunitted to at the financial close. Six of the fifteen units are located in the three duplexes on the southwest conger of the site. Although we expected these duplexes to be available on February 1 with the other Phase 1 homes, construction delays pushed their delivery back to sometime around the second week of February. On the upside, we expect to take possession of all nine of the Phase 2 units (located on the east side of Arnett St.) in late February, three weeks ahead of their original March 15 delivery date. Construction on the remainder of the site is also progressing nicely and without major budget or schedule concerns. We currently have thirty-seven of the forty residential buildings framed and hope to have the framing contractor complete their work in the first half of February. All concrete work is also nearly complete. The residential foundations have been poured leaving only the Community Center slab and patios to be poured before the concrete contractors finish their work. ROP Projected Unit Delivery Schedule Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Phase 1(16 units) Phase 2 (9 units) Phase 3 (10 units) Phase 4 (9 units) Phase 5 (8 units) Phase 6 Q units) Community Center Construction Completion Storm Sewer System and Caisson Drilling: Despite our earlier projection that we would wait until the spring to finish the storm sewer system, the construction team was able to complete it shortly into the new year thanks to some above-average temperatures and fair weather. The caisson drilling was also completed in December. Together the underground utility installations and the caisson drilling presented some of the larger challenges and risk factors during construction. Both the caisson drilling and utility work was completed without obstacle and within the original budget. Next steps: • Move in the first four households on February 1St; • Continue the lease-up process; • Submit Draw 98 in early February; and • Monitor construction activities to ensure the delivery of 15 more units within February. 5 LEE HILL HOUSING Previous Board Meeting: At the last meeting, we provided the following information: • Our anticipated selection and contract with architectural services, geotechnical services, survey, and technical services by early February 2011; and • HHS staff and the TRG's evaluation our appeal for a $300,000 grant, instead of a loan, to support our predevelopment efforts. Progress since Previous Board Meeting: Consultants: We have evaluated and scored the proposals for architectural services, geotechnical services, survey, and cost estimation. We anticipate finalizing our decision by the first week of February and comiencing site work and a kickoff design team meeting by the first week of March. Predevelopment Funding: The City's HFIS staff and the TRG agreed to provide the project with a $300,000 grant instead of a loan. These funds will be used for architectural and other predevelopment services. Schedule: The predevelopment phase of the project commenced in December 2010. The neighborhood outreach process will begin in March, during the concept design phase, and will extend through schematic design. We anticipate the project can complete the design and permitting process in 12 months, or by March 2012. Our efforts to secure financing will run concurrently with the design process; our goal is to secure 100% of the financing by December 2011. The construction process could begin as early as Spring 2012 (likely Fall 2012 if we pursue LIHTC) and will require 10-12 months until completion. Lee HIII Project Schedule Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11[Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Jan-13 Predevelopment Concept Design Schematic Design Design Development Construction Documents Permitting Construction Financin , Next steps: • Create a project budget; • Hire a technical services consultant; and • Execute a binding partnership agreement with the Shelter. G S~ BROADWAY WEST Previous Board Meeting: At the last meeting, we provided the following information: • Broadway West's Land Use Restriction Agreement (LURA) from CHFA had been signed and recorded, and we expected to receive our 8609 certificates; • We provided clarifications to CHFA about our Final LIHTC Application; • We addressed the final questions posed by US Bank regarding the 2nd Capital Installment; and • The loan conversion documents had been signed by BHP in preparation for the actual loan conversion. Progress since Previous Board Meeting: Tax Credit 8609 Certificates Received: In December, CHFA accepted our Final L1HTC Application and sent us the project's 8609 certificates. We signed the certificates and sent a copy to US Bank. These certificates will allow US Bank to begin receiving the tax benefits associated with purchasing Broadway West's tax credits, based on the units fully occupied in 2010. We will also use the 8609 to process the Broadway West 2010 tax return. Capital Contributions and Loan Conversion: On December 6 and 7, we received the 2"d Capital Contribution from US Bank, totaling more than $3 million. This Capital Contribution was intended to be used to partially pay down the project's construction loan and to pay a portion of BHP's developer fee. Upon receipt, the Capital Contribution was immediately transferred to First Bank and put toward paying down the project's construction loan. This loan was then officially converted to permanent status. We then drew down the developer fee portion. We will receive the remaining developer fee through US Bank's aid and 4t" Capital Contribution, which will be available in the second quarter once the Broadway West tax return and audited financials are complete. Next steps • Apply to receive the 3id and 4"' Capital Contributions in the second/third quarter of 2011. PROJECT TRACKING AND TIMELINE The following Development Division tracking tools, which are updated monthly, are attached to this memo: • Development Tracking Sheet • Project Benclunark Timeline 7 k D v e t o p m e n T r a y i n g 4o February 2011 Research, Pre Construction Transition/ Leased-Up/ Evaluation, Development Lease-Up Completed On Hold or Red Oak Park Red Oak Park Tracking (Phase 1) Existing Unit Acquisition Bridgewalk Transit Village (RTD) Wallace Acquistion Lee Hill Housing 28th Kalmia NoBoYarmo High Mar Valmont (ROP II) Armory Redevelopment Hogan Pancost Palo Park Iris Hawthorn Public Housing Conversion Tax Exempt Partnerships 4e Infeasible Technical Landmark Lofts Assistance Junior Academy Roaring Fork Board Action This Month Orchard Grove 7000 2010 2011 2012 2010 Sep Oct No, OeC Jan Feb Ms A p( Maw Jun Jul A" 9G0 OCI Nov Dee Jan Feb V. ar Apr May Jun Jui Fu0 Sep Oct Nov Duo Jan Feb filar Apr May Jun Jul A" Sep 00 Nov ate Jan Fen ma r 'I'd ecw a:.uc Red Oak Park M d+ aM [Ma"mga 1 i" I x;,,_r. ~ 1...I it !3J'r r•i High Mar - - - - - - n;,,:iy c~ an..iq City Apply lcfia] A C PAIY 16r ity Dr Oftigenca flu+J[ FwQa I E :G:rv_ Lae Hill Housing Apply for APAY for eppy In! r~+z^c em Cey f%Tu Dor OeiOenn F-ds FunIs CndAa o, 6eadln BHP Dua ClnenO or I.. 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