240-627-9425 EXPANDED AGENDA January 8, 2014 · 240-627-9425. EXPANDED AGENDA . January 8, 2014 . 4: ... Finance and Audit Committee ... the success of HO’s legislative initiatives

10400 Detrick Avenue

Kensington, Maryland 20895 240-627-9425

EXPANDED AGENDA

January 8, 2014

4:00 p.m. I. CONSENT ITEMS

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A. Approval of Minutes of December 4, 2013 B. Ratification of Action taken in Executive Session on December 4, 2013:

Authorization of the Execution of a Purchase and Sale Contract for the Acquisition of Capital One Site

C. Approval of GFP Residential Holdings, LLC Crane Swing Easement Agreement at Park Potomac

II. INFORMATION EXCHANGE

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A. Report of the Executive Director B. Calendar and Follow-up Action C. Correspondence and Printed Matter D. Commissioner Exchange E. Resident Advisory Board F. Community Forum G. Status Report

4:15 p.m. III. COMMITTEE REPORTS and RECOMMENDATIONS FOR ACTION

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A. Budget, Finance and Audit Committee – Com. Kator, Chair 1. Acceptance of First Quarter FY’14 Budget to Actual Statement

B. Development and Finance Committee – Com. Lindstrom, Chair 1. Approval of a Refinancing Plan for Paddington Square Apartments 2. Consent to Transfer General Partnership Interest in the Oakfield Apartments

Transaction 3. Approval to Execute an Alternative Location Agreement for MPDUs

4:25 p.m. IV. ITEMS REQUIRING DELIBERATION and/or ACTION

4:30 p.m. V. *FUTURE ACTION ITEMS

4:35 p.m. VI. INFORMATION EXCHANGE (continued)

A. Community Forum

4:40 p.m. VII. NEW BUSINESS

4:45 p.m. VIII. EXECUTIVE SESSION FINDINGS

RECESS

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DEVELOPMENT CORPORATION TPM Development Corporation

Approval to Accept an HOC Subordinate Loan to Fund Pre-development and Exterior Renovation Cost for TPM Development Corporation

4:50 p.m. ADJOURN

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Page 2 of 2

EXECUTIVE SESSION

NOTES:

1. This Agenda is subject to change without notice.

2. Public participation is permitted on Agenda items in the same manner as if the Commission was holding a legislative-type Public Hearing.

3. Times are approximate and may vary depending on length of discussion.

4. *These items are listed "For Future Action" to give advance notice of coming Agenda topics and not for action at this meeting.

5. Commission briefing materials are available in the Commission offices the Monday prior to a Wednesday meeting.

If you require any aids or services to fully participate in this meeting, please call (240) 627-9425 or email [email protected].

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Consent Items

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HOUSING OPPORTUNITIES COMMISSION OF MONTGOMERY COUNTY 10400 Detrick Avenue

Kensington, Maryland 20895 (240) 627-9425

Minutes

December 4, 2013

The monthly meeting of the Housing Opportunities Commission of Montgomery County was conducted on Wednesday, December 4, 2013 at 10400 Detrick Avenue, Kensington, Maryland beginning at 4:26 p.m. Those in attendance were:

Present

Roberto Piñero, Chair Sally Roman, Vice Chair

Michael Kator, Chair Pro Tem Jean Banks Rick Edson

Pamela Lindstrom

Also Attending

Stacy Spann, Executive Director Gail Willison Kayrine Brown Kathleen Flanagan, RAB Sarah Sorensen, Independence Now

Jose Garcia Jackie Ghunaim Bobbie DaCosta Vanvisa Sivali Kitty McCoy Eric Axelrod Yolanda Jackson Louis Chaney Rita Harris Ken Goldstraw Dean Tyree Susan Smith Luz Francois Raquel Mitchell Lola Knight Regina Mitchell Nancy Scull Emily Dorfman Zachary Marks

Ken Tecler, Staff Counsel Wilson Choi Lorie Seals Tara Whicker Richard Hanks Christopher Donald Denise Flowers-Brooks,RAB Stewart Holbrook Jim Atwell Madera Clark Maria Montero Bonnie Hodge Clarence Landers Ed Parks Carrie Smith Michelle Ogunbode Paul Vinciguerra Scott Ellinwood Fred Swan Patricia Oliver Eugene Spencer Gina Smith Arthur Owens

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HOC Minutes December 4, 2013 Page 2 of 7

Commission Support Patrice Birdsong, Spec. Asst. to Commission

IT Support Dominique Laws Nick Monaco

Prior to the convening of the Commission meeting, the 2013 Longevity Service Awards

were presented to the following staff members:

30 Years of Service Denise Sadler 25 Years of Service Carol April Diana Bird Kitty McCoy-Butler Angie Ross 20 Years of Service Diane Freeman Juan Garcia Roger Hunter Cathy Kramer Nancy Scull 15 Years of Service Eric Axelrod Valerie Battle Kayrine Brown Joshua Gaskin Lynn Hayes Bonnie Hodge Pamela Lawler Dorothy Lee Ed Parks Sherraine Rawlins Lorenzo Rivero Vanvisa Sivali Hugo Trotman Paige Walsh

10 Years of Service Jose Calderon Ken Goldstraw Daniel Hardnick Ignacio Hernandez Grace Hooper 5 Years of Service Shayna Anderson Nancy Calhoun Jonathan Cartagena Luz Francois Rebecca Grayson Deirdre Harris Ahmed Jalloh Yolanda Joya Veronica Martin Luis Montoya Mytice Nearson Lillian Ofosu Sophia Pryce Jason Quigley Augusta Sannoh Olga Schans Charlene Williams Jerry Williams Lynville Wyse Hiwote Yohannes

2013 Retirees Susan Krimer

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Chair Piñero convened the monthly meeting of the Housing Opportunities Commission at 4:26 p.m.

The Consent Calendar was adopted upon a motion by Vice Chair Roman and seconded

by Commissioner Banks. Affirmative votes were cast by Commissioners Piñero, Roman, Kator, Banks, and Edson. Commissioner Lindstrom was temporarily away and did not participate in the vote.

I. CONSENT ITEMS

A. Approval of Minutes

Approval of Minutes of Regular Meeting of November 6, 2013 – The minutes were approved as submitted.

B. Adoption of Retirement Resolution for Susan Krimer – The following resolution was

approved. RESOLUTION: 13-115 RE: Adoption of Retirement Resolution for Susan Krimer WHEREAS, the Housing Opportunities Commission of Montgomery County is indebted to Susan Krimer for 15 years of loyal service and dedication to the Agency and to the citizens of Montgomery County; and WHEREAS, Susan began her career with HOC in 1998 as Assistant Public Affairs Officer; and WHEREAS, in 1999, Susan established the Housing Resource Service to improve the Agency’s customer service delivery and in this venture launched the HOC website, created a customer service database and began a daily events calendar. She managed the Housing Resource Service for several years and provided oversight of the Kensington reception desk. Susan also was helpful in expanded media interest in HOC programs and initiatives which lead to greater media coverage of HOC events. In 2006, she was instrumental in publicizing the opening of the Housing Choice Voucher and Public Housing waiting lists. In 2007, Susan assumed management of a new Community Advisory Board; and

WHEREAS, Susan’s management of media relations, community relations and event planning programs earned her the respect of colleagues and contributed to the mission and goals of the Housing Opportunities Commission; and

WHEREAS, Susan earned numerous employee awards as a result of her contributions to the success of HOC’s legislative initiatives and special events. She was recognized for her skills in writing speeches, preparing presentations and marketing materials including a Housing Choice Voucher Program highlights video, and her work with Housing Day in Annapolis. In 2003, Susan received the prestigious Montgomery’s Best Honor Award for County Partnerships.

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She was also recognized for her dedication and teamwork in planning and producing a Housing Forum with a legislative work group. Susan was also instrumental in implementing and coordinating the reopening of Montgomery Arms in 2006. She engaged the Art Deco Society and the Historical Society in the event, reflecting a 1940’s theme with period costumes, music and an antique car. Her leadership and creativity set a new standard for HOC celebrations.

NOW, THEREFORE, BE IT RESOLVED that the Housing Opportunities Commission of

Montgomery County expresses sincere thanks and appreciation to Susan for her many contributions and wishes her good health and happiness in her retirement.

C. Approval of New Participating Lenders for the Single Family Mortgage Purchase Program – The following resolution was approved.

RESOLUTION: 13-116 RE: Approval of New

Participating Lenders for The Single Family Mortgage Purchase Program

WHEREAS, the Housing Opportunities Commission of Montgomery approves lenders to participate in the Mortgage Purchase Program; and

WHEREAS, such participation is continuous and for multiple programs; and

WHEREAS, the Commission has approved an ongoing process for adding new lenders to the Mortgage Purchase Program; and

WHEREAS, Bay Capital Mortgage Corp., Embrace Home Loans and Peoples Home Mortgage, a division of Peoples Bank, have applied for participation in the Mortgage Purchase Program; and

WHEREAS, Bay Capital Mortgage Corp., Embrace Home Loans and Peoples Home Mortgage, a division of Peoples Bank, have satisfied the required criteria for admittance to the Mortgage Purchase Program.

NOW, THEREFORE, BE IT RESOLVED by the Housing Opportunities Commission of Montgomery County that Bay Capital Mortgage Corp., Embrace Home Loans and Peoples Home Mortgage, a division of Peoples Bank, are approved for participation in the Mortgage Purchase Program, effective immediately.

II. INFORMATION EXCHANGE

A. Report of the Executive Director – Mr. Spann reported that prior to the

Thanksgiving Holiday he and staff from the Resident Services Division, Stephanie

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Semones, Jonathan Cartagena and Brian Selden, attended the Bullis School to assist families in putting together gift basket to distribute to HOC families the holiday.

B. Commissioner Exchange – Commissioner Banks shared that the County Executive Isiah Leggett attended the Resident Advisory Board’s Holiday Dinner Meeting on November 18, 2013. Mr. Fred Swan, Director of Resident Services was also in attendance. The RAB had an opportunity for Q & A with Mr. Leggett and Mr. Swan.

C. Resident Advisory Board – Denise Flowers-Brooks extended appreciation to Kayrine

Brown and Zachary Marks for attending the RAB and presenting information on the Resident Advisory Demonstration.

D. Community Forum – Kathleen Flanagan, Resident who participates in the Supportive Housing Program, addressed the Board regarding the new HUD Rules. Because of the lower FMRs it’s difficult in find housing.

Sarah Sorensen, Executive Director of Independence Now, addressed the Board regarding an opportunity for bridge subsidy housing to assist people with disabilities who are now living in nursing facilities and wish to live independently. Executive Director Spann explained that there are other agencies funded by the state that are better equipped to handle this particular program.

E. Status Report – None

III. COMMITTEE REPORTS and RECOMMENDATIONS FOR ACTION

A. Development and Finance Committee – Commissioner Lindstrom, Chair 1. Approval to Accept DHMH FY14 Grant Funding and Borrow Pre-development

Funding for the Acquisition of Two Homes for use and Operation by Jubilee Association of Maryland, Inc.

Kayrine Brown, Director of Mortgage Finance/Real Estate Development and Jay

Shepherd, Senior Financial Analyst, requested the Boards authorization to accept FY14 grant funding from the Maryland Department of Health and Mental Hygiene and to obtain approval of a loan from the revolving Opportunity Housing Development Fund for pre-acquisition funding. Chair Piñero asked that when considering a house staff conduct an analysis to make sure that there is not an over concentration of group homes in certain areas of the County. The following resolution was adopted upon a motion by Commissioner Lindstrom and seconded by Commissioner Edson. Affirmative votes were cast by Commissioners Piñero, Roman, Kator, Banks, Lindstrom and Edson.

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RESOLUTION NO: 13-117 RE: Approval to Accept DHMH FY14 Grant Funding and Borrow Pre-Development Funding for the Acquisition of Two Homes for Use and Operation by Jubilee Association of Maryland, Inc.

WHEREAS, the Housing Opportunities Commission of Montgomery County (HOC) is the recipient of a FY14 grant from the Maryland Department of Health and Mental Hygiene (DHMH) Administration-Sponsored Capital Program; and

WHEREAS, the grant award of up to $835,000 or 75% of the estimated project costs is to be used for the purchase and renovation of two single family ranch-type homes that would each house three low income, developmentally disabled adults and one live-on aide employed by Jubilee Association of Maryland, Inc. (Jubilee); and

WHEREAS, as a condition of accepting the award from DHMH, HOC must obtain a firm

commitment from Montgomery County Department of Housing and Community Affairs (DHCA) for the required 25% match of up to $278,306; and

WHEREAS, with the funding from the grant from DHMH and DHCA, HOC will acquire and renovate the units and serve as owner/landlord and will provide three efficiency project-based vouchers for each home; and

WHEREAS, Jubilee will serve as principal partner agency and service provider. NOW, THEREFORE, BE IT RESOLVED by the Housing Opportunities Commission of Montgomery County that:

1. The Executive Director is authorized to accept a grant award of up to $835,000 from DHMH for the purpose of acquiring and renovating two single family homes to serve developmentally disabled residents and is further authorized to execute any and all necessary documents in connection with obtaining and closing on such funding; and

2. The Executive Director is authorized to pursue a firm commitment and thereafter accept

required matching funds and any bridge loans from DHCA for the same purpose and is further authorized to execute any and all necessary documents in connection with obtaining or closing such financing.

3. The Commission authorizes the use up to a maximum of $45,000 from the Opportunity

Housing Development Fund for pre-development financing to be repaid upon closing on approved acquisitions.

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IV. FUTURE ACTION ITEMS

None

V. INFORMATION EXCHANGE (CONT’D)

None

VI. NEW BUSINESS None

Based upon this report and there being no further business to come before this session of the Commission, a motion was made, seconded and unanimously adopted to adjourn.

The meeting adjourned at 5:12 p.m. Respectfully submitted, Stacy L. Spann

Secretary-Treasurer /pmb

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RATIFICATION OF ACTION TAKEN IN EXECUTIVE SESSION ON DECEMBER 4, 2013: AUTHORIZATION OF THE EXECUTION OF A PURCHASE AND SALE

CONTRACT FOR THE ACQUISITION OF CAPITAL ONE SITE

January 8, 2014

• On November 18, 2013, Housing Opportunities Commission of Montgomery County (“HOC” and “Commission”) entered into a non‐binding Letter of Intent (“LOI”) outlining the business terms for entering into a purchase contract for an approximately one‐acre parcel (“Capital One Site”) adjacent to HOC’s Holly Hall senior community.

• The Commission approved this action in Executive Session on December 4, 2013.

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RESOLUTION: RE: Ratification of Action Taken in Executive Session on December 4, 2013: Authorization of the Execution of a Purchase and Sale Contract for the Acquisition of Capital One Site

WHEREAS, the Housing Opportunities Commission of Montgomery County (“HOC”), a public body corporate and politic duly organized under Division II of the Housing and Community Development Article of the Annotated Code of Maryland, as amended, known as the Housing Authorities Law, and authorized thereby to effectuate the purpose of providing affordable housing, including providing for the acquisition, construction, rehabilitation and/or permanent financing or refinancing (or a plan of financing) of rental housing properties which provide a public purpose; and

and

WHEREAS, HOC, from time to time, acquires land in pursuit of new housing development;

WHEREAS, Capital One, N.A. (“Seller”) has offered for fee‐simple sale the 43,671‐square

foot site it owns at 10140 New Hampshire Avenue, Silver Spring, Maryland (“Capital One Site”); and

WHEREAS, HOC recognizes the benefits of acquiring the Capital One Site and the parties have entered into negotiations of a purchase and sale contract for the acquisition of the Capital One Site (“Contract”); and

WHEREAS, the proposed Contract provides for a purchase price of $1.7MM to be paid at closing; and

WHEREAS, the proposed Contract provides for an initial deposit of $85,000 (“Initial Deposit”) at the execution; and

WHEREAS, the Initial Deposit is fully refundable for the duration of the due diligence period outlined in the proposed Contract; and

WHEREAS, the Initial Deposit will be funded out of the Opportunity Housing Reserve Fund from monies yielded by the sale of certain scattered site units and reserved for investment in multifamily development opportunities.

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NOW, THEREFORE, BE IT RESOLVED that the Housing Opportunities Commission of Montgomery County:

1. Upon negotiation of final terms and conditions satisfactory to the Executive Director and Counsel, the Executive Director is authorized to execute the Contract for the purchase of the Capital One Site, and

2. Authorizes the Initial Deposit of $85,000 funded out of the Opportunity Housing

Reserve Fund to be deposited into an escrow account to be defined within the Contract as executed by the Executive Director.

I HEREBY CERTIFY that the foregoing Resolution was adopted by the Housing Opportunities Commission of Montgomery County at a regular meeting conducted on January 8, 2014.

S E Patrice M. Birdsong A Special Assistant to the Commission L

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Approval of GFP Residential Holdings, LLC Crane Swing Easement Agreement at Park Potomac

January 8, 2014

Foulger Pratt, through an affiliate, is constructing two high rise residential buildings in Park Potomac

To complete the construction with a minimum of interference with traffic and nearby uses, Foulger Pratt is installing a crane to swing materials and goods in and around the construction site

Adjacent property owners have been requested to provide easements to allow for the overswing of the crane above their property

HOC owns an MPDU in Park Potomac which is affected by the overswing

Foulger Pratt has requested that HOC execute an easement to allow the crane to swing over the property

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M E M O R A N D U M TO: Housing Opportunities Commission VIA: Stacy L. Spann, Executive Director FROM: Staff: Kenneth Tecler Division: Executive Ext. 9768 RE: Approval of GFP Residential Holdings, LLC Crane Swing Easement Agreement at Park Potomac DATE: January 8, 2014

STATUS: Consent x Deliberation Status Report Future Action OVERALL GOAL & OBJECTIVE: To provide an easement for a crane overswing to permit construction of a high rise building near an HOC owned MPDU. BACKGROUND: Foulger Pratt, through an affiliate GFP Residential Holdings, LLC, is constructing two high rise apartment buildings in Park Potomac, a community to the west of I-270 just north of Montrose Road. The area around the construction site is already occupied by many townhouses, parking lots and commercial uses. To avoid disturbances to traffic caused by movement of equipment and materials on local streets, Foulger Pratt plans to install a crane to move those items between sites and delivery vehicles. The swing of the crane will go in a circle over numerous properties near the construction site. Foulger Pratt is negotiating easements with each owner and homeowner associations to permit the use of airspace over the various properties. HOC owns an MPDU over which the crane is proposed to swing. An easement has been negotiated. The parties have agreed that no equipment or materials will pass over the HOC property, just the end of the crane. Foulger Pratt will provide insurance and a full indemnity for its use of the crane as part of the easement agreement which is proposed to last less than one year.

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HOC has granted crane swing easements in the past for other project, most recently at Metro Pointe. The affect of the crane swing itself on the property should be almost unnoticeable as it is not continuously in use and is relatively quiet in comparison to other construction noise. ISSUES FOR CONSIDERATION: Does the Commission desire to grant the easement for the use of the crane? PRINCIPALS: Foulger Pratt through an affiliate GFP Residential Holdings, LLC Housing Opportunities Commission BUDGET IMPACT: None TIME FRAME: The easement will last approximately 10 months STAFF RECOMMENDATION & COMMISSION ACTION NEEDED: Staff recommends approval of the crane swing easement

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RESOLUTION NO.: RE: Approval of GFP Residential Holdings, LLC Crane Swing Easement Agreement at Park Potomac WHEREAS, the Housing Opportunities Commission of Montgomery County owns an MPDU unit in Park Potomac; and WHEREAS, GFP Residential Holdings, LLC, (“GFP”), an affiliate of Foulger Pratt and an adjacent property owner is constructing two high rise apartment buildings in the vicinity of the Commission’s unit; and WHEREAS, GFP is proposing the use of a crane to swing materials and equipment between delivery equipment and the construction sites; and WHEREAS, the crane swing is proposed to go over the airspace of the unit owned by the Commission; and WHEREAS, a crane swing easement has been negotiated between the parties providing for the use of the air space above the unit for approximately 10 months with proper insurance and indemnifications to the Commission; and NOW, THEREFORE, BE IT RESOLVED by the Housing Opportunities Commission of Montgomery County that the Executive Director is authorized to execute a Crane Swing Easement granting GFP the use of a portion of the airspace above the unit owned by the Commission in Park Potomac on terms and conditions deemed satisfactory to the Executive Director and counsel. S E Patrice M. Birdsong A Special Assistant to the Commission L

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Information Exchange

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Updates and changes in RED January 8, 2014

Housing Opportunities Commission

of Montgomery County

January 2014

1 New Year’s Day Holiday (HOC Closed)

8 HOC Regular Meeting 4:00 p.m.

10 Information and Communication Committee (Banks) 12:30 p.m.

20 Martin Luther King, Jr. Day (HOC Closed)

21 Legislative and Regulatory Committee (Roman, Banks, Lindstrom) 2:00 p.m.

23 Development and Finance Committee (Lindstrom, Edson) 11:30 a.m.

27 Agenda Formulation (Piñero, Roman) 1:00 p.m.

27 Resident Advisory Board (Banks) 7:00 p.m.

February 2014

5 HOC Annual Meeting (HOC Annual Meeting Reception, 3:00 p.m.) 4:00 p.m.

17 President’s Day (HOC Closed)

18 Budget Finance and Audit Committee (2nd Quarter) (Kator, Piñero, Roman) 10:00 a.m.


21 Status/Lunch Meeting w/Executive Director (All)(Location TBD) 12:00 p.m.



March 2014


10-12 NAHRO Legislative Conference (Renaissance Hotel, Washington, DC)


18 Legislative and Regulatory Committee (Roman, Lindstrom, Banks) 2:00 p.m.




April 2014


10 Budget Finance and Audit Committee (Kator, Piñero, Roman) 10:00 a.m.


17 Budget, Finance and Audit Committee (Kator, Piñero, Roman) 10:00 a.m.


28 Agenda Formulation (Piñero, Lindstrom) 1:00 p.m.

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**changes/additions in red January 8, 2014

May 2014

1 Budget Finance and Audit Committee (Opportunity Housing) (Kator, Piñero, Roman) 10:00 a.m.

3 Housing Fair & Financial Fitness Day (Activity Center at Bohrer Park, Summit Hall Farm, 506 S.

Frederick Ave., Gaithersburg, MD 20877)


8 Budget Finance and Audit Committee (Mortg. Fin./Real Estate) (Kator, Piñero, Roman) 10:00 a.m.

9 Status/Lunch Meeting w/Executive Director (All)(Location TBD) 12:00 noon

13 Legislative and Regulatory Committee (Roman, Lindstrom, Banks) 2:00 p.m.


15 Budget Finance and Audit Committee (Wrap-up) (Kator, Piñero, Roman) 10:00 a.m.


20 Budget Finance and Audit Committee (Kator, Piñero, Roman) 10:00 a.m.

21-23 MAHRA Spring Conference

Activities of Interest Hearing Board

TBD

Joint Meeting with Commission on People with Disabilities

Dec. – Jan. (Edson)

TBD Joint Meeting with the Planning Board

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January 8, 2014

TO DO / ACTION

Ref. # DUE DATE ACTION STAFF STATUS

TD-286 First Quarter 2014 Rationale for HOC Managed Properties vs. Contract Managed (Kator, Commission Mtg., Jan. 11, 2012)

RM Status Report

TD-291 First Quarter 2014 Utility Consultation for Client Accounts (Kator – HOC Meeting, July 18, 2012)

JF/TC Status Report

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Committee Reports and

Recommendations for Action

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Budget, Finance

& Audit Committee

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ACCEPTANCE OF FIRST QUARTER FY’14 BUDGET TO ACTUAL STATEMENTS

January 8, 2014

The Agency ended the first quarter with a net cash deficit of $934,606 which was $603,156 more than anticipated.

The General Fund experienced lower than expected income and higher expenses in the first quarter.

At the end of the first quarter, the majority of unrestricted properties in the Opportunity Housing Fund exceeded budget expectations. As a whole, the group was close to meeting budget.

The Public Housing Program ended the quarter with a smaller than anticipated deficit as a result of savings in all major expenses categories.

The Housing Choice Voucher (HCV) Program had a smaller than anticipated administrative deficit through September 30, 2013 due to savings in expenses.

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M E M O R A N D U M TO: Housing Opportunities Commission VIA: Stacy L. Spann, Executive Director FROM: Staff: Gail Willison Division: Finance Ext. 9480 Terri Fowler Ext. 9507 Maria Montero Ext. 9612 RE: Acceptance of First Quarter FY’14 Budget to Actual Statements DATE: January 8, 2014 STATUS: Committee Report: Deliberation [X] OVERALL GOAL & OBJECTIVE: To assess the Agency's financial performance for FY’14. BACKGROUND: In accordance with the Commission's budget policy, the Executive Director will present budget to actual statements and amendments to the Budget, Finance and Audit Committee on a quarterly basis. The Budget, Finance and Audit Committee will review any proposed budget amendments and make a recommendation to the full Commission. ISSUES FOR CONSIDERATION: Does the Commission wish to accept the First Quarter FY’14 Budget to Actual Statements? BUDGET IMPACT: No amendments are being presented at this time. Future amendments will be presented to the Commission as necessary. TIME FRAME: The Budget, Finance and Audit Committee reviewed the First Quarter Budget to Actual Statements at the December 12, 2013 Committee meeting. Action is requested at the January 8, 2014 Commission meeting. STAFF RECOMMENDATION & COMMISSION ACTION NEEDED: To accept the First Quarter FY’14 Budget to Actual Statements.

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DISCUSSION – FIRST QUARTER BUDGET TO ACTUAL STATEMENTS This review of the Budget to Actual Statements for the Agency through the first quarter of FY’14 consists of an overall summary and additional detail on the Opportunity Housing properties, the Development Corporation properties, the Public Housing and Housing Choice Voucher (HCV) Programs and all Capital Improvements Budgets. HOC overall (see Attachment A) Please note the Agency’s Audited Financial Statements are presented on the accrual basis which reflects non‐cash items such as depreciation and the mark‐to‐market adjustment for investments. The Commission approves the Operating Budget at the fund level based on a modified accrual basis which is similar to how other governmental organizations present their budgets. The purpose is to ensure that there is sufficient cash income and short‐term receivables available to pay for current operating expenditures. The Commission approves the revenue and expenses and unrestricted net cash flow from operations for each fund. Unrestricted net cash flow in each fund is what is available to the Commission to use for other purposes. The Budget to Actual Comparison Summary Statement (Attachment A) shows unrestricted net cash flow or deficit for each of the funds. Attachment A also highlights the FY’14 First Quarter Capital Budget to Actual Comparison. The Agency ended the first quarter with a net cash deficit of $934,606 resulting in a negative variance of $603,156. The primary contributors to this negative variance were lower than anticipated income coupled with higher than anticipated expenses in the General Fund explained below, and slightly lower than expected income from a few properties in the Opportunity Housing portfolio (see Opportunity Housing Fund). Explanations of major variances by fund The General Fund consists of the basic overhead costs for the Agency. This fund ended the quarter with a deficit of $2,525,665, which resulted in a negative variance of $743,721. As of September 30, 2013, income in the General Fund was $244,091 less than budget. Loan Management Fees and Commitment Fees for the quarter were under budget as a result of delays in the refinancing plans for Old Towne Gaithersburg and Greenhills Apartments. In addition, Management Fee Income was lower than anticipated for the first quarter. Beginning in FY’14, HOC created a Central Office Cost Center (COCC) to track central office income and expenses related to federally funded programs. The management fees for Public Housing and the Housing Choice Voucher Program (HCVP) are now based on the Department of Housing and Urban Development (HUD) allowed fee schedules and charged to Public Housing based on occupancy and the HCV Program based on utilization. Both fees are lower than anticipated as a result of actual utilization resulting in less income in the COCC. The shortfall in revenue has been partially offset by the recognition of the majority of the cash that was earmarked in FY’13 to pay for the Retirement Incentive Program payouts that have occurred this fiscal year. A Retirement Incentive Program was implemented in April 2013 that allowed for an acceleration of changes in staffing and reduction in personnel expenses through voluntary means. At the time of implementation, staff informed the Commission that the Retirement Incentive Program would be self funded. During the third quarter FY’13, staff anticipated that the majority of the anticipated costs associated with implementing the program could be funded through FY’13 savings; however, the final decision date for participating in the program did not occur until after June 30. Therefore, the budget

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was not amended to account for this program. At year‐end, $1 million of cash was earmarked to cover the majority of the final costs for the Retirement Incentive Program. The balance of the costs will be covered by the anticipated personnel savings in FY’14. Expenses in the General Fund were $499,630 higher than budgeted at quarter‐end. The negative variance was primarily the result of the Retirement Incentive Program payouts explained above coupled with higher than anticipated Information Technologies’ maintenance contract expenses due to the acceleration of a planned project. It is not anticipated that either of these items will have a negative impact at year‐end. The Multifamily Bond Fund and Single Family Bond Fund are budgeted to balance each year. Both income (the bond draw downs that finance the operating costs for these funds) and expenses are in line with budget. The Opportunity Housing Fund Attachment B is a chart of the Development Corporation properties. This chart divides the properties into two groups. • The first group includes properties that we budgeted to provide unrestricted net cash flow toward

the Agency’s FY’14 Operating Budget. This group ended the quarter with cash flow of $2,169,637 or $565,118 greater than budget. It should be noted that we can only recognize revenue up to the amount budgeted for each property. All but three of the properties within this portfolio exceeded its budget for the quarter. However, when we exclude the extra income earned on those properties exceeding budget, the quarter’s recognizable cash flow is $1,594,750 or $9,769 below budget.

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Unrestricted Development Corporations

(3 Months) (3 Months) (3 Months) Budget Actual Variance Adjusted

Alexander House 390,983 440,704 49,721 (1) 390,983

The Barclay 19,066 28,905 9,839 (1) 19,066

Chevy Chase Lake 45,779 51,400 5,621 (1) 45,779

Magruder's Discovery 89,396 129,835 40,439 (1) 89,396

The Metropolitan 552,545 611,246 58,701 (1) 552,545

Montgomery Arms 76,799 140,337 63,538 (1) 76,799

TPM ‐ 59 MPDUs 20,236 47,894 27,658 (1) 20,236

Paddington Square 60,498 241,840 181,342 (1) 60,498

TPM ‐ Pomander Court 42,513 41,863 (650) 41,863

Pooks Hill High‐Rise 114,582 230,682 116,100 (1) 114,582

Scattered Site One Dev. Corp. 3,229 (5,215) (8,444) (5,215)

Scattered Site Two Dev. Corp. (8,409) 5,111 13,520 (1) (8,409)

Sligo Development Corp. 8,113 16,521 8,408 (1) 8,113

TPM ‐ Timberlawn 189,189 188,514 (675) 188,514 Subtotal 1,604,519 2,169,637 565,118 1,594,750

Recognizable Cash Flow (9,769)

Notes: (1) ‐ Properties exceeding budgeted cash flow.

• Alexander House exceeded budget by $49,721 largely due to lower concessions and vacancies

coupled with higher than anticipated parking income. Magruder’s Discovery ended the quarter with a $40,439 positive variance primarily driven by savings in maintenance expenses. Actual cash flow for The Metropolitan was $58,701 more than budget primarily due to savings in utility and maintenance expenses. In addition, income exceeded budget as a result of higher overall tenant income which was partially offset by lower non‐dwelling rental income due to two retail vacancies and a rent adjustment for one retail tenant. Montgomery Arms exceeded budget by $63,538 mainly as a result of savings in administrative expenses, utilities, and maintenance contracts. Paddington Square cash flow exceeded budget by $181,342 largely due to a delay in refinancing, resulting in lower debt service expense. This savings more than offset a loss in revenue due to higher vacancies at the property. Pooks Hill High‐Rise cash flow exceeded budget by $116,100, mainly due to lower than anticipated vacancy loss and savings in administrative, utility, and maintenance expenses.

• The second group consists of properties whose cash flow will not be used for the Agency’s FY’14

Operating Budget. Cash flow from this group of Development Corporation properties was $16,878 more than budgeted. Glenmont Crossing ended the quarter with a positive variance of $7,329 primarily as a result of higher than anticipated tenant income. Cash flow for Glenmont Westerly was $25,351 below budget as a result of higher than anticipated vacancies coupled with higher maintenance and tax expenses. The property was required to escrow real estate taxes based on

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prior assessments. A portion of the payments will be refunded once an assessment is made under HOC ownership. The refund will offset expense overages in the property’s financial performance. The Oaks at Four Corners exceeded budget by $34,863 resulting from higher rent potential as well as savings in administrative, utility, and maintenance expenses.

Attachment C is a chart of the Opportunity Housing properties. This chart divides the properties into two groups. • The first group consists of properties whose unrestricted net cash flow will be used for the Agency’s

FY’14 Operating Budget. This group ended the quarter with cash flow $339,691 or $187,829 greater than budget. As noted above for the Development Corporations, we can only recognize revenue up to the amount budgeted for each property. Many of the properties within this portfolio exceeded their budget for the quarter. However, when we exclude the extra income earned on those properties exceeding budget, the quarter’s recognizable cash flow is $111,453 or $40,409 below budget.

Unrestricted Opportunity Housing Properties

(3 Months) (3 Months) (3 Months) Budget Actual Variance Adjusted

64 MPDUs (4,932) 35,091 40,023 (1) (4,932)Chelsea Towers (38,711) (30,704) 8,007 (1) (38,711)Fairfax Court 27,578 36,544 8,966 (1) 27,578 Greenhills Apartments (8,089) 63,056 71,145 (1) (8,089)Holiday Park (70,457) (76,854) (6,397) (76,854)Jubilee Falling Creek (2,979) 2,053 5,032 (1) (2,979)Jubilee Hermitage (429) 2,794 3,223 (1) (429)Jubilee Woodedge (2,018) 3,899 5,917 (1) (2,018)McHome 18,437 32,898 14,461 (1) 18,437 McKendree (6,938) 12,804 19,742 (1) (6,938)MHLP II (989) (5,900) (4,911) (5,900)MHLP III (19,601) (6,126) 13,475 (1) (19,601)MHLP IV 0 (30) (30) (30)MPDU 2007 0 13 13 (1) 0 MPDU 2007 Phase II 8,121 4,191 (3,930) 4,191 Pooks Hill Mid‐Rise 36,587 74,821 38,234 (1) 36,587 Strathmore Court 216,282 191,141 (25,141) 191,141

Subtotal 151,862 339,691 187,829 111,453

Recognizable Cash Flow (40,409)Notes: (1) ‐ Properties exceeding budgeted cash flow.

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• Cash flow for 64 MPDUs was $40,023 more than budget primarily as a result of savings in administrative expenses, maintenance contracts and bad debt expense. Chelsea Towers exceeded budget for the quarter by $8,007 as a result of savings in Home Owner Association (HOA) fees and maintenance expenses. Fairfax Court had a positive variance of $8,966 mainly due to lower vacancies coupled with savings in maintenance contracts. Cash flow for Holiday Park was $6,397 below budget as a result of slightly higher vacancies coupled with higher maintenance contracts. Greenhills Apartments ended the quarter with a positive cash flow variance of $71,145 primarily due to savings in debt service expense from the delay in the refinancing plans for the property. Cash flow for McHome ended the quarter $14,461 above budget. The main reason for the positive variance was savings in Home Owner Association (HOA) fees and maintenance contracts. McKendree ended the quarter $19,742 above budget. Although the property experienced higher vacancies, the savings in utilities, administrative and maintenance expenses more than offset the loss in revenue. Please note that a very small amount of expenses, related to a couple of units that were previously part of MHLP IV and MPDU 2007 and are now consolidated into Scattered Site One Development Corporation, have been charged to the old properties and will be reclassed. In addition, MHLP II and MHLP III both have units remaining to be sold. The properties are experiencing higher than anticipated vacancies as the units are held for sale. However, savings in Home Owner Association (HOA) fees at MHLP III more than offset the higher vacancies experienced at the property resulting in a positive variance for the quarter. Pooks Hill Mid‐Rise had a positive cash flow variance of $38,234 through September driven by savings in administrative expenses due to staff vacancies and lower advertising costs as well as savings in utility and maintenance expenses. In addition, the property experienced higher than anticipated rents and lower vacancy losses for the quarter. Cash flow for Strathmore Court was $25,141 less than anticipated as a result of an earthquake insurance deductible and expenses related to a flooded unit that were not covered by insurance coupled with higher losses on the tax credit units.

• The second group consists of properties whose cash flow will not be used for the Agency’s FY’14 Operating Budget. Some of these properties have legal restrictions on the use of cash flow; others may have needs for the cash flow. Cash flow for this group of properties was $192,486 higher than budget for the quarter. The Ambassador had a positive cash flow variance of $39,311 mainly due to savings in administrative and utility expenses. Brookside Glen did not meet cash flow expectations for the quarter as a result of higher vacancies and concessions. Cash flow for Diamond Square ended the quarter $27,883 over budget. The main reason for this positive variance was savings in administrative, utility and maintenance expenses. Both the NCI and NSP Units are exceeding budget as a result of savings in maintenance expenses. It should be noted that the budgets for these units include a standard amount for maintenance related expenses. It is not anticipated that the savings will be realized at year‐end. Southbridge ended the quarter with cash flow $28,956 more than budget due to savings in anticipated administrative, utility, and maintenance expenses. Cash flow or State Rental Combined exceeded budget by $75,567 as a result of savings in Home Owner Association (HOA) fees and maintenance expenses. Westwood Towers had a negative variance of $28,860 primarily to higher vacancies coupled with higher than anticipated maintenance expenses.

The Public Fund (Attachment D) • The Public Housing Rental Program ended the quarter with a deficit of $29,053 which resulted in a

positive variance of $626,485 when compared to the projected deficit of $655,538. Income was $177,489 less than budget as a result of higher vacancies and a delay in the anticipated draws from interim financing to pay for capital improvements in the Portfolio. The shortfall in revenue was more than offset by savings in expenses of $803,974. Administrative expenses, utilities, and maintenance

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expenses were all under budget through quarter end. Management fee expenses, which are now based on occupancy, were lower for the first quarter as a result of the higher than anticipated vacancy (See General Fund). It should be noted that for FY’14, the majority of capital improvements in the Public Housing portfolio were budgeted in operations with funding via transfers from interim financing generated through the disposition of the scattered sites. It is anticipated that some of the planned maintenance improvements will occur by year‐end resulting in higher expenses and income as draws are made to cover the expenses.

• The Rental Assistance Program ended the quarter with a surplus of $579,907 which was $869,812

more than anticipated. The surplus was comprised of Housing Assistance Payments (HAP) revenue that exceeded HAP payments by $691,399 and an administrative deficit of $111,492. The HAP revenue will be restricted to the program for future HAP payments to landlords. The administrative deficit was $170,676 less than budgeted. The loss of administrative income due to lower than anticipated utilization, was more than offset by savings in expenses of $278,589. The savings in expenses were primarily due to savings in administrative salaries and benefits, and management fee expenses, which are now based on utilization (See General Fund).

Tax Credit Partnerships The Tax Credit Partnerships have a calendar year end. Quarterly budget to actual statements are reported to the Budget, Finance, and Audit Committee. The Capital Budget (Attachment E) Attachment E is a chart of the Capital Improvements Budget for FY’14. The chart is grouped in two sections – General Fund and Opportunity Housing properties. This report is being presented for information only. Most of the variances in the capital budgets are timing issues. As capital projects are long‐term, it is very difficult to analyze each project on a quarterly basis. We will keep the Commission informed of any major issues or deviations from the planned Capital Improvements Budget. Glenmont Crossing has exceeded its capital budget for the year as a result of unplanned asphalt repairs, sealcoat and striping that was completed at HOC’s request. The overage will be covered by budgeted funds from the Opportunity Housing Property Reserve Fund.

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9

Resolution No. Re: Acceptance of First Quarter FY’14 Budget to Actual Statements WHEREAS, the budget policy for the Housing Opportunities Commission of Montgomery County states that quarterly budget to actual statements will be reviewed by the Commission; and WHEREAS, the Commission reviewed the First Quarter FY’14 Budget to Actual Statements during its January 8, 2014 meeting. NOW, THEREFORE, BE IT RESOLVED by the Housing Opportunities Commission of Montgomery County that it hereby accepts the First Quarter FY’14 Budget to Actual Statements. Patrice Birdsong

Special Assistant to the Commission S E A L

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FY 14 First Quarter Operating Budget to Actual Comparison

(3 Months) (3 Months)Budget Actual Variance

General FundGeneral Fund ($1,781,944) ($2,525,665) ($743,721)

Administration of Mutlifamily and Single Family FundMultifamily Fund ($15,982) $4,085 $20,067Single Family Fund $487,754 $496,739 $8,985Excess Single Family Bond Fund Cash Flow ($487,754) ($496,739) ($8,985)

Opportunity Housing FundOpportunity Housing Properties $151,862 $111,453 ($40,409)Development Corporation Property Income $1,604,519 $1,594,750 ($9,769)

OHRFOHRF Balance $1,441 ($173,438) ($174,879)Excess Cash Flow Restricted ($1,441) $0 $1,441Draw from existing funds $0 $173,438 $173,438

Net ‐OHRF $0 $0 $0

SUBTOTAL ‐General Fund, Multifamily, Single Family, Opportunity Housing ($41,545) ($815,377) ($773,832)

Public Fund

Public Housing Rental (1) ($655,538) ($29,053) $626,485Housing Choice Voucher Program HAP (2) ($7,737) $691,399 $699,136Housing Choice Voucher Program Admin (3) ($282,168) ($111,492) $170,676

Total ‐Public Fund ($945,443) $550,854 $1,496,297

Public Fund ‐ Reserves(1) Public Housing Rental ‐ Restricted to Program $655,538 $29,053 ($626,485)(2) Draw from HCV Program Cash Reserves $0 ($699,136) ($699,136)(3) Restrict HCV Program Excess Admin Fee $0 $0 $0

Total ‐Public Fund Reserves $655,538 ($670,083) ($1,325,621)

SUBTOTAL ‐ Public Funds ($289,905) ($119,229) $170,676

TOTAL ‐ All Funds ($331,450) ($934,606) ($603,156)

FY 14 First Quarter Capital Budget to Actual Comparison

(12 Months) (3 Months) VarianceBudget Actual

General FundEast Deer Park $36,000 $2,315 $33,685Kensington Office $464,725 $25,240 $439,485Information Technology $1,387,100 $354,171 $1,032,929

Opportunity Housing Fund $5,449,406 $622,228 $4,827,178

TOTAL ‐ All Funds $7,301,231 $1,001,639 $6,299,592

Unrestricted Net Cash Flow

Capital Expenses

Attachment A33

FY 14 First Quarter Operating Budget to Actual ComparisonFor Development Corp Properties ‐ Net Cash Flow

(3 Months) (3 Months)Budget Income Expense Actual Variance

Properties with unrestricted cash flow for FY14 operating budgetAlexander House 390,983 51,354 (1,633) 440,704 49,721The Barclay 19,066 (26,945) 36,784 28,905 9,839Chevy Chase Lake 45,779 6,121 (501) 51,400 5,621Magruder's Discovery 89,396 4,228 36,211 129,835 40,439The Metropolitan 552,545 10,967 47,734 611,246 58,701Montgomery Arms 76,799 3,872 59,667 140,337 63,538TPM ‐ 59 MPDUs 20,236 3,452 24,206 47,894 27,658Paddington Square 60,498 (48,901) 230,244 241,840 181,342TPM ‐ Pomander Court 42,513 (1,979) 1,329 41,863 (650)Pooks Hill High‐Rise 114,582 45,323 70,777 230,682 116,100Scattered Site One Dev. Corp. 3,229 (12,506) 4,061 (5,215) (8,444)Scattered Site Two Dev. Corp. (8,409) (13,658) 27,178 5,111 13,520Sligo Development Corp. 8,113 (3,109) 11,517 16,521 8,408TPM ‐ Timberlawn 189,189 (25,027) 24,352 188,514 (675)

Subtotal 1,604,519 (6,808) 571,926 2,169,637 565,118

Properties with restricted cash flow (external and internal)Glenmont Crossing 76,451 9,658 (2,329) 83,780 7,329Glenmont Westerly 106,444 (11,188) (14,163) 81,093 (25,351)MetroPointe (45,370) (7,651) 7,688 (45,333) 37Oaks at Four Corners 33,393 3,731 31,132 68,256 34,863

Subtotal 170,918 (5,450) 22,328 187,796 16,878

TOTAL ALL PROPERTIES 1,775,437 (12,258) 594,254 2,357,433 581,996

Variance

Attachment B34

FY 14 First Quarter Operating Budget to Actual ComparisonFor Opportunity Housing Properties ‐ Net Cash Flow


Properties with unrestricted cash flow for FY13 operating budget64 MPDUs (4,932) 2,134 37,890 35,091 40,023Chelsea Towers (38,711) 312 7,695 (30,704) 8,007Fairfax Court 27,578 3,579 5,387 36,544 8,966Greenhills (8,089) (14,874) 86,019 63,056 71,145Holiday Park (70,457) (1,595) (4,802) (76,854) (6,397)Jubilee Falling Creek (2,979) 2,067 2,965 2,053 5,032Jubilee Hermitage (429) (628) 3,852 2,794 3,223Jubilee Woodedge (2,018) 234 5,683 3,899 5,917McHome 18,437 (1,210) 15,671 32,898 14,461McKendree (6,938) (6,311) 26,053 12,804 19,742MHLP II (989) (6,863) 1,952 (5,900) (4,911)MHLP III (19,601) (9,979) 23,454 (6,126) 13,475MHLP IV 0 0 (30) (30) (30)MPDU 2007 0 0 13 13 13MPDU 2007 Phase II 8,121 1,146 (5,075) 4,191 (3,930)Pooks Hill Mid‐Rise 36,587 4,904 33,331 74,821 38,234Strathmore Court 216,282 (3,149) (21,992) 191,141 (25,141)

Subtotal 151,862 (30,233) 218,066 339,691 187,829

Properties with restricted cash flow (external and internal)The Ambassador 51,485 241 39,070 90,796 39,311Brookside Glen (The Glen) 82,341 (21,393) 8,445 69,393 (12,948)CDBG Units (6,093) 2,690 5,009 1,606 7,699Dale Drive 1,173 (23) 11,212 12,362 11,189Diamond Square 25,185 146 27,737 53,068 27,883NCI Units (28,226) 1,029 31,560 4,363 32,589NSP Units (14,220) 938 16,670 3,387 17,607Paint Branch 2,650 (4,602) (1,905) (3,857) (6,507)Southbridge 55,568 673 28,282 84,524 28,956State Rental Combined (58,679) (14,083) 89,650 16,888 75,567Westwood Tower 72,020 (27,454) (1,405) 43,160 (28,860)

Subtotal 183,204 (61,838) 254,325 375,690 192,486

TOTAL ALL PROPERTIES 335,066 (92,071) 472,391 715,381 380,315

Variance

Attachment C35

FY 14 First Quarter Operating Budget to Actual ComparisonFor HUD Funded Programs


Public Housing RentalRevenue 2,933,589 2,756,100 (177,489)Expenses 3,589,127 2,785,153 803,974

Net Income (655,538) (29,053) 626,485

Housing Choice Voucher ProgramHAP revenue 19,299,880 20,608,061 1,308,181

HAP payments 19,307,617 19,916,662 (609,045)Net HAP (7,737) 691,399 699,136

Admin.fees & other inc. 1,455,503 1,347,590 (107,913)Admin. Expense 1,737,671 1,459,082 278,589

Net Administrative (282,168) (111,492) 170,676

Net Income (289,905) 579,907 869,812

Attachment D36

FY 14 First Quarter Operating Budget to Actual ComparisonFor Public Housing Rental Programs ‐ Net Cash Flow


Elizabeth House (70,509) (9,900) 114,605 34,196 104,705Holly Hall (69,206) (500) 89,148 19,442 88,648Arcola Towers (65,663) (1,423) 99,179 32,094 97,757Waverly House (46,840) (405) 56,672 9,427 56,267Seneca Ridge (50,760) (23,778) 21,795 (52,742) (1,982)Emory Grove / Washington Square (141,091) (56,013) 163,808 (33,296) 107,795Towne Centre Place / Sandy Spring Meadow (85,254) (37,514) 101,004 (21,763) 63,491Ken Gar / Parkway Woods (24,397) (19,566) 2,672 (41,291) (16,894)Scattered Sites Central (36,168) (4,240) 9,349 (31,060) 5,108Scattered Sites East 1,108 (8,228) 42,483 35,363 34,255Scattered Sites Gaithersburg (12,810) (2,541) 41,057 25,706 38,516Scattered Sites North (1,918) (14,401) 36,084 19,765 21,683Scattered Sites West (44,439) (4,152) 32,583 (16,009) 28,430Resident Services (7,591) 5,171 (6,465) (8,885) (1,294)

TOTAL ALL PROPERTIES (655,538) (177,490) 803,974 (29,053) 626,485

Variance

Attachment D-137

FY 14 First Quarter Capital Budget to Actual ComparisonFor Capital Improvements


General FundEast Deer Park 36,000 2,315 33,685Kensington Office 464,725 25,240 439,485Information Technology 1,387,100 354,171 1,032,929

Subtotal 1,887,825 381,726 1,506,099

Opportunity HousingAmbassador 78,612 18,784 59,828Alexander House 263,890 44,172 219,718The Barclay 61,976 1,432 60,544Brookside Glen (The Glen) 78,200 5,432 72,768CDBG Units 0 0 0Chelsea Towers 13,720 520 13,200Chevy Chase Lake 148,950 29,350 119,600Dale Drive 4,870 18 4,852Diamond Square 393,850 23,245 370,605Fairfax Court 13,500 0 13,500Glenmont Crossing 120,885 73,961 46,924Glenmont Waverly 67,624 104,481 (36,857)Greenhills 37,325 10,994 26,331Holiday Park 30,470 0 30,470Jubilee Falling Creek 4,000 0 4,000Jubilee Hermitage 5,178 0 5,178Jubilee Woodedge 3,600 0 3,600Magruder's Discovery 30,635 0 30,635McHome 120,359 451 119,908McKendree 93,600 0 93,600MetroPointe 43,413 3,900 39,513The Metropolitan 235,998 11,472 224,526Montgomery Arms 174,000 1,914 172,086MPDU 2007 Phase II 0 0 064 MPDUs 263,875 2,738 261,137TPM ‐ 59 MPDUs 234,356 27,152 207,204Oaks at Four Corners 256,858 12,112 244,746NCI Units 0 0 0NSP Units 0 0 0Paddington Square 58,393 13,880 44,513Paint Branch 28,480 760 27,720TPM ‐ Pomander Court 39,220 625 38,595Pooks Hill High‐Rise 796,800 37,960 758,840Pooks Hill Mid‐Rise 202,600 23,580 179,020Scattered Site One Dev. Corp. 357,300 34,196 323,104Scattered Site Two Dev. Corp. 27,250 0 27,250Southbridge 2,800 2,221 579Sligo Development Corp. 183,950 7,389 176,561State Rental Combined 329,344 33,711 295,633Strathmore Court 272,925 42,435 230,490TPM ‐ Timberlawn 46,220 8,264 37,956Westwood Tower 324,380 45,079 279,301

Subtotal 5,449,406 622,228 4,827,178

TOTAL 7,337,231 1,003,954 6,333,277

Attachment E 38 Top24 Pg1

Development &

Finance Committee

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APPROVAL OF A REFINANCING PLAN FOR PADDINGTON SQUARE APARTMENTS

JANUARY 8, 2014

• Paddington Square Apartments (the “Property”), built in 1960, consists of 165

apartments and is located on an eight acre parcel in the Rosemary Hills neighborhood in Silver Spring. The Property underwent a comprehensive renovation between 2005 and 2011.

• In December 2011, the Commission approved retiring the Property’s first mortgage in the amount of $7,495,489, using the HOC line of credit with PNC Bank, N.A (“PNC Bank”).

• In November 2012, the Commission redeemed the outstanding $5,698,800 of tax exempt bonds, which facilitated the acquisition of the Property, and refinanced the same amount on an interim basis utilizing the HOC line of credit with PNC Bank.

• While staff explored several options for providing permanent financing for the Property, staff had to solve the Property’s inability to achieve 93% sustained occupancy or better. Staff considered a bond financing option with mortgage insurance under the FHA Risk Sharing Program, an interest only bond structure proposed by PNC Bank, and an FHA Section 223(f) taxable Government National Mortgage Association (GNMA) product.

• The FHA Section 223(f) GNMA execution was compared to a 223(f) tax‐exempt bond execution and, in today’s market, the GNMA transaction costs are considerably less. The GNMA execution also maximizes the loan amount available and allows HOC to retire almost 70% of the existing debt on the Property.

• Staff has identified Love Funding Corporation, a Multifamily Accelerated Processing (MAP) Lender and GNMA issuer with headquarters in Washington, DC to work with staff on a HUD application for Section 223(f) mortgage insurance.

• Staff presented its findings to the Development and Finance Committee at its December 19, 2013 meeting with a request that the Committee recommend to the Commission the following: 1) an approval of the proposed refinancing plan to obtain a FHA 223(f) GNMA backed mortgage that is projected to yield approximately $19.14 million of loan proceeds; and, 2) an approval of utilizing the Property’s savings in Debt Service in the FY14 budget for preliminary transaction costs of up to $75,000. Final loan proceeds and interest rate will be determined when the FHA Firm Commitment and Rate Lock are received.

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M E M O R A N D U M TO: Housing Opportunities Commission VIA: Stacy Spann, Executive Director FROM: Staff: Brown/Benjamin/Arrington Ext. 9589/9590/9760 Division: Mortgage Finance RE: Approval of a Refinancing Plan for Paddington Square Apartments DATE: January 8, 2014 STATUS: COMMITTEE REPORT: Deliberation X _ OVERALL GOAL & OBJECTIVE: To obtain the Commission’s approval of a Refinancing Plan for Paddington Square Apartments. BACKGROUND: Paddington Square Apartments (the “Property”) was built in 1960 and sits on 7.94 acres located north of East West Highway on Lanier Drive in the Rosemary Hills neighborhood. The Property consists of three large three‐story walk‐up brick structures with 15 entrance stairwells, containing a total of 165 units. Of the total units, 153 are two‐bedrooms, and 12 are three‐bedrooms. The community includes a swimming pool, bathhouse, community room, and 184 surface parking spaces. Within walking distance are the Gwendolyn E. Coffield Recreation Center and park, playgrounds, tennis courts and Rosemary Hills Elementary School. The property is within the Bethesda‐Chevy Chase Senior High School district. In February 2004, the Property was acquired by Paddington Square Development Corporation for $13,600,000. HOC financed the acquisition by assuming the first mortgage ($7.5 million), issuing an additional $5.6 million in tax‐exempt bonds, and borrowing $500,000 from the Department of Housing & Community Affairs (DHCA or “the County) Housing Initiative Fund (HIF). At the time of acquisition, the Property was poorly maintained, and staff received the Commission’s approval in September 2004 to conduct a renovation of the Property. The renovation totaled $5.7 million ($34,000/unit) and included electrical upgrades, replacement of all HVAC systems and central water heaters, roof replacements and common area/site improvements. Several sources were used to finance this work: $3 million from the County

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Revolving Fund, $3 million on a Line of Credit with M&T Bank, and $1.1 million from the Opportunity Housing Revenue Fund (OHRF). In March 2006, the Commission approved refinancing the $3 million draw on M&T’s Line of Credit with a fixed rate loan from Wachovia Bank, N.A. In March 2009, the Commission approved a second phase of the rehabilitation to include replacement of windows, extensive brickwork, unit interior upgrades, and additional common area improvements. This work totaled $6.1 million ($37,000/unit) for a combined renovation of $11.7 million ($71,000/unit). To finance the second phase of renovation, an additional $500,000 from the OHRF was committed, and DHCA increased the existing HIF loan by $8.6 million for a total of $9.1 million. Of these loan proceeds, $3 million was used to retire the fixed rate loan with Wachovia Bank. The DHCA HIF loan begins to accrue interest at a rate of 1% per annum commencing March 1, 2014. Repayment commences July 1, 2015 and on the anniversary date each year thereafter at the lesser of 1% amortization of the HIF loan balance over 24 years or 50% of cash flow until July 1, 2039, when the unpaid balance of the loan will be due and payable. In July 2010, the Commission approved an amendment to the second phase of renovation to include additional work discovered during the course of demolition, and increased the second phase OHRF commitment by $1.2 million for a total commitment of $2.8 million. Table 1 summarizes the activity of investment between 2004 and 2010: TABLE 1 ‐ FUNDING SOURCES 2004 2006 2009 2010 TOTALFIRST MORTGAGE ‐ PRUDENTIAL REMIC LOAN 7,495,489 7,495,489 TAX EXEMPT BONDS 5,698,800 5,698,800 DHCA HIF 500,000 8,644,092 9,144,092 COUNTY REVOLVING FUND 3,000,000 3,000,000 M&T BANK LINE OF CREDIT 3,000,000 (3,000,000) ‐ OHRF 1,137,102 500,000 1,203,240 2,840,342 WACHOVIA BANK 3,000,000 (3,000,000) ‐

TOTAL FUNDING SOURCES 20,831,391 ‐ 6,144,092 1,203,240 28,178,723

In December 2011, the Commission approved retiring the first mortgage, a REMIC loan with Prudential, using the HOC Line of Credit with PNC Bank, N.A., and in November 2012, the Commission approved to redeem the outstanding $5.7 million of tax exempt bonds, and refinance the amount on an interim basis, again, utilizing the PNC Bank Line of Credit.

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As of November 30, 2013, the Property’s total outstanding debt/equity is $27,783,649. Table 2 below provides the list of sources: TABLE 2 ‐ OUTSTANDING DEBT /EQUITY TOTALLINE OF CREDIT ‐ PNC (FORMER REMIC LOAN) 6,371,991 LINE OF CREDIT ‐ PNC (FORMER TE BONDS) 5,291,375 DHCA HIF 9,144,902 COUNTY REVOLVING FUND 3,000,000 OHRF 2,310,140

GENERAL FUND DUE TO/DUE FROM HOC1 1,665,240 TOTAL OUTSTANDING DEBT/EQUITY AS OF 11/30/2014 27,783,649 1The General Fund Due to/Due From HOC account is the balance owed to HOC after operational expenses are paid from HOC’s General Fund.

Public Purpose The covenants restrict 40% or 67 units for persons of low and moderate incomes. Of the 67 units, 53 units are restricted to households whose incomes do not exceed 60% AMI and 14 units to those whose incomes do not exceed 50% AMI. Currently, the property is meeting its compliance requirements. Only one unit is vacant of the 60% AMI units and all 50% AMI units are occupied. Refinancing Options Staff has explored several options for providing permanent financing for this transaction. The most significant challenge with refinancing the Property is its historical occupancy. The property has yet to achieve 93% sustained occupancy or better, a requirement for most loan products. For the Property’s historical occupancy, please see Table 3 below:

TABLE 3 – HISTORIC OCCUPANCYJan‐13 Feb‐13 Mar‐13 Apr‐13 May‐13 Jun‐13 88.5% 88.5% 89.6% 90.3% 92.1% 91.5%

Jul‐13 Aug‐13 Sep‐13 Oct‐13 Nov‐13 Average 89.1% 85.5% 88.5% 89.1% 90.3% 89.4%

In addition, as Table 2 illustrates, the property has significant soft and hard debt from various sources, totaling $27.8 million. Therefore, the goal of the refinancing is to retire the maximum amount of debt as possible.

Staff explored several financing options:

1. FHA Risk Sharing, 30‐year fixed rate mortgage; 2. PNC Interest Only Bond Structures; and, 3. FHA Section 223(f) taxable GNMA product.

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5

1. FHA Risk Sharing – Staff considered a bond refinancing with mortgage insurance under the FHA Risk Sharing Program. In order to qualify for a fixed‐rate financing with FHA Risk Sharing mortgage insurance, the Property will need to meet the necessary 93% occupancy requirement at a consistent level, which is typically 12 months. The Property has stabilized at 90% occupancy.

3. PNC Proposal – Staff reviewed options presented by PNC that assumed interest only bond structures with a bullet maturity at five or seven years. However, the scenarios assumed that the debt would be secured by HOC’s General Obligation Pledge, which both staff and HOC’s financial adviser, Caine Mitter, did not support.

4. FHA Section 223(f) – In June 2013, staff issued a Request for Qualification for Approved Multifamily Accelerated Processing (MAP) Lenders. Love Funding Corporation with headquarters in Washington, DC was selected to work with staff on a HUD application for Section 223(f) mortgage insurance. Love Funding is a fully‐approved HUD MAP and LEAN (healthcare programs) Lender, and a Government National Mortgage Association (GNMA) or “Ginnie Mae” issuer, having a GNMA license and its own GNMA trader based in New York. Love Funding services all its loans through Heartland Bank. Some features of the acquisition or refinance 223(f) product are as follows:

• Non‐recourse • 35‐year loan term • Average physical occupancy of at least 85% for six‐months • Maximum 85% LTV for affordable projects • 1.176 DCR • Subordinate debt allowed; cannot have lien and repayment based on cash flow

Caine Mitter has reviewed the Love Funding proposal and recommends proceeding on the condition that the engagement of Love Funding does not preclude HOC’s ability to go back to the bond market to explore alternative structures over the next several weeks.

In today’s market, if HOC were to issue its bonds in lieu of the Ginnie Mae for the 223(f), transactional costs would be considerably higher (cost of issuance, additional legal fees, increased interest rate), which would shrink the amount of loan available and decrease the debt that could be paid off.

Table 4 provides a comparison of the GNMA and tax‐exempt bond executions. In each execution, staff’s underwriting assumes 75 bps above current interest rates for the various products and occupancy of 85%, given that Rate Lock would not occur until May/June 2014. While the property has been averaging 90% occupancy for the past 12 months, given the property’s history since its purchase, staff has taken a conservative approach in its analysis.

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TABLE 4 ‐ GNMA vs. TE BONDSSection 223(f)

(GNMA)Section 223(f)

(Tax Exempt Bonds)Loan Term in Years 35 35Amortization Term in Years 35 35Loan Amount $19,139,513 $16,465,836

4.85% 6.20%

MIP 0.60% 0.60%

Underwritten Interest Rate1,2

Minimum DSC 1.1766 1.1766LTV 85% 85%Prepayment in Years 7 7

Minimum Pre‐Payment Penalty Fee3 none noneLock out 7 7 Financing CostsGNMA Commitment Fee ($4,100) ($3,500)Placement Fee $0 $0FHA Processing Fee ($5,000) ($5,000)

Cost of Issuance 4 $0 ($329,317)

Finance Fee 5 ($191,395) ($164,658)HUD Examination Fee ($57,419) ($49,398)Lender Legal Fee ($20,000) ($30,000)Mortgage Insurance Premium ($191,395) ($164,658)Financing Costs Total ($469,309) ($746,531)

1As of 12/6/13, 40‐year GNMA is 3.85%+0.75% cushion+0.25% servicing fees; rate will be established upon receipt of HUD Firm Commitment and Rate Lock.

2As of 12/6/13, the 40‐year tax‐exempt bond rate is 5.45%+0.75% cushion+0.25% servicing fees. 3FHA 223(f) is typically a 10‐year lock out; negotiated a 7‐year lock out which will add ~50 bps to fixed interest rate; pricing will be established upon Rate Lock. 4Fee of 2% earned by HOC. 5Fee of 1% earned by Lender.

The 223(f) GNMA execution maximizes the loan amount available and allows HOC to

retire almost 67% of the existing debt on the property. Please see Table 5 below.

TABLE 5 ‐ OUTSTANDING DEBT /EQUITY

TOTALOUTSTANDING DEBT/EQUITY

TOTAL DEBT RETIRED(GNMA)

TOTAL DEBT RETIRED

(TE BONDS)LINE OF CREDIT ‐ PNC (FORMER REMIC LOAN) 6,371,991 6,371,991 6,371,991 LINE OF CREDIT ‐ PNC (FORMER TE BONDS) 5,291,375 5,291,375 5,291,375 DHCA HIF 9,144,902 3,841,298 708,443 COUNTY REVOLVING FUND 3,000,000 3,000,000 3,000,000 OHRF 2,310,140 GENERAL FUND DUE TO/DUE FROM 1,665,240

TOTAL DEBT RETIRED 27,783,649 18,504,665 15,371,810 Staff has completed a sensitivity analysis based upon occupancy and fluctuating interest rates to gain an understanding of how these factors impact the maximum loan amount and the amount of debt the transaction will be able to retire. Please see Table 6 below.

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85% 86% 87% 88% 89% 90%INTEREST RATE

4.00%+0.60% MIP $21,174,240 $21,595,844 $22,017,448 $22,439,052 $22,860,657 $23,282,261

4.25%+0.60% MIP $20,543,914 $20,952,968 $21,362,021 $21,771,075 $22,180,129 $22,589,182

4.50%+0.60% MIP $19,940,748 $20,337,792 $20,734,836 $21,131,879 $21,528,923 $21,925,967

4.75%+0.60% MIP $19,363,459 $19,749,008 $20,134,558 $20,520,107 $20,905,657 $21,291,206

5.00%+0.60% MIP $18,810,821 $19,185,367 $19,559,912 $19,934,458 $20,309,004 $20,683,550

5.25%+0.60% MIP $18,281,660 $18,645,670 $19,009,679 $19,373,689 $19,737,698 $20,101,708

4.00%+0.60% MIP $20,456,236 $20,860,734 $21,265,231 $21,669,729 $22,074,226 $22,478,724

4.25%+0.60% MIP $19,851,486 $20,243,942 $20,636,399 $21,028,855 $21,421,311 $21,813,767

4.50%+0.60% MIP $19,272,794 $19,653,727 $20,034,661 $20,415,595 $20,796,529 $21,177,462

4.75%+0.60% MIP $18,718,929 $19,088,834 $19,458,740 $19,828,646 $20,198,551 $20,568,457

5.00%+0.60% MIP $18,188,714 $18,548,063 $18,907,411 $19,266,750 $19,626,108 $19,985,456

5.25%+0.60% MIP $17,681,025 $18,030,264 $18,379,504 $18,728,744 $19,077,983 $19,427,223

TABLE 6 ‐ SENSITIVITY ANALYSISOCCUPANCY

MAX LOAN AMOUNT

TOTAL DEBT PAYMENT

Refinancing Plan Given the above analysis of financing options, the Property will be able to refinance almost 70% of its existing debt by insuring a loan through the Section 223(f) mortgage insurance program. The loan will be financed through the issuance of Ginnie Mae Mortgage Backed Securities. Estimated loan proceeds are $19,139,513 with a 35‐year amortization and an allowable seven‐year prepayment without penalty, which allows the Commission to consider and implement alternate strategies in the future. At 85% occupancy, the Property’s operating budget is anticipated to produce $1,491,194 in net operating income during the first stabilized year (FY15). This will support a new 35‐year mortgage with a 1.19:1 debt service coverage, assuming a 4.85% interest rate or 5.45% including the Mortgage Insurance Premium. The loan proceeds will be used in part to retire $18.5 million in outstanding debt that supported the acquisition and renovation of the property. An additional $1,087,827 will fund financing and closing costs. Please see the attached Project Summary (page 12) for a Sources & Uses breakdown. Staff will return to the Commission with final Sources & Uses for Commission’s approval upon receipt of a HUD Firm Commitment, which is anticipated to be June 4, 2014.

7

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Preliminary Budget In advance of submitting the 223(f) application, the Property will incur transactional costs. Below in Table 7 is a Preliminary Budget of those expenses, including the recommended source to fund those costs. These costs are included in the proforma and will be refunded at loan closing. TABLE 7 – PRELIMINARY BUDGET AMOUNT SOURCE Third Party Reports (appraisal, PNA, Phase I) $21,000 Property’s Replacement Reserve account; qualified

capital expenditure; due upon receipt and approval of bid from Lender (1/2014)

Loan Processing Fee $5,000 Property’s Operating Account; due upon engagement (1/2014)

FHA Application Fee (0.3% of loan) $57,419 Property’s Operating Account; due upon application submittal (5/2014)

The expenses are proposed to be paid from Replacement Reserve funds and Debt Service savings in FY14 (year to date estimate to be $390,000). ISSUES FOR CONSIDERATION: Does the Commission wish to accept the recommendation of the Development and Finance Committee to approve the Refinancing Plan for Paddington Square Apartments? PRINCIPALS: Housing Opportunities Commission Paddington Square Development Corporation Love Funding Corporation BUDGET IMPACT: None for FY14. Adjustments to be made to FY15 budget. The transaction is anticipated to close in early FY15. Upon engagement, HOC is expected to advance fees associated with third party expenses ($21,000) and loan processing ($5,000) and, upon firm application, an FHA Application Fee (0.30% of loan amount. TIME FRAME: Action at the January 8, 2014 meeting of the Commission. STAFF RECOMMENDATION & COMMISSION ACTION NEEDED: Staff recommends that the Commission accept the recommendation of the Development and Finance Committee and approve the Refinancing Plan for Paddington Square Apartments. The plan proposes to obtain a 223(f) GNMA backed mortgage that is projected to yield approximately $19.14 million of loan proceeds at 5.45% amortized over 35 years. Final loan proceeds and interest rate will be determined at HUD Firm Commitment and Rate Lock.

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Staff further recommends that the Commission accept the recommendation of the Development and Finance Committee and approve utilizing the Property’s savings in Debt Service in the FY14 budget for preliminary transactional costs of up to $75,000.

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RESOLUTION: RE: Approval of a Refinancing Plan for Paddington Square Apartments

WHEREAS, Paddington Square Apartments (the “Property”) is a 165‐unit apartment

community located at 8800 Lanier Drive in Silver Spring, Maryland which was acquired by the Paddington Square Development Corporation, an entity wholly controlled by the Commission, in 2004; and

WHEREAS, the Commission is the asset manager for Paddington Square Development

Corporation and in that capacity has been considering various options for permanent financing for the Property; and

WHEREAS, the Property underwent a comprehensive renovation between 2005 and

2011; and

WHEREAS, on December 7, 2011, the Commission approved retirement of the Property’s first mortgage in the amount of $7,495,489, using the Commission line of credit with PNC Bank, N.A.; and

WHEREAS, on November 7, 2012, the Commission approved redemption of the

outstanding $5,698,800 tax exempt bonds, which facilitated the acquisition of the Property, and refinancing of the same amount on an interim basis utilizing the Commission line of credit with PNC Bank, N.A.; and

WHEREAS, the Property has been unable to achieve sustained occupancy of 93% or

better for a consecutive 12‐month period; and WHEREAS, as of November 30, 2013, the Property has outstanding debt from various

soft and hard sources totaling $27,783,649, excluding it from financing under the FHA Risk Sharing Program; and

WHEREAS, a variety of options for permanent financing for the Property has been

explored including a bond financing option with mortgage insurance under the FHA Risk Sharing Program, several interest only bond structures proposed by PNC Bank, N.A., and a proposal from Love Funding Corporation for an FHA Section 223(f) taxable Government National Mortgage Association (GNMA or “Ginnie Mae”) product; and

WHEREAS, after review of the options for refinancing the Property, it appears that a

FHA Section 223(f) GNMA execution offers the best approach available to the Commission as shown in the refinancing plan dated January 8, 2014 (the “Refinancing Plan”) presented to the Commission.

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NOW, THEREFORE, BE IT RESOLVED by the Housing Opportunities Commission of Montgomery County that the Refinancing Plan for Paddington Square Apartments is hereby approved and the Executive Director is authorized to:

1. Engage Love Funding Corporation to seek and obtain a firm commitment from the U.S. Department of Housing and Urban Development (“HUD”) to insure, by way of the Section 223(f) program, a permanent mortgage loan by the issuance of Ginnie Mae Mortgage Backed Securities; and,

2. Utilize the Property’s savings in debt service in FY14 budget for preliminary transaction costs of up to $75,000.

BE IT FURTHER RESOLVED that, upon receipt of a HUD Firm Commitment, to include final loan amount and interest rate, a final Sources and Uses is to be considered by the Commission prior to finalizing the financing transaction for Paddington Square Development Corporation. I HEREBY CERTIFY that the foregoing resolution was adopted by the Housing Opportunities Commission at a regular meeting conducted on January 8, 2014. S E Patrice M. Birdsong A Special Assistant to the Commission L

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PADDINGTON SQUARE APARTMENTS PROJECT SUMMARY

I. PROJECT INFORMATION 1. Project Name: Paddington Square Apartments 2. Location: 8800 Lanier Drive, Silver Spring, Maryland 20910 3. Owner: Paddington Square Development Corporation 4. Property Manager: Equity Management

5. Unit Mix and Rent Schedule:

UNIT TYPE

TOTAL UNITS

UNIT SIZE S.F.

MARKET UNITS

MARKET RENT

≤60% UNITS

≤60% AMI RENT

≤50% UNITS

≤50% AMIRENT

2 BR 153 953 92 $1,519 48 $1,395 14 $1,207 3 BR 12 1,100 6 $1,785 5 $1,674 0 $1,395

TOTAL 165 98 53 14

6. Current Occupancy: 90%. 12‐month average – 89.4% 7. Lease Expiration:

Jan‐14 Feb‐14 Mar‐14 Apr‐14 May‐14 Jun‐14

# of Units/Month 2.00 5.00 4.00 2.00 4.00 1.00

Cumulative Total 2.00 7.00 11.00 13.00 17.00 18.00

Jul‐14 Aug‐14 Sep‐14 Oct‐14 Nov‐14 Dec‐14

# of Units/Month 5.00 4.00 6.00 3.00 4.00 2.00

Cumulative Total 23.00 27.00 33.00 36.00 40.00 42.00

According to Equity Management, it is anticipated that 80% of leaseholders will

renew, while 20% will physically move out. HOC Property Management will discuss the estimated recapture rate (ability to re‐lease and timing) with Equity.

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8. Low to Moderate Income Units: The covenants restrict 40% or 67 units for

persons of low and moderate incomes. Of the 67 units, 53 units are restricted to households whose incomes do not exceed 60% AMI and 14 units to those whose incomes do not exceed 50% AMI. Currently, the property is meeting its compliance requirements. Only one of the 60% AMI units is vacant and all 50% AMI units are occupied.

9. Description of Site: Paddington sits on 7.94 acres located north of East West

Highway on Lanier Drive in the Rosemary Hills neighborhood. The property is within the Bethesda‐Chevy Chase Senior High School district.

10. Description of Existing Improvements: Built in the late 1950s/early 1960s, the

property consists of three large 3‐story walk‐up brick structures with 15 entrance stairwells, containing a total of 165 units. Of the total units, 153 are two‐bedrooms and 12 are three‐bedrooms. The community includes a swimming pool, bathhouse, community room, and 184 surface parking spaces. Within walking distance are the Gwendolyn E. Coffield Recreation Center and park, playgrounds, tennis courts and Rosemary Hills Elementary School.

Between 2005 through 2011, the property underwent a two‐phase

comprehensive renovation, which included the replacement of all major systems (HVAC, electrical roofs, plumbing, windows), extensive brickwork, and unit interior and common area upgrades. Total rehabilitation costs were approximately $11.7 million or ($71,000/unit).

11. Refinancing Sources & Uses Breakdown:

SOURCES AMOUNT PER UNIT HUD 223(f) INSURED MORTGAGE 19,139,513 115,997 EXISTING RESERVES 452,979 2,745

TOTAL SOURCES 19,592,492 118,742

USES AMOUNT PER UNIT PAYOFF EXISTING DEBT 18,504,664 112,149 CONSTRUCTION COSTS (incl. fees) ‐ ‐ FINANCING EXPENSES 444,309 2,693 SOFT COSTS (consultants, closing costs, etc.) 478,518 2,900 INITIAL RESERVE DEPOSIT 165,000 1,000

TOTAL USES 19,592,492 118,742

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12. Stabilized Operations:

STABILIZED PROFORMA (FY15) YR 1 PER UNITINCOME $2,595,287 $16,095

EXPENSES1 $1,104,093 $6,461NOI $1,491,194 $9,634DEBT SERVICE $1,250,090 $7,961

CASH FLOW2 $241,105 $1,673DSC 1.19

1Includes $350 per unit for Replacement Reserves; to be verified by PNA. 2Asset Management Fees will be collected totaling $27,030 annually; Net Cash Flow is equal to

$214,075. 13. Loan to Value Ratio: 1.19:1 or 119% 14. Availability of Utilities: All utilities (electric, gas, water/sewer, telephone, cable,

internet) are available. 15. Zoning Status: Zoned R‐20, which is a multifamily residential zone, and allows

for medium density. 16. Site Control: Property was purchased by Owner in 2004.

II. REINANCING STRUCTURE 1. Type of Loan: GNMA / FHA Section 223(f) 2. Loan Term: 35 year amortization 3. Underwritten Interest Rate: 4.85%. Rate will be fixed upon HUD Firm

Commitment and Rate Lock. 4. Mortgage Insurance Premium: 0.60%. 5. HOC Fees: Asset Management Fees of $27,030 annually.

14

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6. Schedule: From engagement to closing, the transaction will take up to six

months.

Task Date Development & Finance Committee – Refinancing Plan Approval

12/18/13

Commission – Refinancing Plan Approval 01/08/14 Third Party Reports/Lender Underwriting 02/28/14 HUD Review & Firm Commitment 05/15/14 Commission – Approves Acceptance of Loan 06/04/14 Closing 07/30/14

III. ATTACHMENTS

1. Location Map 2. Detailed Sources & Uses 3. 15‐Year Cash Flow

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LOCATION MAP

Paddington Square 8800 Lanier Drive

Silver Spring, MD 20910

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Paddington SquareSilver Spring

LOW INCOME PORTION 41%

TOTAL UNITS 165

ACQUISITION PRICE $18,504,664 Loan bal 10/2013 @ closing

Current Plan Per Unit Percentage of Total

SOURCES:New 223(f) Insured Mortgage $19,139,513 $115,997 97.69%Existing Replacement Reserves $452,979 $2,745 2.31%Deferred Developer's Fee $0 $0 0.00%Tax Credit Equity $0 $0 0.00%(Excess)/Gap $0 $0 0.00%

TOTAL SOURCES $19,592,492 $118,742 100.00%

USES:Acquisition Cost

Outstanding Balance (Existing Debt) $18,504,664 $112,149 94.45%Equity $0 $0 0.00%Reimbursement of Capital Expenses $0 $0 0.00%Capitalized Interest $0 $0 0.00%

Total Acquisition Cost $18,504,664 $112,149 94.45%

Construction CostsRenovation Hard Costs - General Contractor $0 $0 0.00%Renovation Hard Costs - In House To Be Completed $0 $0 0.00%Inspection and cost certification $0 $0 0.00%General Conditions, Misc GC Costs $0 $0 0.00%GC Profit $0 $0 0.00%Building Permit $0 $0 0.00%Contingency $0 $0 0.00%

Total Construction Costs $0 $0 0.00%

Consultants-Preacquisition & SyndicationAppraisal $8,000 $48 0.04%Property Needs Assessment $6,000Phase I $7,000 $42 0.04%

Total Consultants-Preacquisition & Syndication $21,000 $91 0.11%

Financing ExpenseCost of Issuance 0.00% $0 $0 0.00%MAP Lender Finance Fee 1.00% $191,395 $1,160 0.98%GNMA Commitment Fee $4,100 $25 0.02%FHA Exam/App Fee 0.30% $57,419 $348 0.29%Negative Arbitrage 0.00% $0 $0 0.00%MIP Payment Up Front (One Year) 1.00% $191,395 $1,160 0.98%

Total Financing Expense $444,309 $2,693 2.27%

Development Fee $0 $0 0.00%

Settlement CostsTitle Insurance 0.80% $148,037 $897 0.76%Transfer tax 0.00% $0 $0 0.00%Recordation Tax of $9.90 per 1,000 $189,481 $1,148 0.97%Legal - Lender / HOC $40,000 $242 0.20%Survey $5,000Misc. Costs $75,000 $455 0.38%

Total Settlement Costs $457,518 $2,743 2.34%

Misc. Development Costs & Soft Cost ContingencyInitial Deposit to Replacement Reserve $1,000 $165,000 $1,000 0.84%

Total Misc. Dev. Costs & Soft Cost Contingency $165,000 $1,000 0.84%

TOTAL USES $19,592,492 $118,676 100.00%

Paddington Square_223f_121113_JA_W.xlsx 12/13/201356

Paddington SquareSilver Spring15-Year Cash Flow Projection

Assumptions STABILIZEDRent Growth Rate 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%Vacancy,Concessinos & Bad Debt Rate 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00%Expense Growth Rate 3.00%Other Income Growth Rate 2.00%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15FYE FYE FYE FYE FYE FYE FYE FYE FYE FYE FY FY FY FY FY

2014 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028RENTAL INCOME monthly/unitGross Rent Potential $17,769 $2,931,851 $2,990,488 $3,050,298 $3,111,304 $3,173,530 $3,237,001 $3,301,741 $3,367,775 $3,435,131 $3,503,834 $3,573,910 $3,645,388 $3,718,296 $3,792,662 $3,868,515 Less: Vacancy & Concessions, Bad Debt ($2,665) ($439,778) ($448,573) ($457,545) ($466,696) ($476,030) ($485,550) ($495,261) ($505,166) ($515,270) ($525,575) ($536,087) ($546,808) ($557,744) ($568,899) ($580,277)NET RENTAL INCOME $15,103 $2,492,073 $2,541,915 $2,592,753 $2,644,608 $2,697,501 $2,751,451 $2,806,480 $2,862,609 $2,919,861 $2,978,259 $3,037,824 $3,098,580 $3,160,552 $3,223,763 $3,288,238

OTHER INCOME Other $252 41,544.00 $42,375 $43,222 $44,087 $44,969 $45,868 $46,785 $47,721 $48,675 $49,649 $50,642 $51,655 $52,688 $53,742 $54,816 Non-Dwelling Rent $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Other Revenue $65 10,782.00 $10,998 $11,218 $11,442 $11,671 $11,904 $12,142 $12,385 $12,633 $12,885 $13,143 $13,406 $13,674 $13,948 $14,227TOTAL OTHER INCOME $317 $52,326 $53,373 $54,440 $55,529 $56,639 $57,772 $58,928 $60,106 $61,308 $62,534 $63,785 $65,061 $66,362 $67,689 $69,043

EFFECTIVE GROSS INCOME $15,421 $2,544,399 $2,595,287 $2,647,193 $2,700,137 $2,754,140 $2,809,223 $2,865,407 $2,922,715 $2,981,170 $3,040,793 $3,101,609 $3,163,641 $3,226,914 $3,291,452 $3,357,281

OPERATING EXPENSESAdministrative/Tenant $771 $127,275 $131,093 $135,026 $139,077 $143,249 $147,547 $151,973 $156,532 $161,228 $166,065 $171,047 $176,178 $181,464 $186,908 $192,515Utilities $1,021 $168,384 $173,436 $178,639 $183,998 $189,518 $195,203 $201,059 $207,091 $213,304 $219,703 $226,294 $233,083 $240,075 $247,278 $254,696Management Fees $456 $75,240 $77,497 $79,822 $82,217 $84,683 $87,224 $89,840 $92,536 $95,312 $98,171 $101,116 $104,150 $107,274 $110,492 $113,807Payroll & Benefits $2,511 $414,368 $426,799 $439,603 $452,791 $466,375 $480,366 $494,777 $509,620 $524,909 $540,656 $556,876 $573,582 $590,790 $608,513 $626,769R&M Contract $1,204 $198,608 $204,566 $210,703 $217,024 $223,535 $230,241 $237,148 $244,263 $251,591 $259,138 $266,913 $274,920 $283,168 $291,663 $300,412Insurance $164 $27,040 $27,851 $28,687 $29,547 $30,434 $31,347 $32,287 $33,256 $34,253 $35,281 $36,339 $37,430 $38,553 $39,709 $40,900Misc License & Taxes $18 $2,916 $3,003 $3,094 $3,186 $3,282 $3,380 $3,482 $3,586 $3,694 $3,805 $3,919 $4,036 $4,158 $4,282 $4,411

TOTAL OPERATING EXPENSES $6,144 $1,013,831 $1,044,246 $1,075,573 $1,107,841 $1,141,076 $1,175,308 $1,210,567 $1,246,884 $1,284,291 $1,322,820 $1,362,504 $1,403,379 $1,445,481 $1,488,845 $1,533,510Replacement Reserve $352 $58,104 $59,847 $61,643 $63,492 $65,397 $67,358 $69,379 $71,461 $73,604 $75,813 $78,087 $80,430 $82,842 $85,328 $87,888

TOTAL EXPENSES $6,497 $1,071,935 $1,104,093 $1,137,216 $1,171,332 $1,206,472 $1,242,666 $1,279,946 $1,318,345 $1,357,895 $1,398,632 $1,440,591 $1,483,809 $1,528,323 $1,574,173 $1,621,398Expense Ratio 42.13% 42.54% 42.96% 43.38% 43.81% 44.24% 44.67% 45.11% 45.55% 46.00% 46.45% 46.90% 47.36% 47.83% 48.29%

NET OPERATING INCOME (Excludes C.E.) $8,924 $1,472,464 $1,491,194 $1,509,977 $1,528,805 $1,547,668 $1,566,556 $1,585,461 $1,604,370 $1,623,274 $1,642,161 $1,661,018 $1,679,832 $1,698,591 $1,717,279 $1,735,883

DEBT SERVICEDebt Service-New Mortgage $1,137,259 $1,137,259 $1,137,259 $1,137,259 $1,137,259 $1,137,259 $1,137,259 $1,137,259 $1,137,259 $1,137,259 $1,137,259 $1,137,259 $1,137,259 $1,137,259 $1,137,259MIP $114,148 $112,831 $111,450 $109,999 $108,477 $106,880 $105,203 $103,443 $101,596 $99,657 $97,622 $95,486 $93,244 $90,891 $88,421Asset Management Fee $27,030 $27,030 $27,030 $27,030 $27,030 $27,030 $27,030 $27,030 $27,030 $27,030 $27,030 $27,030 $27,030 $27,030 $27,030Loan Manage Fees $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Debt Service Coverage 1.177 1.193 1.209 1.226 1.242 1.259 1.276 1.293 1.310 1.328 1.345 1.363 1.380 1.398 1.416

Cash Flow After Total Debt Service $194,028 $214,075 $234,239 $254,517 $274,902 $295,388 $315,969 $336,639 $357,390 $378,216 $399,108 $420,058 $441,059 $462,100 $483,174

50% of Net Cash Flow50% $97,014 $107,037 $117,120 $127,259 $137,451 $147,694 $157,985 $168,320 $178,695 $189,108 $199,554 $210,029 $220,529 $231,050 $241,587

Debt Payment (County)BOP Balance (Principal + Interest) $10,411,867 $10,304,830 $10,187,710 $10,060,452 $9,923,001 $9,775,307 $9,617,322 $9,449,002 $9,270,307 $9,081,199 $8,881,645 $8,671,616 $8,451,087 $8,220,037HOC Payment to County ($107,037) ($117,120) ($127,259) ($137,451) ($147,694) ($157,985) ($168,320) ($178,695) ($189,108) ($199,554) ($210,029) ($220,529) ($231,050) ($241,587)EOP Balance after Payment $10,304,830 $10,187,710 $10,060,452 $9,923,001 $9,775,307 $9,617,322 $9,449,002 $9,270,307 $9,081,199 $8,881,645 $8,671,616 $8,451,087 $8,220,037 $7,978,450

Paddington Square_223f_121113_JA_W 12/12/201357 Top40 Pg1

CONSENT TO TRANSFER GENERAL PARTNERSHIP INTEREST IN THE OAKFIELD APARTMENTS TRANSACTION

JANUARY 8, 2014

• On September 25, 2005, HOC issued $38,000,000 of tax‐exempt Variable Rate

Housing Revenue Bonds 2005 Issue I to finance the acquisition and substantial rehabilitation of Oakfield Apartments, a 371‐unit affordable multifamily development located in Wheaton, Maryland.

• Built in 1968, the property was substantially rehabilitated in 2005 by Fairfield Residential LLC, a national developer of multifamily apartments throughout the country.

• In 2009, Fairfield Residential LLC (the “old company”) filed for Chapter 11

Bankruptcy protection and was converted to a liquidation trust to hold and liquidate assets to repay creditors.

• After exiting bankruptcy in October 2010, management created a new company,

Fairfield Investment Company LLC (“FIC” or “new company”), to make investments in real estate and assume ownership and financial obligations of asset not liquidated, including Oakfield Apartments.

• The owner has requested that HOC consent to the transfer of the general partner

interest in the development from FF Oakfield LLC to FFI Oakfield LLC.

• The ultimate owner of the new general partner, the new company, is financially stronger than the old company. The property is well maintained, in good physical condition, and performing well financially; the general partner is in compliance with the loan and bond documents.

• On December 19, 2013, the Development and Finance Committee agreed to

consent to a transfer of general partnership interests in Oakfield Apartments. • Staff requests that the Commission accept the recommendation of the

Development and Finance Committee which met on December 19, 2013 and approve a resolution to consent to a transfer of general partnership interests in Oakfield Apartments.

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M E M O R A N D U M

TO: Housing Opportunities Commission VIA: Stacy Spann, Executive Director FROM: Staff: Brown/Benjamin/Rubin Division: Mortgage Finance Ext.9589/9590/9625 RE: Consent to Transfer General Partnership Interest in the Oakfield Apartments

Transaction DATE: January 8, 2014 STATUS: COMMITTEE REPORT: Deliberation X _ OVERALL GOAL & OBJECTIVE: To consent to a request by the Developer to the transfer of general partnership interest for the Oakfield Apartments transaction. BACKGROUND: Fairfield Residential LLC, the Developer of Oakfield Apartments, was a national company focused on the development, acquisition and management of multifamily housing throughout the United States. Due to its inability to honor guarantees in recent real estate transactions, in 2009, Fairfield Residential filed for Chapter 11 Bankruptcy protection. During bankruptcy, Fairfield Residential LLC (the “old company”) was converted into a liquidating trust called FFR Trust to repay creditors. Oakfield Apartments is among the properties currently held in the trust. In October 2010, a new company, Fairfield Investment Company LLC (“FIC” or “new company”), was formed, post bankruptcy, to make investments in real estate and assume ownership and financial obligations of assets not liquidated. FIC has requested that HOC consent to the transfer of general partnership interest in Oakfield Apartments from FF Oakfield LLC to FFI Oakfield LLC. Oakfield Apartments is a 371‐unit affordable multifamily development located at 2121 Shorefield Road, Wheaton, Md. Built in 1968, the property was substantially renovated in 2005. The property was the second phase of a larger three‐phase community consisting of 570 units. Phases I and III are now known as Glenmont Crossing and Glenmont Westerly, owned by affiliates of HOC. An affiliate of HOC also owns the Brookside Glen Apartments situated adjacent to the Oakfield Apartments.

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The apartments are contained within two‐ and three‐story walk‐up garden style buildings with a unit mix of one efficiency unit, 140 one‐bedroom units and 227 three‐bedroom units. Amenities include a swimming pool, laundry facilities, and picnic areas. On September 25, 2005, HOC issued $38,000,000 of tax‐exempt Variable Rate Housing Revenue Bonds 2005 Issue I to finance the acquisition and substantial rehabilitation of Oakfield Apartments. Credit enhancement for the bonds is provided by Fannie Mae and Citibank serves as the lender/servicer. In addition to the bonds, the property was substantially capitalized with $7,400,000 of subordinate financing provided by DHCA and equity raised from, among other sources, the sale of Low Income Housing Tax Credits (“LIHTC”) totaling $18,597,304. Fairfield Apartments is owned by Fairfield Oakfield LP, a LIHTC partnership consisting of FF Oakfield, LLC (the current general partner with a 0.099% interest), TCH II Pool, LLC (the special limited partner with a 0.001% interest), and AMTAX Holdings 724 (the investor limited partner with a 99.99% interest). The limited partner is an affiliate of the Hunt Companies, who purchased the limited partner interest from the original investor, Capmark, in connection with its organizational restructure. The LIHTC partnership is in the seventh year of the 10‐year credit period. The initial compliance period ends on December 31, 2021; the partnership is further subject to an Extended Use Agreement expiring in 2036 requiring the property to maintain the LIHTC affordability requirements for an additional 15 years. Status of the Property FF Properties, LP, an affiliate of FIC, manages the property. FF Properties is an experienced property management company who manages approximately 177 apartment properties totaling approximately 50,050 units, of which 23 properties totaling 5,700 units have tax credits investments. Public Purpose: 10.0% of the units (37 units) are restricted at 40% of AMI, 87.5% of the units (324 units) are restricted at 60% of AMI, 2.5% of the units (10 units) are at market. Physical Condition: The property is well maintained and is in good physical condition.

Management has completed a number of capital improvements within this past year totaling approximately $430,000. The improvements include parking lot resealing and recoating, tree removal, building trash enclosures, pool re‐glazing and new lawn equipment, downspout and sidewalk repairs, enhanced lighting, drainage improvements, unit upgrades (re‐glazing of tubs and countertops, new flooring, and replacement of HVAC system and water heaters).

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Financial Condition: Oakfield Apartments has performed well over the years with consistently high occupancy rates, debt service coverage ratios and cash flow. Below are the performance indicators over the last three years.

*YTD 2013 2012 2011 Average Occupancy 97.1% 97.4% 95.6% Debt Service Coverage Ratio 3.48 2.62 2.49 Cash flow $1.8M $1.8M $1.7M * through October 2013 Request Change in Ownership: The interest of FF Oakfield LLC, the current general partner, is

owned ultimately by FFR Trust, the successor entity to Fairfield Residential LLC or old company. Management is transferring the majority of the unliquidated assets in FFR Trust, including FF Oakfield LLC, to Fairfield Investment Company LLC (FIC or new company). Fairfield plans to transfer 70 properties in total to FIC, of which 35 have already been transferred. The proposed transfer of the general partner interests to FIC necessitates the creation of a new general partner. No changes to operations are anticipated.

Attachments A and B show the current and proposed ownership structures. The new general partner, FFI Oakfield LLC, retains the same interest in the partnership and FIC or new company, the ultimate owner of the new general partner, is owned and controlled by the same ownership of the old company, Fairfield Residential LLC, including Fairfield senior management and CalSTRS, California State Teachers Retirement System, the second largest pension fund in the Country. However, the new company was strengthened with the addition of Brookfield Asset Management, a $185 billion publically held real estate asset management company. Brookfield purchased a 67.5% interest in FIC; CalSTRS and senior management own 22.5% and 10% interests respectively in the new company. The new company is further strengthened in several important ways:

1. It contains only financially performing properties; 2. It is restricted from providing guarantees and off

balance sheet liabilities, the issues that contributed to the Fairfield bankruptcy; and

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3. It contains greater financial strength through contributions from the owners of approximately $100 million for liquidity and investments in real estate.

Consent: The change in ownership of the general partner requires the

consent of HOC pursuant to provisions in the bond and financing documents. It also requires Fairfield to provide to HOC, among other things, the following information:

• Operating documents of the new company; • Good Standing Certificate; • Assumption Agreement; • Opinion of counsel that the new owner has assumed all of

the obligations under the various documents; • Opinion of bond counsel that the change in ownership will

not adversely affect the exclusion from gross income of interest on the tax exempt bonds; and

• Consents from other parties to the transaction.

Staff has received many of the documents and expects to receive all of the documents shortly.

This request to transfer the general partner interest requires the consent of Fannie Mae, the credit enhancer of the bonds, Citibank, the lender/servicer, Hunt companies, the limited partner and HOC, the bond issuer.

In review of the request by both in‐house and outside counsel, the request does not trigger provisions of the Montgomery County Code Chapter 53A, right of first refusal to purchase the development, which applies to a transfer of title to the property or a transfer of a majority interest in the record owner over a 12‐month period.

Status of the Change in Ownership: The credit enhancer of the bonds and the lender/servicer have

provided their consent in writing to the change in general partner while the Limited Partner has provided its verbal agreement. Fairfield is aiming to close on the transfer shortly after it receives the formal consent of HOC and the limited partner.

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Costs: The costs are limited to staff time working on this transaction as well as legal/bond counsel review.

ISSUES FOR CONSIDERATION: Does the Commission wish to accept the recommendation of the Development and Finance Committee to consent to the transfer of general partnership interests in Oakfield Apartments from FF Oakfield LLC to FFI Oakfield LLC? PRINCIPALS: Housing Opportunities Commission, Fairfield Oakfield LP (the partnership), FF Oakfield LLC (the general partner), and the Limited and Special Limited Partners, affiliates of the Hunt Companies. BUDGET IMPACT: None. TIME FRAME: Action at the January 8, 2014 meeting of the Commission. STAFF RECOMMENDATION: Staff recommends that the Commission accept the recommendation of the Development and Finance Committee to approve a resolution to consent to the transfer of the general partnership interest in Oakfield Apartments from FF Oakfield LLC to FFI Oakfield LLC.

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RESOLUTION: RE: Consent to Transfer General Partnership Interest in the

Oakfield Apartments Transaction

WHEREAS, the Housing Opportunities Commission of Montgomery County (the “Commission”) is a public body corporate and politic duly organized under Division II of the Housing and Community Development Article of the Annotated Code of Maryland, as amended, known as the Housing Authorities Law, and the Agreement by and between the Housing Opportunities Commission of Montgomery County and Montgomery County, Maryland (the “County”), effective July 1, 2013, as amended (together, the “Act”); and WHEREAS, on September 25, 2005, HOC issued $38,000,000 of tax‐exempt Variable Rate Housing Revenue Bonds 2005 I (the “Bonds”) to finance the acquisition and substantial rehabilitation of Oakfield Apartments, a 371‐unit affordable multifamily development located in Wheaton, Maryland; and WHEREAS, in 2009, after filing bankruptcy protection, Fairfield Residential LLC, the principal owner of the general partner of Fairfield Oakfield LP, was converted to a liquidating trust to repay creditors and all of its assets, including Oakfield Apartments, were transferred to the trust; and WHEREAS, in October 2010, after completing the bankruptcy process, Fairfield Investment Company LLC was created and is proposed to become, among other things, the principal owner of a new general partner of Fairfield Oakfield LP (the “Borrower”) and to make investments in real estate and assume ownership and financial obligations of assets not liquidated, including Oakfield Apartments; and WHEREAS, on November 20, 2013, the Commission received a request on behalf of the Borrower to consent to the transfer of the general partnership interest in the Borrower from FF Oakfield LLC to FFI Oakfield LLC; and WHEREAS, the proposed transfer of general partner interests to the new company requires consent of the Commission as issuer of the Bonds as well as the servicer and Bond trustee; and WHEREAS, on December 19, 2013, the Development and Finance Committee approved the transfer of the general partnership interest of the Borrower to a new limited liability company, FFI Oakfield, LLC.

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NOW, THEREFORE, BE IT RESOLVED by the Housing Opportunities Commission of Montgomery County that it consents to the transfer of the general partnership interest of Fairfield Oakfield LP, the owner of the Oakfield Apartments from FF Oakfield LLC to FFI Oakfield LLC. BE IT FURTHER RESOLVED, that the Executive Director is authorized to prepare and execute a consent to the transfer of the general partnership interest in Fairfield Oakfield LP and all other documents and certificates necessary to complete the transfer. I HEREBY CERTIFY that the foregoing resolution was adopted by the Housing Opportunities Commission at a regular meeting conducted on January 8, 2014. S E Patrice M. Birdsong A Special Assistant to the Commission L

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BEFORE

ATTACHMENT A

Oakfield Apartments Wheaton, MD 20902

371 Units

Fairfield Oakfield LP a Delaware limited partnership

Tax ID #20-2822430

Co #1522

AMTAX Holdings 724, LLC an Ohio limited liability company

Investor Limited Partner

Percentage Interest 99.9%

Tax ID #

TCH II Pledge Pool, LLC

a Delaware limited liability company

Special Limited Partner

Percentage Interest 0.001% Tax ID #

FF Oakfield LLC A Delaware limited liability

company Co-General Partner


Tax ID #20-2822329 Co #2522

FF Properties, Inc. a Delaware corporation Non-member manager

FFRT Affordable LLC (fka Fairfield Affordable Housing LLC)

a Delaware limited liability company 100% Sole Member

Tax ID # 20-0297111

Fairfield Residential LLC a Delaware limited liability company

100% Sole Member

DISSOLVED

FFR Trust

(Liquidating Trust) As of 12/13/09

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AFTER

ATTACHMENT B

Oakfield Apartments Wheaton, MD 20902

371 Units

Fairfield Oakfield LP a Delaware limited partnership

Tax ID #20-2822430

Co #1522

AMTAX Holdings 724, LLC

an Ohio limited liability company

Investor Limited Partner


Tax ID #

TCH II Pledge Pool, LLC


Special Limited Partner

Percentage Interest 0.001% Tax ID #

FFI Oakfield LLC


Co-General Partner


Tax ID# 46-3423320

Non Member Manager FFI GP Inc. a Delaware corporation Tax ID# 27-3095014

100% Member


FFI Affordable LLC a Delaware limited liability company

Tax ID # 37-1730138 Co# FFN7706

100% Member


FFI JV VI Affordable LLC a Delaware limited liability company

Tax ID # 90-0962073 Co# FFP7706

10% Member 90% Member

FFM LLC on behalf of FFM JV VI Series

a Delaware series limited liability company

Tax ID # 46-0558764 Co# FWFFM43

FF Investments II LLC a Delaware limited liability company Tax ID # 46-2460656 Co# FFI0772

100% Managing Member

Fairfield Investment Company LLC

Delaware limited liability company

Tax ID # 27-3038825 Co# FFU0700

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APPROVAL TO EXECUTE AN ALTERNATIVE LOCATION AGREEMENT FOR MPDUS

January 8, 2014

• Chapter 25A of the Montgomery County Code requires that a percentage of the total

number of dwelling units in a residential development project containing 20 or more units be moderately priced dwelling units (MPDUs). It further provides that the Director of the County’s Department of Housing and Community Affairs (DHCA) after findings may approve an agreement to permit a developer of a high‐rise residential building, instead of building some or all of the required number of MPDUs on‐site, to provide at least the same number of MPDUs at another location in the same planning policy area.

• Toll MD IV Limited Partnership, (the “developer”) owns land located at 4915, 4917 and

4919 Hampden Lane, Bethesda, Maryland 20814 on which it plans to construct a seven‐ story, mid‐rise residential condominium building containing 60 units.

• Toll MD IV Limited Partnership desires to provide MPDUs for the property at an alternative location in the Bethesda planning policy area and has requested that the Director of DHCA approve this plan.

• DHCA has approved the Developer’s plan and has asked HOC to agree to enter into an

agreement to provide 12 MPDUs in one or more of its developments in the Bethesda planning policy area for which HOC would be compensated for the potential loss in income from the lower MPDU rents by a deposit of $1,500,000 from the Developer upon the receipt, by the Developer, of use and occupancy permits for the condo development.

• The Developer must present the signed agreement among the parties as part of its

application for building permits.

• Staff presented this item to the Development and Finance Committee of the Commission at its December 19, 2013 meeting and the Committee agreed to move the item forward to the full Commission but without its recommendation.

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M E M O R A N D U M

TO: Housing Opportunities Commission VIA: Stacy L. Spann, Executive Director FROM: Staff: Brown/Benjamin Division: Mortgage Finance Ext.9589/9590 RE: Approval to Execute an Alternative Location Agreement for MPDUs DATE: January 8, 2014 STATUS: COMMITTEE REPORT: Deliberation X OVERALL GOAL & OBJECTIVE: To expand the supply of affordable housing in Montgomery County BACKGROUND: Section 25A‐5B of the Montgomery County Code provides that the Director of the County’s Department of Housing and Community Affairs (DHCA) may approve an agreement to permit a developer of a high‐rise residential building, instead of building some or all of the required number of MPDUs on‐site, to provide at least the same number of MPDUs at another location in the same planning policy area. The Director’s approval must be based on finding that (1) the public benefit of locating the MPDUs at an alternative location outweighs the value of locating the MPDUs on the property; and (2) locating the MPDUs at an alternative location will further the objective of providing a broad range of housing opportunities throughout the County.

DHCA received a request from Toll MD IV Limited Partnership, a limited partnership (the “developer”) that owns land located at 4915, 4917 and 4919 Hampden Lane, Bethesda, Maryland 20814, on which the developer plans to construct a seven‐story high‐rise residential condominium building containing 55 units. The request of the developer was that the Director of DHCA approve pursuant to Section 25A‐5B of the Code, that instead of building some or all of the required number of MPDUs of the property on‐site, that the same number of MPDUs be provided at an alternate location in the Bethesda planning policy area. To satisfy the requirements of locating MPDUs at an alternative location, a developer may, among other things, encumber existing market rate housing units that meet all standards for use as MPDUs.

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DHDA Findings Pursuant to Section 25A‐5B, the Director of DHCA has determined that the public benefit of locating the planned Toll MD IV Limited Partnership property (Hampden Lane Condo) at an alternative location in the Bethesda planning area outweighs the benefit of locating the MPDUs on the property because the projected monthly condominium fees for the MPDUs, when added to the projected monthly mortgage payment for the purchase of the MPDUs, would not be affordable to persons eligible to participate in the MPDU Program. The Director has also determined that providing the MPDUs at an alternative location in the same planning area furthers the objective of providing a broad range of housing opportunities throughout the County because the alternative location is in the same planning area in Bethesda; the MPDUs at the alternative location will remain at levels affordable to eligible persons.

For the Toll MD IV Limited Partnership property, the MPDU requirement is nine units comprised of three one‐ bedroom units and six two‐bedroom units. To meet this requirement, the DHCA Director has asked HOC to consider encumbering market rate units in HOC owned properties in the Bethesda planning policy area. In accordance with Section 25A‐5B of the Code, the restrictions will be memorialized in an Alternative Location Agreement and must be met in market rate units and will have a term of 30 years. The Director has asked HOC to provide an additional three units bringing the total number of MPDU units to 12.

DHCA’s request is based on its interpretation of the law. DHCA has interpreted the language in Section 25A‐5B to mean that (i) the MPDUs at the alternative location must be either greater in number than the number of MPDUs at the original location; (ii) the MPDUs at the new location must have more bedrooms than would have been required at the original location; (iii)or a combination of both. In the proposed case, more MPDUs will be provided at the new location. However, DHCA believes that the bedroom mix of at least nine of the 12 “substitute” MPDUs should match the bedroom mix of the MPDUs in the original building. The correct mix is three one‐bedroom MPDUs and six two‐bedroom MPDUs.

Alternative Location HOC has at least four developments in the Bethesda planning policy area that have market rate unsubsidized units. Staff has examined the rents in each to determine the financial impact of restricting market rents on several of the units in these properties. The projects are: Pooks Hill High‐rise, Pooks Hill Mid‐rise, the Metropolitan Apartments, and Barclay Manor Apartments. Of the several properties examined, it was determined that the Pooks Hill and Barclay properties were the best candidates. The rents in the Metropolitan were too high to make a good match. The analysis of the Pooks Hill and Barclay Apartments are given below. The attached chart shows that the MPDU requirement can best be met in the Pooks Hill High‐rise and the Barclay Apartments. The plan is to locate three units (three two‐bedroom in Barclay and nine units in Pooks Hill (three studios, three one‐bedroom, and three two‐bedroom apartments).

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The chart below shows the current market rent, the proposed MPDU rent, the Current Utility Allowance and the resulting monthly variance.

Type of Units Rent MPDU Utility Allowance

Variance Unit

Garden/Barclay

Studio $1,155 $1,025 $81 $211 0

1 BR $1,400 $1,095 $117 $422 0

2 BR $1,676 $1,315 $152 $513 3

3

High‐Rise/Pooks Hill

Studio $1,150 $1,095 $58 $113 3

1 BR $1,459 $1,175 $87 $371 3

2 BR $1,769 $1,410 $115 $474 3

9 Both properties, the Barclay and Pooks Hill, are strong performers with healthy debt service coverage ratios making them ideal candidates. The chart below shows the impact of restricting units in the Barclay and Pooks Hill properties. In the current year, the debt service coverage for the Barclay and Pooks Hill Tower will be reduced from 1.22 to 1.19 and 1.37 to 1.34 respectively.

FY 2014 Barclay Pooks Hill Tower Cash Flow After Debt Service $141,630 $355,069 DSCR 1.22 1.37 Reduced After 12 MPDU Units GAP $ Per Year for 12 MPDU Units $18,468 $34,488 Cash Flow After Debt Payment $123,162 $320,581 DSCR 1.19 1.34

DHCA has asked HOC to enter into an agreement to convert 12 market‐rate to MPDUs with 30‐year controls at HOC properties in the Bethesda planning policy area. To compensate HOC for loss of income associated with this conversion, the developer of the Hampden Lane condo project will provide HOC with $1.5 million in exchange for encumbering 12 units. The payment will be due to HOC when the developer obtains Use and Occupancy permits for the project. DHCA anticipates that the developer will obtain building permits in late January and complete the construction of the property in 18 months. The current request is that the Commission approve this action and direct the staff to enter into an agreement with DHCA and the developer to bring this action into being.

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ISSUES FOR CONSIDERATION: Does the Commission wish to approve entering into an alternate location agreement for 12 MPDUs that permits the MPDU Commitment for the Toll MD IV Limited Partnership Hampden Lane property to be met in the Pooks Hill High‐rise and Barclay Apartments? PRINCIPALS: The Department of Housing and Community Development Toll MD IV Limited Partnership, a limited partnership BUDGET IMPACT: The developer will provide the Commission with $1.5 million to cover the potential loss of income associated with reducing the rents on 12 market rate units in the Pooks Hill High‐rise and Barclay Apartments to MPDU rents. The funds will be placed in an escrow account from which HOC can draw funds to cover its loss. Using today’s numbers, the total budget impact for FY14 is a $52,956 reduction in cash flow. In the first year of operation, it is anticipated that the decrease in cash flow will be $54,015 due to trending. TIME FRAME: Commission action at its meeting on January 8, 2014 STAFF RECOMMENDATION & COMMISSION ACTION NEEDED: The staff requests that the Commission approve this action to execute an alternative location agreement for MPDUs.

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RESOLUTION: RE: Approval to Execute an Alternative Location for MPDUs

WHEREAS, Toll MD IV Limited Partnership, a limited partnership, (the “Applicant”) owns land located at 4915, 4917 and 4919 Hampden Lane, Bethesda, Maryland 20814 (the “Project”) on which it plans to construct a seven‐story, mid‐rise residential condominium building containing 60 units (the Project); and

WHEREAS, the County MPDU law (Chapter 25A of the Montgomery County Code) (the “MPDU law”) requires that a percentage of the total number of dwelling units in the Project be moderately priced dwelling units (MPDUs); and

WHEREAS, the required percentage of MPDUs for the Project is fifteen percent (15%) which is equal to nine (9) units; and

WHEREAS, the MPDU law provides that the Director (the “Director”) of the County’s Department of Housing and Community Affairs (DHCA) may approve an agreement to permit a developer of a high‐rise residential building, instead of building some or all of the required number of MPDUs on‐site, to provide at least the same number of MPDUs at another location in the same planning policy area; and

WHEREAS, pursuant to the MPDU law, the Director has determined that the public

benefit of locating the MPDUs at an alternative location in the same planning area outweighs the benefit of locating the MPDUs on the Property; and

WHEREAS, the Director has also determined that providing the MPDUs at an alternative

location furthers the objective of providing a broad range of housing opportunities throughout the County because the alternative location is in the same planning area in Bethesda, the MPDUs at the alternative location will remain at levels affordable to eligible persons as provided in the MPDU law, and the number of MPDUs at the alternative location (12 MPDUs) will be greater than the number of MPDUs required for the Project (9 MPDUs); and

WHEREAS, in return for permitting the waiver of the operation of the MPDUs at the

Project and in an alternate location, the Applicant has agreed to provide $1,500,000 to assist in the operation of the MPDUs; and

WHEREAS, the Applicant and the Director have asked the Commission to enter into an

agreement to provide the required number of MPDU units in a Commission or Commission affiliate owned property in the Bethesda planning policy area; and

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WHEREAS, the Commission and Commission‐related entities own several properties with market rate units in the Bethesda planning policy area that meet all standards for use as MPDUs.

NOW, THEREFORE, BE IT RESOLVED by the Housing Opportunities Commission of

Montgomery County that the Executive Director is authorized to enter into an Alternate Location Agreement (the “Agreement”) with the Applicant and DHCA providing as follows:

1. Encumbering 12 market rate units with MPDU Covenants for a period of thirty years

to be located at Pooks Hill or other properties the Commission or a Commission related entity owns in the Bethesda planning policy area, to be determined at the discretion of the Executive Director and approved, as may be by the appropriate, by Commission related entity in which some or all of the MPDUs will be located.

2. Securing a contribution of One Million Five Hundred Thousand and 00/100 Dollars

($1,500,000.00) from the Applicant to be deposited in escrow as provided in the Agreement to be utilized for operation and management of the MPDU units.

3. Renting the MPDUs to eligible persons under the MPDU law at rents affordable to eligible persons for the full thirty (30) year term of the MPDU Covenants. 4. Such other further provisions and terms as deemed appropriate by the Executive Director. I HEREBY CERTIFY that the foregoing Resolution was adopted by the Housing Opportunities Commission at a regular meeting conducted on January 8, 2014.

S _______________________________ E Patrice M. Birdsong A Special Assistant to the Commission L

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Deliberation

and/or

Action

75

Future Action

76

Information Exchange

77

New Business

78

Executive Session Findings

79

Recess

80

Development

Corporation Meetings

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TPM DEVELOPMENT CORPORATION

APPROVAL TO ACCEPT AN HOC SUBORDINATE LOAN TO FUND PRE-DEVELOPMENT AND EXTERIOR RENOVATION COST FOR TPM

DEVELOPMENT CORPORATION

TPM Development Corporation (“Corporation”) consists of Timberlawn Crescent, Pomander Court, and 59 scattered site MPDUs.

Timberlawn is a 107-unit development located in North Bethesda, Pomander Court is a 24-unit clustered townhome community located in Silver Spring, and the remainder of the corporation comprises 59 MPDUs located in the lower half of Montgomery County (“The Properties”).

The Housing Opportunities Commission adopted a preliminary development plan for the refinancing and renovation of The Properties.

The Resolution identified the pre-development budget as $55,000 for The Properties and a capital expenditure budget of up to $2,300,000 was approved to be utilized for immediate health- and safety-related repairs at Timberlawn.

The Resolution identified the funding source for the pre-development and renovation of The Properties as the MPDU/Property Acquisition Fund (County Revolving Fund).

The Housing Opportunities Commission proposes to obtain the funds from the MPDU/Property Acquisition Fund and make a loan to the Corporation in the amount of $2,355,000 for the purposes identified in the Resolution.

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M E M O R A N D U M

TO: Board of Directors TPM Development Corporation VIA: Stacy L. Spann, Executive Director FROM: Kayrine Brown, Director, Mortgage Finance Ext. 9589 Richard D. Hanks, Housing Acquisitions Manager Ext. 9503 RE: Approval to Accept an HOC Subordinate Loan to Fund Pre-development and

Exterior Renovation Cost for TPM Development Corporation

DATE: January 8, 2014

STATUS: Consent Deliberation X Status Report Future Action

OVERALL GOAL & OBJECTIVE: The overall objectives are to obtain the TPM Development Corporation’s approval to accept a loan from the Commission for $2.335M to pay for expenses including preliminary design and financing related work as well as health and safety repairs.

BACKGROUND:

Timberlawn Crescent and Pomander Court are owned by TPM Development Corporation which consists of Timberlawn Crescent, Pomander Court, and MPDU II (59 scattered site MPDUs). At the July 2013 Commission meeting, the Commission approved the preliminary development plan, the predevelopment budget and interim renovation financing for Timberlawn Crescent and Pomander Court.

The approval included $55,000 for pre-development spending and $2.3M for health and safety repairs at Timberlawn and Pomander Court.

At Timberlawn, the decks were structurally deficient and were closed to residents as a stop-gap measure. In addition, the siding had been cited by the county inspector due to visible rot and peeling paint. HOC staff recommended and the Commission approved interim financing for replacing decks, siding, windows and exterior doors as well as site lighting, railing, grading, and landscaping concerns.

The $2.355M loan will come from the MPDU/Property Acquisition Fund account and be subordinate to current financing at TPM. When the financing of the complete renovation is issued, this loan will be repaid to HOC. That is anticipated to occur in April 2014, following Commission approval at the March 2014 Commission meeting.

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Exhibit A shows the current amount that has been committed for pre-development spending. Exhibit B compares the estimated exterior work budget to the contract and estimated contract amounts.

EXTERIOR WORK UPDATE:

The property is managed by a third-party property manager and as such HOC staff elected to have the exterior work subcontracted through and managed by them. Bozzuto, the property management company, received three bids for each contract, and has initiated the exterior renovations which are currently underway. As of December 16, 2013, the window subcontractor had completed the first test window to make certain there would be no issues during the installation process. It went well, and the window subcontractor is preparing for a January 6, 2014 start date. It will take approximately three weeks to replace all windows. During the week of December 16, 2013, the two subcontractors for the exterior work began the preliminary work of locating, digging, and prepping the footers for the new balconies. The subcontractors will begin full siding and balcony work after the holidays.

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Exhibit A: Pre-Development Spending

Timberlawn Pomander Total

Pre-Development

Appraisal 6,500 6,500 13,000

Phase I 2,200 2,200 4,400

PNA 2,300 2,300 4,600

Total Third Party Report Expense 11,000 11,000 22,000

Miner Feinstein

Exterior Siding 2,420 2,420

Balcony Drawings 880 880

Interior Reconfiguration of Replacement

of kitchens, bathroooms, and other

finishes 6,160 10,780 16,940

Reconfigure Bathrooms 3,660 3,660

Total Architect Expense 13,120 10,780 23,900

Total Pre-Development Expense 24,120 21,780 45,900

HOC Commission Approved Spending 55,000

Variance 9,100

Exhibit B: Timberlawn Exterior Work Contracts

Commission Packet

Estimate Contract Amount Variance

Siding/Gutter 1,302,968 1,182,700 120,268

Fencing 138,288 120,250 18,038

Windows 211,930 173,966 37,964

Balcony 311,400 259,500 51,900

Total 1,964,586 1,736,416 228,170

Commission Packet

Estimate Contract Estimate (a) Variance

Painting (b) 102,375 - 102,375

Site Lighting (c ) - 90,000 -90,000

Doors (d) 193,884 193,884 -

Landscaping (e) - 150,000 -150,000

Total 2,260,845 2,170,300 90,545

(a) Have not been contracted (b) Included in Siding/Gutter contract (c) Not in originally proposed budget (d) To be included with interior work (e) Not included in original total

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ISSUES FOR CONSIDERATION: Does the Board wish to accept a Loan from HOC to fund pre-development and exterior renovation costs for TPM Development Corporation? PRINCIPALS: Housing Opportunities Commission TPM Development Corporation

BUDGET IMPACT: None for FY14. TIME FRAME: For Board action at its meeting on January 8, 2014. STAFF RECOMMENDATION & COMMISSION ACTION NEEDED: Staff recommends that the Board accept a loan from the Commission to fund pre-development and exterior renovation costs for TPM Development Corporation.

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TPM DEVELOPMENT CORPORATION

RESOLUTION: RE: Approval to Accept an HOC Subordinate Loan to Fund Pre-Development and Exterior Renovation Cost for TPM Development Corporation

WHEREAS, Timberlawn and Pomander Court (“The Properties”) are two properties

owned by TPM Development Corporation (“Corporation”), an entity wholly controlled by the Housing Opportunities Commission; and

WHEREAS, Timberlawn is a 107-unit development located in North Bethesda, and Pomander Court is a 24-unit clustered townhome community located in Silver Spring; and WHEREAS, by Resolution No. 13-047, (the “Resolution”) the Housing Opportunities Commission adopted a preliminary development plan for the refinancing and renovation of the Properties; and WHEREAS, the Resolution identified the pre-development budget as $55,000 for the Properties and up to $2,300,000 was approved to be utilized for immediate capital expenditure needs for health- and safety-related repairs at Timberlawn; and WHEREAS, the Resolution identified the funding source for the pre-development and renovation of The Properties as the MPDU/Property Acquisition Fund, a.k.a., the County Revolving Fund (“MPDU/PAF”); and WHEREAS, the Housing Opportunities Commission proposes to obtain the funds from the MPDU/PAF and make a loan to the Corporation in the amount of $2,355,000 for the purposes identified in the Resolution. NOW, THEREFORE, BE IT RESOLVED by the TPM Development Corporation that:

1. The Corporation accepts a $2.355M loan (“Loan”) from the Housing Opportunities Commission to be provided from the MPDU/Property Acquisition Fund (County Revolving Fund).

2. The Executive Director of the Housing Opportunities Commission is authorized, on behalf of the Corporation, to execute all documents, notes, liens, security instruments, certificates and statements to obtain the Loan.

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I HEREBY CERTIFY that the foregoing Resolution was adopted by TPM Development Corporation at a regular meeting conducted on January 8, 2014.

S _______________________________ E Secretary A Board of TPM Development L

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Documents

240-627-9425 EXPANDED AGENDA January 8, 2014 · 240-627-9425. EXPANDED AGENDA . January 8, 2014 . 4: ... Finance and Audit Committee ... the success of HO’s legislative initiatives