2015-04-28 HRA Agenda PacketPLEASE TURN OFF CELL PHONES & PAGERS IN COUNCIL CHAMBERS.
AGENDA
MOUND HOUSING & REDEVELOPMENT AUTHORITY
REGULAR MEETING
TUESDAY, APRIL 28, 2015 6:40 P.M.
MOUND CITY COUNCIL CHAMBERS
Page
1. Open the meeting
2. Action approving agenda, with any amendments
3. Action approving minutes: April 14, 2015 regular meeting 1
Action approving payment of claims 2 -5
5. Catherine Pausche, Director of Finance and Administration, requesting 6 -17
action to appoint two HRA Board Commissioners to serve on an
advisory committee to review options for Indian Knoll Manor
6. Catherine Pausche, Director of Finance and Administration, requesting 18 -36
action on a Resolution Approving Rental Assistance Demonstration (see supplemental
(RAD) Project Partner materials)
7. Adjourn
April 14, 2015
The Mound Housing and Redevelopment Authority in and for the City of Mound, Minnesota, met in
regular session on Tuesday, April 14, 2015, at 6:55 p.m. in the council chambers of the Centennial
Building.
Members present: Chair Mark Wegscheid, Commissioners Ray Salazar, Heidi Gesch, Kelli Gillispie,
Jennifer Peterson
Members absent: None
Others present: City Manager Kandis Hanson, Director of Finance/Treasurer /Clerk Catherine Pausche,
Community Development Director Sarah Smith, City Engineer Dan Faulkner
Public Present: Evan Knollenberg, Katie Morford, Pete Wiechart, John Beise, Kristin Beise, Tim Litfin,
Dale Copeman, Linda Olson, Laura Lloyd and Terry Olson.
1. Open meeting
Chair Mark Wegscheid called the meeting to order at 6:58 p.m.
2. Approve agenda
MOTION by Salazar, seconded by Gesch, to approve the agenda. All voted in favor. Motion carried.
3. Approve minutes
MOTION by Salazar, seconded by Gesch, to approve the minutes of the March 24, 2015 regular
meeting. All voted in favor. Motion carried.
4. Approve claims
MOTION by Salazar, seconded by Gesch, to approve the claims in the amount of $10,906.07. All
voted in favor. Motion carried.
5. Adlourn
MOTION by Gesch, seconded by Salazar, to adjourn at 6:59 p.m. All voted in favor. Motion carried.
Attest: Catherine Pausche, Clerk
-1-
Chair Mark Wegscheid
MOUND HRA CLAIM
4-28-15 MEETINGJ
MWA
pilitsolmol 11 •
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-2-
$7,4.75.67
-3-
CITY OF MOUND
04/23/15 10:26 AM
---
--�
Page 1
/
\ Payments
-- --
GETY OF Mf?UND
Current Period: April 2015
Batch Name
042815HRA User Dollar
Amt $1,855.60
Payments Computer Dollar
Amt $1,855.60
$0.00 In Balance
Refer
5 CENTERPOINT ENERGY(MINNEG
_
Cash Payment
E 680- 49800 -383 Gas Utilities
GAS SVC 2 -19 THRU 3 -23 -15 IKM BAL DUE
$304.00
AFTER ACCT RECON- BUDGET VS ACTUAL
USAGE
Invoice 042815
4/9/2015
Transaction Date 4/22/2015
Wells Fargo HRA 10120 Total
$304.00
Refer
6 FRONTIER/CITIZENS COMMUNICA
Cash Payment
E 680- 49800 -321 Telephone & Cells
PHONE SERVICE IKM 4 -13 -15 TO 5 -12 -15
$258.35
Invoice 042815
4/13/2015
Cash Payment
E 680- 49800 -321 Telephone & Cells
PHONE SERVICE IKM SALES TAX ADJ
- $247.52
CREDIT
Invoice 042815
4/1312015
Transaction Date
4/22/2015
Wells Fargo HRA 10120 Total
$10.83
Refer � .�.
2 HAMERNICK DECORATING COMP
Cash Payment
E 680- 49800 -402 Building Maintenance
KITCHEN VINYL UNIT #202 MATERIALS &
$813.97
LABOR
?.Invoice CG503337 4/7/2015 PO 23721
Transaction Date
4/22/2015
Wells Fargo HRA 10120 Total
$813.97
Refer- -Y --�
4 J.D. WINDOWS &DOORS, INC.
Cash Payment
E 680 - 49800 -401 Building Repairs
BEDROOM DOOR UNIT #206-IKM
$85.50
Invoice 14132
3/27/2015
Transaction Date
4/22/2015
Wells Fargo HRA 10120 Total
$85.50
Refer
1 LANDLORD SERVICES, INC.
_
Cash Payment
E-680 -49800 -304 Legal Fees
EVICTION ACTION UNIT #212 IKM
$530.00
Invoice 26864
3/27/2015
Transaction Date
4/21/2015
�~
Wells Fargo HRA 10120 Total
�.. �. �».., �...». ��,. . �- �-.<, �..,. ,..,.�.,_....,.,....,�.,,._�..,
$530.00
Refer
7 LOFFLER COMPANIES, / NCORPO°
_......»....
Cash Payment
E680-49800-202 Duplicating and copying
IKM COPIER OVERAGE CHARGES BLACK &
$46.30
WHITE 1 -20 -15 THRU 4 -19 -15
Invoice 1960613 -2 4/9/2015
Transaction Date
4/22/2015
Wells Fargo HRA 10120 Total
.,�..,... ..,�...�...,..,,.�m..».�.: -- -.. M—: .m.�.�..a....,�.ws._..�..`w,.
$46.30
--
.
3 ,— LT— OUSING CREDIT CONTRO
_Refer
Cash Payment
E 680 - 49800 -475 Tenant Related Services
PROSPECTIVE IKM TENANTS
$65.00
BACKGROUND CHECKS MARCH 2015
Invoice 15030333
3/31/2015
Transaction Date
4/22/2015
Wells Fargo HRA 10120 Total
$65.00
-3-
Pre - Written Check $0.00
Checks to be Generated by the Computer $1,855.60
Total $1,855.60
E
Refer
CITY OF MOUND
04/21/154:34 PM
Cash Payment
E 680 -49800 -307 Admin /Finance /Compute ADP 401K ADMIN FEES 2 -15
Page 1
Invoice 1515241
Payments
Cash Payment
E 680 - 49800 -430 Miscellaneous AMERIPRIDE MT /CT UNIFORMS 3/15
$26.67
Invoice 1527391
4/21/2015
CITY OF MOUND
E 680 -49800 -307 Admin /Finance /Compute ADP PROCESSING FEES 3/15, 4/15
$19.18
Current Period: April 2015
4/21/2015
Cash Payment
Batch Name
042815COMBND User Dollar Amt $7,475.67
Invoice 1532811
4/21/2015
Payments Computer Dollar Amt $7,475.67
Cash Payment
E 680 -49800 -307 Admin /Finance /Compute MGMT FEES 5115
$0.00 In Balance
Invoice 1532798
Refer
2 COMMON BOND COMMUNITIES _
Cash Payment
Cash Payment
E 680 - 49800 -111 Other IKM Maint PR 3-20,4-3,4-17-15 MTCE SALARY
$2,659.23
Invoice 1515620
4/21/2015
Cash Payment
Cash Payment
E 680- 49800 -130 Employer Paid Ins (GEN PR 3-20,4-3,4-17-15 MTCE ER TAX
$228.32
Invoice 1515621
4/21/2015
Cash Payment
Cash Payment
E 680- 49800 -130 Employer Paid Ins (GEN PR 3-20,4-3,4-17-15 MTCE ER HEALTH INS
$343.83
Invoice 1515622
4/21/2015
Cash Payment
Cash Payment
E 680 - 49800 -130 Employer Paid Ins (GEN PR 3 -20, 4-3,4-17-15 MTCE ER 401K MATCH
$93.58
Invoice 1515623
4/21/2015
Transaction Date
Cash Payment
E 680 - 49800 -103 Part-Time Employees PR 3-20,4-3, 4 -17 -15 CARETAKER SALARY
$1,357.66
Invoice 1515618
4/2112015
10120 Wells Fargo HRA
Cash Payment
E 680- 49800 -122 FICA PR 3-20,4-3,4-17-15 CARETAKER ER TAX
$129.26
Invoice 1515619
4/21/2015
$7,475.67
Transaction Date
4/21/2015 Wells Fargo HRA 10120 Total
$4,811.88
Refer
1 COMMON BOND COMMUNITIES
Cash Payment
E 680 -49800 -307 Admin /Finance /Compute ADP 401K ADMIN FEES 2 -15
$6.38
Invoice 1515241
4/21/2015
Cash Payment
E 680 - 49800 -430 Miscellaneous AMERIPRIDE MT /CT UNIFORMS 3/15
$26.67
Invoice 1527391
4/21/2015
Cash Payment
E 680 -49800 -307 Admin /Finance /Compute ADP PROCESSING FEES 3/15, 4/15
$19.18
Invoice 1515625
4/21/2015
Cash Payment
E 680 - 49800 -307 Admin /Finance /Compute BENEFITS CONSULTING 4 -15
$6.71
Invoice 1532811
4/21/2015
Cash Payment
E 680 -49800 -307 Admin /Finance /Compute MGMT FEES 5115
$2,265.00
Invoice 1532798
4/21/2015
Cash Payment
E 680- 49800 -331 Use of personal auto ON CALL MTCE MILEAGE 2/20 - 3/19
$59.23
Invoice 1515686
4/21/2015
Cash Payment
E 680 -49800 -151 Worker s Comp Insuranc WORKERS COMP 3 -2015
$159.46
Invoice 1521687
4/21/2015
Cash Payment
E 680 -49800 -307 Admin /Finance /Compute HAS FEES WELLS FARGO 2 -15, 3 -15
$5.72
Invoice 1521688
4/21/2015
Cash Payment
E 680 - 49800 -475 Tenant Related Services RESIDENT HANDBOOKS 3/26/15
$115.44
Invoice 1520028
4121/2015
Transaction Date
412112015 Wells Fargo HRA 10120 Total
$2,663.79
Fund Summary
10120 Wells Fargo HRA
680 HRA PUBLIC
HOUSING $7,475.67
$7,475.67
Pre - Written Check $0.00
Checks to be Generated by the Computer $7,475.67
Total $7,475.67
-5-
[UT ia a010 \►`f11a,Yj
April 22, 2015
To: HRA Board Chair and Commissioners
From: Catherine Pausche, Finance Director /Clerk/Treasurer
Re: Request to Appoint Two HRA Commissioners to Serve on an Advisory
Committee to Review Options for Indian Knoll Manor
With the initial approval of our Rental Assistance Demonstration (RAD) application comes a
timeline with "milestones" that must be met in order to receive the final approval of the CHAP,
or Commitment to Enter into a Housing Assistance Payment (CHAP) from HUD.
Attached is an excerpt from the HUD Notice PIH- 2012- 32(HA) Rental Assistance
Demonstration - Final Implementation, which outlines the milestones. Once the development
partner, either CommonBond or Aeon, is selected, the HRA will need to move swiftly to
determine whether rehabilitation or complete rebuild of the property is the more suitable option
and then secure financing.
Staff requests that two HRA Commissioners be appointed who have daytime availability in the
next two to three months to meet with the development team and help develop the strategy.
Regular reports to the HRA Board will be made throughout the process. The intent of the
development team will be to gather perspectives from Staff, the HRA Board representatives,
current IKM residents, HUD, and lenders, in order to develop the most suitable plan for the
future of Indian Knoll Manor.
in
�tf,�flt Rental Assistance
nce
<< Demonstration soar Desk
✓ U.S, -e- partment of Housing and Urban Development - -�
v ° Secretary Julian Castro
HUD-RAD HOME RAI) IZDHOh11 CON AUr RAI> RB LOGIN
The Rental Assistance Demonstration (RAD) allows proven financing tools to be
applied to at -risk public and assisted housing and has two components:
1. 1st Component - Allows Public Housing and Moderate Rehabilitation
(Mod Rehab) properties to convert, under a competition limited to
60,000 units, to long -term Section 8 rental assistance contracts; and
2. 2nd Component - Allows Rent Supplement (Rent Supp), Rental
Assistance Payment (RAP), and Mod Rehab properties to convert
tenant -based vouchers issued upon contract expiration or termination
to project-based assistance.
RAD is a central part of the Department's rental housing preservation strategy,
which works to preserve the nation's stock of deeply affordable rental housing,
promote efficiency within and among HUD programs, and build strong, stable
communities.
Total Construction Activity Leveraged
(closed projects, ist component)
The RAD Resource Desk serves as a comprehensive information archive enabling searches of all published guidance on the Rental Assistance
Demonstration. The Desk also serves as the main portal for Demonstration participants to ask questions, search for information and forms, upload
documents, and track their progress toward closing. Access is available to the public as well as HUD employees and PHA staff.
In addition to maintaining a searchable database of statutes, rules, regulations, notices, memoranda, directives and guidelines that are applicable to
this Demonstration, the Desk also provides answers to questions submitted by participants on the implementation and application of the rules and
regulations governing the Demonstration. Previously asked questions are returned with search results. Additionally, users may submit new questions if
their questions are not (yet) found in the Resource Desk's archive.
within their organization and extend access to
,g PHAs. Each PHA participating in RAD will have the ability to control access
parties such as lenders and attorneys.
If you have questions regarding the Demonstration, please feel free to browse our online database or submit a question via the web —
hth 1w dresource.n et.
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-7-
Table of Contents
DEFINITIONS 1118
SECTION I: PUBLIC HOUSING PROJECTS 1715
1.1
PURPOSE
1714
1.2
GENERAL PROGRAM DESCRIPTION
18,14
1.3
ELIGIBILITY
2044
1.4
REHABILITATION AND FINANCING CONSIDERATIONS
2224
1.5
WAIVERS, ALTERNATIVES, ANDOTHER PUBLIC HOUSING REQUIREMENTS
2824
1.6
SPECIAL PROVISIONS AFFECTING CONVERSIONSTO PBVS
3234
1.7
SPECIAL PROVISIONS AFFECTING CONVERSIONS TO PBRA
4746
1.8
RESIDENT NOTIFICATION
6160
1.9
APPLICATION REQUIREMENTS
6263
1.10
SUBMISSION OF APPLICATIONS
6766
1.11
SELECTION CRITERIA
6766
1.12
CHAP MILESTONES
7776
1.13
CLOSING
8189
1.14
PHA RAD DEVELOPER FEE
8241
1.15
ADDITIONAL INFORMATION
8382
ATTACHMENT IA— CONVERSION DOCUMENTATION AND GUIDELINES
8494
1A.1 FINANCING PLAN REQUIREMENTS AND FEASIBILITY BENCHMARKS
8483
1A.2
CONTENTS OF THE RAD CONVERSION COMMITMENT(RCC)
9199
ATTACHMENT
1B— RESIDENT PROVISIONS IN CONVERSIONS OF ASSISTANCE FROM PUBLIC HOUSING TOP
BRA AND PBV
9392
1B.1
SUMMARY OF RESIDENT PROVISIONS
9342
18.2
RESIDENT PARTICIPATION AND FUNDING
9594
ATTACHMENT
1C— CALCULATION OF HAP CONTRACT RENTS FOR CONVERSIONS OF ASSISTANCE FROM PUBLIC
HOUSING
TO PBRA OR PBV
9998
ATTACHMENT
ID— REQUIREMENTS FOR RAD - SPECIFIC SIGNIFICANT AMENDMENT SUBMISSIONS
104498
SECTION II: MODERATE REHABILITATION PROJECTS 115444
2.1
PURPOSE
115414
2.2
CONVERSIONS UNDER THE FIRST COMPONENT OF RAD: CONVERSIONS TO PBRA OR PBVS, SUBJECT TO
COMPETITION
115444
2.2.1
GENERAL PROGRAM DESCRIPTION
116144
2.2.2
ELIGIBILITY
118444
2.2.3
REHABILITATION AND FINANCING CONSIDERATIONS
1201-44
2.2.4
SUBSTANTIAL CONVERSION OF ASSISTANCE
1201U
PIH- 2012 -32 (HA) Rental Assistance Demonstration —Final Implementation 8
-8-
Table of Contents
2.2.5 SPECIAL PROVISIONS AFFECTING CONVERSIONS TO PBVS
121328
2.2.6 SPECIAL PROVISIONS AFFECTING CONVERSIONS TO PBRA
125324
22.7 RESIDENT NOTIFICATION AND CONSULTATION
130324
2.2.8 APPLICATION REQUIREMENTS
130129
2.2.9 SUBMISSION OF APPLICATIONS
1341 -33
2.2.10 SELECTION CRITERIA
134333
2.2.11 NOTIFICATION OF AWARD, ISSUANCE OF CHAP, AND RELATED MILESTONES
1401 -39
2.2.12 COMPLIANCE WITH ALL APPLICABLE NOTICES REGARDING CONTRACT EXPIRATION OR TERMINATION
141348
2.3 CONVERSIONS UNDER THE SECOND COMPONENT OF RAD: PROJECT- BASING ENHANCED VOUCHER ASSISTANCE
141348
WAIVER OF PBV RULES AND SPECIAL PROVISIONS
2.3.1 GENERAL PROGRAM DESCRIPTION
141340
PROCESSING REQUIREMENTS FOR PROSPECTIVE CONVERSIONS
143342
2.3.2 ELIGIBILITY
SUBMISSION OF REQUESTS FOR PROSPECTIVE CONVERSIONS
2.3.3 WAIVER OF PBV RULES
145344
2.3.4 SUBMISSION OF REQUESTS FOR PROSPECTIVE CONVERSIONS
148347
2.3.5 SUBMISSION REQUIREMENTS FOR RETROACTIVE CONVERSIONS
151330
2.3.6 FUNDING AVAILABILITY
1543=3
2.4 ADDITIONAL INFORMATION
1541-53
ATTACHMENT 2A— SAMPLE 30 -DAY NOTIFICATION LETTER TO RESIDENTS FOR PROSPECTIVE CONVERSION OF SECTION
8
MODERATE REHABILITATION (MOD REHAB) ASSISTANCE TO PROJECT -BASED VOUCHERS
155334
ATTACHMENT 26— SAMPLE NOTIFICATION LETTER TO RESIDENTS FOR RETROACTIVE CONVERSION OF ENHANCED
179374
i VOUCHERS TO PROJECT -BASED VOUCHERS
157436
SECTION III: RENT SUPPLEMENT AND RENTAL ASSISTANCE PAYMENT PROJECTS
15913
1594-99
3.1
PURPOSE
3.2
NOTE ON EFFECTIVE DATE
159438
3.3
GENERAL PROGRAM DESCRIPTION
159138
3.4
ELIGIBILITY
162U4
3.5
WAIVER OF PBV RULES AND SPECIAL PROVISIONS
167166
3.6
PROCESSING REQUIREMENTS FOR PROSPECTIVE CONVERSIONS
170349
3.6.1
SUBMISSION OF REQUESTS FOR PROSPECTIVE CONVERSIONS
1721-74
3.6.2
HUD REVIEW of RAD REQUEST
1763x5
3.6.3
ALLOCATION OFTPV RESOURCES FOR CONVERSIONS
177346
3.6.4
SELECTION OF PHA
178474
3.6.5
CONSENT OF PHA AND EXECUTION OF PBV HAP OR AHAP CONTRACT
178377
3.7
PROCESSING REQUIREMENTS FOR RETROACTIVE CONVERSIONS
179374
3.7.1
SUBMISSION OF REQUESTS FOR RETROACTIVE CONVERSIONS
1804-79
3.7.2
REVIEW AND CONSENT OF PHA AND EXECUTION OF PBV HAP OR AHAP CONTRACT
182341
3.8
COMPLIANCE WITH ALL APPLICABLE NOTICES REGARDING CONTRACT EXPIRATION OR TERMINATION
1833$2
3.9
FUNDING AVAILABILITY
183342
3.10
ADDITIONAL INFORMATION
1 =4383
PIH- 2012 -32 (HA) Rental Assistance Demonstration — Final Implementation 9
KOZ
Table of Contents
ATTACHMENT3A- SAMPLE 30 -DAY NOTIFICATION LETTER TO RESIDENTS FOR PROSPECTIVE CONVERSION OF RENT
SUPPLEMENT ( RENT SUPP) AND RENTAL ASSISTANCE PAYMENT ( RAP) ASSISTANCE TO PROJECT BASED VOUCHERS 185154
ATTACHMENT 3B- SAMPLE NOTIFICATION LETTER TO RESIDENTS FOR RETROACTIVE CONVERSION OF REGULAR VOUCHERS
TO PROJECT BASED VOUCHERS
187156
APPENDIX I —24 CFR PART 880 REGULATION STRICKEN FOR PBRA CONVERSIONS 1894U
APPENDIX II —THE U.S HOUSING ACT OF 1937 WAIVED FOR PBRA CONVERSIONS 222224
APPENDIX 111— PBRA SITE AND NEIGHBORHOOD STANDARDS 223222
APPENDIX IV— NEW CODES FOR SPECIAL PROGRAMS REPORTED ON THE FAMILY REPORT (FORM HUD -
50058) FOR THE RENTAL ASSISTANCE DEMONSTRATION PROGRAM. 225224
APPENDIX V— LIST OF PROGRAM REVISIONS AND CLARIFICATIONS FOR PIH NOTICE 2012 -32 REV -1.
226223
PIH - 2012 -32 (HA) Rental Assistance Demonstration — Final Implementation 10
so
Section I: Public Housing Projects
1.12 CHAP Milestones
All PHAs will be notified of selection via issuance of an award letter, signed by HUD. Attached
to the award letter will be a CHAP, or Commitment to Enter into a Housing Assistance Payment,
which shall indicate the HUD - approved terms and conditions for conversion of assistance. If a
PHA applies for either a multi -phase or portfolio award, HUD will reserve RAD conversion
authority for the phases or projects covered by the award. A PHA will then be required to fulfill
applicable milestones for submission of the applications for the remaining phases or projects.
The CHAP will not be subject to negotiation by the PHA or any third party. If awarded a CHAP,
the PHA will comply with all provisions of the CHAP, as applicable, or will indicate to HUD
within 15 days that it is refusing the terms of the CHAP and is withdrawing from RAD
participation.
HUD's provision of a CHAP includes contractual terms on which HUD will later issue the HAP.
For this reason, the CHAP should be useful in the PHA's discussions with lenders, investors and
other providers of financing.
The CHAP will include provisions that it may be revoked: (1) upon HUD's determination of
financial infeasibility; (2) for PHA failure to meet required deadlines; (3) for PHA non-
cooperation; (4) violation of program rules and restrictions, including fraud, (5) if the PHA fails
to submit an approved significant amendment to HUD, or (6) if HUD determines that the terms
of the conversion would be inconsistent with fair housing and civil rights laws or a fair housing
or civil rights court order, settlement agreement, or voluntary compliance agreement.
Because units under the Demonstration are limited, it is critically important that recipients of a
CHAP diligently pursue the Financing Plan and complete conversion or withdraw so that HUD
might award those units to a PHA that is able and willing to convert the assistance of units.
The CHAP will require each PHA to meet contractual milestones. Milestones generally apply to
all RAD transactions; however, some milestones apply only to transactions that include debt
and/or equity financing. In these cases, the PHA is responsible for ensuring the timelines are met
by their lenders and /or investors. Milestones include the following (expressed in calendar days):
1. Within 30 days following CHAP issuance the PHA must submit to HUD:
a) Accepted Lender Engagement or Commitment Letter (if applicable),
which must include language, specified by HUD, that the lender is aware of
all relevant RAD policies including RAD Use Agreement provisions and
ongoing requirements in the case of foreclosure or bankruptcy. The letter must
include the proposed loan amount, proposed key business terms of the loan,
pro forma sources and uses, and pro forma stabilized cash flow. The letter
may be conditioned upon the lender's due diligence and underwriting
determinations, and the lender's approval processes. If the PHA has paid a
PIH- 2012 -32 (HA) Rental Assistance Demonstration —Final Implementation 77
-11-
Section I: Public Housing Projects
cash fee associated with this Engagement Letter, the amount of that fee must
be reasonable and customary at this point in a loan transaction; and a
b) Statement of development team capacity, which must identify its proposed
development team members, with evidence demonstrating, as applicable, the
team's recent successful experience financing, developing, rehabilitating,
constructing, owning, and operating similar properties. The statement must
describe teaming partner relationships, including resumes. If multiple sources
of financing have been identified for the project, the development team must
have experience with at least three transactions with mixed or multiple
sources of financing. If, in HUD's determination, the applicant does not
demonstrate it has sufficient relevant experience, HUD may require an
applicant to bolster its development team as a condition of final approval of a
RAD conversion application.
2. Within 60 days following CHAP issuance, the PHA must submit to HUD:
a) The significant amendment to its Annual/Five Year Plan. See section 1.5E
and Attachment ID of this Notice.
b) The PHA's decision whether the project will convert its assistance to PBV
or to PBRA. For conversions to PBV, where the PHA does not administer a
Housing Choice Voucher program, the PHA must submit a signed letter from
a voucher agency evidencing their willingness to administer the PBVs.
3. Within 90 days following CHAP issuance, the PHA must submit to HUD a
certification from the PHA that all industry- standard due diligence has been
performed for and received by the Lender and /or other financing source. Due
diligence must, in all cases, include a PCA and appropriate environmental reports
(with the exception of Phase II or other reports required by extraordinary
circumstances) .65 Other due diligence required of financing sources, which may
include an appraisal, a current survey report, and a pro forma title insurance policy,
must also be received within this timeframe. All conversions, with or without
financing, must submit a copy of the completed PCA to HUD by this milestone.
4. Within 150 days following CHAP issuance, the PHA must submit to HUD
certification that it has applied for firm commitments of all financing. For FHA -
ss A PCA will be required on any units except those replaced with new construction.
PIH- 2012 -32 (HA) Rental Assistance Demonstration — Final Implementation 78
-12-
Section I: Public Housing Projects
insured financing this must be in the form of the Firm Commitment Application to
FHA. 66,67
5. Within 180 days following CHAP issuance, the PHA must submit to HUD a
Financing Plan. (See Attachment IA.I for Financing Plan Requirements.) FHA
will release separate guidance detailing what elements of the Financing Plan may be
waived for projects using FHA insurance. HUD will have 60 calendar days from the
date of submission of the Financing Plan to approve, reject, or request additional
information. HUD's decisions regarding the acceptance of the Financing Plan will
be made in HUD's sole discretion. If HUD determines that a Financing Plan is not
feasible, the PHA may make corrections that satisfactorily address HUD's concerns,
or may appeal that decision to HUD within 30 days of notification. If a Financing
Plan is disapproved, HUD's letter of disapproval will discuss changes that would
result in an acceptable Financing Plan.
A PHA will be notified of HUD's acceptance of the Financing Plan via issuance of a
RAD Conversion Commitment (RCC), conditioned upon firm commitment of
financing from the lender on substantially the same terms as those presented with
the Financing Plan. 68 (See Attachment 1A.2 of this Notice for the contents of the
RCC Letter.) The RCC will outline the key components of the planned RAD
conversion and will discuss the conditions that need to be satisfied in order to close
the conversion. The RCC will be a template document not subject to negotiation by
the PHA or by the lender.
The PHA will have 30 calendar days from the date of issuance of the RCC to
execute the RCC and return it to HUD. If the RCC is not returned in this time
period, the PHA will forfeit its award.
66 PHAs applying for FHA financing will be required to fill out Section 1 and, if performing a relocation lasting
longer than 12 months, Section 3 of the Accessibility and Relocation Plan Checklist and submit this Checklist
at the same time as their Firm Commitment Application to FHA.
67 PHAs applying for both PBRA and FHA financing should provide the Affirmative Fair Housing Marketing
Plan at the same time as their Firm Commitment Application to FHA.
" Loan proceeds and other financing sources remain sufficient to cover immediate capital needs and, in comparison
to the terms put forth in the original application, the debt service coverage ratio does not decrease by more than
0.05 %, the amortization and term (maturity) of financing remain the same, and the interest rates are competitive
with the market.
PIH- 2012 -32 (HA) Rental Assistance Demonstration —Final Implementation 79
-13-
Section I: Public Housing Projects
Once the RCC is executed, HUD expects that the RAD conversion will close in a
timely manner. The RCC will allow 90 calendar days (from the date the RCC is
issued to the PHA) in which to close the RAD conversion transaction. The PHA and
lender will need to work diligently to achieve closing within the timeframe required
under this Notice in order to avoid rescission of the RCC.
The RCC will be an attachment to the recorded RAD Use Agreement. Therefore, the
terms of the RCC will survive the closing.
6. Within 320 days following issuance of the CHAP (and no later than 40 days prior to
closing), the PHA must submit evidence of firm commitment for financing or
equivalent milestone in securing all sources of financing required to close the
transaction.
7. Within 360 days following CHAP issuance the PHA must reach closing, upon
which the RAD conversion is completed. See Section 1.13.
8. The Financing Plan and RCC must include a reasonable timeline for completion of
all rehabilitation items acceptable to HUD, generally 12 to 18 months from the
date of closing the conversion and any financing, depending on the scope of
rehabilitation funded.
In addition to the milestones described above, any CHAP awarded to applicants proposing to use
9% LIHTCs or tax- exempt bonds and 4% LIHTCs, where a reservation has not been secured at
the point of RAD Application, will include additional milestones, including, but not limited to:
• A date by which the RAD applicant must have submitted an application for LIHTC
or bond authority, based on the deadlines for required application and related
materials (e.g., inducement resolution for tax- exempt bonds) described in the
applicable QAP
• A date by which the RAD applicant must notify HUD of the decision of the credit -
issuing authority, 10 days after the Notification of award described in the applicable
QAP.
In cases where the converting project is a mixed - finance project or where LIHTCs are proposed,
as well as other special circumstances, HUD may work with the applicants to tailor their
milestones to the particular requirements of their localities.
A PHA that fails to meet a milestone will cause the CHAP to be revoked unless it has submitted,
and HUD has approved, a request for extension of the deadline. The extension request must
include ajustification and explain why failure to meet the milestone should not jeopardize the
PHA's ability to complete the RAD conversion. Approval of extensions is at HUD's sole
PIH- 2012 -32 (HA) Rental Assistance Demonstration —Final Implementation 80
®'
Section I: Public Housing Projects
discretion. Extensions will not be approved if the delays resulted from factors that are within the
PHA's control.
1.13 Closing
A. Closing Preparations.
The closing is a concurrent event that must include:
1. Release of the Public Housing Declaration of Trust (DOT) or Declaration of Restrictive
Covenants;
2. Removal from the public housing or mixed finance ACC;
3. Removal of any Regulatory and Operating agreements and provision of a streamlined
regulatory agreement for affected mixed - finance partnerships;
4. The execution of the new PBRA or PB V HAP contract and RAD Use Agreement;
5. Recordation of the RAD Use Agreement,
6. Closing of any bridge, construction, or permanent debt or equity financing;
7. Closing of any required subordination agreements;
8. Closing of the terms and conditions of the RCC.
When the closing escrow agent confirms that all documents have been properly executed and
have been received into escrow, that all funds have been received into escrow, and that all
preconditions to closing have been fully satisfied, the closing will take place.
At the closing, the closing escrow agent will distribute the proceeds of any new loan, any other
sources of funds, and executed documents (including the HAP), and will deliver appropriate
documents for recordation in the local land records. The lien of the new first mortgage loan (if
any) shall be subject to the encumbrance of the RAD Use Agreement.
Closing preparations will include:
Selection by the primary lender or other financing source of a closing escrow agent
acceptable to HUD;
Receipt by the closing escrow agent of the requisite number of copies of all closing
documents, un- executed;
Preparation of the settlement statement, by the closing escrow agent, to the satisfaction of
all parties; and
69 In the event that construction or bridge financing will be used as part of the financing, HUD will require evidence
at closing of firm commitment of take -out or permanent financing conditional only to the completion of construction
or term of the bridge financing.
PIH- 2012 -32 (HA) Rental Assistance Demonstration —Final Implementation 81
-15-
Section I: Public Housing Projects
Receipt by the closing escrow agent of an opinion of counsel to the owner. This opinion
assures that the owner signatory was authorized to sign, the closing documents do not
conflict with any other agreements of the owner, the closing documents are effective, the
owner entity is in good standing, and that all Closing Documents are valid and
enforceable as against the owner.
Development proceeds will be placed into the account of the closing escrow agent. If the loan
will be funded in draws or the equity funded in installments, the first draw or installment must be
funded into the closing escrow and the closing escrow agent must determine that sources and
uses are in balance at the Closing.
If the project is being financed with an FHA - insured loan, the closing requirements listed under
the MAP guide will apply.
Following the closing, counsel to the lender will deliver an opinion to HUD, to include, at a
minimum, that the closing took place in accordance with this Notice and with all other applicable
HUD requirements.
B. Funding Upon Closing. In the initial year of conversion of assistance, projects will be
funded through the public housing accounts. As such, at closing, a PHA shall provide a
certification that it will make Operating and Capital funds available, in amounts determined
by HUD, within RAD Budget Line Items in the Line of Credit Control System. The PHA
must use all such funds to make monthly HAP payments for the remainder of that calendar
year. Where HUD has not yet obligated the full FY's Operating and Capital Funds to the
PHA, HUD shall obligate the remaining funds as soon as available. For the remaining
months of the calendar year, the PHA can use its available public housing or other funds to
make up any gap in rental subsidy as a result of Operating and Capital Fund allocations to a
RAD project that are lower than the HAP subsidy due to the project.
In the Calendar Year following conversion, projects will be funded from the Project -Based
Rental Assistance (PBRA) account or the Tenant Based Rental Assistance Account (TBRA),
relative to the form of Section 8 assistance for the project(s), according to the amount
indicated in the HAP contract, including any applicable OCAF, subject to all terms and
conditions of the HAP contract.
1.14 PHA RAD Developer Fee
HUD recognizes that in order to secure and administer debt and equity sources, and oversee the
successful completion of significant rehabilitation, PHAs will have to either dedicate
experienced staff, if such experience currently exists on staff, or hire or contract for the expertise
necessary to successfully complete rehabilitation on schedule and on budget.
PIH- 2012 -32 (HA) Rental Assistance Demonstration — Final Implementation 82
-16-
Section 1: Public Housing Projects
The PHA may earn a RAD Developer Fee to address these costs as permitted by the funding
source(s):
A. For non -LIHTC transactions, the RAD Developer Fee may be up to 10 percent of the total
development budget (all hard costs and reasonable soft costs), less developer fee and
reserves and less any acquisition costs in non arms- length acquisitions, e.g., transfers of
property title to related or wholly -owned entities for the purpose of meeting single asset
entity ownership requirements. The release of the RAD Developer Fee will be made upon
achievement of the following milestones:
1. At initial closing, up to 33 percent of the total RAD Developer Fee;
2. At 50 percent completion of rehabilitation, as certified by HUD's inspector, another 33
percent of the total RAD Developer Fee;
3. At 100 percent completion, as certified by HUD's inspector, the remainder of the total
earned RAD Developer Fee. For projects where the PHA had earned competitive ranking
factor points for committing to pursue an industry - recognized standard for green building
(see Section 1.11(D) of this Notice), the final disbursement of the RAD Developer Fee
will also be contingent on certification that the identified green building standard has
been achieved.
Development cost overruns that exceed funded contingencies may be drawn from any
unearned and unreleased portion of the RAD Developer Fee, and may therefore reduce the
ultimate fee paid to the PHA.
Earned developer fees are not considered federal funds.
B. On LIHTC transactions (with or without private debt), PHAs may earn a developer fee
payable from the tax credit equity subject to the LIHTC allocating agency's limitations on
developer fees, and in no case to exceed 15 percent of total development costs, payable on
the schedule allowed by the allocating agency and/or equity investor. PHAs eligible to earn a
LIHTC developer fee are not eligible to earn the RAD Developer Fee.
1.15 Additional Information
For additional information on this section of the Notice, please check www.hud.gov /rad or email
questions to RAD(ahud.eov
PIH- 2012 -32 (HA) Rental Assistance Demonstration —Final Implementation 83
17-
ii
April 22, 2015
To: HRA Board Chair and Commissioners
From: Catherine Pausche, Finance Director /Clerk/Treasurer
Re: Request for Qualifications and Interest in the Purchase of Indian Knoll Manor
On March 25, 2015, the Mound HRA was notified our Rental Assistance Demonstration (RAD)
application was approved with conditions. The HUD RAD program requires capital
improvement needs to be addressed and allows for the transfer /sale of the building to a qualified
non - profit. The feasibility study completed in 2013 by Signet Partners is attached and identified
many challenges associated with a potential RAD conversion and emphasized the need to find
the right partner.
Staff invited the two major non - profit affordable housing organizations in Minnesota,
CommonBond and Aeon, to respond to a "Request for Qualifications and Interest in the Purchase
of Indian Knoll Manor." Responses were received from both organizations and are included
with this agenda packet.
Based on the information contained in the responses, the HRA Board is asked to approve either
CommonBond or Aeon as the partner to work through the RAD process and potentially assume
ownership of Indian Knoll Manor.
Both organizations demonstrated extensive experience in affordable housing development and
securing alternative financing and I am confident we could successfully partner with either
organization. CommonBond has managed Indian Knoll Manor since 2011, owns multiple
affordable housing developments in the area, including Westonka Estates, and is approximately
twice as large as Aeon. Although Aeon is newer and smaller than CommonBond, they were
successful in communicating an entrepreneurial spirit, provided solid recommendations from
other cities that demonstrated their proficiency in revitalizing existing properties, and
communicated flexibility and the desire to work with the HRA to envision what the most suitable
outcome would be for Indian Knoll Manor, including minimizing impacts to existing residents.
Therefore, I am recommending the HRA Board approve Aeon as the development team partner
to work through the RAD process and potentially assume ownership of Indian Knoll Manor.
01
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w`i�lii ;=n
o9•(N Of`hN�'
U.S. DEP:ARIMEN7" OF HOUSING AND URBAN° DEVEI.OPNIP,N I'
WASHINGTON, DC 20410
MAR 25 2015
Kandis M. Hanson
Executive Director
HRA Of the City of Mound, MN
5341 Maywood Road
Mound, MN 55364
CC: Catherine Pausche
Dear Ms. Hanson:
Thank you for your application under the Rental Assistance Demonstration (RAD) for the
conversion of assistance of 50 units at the following PIC Development MN074000001, INDIAN
KNOLL MANOR.
We are pleased to approve your request for conversion as described in the application,
subject to the conditions below.
This award letter serves as the Department's Commitment to Enter into a Housing
Assistance Payments (CHAP) for the above - referenced project, provided the Owner meets all
the requirements contained in the PIH Notice 2012 -32, Revision i ( "Notice ") and all
subsequent revisions. In addition, the owner must comply with all "CHAP Milestones"
identified in section 1.12 of the Notice as applicable.
This award is issued pursuant to the Consolidated and Further Continuing
Appropriations Act, 2012, Pub. L. No. 112 -55, approved November 18, 2011 and the
Consolidated and Further Continuing Appropriations Act of 2015 (P.L. 113 -235), approved
December 6, 2014; section 8 of the United States Housing Act of 1937 (Act), 42 U.S.C. 1437
et seq.; and the Department of Housing and Urban Development Act, 42 U.S.C. 3531 et seq.
The purpose of this award is to begin the process of effectuating the conversion of Public
Housing to a form of project -based assistance under section 8 of the Act. This award cannot be
transferred without the prior written consent of HUD.
www.hud.gov espanol.hud.gov
M
In order to convert your project, the PHA must fulfill the CHAP milestones and deadlines
identified in section 1.12 of the Notice. HUD will rely solely on documents and certifications
the PHA submits through the RAD Resource Desk to monitor compliance with CHAP
milestones. If HUD, in its sole judgment, determines that the PHA fails to meet any of the
requirements, the CHAP will be revoked, unless the PHA submits and HUD approves a request
for a deadline extension, Any extension request must include both a justification and an
explanation of why failure to meet the milestone will not jeopardize the PHA's ability to
complete the RAD conversion. Approval of any request for an extension is at HUD's sole
discretion.
Within 30 days of CHAP issuance, you must confirm your acceptance of a CHAP by ij b,�<
submitting an application into the Inventory Removals module in PIC in order to identify Cam'
the units that will be removed from public housing Annual Contributions Contract (ACC) when
the project completes conversion. HUD has made instructions for submitting a Removal
Application into PIC available at www.hud.>ov /rad.39 Failure to submit a Removal application
into PIC will result in a suspension of the CHAP and a revocation if not corrected within a
reasonable time period. Contact your PIH Field Office if you have any questions about this
submission.
As the award is a conditional commitment by HUD, HUD reserves the right to revoke or
amend its commitment at any time prior to closing if HUD, in its sole judgment, determines that
any of the following conditions are present:
A. any of the contract units were not eligible for selection;
B. the proposed conversion is not or will not be financially feasible;
C. the Owner fails to meet any applicable deadline;
D. the Owner fails to cooperate;
E. there is any violation of program rules, including fraud; or
F. the terms of the conversion would be inconsistent with fair housing and civil rights laws
or a fair housing or civil rights court order, settlement agreement, or voluntary
compliance agreement.
This award shall be interpreted and implemented in accordance with all statutory
requirements, and with all HUD requirements, including amendments or changes in HUD
requirements, the Notice, and all other applicable RAD guidance.
39 See httn / /uort l hud ov/ hudportall docwnents /huddac ?id= RADP1Cinventow removal.ndf
M
20-
As you start the process of conversion, we urge you to continue to maintain an open
dialogue with your residents and local officials. If you have any questions or concerns regarding
the conversion process or fulfilling the CHAP Milestones, please contact your RAD Transaction
Manager.
4Wr
Jemine A /Bryon
General Q uty Assistant Secretary
Office of Public and Indian Housing
Enclosure
91
go
�.-
m�am Gebre
Acting Assistant Secretary for Housing
Federal Housing Commissioner
IDENTIFICATION OF UNITS ( "CONTRACT UNITS ")
BY SIZE AND APPLICABLE CONTRACT RENTS
The Contract Rents below for the subject project are based on Fiscal Year 2014 Federal
Appropriations and assumptions regarding applicable rent caps. The final RAD contracts rents,
which will be reflected in the RAD HAP contract, will be based on Fiscal Year 2014 Federal
Appropriations, as well as applicable program rent caps and Operating Cost Adjustment Factors
(OCAFs), and, as such, may change. In addition, prior to conversion, the PHA must provide
HUD updated utility allowances to be included in the HAP contract.
Existing PIC Development Number: MN074000001
Nu mber of 7
Contract Units
Number of
Bedrooms
Contract Rent
Utility
Allowance
Gross Rent
16
0
$430
$0
$430
33
1
$535
$0
$535
1
2
$670
$0
$670
Please note that this rent schedule includes the 2015 OCAF adjustments that the PHA is
eligible for, and will be confirmed during the Financing Plan review.
-22-
Indian Knoll, Mound - RAD Feasibility Study - 2013
Feasibility Factors:
34 1 -BR and 16 efficiency units
Financing Issues:
• Average RAD conversion rent is $507 /month
• Transition from PILOT to full real estate taxes adds $30K+ to operating costs
• Monthly deposits to replacement reserves will be required
• Cash flow /NOI does not appear to support new permanent loan debt
• Gap funds for rehabilitation are available (Hennepin County, MHFA etc.) but magnitude needed
exceeds reasonable request for these funds, noting that these funds will require the full scope of
rehab noted below
Construction Issues:
• Elevator — undersized, not code
• Plumbing stacks — cast iron, likely to need complete replacement. Will require vacating the
building, triggering relocation requirements
• Mechanicals —all need replacing
• Site issues —severe drainage issues, retaining walls
• Siding — need to investigate condition beneath siding
• Roof— not acceptable type for MHFA
• Concrete walls — can't reconfigure easily
• Narrow corridors, very low ceilings
• Lead paint — pre 1978 construction
• Asbestos — likely in floors and ceilings
Other issues:
• Marketing— efficiency units have high vacancy
• Marketing — image, competition with Westonka
• Long term physical viability
• Rent levels — question re: ongoing rent increases
• Relocation — will require full URA
• Resident service needs
Notes /Suggestions:
The City should consider obtaining a full Physical Conditions Needs Assessment (PCNA) to
determine the immediate vs. long -term capital needs of the property
The City may find potential purchasers who may be comfortable with or more moderate
rehabilitation approach, just addressing the immediate property needs
The City may find potential purchasers who may achieve operating cost savings which could
support other financing options
-23-
, to t-�) " !�-,i 5
Page i
1. Development Information
PHA: Housing Redevelopment Authority of the City of Mound, Minnesota (Mound HRA)
PIC Development it; MN74000001
Development: Indian Knoll Manor
Proposed assistance type post - conversion: PBRA
Total units at the property: 50
Number of units to be converted: 50
2. Unit Configuration
Comment: CommonBond Communities is the Management Agent. It is our understanding that
CommonBond is engaged in discussions with the Mound HRA regarding a potential acquisition
of the property. As part of its due diligence, CommonBond is evaluating whether a conversion
of the efficiency units to 1- bedroom units would be beneficial for the residents and the long-
term viability of the property. CommonBond has provided a preliminary construction cost
estimate to convert these units, but associated relocation costs have yet to be considered. We
have evaluated the feasibility of a RAD conversion using both unit configurations.
3. Existing indebtedness
CommonBond indicates that Indian Knolls Manor has no recorded mortgage debt.
4. Contract Rents Post- Conversion (PUPM)
0 -BR
I 1 -BR
2 -BR
Curcent
i6
33
1
Post RAD Conversion
01
41
1
Comment: CommonBond Communities is the Management Agent. It is our understanding that
CommonBond is engaged in discussions with the Mound HRA regarding a potential acquisition
of the property. As part of its due diligence, CommonBond is evaluating whether a conversion
of the efficiency units to 1- bedroom units would be beneficial for the residents and the long-
term viability of the property. CommonBond has provided a preliminary construction cost
estimate to convert these units, but associated relocation costs have yet to be considered. We
have evaluated the feasibility of a RAD conversion using both unit configurations.
3. Existing indebtedness
CommonBond indicates that Indian Knolls Manor has no recorded mortgage debt.
4. Contract Rents Post- Conversion (PUPM)
Comment: Contract rents past -RAD- conversion are determined by formula. For projects
converting to PBRA, rents are equal to the lower of (a) current funding and (b) 120% of FMRs
minus any utility allowance. (Indian Knoll Manor does not have utility allowances.) For projects
converting to PBVs, rents are equal to the lower of (a) current funding; (b)110 %of FMRs minus
any utility allowance; and (c) reasonable rent. Reasonable rent is calculated at 93% of FMR.
Current Funding is based on the funding that all units in the PIC are eligible for. If Indian Knoll
Manor were to convert its assistance through the program RAD, the property's new contract
Signet Partners
7400 East Cres0ine Circle, Suite 150, Greenwood Village, CO 80111
www.sig nelpartners.com
-24-
0-BR
1 -BR
I 2 -BR
I Weighted Avg.
Current Funding
$507
Reasonable Rent
$662
Hennepin County 2012 FMRs
$632
$745
$904
110% of FMRs
$783
120%ofFMRs
$588
$693
$841
$854
Comment: Contract rents past -RAD- conversion are determined by formula. For projects
converting to PBRA, rents are equal to the lower of (a) current funding and (b) 120% of FMRs
minus any utility allowance. (Indian Knoll Manor does not have utility allowances.) For projects
converting to PBVs, rents are equal to the lower of (a) current funding; (b)110 %of FMRs minus
any utility allowance; and (c) reasonable rent. Reasonable rent is calculated at 93% of FMR.
Current Funding is based on the funding that all units in the PIC are eligible for. If Indian Knoll
Manor were to convert its assistance through the program RAD, the property's new contract
Signet Partners
7400 East Cres0ine Circle, Suite 150, Greenwood Village, CO 80111
www.sig nelpartners.com
-24-
Page 12
rents at the time of conversion would be equal to Current Funding (at the time the property
entered the RAD program).
S. Operating Income
Total Potential Operating Income: $306,500
Comment: The property does not have any market rate units or commercial spaces. Ownership
currently pays all utilities and does not provide air conditioning. Some residents have installed
their own A/C unit and are charged an extra $20 a month in the summer months, if they run
their a/c unit, to cover the additional electrical usage. Miscellaneous income includes late
charges, NSF charges, damage charges, laundry and vending income, if any.
6. Vacancy/ Bad Debt Loss Factors
# Units
Weighted Avg. Rent
Total income
RAD Units
50
$506.66
$303,996
Misc income
0
$0
$1,800
Excess Utility Charges
0
$0
$500
Total Potential Operating Income: $306,500
Comment: The property does not have any market rate units or commercial spaces. Ownership
currently pays all utilities and does not provide air conditioning. Some residents have installed
their own A/C unit and are charged an extra $20 a month in the summer months, if they run
their a/c unit, to cover the additional electrical usage. Miscellaneous income includes late
charges, NSF charges, damage charges, laundry and vending income, if any.
6. Vacancy/ Bad Debt Loss Factors
Comment: The RAD program allows applicants to use a projected vacancy /bad debt loss rate of
as low as 3% and 2% respectively, so long as the applicant can adequately explain to HUD's
satisfaction why their projected loss rate is below the property's historical (3 -year) average loss
rate.
The average vacancy /bad debt loss factors at Indian Knoll Manor from 2009 -11 are reported to
be 7.20% and 0.27% respectively. For the period Jan -Oct 2012 the vacancy rate appears to have
averaged closer to 12 %. However, it is reported that the rate has since declined and that the
property is almost fully occupied. The property's historic vacancy rate is above the expected
range of 3 -5% for subsidized housing properties. We have not investigated the reasons behind
the elevated vacancy rate. There could be several reasons why the vacancy rate is above the
expected range, including but not limited to: a declining senior population in the community,
lack of demand for the efficiency units, general age /condition of the units, or slow unit turnover
due to lack of resources. Absent any systemic or market driven issues, we would expect
properties such as Indian Knoll to operate at a 3-5% vacancy rate after completion of all
necessary repairs and capital replacements. At an average of 0.27 %, the property's historical
bad debt loss rate is better than the typical affordable housing property. Ultimately, your lender
will be responsible for underwriting the new 1" mortgage loan and will determine appropriate
loss factors for use in the underwriting. For purposes of this analysis, we have utilized loss
factors of 5% and 2 %.
Signet Partners
7400 East Crestline Circle, Suite 150, Greenwood Village, CO 80111
www.signetpartners.com
25-
3 -Yr Historical Average
Projected Post Conversion
vacancy
�ad Debt
0.27%
2.0%
Comment: The RAD program allows applicants to use a projected vacancy /bad debt loss rate of
as low as 3% and 2% respectively, so long as the applicant can adequately explain to HUD's
satisfaction why their projected loss rate is below the property's historical (3 -year) average loss
rate.
The average vacancy /bad debt loss factors at Indian Knoll Manor from 2009 -11 are reported to
be 7.20% and 0.27% respectively. For the period Jan -Oct 2012 the vacancy rate appears to have
averaged closer to 12 %. However, it is reported that the rate has since declined and that the
property is almost fully occupied. The property's historic vacancy rate is above the expected
range of 3 -5% for subsidized housing properties. We have not investigated the reasons behind
the elevated vacancy rate. There could be several reasons why the vacancy rate is above the
expected range, including but not limited to: a declining senior population in the community,
lack of demand for the efficiency units, general age /condition of the units, or slow unit turnover
due to lack of resources. Absent any systemic or market driven issues, we would expect
properties such as Indian Knoll to operate at a 3-5% vacancy rate after completion of all
necessary repairs and capital replacements. At an average of 0.27 %, the property's historical
bad debt loss rate is better than the typical affordable housing property. Ultimately, your lender
will be responsible for underwriting the new 1" mortgage loan and will determine appropriate
loss factors for use in the underwriting. For purposes of this analysis, we have utilized loss
factors of 5% and 2 %.
Signet Partners
7400 East Crestline Circle, Suite 150, Greenwood Village, CO 80111
www.signetpartners.com
25-
Page 3
7. Operating Expenses
Operating Expense Comparison
2009
_
2010
2011 1 Average
Post - Conversion
Pro Forma
$265,3256
$309,998 1
$259,659 1 $278,338
$261,180
Comment: The property's most recently approved (2013) operating budget lists total operating
expenses of $276,380 ($5,528 per unit per annum). in developing a post -RAD- conversion pro
forma operating expense budget we removed capital expenditures /depreciation expense of
$46,200 (which is not considered an operating expense) and added estimated annual real estate
taxes of $35,000 (because the property would no longer be eligible for PILOT after transfer of
the Physical Asset (TPA) to CommonBond), which results in a pro forma expense budget of
$261,180 ($6,219 pupa at 42 units). (This figure does not include collection loss or annual
reserve deposits, both of which are addressed elsewhere.)
Upon completion of a RAD conversion, a property will "move" from the PIH side of HUD to the
Multifamily (MF) side of HUD, and follow HUD MF reporting guidelines. In recent years, HUD MF
has placed special emphasis on the way that owners account for their capital replacement
spending. HUD MF prefers that all capital replacements be funded through the property's
reserve account and that the operating account be used only to fund true maintenance and
repair items.
We note that approved 2013 budget for Indian Knoll Manor lists $18,000 in Contract Costs,
$8,000 in Materials, $12,000 in projected Building Repairs, and $15,000 in Building
Maintenance. We do not have a detailed breakout as to what these expenses represent but, it
is our experience that many properties fund at least a portion of their capital replacement needs
through their operating account. In addition, some of these expenses may be reduced or
eliminated upon physical rehabilitation of the property. Additional research /analysis of the
property's historical expense ledgers would be required to in order to make a reasonable
projection.
B. Capital Replacement Reserve Account Funding
After conversion the property will utilize its capital replacement reserve account to pay for its
capital expenditures. The RAD application uses a formula to determine an appropriate initial
Deposit to the Replacement Reserve account (IDRR) and Annual Deposit to the Replacement
Reserve (ADRR). The formula sets the ADRR equal to the property's projected capital
replacement needs in years 2 -20 divided by 20. The IDRR is set equal to the property's short-
term (year 2 -5) replacement needs less five times the ADRR. Thus, the IDRR tends to be zero
unless short-term needs significantly exceed long -term (year 6 -20) needs.
The short -term and long -term capital replacement needs of a property cannot be truly
understood without a Physical Condition Assessment (PCA). Participants in the RAD program
are required to obtain a RAD compliant PCA (an "RPCA "). However, HUD does not require
Signet Partners
7400 East Crestline Circle, Suite 150, Greenwood Village, CO 80111
www.signetpartners.com
-26-
Page 14
owners to obtain an RPCA until afterthey have submitted, and HUD has accepted, a RAD
application.
An RPCA includes a review of a// building systems and capital components at the property and
an estimate of remaining useful life (RUL) of each item. It also contains a schedule which
projects the timing of all capital replacements at the property over the next 20 -years and the
estimated cost to replace each item. Preparing a comprehensive and unique schedule for each
individual property provides a highly effective means for planning capital replacements and
ensuring that "reserves" are being adequately funded.
Since the Indian Knoll Manor does not currently have an RPCA estimating its long -term capital
replacements needs (years 2 -20) we have utilized a HUD rule of thumb and estimated that the
property will need to make an ADDR of $350 per unit ($17,500 per annum). Also, for purposes
of this analysis we have set the IDRR at $0.
9. Net Operating Income (NOI)
Potential Rental Income
$303,996
WBD Loss
- $21,280
Other Income
$2,300
Effective Gross Income
$285,016
Operating Expenses
- $261,180
ADRR
- $17,500
Net Operating Income
$6,336
Comment. The amount of money that an owner can borrow via anew first mortgage loan is
primarily a function of the Net Operating Income of the property. The two main components of
N01 are income and expenses. In the RAD program, the property's conversion rents are
determined by formula, and any future rent increases are determined by OCAF. Thus, there is
relatively little that an owner can do to increase its effective gross income outside of controlling
Its vacancy and bad debt loss. However, owners do have some significant control over their
operating expenses. Ensuring that operating expenses are optimized can assist owners in
identifying the maximize size of their new first mortgage loan.
10. First Mortgage Loan Sizing
te %
3.50%
nsurance Premium %
0.45%
pInterest
on Term
35 years
erm
35 years
e Coverage Ratio
1.20
Supportable New 1st Mortgage Loan
$97,600
First Mortgage Annual Debt Service
$5,280
Signet Partners
7400 East Crestline Circle, Suite 150, Greenwood Village, CO 80111
www.signetpartners.com
-27-
Page (5
Comment: For purposes of this analysis, we have assumed that the new first mortgage will be
FHA insured. Most HUD ME loan programs have terms of 30-40 years. The actual loan term and
interest rate will vary depending on the loan program chosen and the time of closing. Given a
projected NO1 of $5,280, we estimate that the property can support a maximum new V
mortgage loan of $97,600. This would support a maximum of $2,323 per unit (42 units) in
capital replacements, before taking into account any soft costs. Net Operating Income minus
Debt Service results in projected annual operating cash flow of only $1,056.
It is very important to note that if ownership of the property were to remain with the Mound
HRA and the PILOT were to remain in effect, pro forma operating expenses would be
significantly less, and the estimated NOI significantly higher, than whatis shown above.
NOI with PILOT
A projected NOI of $37,336 would support a maximum new 1" mortgage loan of nearly
$575,100 ($11,502 per unit at 50 units) in immediate capital replacement needs, before soft
costs. This illustrates the impact of operating expenses with respect to loan size.
11. Immediate (Year 1) Capital Replacement Needs
The primary objective of the RAD program is to allow owners to obtain mortgage financing
and /or equity to address their property's immediate and longer term capital replacement
needs. Therefore, we must be able to identify the extent of the property's capital replacement
needs in order to determine whether the new loan will be adequate to address those needs.
Comment: We were provided a copy of a twelve page report from MNSpect dated May 15,
2009 which contains a list of 'findings' based on their inspection of the property. The findings
are grouped under the headings: Plumbing, Electrical, Mechanical, Air Handling Unit,
Trash /Maintenance Room, General Building, Roof, Interior, and Exterior. Each finding contains a
recommended action, a cost range, a recommendation as to who should perform the action,
and a priority number.
While the information in the MNSpect report is useful, the report is now 3 -years old and
somewhat outdated. In addition, the report is not comprehensive. The findings are primarily
related to the property's immediate and short-term maintenance and repair needs, and /or
items that are do not meet current building code standards. However, significant portions of
the property are not addressed. (For example, there is no discussion as to the condition /age of
components within unit interiors such as cabinets, appliances, carpet, light fixtures, etc.) in
Signet Partners
7400 East Crestline Circle, Suite 150, Greenwood Village, CO 80111
www.signetpartners.com
Page 6
addition, the report contains no information regarding the property's long -term capital
replacement needs.
We recommend that ownership consider procuring a RAD compliant Physical Condition (needs)
Assessment (RPCA). An RPCA would provide the Mound HRA with a high value planning tool
which would be useful regardless of whether or not the HRA ultimately decides to pursue a RAD
conversion. An RPCA would, among other things, contain a list of all building systems /capital
items at the property, it would contain a description of each item /system, the current condition
of each item /system, and both an Estimated Useful Life (EUL) and estimated Remaining Useful
Life (RUL) for each capital item /system at the property. It would also provide a pro -forma
replacement schedule for each item /system and an estimated cost of replacement. In addition,
it would identify, analyze and provide recommendations regarding building systems which use
water or energy or impact energy consumption at the property. (In the RAD program,
items /systems which pass a financial payback analysis qualify for immediate replacement.)
We also received a spreadsheet entitled Capital Grants 2009 to Present, which indicates that
between 2009 -2012 the property expended some $162,000 ($1,080pupa) in Capital Grant funds
on the following improvements: Site & ground repairs $32,000; Asbestos abatement $58,000;
Hot water heaters: $7,500; Carpet /Paint: $21,800; Fire Alarm: $17,500; Lighting
upgrades /retrofits: $25,250. An RPCA would also take these replacements into account.
Finally, CommonBond provided us with a summary bid package to perform capital replacements
which they believe represent the baseline replacements necessary for stabilizing the property,
and ensuring on -going operating and market viability. Some of the proposed capital
replacements include:
Building Exterior: Roof, roof hatch, scuppers and downspouts, cement board siding,
exterior wall stucco, roof fascia, a/c sleeves, windows, and building entrance doors.
Interior Common Areas: doors, paint, wall coverings, signage, emergency lighting, exit
signage, fire extinguishers, corridor light fixtures, stairway railings, hallway railings,
elevator controls, boilers, water heaters, plumbing stacks, air handling unit, corridor
carpet & tile, mailboxes, hallway heaters, community room flooring and kitchen,
common boilers, and laundry room flooring and exhaust fans.
Dwelling Units: Conversion of efficiency units, entry doors, interior doors, flooring, light
fixtures, a/c units, electrical panel upgrades, kitchen cabinets, appliances, faucets, sinks
toilets, showerheads, and exhaust fans.
Site Improvements: Sidewalks, retaining walls, curbs, paving, storage sheds, storm
water management, landscaping, security cameras.
The bid cost of the Improvements proposed by CommonBond is as follows:
Building Exterior: 605,764
Interior Common Areas: 1,007,366
Dwelling Units: 1,049,533
Site Improvements: 318,445
Total Improvements: 2,981,108
General Contractor Fees: 260,989
Total Cost: 3,242,097
Signet Partners
7400 East Crestline Circle, Suite 150, Greenwood Village, CO 80111
www.signetpartners.com
-29-
Page 17
The bid package provided by CommonBond also includes an estimated cost to convert the 16
efficiency units to 8 one - bedroom units. Upon conversion of these units the property would
have a total of 42 units. Therefore, the cost of ComonBond's rehabilitation and conversion
proposal is approximately $81,052 per unit. In all likelihood, this cost is well in excess of the
property's replacement cost.
The list of capital replacements in CommonBond's bid package reflects what they believe is an
appropriate level of immediate capital improvements. However, it does not necessarily reflect
the level of immediate capital improvements required by the RAD program. The RAD program
requires only that the applicant property demonstrate that it already has funds on -hand or can
obtain debt or equity funding sufficient to address its immediate repair and capital replacement
needs, and to be able to begin reserving funds sufficient to meet its anticipated future (long-
term) capital replacement needs.
Over the past 12 years, we have analyzed hundreds of elderly and family Section 8 properties for
similar HUD programs and we work, on a regular basis, with several PCA contractors who are
familiar with the requirements of the RAD PCA. We have previously spoken with some of these
PCA providers in an effort to obtain a generalized estimate of immediate capital replacement
needs for similarly aged and situated properties. We are told that each property is different and
that without a site visit and a review of a property's building systems and capital replacement
history it is difficult to provide even a ballpark estimate. That being said, we most frequently
see PCA reports for Section 8 MF properties listing immediate capital replacement needs in the
$10 -$20K per unit range. At properties which historically have been able to adhere to a
schedule of relatively robust on -going capital replacements we frequently see PCA reports
indicating immediate capital needs in the $0 -10K per unit range. At properties with unique
needs and /or more deferred maintenance, we sometimes see PCA reports indicating immediate
capital needs of $20 -40K+ per unit range.
12. Total Uses of Funds
Acquisition Costs
$0
_
Construction Costs
$77,600
_
Relocation Costs
$0
Professional Fees
$0
Lender Fees and Loan Closing Costs
$20,000
Additional Reserve Requirements
$0
Developer Fees
$0
Total Uses of Funds
$97,600
Comment: A new 1'' mortgage loan of $97,600 would support only a very limited amount of
repairs and capital replacements ($1,952 per unit at the current unit configuration), A relatively
high percentage of the loan proceeds would be needed to pay legal fees, lender fees, title
insurance fees, and other closing costs. We are not privy to the terms of the proposed sale
agreement between the Mound HDA and CommonBond. For purposes of this analysis we have
assumed only a nominal sales price. Given the small mortgage, we have not allocated any
Signet Partners
7400 East Crestline Circle, Suite 150, Greenwood Village, CO 80111
www.sig netpartners. com
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Page IS
amount to relocation costs, professional fees, or developer fees. The projected uses of funds
shown above are a result of our informal discussions with lenders, third party contractors, title
agents, and legal counsel. Additional uses of funds beyond those listed above may be required
by your lender or depending upon your source(s) of funds.
13. Funding Gap
Comment: The funding gap is the difference between the maximum supportable I' mortgage
loan amount and the total proposed uses of funds. Given that, in the event of a sale of the
property to CommonBond the maximum supportable 1� mortgage for this property is around
$2,000 per unit and the immediate needs of a typical property are $15 -$20K per unit, there is a
strong likelihood of a significant funding gap. This is not necessarily fatal to a RAD application.
However, the purchaser would probably need to seek additional (outside) sources of funds to
close this gap, such as grants and /or tax credits.
Conclusion /Recommendation:
Due to the likelihood of significantly increased operating expenses (real estate taxes) and corresponding
lower NOi likely to result from a transfer of ownership to CommonBond, a RAD conversion at the
Current Funding level appears feasible only if: a) the property has very limited immediate capital
replacement needs and only light to moderate longer term capital replacement needs, or b)
CommonBond is able to obtain additional sources of funds, such as grants or low- income housing tax
credits (LIHTCs), to accommodate the higher level of immediate rehabilitation that deems appropriate.
However, if the intent of the parties is to transfer the asset for a nominal sales price, LIHTCs would not
appear to something that the purchaser would be able to qualify for due to the purchaser's lack of basis
in the property.
If the Mound RHA were to retain ownership of Indian Knoll Manor RAD conversion would appearto be
feasible depending upon the properties actual capital replacement needs. However, an RPCA is needed
to determine the property's true immediate and longer term capital replacement needs. An additional
Important consideration will be determining whether or not the efficiency units at the property are
approaching functional obsolescence. We recommend that the Mound HRA consider obtaining a RAD
compliant PCA since it would provide them with a useful planning tool regardless of whether they
ultimately elect to pursue a RAD conversion. If desired, we can provide a list of the PCA providers that
we use.
Signet Partners
7400 East Crestline Circle, Suite 150, Greenwood Wlege, CO 80111
www.sjgnetpartners.com
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REQUEST FOR QUALIFICATIONS AND INTEREST
IN THE PURCHASE OF
• 1
SUBMITTAL DUE DATE: April 20, 2015 at 4:00 pm
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Request For Qualifications and Interest
March 31, 2015
Mound HRA
REQUEST FOR QUALIFICATIONS
Purchase of Indian Knoll Manor
2020 Commerce Boulevard, Mound, MN
55364
Overview
The City of Mound Housing and Redevelopment Authority (HRA) is requesting
statements of qualification (RFQ) and interest in the purchase of a total of 50 units of
multiple family housing. The units are based in a single four -story building located on 1.5
acres in the heart of downtown Mound, MN. There are 16 studio, 33 one bedroom
and I two bedroom caretaker units.
The HRA is seeking established non - profit housing development entities that have the
ability to perform the following as part of the transfer /sale:
1) Technical expertise to partner with the HRA in completing the
Commitment to Enter into a Housing Assistance Payment Contract (CHAP)
conversion process
2) Demonstration of ability to obtain new financing to fund improvements.
3) Ability to perform the aforementioned objectives coupled with the HRA's
goals, as depicted within the main body of this RFQ.
The intent of the HRA is to interview interested parties to determine a mutual interest in
establishing a process for the eventual transfer /sale of the subject property. It is
understood that as part of this RFQ the HRA has no obligation to select any candidate
and that the HRA and the selected candidate retains the right to terminate their interest
prior to the signing of a purchase agreement.
If any applicant desires more information on the physical aspects of the building
and /or desires a walkthrough of the facility, please contact the City of Mound Finance
Director at 952.472.0633.
Statement of Qualifications Due Date and Time
In order to be considered, one (1) unbound and seven (7) bound copies of the statement
of qualifications must be received by the HRAs' Finance Department by 4:00 p.m.,
Monday, April 20, 2015. Submittals should be made to:
City of Mound
Attn: Catherine
Pausche
2415 Wilshire Blvd.
Mound, MN 55364
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Request For Qualifications and Interest March 31, 2015
Mound, MN
HRA Goals
As part of the CHAP process, and the parameters of what the HRA desires
in the transfer /sale of the subject property, the following goals should serve as a starting point for any
potential buyer:
a) Maintain the property as a strong and vibrant affordable housing community
b) Protecting the existing rental price calculation as required by HUD
c) Demonstration the equivalent of the market price will be reinvested into property
improvements
d) Maintaining Mound's residency priority
It is understood that these goals may be modified as the process unfolds but should be the starting
assumptions for the initial request.
Selection Process- Issues
Since the request is for qualification and interest to enter into an agreement for real estate, the HRA will not
have any formal scoring system. Thejudgment of the HRA will center on the following:
1) The ability of the organization to partner with the HRA to meet the requirements of the
CHAP conversion process.
2) The type of alternative financing that may be put into place to meet the aforementioned
HRA goals.
2) The ability of the subject organization to successfully transact and finalize a sale, based on
the assumption that HUD approves the CHAP conversion.
Narrative and Information Requirements
Applicants should submit a narrative, and any applicable background information, for the following items:
1) Are the HRA goals workable or are modifications necessary to make the process more
realistic?
2) Describe your overall organization, e.g. size of company, assets held, mission statement. Include
your organizations management and ownership experience.
3) Describe your organizations relevant experience in working with HUD
4) Describe why your organization views that they can be successful in working through the
CHAP conversion process.
5) To maintain the goal of subsidized housing, what programs and/or
financing would you attempt to put into place?
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Request For Qualifications and Interest
March 31, 2015
Mound, MN
6) Would you contract management or do it through your parent organization?
7) Would you add any services to what exists or continue as is?
8) The HRA desires to have parties submit a proposal regarding the purchase price /amount that will
be reinvested in the property and provide a pro -forma income statement that also shows the RAD
rents established by HUD. It is understood that this pricing proposal will be general in nature,
and will serve only as a starting point for negotiations since the type of programs, interest rates,
HUD approval requirements, HRA goals, etc. may all have a impact on the final agreement.
Interview Process
After review of the RFQ submittals it is anticipated that the HRA will establish an interview time in April. The
next steps of the process will depend on the interview, number of applicants and other factors. As stated before,
the HRA retains the right to terminate this process until the time of signing of apurchase agreement, with no
recourse for time and /or materials spent in responding to this RFQ.
Attachments
a) Commitment to Enter into a Housing Assistance Payment Contract - 2015
b) Signet Partners Final Report - RAD Financial Screen - 2013
c) FY 2015 Operating Budget
-35-
MOUND HOUSING AND REDEVELOPMENT AUTHORITY
RESOLUTION NO. 15- H
RESOLUTION APPROVING RENTAL ASSISTANCE DEMONSTRATION
(RAD) PROJECT DEVELOPMENT PARTNER
WHEREAS, the Mound Housing and Redevelopment Authority of Mound, Minnesota (the
"HRA ") owns and operates a 50 -unit low rent public housing project known as Indian Knoll
Manor in the city of Mound; and
WHEREAS, the HRA has received preliminary approval from the U.S. Department of Housing
and Urban Development (HUD) for a Commitment to Enter into a Housing Assistance Payments
(CHAP) under the Rental Assistance Demonstration program; and
WHEREAS, the HRA is required to form a development team with evidence demonstrating the
team's recent successful experience financing, developing, rehabilitating, constructing, and
owning similar projects; and
WHEREAS, a Request for Qualifications and Interest in the Purchase of Indian Knoll Manor was
issued to two major non - profit developers in Minnesota, Common Bond and Aeon, both of
whom meet HUD's requirements to be a development partner; and
WHEREAS, responses were received carefully reviewed by the HRA Board of Commissioners
and Staff; and
WHEREAS, while both organizations are highly qualified, Aeon was better able to demonstrate
the ability and willingness to explore all options, including revitalization or total replacement of
the property, and recent direct experience with a HUD disposition process;
NOW, THEREFORE, BE IT RESOLVED by the Board of Commissioners of the Mound Housing
and Redevelopment Authority, that Aeon is approved to be the HRA's Rental Assistance
Demonstration (RAD) Project Development Partner.
Adopted by the HRA this 28th day of April, 2015.
Attest: Catherine Pausche, Clerk
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Chair Mark Wegscheid