Michigan State Housing Development Authority Agenda

MICHIGAN STATE HOUSING DEVELOPMENT AUTHORITY

A G E N D A June 16, 2022 – 10:00 a.m. JUNE 21, 2022 4:00 P.M

735 East Michigan Ave., Lansing, MI 48912 3028 West Grand Blvd., Room 4-602, Detroit, MI 48202

Conference Line: 248-509-0316 | Conference ID: 644 107 820#

Roll Call:

Public Comments:

Remarks:

Chairperson

Executive Director

Voting Issues:

Tab A Approval of Agenda

CONSENT AGENDA ITEMS

Consent Agenda (Tabs B through D are Consent Agenda items. They are considered routine and are to be voted on as a single item by the Authority. There will be no separate discussion of these Tabs; any Authority member, however, may remove any Tab or Tabs from the Consent Agenda prior to the vote by notifying the Chair. The remaining Tabs will then be considered on the Consent Agenda. Tabs removed from the Consent Agenda will be discussed individually.)

Tab B Minutes – May 19, 2022

Tab C Resolution Authorizing Professional Services Contract for Auditing Services with Plante Moran, PLLC and Michigan Office of Auditor General

Tab D Resolution Authorizing Modification of Workforce Attainable Modular Homes Program aka “MSHDA Mod”

REGULAR VOTING ITEMS

Tab E Resolution Approving 2022-2023 Budget

Tab F Resolution Authorizing Modifications To Mortgage Loan for Field Street III, MSHDA Development No. 3928, City of Detroit, Wayne County

Resolution Authorizing Mortgage Resource Fund Loan, Field Street III, MSHDA

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Development No. 3928, City of Detroit, Wayne County Tab G Resolution Authorizing Modifications to Mortgage Loans for HOM Flats at Maynard,

MSHDA No. 3955, City of Grand Rapids, Kent County Tab H Resolution Determining Mortgage Loan Feasibility, Clawson Manor, MSHDA

Development No. 4026, City of Clawson, Oakland County Tab I Resolution Determining Mortgage Loan Feasibility, River’s Edge, MSHDA No. 4029,

City of Kalamazoo, Kalamazoo County Resolution Authorizing Mortgage Loan, River’s Edge, MSHDA No. 4029, City of

Kalamazoo, Kalamazoo County Tab J Resolution Authorizing Approval of Delegated Authority to Approve Grants to

Subrecipients Financed Through the Housing Opportunities Promoting Energy Efficiency (“HOPE”)

Tab K Resolution Authorizing Approval of Delegated Authority to Issue Grants from the State and Local Fiscal Recovery Fund to the City of Detroit and The Heat and Warmth

Fund Closed Session None.

Discussion Issues: None. Reports: Tab 1 Current and Historical Homeownership Data Tab 2 Homeownership Production Report Tab 3 MI 10K DPA Monthly Statistics (Map) Tab 4 MI 10K DPA Weekly Statistics (Graph) Tab 5 2022 Board Calendar Tab 6 Draft - Amended and Restated Pass-Through Bond Program

Michigan State Housing Development Authority Minutes of Regular Authority Meeting

May 19, 2022 – 10:00 a.m.

AUTHORITY MEMBER(S) PRESENT IN LANSING Regina Bell Susan Corbin Carl English Rachael Eubanks Jennifer Grau Deb Muchmore Michele Wildman for Quenton L. Messer, Jr. AUTHORITY MEMBER(S) ABSENT Tyrone Hamilton OTHERS PRESENT IN LANSING Clarence Stone, Legal Affairs Lisa Ward, Legal Affairs Mary Cook, Operations Chris Hall, Information Technology Mark Whitaker, Information Technology Andrew Minegar, MIRS Sandy Pearson, Habitat for Humanity OTHERS PRESENT VIA MICROSOFT TEAMS Gary Heidel, Acting Executive Director Michelle Jenks, Executive Richard Norton, Legal Affairs Jonathan Hilliker, Audit, Compliance and Fraud Investigation Jeff Sykes, Finance Justin Wieber, Asset Management Chad Benson, Rental Development Elizabeth Rademacher, Rental Development John Hundt, Rental Development Sherry Hicks, Operations Mary Townley, Homeownership Katie Bach, Communications Anna Vicari, Communications

Troy Thelen, Asset Management Mark Garcia, Executive Tiffany King, Office of Equity and Engagement Daphne Wells, Operations Carol Brito, Homeownership Joe Kelly, Procurement Amber Martin, Human Resources Lindsey Schmitt, Human Resources Michael Vollick, Environmental Office Matthew Miller, Legal Affairs Bret Bicoy, Legal Affairs Tonya Young, Neighborhood Housing Initiatives Jennifer Bowman, Executive Charles Smith, Rental Development Michael Fobbe, Office of Attorney General John Millhouse, Office of Attorney General Amy Patterson, Office of Attorney General James Kiefer, Dykema Jarrod Smith, Dykema Kris Nied, Miller Canfield Ronald Liscombe, Miller Canfield Seven additional members of the public participated via the Conference Line: 248-509-0316, Conference ID: 644 107 820#. Chairperson Susan Corbin opened the meeting at 10:03 a.m. A quorum was established with the presence of Ms. Corbin, Regina Bell, Carl English, Jennifer Grau, Deb Muchmore and Michele Wildman. Rachael Eubanks joined the meeting at 10:46 a.m. While Authority members were present in Lansing, presenters participated via Microsoft Teams. At Ms. Corbin’s request, Jonathan Hilliker provided instructions for those participating remotely, including guidelines on how to provide public comment via the conference line. Ms. Corbin began the meeting by requesting public comments from participants. Luke Forrest from the Community Economic Development Association of Michigan (CEDAM) thanked the Authority for its support of the Small Town and Rural Development Conference. The conference recently took place in Crystal Mountain, Michigan and was in-person for the first time in three years. Mr. Forrest noted that Authority staff hosted a session on the Statewide Housing Plan and provided information on new funding opportunities available through the American Rescue Plan. He further thanked Authority staff members Tonya Young and Haywood Edwards for their contributions to the event, as well as Authority member Michele Wildman, who served as a judge for the Put Your Town on the Map competition. There being no additional public comment, Ms. Corbin mentioned that there was a goldenrod for the memorandum that covers Tabs E through H. She then provided an update on the Executive Director position by noting there has been ongoing dialogue with the Department of

Housing and Urban Development concerning the exceptions and waivers being sought for Amy Hovey. She is hopeful there will be an update available soon. Following Ms. Corbin’s remarks, Acting Executive Director Gary Heidel provided a brief recap of the Building Michigan Communities Conference (BMCC). He stated that responses to the Statewide Housing Plan have been positive, and the BMCC was a great success. Mr. Heidel further recognized the staff responsible for the event, as well as the Statewide Housing Plan, including Karen Gagnon, Tiffany King, and David Allen. He also recognized the efforts of the Communications Team, including Katie Bach and Molly Ford. To conclude his remarks, Mr. Heidel announced the unveiling of the “We Are MSHDA Wall” during Employee Appreciation Week. The wall celebrates the lives of three former employees—Terrance Duvernay, George Fox, and James Butler--who impacted MSHDA’s culture. Mr. Heidel further noted that the tribute was planned and implemented by staff. Approval of Agenda: Deb Muchmore moved approval of Tab A (Agenda). Michele Wildman supported. The agenda was approved. Voting Items: Consent Agenda (Tabs B through D). Jennifer Grau moved approval of the consent agenda. Regina Bell supported. The Consent Agenda was approved. The Consent Agenda included the following items: Tab B Minutes - April 21, 2022 Tab C Resolution Authorizing Execution of Memorandum of Understanding and Internal

Agency Agreement with Michigan Department of Environment, Great Lakes, and Energy

Tab D Resolution Authorizing Professional Services Contractor for Racial Equity Impact

Assessment Regular Voting Items: Jeff Sykes, Chief Financial Officer, Jarrod Smith, Bond Counsel with Dykema, and Kris Nied, Bond Counsel with Miller Canfield, presented the following items:

• Tab E: Michigan State Housing Development Authority Series Resolution Authorizing the Issuance and Sale of Single-Family Mortgage Revenue Bonds, 2022 Series A in an Amount Not to Exceed $300,000,000.

• Tab F: Michigan State Housing Development Authority Series Resolution Authorizing the Issuance and Sale of Single-Family Mortgage Revenue Bonds, 2022 Series B in an Amount Not to Exceed $125,000,000.

• Tab G: Michigan State Housing Development Authority Series Resolution Authorizing the Issuance and Sale of Single-Family Mortgage Revenue Bonds, 2022 Series C (Federally Taxable) in an Amount Not to Exceed $75,000,000; and

• Tab H: Michigan State Housing Development Authority Resolution Approving Actions Relating to Certain 2017 Swap Transaction for Single-Family Mortgage Revenue Bonds.

Mr. Sykes presented the business terms of Tabs E, F, G and H. Although Rachael Eubanks was not present for this portion of the meeting, Mr. Sykes assured Authority members that he had many discussions with her concerning these items. Following Mr. Sykes’ presentation, Mr. Smith presented the bond resolutions for Tabs E, F, and G. Ms. Nied presented the bond resolution for Tab H. John Millhouse of the Attorney General’s Office confirmed that the documents for Tabs E, F, G and H were acceptable for Board’s action. Clarence Stone, Director of Legal Affairs, confirmed that the documents for Tabs E, F, G and H were acceptable for Board’s action.

Carl English moved approval of Tab E. Jennifer Grau supported. The following Roll Call was taken for Tab E: There were 6 “yes” votes. The resolution was approved. Carl English moved approval of Tab F. Regina Bell supported. The following Roll Call was taken for Tab F:

Regina Bell Yes Jennifer Grau Yes

Susan Corbin Yes Tyrone Hamilton Absent

Carl English Yes Deb Muchmore Yes

Rachael Eubanks Absent Michele Wildman Yes





There were 6 “yes” votes. The resolution was approved. Deb Muchmore moved approval of Tab G. Regina Bell supported. The following Roll Call was taken for Tab G: There were 6 “yes” votes. The resolution was approved. Jennifer Grau moved approval of Tab H. Deb Muchmore supported. The following Roll Call was taken for Tab H: There were 6 “yes” votes. The resolution was approved. Jeff Sykes, Chief Financial Officer and Kris Nied, Bond Counsel with Miller Canfield, presented the following items:

• Tab I: Michigan State Housing Development Authority Sixth Resolution Supplementing Se Resolution Authorizing the Issuance and Sale of Single-Family Mortgage Revenue Bonds, 2007 Series B in an Amount not to Exceed $215,000,000

• Tab J: Michigan State Housing Development Authority Third Resolution Supplementing Series Resolution Authorizing the Issuance and Sale of Single-Family Mortgage Revenue Bonds, 2007 Series F in an Amount Not to Exceed $95,000,000

• Tab K: Michigan State Housing Development Authority Fifth Resolution Supplementing Series Resolution Authorizing the Issuance and Sale of Single-Family Mortgage Revenue Bonds, 2009 Series D in an Amount Not to Exceed $110,000,000









Mr. Sykes presented the business terms of Tabs, I, J and K. Ms. Nied presented the bond resolutions of Tabs I, J, and K. John Millhouse of the Attorney General’s Office confirmed that the documents for Tabs, I, J and K were acceptable for Board’s action. Clarence Stone, Director of Legal Affairs, confirmed that the documents for Tabs, I, J and K were acceptable for Board’s action. Carl English moved approval of Tab I. Michele Wildman supported. The following Roll Call was taken for Tab I: There were 6 “yes” votes. The resolution was approved. Carl English moved approval of Tab J. Deb Muchmore supported. The following Roll Call was taken for Tab J: There were 6 “yes” votes. The resolution was approved. Carl English moved approval of Tab K. Deb Muchmore supported. The following Roll Call was taken for Tab K: There were 6 “yes” votes. The resolution was approved.













Rachael Eubanks joined the meeting following the vote on Tab K at 10:46 a.m. Elizabeth Rademacher, Rental Development, presented Tab L: Resolution Adopting the Second Amendment to the 2022-2023 Qualified Allocation Plan for the Housing Tax Credit Program. Ms. Rademacher reviewed the documents as detailed in the board docket. Michele Wildman moved approval of Tab L. Jennifer Grau supported. The resolution was approved. John Hundt, Rental Development, presented Tab M: Resolution Authorizing Modifications to Mortgage Loan for Westchester Village South, MSHDA Development No. 3788, City of Saginaw/Saginaw Township, Saginaw County. Mr. Hundt reviewed the documents as detailed in the board docket. Carl English moved approval of Tab M. Deb Muchmore supported. The resolution was approved. Justin Wieber, Asset Management, presented Tab N: Resolution Authorizing Waiver of Mortgage Loan Prepayment Prohibition, Elmcrest Village, MSHDA No. 3061, City of Flushing, Genesee County. Mr. Wieber reviewed the documents as detailed in the board docket.

Jennifer Grau moved approval of Tab N. Rachael Eubanks supported. The resolution was approved. Justin Wieber, Asset Management, presented Tab O: Resolution Authorizing Waiver of Mortgage Loan Prepayment Prohibition, Valley View III, MSHDA Development No. 1033, Township of Ionia, Ionia County. Mr. Wieber reviewed the documents as detailed in the board docket. Michele Wildman moved approval of Tab O. Regina Bell supported. The resolution was approved. There being no additional discussion, Ms. Corbin announced the following reports were included in the docket for reference: (Tab 1) MSHDA Proposed 2022-2023 Budget; (Tab 2) Current and Historical Homeownership Data; (Tab 3) Homeownership Production Report; (Tab 4) MI 10K DPA Monthly Statistics (Map); (Tab 5) MI 10K DPA Weekly Statistics (Graph); and (Tab 6) 2022 Board Calendar. Ms. Corbin noted that the next regular board meeting would be June 16, 2022. She then requested a motion to adjourn the meeting. Michele Wildman moved to adjourn, and Regina Bell supported. The meeting adjourned at 11:01 a.m.

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M E M O R A N D U M

TO:

FROM:

DATE:

RE:

Authority Members

Gary Heidel, Acting Executive Director

June 16, 2022 JUNE 21, 2022

Resolution Authorizing Professional Services Contract with Plante Moran, PLLC as External Auditor

RECOMMENDATION:

I recommend that the Michigan State Housing Development Authority (the “Authority”) authorize a one-year extension of the professional services contract as a third-party beneficiary for external audit services. Principal parties to the contract are the Office of Auditor General (“OAG”) and Plante Moran, PLLC (“Contractor”).

CONTRACT SUMMARY:

Name of Contractor: Plante Moran, PLLC Amount of Contract:

• $160,745 for financial audit of fiscal yearending June 2022, including expenses

• Additional services billed between $112and $223/hour

Length of Contract: 1 year Extension Options: Third-party yearly extensions Request for Start Date: July 1, 2022 Number of Bids Received: 0 MSHDA Division Requesting the Contract: Finance

EXECUTIVE SUMMARY:

Services Requested / Benefit: The Authority requires an independent, third-party contractor to perform certain annual audits. Independent auditing, in accordance with audit-industry standards, benefits the Authority by demonstrating the quality of its financial controls to the public, bond investors, and governmental-oversight authorities.

The Authority is a third-party beneficiary to a contract executed in 2012 between the OAG and the Contractor for performance of an annual end-of-year financial audit of the Authority and an additional single audit of the Authority pursuant to the Single Audit Act Amendments of 1996

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(“Public Law 104-156”). The OAG has extended the 2012 contract with the Contractor to continue providing auditing and related services in accordance with the terms and conditions of the contract. Following OAG’s periodic extensions of the contract, the Authority has likewise re-authorized engaging in and renewing this contract as a third-party beneficiary. The current third-party beneficiary approval will expire on June 30, 2022.

By renewing as a third-party beneficiary to the contract, the Authority will ensure continuation of the audit and related services with minimal disruption to the Authority, assuring compliance with audit requirements. If approved, the contract will expire on June 30, 2023.

Amount of Contract: Costs of the contract are based on: (a) actual hours spent on the engagements, which shall not exceed $160,745 (previously $150,640 for 2021) for the 2022 financial audit and (b) additional allowances for cap increase if there are major new programs with bond offerings and other services to be billed between $112/hour and $223/hour (previously $107/hour and $213/hour, for 2021, respectively).

Meeting Expectations: The Contractor has consistently met and/or exceeded expectations and has been approved by the OAG to provide the described services.

Milestones and Track Record: Milestones are set in the prior and proposed contract extensions in the form of demonstrated adherence to industry standards and deadlines for production of audit reports. The Contractor has successfully met milestones in performing prior contracts.

Risk to Authority: Preparation of audits involves performing procedures to obtain the auditor’s judgment, including the assessment of the risk of material misstatement of the financial statements, whether due to fraud or error. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. The risk to the Authority of engaging in the proposed contract is similar to that facing the Authority with any other audit-service provider. This Contractor’s positive past performance and approval by the OAG mitigates such risk.

ADVANCING THE AUTHORITY’S MISSION:

• The continued provision of quality audit services by the Contractor will aid the Authority indata-driven decision making.

• Agreement to adopt the contract as approved by the OAG demonstrates partnercollaboration within State government.

COMMUNITY ENGAGEMENT/IMPACT

Not applicable.

ISSUES, POLICY CONSIDERATIONS, AND RELATED ACTIONS:

None.


RESOLUTION AUTHORIZING PROFESSIONAL SERVICES CONTRACT FOR AUDITING SERVICES WITH PLANTE MORAN, PLLC AND

MICHIGAN OFFICE OF AUDITOR GENERAL

June 16, 2022 JUNE 21, 2022

WHEREAS, pursuant to Act 346 of the Public Acts of 1966 (“Act”), the Michigan State Housing Development Authority (“Authority) has approximately $3.51 billion in outstanding bonds to assist in the development of affordable housing for low and moderate income Michigan households; and

WHEREAS, to induce the investment community to market and purchase Authority bonds, the Authority has made certain promises including the promise to provide annual financial audits of the Authority prepared by independent, nationally recognized accounting firms; and

WHEREAS, timely preparation of the audited financial statements is required under covenants with bond holders, rating agencies, and credit enhancement providers among others; and

WHEREAS, the Authority’s Act provides the Authority with independent, statutory authority to contract with privately held firms to conduct its financial audits; and

WHEREAS, in 2012, the Authority became a third-party beneficiary to a contract between the Michigan Auditor General’s Office (“OAG”) and Plante Moran, PLLC, following an OAG competitive bid process, to provide independent financial audit, a single audit, and services related to bond offerings and other non-audit services; and

WHEREAS, the OAG has periodically extended the original 2012 contract and the Authority has followed in-kind, periodically extending its approval to continue as a third-party beneficiary to the contract; and

WHEREAS, the Authority’s approval to continue as a third-party beneficiary to the OAG contract is set to expire on June 30, 2022; and

WHEREAS, terms and conditions of the contract include increased costs, including increasing the dollar amount previously authorized by the Authority for the financial audit to an amount not to exceed $160,745; and

WHEREAS, the portion of the contract related to preparation of a single audit will not be renewed at this time; and

WHEREAS, the terms and conditions of the contract include a fee increase for services related to bond offerings and other non-audit services to hourly rates ranging from $112/hour to $223/hour; and

WHEREAS, the Acting Executive Director recommends that the Authority continue as a third-party beneficiary to the OAG contract with Plante Moran, PLLC, to obtain the services described in the accompanying memorandum; and

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WHEREAS, the Authority concurs with the recommendations of the Acting Executive Director.

NOW THEREFORE, Be It Resolved by the Michigan State Housing Development Authority, that the Executive Director, the Chief Financial Officer, the Director of Legal Affairs, the Deputy Director of Legal Affairs, or any person duly authorized to act in any of the foregoing capacities, is each hereby authorized to execute, on behalf of the Authority, a third-party beneficiary contract to provide services described in the contract between the Michigan Office of the Auditor General and Plante Moran, PLLC, for the performance of a financial audit, and services related to bond offerings and other non-audit services, as set forth in the accompanying memorandum.

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M E M O R A N D U M

TO:

FROM:

DATE:

Authority Members


June 16, 2022 JUNE 21, 2022

RE: Recommendation to Authorize a Modification of the Workforce Attainable Modular Homes ("MSHDA Mod") Program

RECOMMENDATION:

I recommend the Michigan State Housing Development Authority (the "Authority") adopt a resolution authorizing revisions to the MSHDA Mod Program that was permanently adopted on September 24, 2020, to facilitate implementation of the program by local communities.

The program's primary objective is to enhance opportunities for economic development by providing new affordable single-family housing in areas where there is a housing shortage for moderate income households. The MSHDA Mod Program facilitates and encourages the construction of housing units at an attainable price point.

EXECUTIVE SUMMARY:

MSHDA Mod is designed to encourage building partnerships and increase housing capacity at the local level. It also promotes discussion between community representatives and employers on meeting local workforce housing needs and serves as a catalyst for communities to take an active role in attracting and retaining working families.

The program was developed in response to local officials demonstrating a market need for affordable, workforce single-family housing. Modular homes are typically constructed at the factory, shipped to the site, and assembled by a licensed builder who adds the other site amenities such as a basement, porch, garage, driveway, and landscaping. Modular homes are similar in quality to stick-built homes but typically have a shorter construction timeline, require less local housing capacity, reduce oversight and typically reduce construction waste. Under the pilot program, the Authority provided a repayable grant to the sponsor to acquire and install an initial modular home that could be used as a spec model for up to five (5) years. Once the initial home was sold, the funds received from the sale could be recycled to the grantee to acquire and install additional modular homes for sale in the same community.

Progress to date includes grants awarded to seventeen (17) communities--nine (9) local units of government, six (6) non-profit organizations, and two (2) for-profit developers:

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• City of Coldwater• Kalamazoo Neighborhood Housing Services (Kalamazoo)• City of Beaverton• Bethany Housing Ministries Community Encompass (Muskegon)• Big Rapids Housing Commission• Northeast Michigan Habitat for Humanity (Harrisville)• Barry County Community Foundation (Hastings)• Northern Michigan Limited Dividend Housing Association, LLC (Grayling)• City of Dowagiac• Marquette County Land Bank Authority (Ishpeming)• Four County Community Foundation (Imlay)• Village of Cassopolis• Detroit Land Bank Authority (Detroit)• City of Albion• Habitat for Humanity of St. Joseph County (Three Rivers)• Jones Construction and Development LDHA, LLC (Detroit)• Genesee County Land Bank Authority (Flint)

PROGRAMMATIC RECOMMENDED MODIFICATIONS TO EXISTING AND FUTURE AWARDS:

• Increase the maximum grant term to thirty-six (36) months.• Increase the maximum grant for eligible costs to $250,000.• Remove the limit on using recycled funds in the same community to allow for the

redistribution of MSHDA Mod grant funds across the state to grantees in othercommunities. Any funds that are repaid to the Authority by the grantee, including intereston the repayable grant, will be eligible for recycling.

The MSHDA Mod program guidelines, policies, and implementing agreements will be revised once the recommended programmatic changes are approved by the Authority.


• Workforce housing is an important part of the Authority's housing strategy to expandavailable resources to create and preserve housing that addresses the workforce housingshortage in some Michigan communities.

• The MSHDA Mod Program increases access to housing opportunities in rural communitiesand urban neighborhoods.

MUNICIPAL SUPPORT:

Nine (9) local governments are participating in the program. Other local governments have expressed significant interest or solicited local non-profits to participate.

COMMUNITY ENGAGEMENT/IMPACT:

• One hundred percent (100%) of completed homes have sold (12 of 12 builds).• Thirty-nine (39) occupants are enjoying their new homes.• Three (3) households are first-time homebuyers.

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• At least four (4) homes are workforce housing (less than 10 miles from buyer’s worklocation).

• A competitive funding round award occurred in spring of 2022, with homes expected to bedelivered in 2023.

• Based on contracts in place, it is anticipated that eight (8) new homes will be constructedin 2023, after adopting the recommended programmatic revisions listed above.


Through analysis of the program, it is determined that the proposed revisions are necessary to accommodate local needs and the current economic situation. Approval of these revisions will enable the program to accommodate unforeseen COVID-19-related impacts on construction, including material cost increases, time delays resulting from material shortages/supply chain issues, and labor constraints.

In addition, the program revisions will allow flexibility to redirect the dollars statewide in areas experiencing workforce housing shortages instead of limiting the resources to previous MSHDA Mod communities and grant recipients.


RESOLUTION AUTHORIZING MODIFICATION OF WORKFORCE ATTAINABLE MODULAR HOMES PROGRAM aka "MSHDA MOD"

June 16, 2022 JUNE 21, 2022

WHEREAS, the Michigan State Housing Development Authority (the "Authority") is authorized under Public Act No. 346 of the Public Acts of 1966, as amended, to analyze housing conditions and needs in this state and to formulate new and better techniques and methods for increasing the supply of housing; and

WHEREAS, it has been determined that there is a critical need for new affordable housing in areas experiencing job growth in this state, and on September 24, 2020, the Authority adopted the Workforce Attainable Modular Homes ("MSHDA Mod") Program; and

WHEREAS, on April 22, 2021, the Authority adopted modifications to the MSHDA Mod Program; and

WHEREAS, the Acting Executive Director is recommending further modifications to the MSHDA Mod Program, as described in the accompanying memorandum; and

WHEREAS, the Authority concurs in the recommendations of the Acting Executive Director.

NOW, THEREFORE, Be It Resolved by the Michigan State Housing Development Authority as follows:

1. That the modifications to the MSHDA Mod Program, as described in the accompanyingMemorandum dated June 16, 2022, JUNE 21, 2022 are hereby approved.

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M E M O R A N D U M

TO: Authority Members

FROM: Gary Heidel, Acting Executive Director

DATE:

RE:

June16, 2022 JUNE 21, 2022

The Michigan State Housing Development Authority’s 2022 – 2023 Proposed Budget

RECOMMENDATION:

I recommend that the Michigan State Housing Development Authority (the “Authority”) review and comment on the Authority’s 2022-2023 Budget (the “Budget”).

EXECUTIVE SUMMARY:

The Budget was developed with input from all divisions within the Authority, the review of prior years’ experience, with consideration of the uncertainty created by the COVID pandemic and the unprecedented amount of Federal Resources to be administered by the Authority. The Authority’s annual budget was developed with consideration given to the Authority’s Strategic and Operational Plans.

A few notable items include:

• Net Interest Income is down as higher rate mortgages are refinancing and being modifiedto lower rate mortgages. This was due to the lower interest rate environment experiencedin the prior fiscal year and single-family mortgages (approximately $85 million) beingmodified into lower rate mortgages, due to an FHA requirement. These reductions will bepartially offset by higher returns on investments. Net Interest Income is generated whilethe Authority is meeting its Mission to provide quality affordable housing.

• Salaries and Fringes have increased ($3.2 million) due to the administration of Federalresources. At the conclusion of these temporary programs, it is expected that Salariesand Fringes will decrease.

• Mortgage Servicing Fees continue to increase, primarily due to increased single-familymortgage balances and the anticipated higher cost of servicing delinquent loans and loanmodifications as borrowers come out of their forbearance agreements.

• The Authority is targeting a 1.00% return on Net Assets, bringing a budgeted increase inNet Assets of $8.5 million.

• By targeting a 1.00% increase in Net Assets, the Authority can provide $10.2 million ingrants for the 2022-23 fiscal year.

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Michigan State Housing Development Authority 2022-23 BUDGET(000's Omitted)

PROPOSED ESTIMATED 12 MONTH BUDGETBUDGET 12 MONTH BUDGET ESTIMATED INCREASE

22-23 21-22 21-22 VS. BUDGET (DECREASE)Revenue:

Net interest income $62,957 1 $61,739 $67,606 ($5,867) ($4,649)HCV/FSS fees 17,700 2 17,740 17,500 240 200Fees - Other federal programs 14,053 3 13,425 13,580 (155) 473Preservation fee income 100 4 125 100 25 0LIHTC Fees 4,100 5 4,985 3,900 1,085 200Contract Administration fees 12,500 6 12,500 12,000 500 500Gain (loss) on retirement of bonds 2,500 7 1,775 1,350 425 1,150Gain (loss) on sale of investments 0 8 0 0 0 0Gain on sale of mortgages 950 9 1,096 960 136 (10)Miscellaneous income 7,940 10 14,200 4,084 10,116 3,856

Total Revenue $122,800 $127,585 $121,080 $6,505 $1,720

Expenses:Operating Expenses:

Salaries and fringes $45,996 11 $42,474 $42,754 (280) 3,242Technical service contracts 7,525 12 6,871 7,273 (402) 252General contracts 1,355 13 1,240 1,704 (464) (349)Rent, building depreciation and utilities 1,116 14 1,104 1,092 12 24Buiding maint, equipment purchase & rental 660 19 645 792 (147) (132)Information Technology 8,606 15 4,875 10,042 (5,167) (1,436)State charges for Attorney General, Auditor General, Civil Service and admin 2,657 16 2,861 2,778 83 (121)Travel 156 17 156 204 (48) (48)Telephone 324 17 324 480 (156) (156)Supplies, printing and postage 312 17 312 276 36 36Advertising and publicity 1,950 20 2,065 2,350 (285) (400)HCV contracted agents 9,740 21 9,710 9,755 (45) (15)Memberships, subs., & research mat. 96 17 96 96 0 0Authority sponsored conf. 180 18 180 180 0 0Conference registration fees 108 17 108 108 0 0Temporary support 480 22 135 90 45 390Legal & insurance 450 23 480 480 0 (30)Miscellaneous 840 17 840 372 468 468Deferred loan origination costs (2,625) 24 (2,290) (2,375) 85 (250)

Total Operating expenses 79,926 72,186 78,451 (6,265) 1,475

Single Family & HIP Mortgage servicing/origination/FHA insurance fees 11,152 25 13,750 9,755 3,995 1,397Costs of issuing & paying notes & bonds 3,050 26 2,940 2,900 40 150Bond insurance, LOC & Liquidity fees 1,744 27 1,675 1,693 (18) 51Provision for losses on Mort. loans 7,200 28 10,850 8,700 2,150 (1,500)Rent Subsidies 240 29 (100) 450 (550) (210)Grants (Total $10,188)

Homeless Program (Federal Matching) 5,600 30 5,502 5,502 0 98NEP 2,000 30 2,000 2,000 0 0Key-to-Own 150 30 150 150 0 0Collaborative Grants 2,438 30 2,379 2,379 0 59

Homeownership Counseling 750 31 1,090 700 390 50

Total expenses $114,250 $112,422 $112,680 ($258) $1,570

Net Increase in fund balance $8,550 $15,163 $8,400 $6,763 $150

Notes 1 - 31 - - See pages following

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NOTES

(1) Net interest income is budgeted at $62,957,000, which is $4,649,000 less than was budgeted in FY 22. Weanticipate lower rates earned on slightly higher average balances for mortgage loans compared to FY 22. Higherinterest rates received on higher average balances for investments are anticipated for FY 23. We anticipate bondinterest expense to increase due to higher interest rates paid on higher bond balances in FY 23 over the budgetedamount in FY 22.

The components of interest income are estimated as follows:

Average Average Budget Balance Rate Amount

Interest income: Mortgage loans $3,856,497,000 4.50 % $173,548,000 Investments $ 904,069,000 1.27 % 11,495,000

Interest expense on bonds $3,767,760,000 3.24 % ( 122,086,000)

Net interest income $ 62,957,000

(2) Housing Choice Voucher and Family Self Sufficiency Administration fees are expected to stay flat compared tothe prior year’s budget.

(3) Represents funds available for administering other federal programs, including the HOME Program ($3,600,000),Hardest-Hit Fund ($300,000)*, the Housing Trust Fund Program ($1,500,000) and new Federal FundingPrograms ($8,653,000).

(4) Budgeted amount includes preservation fees of $0 from anticipated prepayments on multifamily loans and$100,000 of funds received from the required annual payments from projects surplus cash. The amount ofpreservation fee income could vary significantly from the budgeted amount. It is based on large payments from asmall number of projects that are anticipated to prepay their multi-family loan. Actual prepayments may not takeplace or may exceed our expectations.

(5) Fees for administering the Low Income Housing Tax Credit Program.

(6) Fees expected to be received for administering the HUD Section 8 Contract Administration Program.

(7) Whether a bond retirement results in a gain or loss depends on the interest rate of the bond called relative to theaverage rate on the issue from which the bond is being called. We are budgeting a gain of $2,500,000 for 2023.

(8) We have projected no gain from the sale of other long-term investments.

(9) Gain on the sale of securitized single-family loans and REO multi-family loans.

(10) Budget amount of $7,940,000 includes fees expected to be received from administering the Mortgage CreditCertificate program ($100,000), administrative oversight fees to be received from developments that have prepaidtheir mortgage loans ($130,000), late fee/prepayment penalties on mortgages ($1,500,000), amortization of assetmanagement fees ($380,000), fees for the issuance of limited obligation bonds ($1,000,000) and various smallerincome items of ($330,000), BMIR funds ($4,500,000).

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(11) Budget requests by Division are as follows: Positions Filled Cost

Executive:Director's Office 4.0 $ 434,283 Communications 5.0 376,028

Compliance, Fraud & Internal Audit 8.0 606,272 Equity & Engagement 4.0 372,604 Market Analysis & Research 4.0 324,809 Southeast Michigan Outreach 3.0 281,692 Students & Co-ops 0.0 0

28.0 $2,395,688 Fringes (75%) 1,796,766 TOTAL $4,192,454

Operations: Director’s Office 1.9 $179,445 Technical Support Services 12.0 969,792 Office Services 7.0 520,173 Employee Services 2.0 157,686 Human Resources 3.0 262,399 Students & Co-ops 0.7 24,000

26.6 $2,113,495 Fringes (75%) 1,585,121 TOTAL $3,698,616

Finance: Director's Office 2.0 $ 242,145 Accounting & Investments 6.0 451,300 Single Family Servicing 3.8 227,667 Multi-Family Servicing 3.0 183,264 Audit 4.0 367,008 Operations – HVP 3.0 270,354 Students & Co-ops 0.0 0

21.8 $1,741,738 Fringes (75%) 1,306,304 TOTAL $3,048,042

Legal: Director's Office 6.0 $ 496,986 Staff Attorneys 9.0 1,019,717 Procurement 1.0 86,067 Students & Co-ops 0.7 24,000

16.7 $1,626,770 Fringes (75%) 1,220,078 TOTAL $2,846,848

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(11) Budget requests by Division (continued) Positions

Filled Cost Neighborhood Housing Initiatives:

Director's Office 1.0 $147,288 Neighborhood Initiatives 9.0 767,611 Students & Co-ops 0.0 0

10.0 $914,899 Fringes (75%) 686,174 TOTAL $1,601,073

Rental Assistance & Housing Solutions: Director's Office* 2.0 $269,081 Rent Assistance* 27.6 1,987,793 Homeless Initiatives 11.0 866,812 CERA* 29.0 1,527,372 Students & Co-ops* 0.7 24,000

70.3 $4,675,058 Fringes (75%) 3,506,294 TOTAL $8,181,352

*Federally Funded

Asset Management: Director's Office 4.0 $339,446 Transactions 6.0 488,655 Small Scale Asset Management 5.0 402,295 Core Properties Intake 8.0 644,378 Operations 4.0 325,749 Contract Administration 9.0 712,718 Compliance Monitoring 9.0 695,763 Students & Co-ops 0.7 24,000

45.7 $3,633,004 Fringes (75%) 2,724,753 TOTAL $6,357,757

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(11) Budget requests by Division (continued) Positions

Filled Cost Homeownership:

Director's Office 7.0 $ 486,629 Single Family/MCC Operations 14.0 948,975 Business Development 6.0 477,672 MIHAF* 47.0 2,200,439 Students & Co-ops 0.0 0

74.0 $4,113,715 Fringes (75%) 3,085,286 TOTAL $7,199,001

*Federally Funded

Rental Development: Director's Office 4.0 $361,704 Multi-family Development 6.0 512,395 Construction Design & EEO 8.0 753,851 Environmental Quality 2.0 198,172 Low Income Housing Tax Credit 7.0 444,389 Students & Co-ops 0.0 0

27.0 $2,270,511 Fringes (75%) 1,702,883 TOTAL $3,973,394

Total Salaries July 1, 2022 320.1 $23,484,878 Total Fringes July 1, 2022 $17,613,659

General increase effective October 1, 2022 (5% of base wages) 1,541,195 General increase effective April 1, 2023 (1% of base wages) 102,746

$42,742,478 Summary of Costs:

Projected salary cost of positions $42,742,478 Vacant positions salaries (23) 1,936,892 Vacant positions fringes 1,452,668 Unfilled Vacant Positions (40%) (1,355,824) Estimated sick and annual leave accrual 60,000

Total budgeted salaries and fringes 22-23 $44,836,214

Estimating 15 new Federally Funded Positions to be filled 662,730 Fringes for the 15 Federally Funded Positions 497,048

Total budgeted salaries and fringes 22-23 with new Federal Positions $45,995,992

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(12) Production-related Contracts: 2022-23

Proposed 2021-22 Budget Budget

Multi-Family: Design Review $53,000 105,000

Marketing 21,000 15,000 Environmental and Technical Resources 50,000 70,000

Subtotal $124,000 $190,000

Contract Administration*: Asset Management $4,822,000 $4,745,000 Consulting 55,000 55,000 TRACS Processing 1,224,000 1,214,000

Subtotal $6,101,000 $6,014,000

Single Family Foreclosure Services/Audit 500,000 273,000 Environmental Legal Matters 40,000 40,000 Capital Needs and Project Assessments 200,000 146,000 TRACS Processing 23,000 10,000 Contractual Tenant File Audits/Physical Inspections 537,000 600,000

Total $7,525,000 $7,273,000

*Additional contracts required for HUD Section 8 Contract Administration Program.

(13) General Contracts: 2022-23 Proposed 2021-22

Budget Budget

Operations Contracts $ 55,000 $ 42,000 Executive Contract 575,000 821,000 Legal Contracts 66,000 57,000 Housing Initiatives Contracts 7,000 9,000 Housing Voucher Program Contracts 335,000 590,000

Miscellaneous 317,000 185,000

$1,355,000 $1,704,000

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(14) Office rent and utility charges by location are as follows:Proposed Budget

Rent: GM Building 395,000

Depreciation on 735 E. Michigan Avenue: $ 525,000

Utilities: 735 E. Michigan Avenue $ 196,000

Total $1,116,000

(15) Information Technology: 2022-23 Proposed 2021-22

Budget Budget

Emphasys system $2,100,000 $1,958,000 Agate 600,000 500,000 DTMB (includes various licenses & equipment) 4,116,000 3,600,000 Ongoing Commitments 940,000 2,304,000

New IT Projects 850,000 1,680,000 $8,606,000 $10,042,000

(16) State Charges include: Proposed Budget Budget

22-23 21-22

Attorney General $1,200,000 $1,200,000 Auditor General 200,000 126,000 Civil Service 732,000 600,000 DTMB Support 225,000 252,000 LEO Admin 300,000 600,000

$2,657,000 $2,778,000

(17) Prior year estimated actual amount.

(18) Amount for Authority sponsored conferences.

(19) Amount includes expense for building maintenance, office equipment and rental.

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(20) Advertising and publicityProposed Budget

22-23

Advertising Campaign – Media/PR/Creative $1,400,000(1)

Video Creation 250,000

Misc. Advertising, Marketing, Promotion & Outreach Items 300,000

Total $1,950,000

(1) $500,000 of these advertising dollars will promote two Federal programs. The expense will be reimbursed through Federaladministrative fees.

(21) Reflects similar utilization of agents and fees paid to agents.

(22) Temporary clericals and laborers.

(23) Budget amount includes $350,000 of legal fees and $100,000 for insurance premiums. Legal fees and insurancepremiums expected to be higher in FY 21.

(24) Represents the direct costs of originating multi-family loans. Pursuant to generally accepted accountingprinciples, the cost of making loans is deferred and amortized against interest income over the term of the loans.

(25) This is the breakdown of estimated Single Family/ HIP servicing, origination costs and FHA Insurancepremiums. The Authority will assemble a team to investigate cost savings related to servicing fees.

22-23 21-22Budget Budget

Single Family Servicing Fees - $7,800,000 $6,000,000 Cost of Loan Origination (a) - 3,200,000 3,550,000 HUD Risk Sharing - 48,000 50,000 HIP Servicing Fee - 64,000 105,000 HIP Origination Fees - 4,000 5,000 HIP FHA Insurance Premiums - 36,000 45,000

Total $11,152,000 $9,755,000

(a) Amortization of Service release premium, Incentive premium and Origination Fee

(26) Staying flat compared to last year’s estimated actual is budgeted because the number of bonds being issued willbe similar to prior year.

(27) An increase over last year’s estimated actual is budgeted because the number of bonds with liquidity facilitieshas decreased, but the fees have increased.

(28) Assumes $1,000,000 of write-offs and will increase current reserve balance by $6,200,000.

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(29) Represents estimated expenditures for the Authority's rent subsidy programs that (1) provide up to a $300 perunit per year subsidy for the total number of units in a project under the prior multi-family program ($40,000),(2) provide a subsidy of up to $400 per unit for each unit in a development under our taxable program so thatsome of the units can be afforded by very low income tenants who would otherwise be paying more than 40% oftheir income for rent ($300,000), and (3) ($190,000) for small size and security loans which are being expensedas paid due to the uncertainty of repayment. Excess subsidy repayments are estimated at ($290,000).

(30) Of the $10,188,000, $5,600,000 will be allocated to a number of programs that require a match in order forMSHDA to be eligible for Federal Funds. The remaining $4,588,000 Grant Funds will be allocated throughoutthe FY.

(31) This counseling network is an ongoing responsibility of MSHDA with annual costs estimated at $750,000.


RESOLUTION APPROVING 2022-2023 BUDGET

June 16, 2022 JUNE 21, 2022

WHEREAS, the fiscal year of the Michigan State Housing Development Authority (the "Authority") is twelve (12) calendar months commencing with the first day of July and ending the last day of the following June pursuant to Article IV of the Authority’s Bylaws; and

WHEREAS, the Acting Executive Director has recommended that the Authority approve the adoption of the 2022-2023 Budget as described in the accompanying memorandum; and

WHEREAS, the Authority concurs in the recommendation of the Acting Executive Director.


1. The Michigan State Housing Development Authority’s 2022-2023 Budget is herebyadopted, subject to the terms of the accompanying memorandum.

2. The Executive Director and the Chief Financial Officer are hereby authorized to implementthe 2022-2023 Budget.

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M E M O R A N D U M

TO:

FROM:

DATE:

RE:

Authority Members


June 16, 2022 JUNE 21, 2022

Field Street III, MSHDA Development No. 3928

RECOMMENDATION:

I recommend that the Michigan State Housing Development Authority (the “Authority”) adopt a resolution authorizing an increase in the tax-exempt bond mortgage loan and a Mortgage Resource Fund (“MRF”) Loan in the amounts set forth in this memorandum.

PROJECT SUMMARY:

MSHDA No: 3928 Development Name: Field Street III Development Location: City of Detroit, Wayne County Sponsor: Church of the Messiah Housing Corporation Mortgagor: Field Street III Limited Dividend Housing Association, LLC Number of Units: 49 affordable family units – scattered site

November 2020 Board Update Difference Total Development Cost: $8,660,199 $10,566,105 $1,905,906 TE Bond Construction Loan: $0 $6,530,332 $6,530,332 TE Bond Mortgage Loan: $3,590,481 $2,844,718 ($745,763) MSHDA MRF Loan $0 $1,448,201 $1,448,201 City of Detroit ADHP Funds $0 $582,626 $582,626 MSHDA HOME Assumption $677,477 $756,007 $78,530 Detroit HOME Assumption $240,000 $240,000 no change LIHTC Equity: $2,185,615 $3,923,678 $1,738,063 Income from Operations: $164,676 $235,309 $70,633 Seller Note $950,781 $465,192 ($485,589) Transferred Reserves $679,969 $17,752 ($662,217) Deferred Developer Fee: $171,000 $52,422 ($118,578)

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EXECUTIVE SUMMARY:

Field Street III (the “Development”) was approved by the Authority Board in November 2020. At that time, the Board approved the financing structure for the Development that included a third-party lender for the construction financing. After receiving Board approval in 2020, the Sponsor decided to have the Authority provide the construction financing in place of the third-party lender.

Since Board approval in 2020, construction pricing has also been extremely volatile, which resulted in an increase of nearly $2 million dollars to the Development’s construction hard costs. Also, due to increased operating expense projections, the first mortgage loan was reduced by an amount of $745,763. To help meet the funding gap caused by the increased construction costs and reduction in the first mortgage loan, the Sponsor secured funds from the City of Detroit to help fund the increase. The Sponsor was also able to take advantage of the 4% fix in the Low Income Housing Tax Credits (“LIHTC”), which will generate an additional $1,738,063 in equity.

I am also recommending the addition of a MRF Loan in the amount of $1,448,201, $634,716 of which is from reserves captured and loaned back out.

The changes described in the attached proforma make the Development feasible and will preserve 49 units of needed affordable family units. Adding an Authority-financed construction loan requires Board approval because it exceeds the Authority’s policy limit, i.e., loan increases greater than 5% percent must be Board approved. The MRF Loan also requires Board approval because it is a new Authority financing source.

I am recommending Board approval for the following reasons:

• The increased costs to be covered are due to the type of unexpected conditions and delays thatthe Loan Increase Policy is intended to address.

• As an existing family development with an excellent occupancy and operational history, thisproposal is low risk to the Authority.

• The Development will remain as an earning asset in the Authority’s portfolio.• All units will be refurbished to meet the physical needs of the Development.


• The Development’s affordability will be extended for up to 50 years for all units.• A new Rental Assistance Contract for Section 8 tenants will be executed to continue rental

support for 8 of the units.• Financing the Development results in an earning asset for the Authority.

MUNICIPAL SUPPORT:

• It is anticipated that the City of Detroit will provide a 4% Payment in Lieu of Taxes (“PILOT”) tothe Development.

• The City of Detroit will allow the new ownership to assume a HOME loan in the amount of$240,000.


• The financing of this Development enables rehabilitation to the property that improves the livesof residents as well as the broader community.

• The Sponsor for the Development is the Church of the Messiah Housing Corporation (“CMHC”),a nonprofit corporation that focuses on the development and support of various programs andservices for neighborhood residents.

RESIDENT IMPACT:

• No residents will be displaced as a result of this preservation.• No residents will experience a rent increase that exceeds 5% as a result of this preservation and

a rent subsidy reserve is being established to protect the existing tenants against an increase inrent for an estimated 5-year period.


None.

ATTACHMENTS: • Mortgage Modification Proforma

Development Field Street IIIFinancing Tax Exempt

MSHDA No. 3928Step ModificationDate 06/16/2022 06/21/2022 Type Preservation - LIHTC

TOTAL DEVELOPMENT COSTS

Mortgage Mod Per

UnitMortgage Mod Total %

in B

asis

Included in Tax Credit

Basis

Board Approved Per Unit

Board Approved

Total % in

Bas

is


Basis

Difference Mod vs. Board

AcquisitionLand 5,510 270,000 0% 0 5,918 290,000 0% 0 (20,000)Existing Buildings 37,347 1,830,000 100% 1,812,248 35,918 1,760,000 100% 1,794,496 70,000Other: Transferred Reserves 0 0 0% 0 13,877 679,969 0% 0 (679,969)

Subtotal 42,857 2,100,000 55,714 2,729,969 (629,969)Construction/Rehabilitation

Off Site Improvements 0 0 100% 0 0 0 100% 0 0On-site Improvements 28,263 1,384,871 100% 1,384,871 10,680 523,300 100% 523,300 861,571Landscaping and Irrigation 0 0 100% 0 0 0 100% 0 0Structures 0 0 100% 0 0 0 100% 0 0Community Building and/or Maintenance Facility 57,005 2,793,237 100% 2,793,237 40,622 1,990,500 100% 1,990,500 802,737Construction not in Tax Credit basis (i.e.Carports) 0 0 0% 0 0 0 0% 0 0General Requirements % of Contract 6.00% Within Range 5,116 250,686 100% 250,686 3,078 150,828 100% 150,828 99,858Builder Overhead % of Contract 2.00% Within Range 1,808 88,576 100% 88,576 1,088 53,293 100% 53,293 35,282Builder Profit % of Contract 6.00% Within Range 5,531 271,042 100% 271,042 3,328 163,075 100% 163,075 107,967Bond Premium, Permits, Cost Cert. 2,315 113,440 100% 113,440 2,231 109,341 100% 109,341 4,099Other: 0 0 100% 0 0 0 100% 0 0

Subtotal 100,038 4,901,853 61,027 2,990,337 1,911,51415%/$15,000 test: met 15%/$15,000 test: met

Professional FeesDesign Architect Fees 341 16,720 100% 16,720 341 16,720 100% 16,720 0Supervisory Architect Fees 85 4,180 100% 4,180 85 4,180 100% 4,180 0Engineering/Survey 306 15,000 100% 15,000 306 15,000 100% 15,000 0Legal Fees 2,041 100,000 100% 100,000 1,531 75,000 60% 45,000 25,000

Subtotal 2,773 135,900 2,263 110,900 25,000Interim Construction Costs

Property and Causality Insurance 472 23,128 100% 23,128 284 13,916 100% 13,916 9,212Construction Loan Interest 194,545 3,970 194,545 80% 155,636 2,724 133,457 80% 106,766 61,088Title Work 510 25,000 83% 20,833 612 30,000 83% 25,000 (5,000)Construction Taxes 360 17,636 100% 17,636 353 17,303 100% 17,303 333Other: 0 0 100% 0 807 39,532 100% 39,532 (39,532)

Subtotal 5,312 260,309 4,780 234,208 26,101Permanent Financing

Loan Commitment Fee to MSHDA 2% 3,565 174,691 0% 0 1,742 85,359 0% 0 89,332Other: Pre-pay 327 16,000 0% 0 327 16,000 0% 0 0

Subtotal 3,892 190,691 2,069 101,359 89,332Other Costs (In Basis)

Application Fee 41 2,000 100% 2,000 41 2,000 100% 2,000 0Market Study 133 6,500 100% 6,500 133 6,500 100% 6,500 0Environmental Studies 6,122 300,000 100% 300,000 2,041 100,000 100% 100,000 200,000Cost Certification 306 15,000 0% 0 163 8,000 0% 0 7,000Equipment and Furnishings 204 10,000 100% 10,000 408 20,000 100% 20,000 (10,000)Temporary Tenant Relocation 1,020 50,000 100% 50,000 4,541 222,500 100% 222,500 (172,500)Construction Contingency 10,004 490,185 100% 490,185 6,185 303,045 100% 303,045 187,140Appraisal and C.N.A. 367 18,000 100% 18,000 367 18,000 100% 18,000 0Other: 0 0 100% 0 0 0 100% 0 0

Subtotal 18,198 891,685 13,878 680,045 211,640Other Costs (NOT In Basis)

Start-Up and Organization 1,122 55,000 0% 0 1,122 55,000 0% 0 0Tax Credit Fees (based on 2022 QAP) 31,590 Out of Range 599 29,330 0% 0 348 17,061 0% 0 12,269Compliance Monitoring Fee (based on 2022 QAP) 475 23,275 0% 0 475 23,275 0% 0 0Marketing Expense 204 10,000 0% 0 204 10,000 0% 0 0Syndication Legal Fees 0 0 0% 0 0 0 0% 0 0Rent Up Allowance 0.0 months 0 0 0% 0 0 0 0% 0 0Other: 0 0 0% 0 0 0 0% 0 0

Subtotal 2,400 117,605 2,150 105,336 12,269

Summary of Acquisition Price As of 12/31/20 Construction Loan TermAttributed to Land 270,000 Field St 1 1st mrtg Security 511,428 MonthsAttributed to Existing Structure1,830,000 Field st 2 1st mrtg and HOM 883,380 Construction Contract 12Other: 0 City HOME Loan 240,000 Holding Period (50% Test) 6Fixed Price to Seller 2,100,000 Subordinate Mortgage(s) 0 Rent up Period 0

0 Construction Loan Period 18Premium/(Deficit) vs Existing Debt 465,192

Appraised Value Valuse As of: 11/15/19"Encumbered As-Is" value as determined by appraisal: 2,100,000Plus 5% of Appraised Value: 0 OverrideLESS Fixed Price to the Seller: 2,100,000Surplus/(Gap

Within Range 0

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Mortgage Mod Per

UnitMortgage Mod Total


Basis


Board Approved

Total


Basis


Project ReservesOperating Assurance Reserv 4.0 months Funded in Cas 5,093 249,558 0 3,763 184,384 0 65,174 169,129Replacement Reserve Required 700 34,300 0 700 34,300 0 0Operating Deficit Reserve 0 0 0 0 0 0 0Rent Subsidy Reserve 8,761 429,301 0 9,508 465,901 0 (36,600)Syndicator Held Reserve 0 0 0 0 0 0 0Rent Lag Escrow 0 0 0 0 0 0 0Tax and Insurance Escrows 362 17,752 0 567 27,774 0 (10,022)Other: 0 0 0 0 0 0 0Other: Additional OAR per syndicator 0 0 886 43,416 0 (43,416)

Subtotal 14,917 730,911 15,424 755,775 (24,864)MiscellaneousDeposit to Development Operating Account (1MGRRequired 913 44,746 0 905 44,355 0 391Other (Not in Basis): 0 0 0 0 0 0 0Other (In Basis): 0 0 1,020 50,000 50,000 (50,000)Other (In Basis): 0 0 0 0 0 0 0

Subtotal 913 44,746 1,926 94,355 (49,609)

Total Acquisition Costs 42,857 2,100,000 55,714 2,729,969 (629,969)Total Construction Hard Costs 100,038 4,901,853 61,027 2,990,337 1,911,515Total Non-Construction ("Soft") Costs 48,405 2,371,847 42,489 2,081,978 289,869

Developer Overhead and FeeMaximum 1,193,737 24,335 1,192,405 1,192,405 17,508 857,914 857,914 334,491

7.5% of Acquisition/Project Reserves Override 5% Attribution Test15% of All Other Development Costs 1,192,405 met

Total Development Cost 215,635 10,566,105 9,136,324 176,739 8,660,199 8,851,834 1,905,906

TOTAL DEVELOPMENT SOURCES % of TDCMSHDA Permanent Mortgage 26.92% 58,055 2,844,718 73,275 3,590,481 (745,763)Conventional/Other Mortgage 0.00% 0 0 0 0 0 Gap toEquity Contribution from Tax Credit Syndication 37.13% 80,075 3,923,678 # of Units 44,604 2,185,615 # of Units 1,738,063 Hard DebtCity of Detroit ADHP Funds 5.51% 11,890 582,626 2.70 0 0 0.00 582,626 RatioMSHDA HOME 0.00% 0 0 10.00 0 0 0 96%Mortgage Resource Funds 13.71% 29,555 1,448,201 0 0 1,448,201Other MSHDA MSHDA HOME Assumption 7.16% 15,429 756,007 11.00 13,826 677,477 78,530Detroit HOME Assumption 2.27% 4,898 240,000 4,898 240,000 0Income from Operations 2.23% 4,802 235,309 3,361 164,676 70,633Other Equity Seller note 4.40% 9,494 465,192 19,404 950,781 (485,589)Transferred Reserves: 0.17% 362 17,752 13,877 679,969 (662,217)Other: GP cont 0.00% 2 100 2 100 0Other: SPLP cont 0.00% 2 100 2 100 0Deferred Developer Fee 0.50% 1,070 52,422 4.40% 3,490 171,000 19.93% (118,578)Total Permanent Sources 10,566,105 8,660,200 1,905,905

Sources Equal Uses? Balanced SurplusSurplus/(Gap) 0 0 0

61.80% 133,272 6,530,332 80,679 3,953,249 2,577,083 Board LoansConstruction Loan Rate 4.250% 362,768 8,221,207Repaid from equity prior to final closing 3,685,614 Board Test

Eligible Basis for LIHTC/TCAP Value of LIHTC/TCAPAcquisition 1,917,248 Acquisition 76,690 Existing Reserve AnalysisConstruction 9,384,799 Construction 375,392 Override DCE Interes 0 Current Owner's Reserves: 0Acquisition Credit % 4.00% Total Yr Credit 452,082 Insurance: 10,223 634,716Rehab/New Const Credit % 4.00% Equity Price $0.8680 Taxes: 7,529 17,752Qualified Percentage 100.00% Equity Effective Price $0.8680 Override Rep. Reser 588,465QCT/DDA Basis Boost 130% Equity Contribution 3,923,678 ORC: 7,683Historic? No DCE Princip 0

Other: 38,568

Initial Owner's Equity CalculationEquity Contribution from Tax Credit Syndication 3,923,678 Brownfield EquityHistoric Tax Credit EquityGeneral Partner Capitla ContributionsOther Equity Sources

New Owner's Equity 3,923,678

Tax/Ins Escrows transferred to Reserves Transferred in to Proj

4 Month OAR

MSHDA Construction Loan

Deferred Dev Fee

Deferred Dev Fee

LIHTC Basis

LIHTC Basis


RESOLUTION AUTHORIZING MODIFICATIONS TO MORTGAGE LOAN FOR FIELD STREET III, MSHDA DEVELOPMENT NO. 3928

CITY OF DETROIT, WAYNE COUNTY

June 16, 2022 JUNE 21, 2022

WHEREAS, on November 19, 2020, the Michigan State Housing Development Authority (the “Authority”) authorized a permanent mortgage loan (the "Mortgage Loan") and assumption of an existing HOME mortgage loan (the “HOME Loan”) for the acquisition and rehabilitation of Field Street III, MSHDA No. 3928 (the “Development”); and

WHEREAS, for a variety of reasons including a change in the construction lender, a global pandemic adversely affecting construction costs, and an increase in operating expense projections, rehabilitation of this 49-unit Development is no longer viable as originally planned; and

WHEREAS, the Authority’s Mortgage Loan Increase Policy dated August 26, 2021, requires Authority approval for loan increases greater than 5% of the original mortgage loan amount or $900,000; and

WHEREAS, for the reasons set forth in the accompanying Memorandum, the Acting Executive Director has recommended a modification of the Mortgage Loan that exceeds 5% of the Mortgage Loan amount or $900,000, and the addition of a Mortgage Resource Fund Loan (the “MRF Loan”); and


NOW THEREFORE, the Michigan State Housing Development Authority resolves as follows:

1. The Authority hereby approves the modification of the Mortgage Loan, pursuant and subjectto the terms and conditions set forth in the Memorandum dated June 16, 2022, JUNE21, 2022 and the proforma attached thereto and incorporated herein.

2. The Executive Director, the Director of Legal Affairs, the Deputy Director of Legal Affairs,the Chief Financial Officer, or any person duly appointed and acting in such capacity (each,an Authorized Officer of the Authority), is hereby granted the authority to authorize themodification of the Mortgage Loan as set forth in the Memorandum.

3. The Executive Director or any person duly appointed and acting in such capacity, is herebyauthorized to modify or waive any of the terms and conditions of the Memorandum as maybe deemed necessary to effectuate the ability of the Sponsor to acquire and rehabilitate theDevelopment in a manner that is satisfactory to the Authority.

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WHEREAS, on November 19, 2020, the Michigan State Housing Development Authority (the “Authority”) authorized a permanent mortgage loan (the "Mortgage Loan") and assumption of an existing HOME mortgage loan (the “HOME Loan”) for the acquisition and rehabilitation of Field Street III, MSHDA No. 3928 (the “Development”); and

WHEREAS, for a variety of reasons including a change in the construction lender, a global pandemic adversely affecting construction costs, and an increase in operating expense projections, rehabilitation of this 49-unit Development is no longer viable as originally planned; and

WHEREAS, the Mortgagor has sought out and obtained additional financing sources, but a financing gap remains; and

WHEREAS, the Mortgagor has made an application (the "Application") to the Authority for a Mortgage Resource Fund to fund the shortfall on the terms and conditions set forth in the accompanying mortgage modification and proforma dated June 16, 2022 JUNE 21, 2022; and

WHEREAS, the Authority is empowered under Act No. 346 of the Public Acts of 1966, as amended (the "Act") to provide loans in furtherance of the purposes of the Act; and

WHEREAS, the Acting Executive Director has considered the Mortgagor's Application and recommends that the Authority approve a mortgage loan from the Mortgage Resource Fund for the Development as described in the mortgage modification and proforma attached hereto; and

WHEREAS, the Authority has reviewed the Application and the recommendation of the Acting Executive Director and, on the basis of the Application and such recommendation, has made determinations that:

(a) The Mortgagor is an eligible applicant;

(b) The housing project does and will continue to provide housing for persons of lowand moderate income and will serve and improve the residential area in whichAuthority financed housing is located or is planned to be located therebyenhancing the viability of such housing;

(c) The Mortgagor is reasonably expected to be able to achieve successfulcompletion of the housing project;

(d) The housing project does and will continue to meet a social need in the area inwhich it is to be located;

(e) The housing project may reasonably be expected to be marketed successfully;

(f) All elements of the housing project have been established in a manner consistentwith the Authority's evaluation factors, except as otherwise provided herein;


RESOLUTION AUTHORIZING MORTAGE RESOURCE FUND LOAN FIELD STREET, MSHDA DEVELOPMENT NO. 3928

CITY OF DETROIT, WAYNE COUNTY

June 16, 2022 JUNE 21, 2022

GOLDENRODTAB F

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(g) The construction or rehabilitation will be undertaken in an economical mannerand will not be of elaborate design or materials; and

(h) In light of the total project cost of the housing project, the amount of the mortgageloan authorized hereby is consistent with the requirements of the Act as to themaximum limitation on the ratio of mortgage loan amount to total project cost.

WHEREAS, the Authority has considered the Application in the light of the criteria established for the determination of priorities pursuant to General Rule 125.145 and hereby determines that the proposed Development is consistent therewith.


1. The Application be and it hereby is approved, subject to the terms and conditionsof this Resolution, the Act and of the General Rules of the Authority.

2. A Mortgage Resource Fund mortgage loan (the "Mortgage Loan") be and ithereby is authorized for the financing of the Development, with the Mortgage Loan having an initial principal amount of One Million Four Hundred Forty-Eight Thousand Two Hundred One Dollars ($1,448,201), having a term of fifty (50) years and bearing interest at the rate of three percent (3%) per annum. The Executive Director, the Chief Operating Officer, the Chief Housing Investment Officer, the Director of Legal Affairs, the Deputy Director of Legal Affairs, the Director of Finance, the Deputy Director of Finance and any person duly authorized to act in any of the foregoing capacities, or any one of them acting alone (each an "Authorized Officer") is hereby authorized to modify or waive any condition or provision contained in Action Report.

3. This mortgage loan commitment resolution is based on the information obtainedfrom the Mortgagor and the assumption that all factors necessary for the successful construction and operation of the proposed Development shall not change in any materially adverse respect prior to the closing. If the information provided by the Mortgagor is discovered to be materially inaccurate or misleading, or any factors necessary for the successful construction and operation of the proposed Development change in any materially adverse respect, this mortgage loan commitment resolution may, at the option of an Authorized Officer, be rescinded.

4. Notwithstanding passage of this resolution or execution of any documents inanticipation of the closing or the proposed Mortgage Loan, no contractual rights to receive the Mortgage Loan authorized herein shall arise unless and until an Authorized Officer shall have approved disbursement of the proceeds of the Mortgagor Loan, subject to the terms and conditions contained herein.

5. The Mortgage Loan shall further be subject to the conditions set forth in themortgage modification and proforma dated June 16, 2022 JUNE 21, 2022, which conditions are hereby incorporated by reference as if fully set forth herein.

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TO:

FROM:

DATE:

RE:

M E M O R A N D U M

Authority Members


June 16, 2022 JUNE 21, 2022

HOM Flats at Maynard, MSHDA Development No. 3955

RECOMMENDATION:

I recommend that the Michigan State Housing Development Authority (the “Authority”) adopt a resolution authorizing (i) an increase in the permanent tax-exempt bond mortgage loan, and (ii) an increase in the Mortgage Resource Fund loan to provide construction loan financing in the amounts set forth in this memorandum.

PROJECT SUMMARY:

MSHDA No: 3955 Development Name: HOM Flats at Maynard Development Location: City of Grand Rapids, Kent County Sponsor: Magnus Capital Partners. Mortgagor: Maynard Avenue Limited Dividend Housing

Association Limited Partnership Number of Units: 240 Affordable units

March 17, 2022 Report Update Difference Total Development Cost: $44,034,012 $51,495,257 $7,461,245 TE Bond Construction Loan: $34,069,680 $33,698, 717 $-370,982 TE Bond Mortgage Loan: $28,383,437 $33,698,717 $5,315,280 MSHDA HOME Loan: $1,545,000 $1,545,000 No change MSHDA MRF Loan $967,881 $12,075,868 $11,107,987 LIHTC Equity: $12,081,967 $14,687,677 $2,605,710 Income from Operations: $450,137 $450,137 No change GP Equity: $100 $100 No change Deferred HOME and MRF Interest: $30,126 $24,041 $-6,085 Deferred Developer Fee: $575,364 $315,000 $-260,364

DIFFERENCE

GOLDENROD TAB G

$-370,963

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EXECUTIVE SUMMARY:

In March of 2022, the Authority approved HOM Flats at Maynard for a mortgage loan commitment. The sponsor was recently informed by the General Contractor that, as the result of global supply shortages and substantial increases in the cost of labor and materials, they were unable to hold the construction costs to those approved by the Authority in March. Construction cost estimates have increased by over $5 million (14% increase) as reflected in the proforma’s Zsources and uses tab.

Since the proposal completed the underwriting process, the 2022 Area Median Income (“AMI”) limits were published by the U.S. Department of Housing and Urban Development (“HUD”) and the Authority’s Marketing Department reviewed and approved substantial increases to the allowable rents. The new rental rates will support an increase to the Authority's permanent tax-exempt bond loan by just over $5 million, effectively keeping the proposal viable.

As part of the tax-exempt bond process, the Authority publishes a Tax Equity and Fiscal Responsibility (“TEFRA”) notice and sets certain bond amounts for the projects within the bond series. In this case, the overall construction loan increase request is above the amount of available bond proceeds from the series, and staff has recommended funding the difference with increased funding from the Mortgage Resource Fund ("MRF"). The additional MRF loan proceeds will be advanced during the construction period only, will require interest only payments, and must be repaid on or before permanent loan conversion.

The $45-million in construction financing requested by the sponsor will cover the increased construction costs as well as allow for an extended LIHTC equity investor pay-in, and will be funded as follows:

The Authority will provide a first priority tax-exempt bond construction Mortgage Loan in the amount $33,698,717 and a second priority MRF Loan in the amount of $12,075,868. The interest rate on both loans will be 3.95%. The MRF Loan will be made pursuant to two notes, a Part A note in the amount of $11,301,283 that will mature at or before permanent loan conversion and require payments of interest only. A Part B MRF note in the amount of $774,585 will be payable from 50% of cash flow beginning in the 13th year or after available cash flow equals the amount of the deferred developer fee, with a maximum 50-year term.

I am recommending Authority approval of the proposed loan increases for the following reasons: • The increased costs to be covered are due to unanticipated supply chain shortages and

increased costs in labor and materials.


• HOM Flats at Maynard is a 100% affordable development.• The development will add 240 affordable units to the Authority’s portfolio, including 40 units

targeted to families at or below the 40% MTSP income limit and 60 units targeted to families ator below the 50% MTSP income limit.

MUNICIPAL SUPPORT:

• Community support is evidenced by approval of the site plan, which required a major amendmentto the established Planned Redevelopment District, and approval of the property tax exemptionand a payment in lieu of taxes for the Development.


• This new construction proposal will increase the available housing stock in the Grand Rapidsmarket.

• The Development’s affordability will be maintained for up to 50 years on all units.• The City of Grand Rapids requires community engagement for all developers proposing new

construction developments. The sponsor organized three Google Hangout (virtual meetings)where the proposal was presented to community members. Invitation flyers were handed out toneighbors around the site that described the proposed project and asked that they attend theGoogle Hangout meetings to provide feedback. Feedback from those meetings helped thesponsor in completing their vision for the project.

RESIDENT IMPACT:

• This is a new construction proposal so there are no current residents impacted


None.

ATTACHMENTS:

• Mortgage Modification Proforma

Development Hom Flats at Maynard 240 Total Tenant UnitsFinancing Tax Exempt Z 240 TC Units

MSHDA No. 3955 0 Manager Unit(s)Step Commitment Mortgage Assumptions:Date 06/16/2022 Debt Coverage Ratio 1.15Type New Construction Mortgage Interest Rate 3.950%

Pay Rate 3.950%Mortgage Term 40 yearsIncome from Operations No

Total Development Income Potential

Annual Rental Income 13,237 3,176,760 11,858 2,846,016 330,744 1.0% 6 2.0%Annual Non-Rental Income 108 25,920 108 25,920 0 1.0% 6 2.0%Total Project Revenue 13,345 3,202,680 11,966 2,871,936 330,744

Total Development Expenses

Vacancy Loss 8.00% of annual rent potential 1,059 254,141 949 227,681 26,460 6 8.0%Management Fee 534 per unit per year 534 128,160 534 128,160 0 3.0% 1 3.0%Administration 1,000 240,000 1,000 240,000 0 3.0% 1 3.0%Project-paid Fuel 60 14,400 60 14,400 0 3.0% 6 3.0%Common Electricity 141 33,840 141 33,840 0 4.0% 6 3.0%Water and Sewer 350 84,000 350 84,000 0 5.0% 6 5.0%Operating and Maintenance 1,153 276,800 1,153 276,800 0 3.0% 1 3.0%Real Estate Taxes 0 0 0 0 0 5.0% 1 5.0%Payment in Lieu of Taxes (PILOT) 3.00% Applied to: All Units 311 74,583 311 74,583 0Insurance 348 83,602 348 83,602 0 3.0% 1 3.0%Replacement Reserve 350 per unit per year 350 84,000 350 84,000 0 3.0% 1 3.0%Other: 0 0 0 0 0 3.0% 1 3.0%Other: 0 0 0 0 0 3.0% 1 3.0%

Total Expenses 39.76% 5,306 1,273,526 5,196 1,247,066 26,460

Base Net Operating Income 8,038 1,929,154 Override 6,770 1,624,870 304,284Part A Mortgage Payment 52.38% 6,990 1,677,526 5,887 1,412,930 264,595Part A Mortgage 140,411 33,698,717 118,264 28,383,437 5,315,281Non MSHDA Financing Mortgage Payment 0 0 0 0Non MSHDA Financing Type: 0 0 0 0Base Project Cash Flow (excludes ODR) 7.86% 1,048 251,629 883 211,940 39,689

Beginning in Year

Future Inflation Factor

Future Vacancy

% of Revenue


Board Approved

TotalMortgage Mod Total

Mortgage Mod Per

Unit


Initial Inflation Factor

0 6 / 2 1 / 2 0 2 2

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Development Hom Flats at Maynard Income Limits for (Effective April 1,2022)Financing Tax Exempt 1 Person 2 Person 3 Person 4 Person 5 Person 6 Person

MSHDA No. 3955 1 2 3 4 5 630% of area median 18,810 21,480 24,180 26,850 29,010 31,17040% of area median 25,080 28,640 32,240 35,800 38,680 41,560

Step Commitment Date ######## 06/21/22 Type New Construction 50% of area median 31,350 35,800 40,300 44,750 48,350 51,950

60% of area median 37,620 42,960 48,360 53,700 58,020 62,340

Rental Income

UnitNo. of Units Unit Type Bedrooms Baths Net Sq. Ft.

Contract Rent Utilities

Total Housing Expense Gross Rent

Section 8 Contract

Rent

% of Gross Rent

% of Total Units

Gross Square

Feet

% of Total Square

Feet

TC Units Square

Feet Unit Type

Allowed Housing Expense

40% Area Median Income UnitsFamily Occupancy

A 15 Apartment 1 1.0 600 579 92 671 104,220 0 3.3% 6.3% 9,000 4.4% 9,000 0 671B 20 Apartment 2 1.0 840 691 115 806 165,840 0 5.2% 8.3% 16,800 8.3% 16,800 0 806C 5 Apartment 3 2.0 1,006 794 137 931 47,640 0 1.5% 2.1% 5,030 2.5% 5,030 0 931

317,700 0 10.0% 16.7% 30,830 15.2% 30,83050% Area Median Income Units

Family OccupancyA 13 Apartment 1 1.0 600 747 92 839 116,532 0 3.7% 5.4% 7,800 3.8% 7,800 0 839B 25 Apartment 2 1.0 840 892 115 1,007 267,600 0 8.4% 10.4% 21,000 10.4% 21,000 0 1,007C 12 Apartment 3 2.0 1,006 1,026 137 1,163 147,744 0 4.7% 5.0% 12,072 6.0% 12,072 0 1,163


Family OccupancyA 23 Apartment 1 1.0 600 915 92 1,007 252,540 0 7.9% 9.6% 13,800 6.8% 13,800 0 1,007B 25 Apartment 2 1.0 840 1,094 115 1,209 328,200 0 10.3% 10.4% 21,000 10.4% 21,000 0 1,209C 35 Apartment 3 2.0 1,006 1,259 137 1,396 528,780 0 16.6% 14.6% 35,210 17.4% 35,210 0 1,396

1,109,520 0 34.9% 34.6% 70,010 34.6% 70,01080% Area Median Income Units

Family OccupancyA 5 Apartment 1 1.0 600 1,251 92 1,343 75,060 0 2.4% 2.1% 3,000 1.5% 3,000 0 1,343B 19 Apartment 2 1.0 840 1,497 115 1,612 341,316 0 10.7% 7.9% 15,960 7.9% 15,960 0 1,612C 35 Apartment 3 2.0 1,006 1,725 137 1,862 724,500 0 22.8% 14.6% 35,210 17.4% 35,210 0 1,862


Family OccupancyA 2 Apartment 1 1.0 600 660 92 752 15,840 0 0.5% 0.8% 1,200 0.6% 1,200 Low HOME 752B 3 Apartment 2 1.0 840 787 115 902 28,332 0 0.9% 1.3% 2,520 1.2% 2,520 Low HOME 902C 3 Apartment 3 2.0 1,006 906 137 1,043 32,616 0 1.0% 1.3% 3,018 1.5% 3,018 Low HOME 1,043

76,788 0 2.4% 3.3% 6,738 3.3% 6,738Mgrs 0 0 0.0 0 0 0.0% 0.0% 0 0.0% 0

202,620 202,620Total Revenue Units 240 Gross Rent Potential 3,176,760 HOME Units SF/Total Units SF 3.3% Within RangeManager Units 0Income Aveaging 59% Average Monthly Rent 1,103 # HOME Units/# Total Units 3.3% Within RangeSet Aside 100% Gross Square Footage 202,620

Utility Allowances

Non-Rental Income Electricity A/C Gas Other Total OverideMisc. and Interest 0 A 48 0 44 0 0 92 Total Income Annual MonthlyLaundry 0 B 64 0 51 0 0 115 Rental Income 3,176,760 264730Carports 0 C 79 0 58 0 0 137 Non-Rental Income 25,920 2160Other: 25,920 D 0 0 0 0 0 0 Total Project Revenue 3,202,680 266890Other: 0 E 0 0 0 0 0 0

25,920 F 0 0 0 0 0 0G 0 0 0 0 0 0H 0 0 0 0 0 0

Water/ Sewer

Kent County

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Development Hom Flats at MaynardFinancing Tax Exempt

MSHDA No. 3955Step CommitmentDate 06/16/2022Type New Construction

TOTAL DEVELOPMENT COSTS

Mortgage Mod Per

UnitMortgage Mod

Total % in

Bas

is


Basis


Board Approved Total %

in B

asis


Basis


Mortgage Mod Per

UnitMortgage Mod

Total % in

Bas

is

Included in Tax Credit Basis


Board Approved Total



Acquisition Project ReservesLand 10,000 2,400,000 0 10,000 2,400,000 0 0 Operating Assurance Reserv 4.0 months Funded in Cas 4,099 983,684 0 3,694 886,665 0 97,019 983,684Existing Buildings 0 0 0 0 0 0 0 Replacement Reserve Not Required 0 0 0 0 0 0 0Other: 0 0 0 0 0 0 0 Operating Deficit Reserve 0 0 0 0 0 0 0

Subtotal 10,000 2,400,000 10,000 2,400,000 0 Rent Subsidy Reserve 0 0 0 0 0 0 0Construction/Rehabilitation Syndicator Held Reserve 2,049 491,842 0 1,847 443,333 0 48,509

Off Site Improvements 0 0 0 0 0 0 0 Rent Lag Escrow 0 0 0 0 0 0 0On-site Improvements 11,877 2,850,569 2,850,569 11,028 2,646,742 2,646,742 203,827 Tax and Insurance Escrows 0 0 0 0 0 0 0Landscaping and Irrigation 1,299 311,731 311,731 1,028 246,787 246,787 64,944 Other: 0 0 0 0 0 0 0Structures 117,293 28,150,282 28,150,282 99,662 23,918,838 23,918,838 4,231,444 Other: 0 0 0 0 0 0 0Community Building and/or Maintenance Facility 0 0 0 0 0 0 0 Subtotal 6,148 1,475,526 5,542 1,329,998 145,528Construction not in Tax Credit basis (i.e.Carports) 0 0 0 0 0 0 0 MiscellaneousGeneral Requirements % of Contract 3.36% Within Range 4,388 1,053,000 1,053,000 4,308 1,034,000 1,034,000 19,000 Deposit to Development Operating Account (1 Not Required 0 0 0 0 0 0 0Builder Overhead % of Contract 2.00% Within Range 2,697 647,232 647,232 2,320 556,748 556,748 90,484 Other (Not in Basis): 0 0 0 0 0 0 0Builder Profit % of Contract 4.00% Within Range 5,507 1,321,569 1,321,569 4,739 1,137,285 1,137,285 184,284 Other (In Basis): MRF Interest 38 9,113 9,113 83 19,869 19,869 (10,756)Bond Premium, Permits, Cost Cert. 2,082 499,650 499,650 1,000 240,000 240,000 259,650 Other (In Basis): HOME Interest 62 14,928 14,928 43 10,257 10,257 4,671Other: 0 0 0 0 0 0 0 Subtotal 100 24,041 126 30,126 (6,085)

Subtotal 145,142 34,834,033 124,085 29,780,400 5,053,63315%/$15,000 test: met 15%/$15,000 test: met Total Acquisition Costs 10,000 2,400,000 10,000 2,400,000 0

Professional Fees Total Construction Hard Costs 145,142 34,834,033 124,085 29,780,400 5,053,633Design Architect Fees 2,681 643,500 643,500 2,681 643,500 643,500 0 Total Non-Construction ("Soft") Costs 50,672 12,161,224 40,640 9,753,612 2,407,612Supervisory Architect Fees 670 160,875 160,875 670 160,875 160,875 0Engineering/Survey 208 50,000 50,000 208 50,000 50,000 0 Developer Overhead and FeeLegal Fees 833 200,000 200,000 417 100,000 100,000 100,000 Maximum 7,118,624 8,750 2,100,000 2,100,000 8,750 2,100,000 2,100,000 0

Subtotal 4,393 1,054,375 3,977 954,375 100,000 7.5% of Acquisition/Project Reserves Override 5% Attribution TestInterim Construction Costs 15% of All Other Development Costs 2,100,000 met

Property and Causality Insurance 1,667 400,000 400,000 1,667 400,000 400,000 0Construction Loan Interest 1,955,536 8,148 1,955,536 1,422,208 4,727 1,134,551 510,548 820,985 Total Development Cost 214,564 51,495,257 43,744,879 183,475 44,034,012 36,838,949 7,461,245Title Work 417 100,000 100,000 417 100,000 100,000 0Construction Taxes 333 80,000 80,000 333 80,000 80,000 0 TOTAL DEVELOPMENT SOURCES % of TDCOther: Tap Fe 1,250 300,000 300,000 417 100,000 100,000 200,000 MSHDA Permanent Mortgage 65.44% 140,411 33,698,717 118,264 28,383,437 5,315,280

Subtotal 11,815 2,835,536 7,561 1,814,551 1,020,985 Conventional/Other Mortgage 0.00% 0 0 0 0 0 Gap toPermanent Financing Equity Contribution from Tax Credit Syndicatio 28.52% 61,199 14,687,677 # of Units 50,342 12,081,967 # of Units 2,605,710 Hard Debt

Loan Commitment Fee to MSHDA 2% 3,943 946,392 0 3,049 731,651 0 214,741 MSHDA NSP Funds 0.00% 0 0 0.00 0 0 0.00 0 RatioOther: 0 0 0 0 0 0 0 MSHDA HOME or Housing Trust Funds 3.00% 6,438 1,545,000 8.00 6,438 1,545,000 0 7%

Subtotal 3,943 946,392 3,049 731,651 214,741 Mortgage Resource Funds 1.50% 3,227 774,585 4,033 967,881 (193,296)Other Costs (In Basis) Other MSHDA 0.00% 0 0 0 0 0

Application Fee 8 2,000 2,000 8 2,000 2,000 0 NON MSHDA LOAN 0.00% 0 0 0 0 0Market Study 27 6,500 6,500 27 6,500 6,500 0 Income from Operations 0.87% 1,876 450,137 1,876 450,137 0Environmental Studies 333 80,000 80,000 333 80,000 80,000 0 Other Equity 0.00% 0 0 0 0 0Cost Certification 83 20,000 20,000 83 20,000 20,000 0 Transferred Reserves: 0.00% 0 0 0 0 0Equipment and Furnishings 2,083 500,000 500,000 1,250 300,000 300,000 200,000 Other: GP Equity 0.00% 0 100 0 100 0Temporary Tenant Relocation 0 0 0 0 0 0 0 Other: Deferred HOME and MRF Intere 0.05% 100 24,041 126 30,126 (6,085)Construction Contingency 14,514 3,483,403 2,786,722 12,188 2,925,000 2,340,000 558,403 Deferred Developer Fee 0.61% 1,313 315,000 15.00% 2,397 575,364 27.40% (260,364)Appraisal and C.N.A. 21 5,000 5,000 21 5,000 5,000 0 Total Permanent Sources 51,495,257 44,034,012 7,461,245Other: Soil St 125 30,000 30,000 125 30,000 30,000 0

Subtotal 17,195 4,126,903 14,035 3,368,500 758,403 Sources Equal Uses? Balanced BalancedOther Costs (NOT In Basis) Surplus/(Gap) 0 0 0

Start-Up and Organization 42 10,000 0 42 10,000 0 0Tax Credit Fees (based on 2017 QAP) 107,488 Within Range 448 107,488 0 379 90,913 0 16,575 87.39% 187,500 45,000,000 141,957 34,069,680 10,930,320 Board LoansCompliance Monitoring Fee (based on 2017 QAP) 475 114,000 0 475 114,000 0 0 Construction Loan Rate 3.950% 5,686,243 64,965,998Marketing Expense 1,250 300,000 0 1,250 300,000 0 0 Repaid from equity prior to final closing 11,301,283Syndication Legal Fees 208 50,000 0 208 50,000 0 0Rent Up Allowance 9.0 months 4,654 1,116,963 0 3,998 959,498 0 157,465 Eligible Basis for LIHTC/TCAP Value of LIHTC/TCAPOther: 0 0 0 0 0 0 0 Acquisition 0 Acquisition 0 Existing Reserve Analysis

Subtotal 7,077 1,698,451 6,352 1,524,411 174,040 Construction 43,744,879 Construction 1,749,795 Override DCE Interest: 0 Current Owner's Reserves: 0Acquisition Credit % 4.00% Total Yr Credit 1,749,795 Insurance: 0 0

Summary of Acquisition Price As of 01/00/00 Construction Loan Term Rehab/New Const Credit % 4.00% Equity Price $0.8400 Taxes: 0 0Attributed to Land ######## 1st Mortgage Balance 0 Months Qualified Percentage ###### Equity Effective Price $0.8395 Override Rep. Reserve 0Attributed to Existing Structur 0 Subordinate Mortgage(s) 0 Construction Contract 24 QCT/DDA Basis Boost 100% Equity Contribution 14,696,810 14,687,677 ORC: 0Other: 0 Subordinate Mortgage(s) 0 Holding Period (50% Test) 0 Historic? No DCE Principal 0Fixed Price to Seller ######## Subordinate Mortgage(s) 0 Rent up Period 9 Other: 0

Construction Loan Period 33Premium/(Deficit) vs Existing Debt 2,400,000 Initial Owner's Equity Calculation

Equity Contribution from Tax Credit Syndicatio 14,687,677 Appraised Value Valuse As of: 03/08/21 Brownfield Equity"Encumbered As-Is" value as determined by appraisal: 2,400,000 Historic Tax Credit EquityPlus 5% of Appraised Value: 0 Override General Partner Capitla ContributionsLESS Fixed Price to the Seller: 2,400,000 Other Equity Sources 100 Surplus/(Ga Within Range 0


Tax/Ins Escrows transferred to projReserves Transferred in to Project

4 Month OAR


Deferred Dev Fee

Deferred Dev Fee

LIHTC BasisLIHTC Basis

06/21/2022

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RESOLUTION AUTHORIZING MODIFICATION TO MORTGAGE LOANS FOR HOM FLATS AT MAYNARD, MSHDA DEVELOPMENT NO. 3955

CITY OF GRAND RAPIDS, KENT COUNTY

June 16, 2022 JUNE 21, 2022

WHEREAS, on March 17, 2022, the Michigan State Housing Development Authority (the “Authority”) authorized a construction and permanent mortgage loan (the "Mortgage Loan"), a Mortgage Resource Fund loan (the “MRF Loan”), and a HOME mortgage loan (the “HOME Loan”) (collectively, the "Mortgage Loans”) for the acquisition and construction of HOM Flats at Maynard, MSHDA No. 3955 (the "Development"); and

WHEREAS, due to unanticipated increases in the cost of labor and materials resulting from the pandemic and global supply issues, the estimated cost to complete the construction of the Development has increased by over $5,000,000; and

WHEREAS, by its Resolution dated August 26, 2021, the members adopted a revised Mortgage Loan Increase Policy providing that “without Board action, mortgage loan increases are limited to a maximum of 5% of the original mortgage loan amount or $900,000, whichever is less”; and

WHEREAS, as set forth in the accompanying Memorandum, the Acting Executive Director has recommended increases to the construction and permanent Mortgage Loans that exceed 5% of the amount of original Mortgage Loans or $900,000; and


NOW THEREFORE, the Michigan State Housing Development Authority resolves as follows:

1. The Authority hereby approves the modification of the Mortgage Loans, pursuant andsubject to the terms and conditions set forth in the Memorandum dated June 16, 2022JUNE 21, 2022, and the proforma attached thereto and incorporated herein.

2. The Executive Director, the Director of Legal Affairs, the Deputy Director of Legal Affairs,the Chief Financial Officer, or any person duly appointed and acting in such capacity (each,an Authorized Officer of the Authority), is hereby granted the authority to authorize themodification of the Mortgage Loans as set forth in the Memorandum.

3. The Executive Director or any person duly appointed and acting in such capacity, is herebyauthorized to modify or waive any of the terms and conditions of the Memorandum as maybe deemed necessary to effectuate the ability of the Sponsor to acquire and construct theDevelopment in a manner that is satisfactory to the Authority.

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M E M O R A N D U M



DATE: June 16, 2022

RE: Clawson Manor, Development No. 4026

RECOMMENDATION:

I recommend that the Michigan State Housing Development Authority (the “Authority”) 1) adopt a resolution that determines Mortgage Loan Feasibility with respect to this development, subject to the terms and conditions set forth in this report, and 2) authorize a waiver of the Authority’s Direct Lending Parameters concerning the Master Lease Reserve.

PROJECT SUMMARY:

MSHDA No: 4026 Development Name: Clawson Manor Development Location: City of Clawson, Oakland County Sponsor: CSI Support & Development Services Mortgagor: Clawson Manor Apartments Limited Dividend

Housing Association Limited Partnership

Number of Units (Affordable and Market Rate): 251 affordable units for senior occupancy Occupancy Rate: 98.0% Total Development Cost: $50,051,170 TE Bond Construction Loan: $26,026,608 TE Bond Permanent Loan: $19,233,297 MSHDA Gap Funds (HTF Loan): $6,308,521 Other Funds: $15,115,000 LIHTC Equity; $1,336,878

Income from Operations; $148,165 Transferred Reserves; $5,502,370 Sponsor Loan; $2,406,938 Deferred Developer Fee

EXECUTIVE SUMMARY:

Originally built in 1972 with a United States Department of Housing and Urban Development (“HUD”) 202 loan, Clawson Manor (the “Development”) is an existing 251-unit senior development located at 255 West 14 Mile Road in the City of Clawson, Oakland County. The non-profit sponsor, CSI Support & Development Services “CSI”), is seeking to acquire and rehabilitate

GOLDENROD TAB H

JUNE 21, 2022

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Clawson Manor under the Authority’s Round 14 Gap Funding Program. A tax-exempt bond loan, Housing Trust Fund (“HTF”) gap loan, and a 4% Low Income Housing Tax Credit (“LIHTC”) equity investment will facilitate rehabilitation of the Development. The sponsor is also providing a loan of more than $5.5 million.

CSI has been devoted to providing superior affordable senior housing for more than 50 years and owns and operates more than 2,500 units in Michigan. As the property manager, CSI utilizes a cooperative management system that enable tenants to voluntarily participate in the development’s operations, giving them a voice in how the building is managed. The Development also employs a service coordinator who connects residents with services available in the area. Plans for the redevelopment are to convert an existing space to a new office for visiting physicians. Development amenities include elevator service, central laundry facilities, community room, business center/computer lab, beauty salon, library, picnic area, and on-site management. The Development includes 140 surface parking spaces on site. Of these, 89 are carport spaces.

I am recommending Board approval for the following reasons:

• All units will be refurbished to meet the physical needs of the Development.• The Development will become an earning asset to the Authority’s portfolio.• Long-term affordability will be preserved with 20% of the units reserved for extremely low-

income seniors.• All units will benefit from Project-Based Rental Assistance(“PBRA”).• Risk should be minimal due to the operational history of the Development, the local rental

market, and the sponsor’s track record.


• 251 affordable housing units for seniors will be preserved.• A long-term rental subsidy will be provided for all units.• Over $32.3 million in new Authority loans will be established.

MUNICIPAL SUPPORT:

• The Development qualifies for the senior tax exemption under MCL 211.7.


• Tenants will be engaged through a cooperative management system that allowsresidents to participate in the operation of the building and reduces social isolation.

• Plans call for on-site space for visiting physicians.

RESIDENT IMPACT:

• No residents will be displaced as a result of the rehabilitation.• No residents will experience a rental increase as a result of the preservation.


Clawson Manor was originally constructed in 1972 using the HUD 202 direct lending program for senior housing; 20% of the units are currently occupied by senior households with incomes at or below 30% of area median income (“AMI”). The existing HUD 202 mortgage was set to mature in August 2022 but was prepaid to secure project-based tenant protection vouchers for the 246 unassisted units without rental subsidy, ensuring affordability for current and future residents. The Authority has been selected to administer the project-based voucher ("PBV") housing assistance payments ("HAP") contract and rents will be set at the Authority's 2022 payment standard. The remaining six units are occupied by residents with Housing Choice Vouchers from the Authority (“HCV”); however, all those units will be added to the PBV HAP contract once they are occupied by tenants who do not have HCVs.

CSI’s wholly owned subsidiary, Clawson (CSI) Non-Profit Housing Corporation, acquired the development in April of this year from the unrelated seller to allow for the necessary prepayment of the 202 mortgage and will rehabilitate the property using 4% LIHTC, a tax-exempt mortgage loan and an HTF loan from the Authority. If not for the sponsor purchasing the property, Clawson Manor likely would have been converted to market rate.

The Development is the tallest building in the City of Clawson making it an ideal location for rooftop cell sites. There are four long-term cell tower leases that provide additional revenue which helps support debt service. Each lease has automatic renewals and provides for rental increases at regular intervals. New lease contracts are executed at the end of the automatic renewal terms. The lease with AT&T Wireless automatically renews until 2044 with a 5% rental increase every five years. The lease with New Par (d/b/a Verizon Wireless) automatically renews until 2038 with rental increases at 3% annually. The lease with Sprint Spectrum automatically renews until 2039 with rental increases of 8% every 5 years, and the lease with T-Mobile automatically renews until 2028 with rental increases of 20% every 5 years. The sponsor has already begun new lease contract negotiations with each entity.

Due to the type, historical performance, length of the terms of these commercial leases, and staff support, I recommend a waiver of the Direct Lending Parameters regarding the Commercial Master Lease Reserve and Master Lease, which are as follows:

VI. Underwriting Terms, K. 6. Master Lease Reserve:

A Master Lease Reserve equal to three years of the annual lease payment under the master lease will be required with developments for which commercial income is counted as source of income in the underwriting of the residential project (see Commercial Income/Master Lease Section VII.K). Funds in this reserve may only be withdrawn by the mortgagor to cover shortfalls of income from the master lease when the master tenant is not receiving payments from commercial tenants occupying the commercial space under subleases sufficient to make full payment required under the master lease. If at any time the reserve and any interest earned on it fall below the initial deposit level, the mortgagor will not be eligible for a limited dividend distribution payment until the reserve is replenished to the initial deposit level. At such time as MSHDA’s mortgage loan(s) and all other financial obligations to MSHDA are paid in full, the remaining balance of the Master Lease Reserve, including all interest that has accumulated, will be released in accordance with the Authority’s written policy on the use of the Master Lease Reserve, as amended from time to time.

Section VII Additional MSHDA Direct Lending Requirements, K Commercial Income/Master Lease:

Projected rental income from the commercial space within a mixed-use transaction is generally not counted as a source of income for the MSHDA-financed residential project unless covered by a MSHDA-approved master lease, which master lease must include an unconditional guaranty of the commercial space income from a sponsor that has met MSHDA’s financial requirements. In addition, a master lease arrangement will only be allowed when the following conditions have been met:

• An acceptable commercial market study has been completed. At MSHDA’sdiscretion, the commercial market study requirement may be waived forrehabilitation proposals where a commercial tenant exists with proof of historicalincome equal to or in excess of the amount of the master lease payments.

• Final, signed lease(s) are in place with the commercial tenant(s).• The commercial space budget must show that it is feasible and that there is

sufficient surplus cash flow from the commercial space subleases to support therequired master lease payments.

• A Master Lease Reserve equal to 3 years of the annual lease payments underthe master lease will be required (see reserve requirement Section VI.K.8).

• A Commercial Absorption Reserve will be required to cover anticipated incomefrom the master lease during the commercial absorption period, if applicable (i.e.,the time the commercial space build out exceeds the residential projectconstruction/rehabilitation period. See reserve requirement Section VI.K.9)

MORTGAGE LOAN FEASIBILITY STAFF REPORT

June 16, 2022

RECOMMENDATION:

I recommend that the Michigan State Housing Development Authority (the “Authority”) 1) adopt a resolution that determines Mortgage Loan Feasibility with respect to this development, subject to the terms and conditions set forth in this report, and 2) authorize a waiver of the Authority’s Direct Lending Parameters concerning the Master Lease Reserve.

MSHDA No.: 4026 Development Name: Clawson Manor Development Location: City of Clawson, Oakland County Sponsor: CSI Support & Development Services Mortgagor: Clawson Manor Apartments Limited Dividend Housing

Association Limited Partnership TE Bond Construction Loan: $26,026,608 (52% of TDC) TE Bond Permanent Loan: $19,233,297 MSHDA Permanent HTF Loan: $6,308,521 Total Development Cost: $50,051,170 Mortgage Amortization and Term: 40 years for the tax-exempt bond loan and 50 years for the

HTF loan Interest Rate: 5.85% for the tax-exempt bond loan and 1% simple interest

for the HTF loan Program: Tax-Exempt Bond and Gap Financing Programs Number of Units: 251 elderly units of rehabilitation Unit Configuration: 158 studio apartments and 93 one-bedroom apartments,

including 8 larger (“deluxe”) one-bedroom units, in one 15- story building

Builder: Kasco, Inc. Syndicator: Enterprise Housing Credit Investments Date Application Received: December 15, 2021 HDO: JT Johnston

Issuance of the Authority's Mortgage Loan Commitment is subject to fulfillment of all Authority processing and review requirements and obtaining all necessary staff approvals as required by the Authority's underwriting standards.

Determination by the Authority of Mortgage Loan Feasibility is not a covenant by the Authority that funds are or will be available to provide financing of the proposed development or that the Authority will commit to financing the proposed development.

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ISSUES, POLICY CONSIDERATIONS AND RELATED ACTIONS:

Clawson Manor (the “Development”) was originally constructed in 1972 using the U.S. Department of Housing and Urban Development's (“HUD”) 202 direct lending program for senior housing; 20% of the units are currently occupied by senior households with incomes at or below 30% of area median income (“AMI”). The existing HUD 202 mortgage was set to mature in August 2022 but was prepaid to secure project-based tenant protection vouchers for the 246 unassisted units without rental subsidy, ensuring affordability for current and future residents. The Authority has been selected to administer the project-based voucher ("PBV") housing assistance payments ("HAP") contract and rents will be set at the Authority's 2022 payment standard. The remaining six units are occupied by residents with Housing Choice Vouchers from the Authority (“HCV”); however, all those units will be added to the PBV HAP contract once they are occupied by tenants who do not have HCVs.

CSI’s wholly owned subsidiary, Clawson (CSI) Non-Profit Housing Corporation, acquired the development in April of this year from the unrelated seller to allow for the necessary prepayment of the 202 mortgage and will then rehabilitate the property using 4% Low Income Housing Tax Credits, a tax-exempt mortgage loan and an HTF loan from the Authority. If not for the sponsor purchasing the property, Clawson Manor likely would have been converted to market rate.

The Development is the tallest building in the City of Clawson making it an ideal location for rooftop cell sites. There are four long-term cell tower leases that provide additional revenue which helps support debt service. Each lease has automatic renewals and provides for rental increases at regular intervals. New lease contracts are executed at the end of the automatic renewal terms. The lease with AT&T Wireless automatically renews until 2044 with a 5% rental increase every five years. The lease with New Par (d/b/a Verizon Wireless) automatically renews until 2038 with rental increases at 3% annually. The lease with Sprint Spectrum automatically renews until 2039 with rental increases of 8% every 5 years, and the lease with T-Mobile automatically renews until 2028 with rental increases of 20% every 5 years. The sponsor has already begun new lease contract negotiations with each entity.

Due to the type, historical performance, and the length of the terms of these commercial leases, staff recommend a waiver of the Direct Lending Parameters regarding the Commercial Master Lease Reserve and Master Lease, which are as follows:

VI. Underwriting Terms, K. 6. Master Lease Reserve:

A Master Lease Reserve equal to three years of the annual lease payment under the master lease will be required with developments for which commercial income is counted as source of income in the underwriting of the residential project (see Commercial Income/Master Lease Section VII.K). Funds in this reserve may only be withdrawn by the mortgagor to cover shortfalls of income from the master lease when the master tenant is not receiving payments from commercial tenants occupying the commercial space under subleases sufficient to make full payment required under the master lease. If at any time the reserve and any interest earned on it fall below the initial deposit level, the mortgagor will not be eligible for a limited dividend distribution payment until the reserve is replenished to the initial deposit level. At such time as MSHDA’s mortgage loan(s) and all other financial obligations to MSHDA are paid in full, the remaining balance of the Master Lease Reserve, including all interest that has accumulated, will be released in accordance with the

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Authority’s written policy on the use of the Master Lease Reserve, as amended from time to time.

Section VII Additional MSHDA Direct Lending Requirements, K Commercial Income/Master Lease:

Projected rental income from the commercial space within a mixed-use transaction is generally not counted as a source of income for the MSHDA-financed residential project unless covered by a MSHDA-approved master lease, which master lease must include an unconditional guaranty of the commercial space income from a sponsor that has met MSHDA’s financial requirements. In addition, a master lease arrangement will only be allowed when the following conditions have been met:

• An acceptable commercial market study has been completed. At MSHDA’sdiscretion, the commercial market study requirement may be waived forrehabilitation proposals where a commercial tenant exists with proof of historicalincome equal to or in excess of the amount of the master lease payments.

• Final, signed lease(s) are in place with the commercial tenant(s).• The commercial space budget must show that it is feasible and that there is

sufficient surplus cash flow from the commercial space subleases to support therequired master lease payments.

• A Master Lease Reserve equal to 3 years of the annual lease payments underthe master lease will be required (see reserve requirement Section VI.K.8).

• A Commercial Absorption Reserve will be required to cover anticipated incomefrom the master lease during the commercial absorption period, if applicable (i.e.,the time the commercial space build out exceeds the residential projectconstruction/rehabilitation period. See reserve requirement Section VI.K.9)

EXECUTIVE SUMMARY:

Originally built in 1972 with a HUD 202 loan, the Development is an existing 251-unit senior development located at 255 West 14 Mile Road in the City of Clawson, Oakland County. The nonprofit sponsor, CSI Support & Development Services, is seeking to acquire and rehabilitate Clawson Manor under the Authority’s Round 14 Gap Funding Program. A tax-exempt bond loan, Housing Trust Fund (“HTF”) gap loan, and a 4% Low Income Housing Tax Credit (“LIHTC”) equity investment will facilitate rehabilitation of the Development. The sponsor is also providing a loan of more than $5.5 million.

CSI has been devoted to providing superior affordable senior housing for more than 50 years and owns and operates more than 2,500 units in Michigan. As the property manager, CSI utilizes a cooperative management system that enable tenants to voluntarily participate in the development’s operations, giving them a voice in how the building is managed. The Development also employs a service coordinator who connects residents with services available in the area. Plans for the redevelopment are to convert an existing space to a new office for visiting physicians. Development amenities include elevator service, central laundry facilities, community room, business center/computer lab, beauty salon, library, picnic area, and on-site management. The Development includes 140 surface parking spaces on site. Of these, 89 are carport spaces.

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Structure of the Transaction and Funding:

There are several elements to this transaction that are common to preservation transactions:

• A tax-exempt bond construction loan will be provided by the Authority in the amount of$26,026,608 at 5.85% interest with a 12-month term, which will be used to bridge anextended equity pay-in period. Payments of interest only will be required during theconstruction loan. The principal balance of the construction loan will be reduced to thepermanent loan amount due on the first day of the month following the month in which the12-month construction loan term expires or such later date as established by an AuthorizedOfficer of the Authority (the “Permanent Financing Date”).

• A permanent Mortgage Loan will be provided by the Authority in the amount of $19,233,297.The permanent loan amount is underwritten using the current rents, less vacancy loss,payments to reserves and escrows, operating costs based on historical data unlessmodified by project improvements and construction and soft costs at levels appropriate forthis specific transaction. The permanent loan is based on a 1.15 debt service coverageratio, an annual interest rate of 5.85%, with a fully amortizing term of 40 years commencingon the Permanent Financing Date. The permanent Mortgage Loan will begin to amortize onthe Permanent Financing Date and will be in First Position.

• A permanent subordinate loan using an Authority Housing Trust Fund Loan (the “HTFLoan”) in the amount of $6,308,521 will be provided at 1% simple interest with paymentsinitially deferred. The HTF Loan will be in Second Position.

• The Sponsor is providing a loan in the amount of $5,502,370. See Special Condition No. 2.

• Equity support comes from an investment related to the 4% LIHTC in the estimated amountof $15,115,000.

• A new PBV HAP contract ("HAP Contract") from the Authority will ultimately provideproject-based assistance for all 251 units in the Development. Subject to HUD approval,the existing subsidy contract will be transferred to the Mortgagor and will continue toprovide deep subsidy assistance for all of the assisted units.

• Income from operations will be used as a source of funding to make the interest onlypayments and the tax and insurance payments during the construction period in the amountof $1,336,878.

• The Sponsor has agreed to defer $2,406,938 (50%) of the developer fee to help fill theremaining funding gap.

• An amount equal to one month’s gross rent potential will be funded in the Development’soperating account.

• An operating assurance reserve (“OAR”) will be required in the amount identified in theattached proforma.

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• The Development will be renovated, and a new replacement reserve requirement imposed,based upon a capital needs assessment (“CNA”), to ensure an extension of the useful life ofthe property and to maintain an excellent quality of life for the residents. At the closing, theMortgagor must deposit the amount determined necessary to satisfy the requirements of theAuthority-approved CNA over a 20-year period. This reserve will be held by the Authority.

• Existing Residual Receipts escrow funds in the amount identified in the attached proformawill be used as a source of funding.

Scope of Rehabilitation:

The following improvements to the property are included in the Scope of Work:

• New roof• New windows• New aluminum panel exterior• Replacement of electrical panels• Replacement of plumbing pipe and systems• New natural gas emergency back-up generator• New HVAC system• Refurbish elevator cab• New E-call system• New fire pump controller• Fire alarm upgrades• Replace building entry doors• Repaint common areas• Replace common area flooring• Replace community room kitchen• Renovate common area restrooms• Install new mailboxes• Replace unit kitchen cabinets• Replace bathroom vanities and install low flow toilets• Replace unit flooring• Replace signage

Affordability Requirements:

The Authority’s tax-exempt bond regulatory agreement will require that all the dwelling units in the property remain occupied by households with incomes at or below 60% of the Multifamily Tax Subsidy Project (“MTSP”) income limit, adjusted for family size. The number of restricted units is controlled by the number of eligible households in place at closing, estimated to be 100% of the units. All 251 units will be further restricted to the income limits required by the HAP Contract, fifty- one (51) units will be restricted to extremely low-income (at or below 30% AMI) households and of these, thirty-four (34) units will be designated as HTF units as required by the HTF Program.

Protections for Existing Residents:

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The preservation and renovation of the Development will not result in a rent increase for the existing tenants. There will be no tenant displacement will occur as a result of this transaction.

Site Selection:

Clawson Manor has been vetted by Authority Staff, and the Authority’s Manager of the Office of Market Research has indicated that the site meets the Authority's current site selection criteria.

Market Evaluation:

The unit mix as well as the amenities package and rent levels have been approved by the Authority’s Manager of the Office of Market Research.

Valuation of the Property:

An appraisal dated May 19, 2022, estimates the “As Is” value of the Development at $25,000,000.

CONDITIONS:

At or prior to (i) issuance of the Authority’s mortgage loan commitment (“Mortgage Loan Commitment”), (ii) the initial Mortgage Loan Closing (the “Initial Closing”), or (iii) such other date as may be specified herein, the new Mortgagor, and other members of the Development team, where appropriate, must satisfy each of the following conditions by entering into a written agreement or providing documentation acceptable to the Authority:

Standard Conditions:

1. Limitation for Return on Equity:

For each year of the Development's operation, beginning in the year in which the MortgageCut-Off Date occurs, payments are limited to twelve percent (12%) of the Mortgagor'sequity. For purposes of distributions, the Mortgagor's equity will be the sum of (i) the LIHTCequity; (ii) the brownfield tax credit equity; (iii) the historic tax credit equity; (iv) generalpartner capital contributions; and (v) any interest earned on an equity escrow held by theAuthority (estimated to be a total of $15,115,000). All such payments shall be referred to as"Limited Dividend Payments". The Mortgagor's return shall be fully cumulative. If Authoritygap funds are included in the development sources the Limited Dividend Payments arecapped at 12% per annum, while those loans remain outstanding. If there are no Authoritygap loan outstanding, then Limited Dividend Payments may increase 1% per annum until acap of 25% per annum is reached.

2. Income Limits:

The income limitations for 251 units of this proposal are as follows:

a) 251 units (158 studio units and 93 one-bedroom units) must be occupied oravailable for occupancy by households whose incomes do not exceed the incomelimits in the HAP Contract for so long as the HAP Contract between the Mortgagorand the Authority or HUD is in effect (including extensions and renewals), or forsuch longer period as determined by HUD.

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b. 32 units have been designated as HTF units and during the Period of Affordabilityrequired under the HTF program (30 years) must be available for occupancy byExtremely Low-income households whose incomes do not exceed 30% of AMI, asdetermined by HUD, adjusted for family size, or families whose adjusted grossincome is at or below the poverty line (as defined in Section 673 of the OmnibusBudget Reconciliation Act of 1981, 42 U.S.C. 9902), whichever is greater.

b) 51 units (32 studio units and 19 one-bedroom units) must be available foroccupancy by households whose incomes do not exceed the MTSP 30% incomelimits, adjusted for family size, until latest of (i) the expiration of the LIHTC“Extended Use Period” as defined in the Development’s LIHTC RegulatoryAgreement; (ii) 50 years from Initial Closing; or (iii) so long as any Authority loanremains outstanding.

c) 200 units (126 studio units and 74 one-bedroom units) must be available foroccupancy by households whose incomes do not exceed the MTSP 60% incomelimits, adjusted for family size, until latest of (i) the expiration of the LIHTC“Extended Use Period” as defined in the Development’s LIHTC RegulatoryAgreement; (ii) 50 years from Initial Closing; or (iii) so long as any Authority loanremains outstanding.

To the extent units within the Development are subject to multiple sets of income limits, the most restrictive income limit will apply so long as the applicable term of affordability continues.

The income of individuals and area median income shall be determined by the Secretary of the Treasury in a manner consistent with determinations of lower income families and area median income under Section 8 of the U.S. Housing Act of 1937, including adjustments for family size.

3. Limitations on Rental Rates:

The Total Housing Expense (contract rent plus tenant-paid utilities) for 251 units is subjectto the following limitations:

a. So long as the HAP Contract remains in effect, the Mortgagor agrees to establishand maintain rents for all 251 HAP-assisted units (158 studio units and 93 one- bedroom units) ("Contract Rents") that comply with the rent levels established by theHAP Contract and that do not exceed the rent levels approved by HUD.

b. During the Period of Affordability required under the HTF program (30 years), theTotal Housing Expense for the thirty-two (32) HTF units may not exceed theHousing Trust Fund rent limit for the unit established and published annually byHUD and based upon an imputed occupancy of one and one-half persons perbedroom.

c. The Total Housing Expense for 51 units (32 studio units and 19 one-bedroom units),may not exceed one-twelfth (1/12th) of 30% of 30% of the MTSP limit, adjusted forfamily size and based upon an imputed occupancy of one and one-half persons per

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bedroom. This restriction will apply until the latest of (i) the end of the Extended Use Period, (ii) 50 years after Initial Closing; or (iii) so long as any Authority loan remains outstanding.

d. The Total Housing Expense for 200 units (126 studio units and 74 one-bedroomunits), may not exceed one-twelfth (1/12th) of 30% of 60% of the MTSP limit,adjusted for family size and based upon an imputed occupancy of one and one-halfpersons per bedroom. This restriction will apply until the latest of (i) the end of theExtended Use Period, (ii) 50 years after Initial Closing; or (iii) so long as anyAuthority loan remains outstanding.

To the extent units within the Development are subject to multiple sets of rent limits, the most restrictive rent limit will apply so long as the applicable term of affordability continues.

For the initial lease term of the first household occupying each rent restricted unit in the Development the initial rent may not exceed 105% of the rent approved in this Mortgage Loan Feasibility/Commitment Staff Report. Rental increases on occupied units during any 12-month period will be limited to not more than 5% of the rent paid by the residenthousehold at the beginning of that annual period. Rents on vacated units may be increasedto the maximum level permissible by the applicable programs. Rents and utility allowancesmust be approved annually by the Authority’s Division of Asset Management.

Exceptions to the foregoing limitations may be granted by the Authority's Director of Asset Management to pay for extraordinary increases in operating expenses (exclusive of Limited Dividend Payments) or to enable the owner to amortize a Mortgage Loan increase to fund cost overruns pursuant to the Authority's policy on Mortgage Loan increases.

4. Covenant Running with the Land:

The Mortgagor must subject the Development site to a covenant running with the land so asto preserve the tax-exempt status of the obligations issued or to be issued to finance theMortgage Loan. This covenant will provide that each unit must be rented or available forrental on a continuous basis to members of the general public for a period ending on thelatest of the date which is 15 years after the date on which 50% of the residential units in theDevelopment are occupied, the first day on which no bonds are outstanding with respect tothe project, or the date on which assistance provided to the project under Section 8 of theU.S. Housing Act of 1937 terminates. The income of individuals and area median incomeshall be determined by the Secretary of the Treasury in a manner consistent withdeterminations of lower income families and area median income under Section 8 of the U.S.Housing Act of 1937, including adjustments for family size. Until the Secretary of theTreasury publishes its requirements, income of the individuals shall be determined inaccordance with Section 8 regulations. Additionally, if LIHTC is awarded to theDevelopment, the Mortgagor must agree to subject the property to the extended low-incomeuse commitment required by Section 42 of the Internal Revenue Code.

5. Restriction on Prepayment and Subsequent Use:

The Mortgage Loan is eligible for prepayment after the expiration of fifteen (15) years afterthe commencement of amortization. The Mortgagor must provide the Authority with at least60 days' written notice prior to any such prepayment.

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In the event of a prepayment, however, the Mortgagor must pay a prepayment fee equal to the sum of:

a. 1% of the balance being prepaid;b. Any bond call premium, prepayment or swap penalty, or any other cost that the

Authority incurs to prepay the bonds or notes that were used to fund the MortgageLoan; and

c. Any loss of debt service spread between the Mortgage Loan and the bonds used tofinance the loan from the date of the prepayment through the end of the 20th year ofamortization.

Once the Mortgagor has been approved for the early prepayment of the underlying loan, it must sign an agreement with the Authority stating it is responsible for the cost of terminating the swap. The Mortgagor can then choose the timing of the termination and participate in the transaction with the swap counterparty. The swap counterparty will quote the cost of terminating the swap and the Mortgagor will have the ability to execute the transaction or cancel at its sole discretion. If the Mortgagor chooses not to terminate the swap, it will forfeit the right to prepay the Mortgage Loan.

Subordinate loans are eligible to prepay at any time upon 60 days prior written notice to the Authority, but prepayment may not extinguish federal affordability and compliance requirements.

6. Operating Assurance Reserve:

At Initial Closing, the Mortgagor shall fund an operating assurance reserve ("OAR") in theamount equal to 4 months of estimated Development operating expenses (estimated to be$940,518). The OAR will be used to fund operating shortfalls incurred at the Developmentand will be disbursed by the Authority in accordance with the Authority's written policy onthe use of the Operating Assurance Reserve, as amended from time to time. The OARmust be either (i) fully funded with cash, or (ii) funded with a combination of cash and anirrevocable, unconditional letter of credit acceptable to the Authority, in an amount that maynot exceed 50% of the OAR requirement. To the extent that any portion of the OAR isdrawn for use prior to the final closing of the Mortgage Loan, the Mortgagor must restore theOAR to its original balance at final closing.

7. Replacement Reserve:

At Initial Closing, the Mortgagor must establish a replacement reserve fund (“ReplacementReserve”) with an initial deposit in an amount of $1,391 per unit. The Mortgagor must agreeto make annual deposits to the Replacement Reserve, beginning on the Mortgage Cut-OffDate, at a minimum of $300 per unit for the first year of operation, payable in monthlyinstallments, with deposits in subsequent years to be the greater of (i) the prior year’sdeposit, increased by 3%, or (ii) a percentage of the Development’s projected annual rentalincome or gross rent potential (“GRP”) for the year using the percentage obtained bydividing the first year’s deposit by the first year’s GRP shown on the operating proforma forthe Development attached hereto. The annual deposit to the Replacement Reserve mayalso be increased to any higher amount that is determined to be necessary by the Authority,based on a CNA and the Authority’s Replacement Reserve policies. The Authority may

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update any CNA or obtain a new CNA every five years, or upon any frequency, as determined necessary by the Authority.

8. One Month’s Gross Rent Potential:

At Initial Closing, the Mortgagor shall deposit an amount equal to one month’s gross rentpotential ($233,463) into the Development’s operating account.

9. Authority Subordinate Loan(s):

At Initial Closing, the Mortgagor must enter into agreements relating to the permanent HTFLoan. The HTF Loan will be secured by a subordinate mortgage and will bear simpleinterest at 1% with a 50-year term. No payments on the HTF Loan will be required until theearlier of (a) the year in which the sum of all annual surplus funds available for distributionequals or exceeds the amount of the deferred developer fee, or (b) the 13th year followingthe commencement of amortization of the Mortgage Loan. Interest will continue to accrueon the HTF loan until it is paid in full.

At the earlier of (a) the year in which the sum of all annual surplus funds available fordistribution equals or exceeds the amount of the deferred developer fee or (b) the 13th yearfollowing the date that Mortgage Loan amortization commences, in lieu of repayment of theHTF Loan, payments of fifty percent (50%) of any surplus cash available for distributionshall be deposited into an HTF Subsidy Reserve and will be used to repay the HTF Loanperiodically, if the amount of funds accumulated in the reserve warrant it, or at the end of theloan term, or otherwise used to assist the Development if needed. If reserve funds are usedtoward loan repayment, they shall be applied first to accrued interest, then to current interestand principal and shall continue until the sale of the Development or refinancing of theMortgage Loan, at which time the HTF Loan shall be due in full. If the HTF Loan is stilloutstanding, then following repayment of the Mortgage Loan and continuing on the first dayof every month thereafter, the Mortgagor shall make monthly payments of principal andinterest equal to the monthly payments that were required on the Mortgage Loan on the firstday of every month until the HTF Loan is paid in full, sale of the Development or the datethat is 50 years from date of Initial Closing, whichever occurs first. There is no prohibitionon prepayment of the HTF Loan.

10. Architectural Plans and Specifications; Contractor’s Qualification Statement:

Prior to Mortgage Loan Commitment, the architect must submit architectural drawings andspecifications that address all design review comments, acceptable to the Authority’s ChiefArchitect and the Director of Development.

Prior to Mortgage Loan Commitment, the general contractor must submit AIA DocumentA305 as required by the Authority’s Chief Architect.

11. Owner/Architect Agreement:

Prior to Mortgage Loan Commitment, the Mortgagor must provide the Authority with anexecuted Owner Architect Agreement acceptable in form and substance to the Director ofLegal Affairs.

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12. Trade Payment Breakdown:

Prior to Mortgage Loan Commitment, the general contractor must submit a signed TradePayment Breakdown acceptable to the Authority’s Design and Construction Manager.

13. Section 3 Requirements:

Prior to Mortgage Loan Commitment, the general contractor must agree to comply with allfederal Section 3 hiring requirements. The general contractor must provide a copy of thecontractor’s “Section 3 Hiring Plan” which must be reviewed and found acceptable to theAuthority’s Section 3 Compliance Officer. In addition, the general contractor must agree toadhere to follow-up reporting requirements as established by the Authority.

14. Equal Opportunity and Fair Housing:

Prior to Mortgage Loan Commitment, the management and marketing agent’s AffirmativeFair Housing Marketing Plan must be reviewed and found acceptable to the Authority’sEqual Employment Officer for Fair Housing Requirements.

In addition, prior to Mortgage Loan Commitment, the general contractor’s EqualEmployment Opportunity Plan must be reviewed and found acceptable to the Authority’sEqual Employment Officer.

15. Davis-Bacon and Cross-cutting Federal Requirements:

The general contractor will be required to comply with all federal prevailing wagerequirements, the requirements of the Davis-Bacon and Related Acts, and other applicablefederal regulations as required under the terms of the HOME Program, and the HousingChoice Voucher Program.

16. Cost Certification:

The contractor’s cost certification must be submitted within 90 days following the completionof construction, and the Mortgagor’s cost certification must be submitted within 90 daysfollowing the Mortgage Cut-off Date. For LIHTC, the owner is obligated to submit costcertifications applicable to itself and the contractor prior to issuance of IRS form 8609 (seeLIHTC Program Cost Certification Guidelines).

17. Environmental Review and Indemnification:

Prior to Mortgage Loan Commitment, the Mortgagor must address any outstandingenvironmental issues, in form and substance acceptable to the Authority’s EnvironmentalReview Officer.

At Initial Closing, the Mortgagor must enter an agreement to indemnify the Authority for anyloss, damage, liability, claim, or expense which it incurs as a result of any violation ofenvironmental laws. The indemnification agreement must be acceptable to the Director ofLegal Affairs.

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18. Title Insurance Commitment and Survey:

Prior to Mortgage Loan Commitment, the Mortgagor must provide an updated title insurancecommitment, including zoning, pending disbursement, comprehensive, survey and suchother endorsements as deemed necessary by the Authority’s Director of Legal Affairs. Theupdated title commitment must contain only exceptions to the insurance acceptable to theAuthority’s Director of Legal Affairs.

Additionally, prior to Mortgage Loan Commitment, the Mortgagor must provide a surveyor’scertificate of facts together with an ALTA survey certified to the 2021 minimum standards,and that appropriately reflects all easements, rights of way, and other issues noted on thetitle insurance commitment. All documents must be acceptable to the Director of LegalAffairs.

19. Organizational Documents/Equity Pay-In Schedule:

Prior to Mortgage Loan Commitment, the Mortgagor must submit a substantially final formsyndication partnership agreement, including an equity pay-in schedule, that is acceptablein form and substance to the Director of Development and Director of Legal Affairs.

At or prior to Initial Closing, the final, executed syndication partnership agreement mustbecome effective and the initial installment of equity must be paid in an amount approved bythe Director of Development.

20. Designation of Authority Funds:

The Authority reserves the express right, in its sole discretion, to substitute alternatesubordinate funding sources.

21. Management & Marketing:

Prior to Mortgage Loan Commitment, the management and marketing agent must submitthe following documents, which must be found acceptable to the Director of AssetManagement:

a. Management Agreementb. Marketing/Construction Transition Plan

22. Guaranties:

At Initial Closing, the Sponsor, General Partner, and any entity receiving a developer fee inconnection with the Development must deliver certain guaranties. The required guarantiesinclude a guaranty of HTF recapture liability, an operating deficit guaranty and aperformance completion guaranty. The required guaranties, the terms thereof and theparties who shall be required to deliver the guaranty must be determined and approved bythe Authority’s Director of Development.

23. Financial Statements:

Prior to Mortgage Loan Commitment, financial statements for the Sponsor, the guarantor(s)

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and the general contractor must be reviewed and found acceptable by the Authority’s Chief Financial Officer.

If prior to Initial Closing the financial statements that were approved by the Authority become more than six months old, the Sponsor, the guarantor(s) and/or the general contractor must provide the Authority with updated financial statements meeting Authority requirements upon request.

24. Future Contributions:

To ensure the Authority is contributing the least amount of funding necessary to achieveproject feasibility, any decrease in Development costs or future contributions not included inthe Development proforma may, at the Authority’s discretion, be utilized to reduce, in equalproportions, any deferred developer fee and Authority soft funds.

25. Ownership of Development Reserves:

At the Initial Closing, the Mortgagor must enter into an agreement confirming the Authority’sultimate ownership of excess cash reserves, escrows and accounts as may exist at the timethe Authority’s mortgage loans are paid off or the Development is sold or refinanced. Thisagreement must be acceptable to the Authority’s Director of Legal Affairs.

26. Section 8 Required Approvals - HUD and MSHDA:

This transaction is subject to certain HUD approvals including, but not limited to 1) thechange in ownership and assignment of the HAP Contract and 2) previous participationapproval (HUD Form 2530) for the Mortgagor, its partners, and property managementagent. Prior to the Initial Closing, the HUD approvals must be obtained and must beconsistent with the loan structure and intent of the transaction as described in this report.The approvals by HUD are subject to review and concurrence by the Authority’s Director ofLegal Affairs. The Mortgagor must enter into all agreements as may be required by HUDand to abide by all terms, conditions, and requirements of the Section 8 Program and allother Authority rules, guidelines, and procedures as required under the RegulatoryAgreement.

27. HAP Extension:

At Initial Closing, the Mortgagor must enter into an agreement to apply for and accept anyHAP or other HUD subsidy extensions available in the future, subject to Authority approval.

28. HUD Subsidy Layering Review:Prior to Initial Closing, the subsidy layering review must be performed by Authority staff andmust be submitted to HUD for approval. The subsidy layering approval is subject to reviewand approval by the Authority’s Director of Development.

29. Application for Disbursement:Prior to Initial Closing, the Mortgagor must submit an “Application for Disbursement” alongwith supporting documentation, which must be found acceptable to the Authority’s Director

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of Development.

30. Uniform Relocation Act Compliance:

If the Development is occupied at Initial Closing and any occupants of the Development willbe displaced and/or relocated as a result of the rehabilitation of the Development, then theMortgagor and/or the Sponsor shall ensure compliance with all requirements of the UniformRelocation Act and implementing regulations as set forth in 24 CFR Part 42 and 49 CFRPart 24, as well as 24 CFR §570.606. Such compliance shall be at the Mortgagor's orSponsor's sole cost and expense. Prior to Final Closing, the Mortgagor must submitdocumentation that it has complied with all requirements of the Uniform Relocation Act.This documentation must be found acceptable by the Authority’s Director of Development.

Special Conditions:

1. Legal Requirements:

Prior to Initial Closing the Mortgagor and/or Sponsor must submit documentation acceptableto the Authority’s Director of Legal Affairs for the items listed below:

• Approval by the Michigan Department of Treasury of the Senior Housing Exemptionfor the Development under MCL 211.7d by submission and return of completed form4719.

• Revised legal description to be used on both survey and title commitment.• Copy of IRS approval of the general partner as a 501(c)(3) charitable organization.• The Michigan Attorney General’s Office must complete its review of the transaction

and provide the Director of Legal Affairs its recommendation.• Any other documentation as required by the Director of Legal Affairs, including

acceptable evidence of insurance, permits, licenses, zoning approvals, utilityavailability, payment and performance bonds and other closing requirements.

2. Sponsor Loan:

Prior to Mortgage Loan Commitment, the Mortgagor must submit substantially finaldocuments evidencing the Sponsor loan acceptable to the Authority’s Director of LegalAffairs and Director of Development. The Sponsor loan must:

a) not be secured by a lien on the Development or any of the Development’sproperty, funds or assets of any kind;

b) be payable solely from approved Limited Dividend payments, and not from otherdevelopment funds;

c) be expressly subordinate to all Authority mortgage loans; andd) have a loan term not less than the longest term of all Authority mortgage loans.

At or prior to Initial Closing, the final, executed Sponsor loan documents must become effective and initial funding of the loan must be made in an amount approved by the Director of Development.

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3. Residual Receipts and Cost Savings - Final Audit:

50% of any cost savings and residual receipts identified in any post-construction costcertification or the Authority's final closing audit that might otherwise be used to pay downdeferred developer fee will be deposited in the HTF Subsidy Reserve, to the extentavailable.

4. Additional Terms of Operating Deficit Guaranty:

The form of operating deficit guaranty to be provided by the Sponsor and General Partnermust include an additional guaranty obligation to cover the projected income stream fromthe existing rooftop leases as set forth in the proforma, as adjusted by the annual escalationfactor, for the term of the permanent tax-exempt bond Mortgage Loan.

DEVELOPMENT TEAM AND SITE INFORMATION

I. MORTGAGOR: Clawson Manor Apartments Limited Dividend Housing Association Limited Partnership

II. GUARANTOR(S):

A. Guarantor #1:

Name: CSI Support & Development Services Address: 8425 E. Twelve Mile Road

Warren, MI 48093

III. DEVELOPMENT TEAM ANALYSIS:

A. Sponsor:

Name: CSI Support & Development Services Address: 8425 E. Twelve Mile Road

Warren, MI 48093

Individuals Assigned: Diane Smith Telephone: 586-753-9029 Fax: 586-753-9022 E-mail: [email protected]

1. Experience: The Sponsor has experience working on Authority-financeddevelopments.

2. Interest in the Mortgagor and Members: Clawson (CSI) Non-ProfitHousing Corporation, General Partner – 0.01%TBD, Limited Partner – 99.99%

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mailto:[email protected]

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B. Architect:

Name: Fusco, Shaffer & Pappas, Inc. Address: 550 E. Nine Mile Road

Ferndale, MI 48220

Individual Assigned: James Pappas Telephone: 248-543-4100 Fax: 248-543-4141 E-Mail: [email protected]

1. Experience: Architect has previous experience with Authority-financeddevelopments.

2. Architect's License: License number 1301029064, exp. 04/01/2023.

C. Attorney:

Name: Frost Brown Todd, LLC Address: 201 North Illinois Street, Suite 1900

Indianapolis, IN 46204

Individual Assigned: Matthew S. Carr Telephone: 317-237-3803Fax: 317-237-3900E-Mail: [email protected]

Name: Dykema (Michigan counsel) Address: 39577 Woodward Avenue, Suite 300

Bloomfield Hills, MI 48304

Individual Assigned: Scott A. Steinhoff Telephone: 248-203-0736 Fax: 248-703-6553 E-Mail: [email protected]

1. Experience: The firm selected as Michigan counsel has experience inclosing Authority-financed developments.

D. Builder:

Name: Kasco, Inc. Address: 226 E. Hudson

Royal Oak, MI 48067

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Individual Assigned:Mike Engle Telephone: 248-677-7373 Fax: 248-546-1276 E-mail: [email protected]

1. Experience: The firm has previous experience in constructing Authority- financed developments.

2. State Licensing Board Registration: License number 2102088839, withan expiration date of 05/31/2023, Stephen John Kassab, Qualifying Officer.

E. Management and Marketing Agent:

Name: CSI Support & Development Services Address: 8425 E. 12 Mile Road

Warren, MI 48093

Individual Assigned: Anne Sackrison Telephone: 586-753-9053 Fax: 586-753-9022 E-mail: [email protected]

1. Experience: This firm has significant experience managing Authority- financed developments.

F. Development Team Recommendation: Acceptable

IV. SITE DATA:

A. Land Control/Purchase Price:Option Agreement dated May 23, 2022, between Clawson (CSI) Non-Profit HousingCorporation (“Seller”) and Clawson Manor Apartments Limited Dividend HousingAssociation Limited Partnership (“Buyer”) for Clawson Manor, 225 West 14 MileRoad, Clawson, Michigan, with a purchase price of fair market value as determinedby a third-party appraisal, with an Option Period of 18 months.

B. Site Location:Southside of 14 Mile Road, east of South Washington Avenue and west of GeraldAvenue, at 255 West 14 Mile Road, Clawson, Oakland County,

C. Size of Site:3.2 +/- acres

D. Density:Appropriate

E. Physical Description:

1. Present Use: Multi-family residential

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2. Existing Structures: One 15-story building

3. Relocation Requirements: None

F. Zoning:RM-2

G. Contiguous Land Use:

1. North: Commercial, retail, and single-family residential

2. South: Single-family residential

3. East: Commercial and retail

4. West: Commercial, retail, and single-family residential

H. Tax Information:Taxes paid by the Michigan Department of Treasury per MCL 211.7(d) (also, PA 78,2016)

I. Utilities:Electric: DTE Energy and Constellation Energy CompanyGas: Consumers EnergyWater & Sewer: City of Clawson

J. Community Facilities:

1. Shopping:Aldi grocery store is located approximately 0.7 miles west of the site andWalmart Supercenter is located approximately 2.0 miles to the northwest.Costco Wholesale is located approximately 2.0 miles southeast of the site.Numerous restaurants, banks, gas stations, and retail establishments arelocated along 14 Mile Road to the east and west of the site.

2. Recreation:The Clawson Senior Center is located approximately 0.8 miles northeast ofthe site and offer various recreation and social services including a lunchprogram, transportation for medical appointments and shopping, offers amedical equipment loan closet and more. Blair Memorial Library is locatedapproximately 0.6 miles northeast of the site. The Clawson HistoricalMuseum is located approximately 0.7 miles to the northeast of the site.Multiple parks are located within 2.0 miles around the site.

3. Public Transportation:Bus transportation is available through Oakland County’s SMART busservice and has routes in Clawson and throughout Oakland County. A busstop is located approximately 0.2 miles northwest of the site.

4. Road SystemsThe site fronts 14 Mile Road which is a moderately travelled thoroughfare inthe City of Clawson. I-75 is approximately 1.7 miles to the east andaccessible from West 14 Mile Road. Woodward Avenue is just over 2.0

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miles west of the site. 5. Medical Services and other Nearby Amenities:

Royal Oak Hospital is located approximately 3.9 miles southwest of the site.A CVS Pharmacy is located less than a mile to the east of the site. TheClawson Fire Department is located approximately 0.4 miles to thesoutheast and the Clawson Police Department is approximately 0.6 miles tothe northeast. The US Post Office is located approximately 0.5 milesnortheast of the site.

6. Description of Surrounding Neighborhood:Mixed-use neighborhood consisting of commercial, retail, residential, andmunicipal uses.

7. Local Community Expenditures Apparent:None.

8. Indication of Local Support:None.

V. ENVIRONMENTAL FACTORS:

A Phase I Environmental Site Assessment was submitted to the Authority and has beenreviewed by the Authority’s Environmental Manager. (See Standard Condition No. 17).

VI. DESIGN AND COSTING STATUS:

Architectural plans and specifications consistent with the scope of work have been reviewedby the Chief Architect. A response to all design review comments and the submission ofcorrected and final plans and specifications must be made prior to initial closing.

This proposal will satisfy the State of Michigan barrier-free requirements, the Authority’spolicy regarding accessibility and non-discrimination for the disabled, the Fair HousingAmendments Act of 1988, and the HOME requirements for barrier-free vision and hearingdesigned units. Construction documents must be acceptable to the Authority’s ChiefArchitect.

VII. MARKET SUMMARY:

The Market study has been reviewed by the Authority’s Chief Market Analyst and found tobe acceptable. The Authority’s Chief Market Analyst has reviewed and approved the unitmix, rental structure, and unit amenities.

VIII. EQUAL OPPORTUNITY AND FAIR HOUSING:

The contractor's Equal Employment Opportunity Plan is currently being reviewed and mustbe approved by the Authority’s Design and Construction Manager prior to initial closing.The management and marketing agent's Affirmative Fair Housing Marketing Plan has beenapproved.

IX. MANAGEMENT AND MARKETING:

The management/marketing agent has submitted application-level management andmarketing information, to be approved prior to initial closing by the Authority’s Director of

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Asset Management.

X. FINANCIAL STATEMENTS:

The sponsor’s/guarantor’s and the builder’s financial statements have been submitted andare to be approved prior to initial closing by the Authority’s Director of Rental Development.

XI. DEVELOPMENT SCHEDULING:

A. Mortgage Loan Commitment: July 2022 B. Initial Closing and Disbursement: August 2022 C. Construction Completion: September 2023 D. Cut-Off Date: October 2023

XII. ATTACHMENTS:

A. Development Proforma

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Clarence L. Stone, Jr.

Digitally signed by Clarence L. Stone, Jr. Date: 2022.06.09 10:47:08 -04'00'

6/9/2022

APPROVALS:

Chad Benson Digitally signed by Chad Benson Date: 2022.06.09 09:16:25 -04'00' 6/9/22

Chad Benson Date Director of Development

Clarence L. Stone, Jr. Date Director of Legal Affairs

6/9/22

Gary Heidel Date Acting Executive Director

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Development Clawson ManorFinancing Tax Exempt

MSHDA No. 4026Step CommitmentDate 06/16/2022 06/21/2022Type Preservation - Subsidized

TOTAL DEVELOPMENT COSTS Per Unit Total % in

Bas

is


Basis

Included in Historic TC

Basis Per Unit Total % in

Bas

is



Basis

Acquisition Project ReservesLand 11,155 2,800,000 0% 0 0 Operating Assurance Reserv 4.0 months Funded in Cas 3,747 940,518 0% 0 0 940,518 940,518Existing Buildings 88,446 22,200,000 100% 22,200,000 0 Replacement Reserve Required 1,391 349,054 0% 0 0Other: 0 0% 0 0 Operating Deficit Reserve Not Required 0 0 0% 0 0

Subtotal 99,602 25,000,000 Rent Subsidy Reserve 0 0 0% 0 0Construction/Rehabilitation Syndicator Held Reserve 0 0 0% 0 0

Off Site Improvements 0 100% 0 0 Rent Lag Escrow 0 0 0% 0 0On-site Improvements 436 109,450 100% 109,450 0 Tax and Insurance Escrows 0 0 0% 0 0Landscaping and Irrigation 199 50,000 100% 50,000 50,000 Other: 0 0% 0 0Structures 40,419 10,145,165 100% 10,145,165 10,145,165 Other: 0 0% 0 0Community Building and/or Maintenance Facility 0 100% 0 0 Subtotal 5,138 1,289,572Construction not in Tax Credit basis (i.e.Carports and Commercial Space 0 0% 0 0 MiscellaneousGeneral Requirements % of Contract 5.33% Within Range 2,463 618,277 100% 618,277 618,277 Deposit to Development Operating Account (1MGRPRequired 930 233,463 0% 0 0Builder Overhead % of Contract 1.79% Within Range 870 218,458 100% 218,458 218,458 Other (Not in Basis): 0 0 0% 0 0Builder Profit % of Contract 5.37% Within Range 2,663 668,481 100% 668,481 668,481 Other (In Basis): 0 0 100% 0 0Permits, Bond Premium, Tap Fees, Cost Cert. 959 240,748 100% 240,748 240,748 Other (In Basis): 0 0 100% 0 0Other: Plumbing replacement for HTF 5,179 1,300,000 100% 1,300,000 1,300,000 Subtotal 930 233,463

Subtotal 53,190 13,350,57815% of acquisition and $15,000/unit test: met Total Acquisition Costs 99,602 25,000,000

Professional Fees Total Construction Hard Costs 53,190 13,350,578Design Architect Fees 1,912 480,000 100% 480,000 480,000 Total Non-Construction ("Soft") Costs 27,437 6,886,716Supervisory Architect Fees 478 120,000 100% 120,000 120,000Engineering/Survey 139 35,000 100% 35,000 35,000 Developer Overhead and FeeLegal Fees 478 120,000 100% 120,000 120,000 Maximum 4,813,876 19,179 4,813,876 100% 4,813,876 4,813,876

Subtotal 3,008 755,000 7.5% of Acquisition/Project Reserves Override 5% Attribution TestInterim Construction Costs 15% of All Other Development Costs met

Property & Casualty Insurance 545 136,878 100% 136,878 136,878Construction Loan Interest Override 1,200,000 4,781 1,200,000 100% 1,200,000 1,200,000 Total Development Cost 199,407 50,051,170 44,800,862 22,121,412 41,973,635 47,600,862Title Work 797 200,000 100% 200,000 0 ElevatorConstruction Taxes 0 100% 0 0 TOTAL DEVELOPMENT SOURCES % of TDCOther: Equity Advance Note Interest 1,478 370,971 100% 370,971 370,971 MSHDA Permanent Mortgage 38.43% 76,627 19,233,297 Gap to

Subtotal 7,601 1,907,849 Conventional/Other Mortgage 0.00% 0 0 Hard DebtPermanent Financing Equity Contribution from Tax Credit Syndication 30.20% 60,219 15,115,000 # of Units Ratio

Loan Commitment Fee to MSHDA 2% 2,577 646,703 0% 0 0 MSHDA NSP Funds 0.00% 0 0.00 30.80% 0 0 Zero Bedroom21 Zero Bedroom, 1 BathOther: 0 0% 0 0 MSHDA HOME 0.00% 0 0.00 0 One Bedroom12 One Bedroom, 1 Bath

Subtotal 2,577 646,703 Mortgage Resource Funds 0.00% 0 0 One Bedroom2 One Bedroom, 1 Bath, Other Costs (In Basis) MSHDA Housing Trust Funds 12.60% 25,134 6,308,521 35

Application Fee 8 2,000 100% 2,000 2,000 Local HOME 0.00% 0Market Study 26 6,500 100% 6,500 6,500 Income from Operations 2.67% 5,326 1,336,878Environmental Studies 797 200,000 100% 200,000 200,000 Other Equity 0.00% 0Cost Certification 80 20,000 100% 20,000 20,000 Transferred Reserves: 0.30% 590 148,165Equipment and Furnishings 677 170,000 100% 170,000 0 Other: Sponsor Loan 10.99% 21,922 5,502,370 Deferred Dev Temporary Tenant Relocation 598 150,000 100% 150,000 150,000 Other: 0.00% 0 Dev FeeConstruction Contingency 4,801 1,205,058 100% 1,205,058 1,205,058 Deferred Developer Fee 4.81% 9,589 2,406,938 50.00%Appraisal and C.N.A. 80 20,000 100% 20,000 20,000 Total Permanent Sources 50,051,170Other: 0 100% 0 0

Subtotal 7,066 1,773,558 Sources Equal Uses? BalancedOther Costs (NOT In Basis) Surplus/(Gap) 0

Start-up and Organization 20 5,000 0% 0 0Tax Credit Fees (based on 2017 QAP) 107,346 Within Range 428 107,346 0% 0 0 52.00% 103,692 26,026,608Compliance Monitoring Fee (based on 2017 QAP) 475 119,225 0% 0 0 Construction Loan Rate 5.850%Marketing Expense 16 4,000 0% 0 0 Repaid from equity prior to final closing 6,793,311Syndication Legal Fees 179 45,000 0% 0 0Rent Up Allowance months 0 0 0% 0 0 Eligible Basis for LIHTC/TCAP Value of LIHTC/TCAP Existing Reserve AnalysisOther: 0 0% 0 0 Acquisition 23,450,000 Acquisition 938,000 DCE Interest: Current Owner's Reserves: 0

Subtotal 1,118 280,571 Construction 21,350,862 Construction 854,034 Override Insurance: 148,165Acquisition Credit % 4.00% Total Yr Credit 1,792,034 1,747,430 Taxes: 0

Summary of Acquisition Price As of August 1, 2022 Construction Loan Term Rehab/New Const Credit % 4.00% Equity Price $0.8650 Rep. Reserve:Attributed to Land 2,800,000 1st Mortgage Balance 18,320,000 Months Qualified Percentage 100.00% Equity Effective Price $0.8651 Override ORC:Attributed to Existing Structure 22,200,000 Closing Costs 3,688,969 Construction Contract 12 QCT/DDA Basis Boost 100% Equity Contribution 15,113,758 15,115,000 DCE Principal:Other: 0 Subordinate Mortgage(s) Holding Period (50% Test) 0 Historic? No Residual Rcpts 148,165Fixed Price to Seller 25,000,000 Subordinate Mortgage(s) Rent Up Period 0


Equity Contribution from Tax Credit Syndication 15,115,000Appraised Value Value As of: May 19, 2022 Brownfield Equity"Encumbered As-Is" value as determined by appraisal: 25,000,000 Historic Tax Credit EquityPlus 5% of Appraised Value: 0 Override General Partner Capital ContributionsLESS Fixed Price to the Seller: 25,000,000 Other Equity SourcesSurplus/(Gap)

Within Range 0


4 Month OAROAR Funded

Yr 1

Home Subsidy

LimitHOME Unit

Mix


Tax/Ins Escrows transferred to project

LIHTC BasisHistoric Basis

221(d)(3) Limit

Aggregate Basis

Reserves Transferred in to Project

HTF Unit Mix

Instructions

GOLDENRODTAB H

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Development Clawson ManorFinancing Tax Exempt Mortgage Assumptions:

MSHDA No. 4026 Debt Coverage Ratio 1.15Mortgage Interest Rate 5.850%Pay Rate 5.850%

Step CommitmentDate 06/16/2022 06/21/2022Type Preservation - Subsidized Mortgage Term 40 years

Income from Operations YesYes

Total Development Income Potential Per Unit Total

Annual Rental Income 11,162 2,801,556 1.0% 2 2.0%Annual Non-Rental Income 824 206,874 1.0% 6 2.0%Total Project Revenue 11,986 3,008,430


Vacancy Loss 5.00% of annual rent potential 558 140,078 6 3.0%Management Fee 562 per unit per year 562 141,062 3.0% 1 3.0%Administration 1,458 365,910 3.0% 1 3.0%Project-paid Fuel 264 66,200 3.0% 6 3.0%Common Electricity 459 115,125 4.0% 6 3.0%Water and Sewer 482 121,000 5.0% 6 5.0%Operating and Maintenance 1,650 414,160 3.0% 1 3.0%Real Estate Taxes 0 5.0% 1 5.0%Payment in Lieu of Taxes (PILOT) Applied to: All Units 0 0Insurance 545 136,878 3.0% 1 3.0%Replacement Reserve 300 per unit per year 300 75,300 3.0% 1 3.0%Other: 0 3.0% 1 3.0%Other: 0 3.0% 1 3.0%

Total Expenses 52.38% 6,278 1,575,713

Base Net Operating Income 5,708 1,432,717 OverridePart A Mortgage Payment 41.41% 4,964 1,245,841Part A Mortgage 76,627 19,233,297Non MSHDA Financing Mortgage Payment 0Non MSHDA Financing Type: 0Base Project Cash Flow (excludes ODR) 6.21% 745 186,876

PBV and/or Existing Section 8 Assistance

Future Vacancy

% of Revenue


Beginning in Year


Instructions

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Development Clawson Manor Income Limits for (Effective April 1,2022)Financing Tax Exempt 1 Person 2 Person 3 Person 4 Person 5 Person 6 Person


Step CommitmentDate 06/16/2022 06/21/2022Type Preservation - Subsidized 50% of area median 31,350 35,800 40,300 44,750 48,350 51,950

60% of area median 37,620 42,960 48,360 53,700 58,020 62,340

Rental Income

Unit No. of Units Unit Type Bedrooms Baths Net Sq. Ft.Contract

Rent Utilities


Current Section 8

Contract Rent% of Gross

Rent% of Total

UnitsGross

Square Feet

% of Total Square

Feet

TC Units Square

Feet Unit Type

Max Allowed Housing Expense

30% Area Median Income Units PBRA/PBV UnitsSenior Occupancy

A 20 Apartment 0 1.0 375 879 0 879 210,960 0 7.5% 8.0% 7,500 7.0% 7,500 HTF 470B 12 Apartment 1 1.0 500 1,017 0 1,017 146,448 0 5.2% 4.8% 6,000 5.6% 6,000 HTF 503C 2 Apartment 1 1.0 750 1,017 0 1,017 24,408 0 0.9% 0.8% 1,500 1.4% 1,500 HTF 503

381,816 0 13.6% 13.5% 15,000 13.9% 15,00030% Area Median Income Units PBRA/PBV Units

Senior OccupancyA 12 Apartment 0 1.0 375 879 0 879 126,576 0 4.5% 4.8% 4,500 4.2% 4,500 470B 5 Apartment 1 1.0 500 1,017 0 1,017 61,020 0 2.2% 2.0% 2,500 2.3% 2,500 503

187,596 0 6.7% 6.8% 7,000 6.5% 7,00060% Area Median Income Units PBRA/PBV Units

Senior OccupancyA 125 Apartment 0 1.0 375 879 0 879 1,318,500 0 47.1% 49.8% 46,875 43.5% 46,875 940B 66 Apartment 1 1.0 500 1,017 0 1,017 805,464 0 28.8% 26.3% 33,000 30.6% 33,000 1,007C 3 Apartment 1 1.0 750 1,017 0 1,017 36,612 0 1.3% 1.2% 2,250 2.1% 2,250 1,007


Senior OccupancyA 1 Apartment 0 1.0 375 879 0 879 10,548 0 0.4% 0.4% 375 0.3% 375 940B 2 Apartment 1 1.0 500 1,017 0 1,017 24,408 0 0.9% 0.8% 1,000 0.9% 1,000 1,007C 3 Apartment 1 1.0 750 1,017 0 1,017 36,612 0 1.3% 1.2% 2,250 2.1% 2,250 1,007

71,568 0 2.6% 2.4% 3,625 3.4% 3,625Mgrs 0 0 0.0% 0.0% 0 0.0% 0

107,750 107,750Total Revenue Units 251 Gross Rent Potential 2,801,556 HOME Units SF/Total Units SF 0.0% Within RangeManager Units 0Income Average 53.90% Average Monthly Rent 930 # HOME Units/# Total Units 0.0% Within RangeSet Aside 100.00% Gross Square Footage 107,750

Utility AllowancesOwner-Paid Owner-Paid Owner-Paid Owner-Paid Owner-Paid

Annual Non-Rental Income Electricity A/C Gas Other Total OverideMisc. and Interest A 0 Total Income Annual MonthlyLaundry 28,000 B 0 Rental Income 2,801,556 233,463Carports 19,224 C 0 Non-Rental Income 206,874 17,240Other: Cell Tower Leases 159,650 D 0 Total Project Revenue 3,008,430 250,703Other: E 0

206,874 F 0G 0H 0

Water/ Sewer

Oakland County

Instructions

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Cash Flow Projections Development Clawson ManorFinancing Tax Exempt

MSHDA No. 4026Step CommitmentDate 06/16/2022 06/21/2022Type Preservation - Subsidized

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

IncomeAnnual Rental Income 1.0% 2 2.0% 2,801,556 2,857,587 2,914,739 2,973,034 3,032,494 3,093,144 3,155,007 3,218,107 3,282,469 3,348,119 3,415,081 3,483,383 3,553,050 3,624,111 3,696,594 3,770,526 3,845,936 3,922,855 4,001,312 4,081,338Annual Non-Rental Income 1.0% 6 2.0% 206,874 208,943 211,032 213,142 215,274 219,579 223,971 228,450 233,019 237,680 242,433 247,282 252,228 257,272 262,418 267,666 273,019 278,480 284,049 289,730

Total Project Revenue 3,008,430 3,066,530 3,125,771 3,186,176 3,247,768 3,312,724 3,378,978 3,446,558 3,515,489 3,585,799 3,657,515 3,730,665 3,805,278 3,881,384 3,959,011 4,038,192 4,118,955 4,201,335 4,285,361 4,371,068

ExpensesVacancy Loss 5.0% 6 3.0% 140,078 142,879 145,737 148,652 151,625 92,794 94,650 96,543 98,474 100,444 102,452 104,501 106,592 108,723 110,898 113,116 115,378 117,686 120,039 122,440Management Fee 3.0% 1 3.0% 141,062 145,294 149,653 154,142 158,767 163,530 168,435 173,488 178,693 184,054 189,576 195,263 201,121 207,154 213,369 219,770 226,363 233,154 240,149 247,353Administration 3.0% 1 3.0% 365,910 376,887 388,194 399,840 411,835 424,190 436,916 450,023 463,524 477,430 491,752 506,505 521,700 537,351 553,472 570,076 587,178 604,793 622,937 641,625Project-paid Fuel 3.0% 6 3.0% 66,200 68,186 70,232 72,339 74,509 76,744 79,046 81,418 83,860 86,376 88,967 91,636 94,385 97,217 100,133 103,137 106,232 109,419 112,701 116,082Common Electricity 4.0% 6 3.0% 115,125 119,730 124,519 129,500 134,680 138,720 142,882 147,168 151,583 156,131 160,815 165,639 170,609 175,727 180,999 186,429 192,021 197,782 203,716 209,827Water and Sewer 5.0% 6 5.0% 121,000 127,050 133,403 140,073 147,076 154,430 162,152 170,259 178,772 187,711 197,096 206,951 217,299 228,164 239,572 251,550 264,128 277,334 291,201 305,761Operating and Maintenance 3.0% 1 3.0% 414,160 426,585 439,382 452,564 466,141 480,125 494,529 509,365 524,645 540,385 556,596 573,294 590,493 608,208 626,454 645,248 664,605 684,543 705,080 726,232Real Estate Taxes 5.0% 1 5.0% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Payment in Lieu of Taxes (PILOT) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Insurance 3.0% 1 3.0% 136,878 140,984 145,214 149,570 154,057 158,679 163,439 168,343 173,393 178,595 183,953 189,471 195,155 201,010 207,040 213,251 219,649 226,238 233,026 240,016Replacement Reserve 3.0% 1 3.0% 75,300 77,559 79,886 82,282 84,751 87,293 89,912 92,610 95,388 98,249 101,197 104,233 107,360 110,581 113,898 117,315 120,834 124,459 128,193 132,039Other: 3.0% 1 3.0% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Other: 3.0% 1 3.0% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Subtotal: Operating Expenses 1,575,713 1,625,155 1,676,219 1,728,961 1,783,440 1,776,506 1,831,961 1,889,217 1,948,333 2,009,374 2,072,405 2,137,494 2,204,713 2,274,135 2,345,835 2,419,892 2,496,389 2,575,409 2,657,041 2,741,376Debt ServiceDebt Service Part A 1,245,841 1,245,841 1,245,841 1,245,841 1,245,841 1,245,841 1,245,841 1,245,841 1,245,841 1,245,841 1,245,841 1,245,841 1,245,841 1,245,841 1,245,841 1,245,841 1,245,841 1,245,841 1,245,841 1,245,841Debt Service Conventional/Other Financing 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Total Expenses 2,821,554 2,870,996 2,922,060 2,974,802 3,029,281 3,022,347 3,077,802 3,135,058 3,194,174 3,255,215 3,318,246 3,383,335 3,450,554 3,519,976 3,591,676 3,665,733 3,742,230 3,821,250 3,902,882 3,987,217

Cash Flow/(Deficit) 3,257,531 186,876 195,534 203,711 211,374 218,487 290,377 301,176 311,500 321,315 330,584 339,269 347,329 354,724 361,408 367,336 372,458 376,726 380,084 382,479 383,851Cash Flow Per Unit 745 779 812 842 870 1,157 1,200 1,241 1,280 1,317 1,352 1,384 1,413 1,440 1,463 1,484 1,501 1,514 1,524 1,529Debt Coverage Ratio on Part A Loan 1.15 1.16 1.16 1.17 1.18 1.23 1.24 1.25 1.26 1.27 1.27 1.28 1.28 1.29 1.29 1.30 1.30 1.31 1.31 1.31Debt Coverage Ratio on Conventional/Other Financing N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

Interest Rate on Reserves 3% Average Cash Flow as % of Net Income

Operating Deficit Reserve (ODR) AnalaysisMaintained Debt Coverage Ratio (Hard Debt) 1.00Maintained Operating Reserve (No Hard Debt) 250Initial Balance 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Total Annual Draw to achieve 1.0 DCR 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Total Annual Deposit to achieve Maintained DCR 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Total 1.0 DCR and Maintained DCR 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Interest 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Ending Balance at Maintained DCR 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Maintained Cash Flow Per Unit 745 779 812 842 870 1,157 1,200 1,241 1,280 1,317 1,352 1,384 1,413 1,440 1,463 1,484 1,501 1,514 1,524 1,529Maintained Debt Coverage Ratio on Part A Loan 1.15 1.16 1.16 1.17 1.18 1.23 1.24 1.25 1.26 1.27 1.27 1.28 1.28 1.29 1.29 1.30 1.30 1.31 1.31 1.31Maintained Debt Coverage Ratio on Conventional/Other N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/AStandard ODRNon-standard ODR

Operating Assurance Reserve AnalysisRequired in Year: 1

Initial Balance 940,518 968,733 997,795 1,027,729 1,058,561 1,090,318 1,123,028 1,156,718 1,191,420 1,227,163 1,263,977 1,301,897 1,340,954 1,381,182 1,422,618 1,465,296 1,509,255 1,554,533 1,601,169 1,649,204Interest Income 28,216 29,062 29,934 30,832 31,757 32,710 33,691 34,702 35,743 36,815 37,919 39,057 40,229 41,435 42,679 43,959 45,278 46,636 48,035 49,476Ending Balance 968,733 997,795 1,027,729 1,058,561 1,090,318 1,123,028 1,156,718 1,191,420 1,227,163 1,263,977 1,301,897 1,340,954 1,381,182 1,422,618 1,465,296 1,509,255 1,554,533 1,601,169 1,649,204 1,698,680

Deferred Developer Fee AnalysisInitial Balance 2,406,938 2,220,062 2,024,528 1,820,817 1,609,443 1,390,956 1,100,579 799,403 487,903 166,589 0 0 0 0 0 0 0 0 0 0Dev Fee Paid 186,876 195,534 203,711 211,374 218,487 290,377 301,176 311,500 321,315 166,589 0 0 0 0 0 0 0 0 0 0Ending Balance Repaid in yea 0 2,220,062 2,024,528 1,820,817 1,609,443 1,390,956 1,100,579 799,403 487,903 166,589 0 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Mortgage Resource Fund LoanInterest Rate on Subordinate Financing 3%Principal Amount of all MSHDA Soft Funds 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Current Yr Int 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Accrued Int 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Subtotal 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Annual Payment Due 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Year End Balance 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Initi

al In

flato

r

Star

ting

in Y

r

Futu

re In

flato

r

Initital Deposit940,518

Initial Deposit0

00

940,518

0Initial Balance

% of Cash Flow50%

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RESOLUTION DETERMINING MORTGAGE LOAN FEASIBILITY CLAWSON MANOR, MSHDA DEVELOPMENT NO. 4026

CITY OF CLAWSON, OAKLAND COUNTY

June 16, 2022

WHEREAS, Clawson Manor Limited Dividend Housing Association Limited Partnership (the "Seller") is the owner of a development for low and moderate income persons located in the City of Clawson, Oakland County, Michigan, known as Clawson Manor, MSHDA Development No. 4026 (the "housing project"); and

WHEREAS, the housing project receives federal project-based rental assistance under the Section 8 program; and

WHEREAS, CSI Support & Development Services (the "Applicant") desires to purchase and rehabilitate the housing project for an estimated total development cost of Fifty Million Fifty-One Thousand One Hundred Seventy Dollars ($50,051,170); and

WHEREAS, the Applicant has filed an Application for Mortgage Loan Feasibility with the Authority for a new tax exempt mortgage loan in the maximum amount of Twenty-Six Million Twenty-Six Thousand Six Hundred Eight Dollars ($26,026,608) and a Housing Trust Fund Loan in the amount of Six Million Three Hundred Eight Thousand Five Hundred Twenty-One Dollars ($6,308,521) (hereinafter referred to as the "Application") to finance the acquisition and rehabilitation of the housing project, as described in the attached Mortgage Loan Feasibility Staff Report dated June 16, 2022 (the "Staff Report"); and

WHEREAS, the Michigan State Housing Development Authority (the "Authority") is authorized under the provisions of Act No. 346 of the Public Acts of 1966 of the State of Michigan, as amended (the "Act"), to make mortgage loans to qualified non-profit housing corporations, consumer housing cooperatives and limited dividend housing corporations and associations; and

WHEREAS, a housing association to be formed by the Applicant (the "Mortgagor") may become eligible to receive a Mortgage Loan from the Authority under the provisions of the Act and the Authority's General Rules; and

WHEREAS, the Acting Executive Director has forwarded to the Authority his analysis of the Application and his recommendations with respect thereto; and

WHEREAS, the Authority has considered the Application in the light of the Authority's project mortgage loan feasibility evaluation factors.


1. The following determinations be and they hereby are made:

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a. The proposed housing project will provide housing for persons of low andmoderate income and will serve and improve the residential area in whichAuthority-financed housing is located or is planned to be located, therebyenhancing the viability of such housing.

b. The Applicant is reasonably expected to be able to achieve successfulcompletion of the proposed housing project.

c. The proposed housing project will meet a social need in the area in whichit is to be located.

d. A mortgage loan, or a mortgage loan not made by the Authority that is afederally-aided mortgage, can reasonably be anticipated to be obtained toprovide financing for the proposed housing project.

e. The proposed housing project is a feasible housing project.

f. The Authority expects to allocate to the financing of the proposed housingproject proceeds of its bonds issued or to be issued for multifamily housingprojects a maximum principal amount not to exceed Twenty-Eight MillionFive Hundred Ninety-Five Thousand Eight Hundred Thirty-Nine Dollars($28,595,839).

2. The proposed housing project be and it is hereby determined to be feasible for amortgage loan on the terms and conditions set forth in the Staff Report presented to the meeting, subject to any and all applicable determinations and evaluations issued or made with respect to the proposed housing project by other governmental agencies or instrumentalities or other entities concerning the effects of the proposed housing project on the environment as evaluated pursuant to the federal National Environmental Policy Act of 1969, as amended, and the regulations issued pursuant thereto as set forth in 24 CFR Part 58.

3. The determination of feasibility is based on the information obtained from theApplicant and the assumption that all factors necessary for the successful construction and operation of the proposed housing project shall not change in any materially adverse respect prior to the closing. If the information provided by the Applicant is discovered to be materially inaccurate or misleading, or any factors necessary for the successful construction and operation of the proposed project change in any materially adverse respect, this feasibility determination resolution may, at the option of the Executive Director, the Chief Housing Investment Officer, the Director of Legal Affairs, the Deputy Director of Legal Affairs, the Chief Financial Officer, the Deputy Director of Finance or any person duly authorized to act in any of the foregoing capacities (each an "Authorized Officer"), be immediately rescinded.

4. Neither this determination of feasibility nor the execution prior to closing of anydocuments requested to facilitate processing of a proposed mortgage loan to be used in connection therewith constitutes a promise or covenant by the Authority that it will make a Mortgage Loan to the Mortgagor.

5. This determination of Mortgage Loan Feasibility is conditioned upon the availabilityof financing to the Authority. The Authority does not covenant that funds are or will be available for the financing of the subject proposed housing development.

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6. The Authority hereby waives Section VI.K.6 and Section VII.K of the MultifamilyDirect Lending Parameters adopted on June 28, 2017, requiring various commercial income requirements, a Master Lease and Master Lease Reserve.

7. The Mortgage Loan Feasibility determination is subject to the conditions set forthin the Staff Report, which conditions are hereby incorporated by reference as if fully set forth herein.

M E M O R A N D U M



DATE: June 16, 2022

RE: River’s Edge, MSHDA Development No. 4029

RECOMMENDATION:

I recommend that the Michigan State Housing Development Authority (the “Authority”) adopt resolutions that 1) determine Mortgage Loan Feasibility as to the following proposal, 2) authorize tax-exempt bond and Mortgage Resource Fund (“MRF”) mortgage loans in the amounts set forth in this report, 3) authorize certain waivers of the Authority’s Multifamily Direct Lending Parameters ("Parameters") regarding the maximum allowable rents and deferred percentage of developer fee exceeding 50% of overall developer fee, 4) authorize certain waivers of the Authority’s Design Standards regarding parking ratio and balcony requirements, and 5) authorize the Executive Director, or an Authorized Officer of the Authority, to issue the Authority’s Mortgage Loan Commitment with respect to this development, subject to the terms and conditions set forth in this report.

PROJECT SUMMARY:

MSHDA No: 4029 Development Name: River’s Edge Development Location: Kalamazoo Sponsor: Standard Caddis 4 GP, LLC Mortgagor: Standard Caddis 4 Limited Dividend Housing Association

Limited Partnership Number of Units: 111 Affordable and 115 Market Rate Units Total Development Cost: $55,085,303 TE Bond Construction and Permanent Loan: $33,388,616 MSHDA Gap Funds: $5,026,438 (MRF Funds) Other Funds:

Income from Operations: $771,106 Sponsor EGLE Loan: $1,000,000 Syndication Proceeds: $10,750,165 Deferred Developer Fee: $4,148,978

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EXECUTIVE SUMMARY:

River’s Edge (the "Development") is a proposed workforce housing development that has 111 affordable units restricted to 60% Area Median Income ("AMI”) and 115 market rate units. There will be two 4-story buildings containing 222 units, a leasing office which also includes amenity spaces (game room/community room with kitchen/fitness center), and a four unit “Live/Work” building. The development site is just under seven acres and includes multiple parcels. One of the parcels is currently occupied by a metal heat treatment facility (Precision Heat Treating Company – located at 660 Gull Road). The 73-year-old heat treatment facility will be purchased as part of this transaction, and it is expected that significant environmental remediation will be necessary because of the site use history. Nearly $1.8 million in remediation costs are included in the Development proforma.

The Authority’s Workforce Housing Initiative is designed to develop affordable workforce housing in targeted areas and has successfully financed new construction and adaptive reuse developments. Marketing staff has determined that Kalamazoo needs additional workforce housing, and the workforce housing units proposed will include 60% AMI, 120% AMI, and market rate units. I am recommending Board approval for the following reasons:

• Financing the Development results in a new earning asset for the Authority.• The Development will contain 226 new construction units.


The Development will add 111 affordable and 115 market rate units to the Authority’s Portfolio, including 40 units targeted to families at or below the 40% Multifamily Tax Subsidy Project (“MTSP”) income limit and 60 units targeted to families at or below the 50% MTSP income limit.

MUNICIPAL SUPPORT:

Municipal support is evidenced by approval of the site plan, which required a major amendment to the established Planned Redevelopment District, and approval of the property tax exemption and a payment in lieu of taxes for the Development.


This new construction proposal will increase the available housing stock in Kalamazoo. The City of Kalamazoo’s 2025 Master Plan and Northside Neighborhood Plan (within which this property is located) were part of a robust community engagement process that spanned multiple years. This included extensive meetings with stakeholders which culminated in the summary section of “The Kalamazoo Riverfront Redevelopment Plan,”: “…without question, people feel the area offers dramatic opportunities to consolidate underutilized parcels for development, renovate buildings and add streetscape improvements to create a vital urban neighborhood. The Plan illustrates specific elements and offers guidelines for development that enhances the experience for both visitors and residents by creating an interesting, and economically viable place where people can work, live and play.”

RESIDENT IMPACT:

This is a new construction proposal so there are no current residents impacted.


The Authority is piloting an initiative to finance developments with challenging cost structures to meet middle-income, workforce housing needs. At the request of Standard Caddis 4 GP, LLC (the "Sponsor"), Authority staff are proposing a tax-exempt loan and a MRF loan in support of this workforce housing initiative.

The Authority's Chief Market Analyst has approved the rental rates as well as the reduced 5% vacancy rate that is reflected in the NOI tab of the proforma. The Authority typically underwrites vacancy loss at 8% for similar proposals, however, the market appears strong enough to support the lower rate.

Since this is a Brownfield site, the Sponsor has been approved for a Tax Increment Financing ("TIF") reimbursement plan. The developer will receive an annual “rebate” on property taxes based on a formula schedule approved as an addendum to the remediation plan. The total award is nearly $2.5 million and will be paid out over a 13-year period, for an average of $187,298 as is reflected in the proforma’s revenue and cash flow tabs.

I recommend the following waivers:

A waiver request of the Authority’s Parameters to allow for the deferred developer fee of more than 50% of the overall developer fee. The Sponsor is requesting a developer fee of $6 million, with a $4.1 million deferral (69.15%). The proforma’s cash flow tab indicates that the deferred fee is not quite fully repaid within the twenty-year projection period. The Sponsor and syndicator have reviewed the Authority’s and their own projections and are prepared to move forward with the project.

The Authority’s Parameters (Section II.B.2(f)) state that annual payments equal to 50% of cash available for distribution are required on gap loans after 12 years or the year in which the sum of all surplus cash available for distribution equals the amount of deferred developer fee. In this case, the 50% payment will begin immediately following the first year after construction completion because the development fee is over $2.1 million. Furthermore, any cost savings and residual receipts during the construction period will be used to pay down the gap loan (see Standard Condition No. 8).

It is also recommended that a waiver be granted of the Parameter (Section VI.E.1) that, for underwriting purposes, requires all new construction or acquisition-rehab transactions have rents underwritten on all units restricted to the MTSP 60% AMI limit, will be limited to 95% of 30% of the MTSP 60% AMI limit be granted.

A waiver request is also recommended for the Authority’s Design Standards 2:1 parking ratio requirement. Due to site limitations the Sponsor is only able to achieve a 1.28 ratio. Also, a design standard waiver is requested because only 50% of the units will have either a patio or balcony. The balcony/patio units will be charged an extra $35 per month.

MORTGAGE LOAN FEASIBILITY/COMMITMENT STAFF REPORT

June 16, 2022

RECOMMENDATION:

I recommend that the Michigan State Housing Development Authority (the “Authority”) adopt resolutions that 1) determine Mortgage Loan Feasibility as to the following proposal, 2) authorize tax-exempt bond and Mortgage Resource Fund (“MRF”) mortgage loans in the amounts set forth in this report, 3) authorize certain waivers of the Authority’s Multifamily Direct Lending Parameters ("Parameters") regarding the maximum allowable rents and deferred percentage of developer fee exceeding 50% of overall developer fee, 4) authorize certain waivers of the Authority’s Design Standards regarding parking ratio and balcony requirements, and 5) authorize the Executive Director, or an Authorized Officer of the Authority, to issue the Authority’s Mortgage Loan Commitment with respect to this development, subject to the terms and conditions set forth in this report.

MSHDA No.: 4029 Development Name: River’s Edge Development Location: City of Kalamazoo, Kalamazoo County Sponsor: Standard Caddis 4 GP, LLC Mortgagor: Standard Caddis 4 Limited Dividend Housing

Association Limited Partnership TE Bond Construction & Permanent Loan: $33,388,616 MSHDA Permanent MRF Loan: $5,026,438 Total Development Cost: $55,085,303

Mortgage Amortization and Term: 40 years for the tax-exempt bond loan and 50 years for the MRF loan

Interest Rate: 4.75% for the tax-exempt bond loan and 3% simple interest for the MRF loan

Program: Tax-Exempt Bond Program and Workforce Housing Initiative

Number of Units: 226 family units of new construction. Unit Configuration: 30 Efficiencies, 144 one bedroom and 52 two-

bedroom apartments Builder: AVB, Inc. Syndicator: Stratford Date Application Received: August 24, 2021 HDO: Charles J. Smith

Issuance of the Authority's Mortgage Loan Commitment is subject to fulfillment of all Authority processing and review requirements and obtaining all necessary staff approvals as required by the

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Mortgage Feasibility/Commitment Staff Report River’s Edge, MSHDA No. 4029

City of Kalamazoo, Kalamazoo County June 16, 2022

JUNE 21, 2022

Page 2 of 17

Authority's underwriting standards.

ISSUES, POLICY CONSIDERATIONS AND RELATED ACTIONS:

The Authority is piloting an initiative to finance developments with challenging cost structures to meet middle-income, workforce housing needs. At the request of Standard Caddis 4 GP, LLC (the "Sponsor"), Authority staff are proposing a tax-exempt loan and a MRF loan in support of this workforce housing initiative.

The Authority's Chief Market Analyst has approved the rental rates as well as the reduced 5% vacancy rate that is reflected in the NOI tab of the proforma. The Authority typically underwrites vacancy loss at 8% for similar proposals, however, the market appears strong enough to support the lower rate.

Since this is a Brownfield site, the Sponsor has been approved for a Tax Increment Financing ("TIF") reimbursement plan. The developer will receive an annual “rebate” on property taxes based on a formula schedule approved as an addendum to the remediation plan. The total award is nearly $2.5 million and will be paid out over a 13-year period, for an average of $187,298 as is reflected in the proforma’s revenue and cash flow tabs.

A waiver request of the Authority’s Parameters is recommended to allow for the deferred developer fee of more than 50% of the overall developer fee. The Sponsor is requesting a developer fee of $6 million, with a $4.1 million deferral (69.15%). The proforma’s cash flow tab indicates that the deferred fee is not quite fully repaid within the twenty-year projection period. The Sponsor and syndicator have reviewed the Authority and their own projections and are prepared to move forward with the project.

The Authority’s Parameters (Section II.B.2(f)) state that annual payments equal to 50% of cash available for distribution are required on gap loans after the earlier of 12 years or the year in which the sum of all surplus cash available for distribution equals the amount of deferred developer fee. In this case, the 50% payment will begin immediately following the first year after construction completion because the development fee is over $2.1 million. Furthermore, any cost savings and residual receipts during the construction period will be used to pay down the gap loan (see Standard Condition No.8).

It is also recommended that a waiver be granted of the Parameter (Section VI.E.1) that, for underwriting purposes, requires all new construction or acquisition-rehab transactions have rents underwritten on all units restricted to the Multifamily Tax Subsidy Project (“MTSP”) 60% Area Median Income (“AMI”) limit, will be limited to 95% of 30% of the MTSP 60% AMI limit be granted.

A waiver request is also recommended for the Authority’s Design Standards 2:1 parking ratio requirement. Due to site limitations the Sponsor is only able to achieve a 1.28 ratio. Also, a design standard waiver is requested because only 50% of the units will have either a patio or balcony. The balcony/patio units will be charged an extra $35 per month.

EXECUTIVE SUMMARY:

River’s Edge (the "Development") is a proposed workforce housing development that has 111 affordable units restricted to 60% AMI and 115 market rate units. There will be two 4-story buildings

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JUNE 21, 2022

Page 3 of 17

containing 222 units, a leasing office which also includes amenity spaces (game room/community room with kitchen/fitness center) and a four unit “Live/Work” building. The development site is just under seven acres and includes multiple parcels. One of the parcels is currently occupied by a metal heat treatment facility (Precision Heat Treating Company – located at 660 Gull Road). The 73-year-old heat treatment facility will be purchased as part of this transaction, and it is expectedthat significant environmental remediation will be necessary because of the site use history. Nearly$1.8 million in remediation costs are included in the development proforma.

The Authority’s Workforce Housing Initiative is designed to develop affordable workforce housing in targeted areas and has successfully financed new construction and adaptive reuse developments. Marketing staff has determined that Kalamazoo needs additional workforce housing and the workforce housing units proposed will include 60% AMI, 120% AMI, and market rate units.

Structure of the Transaction and Funding:

There are several elements to this transaction that are common to new construction transactions:

• A tax-exempt bond construction and permanent mortgage loan will be provided by theAuthority (the “Mortgage Loan”). The Mortgage Loan will be in the amount of $33,388,616at 4.75% interest with 28-monthly interest only payments (a 16-month construction term anda 12-month rent-up period required under the construction loan). The permanent financingdate will commence on the first day of the month following the month in which the 28-monthconstruction loan term expires or such later date as determined by an Authorized Officer ofthe Authority (the “Permanent Financing Date”).

• The permanent tax-exempt bond loan is based upon the current rents, less vacancy loss,payments to reserves and escrows, operating costs based on historical data unlessmodified by project improvements and construction and soft costs at levels appropriate forthis specific transaction. The permanent loan includes a 1.15 debt service coverage ratio, anannual interest rate of 4.75%, with a fully amortizing term of 40 years commencing on thePermanent Financing Date. The Mortgage Loan will be funded on the Permanent FinancingDate and will be in First Position.

• A permanent subordinate loan using an Authority MRF Loan (the “MRF Loan”) in theamount of $5,026,438 will be provided at 3% simple interest with payments initially deferred.The MRF Loan will be in Second Position.

• Equity support comes from an investment related to the 4% LIHTC in the estimated amountof $10,750,165.

• Income from operations will be used as a source of funding to make the interest onlypayments and the tax and insurance payments during the construction period in the amountof $771,106.

• The Michigan Department of Environment, Great Lakes, and Energy (“EGLE”) is providing aloan of $1,000,000 to be provided as a development source.

• An operating assurance reserve (“OAR”) will be required in the amount identified in theattached proforma. The reserve will be capitalized at closing in an amount which, along with

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accumulated interest, is expected to meet the Development’s unanticipated operating needs. This reserve will be held by the Authority.

• A syndicator reserve in the amount of $400,975 is required by the equity investor foradditional operational needs.

• The Sponsor has agreed to defer $4,148,978 of the developer fee to help fill the remainingfunding gap.

• A 12-month rent-up allowance in the amount identified in the attached proforma will berequired to support interest payments between construction completion and the MortgageCut-Off Date, as determined by the Authority.

• Due to its small size, the operating deficit reserve (“ODR”) has been combined with theoperating assurance reserve (“OAR”) and the condition for a separate ODR has beenintentionally omitted. The ODR covers the first year of TIF reimbursement funds which willnot be received until the second year of operations.

Site Selection:

The site has been vetted by Authority Staff and the Authority's Manager of the Office of Market Research has indicated that the site meets the Authority's current site selection criteria.

Market Evaluation:

The unit mix as well as the amenities package and rent levels have been approved by the Manager of the office of Market Research Rental Development Division.

Valuation of the Property:

An appraisal dated July 30, 2021, estimates the value at $3,300,000.

CONDITIONS:

At or prior to (i) issuance of the Authority’s mortgage loan commitment (“Mortgage Loan Commitment”), (ii) the initial Mortgage Loan Closing (the “Initial Closing”), or (iii) such other date as may be specified herein, the new Mortgagor, and other members of the Development team, where appropriate, must satisfy each of the following conditions by entering into a written agreement or providing documentation acceptable to the Authority:

Standard Conditions:

1. Limitation for Return on Equity:

For each year of the Development's operation, beginning in the year in which the MortgageCut-Off Date occurs, payments are limited to twelve percent (12%) of the Mortgagor'sequity. For purposes of distributions, the Mortgagor's equity will be the sum of (i) the LIHTCequity; (ii) the brownfield tax credit equity; (iii) the historic tax credit equity; (iv) general

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partner capital contributions; and (v) any interest earned on an equity escrow held by the Authority (estimated to be a total of $10,750,165). All such payments shall be referred to as "Limited Dividend Payments". The Mortgagor's return shall be fully cumulative. If Authority gap funds are included in the development sources the Limited Dividend Payments are capped at 12% per annum, while those loans remain outstanding. If there are no Authority gap loan outstanding, then Limited Dividend Payments may increase 1% per annum until a cap of 25% per annum is reached.

2. Income Limits:

The income limitations for 226 units of this proposal are as follows:

a. 111 units (15 efficiencies, 72 one-bedroom units, and 24 two-bedroom units) mustbe available for occupancy by households whose incomes do not exceed the MTSP60% income limits, adjusted for family size, until latest of (i) the expiration of theLIHTC “Extended Use Period” as defined in the Development’s LIHTC RegulatoryAgreement; (ii) 50 years from Initial Closing; or (iii) so long as any Authority loanremains outstanding.

b. 40 units (5 efficiencies, 26 one-bedroom units, and 9 two-bedroom units) areworkforce/market rate and must be available for occupancy by households whoseincomes do not exceed the MTSP 120% income limits, adjusted for family size, untillatest of (i) the expiration of the LIHTC “Extended Use Period” as defined in theDevelopment’s LIHTC Regulatory Agreement; (ii) 50 years from Initial Closing; or (iii)so long as any Authority loan remains outstanding.

c. 75 units (10 efficiencies, 46 one-bedroom units and 19 two-bedroom units) aremarket rate and may be rented without regard to income.

To the extent units within the Development are subject to multiple sets of income limits, the most restrictive income limit will apply so long as the applicable term of affordability continues.

The income of individuals and area median income shall be determined by the Secretary of the Treasury in a manner consistent with determinations of lower income families and area median income under Section 8 of the U.S. Housing Act of 1937, including adjustments for family size.

3. Limitations on Rental Rates:

The Total Housing Expense (contract rent plus tenant-paid utilities) for 226 units is subjectto the following limitations:

a. The Total Housing Expense for all 111 units (15 efficiencies, 72 one-bedroom units,and 24 two-bedroom units), may not exceed one-twelfth (1/12th) of 30% of 60% ofthe MTSP limit, adjusted for family size and based upon an imputed occupancy ofone and one-half persons per bedroom. This restriction will apply until the latest of(i) the end of the Extended Use Period, (ii) 50 years after Initial Closing; or (iii) solong as any Authority loan remains outstanding.

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b. The Total Housing Expense for forty (40) workforce housing units (5 efficiencies, 26one-bedroom units, and 9 two-bedroom units) may not exceed one-twelfth (1/12th) of30% of MTSP income limits up to 120% AMI without regard to tenant paid utilities.However, the Authority, by its Director of Asset Management and in his solediscretion, may adjust the rent limitation upon request of the Mortgagor.

c. 75 units (10 efficiencies, 46 one-bedroom units, and 19 two-bedroom units) aremarket rate and there shall be no limit on the rents charged for these units.

To the extent units within the Development are subject to multiple sets of rent limits, the most restrictive rent limit will apply so long as the applicable term of affordability continues.

For the initial lease term of the first household occupying each rent restricted unit in the Development, the initial rent may not exceed 105% of the rent approved in this Mortgage Loan Feasibility/Commitment Staff Report. Rental increases on occupied units during any 12-month period will be limited to not more than 5% of the rent paid by the residenthousehold at the beginning of that annual period. Exceptions to this limitation may begranted by Authority’s Director of Asset Management for extraordinary increases in projectoperating expenses (exclusive of limited dividend payments) or mortgage loan increases tofund cost overruns pursuant to the Authority's policy on Mortgage Loan increases. Rents onvacated units may be increased to the maximum level permissible by the applicableprograms. Rents and utility allowances must be approved annually by the Authority’sDivision of Asset Management.

Exceptions to the foregoing limitations may be granted by the Authority's Director of Asset Management to pay for extraordinary increases in operating expenses (exclusive of Limited Dividend Payments) or to enable the owner to amortize a Mortgage Loan increase to fund cost overruns pursuant to the Authority's policy on Mortgage Loan increases.

4. Covenant Running with the Land:

The Mortgagor must subject the Development site to a covenant running with the land so asto preserve the tax-exempt status of the obligations issued or to be issued to finance theMortgage Loan. This covenant will provide that each unit must be rented or available forrental on a continuous basis to members of the general public for a period ending on thelatest of the date which is 15 years after the date on which 50% of the residential units in theDevelopment are occupied, the first day on which no bonds are outstanding with respect tothe project, or the date on which assistance provided to the project under Section 8 of theU.S. Housing Act of 1937 terminates. The income of individuals and area median incomeshall be determined by the Secretary of the Treasury in a manner consistent withdeterminations of lower income families and area median income under Section 8 of the U.S.Housing Act of 1937, including adjustments for family size. Until the Secretary of theTreasury publishes its requirements, income of the individuals shall be determined inaccordance with Section 8 regulations. Additionally, if LIHTC is awarded to theDevelopment, the Mortgagor must agree to subject the property to the extended low-incomeuse commitment required by Section 42 of the Internal Revenue Code.

5. Restriction on Prepayment and Subsequent Use:

The Mortgage Loan is eligible for prepayment after the expiration of fifteen (15) years after

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the commencement of amortization. The Mortgagor must provide the Authority with at least 60 days' written notice prior to any such prepayment.

In the event of a prepayment, however, the Mortgagor must pay a prepayment fee equal to the sum of:

a. 1% of the balance being prepaid;b. Any bond call premium, prepayment or swap penalty, or any other cost that the

Authority incurs to prepay the bonds or notes that were used to fund the MortgageLoan; and

c. Any loss of debt service spread between the Mortgage Loan and the bonds used tofinance the loan from the date of the prepayment through the end of the 20th year ofamortization.

Once the Mortgagor has been approved for the early prepayment of the underlying loan, it must sign an agreement with the Authority stating it is responsible for the cost of terminating the swap. The Mortgagor can then choose the timing of the termination and participate in the transaction with the swap counterparty. The swap counterparty will quote the cost of terminating the swap and the Mortgagor will have the ability to execute the transaction or cancel at its sole discretion. If the Mortgagor chooses not to terminate the swap, it will forfeit the right to prepay the Mortgage Loan.

Subordinate loans are eligible to prepay at any time upon 60 days prior written notice to the Authority, but prepayment may not extinguish federal affordability and compliance requirements.

6. Operating Assurance Reserve:

At Initial Closing, the Mortgagor shall fund an OAR in the amount equal to 4 months ofestimated Development operating expenses (estimated to be $1,097,651) plus $141,851 tofund the projected operating deficits. An operating deficit is projected for year one ofoperations because the TIF reimbursement payments begin in year 2 of operations. TheOAR will be used to fund operating shortfalls incurred at the Development and will bedisbursed by the Authority in accordance with the Authority's written policy on the use of theOAR, as amended from time to time. The OAR must be either (i) fully funded with cash, or(ii) funded with a combination of cash and an irrevocable, unconditional letter of creditacceptable to the Authority, in an amount that may not exceed 50% of the OARrequirement. To the extent that any portion of the OAR is drawn for use prior to the finalclosing of the Mortgage Loan, the Mortgagor must restore the OAR to its original balance atfinal closing.

7. Replacement Reserve:

The Mortgagor must agree to establish a replacement reserve fund (“ReplacementReserve”) by making annual deposits to the Replacement Reserve, beginning on theMortgage Cut-Off Date, at a minimum of $350 per unit for the first year of operation, payablein monthly installments, with deposits in subsequent years to be the greater of (i) the prioryear’s deposit, increased by 3%, or (ii) a percentage of the Development’s projected annualrental income or gross rent potential (“GRP”) for the year using the percentage obtained bydividing the first year’s deposit by the first year’s GRP shown on the operating proforma forthe Development attached hereto. The annual deposit to the Replacement Reserve may

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also be increased to any higher amount that is determined to be necessary by the Authority, based on a CNA and the Authority’s Replacement Reserve policies. The Authority may update any CNA or obtain a new CNA every five years, or upon any frequency, as determined necessary by the Authority.

8. Authority Subordinate Loan(s):

At Initial Closing, the Mortgagor must enter into agreements relating to the MRF Loan. TheMRF Loan will be secured by a subordinate mortgage and will bear simple interest at 3%with a 50-year term. Following the first year after construction completion, repayment of theMRF Loan will be made from fifty percent (50%) of any surplus cash available fordistribution. Such payments shall be applied first to accrued interest, then to current interestand principal. Payments shall continue until the sale of the Development or refinancing ofthe Mortgage Loan, at which time the MRF Loan shall be due in full. If the MRF Loan is stilloutstanding, then following repayment of the Mortgage Loan and continuing on the first dayof every month thereafter, the Mortgagor shall make monthly payments of principal andinterest equal to the monthly payments that were required on the Mortgage Loan on the firstday of every month until the MRF Loan is paid in full, sale of the Development or the datethat is 50 years from date of Initial Closing, whichever occurs first.

9. Architectural Plans and Specifications; Contractor’s Qualification Statement:

Prior to Mortgage Loan Commitment, the architect must submit architectural drawings andspecifications that address all design review comments acceptable to the Authority’s ChiefArchitect and the Director of Development.

Prior to Mortgage Loan Commitment, the general contractor must submit AIA DocumentA305 as required by the Authority’s Chief Architect.

10. Owner/Architect Agreement:

Prior to Mortgage Loan Commitment, the Mortgagor must provide the Authority with anexecuted Owner Architect Agreement acceptable in form and substance to the Director ofLegal Affairs.

11. Trade Payment Breakdown:

Prior to Mortgage Loan Commitment, the general contractor must submit a signed TradePayment Breakdown acceptable to the Authority’s Design and Construction Manager.

12. Cost Certification:

The contractor’s cost certification must be submitted within 90 days following the completionof construction, and the Mortgagor’s cost certification must be submitted within 90 daysfollowing the Mortgage Cut-off Date. For LIHTC, the owner is obligated to submit costcertifications applicable to itself and the contractor prior to issuance of IRS form 8609 (seeLIHTC Program Cost Certification Guidelines).

13. Environmental Review and Indemnification:

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Prior to Mortgage Loan Commitment, the Mortgagor must address any outstanding environmental issues in form and substance acceptable to the Authority’s Environmental Review Officer.

At Initial Closing, the Mortgagor must enter an agreement to indemnify the Authority for any loss, damage, liability, claim, or expense which it incurs as a result of any violation of environmental laws. The indemnification agreement must be acceptable to the Director of Legal Affairs.

14. Title Insurance Commitment and Survey:

Prior to Mortgage Loan Commitment, the Mortgagor must provide an updated title insurancecommitment, including zoning, pending disbursement, comprehensive, survey and suchother endorsements as deemed necessary by the Authority’s Director of Legal Affairs. Theupdated title commitment must contain only exceptions to the insurance acceptable to theAuthority’s Director of Legal Affairs.

Additionally, prior to Mortgage Loan Commitment, the Mortgagor must provide a surveyor’scertificate of facts together with an ALTA survey certified to the 2021 minimum standards,and that appropriately reflects all easements, rights of way, and other issues noted on thetitle insurance commitment. All documents must be acceptable to the Director of LegalAffairs.

15. Organizational Documents/Equity Pay-In Schedule:

Prior to Mortgage Loan Commitment, the Mortgagor must submit a substantially final formsyndication partnership agreement, including an equity pay-in schedule, that is acceptablein form and substance to the Director of Development and Director of Legal Affairs.

At or prior to Initial Closing, the final, executed syndication partnership agreement mustbecome effective and the initial installment of equity must be paid in an amount approved bythe Director of Development.

16. Designation of Authority Funds:

The Authority reserves the express right, in its sole discretion, to substitute alternatesubordinate funding sources.

17. Management & Marketing:

Prior to Mortgage Loan Commitment, the management and marketing agent must submitthe following documents, which must be found acceptable to the Director of AssetManagement:

a. Management Agreementb. Marketing Addendum

18. Guaranties:

At Initial Closing, the Sponsor, General Partner, and any entity receiving a developer fee in

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connection with the Development must deliver certain guaranties. The required guaranties include an operating deficit guaranty and a performance completion guaranty. The required guaranties, the terms thereof and the parties who shall be required to deliver the guaranty must be determined and approved by the Authority’s Director of Development.

19. Financial Statements:

Prior to Mortgage Loan Commitment, financial statements for the Sponsor, the guarantor(s)and the general contractor must be reviewed and found acceptable by the Authority’s ChiefFinancial Officer.

If prior to Initial Closing the financial statements that were approved by the Authoritybecome more than six months old, the Sponsor, the guarantor(s) and/or the generalcontractor must provide the Authority with updated financial statements meeting Authorityrequirements upon request.

20. Future Contributions:

To ensure the Authority is contributing the least amount of funding necessary to achieveproject feasibility, any decrease in Development costs or future contributions not included inthe Development proforma may, at the Authority’s discretion, be utilized to reduce, in equalproportions, any deferred developer fee and Authority soft funds.

21. Ownership of Development Reserves:

At the Initial Closing, the Mortgagor must enter into an agreement confirming the Authority’sultimate ownership of excess cash reserves, escrows and accounts as may exist at the timethe Authority’s mortgage loans are paid off or the Development is sold or refinanced. Thisagreement must be acceptable to the Authority’s Director of Legal Affairs.

22. Application for Disbursement:Prior to Initial Closing, the Mortgagor must submit an “Application for Disbursement” alongwith supporting documentation, which must be found acceptable to the Authority’s Directorof Development.

Special Conditions:

1. Legal Requirements:

The Mortgagor and/or Sponsor must submit documentation acceptable to the Authority’sDirector of Legal Affairs for the items listed below:

• Prior to Initial Closing, the Michigan Attorney General’s Office must complete itsreview of the transaction and provide the Director of Legal Affairs itsrecommendation.

• Any other documentation as required by the Director of Legal Affairs, includingacceptable evidence of insurance, permits, licenses, zoning approvals, utilityavailability, payment and performance bonds and other closing requirements.

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2. Condominium Requirement:

The PILOT resolution that has been adopted by The City of Kalamazoo requires acondominium agreement. The site will have two condos; one that covers the affordableunits and the one for the market rate units. The affordable condo unit will pay taxes inaccordance with the approved PILOT, whereas the Market rate condo unit will pay AdValorem taxes. The market rate and affordable units will be distributed equally among thetwo 4-story buildings.

3. Syndicator Reserve:

The Mortgagor shall fund a syndicator held reserve (“Syndicator Reserve”) with a one-timedeposit in the amount of $400,975 paid from equity proceeds according to the terms of theMortgagor’s limited partnership agreement. The Syndicator Reserve shall be controlled bythe syndicator. The purpose of this reserve will be to fund potential operating deficits.

4. Residual receipts and cost savings at the end of the construction period:

Any cost savings and residual receipts identified in any post-construction cost certification oraudit that would otherwise be used to pay down deferred developer fee will be applied to theMRF loan interest, then principal.

5. Sponsor (EGLE) Loan:

Prior to Mortgage Loan Commitment, the Mortgagor must submit substantially finaldocuments evidencing the Sponsor loan acceptable to the Authority’s Director of LegalAffairs and Director of Development. The Sponsor loan must:

a) not be secured by a lien on the Development or any of the Development’sproperty, funds or assets of any kind.

b) be payable solely from approved Limited Dividend payments, and not from otherdevelopment funds.

c) be expressly subordinate to all Authority mortgage loans; andd) have a loan term not less than the longest term of all Authority mortgage loans.

At or prior to Initial Closing, the final, executed Sponsor loan documents must become effective and initial funding of the loan must be made in an amount approved by the Director of Development.

6. Disbursement through Title Company

Prior to Initial Mortgage Loan Closing the general contractor must agree that all fundsdisbursed for the construction of the Development will be disbursed directly through a titleinsurance company to subcontractors and suppliers. The agreement must be acceptable tothe Authority's Director of Legal Affairs.

DEVELOPMENT TEAM AND SITE INFORMATION

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I. MORTGAGOR: Standard Caddis 4 Limited Dividend Housing Association Limited Partnership

II. GUARANTOR(S):

A. Guarantor #1:

Name: River Caddis Development, LLC Address: 1038 Trowbridge Road

East Lansing, MI 48823

III. DEVELOPMENT TEAM ANALYSIS:

A. Sponsor:

Name:Address:

Standard Caddis 4 GP, LLC 1038 Trowbridge Road East Lansing, MI 48823

Individuals Assigned: Kevin McGraw Telephone: Fax: E-mail:

517-703-2131 Not provided [email protected]

1. Experience: The Sponsor does not have experience working on Authority- financed developments; however, it has developed 3 multifamily projects inMichigan, and is partnering with Standard Companies, which has a nationalportfolio of over 11,600 apartment units, including approximately 10,600affordable and workforce housing units.

2. Interest in the Mortgagor and Members: GP - .01%, LP – 99.99%

B. Architect:

Name: Byce & Associates, Inc. Address: 487 Portage Street

Kalamazoo, MI 49007

Individual Assigned: Michael Flynn Telephone: 269-381-6170 Fax: Not provided E-Mail: [email protected]

1. Experience: Architect has previous experience with Authority-financeddevelopments.

2. Architect's License: License number 1301057257, exp. 4/12/2023

C. Attorney:



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Name: Honigman LLP Address: 650 Trade Centre Way

Suite 200 Kalamazoo, MI 49002

Individual Assigned: Steve Rypma Telephone: 269-337-7842Fax: Not providedE-Mail: [email protected]

1. Experience: This firm has experience in closing Authority-financeddevelopments.

D. Builder:

Name: AVB, Inc. Address: 4200 W Centre Ave

Portage, MI 49024

Individual Assigned:Greg Dobson Telephone: 269-352-4213 Fax: Not provided E-mail: [email protected]

1. Experience: The firm does not have previous experience in constructingAuthority-financed developments, however, the Authority’s ConstructionManager has approved them for this proposal.

2. State Licensing Board Registration: License number 2102185971, withan expiration date of 05/31/2023

E. Management and Marketing Agent:

Name: KMG Prestige Address: 102 South Main Street

Mt. Pleasant, MI 48858

Individual Assigned: Karen Mead Telephone: 989-400-4828 Fax: Not provided E-mail: [email protected]

1. Experience: This firm has significant experience managing Authority- financed developments.

E. Consultant:

Name: Advanced Redevelopment Solutions Address: PO Box 204

Eagle, MI 48822




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Individual Assigned: Eric Helzer Telephone: 517-648-2434 Fax: Not provided E-mail: [email protected]

2. Experience: This firm was engaged to author and submit the BrownfieldRedevelopment plan.

F. Development Team Recommendation: Go

IV. SITE DATA:

A. Land Control/Purchase Price:$1,550,000 purchase agreement for parcel one, $440,000 for parcel 2

B. Site Location:508 Harrison Street and 660 Gull Road, Kalamazoo, MI

C. Size of Site:Approximately 6.86 acres

D. Density:Deemed appropriate

E. Physical Description:

1. Present Use: Metal Heat Treatment Facility and vacant land

2. Existing Structures: Large industrial building

3. Relocation Requirements: None

F. Zoning:Commercial- mixed use district, zone CMU Subarea 4 – Deemed appropriate.

G. Contiguous Land Use:

1. North: Kalamazoo River

2. South: Railroad Tracks

3. East: Kalamazoo River

4. West: Commercial

H. Tax Information:

Ad valorem on Market rate and 4% Payment in Lieu of Taxes (“PILOT”) foraffordable units was approved by the City of Kalamazoo on October 18, 2021


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I. Utilities: Consumers Energy will provide electric and natural gas, water and sewerwill be provided by The City of Kalamazoo

J. Community Facilities:

1. Shopping:Site is near downtown business district; PFC natural Grocery and Deli islocated across Harrison Street and North Kalamazoo Mall is 4.4 miles away

2. Recreation:There are several City parks and recreational activities in Kalamazoo

3. Public Transportation:Dial a Ride (Metro Connect)

4. Road SystemsFrontage on Harrison Street and Gull Road

5. Medical Services and other Nearby Amenities:Family Health Center – Paterson, is located a few miles from site

6. Description of Surrounding Neighborhood:Commercial and residential mixture

7. Local Community Expenditures Apparent:Not apparent

8. Indication of Local Support:Approval of Brownfield reimbursement plan, PILOT

V. ENVIRONMENTAL FACTORS:

A Phase I Environmental Site Assessment was submitted to the Authority and has beenreviewed by the Authority’s Environmental Manager. (See Standard Condition No. 13).

VI. DESIGN AND COSTING STATUS:

Architectural plans and specifications consistent with the scope of work have been reviewedby the Chief Architect. A response to all design review comments and the submission ofcorrected and final plans and specifications must be made prior to initial closing.

This proposal will satisfy the State of Michigan barrier-free requirements, the Authority’spolicy regarding accessibility and non-discrimination for the disabled, the Fair HousingAmendments Act of 1988, and the HOME requirements for barrier-free vision and hearingdesigned units. Construction documents must be acceptable to the Authority’s ChiefArchitect.

VII. MARKET SUMMARY:

The Market study has been reviewed by the Authority’s Chief Market Analyst and found tobe acceptable. The Authority’s Chief Market Analyst has reviewed and approved the unitmix, rental structure, and unit amenities.

VIII. MANAGEMENT AND MARKETING:

The management/marketing agent has submitted application-level management and

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marketing information, to be approved prior to initial closing by the Authority’s Director of Asset Management.

IX. FINANCIAL STATEMENTS:

The Sponsor’s/guarantor’s and the builder’s financial statements have been submitted andare to be approved prior to initial closing by the Authority’s Director of Rental Development.

X. ESTIMATED DEVELOPMENT SCHEDULING:

A. Mortgage Loan Commitment: June 2022 B. Initial Closing and Disbursement: September 2022 C. Construction Completion: January 2024 D. Cut-Off Date: January 2025

XI. ATTACHMENTS:

A. Development Proforma

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Digitally signed by Chad

Chad Benson Benson Date: 2022.06.09

09:23:58 -04'00' 6/9/22

APPROVALS:

Chad Benson Date Director of Development

Clarence L. Stone, Jr.

Digitally signed by Clarence L. Stone, Jr. Date: 2022.06.09 10:43:50 -04'00'

6/9/2022 Clarence L. Stone, Jr. Date Director of Legal Affairs

6/9/22 Gary Heidel Date Acting Executive Director

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Development River's EdgeFinancing Tax Exempt

MSHDA No. 4029Step Commitment Date 06/16/2022 06/21/2022 Type New Construction

TOTAL DEVELOPMENT COSTS Per Unit Total % in

Bas

is


Basis


Basis Per Unit Total % in

Bas

is


Basis


Basis

Acquisition Project ReservesLand 8,805 1,990,000 0% 0 0 Operating Assurance Reserv 4.0 months Funded in Cas 5,485 1,239,502 0% 0 0 1,097,651 1,097,651Existing Buildings 0 100% 0 0 Replacement Reserve Not Required 0 0 0% 0 0Other: Acq. Closing Costs 330 74,500 0% 0 0 Operating Deficit Reserve 0 0 0% 0 0 1239502

Subtotal 9,135 2,064,500 Rent Subsidy Reserve 0 0 0% 0 0Construction/Rehabilitation Syndicator Held Reserve 1,774 400,975 0% 0 0

Off Site Improvements 0 100% 0 0 Rent Lag Escrow 0 0 0% 0 0 141,851On-site Improvements 10,988 2,483,233 100% 2,483,233 0 Tax and Insurance Escrows 0 0 0% 0 0Landscaping and Irrigation 0 100% 0 0 Other: 0 0% 0 0Structures 129,272 29,215,487 97% 28,339,022 28,339,022 Other: 0 0% 0 0Community Building and/or Maintenance Facility 0 0% 0 0 Subtotal 7,259 1,640,477Construction not in Tax Credit basis (i.e.Carports and Commercial Space) 0 0% 0 0 MiscellaneousGeneral Requirements % of Contract 5.15% Within Range 7,220 1,631,677 100% 1,631,677 1,631,677 Deposit to Development Operating Account (1MGRP Not Required 0 0 0% 0 0Builder Overhead % of Contract 1.51% Within Range 2,224 502,611 100% 502,611 502,611 Other (Not in Basis): 0 0 0% 0 0Builder Profit % of Contract 2.48% Within Range 3,707 837,685 100% 837,685 837,685 Other (In Basis): 0 0 100% 0 0Permits, Bond Premium, Tap Fees, Cost Cert. 0 100% 0 0 Other (In Basis): 0 0 100% 0 0Other: 0 0% 0 0 Subtotal 0 0

Subtotal 153,410 34,670,69315% of acquisition and $15,000/unit test: met Total Acquisition Costs 9,135 2,064,500

Professional Fees Total Construction Hard Costs 153,410 34,670,693Design Architect Fees 3,044 687,911 100% 687,911 687,911 Total Non-Construction ("Soft") Costs 54,647 12,350,110Supervisory Architect Fees 761 171,978 100% 171,978 171,978Engineering/Survey 2,049 463,017 100% 463,017 463,017 Developer Overhead and FeeLegal Fees 1,327 300,000 100% 300,000 300,000 Maximum 7,079,335 26,549 6,000,000 100% 6,000,000 6,000,000

Subtotal 7,181 1,622,906 7.5% of Acquisition/Project Reserves Override 5% Attribution TestInterim Construction Costs 15% of All Other Development Costs 6,000,000 met

Property & Causality Insurance 783 177,000 100% 177,000 177,000Construction Loan Interest Override 1,200,000 5,310 1,200,000 57% 685,714 685,714 Total Development Cost 243,740 55,085,303 47,804,865 45,046,632 40,056,652 49,794,865Title Work 111 25,000 100% 25,000 0 ElevatorConstruction Taxes 67 15,095 100% 15,095 15,095 TOTAL DEVELOPMENT SOURCES % of TDCOther: 0 100% 0 0 MSHDA Permanent Mortgage 60.61% 147,737 33,388,616 Gap to

Subtotal 6,270 1,417,095 Conventional/Other Mortgage 0.00% 0 0 Hard DebtPermanent Financing Equity Contribution from Tax Credit Syndication 19.52% 47,567 10,750,165 # of Units Ratio

Loan Commitment Fee to MSHDA 2% 3,400 768,301 0% 0 0 MSHDA NSP Funds 0.00% 0 0.00 15.05% 0 0 Zero Bedroom, 1 Bath, 566 Sq Ft AOther: Additional Financing Costs 1,771 400,301 0% 0 0 MSHDA HOME or Housing Trust Funds 0.00% 0 0.00 0 One Bedroom, 1 Bath, 619 Sq Ft A

Subtotal 5,171 1,168,602 Mortgage Resource Funds (MRF) 9.12% 22,241 5,026,438 0 Two Bedroom, 1.5 Bath, 933 Sq Ft Other Costs (In Basis) Other MSHDA: 0.00% 0 0 Zero Bedroom, 0 Bath, 0 Sq Ft 0

Application Fee 9 2,000 100% 2,000 2,000 Local HOME 0.00% 0Market Study 45 10,225 100% 10,225 10,225 Income from Operations 1.40% 3,412 771,106Environmental Studies 145 32,800 100% 32,800 32,800 Other Equity 0.00% 0Cost Certification 88 20,000 100% 20,000 20,000 Transferred Reserves: 0.00% 0 0Equipment and Furnishings 63 1,106 250,000 100% 250,000 0 Other: 0.00% 0 Deferred Dev Temporary Tenant Relocation 0 100% 0 0 Sponsor EGLE Loan 1.82% 4,425 1,000,000 Dev FeeConstruction Contingency 5.71% 8,756 1,978,794 100% 1,978,794 1,978,794 Deferred Developer Fee 7.53% 18,358 4,148,978 69.15%Appraisal and C.N.A. 35 8,000 100% 8,000 8,000 Total Permanent Sources 55,085,303Other: Brownfield Remediation 7,820 1,767,312 90% 1,590,581 1,590,581

Subtotal 18,005 4,069,131 Sources Equal Uses? BalancedOther Costs (NOT In Basis) Surplus/(Gap) 0

Start-up and Organization 1,162 262,532 0% 0 0Tax Credit Fees (based on 2017 QAP) 74,224 Within Range 328 74,224 0% 0 0 0.00% 0Compliance Monitoring Fee (based on 2017 QAP) 233 52,725 0% 0 0 Construction Loan Rate 4.750%Marketing Expense 52 11,766 0% 0 0 Repaid from equity prior to final closing 0Syndication Legal Fees 177 40,000 0% 0 0Rent Up Allowance 12.0 months 8,808 1,990,652 80% 1,592,522 1,592,522 Eligible Basis for LIHTC/TCAP Value of LIHTC/TCAP Existing Reserve Analysis

0 0% 0 0 Acquisition 0 Acquisition 0 DCE Interest: Current Owner's Reserves: 0Subtotal 10,761 2,431,899 Construction 29,884,896 Construction 1,195,396 Override Insurance: 0

Acquisition Credit % 4.00% Total Yr Credit 1,195,396 Taxes: 0Summary of Acquisition Price As of Construction Loan Term Rehab/New Const Credit % 4.00% Equity Price $0.9000 Rep. Reserve:Attributed to Land 1,990,000 1st Mortgage Balance Months Qualified Percentage 48.09% Equity Effective Price $0.8994 Override ORC:Attributed to Existing Structures 0 Subordinate Mortgage(s) Construction Contract 16 QCT/DDA Basis Boost 130% Equity Contribution 10,757,487 10,750,165 DCE Principal:Other: 74,500 Subordinate Mortgage(s) Holding Period (50% Test) Historic? No Other:Fixed Price to Seller 2,064,500 Subordinate Mortgage(s) Rent Up Period 12


Equity Contribution from Tax Credit Syndication 10,750,165Appraised Value Value As of: July 30, 2021 Brownfield Equity"Encumbered As-Is" value as determined by appraisal: 3,300,000 Historic Tax Credit EquityPlus 5% of Appraised Value: 0 Override General Partner Capital ContributionsLESS Fixed Price to the Seller: 2,064,500 Other Equity SourcesSurplus/(Gap)

Within Range 1,235,500



Tax/Ins Escrows transferred to project

LIHTC BasisHistoric Basis

221(d)(3) Limit

Aggregate Basis

Reserves Transferred in to Project

4 Month OAROAR Funded

Yr 1

Home Subsidy

LimitHOME Unit

Mix

InstructionsGOLDENROD

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Development River's Edge Income Limits for (Effective April 1,2022)Financing Tax Exempt 1 Person 2 Person 3 Person 4 Person 5 Person 6 Person


Step Commitment Date 06/16/2022 06/21/2022 Type New Construction 50% of area median 30,350 34,650 39,000 43,300 46,800 50,250

60% of area median 36,420 41,580 46,800 51,960 56,160 60,300

Rental Income

Unit No. of Units Unit Type Bedrooms Baths Net Sq. Ft. Contract Rent Utilities


Current Section 8

Contract Rent% of Gross

Rent% of Total

UnitsGross

Square Feet

% of Total Square

Feet

TC Units Square

Feet Unit Type

Max Allowed Housing Expense

60% Area Median Income UnitsFamily Occupancy No Balc/Patio

A 7 Apartment 0 1.0 566 820 55 875 68,880 0 2.0% 3.1% 3,962 2.5% 3,962 910B 36 Apartment 1 1.0 619 875 65 940 378,000 0 11.2% 15.9% 22,284 14.2% 22,284 975C 12 Apartment 2 1.5 933 1,049 86 1,135 151,056 0 4.5% 5.3% 11,196 7.1% 11,196 1,170


Family Occupancy W/Balc/PatioA 8 Apartment 0 1.0 566 855 55 910 82,080 0 2.4% 3.5% 4,528 2.9% 4,528 910B 36 Apartment 1 1.0 619 910 65 975 393,120 0 11.6% 15.9% 22,284 14.2% 22,284 975C 12 Apartment 2 1.5 933 1,084 86 1,170 156,096 0 4.6% 5.3% 11,196 7.1% 11,196 1,170

631,296 0 18.7% 24.8% 38,008 24.2% 38,008120% Area Median Income UnitsFamily Occupancy No Balc/Patio

A 2 Apartment 0 1.0 566 1,130 55 1,185 27,120 0 0.8% 0.9% 1,132 0.7% 0 1,821B 13 Apartment 1 1.0 619 1,348 65 1,413 210,288 0 6.2% 5.8% 8,047 5.1% 0 1,950C 4 Apartment 2 1.5 933 2,060 86 2,146 98,880 0 2.9% 1.8% 3,732 2.4% 0 2,340

336,288 0 9.9% 8.4% 12,911 8.2% 0120% Area Median Income UnitsFamily Occupancy W/Balc/Patio

A 3 Apartment 0 1.0 566 1,165 55 1,220 41,940 0 1.2% 1.3% 1,698 1.1% 0 1,821B 13 Apartment 1 1.0 619 1,383 65 1,448 215,748 0 6.4% 5.8% 8,047 5.1% 0 1,950C 5 Apartment 2 1.5 933 2,095 86 2,181 125,700 0 3.7% 2.2% 4,665 3.0% 0 2,340

383,388 0 11.3% 9.3% 14,410 9.2% 0Market Rate UnitsFamily Occupancy No Balc/Patio

A 5 Apartment 0 1.0 566 1,187 55 1,242 71,220 0 2.1% 2.2% 2,830 1.8% 0 N/AB 23 Apartment 1 1.0 619 1,415 65 1,480 390,540 0 11.6% 10.2% 14,237 9.1% 0 N/AC 8 Apartment 2 1.5 933 2,163 86 2,249 207,648 0 6.1% 3.5% 7,464 4.8% 0 N/AD 2 Live/Work 2 2.0 1,500 2,163 112 2,275 51,912 0 1.5% 0.9% 3,000 1.9% 0 N/A

721,320 0 21.3% 16.8% 27,531 17.5% 0Market Rate UnitsFamily Occupancy W/Balc/Patio

A 5 Apartment 0 1.0 566 1,222 55 1,277 73,320 0 2.2% 2.2% 2,830 1.8% 0 N/AB 23 Apartment 1 1.0 619 1,450 65 1,515 400,200 0 11.8% 10.2% 14,237 9.1% 0 N/AC 7 Apartment 2 1.5 933 2,198 86 2,284 184,632 0 5.5% 3.1% 6,531 4.2% 0 N/AD 2 Live/Work 2 2.0 1,500 2,198 112 2,310 52,752 0 1.6% 0.9% 3,000 1.9% 0 N/A

710,904 0 21.0% 16.4% 26,598 17.0% 0Mgrs 0 0 0.0% 0.0% 0 0.0% 0

156,900 75,450Total Tenant Units 226 Gross Rent Potential 3,381,132 HOME Units SF/Total Units SF 0.0% Within RangeManager Units 0Income Average 60.00% Average Monthly Rent 1,247 # HOME Units/# Total Units 0.0% Within RangeSet Aside 49.12% Gross Square Footage 156,900

Utility AllowancesTenant-Paid Tenant-Paid Tenant-Paid Owner-Paid

Annual Non-Rental Income Electricity A/C Gas Other Total OverideMisc. and Interest 4,440 A 29 26 0 0 55 Total Income Annual MonthlyLaundry B 34 31 0 0 65 Rental Income 3,381,132 281,761Carports C 49 37 0 0 86 Non-Rental Income 191,738 15,978

D 0 Total Project Revenue 3,572,870 297,739TIF Reimbursement 187,298 E 0

191,738 F 0G 0H 0

Water/ Sewer

Kalamazoo County

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Development River's EdgeFinancing Tax Exempt

MSHDA No. 4029 Mortgage Assumptions:Debt Coverage Ratio 1.15Mortgage Interest Rate 4.750%

Step Commitment Date 06/16/2022 06/21/2022 Type New Construction Pay Rate 4.750%

Mortgage Term 40 yearsIncome from Operations No

Total Development Income Potential Per Unit Total

Annual Rental Income 14,961 3,381,132 1.0% 6 2.0%Annual Non-Rental Income 848 191,738 1.0% 6 2.0%Total Project Revenue 15,809 3,572,870


Vacancy Loss 5.00% of annual rent potential 748 169,057 6 5.0%Management Fee 562 per unit per year 562 127,012 3.0% 1 3.0%Administration 1,000 226,000 3.0% 1 3.0%Project-paid Fuel 196 44,400 3.0% 6 3.0%Common Electricity 221 49,950 4.0% 6 3.0%Water and Sewer 393 88,800 5.0% 6 5.0%Operating and Maintenance 1,033 233,499 3.0% 1 3.0%Real Estate Taxes 1,257 284,132 5.0% 1 5.0%Payment in Lieu of Taxes (PILOT) 4.00% Applied to: TC Units Only 43 9,829Insurance 490 110,732 3.0% 1 3.0%Replacement Reserve 350 per unit per year 350 79,100 3.0% 1 3.0%Balance of Live/work vacancy loss 19 4,320 3.0% 1 3.0%Other: 0 3.0% 1 3.0%

Total Expenses 39.94% 6,313 1,426,831

Base Net Operating Income 9,496 2,146,039 Override 1.2863Part A Mortgage Payment 52.23% 8,257 1,866,121Part A Mortgage 147,737 33,388,616Non MSHDA Financing Mortgage Payment 0 0Non MSHDA Financing Type: 0 0Base Project Cash Flow (excludes ODR) 7.83% 1,239 279,918

Future Vacancy

% of Revenue


Beginning in Year


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Cash Flow Projections Development River's EdgeFinancing Tax Exempt

MSHDA No. 4029Step Commitment #REF!Date 06/16/2022 06/21/2022Type New Construction

A7

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

IncomeAnnual Rental Income 1.0% 6 2.0% 3,381,132 3,414,943 3,449,093 3,483,584 3,518,420 3,588,788 3,660,564 3,733,775 3,808,450 3,884,619 3,962,312 4,041,558 4,122,389 4,204,837 4,288,934 4,374,712 4,462,207 4,551,451 4,642,480 4,735,329Annual Non-Rental Income 1.0% 6 2.0% 4,440 4,484 4,529 4,575 4,620 4,713 4,807 4,903 5,001 5,101 5,203 5,307 5,413 5,522 5,632 5,745 5,860 5,977 6,096 6,218Annual Tiff reimbursement 2445348 41,191 191,111 193,110 195,129 197,168 199,228 201,308 203,409 205,531 207,674 209,838 212,025 188,626

Total Project Revenue 3,426,763 3,610,539 3,646,732 3,683,287 3,720,208 3,792,729 3,866,679 3,942,087 4,018,983 4,097,395 4,177,353 4,258,890 4,316,429 4,210,359 4,294,566 4,380,457 4,468,066 4,557,428 4,648,576 4,741,548

ExpensesVacancy Loss 5.0% 6 5.0% 169,057 170,747 172,455 174,179 175,921 179,439 183,028 186,689 190,423 194,231 198,116 202,078 206,119 210,242 214,447 218,736 223,110 227,573 232,124 236,766Management Fee 3.0% 1 3.0% 127,012 130,822 134,747 138,789 142,953 147,242 151,659 156,209 160,895 165,722 170,694 175,814 181,089 186,521 192,117 197,881 203,817 209,931 216,229 222,716Administration 3.0% 1 3.0% 226,000 232,780 239,763 246,956 254,365 261,996 269,856 277,951 286,290 294,879 303,725 312,837 322,222 331,889 341,845 352,101 362,664 373,544 384,750 396,292Project-paid Fuel 3.0% 6 3.0% 44,400 45,732 47,104 48,517 49,973 51,472 53,016 54,606 56,245 57,932 59,670 61,460 63,304 65,203 67,159 69,174 71,249 73,386 75,588 77,856Common Electricity 4.0% 6 3.0% 49,950 51,948 54,026 56,187 58,434 60,187 61,993 63,853 65,768 67,742 69,774 71,867 74,023 76,244 78,531 80,887 83,314 85,813 88,387 91,039Water and Sewer 5.0% 6 5.0% 88,800 93,240 97,902 102,797 107,937 113,334 119,000 124,951 131,198 137,758 144,646 151,878 159,472 167,446 175,818 184,609 193,839 203,531 213,708 224,393Operating and Maintenance 3.0% 1 3.0% 233,499 240,504 247,719 255,151 262,805 270,689 278,810 287,174 295,790 304,663 313,803 323,217 332,914 342,901 353,188 363,784 374,697 385,938 397,516 409,442Real Estate Taxes 5.0% 1 5.0% 284,132 298,338 313,255 328,918 345,364 362,632 380,764 399,802 419,792 440,782 462,821 485,962 510,260 535,773 562,562 590,690 620,224 651,235 683,797 717,987Payment in Lieu of Taxes (PILOT) 9,829 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Insurance 3.0% 1 3.0% 110,732 114,054 117,476 121,000 124,630 128,369 132,220 136,186 140,272 144,480 148,815 153,279 157,877 162,614 167,492 172,517 177,692 183,023 188,514 194,169Replacement Reserve 3.0% 1 3.0% 79,100 81,473 83,917 86,435 89,028 91,699 94,450 97,283 100,202 103,208 106,304 109,493 112,778 116,161 119,646 123,235 126,932 130,740 134,662 138,702Balance of Live/work vacancy loss 3.0% 1 3.0% 4,320 4,450 4,583 4,721 4,862 5,008 5,158 5,313 5,472 5,637 5,806 5,980 6,159 6,344 6,534 6,730 6,932 7,140 7,355 7,575Other: 3.0% 1 3.0% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Subtotal: Operating Expenses 1,426,831 1,464,088 1,512,947 1,563,650 1,616,272 1,672,067 1,729,954 1,790,018 1,852,346 1,917,032 1,984,172 2,053,865 2,126,217 2,201,337 2,279,339 2,360,342 2,444,471 2,531,855 2,622,631 2,716,939Debt ServiceDebt Service Part A 1,866,121 1,866,121 1,866,121 1,866,121 1,866,121 1,866,121 1,866,121 1,866,121 1,866,121 1,866,121 1,866,121 1,866,121 1,866,121 1,866,121 1,866,121 1,866,121 1,866,121 1,866,121 1,866,121 1,866,121Principal balance 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 22,180,019

Total Expenses 3,292,952 3,330,210 3,379,068 3,429,771 3,482,393 3,538,188 3,596,075 3,656,139 3,718,467 3,783,153 3,850,293 3,919,986 3,992,338 4,067,458 4,145,460 4,226,464 4,310,592 4,397,977 4,488,752 4,583,060

Cash Flow/(Deficit) 133,811 280,329 267,664 253,516 237,815 254,540 270,603 285,948 300,515 314,241 327,060 338,904 324,090 142,901 149,106 153,994 157,474 159,451 159,824 158,488Cash Flow Per Unit 592 1,240 1,184 1,122 1,052 1,126 1,197 1,265 1,330 1,390 1,447 1,500 1,434 632 660 681 697 706 707 701Debt Coverage Ratio on Part A Loan 1.07 1.15 1.14 1.14 1.13 1.14 1.15 1.15 1.16 1.17 1.18 1.18 1.17 1.08 1.08 1.08 1.08 1.09 1.09 1.08Debt Coverage Ratio on Conventional/Other Financing N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 1.01

Interest Rate on Reserves 3% Average Cash Flow as % of Net Income

Operating Deficit Reserve (ODR) AnalaysisMaintained Debt Coverage Ratio (Hard Debt) 1.00Maintained Operating Reserve (No Hard Debt) 250Initial Balance 141,851 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Total Annual Draw to achieve 1.0 DCR 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Total Annual Deposit to achieve Maintained DCR (146,107) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Total 1.0 DCR and Maintained DCR (146,107) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Interest 4,256 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Ending Balance at Maintained DCR 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Maintained Cash Flow Per Unit 1,239 1,240 1,184 1,122 1,052 1,126 1,197 1,265 1,330 1,390 1,447 1,500 1,434 632 660 681 697 706 707 701Maintained Debt Coverage Ratio on Part A Loan 1.15 1.15 1.14 1.14 1.13 1.14 1.15 1.15 1.16 1.17 1.18 1.18 1.17 1.08 1.08 1.08 1.08 1.09 1.09 1.08Maintained Debt Coverage Ratio on Conventional/Other N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 1.01Standard ODRNon-standard ODR

Operating Assurance Reserve AnalysisRequired in Year: 1

Initial Balance 1,097,651 1,130,580 1,164,498 1,199,432 1,235,415 1,272,478 1,310,652 1,349,972 1,390,471 1,432,185 1,475,151 1,519,405 1,564,987 1,611,937 1,660,295 1,710,104 1,761,407 1,814,249 1,868,677 1,924,737Interest Income 32,930 33,917 34,935 35,983 37,062 38,174 39,320 40,499 41,714 42,966 44,255 45,582 46,950 48,358 49,809 51,303 52,842 54,427 56,060 57,742Ending Balance 1,130,580 1,164,498 1,199,432 1,235,415 1,272,478 1,310,652 1,349,972 1,390,471 1,432,185 1,475,151 1,519,405 1,564,987 1,611,937 1,660,295 1,710,104 1,761,407 1,814,249 1,868,677 1,924,737 1,982,479

Sustainability Reserve AnalysisInitial Balance 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Interest Income 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Ending Balance 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Asset Management Fee Reserve AnalysisInitial Balance 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Interest Income 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Required Draw 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Ending Balance 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Deferred Developer Fee AnalysisInitial Balance 4,148,978 4,082,072 3,941,908 3,808,076 3,681,318 3,562,411 3,435,141 3,299,839 3,156,865 3,006,607 2,849,487 2,685,957 2,516,505 2,354,459 2,283,009 2,208,456 2,131,459 2,052,723 1,972,997 1,893,085Dev Fee Paid 66,906 140,165 133,832 126,758 118,907 127,270 135,302 142,974 150,258 157,121 163,530 169,452 162,045 71,450 74,553 76,997 78,737 79,725 79,912 79,244Ending Balance Repaid in #N/A 4,082,072 3,941,908 3,808,076 3,681,318 3,562,411 3,435,141 3,299,839 3,156,865 3,006,607 2,849,487 2,685,957 2,516,505 2,354,459 2,283,009 2,208,456 2,131,459 2,052,723 1,972,997 1,893,085 1,813,841Total Deferred Paid 66,906 207,070 340,902 467,660 586,567 713,837 849,139 992,113 1,142,371 1,299,491 1,463,021 1,632,473 1,794,519 1,865,969 1,940,522 2,017,519 2,096,255 2,175,981 2,255,893 2,335,137Total Developer Fee Paid 1851022 66,906 273,976 547,972 808,562 1,054,227 1,300,405 1,562,976 1,841,252 2,134,484 2,441,862 2,762,513 3,095,495 3,426,992 3,660,487 3,806,491 3,958,040 4,113,774 4,272,236 4,431,874 4,591,030

Mortgage Resource Fund LoanInterest Rate on Subordinate Financing 3%Principal Amount of all MSHDA Soft Funds 5,026,438 5,026,438 5,026,438 5,026,438 5,026,438 5,026,438 5,026,438 5,026,438 5,026,438 5,026,438 5,026,438 5,026,438 5,026,438 5,026,438 5,026,438 5,026,438 5,026,438 5,026,438 5,026,438 5,026,438Current Yr Int 150,793 150,793 150,793 150,793 150,793 150,793 150,793 150,793 150,793 150,793 150,793 150,793 150,793 150,793 150,793 150,793 150,793 150,793 150,793 150,793Accrued Int 0 83,888 94,516 111,478 135,513 167,399 190,921 206,413 214,232 214,768 208,440 195,703 177,044 165,792 245,135 321,375 395,172 467,228 538,296 609,177Subtotal 5,177,231 5,261,119 5,271,747 5,288,709 5,312,744 5,344,630 5,368,153 5,383,644 5,391,463 5,391,999 5,385,671 5,372,934 5,354,275 5,343,023 5,422,366 5,498,607 5,572,403 5,644,459 5,715,527 5,786,408Annual Payment Due 66,906 140,165 133,832 126,758 118,907 127,270 135,302 142,974 150,258 157,121 163,530 169,452 162,045 71,450 74,553 76,997 78,737 79,725 79,912 79,244Year End Balance 5,110,326 5,120,954 5,137,916 5,161,951 5,193,837 5,217,359 5,232,851 5,240,670 5,241,206 5,234,878 5,222,141 5,203,482 5,192,230 5,271,573 5,347,813 5,421,610 5,493,666 5,564,734 5,635,615 5,707,164

1,097,651

5,026,438Initial Balance

Not Required

Amount Initial Deposit0 0

% of Cash Flow50%

Initi

al In

flato

r

Star

ting

in Y

r

Futu

re In

flato

r

Initital Deposit1,097,651

Initial Deposit141,851

141,8510

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RESOLUTION DETERMINING MORTGAGE LOAN FEASIBILITY RIVER’S EDGE, MSHDA DEVELOPMENT NO. 4029

CITY OF KALAMAZOO, KALAMAZOO COUNTY

June 16, 2022 JUNE 21, 2022

WHEREAS, the Michigan State Housing Development Authority (the "Authority") is authorized under the provisions of Act No. 346 of the Public Acts of 1966 of the State of Michigan, as amended (the "Act"), to make mortgage loans to qualified non-profit housing corporations, consumer housing cooperatives and limited dividend housing corporations and associations; and

WHEREAS, an Application for Mortgage Loan Feasibility has been filed with the Authority by Standard Caddis 4 GP, LLC (the "Applicant") for a multifamily housing project to be located in the City of Kalamazoo, Kalamazoo County, Michigan, having a total estimated development cost of Fifty-Five Million Eighty-Five Thousand Three Hundred Three Dollars ($55,085,303), a total estimated maximum mortgage loan amount of Thirty-Three Million Three Hundred Eighty-Eight Thousand Six Hundred Sixteen Dollars ($33,388,616) and a Mortgage Resource Fund loan in the amount of Five Million Twenty-Six Thousand Four Hundred Thirty-Eight Dollars ($5,026,438) hereinafter referred to as the "Application"); and

WHEREAS, a housing association to be formed by the Applicant may become eligible to receive a Mortgage Loan from the Authority under the provisions of the Act and the Authority's General Rules; and

WHEREAS, the Acting Executive Director has forwarded to the Authority his analysis of the Application and his recommendations with respect thereto; and

WHEREAS, the Authority has considered the Application in the light of the Authority's project mortgage loan feasibility evaluation factors.


1. The following determinations be and they hereby are made:

a. The proposed housing project will provide housing for persons of low andmoderate income and will serve and improve the residential area in whichAuthority-financed housing is located or is planned to be located, therebyenhancing the viability of such housing.

b. The Applicant is reasonably expected to be able to achieve successfulcompletion of the proposed housing project.

c. The proposed housing project will meet a social need in the area in which itis to be located.

GOLDENROD TAB I

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d. A mortgage loan, or a mortgage loan not made by the Authority that is afederally-aided mortgage, can reasonably be anticipated to be obtained toprovide financing for the proposed housing project.

e. The proposed housing project is a feasible housing project.

f. The Authority expects to allocate to the financing of the proposed housingproject proceeds of its bonds issued or to be issued for multifamily housingprojects a maximum principal amount not to exceed Forty-One Million FourHundred Ninety Thousand Eight Hundred Sixty-Five Dollars ($41,490,865).

2. The proposed housing project be and it is hereby determined to be feasible for amortgage loan on the terms and conditions set forth in the Mortgage Loan Feasibility/Commitment Report of the Authority Staff presented to the meeting, subject to any and all applicable determinations and evaluations issued or made with respect to the proposed housing project by other governmental agencies or instrumentalities or other entities concerning the effects of the proposed housing project on the environment as evaluated pursuant to the federal National Environmental Policy Act of 1969, as amended, and the regulations issued pursuant thereto as set forth in 24 CFR Part 58.

3. The determination of feasibility is based on the information obtained from theApplicant and the assumption that all factors necessary for the successful construction and operation of the proposed project shall not change in any materially adverse respect prior to the closing. If the information provided by the Applicant is discovered to be materially inaccurate or misleading, or any factors necessary for the successful construction and operation of the proposed project change in any materially adverse respect, this feasibility determination resolution may, at the option of the Executive Director, the Chief Housing Investment Officer, the Director of Legal Affairs, the Deputy Director of Legal Affairs, the Chief Financial Officer, the Deputy Director of Finance or any person duly authorized to act in any of the foregoing capacities (each an "Authorized Officer"), be immediately rescinded.

4. Neither this determination of feasibility nor the execution prior to closing of anydocuments requested to facilitate processing of a proposed mortgage loan to be used in connection therewith constitutes a promise or covenant by the Authority that it will make a Mortgage Loan to the Applicant.

5. This determination of Mortgage Loan Feasibility is conditioned upon the availability offinancing to the Authority. The Authority does not covenant that funds are or will be available for the financing of the subject proposed housing development.

6. The Mortgage Loan Feasibility determination is subject to the conditions set forth inthe Mortgage Loan Feasibility/Commitment Staff Report dated June 16, 2022, JUNE 21, 2022 which conditions are hereby incorporated by reference as if fully set forth herein.

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RESOLUTION AUTHORIZING MORTGAGE LOAN RIVER’S EDGE, MSHDA DEVELOPMENT NO. 4029

CITY OF KALAMAZOO, KALAMAZOO COUNTY

June 16, 2022 JUNE 21, 2022

WHEREAS, the Michigan State Housing Development Authority (the "Authority") is authorized, under the provisions of Act No. 346 of the Public Acts of 1966 of the State of Michigan, as amended (hereinafter referred to as the "Act"), to make mortgage loans to qualified nonprofit housing corporations, consumer housing cooperatives, limited dividend housing corporations and associations and certain qualified individuals; and

WHEREAS, an application (the "Application") has been filed with the Authority by Standard Caddis 4 GP, LLC (the "Applicant") for a construction and permanent mortgage loan in the amount of Thirty-Three Million Three Hundred Eighty-Eight Thousand Six Hundred Sixteen Dollars ($33,388,616) for the construction and permanent financing of a multi-family housing project having an estimated total development cost of Fifty-Five Million Eighty-Five Thousand Three Hundred Three Dollars ($55,085,303), to be known as River’s Edge, located in the City of Kalamazoo, Kalamazoo County, Michigan, and to be owned by Standard Caddis 4 Limited Dividend Housing Association Limited Partnership (the "Mortgagor"); and

WHEREAS, the Applicant has also requested a Mortgage Resource Fund ("MRF") loan in the estimated amount of Five Million Twenty-Six Thousand Four Hundred Thirty-Eight Dollars ($5,026,438) (the "MRF Loan"); and

WHEREAS, the Acting Executive Director has forwarded to the Authority his analysis of the Application and his recommendation with respect thereto; and

WHEREAS, the Authority has reviewed the Application and the recommendation of the Acting Executive Director and, on the basis of the Application and recommendation, has made determinations that:

(a) The Mortgagor is an eligible applicant;

(b) The proposed housing project will provide housing for persons of low and moderateincome and will serve and improve the residential area in which Authority-financedhousing is located or is planned to be located thereby enhancing the viability of suchhousing;

(c) The Applicant and the Mortgagor are reasonably expected to be able to achievesuccessful completion of the proposed housing project;

(d) The proposed housing project will meet a social need in the area in which it is to belocated;

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(e) The proposed housing project may reasonably be expected to be marketedsuccessfully;

(f) All elements of the proposed housing project have been established in a mannerconsistent with the Authority's evaluation factors, except as otherwise providedherein;

(g) The construction or rehabilitation will be undertaken in an economical manner and itwill not be of elaborate design or materials; and

(h) In light of the estimated total project cost of the proposed housing project, theamount of the mortgage loan authorized hereby is consistent with the requirementsof the Act as to the maximum limitation on the ratio of mortgage loan amount toestimated total project cost.

WHEREAS, the Authority has considered the Application in the light of the criteria established for the determination of priorities pursuant to General Rule 125.145 and hereby determines that the proposed housing project is consistent therewith; and

WHEREAS, Sections 83 and 93 of the Act provide that the Authority shall determine a reasonable and proper rate of return to limited dividend housing corporations and associations on their investment in Authority-financed housing projects.


1. The Application be and it hereby is approved, subject to the terms and conditions ofthis Resolution, the Act, the General Rules of the Authority, and of the Mortgage Loan Commitment hereinafter authorized to be issued to the Applicant and the Mortgagor.

2. A mortgage loan (the "Mortgage Loan") be and it hereby is authorized and theExecutive Director, the Chief Housing Investment Officer, the Director of Legal Affairs, the Deputy Director of Legal Affairs, the Chief Financial Officer, the Deputy Director of Finance or any person duly authorized to act in any of the foregoing capacities, or any one of them acting alone (each an "Authorized Officer"), are hereby authorized to issue to the Applicant and the Mortgagor the Authority's Mortgage Loan Commitment (the "Commitment") for the construction and permanent financing of the proposed housing project, in an amount not to exceed of Thirty-Three Million Three Hundred Eighty-Eight Thousand Six Hundred Sixteen Dollars ($33,388,616), and to have a term of 40 years after amortization of principal commences and to bear interest at a rate of four and 75/100 percent (4.75%) per annum. The amount of proceeds of tax exempt bonds issued or to be issued and allocated to the financing of this housing project shall not exceed Forty-One Million Four Hundred Ninety Thousand Eight Hundred Sixty-Five Dollars ($41,490,865). Any Authorized Officer is hereby authorized to modify or waive any condition or provision contained in the Commitment.

3. The MRF Loan be and it hereby is authorized and an Authorized Officer is herebyauthorized to issue to the Applicant and the Mortgagor a commitment for an MRF Loan (together with the Commitment for the Mortgage Loan, the "Mortgage Loan Commitment") in the estimated amount of Five Million Twenty-Six Thousand Four Hundred Thirty-Eight Dollars ($5,026,438), and to have a term not to exceed fifty (50) years and to bear interest at a rate of three percent (3%) per annum.

3

4. The mortgage loan commitment resolution and issuance of the Mortgage LoanCommitment are based on the information obtained from the Applicant and the assumption that all factors necessary for the successful construction and operation of the proposed project shall not change in any materially adverse respect prior to the closing. If the information provided by the Applicant is discovered to be materially inaccurate or misleading, or any factors necessary for the successful construction and operation of the proposed project change in any materially adverse respect, this mortgage loan commitment resolution together with the commitment issued pursuant hereto may, at the option of an Authorized Officer, be rescinded.

5. Notwithstanding passage of this resolution or execution of any documents inanticipation of the closing of the proposed mortgage loan, no contractual rights to receive the mortgage loan authorized herein shall arise unless and until an Authorized Officer shall have issued a Mortgage Loan Commitment and the Applicant shall have agreed in writing within fifteen days after receipt thereof, to the terms and conditions contained therein.

6. The proposed housing project be and it hereby is granted a priority with respect toproceeds from the sale of Authority securities which are determined by the Executive Director to be available for financing the construction and permanent loans of the proposed housing project. Availability of funds is subject to the Authority's ability to sell bonds at a rate or rates of interest and at a sufficient length of maturity so as not to render the permanent financing of the development unfeasible.

7. In accordance with Section 93(b) of the Act, the maximum reasonable and properrate of return on the investment of the Mortgagor in the housing project be and it hereby is determined to be twelve percent (12%) per annum initially. Following the payment in full of the MRF Loan, the Mortgagor's rate of return may be increased by one percent (1%) annually until a cap of twenty-five percent (25%) is reached.

8. The Authority hereby waives its Multifamily Direct Lending Parameter: VIUnderwriting Terms, E.1 LIHTC/Tax-Exempt Bond or Taxable Bond Rent Restrictions: to permit underwritten rents equal to 100% of the maximum allowable rent rather than 95% of the maximum allowable rent.

9. The Authority hereby waives Section VI.P.4 of the Multifamily Direct LendingParameters requiring that no more than 50% of the total development fee may be deferred to cover a gap in funding sources.

10. The Authority hereby waives its Standards of Design, which require individualbalconies or patios and instead allow only 50% of the units to have balconies or patios.

11. The Authority hereby waives its Standards of Design, which require a parking ratio of2:1. Based on the site limitation, a 1:28 parking ratio is approved.

12. The Mortgage Loan shall be subject to, and the Commitment shall contain, theconditions set forth in the Mortgage Loan Feasibility/Commitment Staff Report dated June 16, 2022, JUNE 21, 2022, which conditions are hereby incorporated by reference as if fully set forth herein.

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TO:

FROM:

DATE:

RE:

M E M O R A N D U M

Authority Members


June 16, 2022 JUNE 21, 2022

Housing Opportunities Promoting Energy Efficiency (HOPE) Program

RECOMMENDATION:

I recommend the Michigan State Housing Development Authority (the “Authority”) approve a resolution delegating authority to the Executive Director or an authorized officer to approve grants to subrecipients through the Housing Opportunities Promoting Energy Efficiency (“HOPE”) Program.

EXECUTIVE SUMMARY:

The HOPE Program is a federally funded grant program utilizing the United States Department of the Treasury (“Treasury”) American Rescue Plan Coronavirus State and Local Fiscal Recovery Funds (“ARP-SLFRF”), which the Michigan Legislature appropriated to the Authority pursuant to the Public Act 53 of 2022 (“2022 PA 53”). Under 2022 PA 53, a total of $30 million dollars was appropriated to the HOPE Program to provide residential clean energy improvements for homeowner rehabilitation assistance to existing owner-occupied homeowners and rental property homeowners for structural and mechanical repairs and for stabilization and enhancement of Michigan neighborhoods.

The HOPE Program will be available statewide based on a formal subrecipient award structure to 501(c)(3) nonprofit agencies and local units of government (the “local entities”) with award determinations based on competitive funding rounds and subsequent obligation and expenditure performance. The Authority will implement prioritization of HOPE Program awards to targeted areas and direct at least 30% of the HOPE Program awards to rural communities with at least 5% being focused within the Upper Peninsula.

Because the HOPE Program is utilizing federal funds from the ARP-SLFRF, Treasury requires the ARP-SLFRF funds to be obligated to subrecipients and beneficiaries by December 31, 2024, and to be fully expended by December 31, 2026. To facilitate the efficient and timely distribution of these funds, I am recommending that the Authority adopt a resolution granting the Executive Director, an authorized officer, or anyone acting in those capacities respectively, the authority to

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approve grants to subrecipients financed through the HOPE Program. Parameters of the delegated authority are:

• Following federal requirements as provided in the ARP-SLFRF and associated federalregulations.

• Following Michigan statutory requirements as provided in Section 354 of 2022 PA 53 andany amendments.

• Seeking Administrative Board approval for all grants that are $250,000 or more.• Providing a report on the subrecipient grants approved under the HOPE Program every

quarter, as part of the Delegated Action Report.


• The HOPE Program will preserve existing occupied housing and reduce home coststhrough energy efficiency home repairs that provide an immediate impact to individualhouseholds and a long-term community benefit of improving the existing housing stockand increasing the areas’ home values.

• The HOPE Program awards will be regionally distributed and will encourage and facilitateenergy-efficiency focused residential housing repairs and upgrades to owner-occupiedhomes and non-owner-occupied homes with up to 3 total units within both rural and urbanareas.

• The HOPE Program will provide awards to subrecipients that target households at orbelow 300% of the federal poverty level across the State of Michigan.

• The HOPE Program will provide households with the opportunity to receive grant fundingto address energy efficiency repairs and/or replacement needs resulting in an improvedquality of life.

• The HOPE Program is designed to help households impacted by the Coronavirus Disease2019 (“COVID-19”) that experienced financial hardships and increased costs of living.

• By partnering with local entities, the Authority can promote energy efficiency within existinghousing stock to assist households in need.

STAKEHOLDER ENGAGEMENT:

Multiple engagement activities occurred during the initial program drafting process, and numerous meetings and conversations were held with stakeholders throughout the HOPE Program’s development. A formal stakeholder engagement was held from May 25, 2022, through June 3, 2022, and all comments were submitted and captured via survey monkey (see report #1). Following receipt of stakeholder input, adjustments were made to the attached HOPE Program Statement, Terms Sheet, and Subrecipient Application Instructions and Process on June 4, 2022, and updated drafts were issued for formal public comment from June 5, 2022, through June 15, 2022, to stakeholder entities through a division-specific mailing list of 6,000+ entities via a .gov e-mail blast, and publicly posted on the Authority’s website. All comments will be evaluated, and adjustments will be made, where appropriate, prior to the Board Meeting and outlined within the Board presentation (see report #2). Additional adjustments will be made, as needed, post-Board Meeting.

PUBLIC ENGAGEMENT:

In addition to engagement at the State level, all subrecipients must incorporate stakeholder engagement at the local level as part of the program parameters.

Marketing and promoting this opportunity to all area residents will be critical to the success of the HOPE Program. Authority staff working on the HOPE Program will work with local entities on public notification and engagement.


Due to the large allocation of funds for the HOPE Program and Treasury’s expedited commitment and obligation deadline of December 31, 2024, for ARP-SLFRF funds, the Executive Director is requesting delegated authority for the Executive Director and selected authorized officers to issue commitments and grants up to $1 million dollars. This change will expedite the awarding of HOPE Program funds to subrecipient agencies and assist the Authority’s ability to meet Treasury’s required ARP-SLFRF deadlines.


RESOLUTION AUTHORIZING APPROVAL OF DELEGATED AUTHORITY

TO APPROVE GRANTS TO SUBRECIPIENTS FINANCED THROUGH THE HOUSING OPPORTUNITIES PROMOTING ENERGY EFFICIENCY (“HOPE”)

June 16, 2022 JUNE 21, 2022

WHEREAS, the Michigan State Housing Development Authority (the "Authority") has received the Acting Executive Director’s memorandum regarding the Housing Opportunities Promoting Energy Efficiency (“HOPE”) Program, which is a federally funded grant program utilizing the United States Department of Treasury American Rescue Plan Coronavirus State and Local Fiscal Recovery Funds (“ARP-SLFRF”) that was appropriated to the Authority pursuant to the Public Act 53 of 2022 to provide residential clean energy improvements for homeowner rehabilitation assistance to existing owner-occupied homeowners and rental property homeowners for structural and mechanical repairs and for stabilization and enhancement of Michigan neighborhoods; and

WHEREAS, the Acting Executive Director has recommended that the Authority grant the Executive Director, the Chief Finance Officer, the Director of Legal Affairs, or anyone acting in those capacities respectively, the authority to approve grants made through the HOPE Program as described in the memorandum; and


NOW, THEREFORE, Be It Resolved by the Michigan State Housing Development Authority that the Executive Director, the Chief Finance Officer, the Director of Legal Affairs, or anyone acting in those capacities respectively, be each granted the authority to issue grants and execute grant agreements and any other agreements deemed necessary by the Authority staff to evidence and administer the grants as described in the attached memorandum.

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M E M O R A N D U M

TO:

FROM:

DATE:

Authority Members


June 16, 2022 JUNE 21, 2022

RE: Authorization of the pass-through of $20 million dollars of U.S. Department of the Treasury American Rescue Plan funding to the City of Detroit and The Heat and Warmth Fund (THAW)

RECOMMENDATION:

I recommend that the Michigan State Housing Development Authority (the “Authority”) authorize the Executive Director or an authorized officer to (1) approve the direct allocation of $20 million dollars in State and Local Fiscal Recovery Funds (SLFRF) as outlined in the 2022 legislative appropriation enacted as Public Act 53 of 2022 (PA 53), and under the terms more specifically stated in Sections 354 (1)(c) and (d) and (2) execute grant agreements for the legislatively appropriated funds. Per the terms of PA 53, these funds are to be distributed to the City of Detroit ($15 million dollars) and The Heat and Warmth Fund (THAW) ($5 million dollars).

EXECUTIVE SUMMARY:

In April 2022, $50 million dollars were allocated to the State of Michigan from the SLFRF, as created by the American Rescue Plan (ARP), for residential clean energy improvement funding. These funds were budgeted and allocated to the Authority by the Legislature for statewide distribution. Of the total allocation of $50 million, a set-aside amount of $15 million was identified as going to the City of Detroit and $5 million was identified as going to the nonprofit agency known as THAW as implied in Sections 354 (1)(c) and (d) as outlined below:

Sec. 354. (1) Funds appropriated in part 1 for ARP – residential clean energy improvements must be allocated to the Michigan state housing development authority to incentivize energy efficiency and health improvements that promote health or safety for single-family and multifamily residential properties and to provide energy assistance. Funds shall be available for both owner-occupied and rental properties and must be allocated as follows: … (c) From the funds appropriated in part 1 for ARP – residential clean energyimprovements, $15,000,000.00 must be allocated to a city with a population between639,000 and 640,000 according to the most recent federal decennial census and mustbe used to invest in and repair homes which will promote public health and safety andincrease property values.

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(d) From the funds appropriated in part 1 for ARP – residential clean energyimprovements, $5,000,000.00 must be allocated for energy assistance programmingadministered by a 501(c)(3) nonprofit that manages a low-income home energyassistance program in a city with a population between 639,000 and 640,000according to the most recent federal decennial census.


• The funding will be made available to subrecipients that will target households at or below300% of the federal poverty level across the state of Michigan. This program will providehouseholds with the opportunity to receive grant funding intended to result in an improvedquality of life.

• This program is designed to help COVID-impacted households that are experiencing afinancial hardship and are experiencing increased costs of living.

• By partnering with the City of Detroit and THAW, the Authority can promote energyefficiency within existing housing stock to assist households in need.

STAKEHOLDER ENGAGEMENT:

The City of Detroit and THAW will be required to engage stakeholders at a local level as part of the program parameters.

PUBLIC ENGAGEMENT:

Marketing and promoting this opportunity to all area residents will be critical to its success. The Authority’s Housing Opportunities Promoting Energy-Efficiency (HOPE) staff will work with the City of Detroit and THAW on public notification, engagement, and the distribution of funds to eligible households.


None.


RESOLUTION AUTHORIZING APPROVAL OF DELEGATED AUTHORITY

TO ISSUE GRANTS FROM THE STATE AND LOCAL FISCAL RECOVERY FUND TO THE CITY OF DETROIT AND THE HEAT AND WARMTH FUND

June 16, 2022 JUNE 21, 2022

WHEREAS, the Michigan State Housing Development Authority (the "Authority") has received the Acting Executive Director’s memorandum regarding the State and Local Fiscal Recovery Funds distributed to the State of Michigan pursuant to the American Rescue Plan Act for the purpose of addressing the negative impacts of the COVID-19 pandemic, and subsequently appropriated to the Authority under Public Act 53 of 2022 for use as grants to the City of Detroit and The Heat and Warmth Fund (THAW) as subrecipients through the Housing Opportunities Providing Energy-Efficiency Program (“HOPE”); and

WHEREAS, the Acting Executive Director has recommended that the Authority grant the Executive Director, the Chief Financial Officer, the Director of Legal Affairs, or anyone acting in those respective capacities, the authority to approve grants to these subrecipients made through the HOPE program as described in the memorandum; and


NOW, THEREFORE, Be It Resolved by the Michigan State Housing Development Authority that the Executive Director, the Chief Financial Officer, the Director of Legal Affairs, or anyone acting in those capacities respectively, be each granted the authority to issue grants respectively to the City of Detroit for Fifteen Million Dollars ($15,000,000) and THAW for Five Million Dollars ($5,000,000) and execute grant agreements and any other agreements deemed necessary by Authority staff to evidence and administer the grants as described in the attached memorandum.

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MSHDA’s Homeownership Division delivers responsive homeownership products, education and technical assistance that empower our customers and strengthen and sustain Michigan communities. We work with our partners to provide creative solutions that maximize existing resources and preserve homeownership opportunities for future generations.

SINGLE FAMILY MORTGAGES

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Mill

ions

MAY 2022

GOAL PURCHASED

Print on Legal-Size paper

Series/Date Month #

PURCHASED Prior Total

PURCHASED NEW Total

1st + DPATO DATE

NEWEST ALLOCATED

031 May-22 0 -$ 0 $0.00 0 $0.00 0 $0.00 0 $0.00 0 $0.00 0 $0.00 0 $0.00 0 $0.00 0 $0.00 031 32,837,184.00$ 32,837,184.00$ 34,689,829.00$ 10,000,000.00$

Apr-22 0 -$ 0 $0.00 0 $0.00 0 $0.00 0 $0.00 0 $0.00 0 $0.00 0 $0.00 0 $0.00 0 $0.00 101 1,852,645.00$ 1,852,645.00$ remaining: (24,689,829.00)$

060 May-22 0 -$ 0 $0.00 2 $378,026.00 0 $0.00 -1 -$216,015.00 0 $0.00 -1 -$162,011.00 0 $0.00 0 $0.00 0 $0.00 060 215,472,592.00$ 215,472,592.00$ 230,040,230.00$ 300,000,000.00$

2/1/2021 Apr-22 0 - 0 $0.00 2 $378,026.00 0 $0.00 -1 -$105,362.00 0 $0.00 -4 -$432,155.00 2 $378,026.00 0 $0.00 0 $0.00 160 14,567,638.00$ 14,567,638.00$ remaining: 69,959,770.00$

061 May-22 224 31,499,496.00$ 309 $41,433,046.00 452 $59,981,434.00 315 $43,225,363.00 -4 -$426,426.00 1 $162,011.00 0 $0.00 541 $73,010,980.00 223 $29,931,402.00 213 $1,883,362.00 061 128,895,310.00$ 158,826,712.00$ 165,996,587.00$ 300,000,000.00$

9/8/2021 Apr-22 436 59,674,745.00 377 $51,048,640.00 452 $59,981,434.00 287 $38,999,362.00 -2 -$201,985.00 4 $432,155.00 -7 -$831,493.00 452 $59,981,434.00 275 $35,326,931.00 265 $2,270,179.00 161 5,286,513.00$ 7,169,875.00$ remaining: 134,003,413.00$

062 May-22 312 72,859,593.00$ 23 $3,424,826.00 0 $0.00 2 $253,945.00 0 $0.00 0 $0.00 0 $0.00 2 $253,945.00 0 $0.00 0 $0.00 062 128,895,310.00$ 128,895,310.00$ 134,181,823.00$ 300,000,000.00$

5/12/2022 Apr-22 0 - 0 $0.00 0 $0.00 0 $0.00 0 $0.00 0 $0.00 0 $0.00 0 $0.00 0 $0.00 0 $0.00 162 5,286,513.00$ 5,286,513.00$ remaining: 165,818,177.00$

TOTAL May-22 536 $104,359,089.00 332 $44,857,872.00 454 $60,359,460.00 317 $43,479,308.00 -5 -$642,441.00 1 $162,011.00 -1 -$162,011.00 543 $73,264,925.00 223 $29,931,402.00 213 $1,883,362.00

MI HOME FLEX Loan Program (MBS)

Series/Date Month

900 May-22 0 -$ 16 $2,064,673.00 21 $2,721,492.00 16 $1,909,043.00 0 $0.00 0 $0.00 26 $4,508,029.00 11 $122,506.00 11 $72,847.00

11/14/2013 Apr-22 39 5,143,355.00$ 18 $2,249,854.00 21 $2,721,492.00 12 $1,600,089.00 0 $0.00 0 $0.00 21 $2,721,492.00 21 $2,496,419.00 21 $138,104.00

MCC PIP Loans Applications Commitments Purchased 212 MCC May-22 8 1,140,497.00$ 4 545,351.00$ 6 854,906.00$ 8 1,073,550.00$ May-22 0 -$ 0 -$ 0 -$ 1 6,526.00$

9/18/2019 Apr-22 8 958,016.00$ 9 1,108,152.00$ 10 1,251,712.00$ 6 796,410.00$ April-22 0 -$ 0 -$ 0 -$ 1 7,495.00$

ReservationsRESERVATIONS APPS RECEIVED COMMITMENTS CERTIFICATES

APPLICATIONS RECEIVED

COMMITMENTS BEGINNING COMMITMENTS ISSUEDRESERVATIONS

COMMITMENTS BEGINNING

Transfers INor AdjustmentRESERVATIONS COMMITMENTS ISSUED

APPLICATIONS RECEIVED

Monthly Homeownership Production Report: MAY 2022

COMMITMENT Cancellations Reinstatements Net

COMMITMENT & PURCHASE IN/DEcrease Net

COMMITMENTS ENDING PURCHASED #1 PURCHASED-DPA

PURCHASED-DPAPURCHASED #1Cancellations Reinstatements Net

Transfers OUT or Adjustment

COMMITMENTS ENDING

MI HOME Loan Programs

County (#zips) # Loan DPA Total $ Allegan (2) -$ Barry (1) -$ Bay (2) 1 103,098$ 8,060$ 111,158$ Berrien(2) -$ Calhoun (4) 3 417,176$ 27,876$ 445,052$ Clinton (1) -$ Delta (1) -$ Eaton (2) -$ Genesee (16) 9 1,225,005$ 86,368$ 1,311,373$ Ingham (12) 7 692,509$ 69,482$ 761,991$ Ionia (1) -$ Isabella (1) -$ Jackson (3) 8 860,847$ 77,063$ 937,910$ Kalamazoo (11) 4 510,551$ 37,341$ 547,892$ Kent (18) 9 1,569,846$ 80,989$ 1,650,835$ Lapeer (1) -$ Lenawee (3) 4 625,672$ 39,755$ 665,427$ Macomb (27) 26 4,162,012$ 257,228$ 4,419,240$ Manistee (1) 1 134,518$ 10,000$ 144,518$ Midland (1) 1 144,375$ 9,719$ 154,094$ Monroe (1) 1 88,369$ 8,459$ 96,828$ Muskegon (5) 2 204,590$ 17,624$ 222,214$ Newaygo (1) -$ Oakland (36) 7 936,337$ 66,254$ 1,002,591$ Oceana (1) -$ Ottawa (5) 2 304,384$ 20,000$ 324,384$ Saginaw (6) 4 398,273$ 36,648$ 434,921$ Saint Clair (1) 7 926,828$ 63,330$ 990,158$ Van Buren (2) -$ Washtenaw (7) 1 125,400$ 10,000$ 135,400$ Wayne (61) 60 8,591,509$ 589,152$ 9,180,661$ TOTAL 157 22,021,299$ 1,515,348$ 23,536,647$

APRIL Total Purchases 223 29,931,402$ 1,883,362$ 31,814,764$ Percentage that is 10K 70% 74% 80% 74%

The MI 10K DPA Loan program is a $10,000 down payment assistance program available in 236 zip codes throughout the state. The MI 10K DPA Loan must be combined with a MI Home Loan.

MAY 2022

Dark Grey = No Zip Codes availableLight Grey = Zip Codes available but not used yetYellow = 10K DPAs purchased

WeekEnding

Total Loans

TotalAmount (1&2)

10K Loans

10KAmount (1&2) 10K %

1/7/2022 90 12,480,768$ 63 9,094,833$ 70%1/14/2022 64 9,225,443$ 46 6,793,571$ 72%1/21/2022 81 11,789,951$ 58 8,568,528$ 72%1/28/2022 115 16,653,269$ 79 11,898,383$ 69%2/4/2022 103 14,745,328$ 72 10,515,050$ 70%2/11/2022 97 13,187,805$ 71 10,153,467$ 73%2/18/2022 75 10,719,445$ 46 6,969,997$ 61%2/25/2022 74 10,959,768$ 54 7,904,384$ 73%3/4/2022 83 11,497,056$ 48 7,500,023$ 58%3/11/2022 83 11,264,254$ 59 8,183,938$ 71%3/18/2022 60 8,626,504$ 44 6,359,013$ 73%3/25/2022 85 11,682,605$ 48 6,777,348$ 56%4/1/2022 44 5,871,455$ 29 4,115,839$ 66%4/8/2022 87 11,689,819$ 59 8,320,836$ 68%4/15/2022 38 5,091,172$ 24 3,380,589$ 63%4/22/2022 103 14,033,311$ 67 9,574,942$ 65%4/29/2022 47 6,782,808$ 35 5,051,463$ 74%5/6/2022 43 5,626,633$ 27 3,988,099$ 63%5/13/2022 59 8,928,669$ 42 6,560,370$ 71%5/20/2022 64 9,149,520$ 44 6,575,841$ 69%5/27/2022 57 8,109,942$ 44 6,412,337$ 77%6/3/20226/10/20226/17/20226/24/20222022 TOTAL 1552 218,115,525.00$ 1059 154,698,851.00$ 68%

MI 10K DPA vs MI HOME LOANS 2022

$-

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

$16,000,000

$18,000,000

1/7/2022 2/7/2022 3/7/2022 4/7/2022 5/7/2022 6/7/2022

Year # 2 - 2022

2022 BOARD CALENDAR DRAFT

January February VOTING ITEMS: VOTING ITEMS: • Intent to Reimburse Resolution

DISCUSSION ITEMS: DISCUSSION ITEMS: • FY 2021-2022 PHA Plan• Quarterly Financials

March April VOTING ITEMS: VOTING ITEMS: • FY 2021-2022 PHA Plan • Multifamily Bond Deal

DISCUSSION ITEMS: DISCUSSION ITEMS: • Multifamily Bond Deal • Professional Services Contracts and

IT Contracts• Resolution Amending Section XI of the

Amended and Restated Pass-ThroughProgram

• Single Family Bond Deal

• • Quarterly Financials

May June VOTING ITEMS: VOTING ITEMS: • Single Family Bond Deal • 2022-23 Budget

DISCUSSION ITEMS: DISCUSSION ITEMS: • 2022-23 Budget • Pass-Through Program

July August VOTING ITEMS: VOTING ITEMS:

• Pass-Through Program

DISCUSSION ITEMS: DISCUSSION ITEMS: Quarterly Financials

September October VOTING ITEMS: VOTING ITEMS:

• Single Family Bond Deal

DISCUSSION ITEMS: DISCUSSION ITEMS: • Single Family Bond Deal • Approval of Board Meeting Schedule

for 2023

November December VOTING ITEMS: VOTING ITEMS: • Approval of Board Meeting Schedule for

2023

DISCUSSION ITEMS: DISCUSSION ITEMS: • Audited Year-End 6/30/2022 Financials

TO:

FROM:

DATE:

RE:

M E M O R A N D U M

Authority Members


July 14, 2022

Amended and Restated Pass-Through Bond Program

RECOMMENDATION:

I recommend that the Michigan State Housing Development Authority (the “Authority”) authorize a resolution that extends the Amended and Restated Pass-Through Bond Program (“Amended and Restated Pass-Through Program”) until the July 2023 Board meeting, increases the maximum set-aside of tax-exempt bonds to an amount not to exceed $150 million, and approves an updated program statement.

EXECUTIVE SUMMARY:

A. Section 44c—Limited Obligation Bonds or Notes and Credit Enhancement

Under Section 44c of its Act, the Authority can participate in "conduit” or "pass-through" financings in which the bonds (or notes) issued to finance a development are a limited obligation of the Authority. The bonds are neither backed by the moral obligation of the State of Michigan nor secured by the Authority's capital reserve capital account. Instead, the bonds are secured by the revenues of the borrower and a form of credit enhancement acceptable to the Authority.

A borrower seeking a loan financed with limited obligation bonds issued by the Authority must provide evidence of a commitment to issue credit enhancement. The credit enhancement must be in a form and amount sufficient to assure the Authority that the repayment of the bonds is “reasonably secure.” The credit enhancement may be in the form of a letter of credit, bonding, guarantee, mortgage insurance, or other appropriate security. If the Authority determines that repayment of the bonds is reasonably secure, the Authority's review of the credit enhancement replaces the Authority's normal underwriting and feasibility review.

B. Modified Pass-Through Program and Short-Term Pass-Through Program

The Pass-Through program was originally authorized in 1984. In 1991, Section 44c was amended to require the Authority to determine that the use of the bond volume cap for a pass-through project would not impair the Authority’s ability to carry out its programs or finance other

housing developments or units targeted to lower income households. In 1998, the Authority offered a pilot Modified Pass-Through Program, which was made permanent in 1999.

In February 2012, the Authority approved the Pass-Through Short-Term Bond Pilot Program (“Short-Term Bond Program). The Short-Term Bond Program provided construction loan financing with cash collateral from FHA insured permanent loans serving as credit enhancement. The Short-Term Bond Program was extended in March 2014 and annually thereafter with the last extension being approved in June of 2019.

C. Amended and Restated Pass-Through Bond Program.

In 2020, the Authority authorized an Amended and Restated Pass-Through Program to increase the number of units financed and to expand the scope of the Short-Term Bond Program to include construction and permanent loans. In 2021, the Authority extended the Amended and Restated Pass-Through Program.

The proposed resolution would extend the Amended and Restated Pass-Through Program for one year, increase the maximum set-aside of tax-exempt bonds to an amount not to exceed $150 million, and authorize the attached program statement that has been modified to reflect the current application and closing process for the program. The Amended and Restated Pass-Through Program will continue to seek project proposals that address the mission objectives of the Authority, which include, but are not limited to, increasing the supply of deep income targeted units, and addressing rural housing needs.

If approved, the 2022-2023 Amended and Restated Pass-Through Program will waive the requirement that mortgages required for credit enhancement be subordinated to the Authority Regulatory Agreement’s income and rent covenants (“Subordination Requirement”). Over the past year, the Authority waived the Subordination Requirement for each pass-through transaction approved under the 2021-2022 Amended and Restated Pass-Through Program. The waivers were necessary because the Department of Housing and Urban Development (“HUD”) required the subordination of the Authority Regulatory Agreement’s income and rent restrictions to HUD’s mortgages that secured HUD’s 221(d)(4) loans, the proceeds of which served as credit enhancement. To avoid having repeated waivers over the Subordination Requirement, Authority staff recommend removing the Subordination Requirement from the 2022-2023 Amended and Restated Pass-Through Program.

If approved, the 2022-2023 Amended and Restated Pass-Through Program will also update the definition of borrower’s “investment,” which is currently defined in the Board Memorandum dated March 13, 1985 (“1985 Memorandum”). (The update is necessary because the 1985 Memorandum includes terms and concepts that are no longer used by Authority staff to calculate returns.) The new definition of borrower’s “investment” is set forth in a memorandum dated July 14, 2022 and attached as Exhibit B to the 2022-2023 Amended and Restated Pass-Through Program statement. The new definition of borrower’s “investment” will be the equity established by the Authority’s Office of Low Income Housing Tax Credits (“LIHTC Office”). Using the LIHTC Office’s determination of equity will enable Authority staff to determine the borrower’s investment easily and reduce time spent on calculating the borrower’s return on an investment.


Approximately half of renters in the State of Michigan are overburdened and devote more than 30% of their income to paying rent. Additionally, there are housing challenges in Michigan, such as rural housing, permanent supportive housing, and senior housing that need to be addressed for the Authority to advance its mission. The Amended and Restated Pass-Through Program will continue to be part of a housing strategy to expand available resources to create and preserve more housing and address these various housing needs throughout Michigan.

MUNICIPAL SUPPORT:

Developments are expected to be granted tax abatement and/or receive statements of support from municipal officials.


It is anticipated that the rehabilitation and new construction of developments throughout the state will create numerous temporary jobs. The communities will be invited to engage in public hearings (TEFRA Hearings) regarding bond funding, preceded by public notices.

When pass-through loans are used to rehabilitate developments, sponsors will be asked to hold meetings with residents to discuss the rehabilitation of developments and address concerns and questions. For pass-through loans financing new construction of developments, sponsors will be asked to engage with community and neighborhood groups to address concerns and questions.

RESIDENT IMPACT:

Affordable housing developments will be built or rehabilitated throughout the state, with a percentage of units in each development reserved for low or very low-income tenants.


The proposed changes to the Amended and Restated Pass-Through Program should not impede the Authority’s ability to fulfill its mission under other programs that utilize the volume-cap-limited bonds.

The review of project proposals to determine whether projects are competitive and able to proceed with the funds available in the Gap Financing Program remains a formal part of the program. The Direct Lending Program, however, is currently oversubscribed—therefore, it is anticipated that applications for the Amended and Restated Pass-Through Program will receive approval to bypass the Direct Lending Program and be eligible for review under the Amended and Restated Pass-Through Program.

Project proposals will also be reviewed to ensure that the Authority’s various mission objectives are met. The mission objectives include, but are not limited to, increasing the supply of deep income targeted units, and addressing rural housing needs.

DRAFT

AMENDED AND RESTATED PASS-THROUGH BOND PROGRAM

JULY 1422, 20221

(Debt Financing Under Section 44c of the Authority's Act)

Act 346 of the Public Acts of 1966 (the “Act”) permits the Michigan State Housing Development Authority (the “Authority”) to participate in "conduit” or "pass-through" financings in which the bonds issued to finance a development are a limited obligation of the Authority; the bonds are not secured by the Authority's capital reserve capital account; and the bonds are not backed by the moral obligation of the State of Michigan. Instead, the bonds are secured by the revenues of the borrower, the real and personal property being financed, and a form of credit enhancement acceptable to the Authority.

Projects participating in this program (the “Pass-Through Bond Program” or the “Program”) may use pass-through bonds as long-term financing (construction and permanent financing) or as short-term financing (construction financing only). All projects must show evidence of credit enhancement that is acceptable to the Authority.

I. Eligible Projects:

Projects must satisfy the eligibility requirements of Section 44c of the Authority's Act. Both new construction and acquisition and substantial rehabilitation of residential rental units will be considered.

Proposals receiving Low-Income Housing Tax Credit (“LIHTC”) must meet the threshold requirements of the LIHTC program (“LIHTC Program”) for projects financed with tax-exempt bonds as provided in the Qualified Allocation Plan (QAP).

II. Eligible Borrowers:

The Borrower must be an eligible entity under the Authority's Act (e.g., a limited dividend housing association organized as a limited partnership, a corporation, or a limited liability company). The sponsor or developer must be in good standing at the time of application. Good standing means that none of the other projects involving the sponsor or developer that have been financed by the Authority under this Program or another Authority lending/subsidy program are experiencing significant, unresolved problems.

Ill. Minimum Income and Rent Restriction Requirements:

Applicants are required to commit to income and rent restrictions targeting either (i) 40% of the units for households whose income is at or below 60% of Area Median Income (AMI), or (ii) 20% of the units for households whose income is at or below 50% of AMI. These income and rent restrictions set forth in the Authority-approved application described in Section XIII below shall (a) be set forth in the Authority’s regulatory agreement that will recorded at the bond closing (“Authority Regulatory Agreement”), and (b) remain in place for the longer of the “qualified project

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period” of the bonds, as defined in the Internal Revenue Code or the extended use period of the LIHTC and (c) have priority over a mortgage or foreclosable lien required for credit enhancement.

In addition to the minimum requirements above, applicants will be required to commit to income and rent restrictions to target at least 10% of the total affordable units in the project for households whose income is at or below 40% of AMI (10% affordable unit restriction). In lieu of the 10% affordable unit restriction, the Authority may permit applicants to commit to satisfying other important mission objectives such as developing or rehabilitating projects in rural areas, or projects that meet the definition of Permanent Supportive Housing and have all necessary supportive services available, etc. The 10% affordable unit restriction may not otherwise be waived or reduced unless the Authority determines that the restriction impedes the Authority’s ability to finance the rehabilitation or new production of projects under this Program.

Developments will be eligible to utilize the income averaging set-aside in the LIHTC Program to maximize project Net Operating Income while also achieving the deeper targeting referenced above. Because tax-exempt bond regulations do not allow income averaging as a set-aside option, the projects would need to comply with both the LIHTC income averaging set-aside and the tax-exempt bond set-aside.

IV. Threshold Requirements:

Authority staff will review each application to assure that the use of the State's volume cap for a project will not impair the Authority's ability to carry out its programs or finance developments or housing units that are targeted to lower income persons. Authority staff will also determine whether there is sufficient available Program Bond Cap for the proposal.

The Authority's Office of Rental Development-Tax Credit Allocation Section will review the applicant’s standard tax credit application to assure that threshold requirements for participation in the LlHTC Program are met if LlHTC are being used to finance the development.

V. Program Bond Cap:

The Authority has allocated $1500 million of its volume cap for the Program (the “Program Bond Cap”). All proposals are subject to availability of Program Bond Cap and volume cap. Applications that are currently in the expiring July 20210 Pass-Through Bond Program pipeline and are continuing to move forward, but have not yet been approved for inducement, will automatically be considered in this July 20221 Pass-Through Bond Program. The Program Bond Cap may be reduced or increased by the Authority subject to the Authority having sufficient volume cap for its direct lending multifamily program (“Direct Lending” or “Direct Lending Program”) and single-family programs.

This Program will terminate at the earliest of the following: 1) the Authority’s regularly scheduled July 202322 meeting; 2) the Authority’s regularly scheduled June 20232 meeting if there is no July 20232 meeting; or 3) the Program Bond Cap is fully subscribed. For a project to be included in the Program Bond Cap, a project must have been approved by the Authority for an inducement resolution at or before the Authority’s July 20232 board meeting. The volume cap constituting any Program Bond Cap remaining upon termination of the Program (as outlined above) will no

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longer be available to the Program nor will it be added to any subsequent reinstatement of the Program that may occur. Once the Program has terminated, the Authority will review the Program and determine whether, and under what conditions, to extend the Program.

VI. Project Limits:

To qualify as rehabilitation, the rehabilitation expenditures with respect to the project must equal or exceed 30% of the portion of the cost of acquiring the building and equipment financed with the proceeds of the bonds issued to acquire and rehabilitate the project. For a project located in an eligible distressed area, the amount of rehabilitation may be less than the 30% requirement but not less than 15% if the Authority determines and expresses by resolution that the likely benefit to the community or the proposed residents of the project merits the use of this financing source.

Per the MSHDA Act, under this structure, the maximum amounts that the Authority is permitted to commit and lend are:

1. For projects not located in an eligible distressed area, the lesser of the total developmentcost of the proposed multifamily housing project or $25 million.

2. For projects located in an eligible distressed area, the lesser of the total development costof the proposed multifamily housing project or $50 million.

Additionally, per the MSHDA Act, a borrower shall not have outstanding loan commitments under this Program which total more than the amounts above in items 1 or 2. Once a loan has been made under this Program, the commitment made with respect to the loan shall no longer be considered outstanding.

VII. Application, Commitment, Closing and Other Fees:

Fees shall be determined as follows:

A. Upon submission of an application, the sponsor shall include an application fee equal to thegreater of $5,000 or .0005 times the amount of the bonds to be issued. This application fee willbe credited to the commitment fee due.

B. Upon receipt of a loan commitment, the sponsor/developer shall pay a commitment fee of 0.1%of the principal amount of the bonds to be issued, less the amount of the application fee paid withthe initial application.

C. Upon issuance of the bonds, the borrower shall pay to the Authority a fee not to exceed 0.9%of the principal amount of the bonds for developments located in an eligible distressed area or1.9% of the principal amount of the bonds for developments not in an eligible distressed area.

D. For each year that bonds remain outstanding, the borrower shall pay an annual compliancemonitoring fee in an amount not to exceed 0.25% of the outstanding principal amount of thebonds. This fee shall be paid according to such terms and conditions as may be approved by anauthorized officer of the Authority.

VIII. Application Requirements:

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For a project to be eligible to apply for the Pass-Through Bond Program, it must first be submitted to the Authority to evaluate whether the project is likely to be competitive under the Authority’s Gap Financing program (“Gap Financing Program”). The Gap Financing Program makes available a certain amount of gap financing to be used in combination with Authority Direct Lending tax-exempt bond financing. To perform its evaluation, the Authority will consider the following:

1. The financial viability of a project based on the pro-forma analysis, site, and preliminarymarket analysis.

2. The overall capacity and experience of the development team.3. The likelihood that the project will be competitive and be able to proceed with the funds

available in the Gap Financing Program. To determine how competitive a project is likelyto be, the Authority will primarily evaluate a project’s soft to hard debt ratio, which is usedto rank the proposals in the Gap Financing Program, to determine if the project appearsto be competitive as compared to the current or most recent Gap Financing Programfunding round. Applicants are encouraged to view rankings of recent Gap FinancingProgram funding rounds on the Authority’s website to determine with more certaintywhether their project has a competitive soft to hard debt ratio. Since the Direct LendingProgram is currently oversubscribed, it is anticipated that Pass-Through Bond Programapplications during this time will be given MSHDA staff approval to bypass the DirectLending Program so they can apply under the Pass-Through Bond Program.

Following the analysis above, if, based on the Authority’s determination, a project is unlikely to be competitive in the Gap Financing Program, the project will be eligible to continue under consideration as part of the Pass-Through Bond Program. Additionally, following an evaluation based on the process outlined above, projects that do compete under the Gap Financing Program, but that cannot move forward using gap financing with an Authority Direct Lending tax-exempt loan (as determined by the Authority as part of the Gap Financing Program) will be able to submit an application as part of the Pass-Through Bond Program. However, Authority gap financing such as HOME funds and/or Mortgage Resource Funds are not available to projects that apply and are financed under the Pass-Through Bond Program.

If the sponsor chooses to proceed to the Pass-Through Bond Program, the following items must be submitted:

A. The sponsor/developer must submit a completed application under the LlHTC Program,including all required attachments.

B. To be considered complete, all applications for an allocation of volume cap under this Programmust include:

i. A description of the proposed credit enhancement and a statement as to the amount ofthe tax-exempt bonds (and taxable bonds, if appropriate) requested. The proposed creditenhancement may be in the form of cash collateral from a HUD permanent mortgage loanor similar funding source, an unconditional, irrevocable letter of credit, guaranty, bond or

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mortgage insurance, or other security as the Authority deems appropriate to assure the Authority that repayment of the bonds is reasonably secure.

ii. Assurance that all bond issuance costs will be paid and the professional team (bondunderwriter, bond trustee, bond counsel, etc.) will be compensated for services renderedin issuing the bonds. All bond issuance costs are the responsibility of thesponsor/developer and are not the responsibility of the Authority.

iii. To the extent not identified in the LIHTC Program application, identification of the fulldevelopment team, including the bond underwriter, bond trustee, bond counsel, equitypartner and rating agency. Bond counsel must have prior experience on Authority bondtransactions and must be pre-approved by the Director of Legal Affairs, the Chief FinancialOfficer, and the Finance Division of the Office of Attorney General. The bond underwriter,bond trustee and rating agency must be acceptable to the Chief Financial Officer.

iv. For proposals involving the acquisition and rehabilitation of existing property,substantiation that the rehabilitation expenditures will equal at least 30% of the bondproceeds used to acquire the building(s) and equipment. (For a project located in aneligible distressed area, the amount of rehabilitation may be less than the 30% but notless than 15% if the Authority determines and expresses by resolution that the likelybenefit to the community or the proposed residents of the project merits the use of thisfinancing source.)

v. If applicable, a tenant relocation plan.

vi. A phase I environmental assessment report.

vii. A market study.

viii. The application fee for both the Pass-Through Bond Program and the LIHTC Program,

C. Applications may be submitted at any time after the Program is authorized. Authority staff willprocess applications on a first-come first-served basis in the order they are received inaccordance with the date the application is received by MSHDA. The Authority will adviseprospective sponsors/developers of (a) the number of proposals in process, (b) the place “in line”where the application is, based on the submission date/time of the application, and (c) the totalvolume cap requested by those proposals. Project applications that are submitted but are foundto have substantial deficiencies, and cannot progress along a normal approval timeline, may losetheir place in line to other projects that are ready to move forward, but were submitted after them.For a project to be included in the Program Bond Cap, a project must have been approved by theAuthority for an inducement resolution.

D. Applications that do not receive a reservation of volume cap due to the then-currentunavailability or inadequacy of Program Bond Cap will be automatically considered under futurere-authorizations of this Program, to the extent that it is re-authorized. All applications will besubject to the guidelines and order of processing as outlined under the Pass-Through BondProgram that is in place at the time they receive a reservation of volume cap.

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IX. The Authority Processing Sequence:

A. Upon receipt of an application, staff will conduct a preliminary review, and will notify thesponsor/developer in writing within thirty (30) days as to whether (i) the application is complete or(ii) the application is not complete, and what must be corrected or completed. Staff will review andevaluate a completed application and, if appropriate, make a recommendation to the Authoritymembers that use of the State's volume cap for the proposed project will not impair the ability ofthe Authority to carry out its programs or to finance housing developments or housing units thatare targeted to lower income persons. This process includes:

i. A determination of the extent, if any, to which the proposed project may adverselyaffect projects (a) financed with Authority loans, or (b) to which the Authority hasextended a loan commitment that has not been terminated, or (c) that areconsidered to be "active" in the Authority's pipeline.

ii. A review of the environmental assessment report to confirm that no environmentalproblems exist that cannot be resolved to the satisfaction of EGLE and theAuthority.

iii. A review and evaluation of the proposed credit enhancement and the proposedcredit enhancement provider.

iv. A review of the LIHTC application and accompanying exhibits to ensure that theinformation submitted is substantially complete.

v. Preparation of an Inducement Report and Resolution for Authority considerationwithin sixty (60) days of receipt of a completed application. This represents theAuthority's formal action for purposes of applicable tax regulation, currently Treas.Reg. §1.150-2(d). It does not constitute a commitment to loan funds or adetermination that the proposal is acceptable.

B. The Authority will use its best efforts to complete the processing sequence identified in IX.A(i)- (v) within sixty (60) days of receipt of a completed application. Once the review has beencompleted and the Authority has approved the Inducement Resolution, the Director of LegalAffairs will then issue a letter reserving volume cap for 6 months. This letter must be signed andreturned by the sponsor/developer within twenty (20) days or the volume cap reservation willlapse. Proposals must proceed to loan commitment and authorization of the issuance of theAuthority bonds within 6 months after the sponsor's acceptance of the reservation of volume cap.Extensions will be provided only upon payment of a $5,000 non-refundable fee. According tostatute, the Authority is only authorized to grant one 6-month extension.

C. Upon issuance of the HUD loan commitment or other commitment providing confirmation ofcredit enhancement for the bonds, Authority staff and/or bond counsel will:

i. Begin drafting loan and bond documents;ii. Publish a TEFRA notice and conduct a TEFRA hearing. This must occur prior to

the Authority's meeting at which the Bond Resolution will be considered (see (iv)below);

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iii. Prepare a Commitment Report and Resolution for Authority consideration after evidence of a firm commitment for acceptable credit enhancement has been received, reviewed, and evaluated by staff; and

iv. Prepare a Bond Resolution for Authority consideration together with the Commitment Resolution, provided that the principal bond documents requiring Authority signature or approval are in substantially final form.

v. Complete the LIHTC review, if applicable, with issuance of a LIHTC Reservation.

Both the commitment resolution and the bond resolution must be approved and adopted by the Authority.

D. Proposals that are found unacceptable shall be terminated. The Authority will notify the sponsor/developer in writing of any termination and the basis for termination.

F. For planning and administrative reasons, closings will not be permitted during the month of December, absent approval from the Authority. Requests will be considered on a case-by-case basis. If a project's 6-month reservation of volume cap terminates during the month of December, however, an additional thirty (30) days will be granted, and no extension fee shall be charged to the borrower.

X. Return on Equity:

A borrower is allowed distributions equal to a 12% return on investment in the project for the first 12-month period following the substantial completion of the development. Thereafter, the allowable return on investment is increased by 1% annually up to 25% (except for developments in eligible distressed areas where there is no cap) and is fully cumulative. The borrower shall be required to submit to the Authority a copy of the annual financial statement evidencing its eligibility for return on investment no later than ninety (90) days following the close of the borrower's fiscal year. The borrower's "investment" is defined pursuant to Exhibit B of this Program Statement, which rescinds and replaces the Authority's Resolution dated March 13, 1985, a copy of which is attached as Exhibit C B.

XI. Bond and Tax Credit Requirements

At the time of the bond closing, the borrower must enter into agreements relating to the credit enhancement acceptable to the Authority. The credit enhancement must be unconditional and irrevocable and in an aggregate amount equal to or in excess of the bond obligations. For projects where the credit enhancement is the cash proceeds of a HUD permanent mortgage loan or other loan, the trust indenture must provide for the deposit, disbursement, and investment of the cash collateral. All investments of cash collateral must be limited to “Permitted Investments” as described in Exhibit A of the Authority Resolution dated March 18, 2021, which is attached to and made a part of this program statement. The Permitted Investments will be held by the bond trustee. The borrower must also provide the Authority with an opinion of the borrower’s counsel, a Useful Life Certificate prepared by borrower’s accountant, and/or other evidence as determined by the Authority’s Director of Legal Affairs, that respectively confirms the structure of the transaction will permit the applicant to claim the 4% LIHTC. In addition, the applicant must certify

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in writing to the sources and uses involved in the financing of the development. To ensure the Authority Regulatory Agreement’s income and rent covenants are not wiped by a foreclosure, a mortgage or foreclosable lien required for credit enhancement must be subordinated to the Authority’s Regulatory Agreement.

XII. Compliance Monitoring and Reporting Requirements:

On or before September 1 of each year, the borrower must provide the Authority with a report in a form acceptable to the Authority that includes the following statutorily-required information: incomes of the tenants, the estimated economic and social benefits of the housing to the immediate neighborhoods, the estimated economic and social benefits to the city or community, information with respect to displacement of lower income persons to the extent such occurs, together with steps taken by governmental or private parties to ameliorate the displacement and the results of such efforts, any additional information the Authority needs to report the extent of reinvestment by private lenders in the neighborhood resulting from the housing project, the age, race, family size and average income of tenants, and the estimated economic impact of the project, including the number of construction jobs created, wages paid, and taxes and payments in lieu of taxes paid.

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EXHIBIT A

Permitted Investments – Cash Collateralized Bond/Note Structure (2021) (Supplementing 44c Short-Term Pass Through Program Statement)

The investment of funds held in a collateral account, in the context of a “short-term” cash collateralized tax-exempt bond issue, should be restricted to the following general categories: (i) non-AMT tax-exempt obligations; (ii) time deposit securities issued by the United States Treasury under the State and Local Government Securities Program; and (iii) direct obligations of the United States or its agencies. The Authority generally prefers that investments of funds in the collateral account be made in the foregoing order of preference; however, deviations may be appropriate for a number of factors, including, for example, availability of investments, efficiency of the investment rate of return, and restrictions based on the national rating agencies’ rating criteria. If such is the case, the developer or the underwriter should so inform the Authority prior to pricing. In addition, investment of collateral account fund balances may be subject to yield restrictions and other tax requirements, including without limitation investment bidding requirements, the particulars of which should be confirmed prior to pricing with the Authority, bond counsel, and the representatives of the Michigan Attorney General engaged on the financing.

The collateral account fund investment (Permitted Collateral Account Investments) provisions and defined terms within the bond documents, should read substantially as follows:

“Permitted Collateral Account Investments” means the following investment obligations (subject to (A) [RATING AT TIME OF INVESTMENT OR MORE RESTRICTIVE APPLICABLE RATING AGENCY CRITERIA] and (B) investments shall, in the aggregate, have accrual periods and payment dates that provide for timely payments in amounts sufficient to meet the payment obligations with respect to the Bonds):

(i) a debt security, the interest on which is excluded from gross income for federal incometax purposes and is not a specific preference item for purposes of the federal alternativeminimum tax imposed on individuals and corporations;

(ii) a security that is an interest in a regulated investment company, as defined in Section67(c)(2)(B) of the Internal Revenue Code of 1986, as amended, at least 95 percent of theincome from which is excluded from gross income for federal income tax purposes and is nota specific preference item for purposes of the federal alternative minimum tax imposed onindividuals and corporations;

(iii) money market mutual funds that (a) have a stated primary investment criterion to investin obligations described in (i) above, and (b) permit the withdrawal of such investment on anygiven day specified by the Trustee for a value of not less than the par value of initial investmentmade therein (including, without limitation, funds for which the Trustee or an Affiliate of theTrustee serves as investment manager, administrator, shareholder servicing agent, and/orcustodian or subcustodian, notwithstanding that (x) the Trustee or an Affiliate of the Trusteereceives fees from funds for services rendered, (y) the Trustee collects fees for servicesrendered pursuant to [this Indenture], which fees are separate from the fees received from suchfunds, and (z) services performed for such funds and pursuant to [this Indenture] may at timesduplicate those provided to such funds by the Trustee or an Affiliate of the Trustee);

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(iv) securities issued by the United States Treasury pursuant to the Time Deposit State andLocal Government Securities Program described in 31 C.F.R. part 344;

(v) direct obligations of the United States of America, including obligations issued or heldin book-entry form on the books of the Department of the Treasury of the United States ofAmerica;

(vi) obligations the full and prompt payment of which is secured by the pledge of the fullfaith and credit of the United States of America;

(vii) non-callable, non-prepayable obligations of the following federal governmentagencies: Federal Home Loan Bank, Federal National Mortgage Association, Federal HomeLoan Mortgage Corporation, Farm Credit System and United States Department of Housingand Urban Development; and

(viii) money market mutual funds that (a) have a stated primary investment criterion to investin obligations described in (v) through and including (vii) above, and (b) permit the withdrawalof such investment on any given day specified by the Trustee for a value of not less than thepar value of initial investment made therein (including, without limitation, funds for which theTrustee or an Affiliate of the Trustee serves as investment manager, administrator, shareholderservicing agent, and/or custodian or subcustodian, notwithstanding that (x) the Trustee or anAffiliate of the Trustee receives fees from funds for services rendered, (y) the Trustee collectsfees for services rendered pursuant to [this Indenture], which fees are separate from the feesreceived from such funds, and (z) services performed for such funds and pursuant to [thisIndenture] may at times duplicate those provided to such funds by the Trustee or an Affiliateof the Trustee).

4842-2552-4957

EXHIBIT B

M E M O R A N D U M



DATE: July 14, 2022

RE: Determining Return on Investment for Projects Financed under Section 44(c)

RECOMMENDATION:

I recommend that the Michigan State Housing Development Authority (the “Authority”) authorize a revision of the determination of a return on investment for projects financed under the Authority’s Pass-Through Program by replacing the Board Memorandum dated March 13, 1985 (“1985 Memorandum”) with this memorandum.

EXECUTIVE SUMMARY:

The 1985 Memorandum established a borrower’s return on an investment in a multifamily project under Section 44c of the Authority’s Act (i.e., the Pass-Through Program). The 1985 Memorandum includes terms and concepts that are no longer used by Authority staff to calculate returns.

Authority staff recommend replacing the 1985 Memorandum with this memorandum (“Memorandum”), which would set the borrower’s investment (owner’s equity) in a pass-through transaction based on the equity established by the Office of Low Income Housing Tax Credits (“LIHTC Office”). Using the LIHTC Office’s determination of equity will enable Authority staff to determine the borrower’s investment easily and reduce time spent on calculating the borrower’s return on an investment.

If approved, this Memorandum will rescind and replace the 1985 Memorandum as Exhibit B to the Amended and Restated Pass-Through Bond Program Statement (“Pass-Through Program Statement”). The Pass-Through Program Statement will be amended to reference this Memorandum as Exhibit B.

ADVANCING THE AUTHORITY’S MISSION: This proposed change will promote the “Decision Making” Guiding Principle. By using the LIHTC Office’s determination of equity, Authority staff can determine the borrower’s return on an investment more easily. COMMUNITY ENGAGEMENT/IMPACT: Not applicable. ISSUES, POLICY CONSIDERATIONS, AND RELATED ACTIONS: None.

EXHIBIT C

Michigan State Housing Development Authority Agenda

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