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Home My WebLink About32 - NB-4 - Attachment 1 - 8/3/2021 CALIFORNIA STATEWIDE COMMUNITIES DEVELOPMENT AUTHORITY WORKFORCE HOUSING PROGRAM 580 ANTON APARTMENTS Opportunity to Immediately Convert 250 Market Rate Units to Low, Middle and Moderate Income Housing 580 Anton Blvd., Costa Mesa June 14, 2021 California Statewide Communities Development Authority: A Trusted Partner The California Statewide Communities Development Authority (CSCDA), a joint powers authority, was founded in 1988 by the League of California Cities and the California State Association of Counties to help local governments build community infrastructure, provide affordable housing, create jobs, and make access available to quality healthcare.  CSCDA has issued more than $65 billion in bonds for over 1,700 public benefit financings, including the creation or preservation of nearly 100,000 affordable housing units throughout California.  The CSCDA governing board is comprised of current and retired City Managers, County Treasurer‐Tax Collectors and other city and county officials from across the State.  Over 530 cities, counties and special districts are CSCDA members, including the City of Costa Mesa, which has been a member since 2006.  CSCDA remains accountable to its members via its founders and sponsors. In addition to six approved sponsors, four national underwriting firms are part of CSCDA program. Very Experienced Sponsorship Team  Opportunity Housing Group (Sponsor): OHG is an affiliate of Blake Griggs Properties. OHG’s principals have extensive experience in multifamily acquisitions and asset management. Its individual team members have acquired over 15,000 apartments, managed over 100 properties comprised of 35,000+ units, and developed over 7,500 units. www.opportunityhousinggroup.com.  Citigroup Global Markets (Bond Underwriter): The market leader in tax‐exempt “high yield” (from BBB+ to non‐investment grade) debt, both in the primary market underwriting as well as in secondary market sales and trading. Citi’s trading volume is typically in the $2 billion / month range. Citi’s tax‐exempt sales and trading team is the largest on Wall Street and has extensive experience distributing large complex high yield deals.  Legacy Partners (Property Manager): Legacy will remain as the property manager of the asset following closing. There will be no material change in management of the asset. Legacy is a highly experienced manager of Class A multifamily projects with a long history in Costa Mesa. www.legacypartners.com. Summary of Key Benefits of CSCDA’s Workforce Housing Program  Immediately create 250 units of Low, Middle and Moderate Income Housing to benefit essential workers in Costa Mesa over the next 30 years.  Residents receive initial rent savings of $1.1 million per year and capped future rent increases. Rent savings are typically reinvested into the local economy.  The City’s investment by way of the property tax exemption will cost approximately $129,000/yr (0.08% of 2020‐21 general fund revenue). In exchange, the City receives the full net sales proceeds from the asset under the Public Benefit Agreement. This is projected to return $219 million to the City on sale of the asset (41.8x ROI to the City not including resident rent savings).  No liability for City. Minimal time & effort to approve program. No ongoing administration requirements.  Significant budgeted reserves and best‐in‐class operator to maintain asset in Class A condition.  580 Anton Apartments is ideally suited for this program and under contract to convert immediately following City approval. Attachment 1 CSCDA Workforce Housing Program for 580 Anton, Costa Mesa Page 2 Workforce Housing for Middle‐Income First Responders or Other Public Employees  CSCDA’s Workforce Housing Program facilitates the acquisition or construction of properties for low, middle and moderate‐ income individuals and families typically earning between <80% and <120% of AMI.  The City of Costa Mesa may opt to give a priority in the Regulatory Agreement to local artists, healthcare workers, policemen, firemen, teachers, government employees, or local public‐school graduates. This “missing middle” earns too much to qualify for traditional subsidized affordable housing, but not enough to afford market rate rents in the communities where they work.  580 Anton is a Class A asset that will be ready to be immediately delivered to this rental community with a very qualified Sponsorship Team for the next 30 years (although no existing tenants will be displaced). 580 Anton Target Renters & Income Levels: Rent levels will be lowered to no more than 35% of household income at Low (<80% AMI) to Moderate (<120% AMI) levels and will be annually capped with annual rent increases of no more than 4%. This provides stability and long‐term attainability for residents over the life of the bonds.  Rent growth is limited under the Regulatory Agreement to Income Growth, not to exceed 4% annually. This locks in currently depressed rents due to COVID and preserves affordability as the market recovers.  Current residents will not be displaced by the program. If tenants do not qualify for restricted rents, they may remain at their current market rent. Eventually, all renters will qualify for rent within the Low to Moderate income range.  Residents tend to spend monthly rent savings, thus benefiting local businesses.  This program does not involve a Section 8 or HUD Voucher subsidy. Public Benefits to the City of Costa Mesa and Cost/Benefit Analysis for Loss of Tax Revenue Under the Public Benefit Agreement, the City, at its sole discretion, may force a sale of the property between Year 15 and Year 30, and the City would receive the net sale proceeds.  All properties are financed through the issuance of tax‐exempt bonds and have no equity partners which means that after paying off the bond payments upon a sale, all excess sales proceeds go to the City.  The City never has to own the property, and still receives all the financial benefits.  The City incurs no fees, costs, liability, or administrative responsibilities from the program or individual projects.  All excess cash flow goes either to maintain the asset in “Class A” condition over 30‐years or to pay down the bond principal. RESIDENT RENT SAVINGS TOTAL AFTER Acquisition Pre‐CURRENT LOW MIDDLE MODERATE UNITS COVID Market <80% AMI <100% AMI <120% AMI Restricted Rent/Unit Rent/Unit 84 units 83 units 83 units Rent/Unit Unit Type # Units Income <$86,080 Income <$107,600 Income <$129,120 TOTAL Studio 5 $2,436 $2,300 2,197 2,229 2,229 $2,216 One Bed 165 $2,966 $2,800 2,433 2,468 2,476 $2,459 Two Bed 80 $3,787 $3,575 2,825 3,290 3,350 $3,147 TOTAL 250 $3,218 $3,038 $2,558 $2,720 $2,747 $2,674 RESIDENT SAVINGS VS. CURRENT RENTS Initial Rent Savings/Unit/Mo ‐$480 ‐$318 ‐$291 ‐$364 Total Rent Savings/Annual ‐$483,892 ‐$316,893 ‐$289,732 ‐$1,090,518 RESIDENT SAVINGS VS. PRE‐COVID RENTS Initial Rent Savings/Unit/Mo ‐$660 ‐$498 ‐$471 ‐$544 Total Rent Savings/Annual ‐$665,332 ‐$496,173 ‐$469,012 ‐$1,630,518 Note: Income limit shown for a family of two (one ‐bed unit). Pre‐Covid rents are from Costar. RENTS AFTER ACQUISITION FINANCIAL METRICS (ESTIMATED) Investment of Property Tax Annual ‐$129,240 Total‐ 30 Yrs ‐$5,243,020 Projected Cash to City on Sale of Asset TOTAL YR 30 (2051) $219,090,212 Return on Investment (Property tax investment vs. project cash to City) 41.8x Plus: Resident Rent Savings (vs. Current Rents)Annual $1,090,518 Total‐ 30 Yrs $37,933,544 Sale in year 30 assumes 3% market rent growth and 4.75% exit cap rate. CSCDA Workforce Housing Program for 580 Anton, Costa Mesa Page 3 580 Anton Apartments 250 Units Completed 2018 Amenities Include:  Pool & Spa  Grand Salon, entertaining club, game rooms  Lake View Fitness Center, yoga/dance studio  Relaxation Room  Business Center  Easy access to South Coast Plaza, 405, 55, John Wayne Airport