AgdaPkt 2016-01-25 Closed and Interview and Joint SA PFA

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In addition to the RDA assistance the original project financing for the development of MidPen’s City Center Plaza apartments included 9% Federal Low Income Housing Tax Credits (“Tax Credits”), provided through the California Tax Credit Allocation Committee and Program. As a result, the project was owned by a limited partnership known as Mezes Court Associates, LP of which the tax credit investor was a 99.9% limited partner. MP Mezes, Inc., a wholly controlled affiliate of MidPen Housing is the general partner. As is common in all tax credit projects, the nonprofit general partner (in this case MP Mezes, Inc., an affiliate of MidPen Housing) had an option to buy the property back from the limited partner at the end of the tax credit compliance period. This acquisition was completed in June 2014. The terms of the purchase option allowed MidPen to acquire the property for the greater of Fair Market Value or existing debt and exit taxes. In the case of City Center Plaza, given the recent escalation in the rental market, the Fair Market Value as determined by a qualified appraiser was greater than the outstanding debt. As a result, in order to preserve the property and secure the investor’s exit from the partnership, MidPen was required to pay the limited partner investor $1.46 million (the difference between the outstanding debt/exit taxes and the Fair Market Value). MidPen now desires to refinance City Center Plaza to pay off the existing senior lender, repay MidPen loans/advances for buyout costs of the limited partner that occurred in June 2014 and complete essential property rehabilitation. In order to accomplish this MidPen proposes to obtain tax exempt financing in an amount not to exceed $20,000,000. ANALYSIS MidPen identified capital repairs necessary to preserve and maintain the property including substantial dry rot repair to the building’s structural framing, exterior stucco replacement, exterior painting, various building envelope waterproofing and several other essential items. Based on the scope of work MidPen estimates the total hard costs will be $4.3 million dollars. These repairs are critical to the long term preservation of this existing affordable housing. MidPen intends to re-syndicate the Project to generate tax credit equity. In order to favorably position the Project to facilitate a successful re-syndication they needed to reduce or eliminate existing debt or need existing lien holders to subordinate to new mortgage financing and modified loan terms. In November 2015, in support of MidPen’s successful tax re-syndication process the Redwood City Successor Agency approved the prepayment of the outstanding RDA General portion of principal and accrued interest and Redwood City acting as the Housing Successor approved the prepayment of unpaid accrued interest on the RDA Low Mod portion of the loan. The Housing Successor also approved modified Note terms that extend the balance of the loan repayment of principal and interest by forty 9.B. - Page 2