Florida Housing Finance Corporation Captiva Cove II · Florida Housing Finance Corporation ... The...

Florida Housing Finance Corporation

Credit Underwriting Report

Captiva Cove II

MMRB, HOME and Housing Credit Program

2014‐110B/2014‐298H

Section A Report Summary

Section B Loan Conditions and HC Allocation Contingencies

Section C Supporting Information and Schedules

Prepared by

Seltzer Management Group, Inc.

Final Report

June 3, 2014

EXHIBIT B of 38

SMG

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JUNE 3, 2014

Captiva Cove II

TABLE OF CONTENTS

Page Section A

Report Summary Recommendation A1‐A8

Overview A9‐A13 Uses of Funds A14‐A21 Operating Pro Forma A22‐A24

Section B Loan Conditions and HC Allocation Contingencies B1‐B6

Section C

Supporting Schedules Additional Development and Third Party Information C1‐C14 Borrower Information C15‐C19 Guarantor Information C20 Credit Enhancer Information C21 Syndicator Information C22‐C23 General Contractor Information C24‐C25 Property Manager Information C26‐C27

Exhibits

15 Year Pro Forma 1 Features and Amenities and Resident Programs 2 1‐2 Completeness and Issues Checklist 3 1‐2 HC Allocation Calculation 4 1‐3

EXHIBIT B of 38

SMG

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JUNE 3, 2014

Section A

Report Summary

EXHIBIT B of 38

MMRB, HOME AND HC CREDIT UNDERWRITING REPORT SMG

CAPTIVA COVE I I A-1

JUNE 3, 2014

Recommendation

Seltzer Management Group, Inc. (“SMG” or “Seltzer”) recommends a Multifamily Mortgage Revenue Bond (“MMRB”) Program loan in the amount of $8,500,000, a HOME loan in the amount of $2,800,000 and a Housing Credit (“HC”) allocation in the annual amount of $535,900 be awarded to this development by the Florida Housing Finance Corporation (“FHFC” or “Florida Housing”).

Address: City: Zip Code:

County: County Size:

Development Category: Development Type:

Construction Type:

Demographic Commitment: Elderly: Homeless: ELI: Units @ AMI

Farmworker or Commercial Fish Worker: Family: Link: Units

Annual

Rental

Income

$35,280

$163,704

$67,968

$331,392

$49,320

$228,456

CU Rents

$588

$718

$708

$863

$822

$1,002

$766

$863

$889

$1,002

Units AMI%

50%

60%

50%

60%

50%

60%

No

Yes

765

765

1027

1027

Utility

Allow

$58

$58

$68

$718$718

$708

$863

$822

$1,002

Net HC

Rent

$588

Appraiser

Rents

$637

Program Numbers: 2014‐298H

Large

New Construction Garden Style Apartments

Concrete walls on concrete slab with stucco exteriors and ceramic tile roofs

Broward

2014‐110B

$776

$931

$897

$1,063

3.0

5

19

8

32

5

$695

$834

$964

Square

Feet

1201

Gross HC

Rent

$646

$776

Bed

Rooms

2.0

$1,077

2.0

2.0

Captiva Cove IIDevelopment Name:

1201 S. Dixie Highway West Pompano Beach 33060

1.0

1.0

2.0

2.0

1.0

$766

$863

Bath

Rooms

1.0

RD/HUD

Cont

Rents

Applicant

Rents

$637

$718

No

No

$1,2193.0 1201192.0

$889

$1,002

High

HOME

Rents

Low

HOME

Rents

$884

$75

$68

$75

$876,12088 88264

HOME Subsidy Limits 24 One Bedroom Units at $88,306 = $2,119,344 40 Two Bedroom Units at $107,378 = $4,295,120 24 Three Bedroom Units at $138,913 $3,333,912 88 Total Units for Maximum Subsidy of: $9,748,376

Buildings: Residential ‐ Non‐Residential ‐

Parking: Parking Spaces ‐ Accessible Spaces ‐

Set Asides:

HC

HOME

HOME

88

18

70

50%

60%

Term (Years)

12

3060%

60%

30

30

30

75

Program

144

% AMI

4

85.0%

100.0%

20.0%

80.0%

0

# of Units% of Units

MMRB

EXHIBIT B of 38



JUNE 3, 2014

Absorption Rate units per month for months.

Occupancy Rate at Stabilization: Physical Occupancy Economic Occupancy

Occupancy Comments

DDA?: QCT?:

Site Acreage: Density: Flood Zone Designation:

Zoning: Flood Insurance Required?:

97.00%

A

RPUD, Residential Planned Unit Development

As projected by Appraiser

4.96 17.7419

Yes

22 4

Yes No

95.00%

EXHIBIT B of 38



JUNE 3, 2014

Applicant/Borrower:

General Partner 1:

General Partner 2:

General Partner 3:

General Partner 4:

Limited Partner 1:

Limited Partner 2:

Limited Partner 3:

Special Limited Partner:

Construction Completion

Guarantor(s):

Operating Deficit

Guarantor(s):

Captiva Cove II Associates, Ltd.

Jorge and Awilda Lopez, tenants by the entireties

M3 Acquisitions, LLC/M.S. Mades Family L.imited Partnership

Stuart I. Meyers Family Partnership, Ltd.

% Ownership

0.0100%

Leon J. Wolfe


Mara S. Mades


DEVELOPMENT TEAM

99.9900%

Cornerstone Captiva Cove II, LLC

CSG Development Services II, L.L.C.

Stuart Meyers




Mara S. Mades

Leon J. Wolfe



Stuart Meyers

Pvt Placement Purchaser:

Developer:

Principal 1

Principal 2

Principal 3

Principal 4



M3 Acquisitions, LLC

M.S. Mades Family Limited Partnership

Stuart I. Meyers Family Partnerhship, Ltd.

General Contractor 1:

General Contractor 2:

Management Company:

Const. Credit Enhancer:

Perm. Credit Enhancer:

Syndicator:

Bond Issuer:

Architect:

Market Study Provider:

Appraiser:

CSG Construction, LLC

CSG Management Services, LLC

Clobus, McLemore and Duke, Inc.

Citi Community Capital

Stratford Capital Group L.L.C.

FHFC

Clobus, McLemore and Duke, Inc.

Citi Community Capital

Burgos Lanza & Associates

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JUNE 3, 2014

62.5% 96%

Market Rate/Market

Financing LTV

1.257 1.23

$282,692

42.9%

Loan to Cost

Restricted/ Favorable

Financing LTV

Operating/Deficit

Service Reserve

33.9% 51.8%

Period of Operating

Expenses/Deficit

Reserve in Months

4

66%

First

0.00% 0.00%

$467,993.00

FHFC

30.00

CITI AHS

$0.00 $0.00

Lender/Grantor

Loan Term

Amortization

Lien Position

Amount

Underwritten Interest

Rate

All In Interest Rate 5.04%

ThirdSecond

1st Source

PERMANENT FINANCING INFORMATIONOther5th Source4th Source3rd Source2nd Source

Debt Service Coverage

5.04% 0.28% 0.00% 0.00% 0.00%

0

$5,300,000 $2,800,000

0.00 0.0018.00 20.00

35.00

Broward Co.

0.281% 0.00%

$500,000.00

$7,735,000.00

Year 15 Pro Forma Income Escalation Rate

Year 15 Pro Forma Expense Escalation Rate

2.00%

3.00%

Land Value

As‐Is Value (Rehabilitation)

Projected Net Operating Income (NOI) ‐ Year 1 $405,274.85

$535,900

Bond Structure

Housing Credit Annual Allocation

$0.95

$2,510,000.00

$0.00

Rent Restricted Favorable Financing Stablized Value $8,475,000.00

Private Placement

$445,713.69

Deferred Developer Fee

Market Rent/Market Financing Stabil ized Value

Rent Restricted Market Financing Stablized Value

Projected Net Operating Income (NOI) ‐ 15 Year

Housing Credit Syndication Price

$1,677,545.34

$12,355,000.00

EXHIBIT B of 38



JUNE 3, 2014

Cornerstone $1,677,545 $19,063

$60,227

$31,818

Stratford

First Mortgage

$0

$15,637,538

$1,959,191

TOTAL

Deferred ODR

$8,500,000

$2,800,000

$282,692

$2,800,000

$467,993

$500,000

$467,993

$500,000

CONSTRUCTION/PERMANENT SOURCES:

CITI/FHFC

FHFC

Broward County

Second Mortgage

$5,318

$5,682

$5,300,000

$177,699

Perm Loan/UnitPermanentConstructionLender

HC Equity Stratford $1,125,000 $4,892,000 $55,591

Deferred Developer Fee

Third

HOME Match Grant AHS

$15,634,876

Source

Deferred GC Fee FHFC $0 $0

Changes from the Application:

COMPARISON CRITERIA YES NO

Does the level of experience of the current team equal or exceed that of the team described in the application?

X

Are all funding sources the same as shown in the Application? 1

Are all local government recommendations/contributions still in place at the level described in the Application?

X

Is the Development feasible with all amenities/features listed in the Application? X

Do the site plans/architectural drawings account for all amenities/features listed in the Application?

2

Does the Applicant have site control at or above the level indicated in the Application? X

Does the Applicant have adequate zoning as indicated in the Application? X

Has the Development been evaluated for feasibility using the total length of set‐aside committed to in the Application?

X

Have the Development costs remained equal to or less than those listed in the Application?

3

Is the Development feasible using the set‐asides committed to in the Application? X

If the Development has committed to serve a special target group (e.g. elderly, large family, etc.), do the development and operating plans contain specific provisions for implementation?

X

HOME ONLY: If points were given for match funds, is the match percentage the same as or greater than that indicated in the Application?

X

HC ONLY: Is the rate of syndication the same as or greater than that shown in the X

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JUNE 3, 2014

Application?

Is the Development in all other material respects the same as presented in the Application?

X

The following are explanations of each item checked “No” in the table above:

1. Stratford will be the Syndicator of the HC in the total amount of $4,892,000, replacing R4 Capital LLC, which was reflected as HC Syndicator for $4,501,000 in Applicant’s Non‐Competitive Application.

Applicant has increased the MMRB amount during the construction/stabilization period from $7,700,000 to $8,500,000. The Applicant has decreased the MMRB amount during the permanent period from $5,700,000 to $5,300,000.

2. Required HOME Construction Features and Amenities and MMRB and HOME Optional Features and Amenities have only recently been selected and all are not currently reflected on the Subjects plans and specifications. Upon receipt of updated plans and specifications, SMG will confirm (as an addendum to the Plan and Cost Analysis) that site plans and architectural drawings account for all Required and Optional Amenities and Features selected and detailed in Exhibit 2. This requirement has been included as a Special Condition to this Report.

3. Development costs have increased from $14,904,454 in the application to $15,637,538 primarily due to increases in construction costs and financial costs which are somewhat offset by decreases in general development costs.

These changes have no substantial material impact to the MMRB/HC recommendation for this development.

Does the Development Team have any FHFC Financed Developments on the Past Due/Non‐Compliance Report? Florida Housing’s Past Due Report dated March 28, 2014, does not reflect any past due items for the development team. The Asset Management Noncompliance Report dated March 28, 2014, does not reflect the subject to be in noncompliance.

This recommendation is subject to satisfactory resolution (as determined by FHFC) of any outstanding past due or noncompliance issues. Failure to correct such deficiencies could reflect poorly on the development team’s past performance which may cause the recommended HC to be in jeopardy.

Strengths:

1. The Principals to this transaction, Stuart I. Meyers, Jorge Lopez, Leon J. Wolfe and Mara S. Mades, and their Development Team are experienced developers of Affordable Multifamily Housing and have sufficient financial resources to develop, construct and operate the Subject development.

2. The Subject is the second phase of the overall Captiva Cove development. Phase I consists of 264 units. Funding sources included FHFC MMRB, NIBP, HOME and 4% HC. Construction was completed on schedule and stabilized occupancy was achieved sooner and at levels greater than underwriting assumptions, September 2013 at 99% occupancy. Since that time occupancy has remained stable at

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JUNE 3, 2014

that level and is currently reported at 99% occupancy. The Appraiser estimates that the Subject will be leased prior to individual buildings being completed with move‐ins immediately after receipt of certificates of occupancy. The Appraiser’s stabilized occupancy assumption for the Subject is 97%.

Other Considerations:

1. The Principals to this transaction are Stuart I. Meyers, Jorge Lopez, Leon J. Wolfe and Mara S. Mades. Each has disclosed that as a result of the recent financial crisis and economic downturn they have been involved in multiple transactions that required loan modifications and work outs. While settlements appear to have been reached with all lenders, several of the settlements require material future payments. SMG is unable to determine the impact that these settlements and/or unresolved disputes may have upon the financial capacity of Mr. Meyers, Mr. Lopez, Mr. Wolfe and Ms. Mades to provide meaningful Construction Completion and Operating Deficit Guarantees.

2. Financial statements received for the Developer Entity, CSG Development Services II, LLC (“CSG”), and individual personal guarantors, Mr. Meyers, Mr. Lopez, Ms. Mades, and Mr. Wolfe, are not audited, compiled or reviewed by an independent licensed CPA, or unaudited prepared by an independent licensed CPA with the two most recent years tax returns, as required by Rule.

3. The Principals Lopez, Mades, and Wolfe have disclosed that they are Defendants (individually and along with various related party affiliated entities) in legal action brought by Principal Meyers and Stuart Meyers Family Partnership, Ltd., as Plaintiff(s). The Plaintiffs and Defendants have both indicated that the parties have agreed to a “stand still” agreement and are discussing various settlement proposals. The stand still agreement expires June 13, 2014. SMG is unable to determine the impact that this unresolved dispute and or any potential settlement may have on the Defendants or the ability of the General Partner to carry on typical functions unobstructed.

Mitigating Factors:

1. SMG has evaluated the potential impact of these settlements on the Principals over the last several years as part of four credit underwriting assignments, specifically, Captiva Cove (Phase I), Villa Capri I and III, and The Preserve at Boynton Beach. Each of these transactions received recommendations that included conditions to provide additional security (cash collateral, letters of credit, etc.) to further support the personal guarantees of the Principals. During that time, settlements on several of the transactions had not been finalized. Since that time, settlements have been reached with all lenders. Further, all four transactions listed above were successfully closed and constructed and have reached stabilized occupancy consistent with or ahead of underwriting assumptions. Accordingly, SMG recommends that the Principals provide standard FHFC Guarantees subject only to the following: execution of a liquidity maintenance agreement requiring that the Principals maintain an aggregate net worth and liquidity of not less than $10,000,000 and $1,000,000, respectively.

2. SMG has received certified internally prepared balance sheets as true and correct. SMG has verified trade references and bank balances, and pulled credit reports to verify the creditworthiness of the Guarantors. However, receipt and satisfactory review of financial statements and/or tax returns meeting the Rule is a condition to closing.

3. SMG recommends that should the litigation remain unsettled, FHFC and Special Counsel review the status of this litigation prior to closing to assess any potential negative impact on the General

EXHIBIT B of 38



JUNE 3, 2014

Partner’s ability to perform its duties and financial exposure to Defendants. Should there be a determination of potential negative impact, FHFC, Special Counsel and Credit Underwriter, shall recommend measures to mitigate such risk. Implementation of the recommended measures (if required) prior to or concurrent with the MMRB and HOME closing is a Special Condition to this Report.

Waiver Requests/Special Conditions: None

Additional Information:

1) In its March 18, 2014, HC Equity Proposal, Stratford requires an ODR of $282,692, which is approximately 4 months of Annual Debt Service plus 4 months of Operating Expenses. SMG considers an ODR ranging between 3‐6 months of Annual Debt Service plus 3‐6 months of Operating Expenses to be reasonable. Seltzer’s MMRB/HOME Program Loan and Annual HC Allocation Recommendations are contingent upon:

a) Prior approval of ODR disbursements by FHFC.

b) Upon expiration of the ODR, the balance in the ODR Account will be used to pay down FHFC‐administered Loan Debt, if any, with the remaining amount deposited to the Replacement Reserve Account.

Issues and Concerns: None

Recommendation:

SMG recommends FHFC approve a $8,500,000 MMRB loan consisting entirely of tax‐exempt bonds (which will be reduced to $5,300,000 at permanent loan conversation), a $2,800,000 HOME Loan and a $535,900 annual allocation of HC be awarded for the construction and permanent financing of Captiva Cove II.

When utilizing a 1.00 to 1.00 debt service coverage ratio required by the State Board of Administration in their fiscal sufficiency determination, the current net operating income at the current interest rate would support a tax‐exempt bond amount of $6,660,000.

This recommendation is based upon the assumptions detailed in the Report Summary (Section A) and Supporting Information and Schedules (Section C). In addition, this recommendation is subject to the MMRB and HC Allocation Contingencies (Section B). The reader is cautioned to refer to these sections for complete information.

This recommendation is only valid for six months from the date of the report.

Prepared by: Reviewed by:

Benjamin S. Johnson Cindy Highsmith President Chair Underwriting Review Committee

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JUNE 3, 2014

Overview

Construction Financing Sources

Source Lender Applicant

Revised

Applicant Underwriter

Interest

Rate

Construction

Debt ServiceFi rs t Mortgage CITI/FHFC $7,700,000 $8,500,000 $8,500,000 3.485% $296,262

Second ‐ HOME FHFC $2,000,000 $2,800,000 $2,800,000 0.281% $7,871

Third ‐ HOME Broward Co HOME $467,993 $467,993 $467,993 0.00% $0

HOME Match Grant AHS $0 $500,000 $500,000

HC Equity Stratford $3,150,000 $1,125,160 $1,125,000

Deferred Developer Fee Cornerstone $1,834,000 $1,887,186 $1,959,191

Deferred GC Fee/ODR Stratford $0 $282,692 $282,692

Deferred HC Admin FHFC $0 $42,000 $0

Total $15,151,993 $15,605,031 $15,634,876 $304,133 Tax Exempt MMRB Loan:

Borrower applied to FHFC to provide Tax‐Exempt Bonds for Construction Period Loan Financing of the Subject Development. Per a May 15, 2014 Letter of Interest and accompanying Term Sheet, CITI proposes to provide a construction period funding loan, the proceeds of which will be utilized to purchase tax‐exempt bonds issued by FHFC, in an amount up to $8,500,000. The bond issue will include $3,200,000 of Short‐Term “Gap” Bonds that will be retired at Permanent Loan Conversion.

Terms of the Construction Period Loan are anticipated to include: a term of 24 months, plus two six‐month extension options, and an interest only variable rate equal to SIFMA (currently 0.06%) plus a spread of 2.5%. SMG utilizes an “All‐In” interest rate of 3.485% for that reflects a base rate of 2.56% plus Issuer (24 basis points), Trustee (minimum of $4,500 or 8 basis points in this instance), Compliance Monitoring (based on number of units and set‐aside period or minimum of $2,928, minimum applicable or 6 basis points in this instance), Servicing Fees (0.023% or minimum of $2,400, minimum applicable or 5 basis points in this instance) and a 0.50% (50 basis points) cushion for interest rate fluctuations.

Other Construction Sources of Funds:

Additional sources of funds for this development during the construction period include a FHFC HOME loan, a Broward County HOME loan, a Grant, HC Equity, and deferred developer fees. Credit is also given for the operating deficit reserve that is not required to be funded until after rental achievement, permanent loan conversion and Forms 8609. See the Permanent Financing section below for details.

Construction/Stabilization Period:

An AIA Standard Form of Agreement between Owner and Contractor, dated May 12, 2014, reflects Substantial Completion within 365 days (12 months) from Notice of Commencement. A Production Schedule projects site work construction beginning in September 2014 with construction completion expected in August 2015. Delivery of the first building is scheduled for May 2015. Leasing will commence in April 2015. The April 13, 2014, Market Study by Clobus reflects an Absorption Rate of 22 units per month. Stabilization at a 97% Occupancy Rate should be reached in September 2015. SMG assumes a 12‐month Construction/Stabilization Phase.

EXHIBIT B of 38



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Permanent Financing Sources

Source Lender Applicant

Revised

Applicant Underwriter

Interest

Rate

Amort.

Yrs.

Term

Yrs.

Annual

Debt

Fi rs t Mortgage CITI/FHFC $5,700,000 $5,300,000 $5,300,000 5.035% 35 18 $322,419

Second ‐ HOME FHFC $2,800,000 $2,800,000 $2,800,000 0.281% 20 $7,871

Third ‐ HOME Broward Co. $467,993 $467,993 $467,993 0.00% 30 $0

HOME Match Grant AHS $500,000 $500,000 $500,000

HC Equity Stratford $4,501,000 $4,892,000 $4,892,000

Def Developer Fee Conerstone $1,834,000 $1,685,038 $1,677,545

Total $15,802,993 $15,645,031 $15,637,538 $330,290

MMRB First Mortgage:

At Permanent Loan conversion, the short term gap bonds will be retired resulting in an outstanding MMRB Permanent Loan of $5,300,000. Per the CITI Letter of Interest conditions to conversion include construction completion, 90% physical occupancy for three consecutive months, and confirmation of 1.15 to 1.00 minimum Debt Service Coverage and 80% Loan to Value ratios.

The interest rate for the eighteen year term option is equal to the sum of the 18‐year maturity of “AAA” bond rates as published by Thompson Municipal Market Monitor (“MMD”) plus a spread of 1.70%. Principal amortization is based on a 35 year period.

For purposes of this analysis, SMG has utilized the fifteen year term (not including an up to 36‐month construction term), beginning at loan conversion, with the fourteen and one half years Lock Out/Yield Maintenance protection period. The “all in” interest rate of 5.035% is calculated as follows: base rate (2.91%), spread (1.70%), Issuer fee (24 basis points), Compliance Fee (6 basis points), Servicing Fee (5 basis points) and Trustee Fee (8 basis points).

FHFC HOME Loan:

The Applicant has applied for $2,800,000 in HOME financing under RFP 2013‐010. The term of the HOME Loan is 20‐years. The loan is non‐amortizing, with a base interest rate of zero (0.0%) per annum as approved by Florida Housing’s Board of Directors for all HOME Loans issued under RFA 2013‐010 at the December 31, 2013, Board of Directors Meeting. Annual payments of all applicable fees will be required. Fees include Servicing Fees (0.025% or minimum of $2,364, minimum applicable in this instance or 0.2500%) and Compliance Fees ($858 or 0.0311%). The Compliance Monitoring Fee shall be adjusted January 1 of each year, but not decreased, based on the South Region Consumer Price Index for the twelve month period ending each November 30th. This automatic increase shall not exceed 3% of the prior year’s fee. All unpaid principal will be due at maturity. SMG underwrites the Subject Development assuming the payment of fees only, 0.281%.

Broward County HOME Loan:

The Applicant is anticipated to receive a $467,993 Broward County HOME loan (“County HOME Loan”) as evidenced by a HOME Funding Agreement, executed March 28, 2014, between Broward County and the Applicant. The County HOME Loan will (i) be available at closing, (ii) require no payments until maturity (30‐years from closing), and (iii) be subordinate to the First Mortgage Loan and Florida Housing’s HOME Loan. Required set‐asides are eleven HOME‐assisted units; however, all of the units must be Affordable consistent with the HC and MMRB programs.

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AHS Grant:

The Applicant is anticipated to receive a $500,000 grant from Affordable Housing Solutions for Florida, Inc. (“AHS”), as evidenced by a Grant Agreement, dated April 7, 2014, between AHS and the Applicant. Grant funds are to be utilized as a funding source for land on which described improvements will be constructed. The described improvements are consistent with the assumptions utilized in this report.

Housing Credits Equity Investment:

The Applicant has applied to Florida Housing to receive 4% Housing Credits directly from the United States Treasury in conjunction with tax‐exempt financing. A HC calculation is contained in Exhibit 4 of this credit underwriting report.

Based upon a May 15, 2014 proposal, Stratford Capital Group (“Stratford”) will provide HC equity as follows:

Capital Contributions Amount

Percent of

Total When Due

1st Ins ta l lment $734,000 15.0% Clos ing

2nd Ins ta l lment $391,000 8.0% Later of 75% Completion or 1‐1‐15

3rd Ins ta l lment $2,201,000 45.0% Construction Completion or 7‐1‐15

4th Ins ta l lment $1,076,000 22.0% Ini tia l Qual i fied Occupancy, El igible Bas is

Determination or 4 ‐1‐16

5th Ins ta l lment $490,000 10.0% Forms 8609, Stabi l i za tion or 4‐1‐2016

Tota l $4,892,000 100%

Annual Tax Credits per Syndication Agreement: $515,084 Total HC Syndication: $5,150,325 Syndication Percentage (limited partner interest): 99.990% Calculated HC Exchange Rate (per dollar): $0.950 Proceeds Available During Construction: $1,125,000

Although the Applicant committed to set aside 85% of the units for the MMRB loan, the above calculations are based upon the Applicant setting aside 100% of the units for purposes of the 4% HC portion of its application.

Other Permanent Sources of Funds:

The developer will have to defer $1,677,545 of developer fees for payment from development operations after all loan proceeds and capital contributions have been received.

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CAPTIVA COVE I I PAGE A-12

JUNE 3, 2014

Uses of Funds

Applicant CostsRevised

Applicant Costs

Underwriters

Total Costs ‐ CUR

Cost Per

Unit

HC Ineligible

Costs ‐ CUR

HOME Ineligible

Costs ‐ CUR

Accessory Buildings

Demolition

Installation of Pre Fab Units

New Rental Units $6,353,420 $6,878,177 $6,878,177 $78,161 $80,000 $80,000

Off‐Site Work

Recreational Amenities

Rehab of Existing Common Areas

Rehab of Existing Rental Units

Site Work $431,200 $392,000 $392,000 $4,455

Swimming Pool

General Conditions $436,210 $436,210 $4,957

Overhead $923,380 $145,403 $145,403 $1,652

Profit $436,210 $436,210 $4,957

Builder's Risk Insurance

General Liability Insurance

Payment and Performance Bonds

Furniture, Fixture, & Equipment

Total Construction Contract/Costs $7,708,000 $8,288,000 $8,288,000 $94,182 $80,000 $80,000

Hard Cost Contingency $381,000 $414,400 $414,400 $4,709

Fees for LOC used as Construction Surety

Other: Payment and Performance Bonds $70,000 $70,000 $795

Other:

Other:

Other:

Other:

$8,089,000 $8,772,400 $8,772,400 $99,686 $80,000 $80,000

CONSTRUCTION COSTS:

Total Construction Costs:

Notes to the Actual Construction Costs:

1. Applicant provided SMG with a copy of an May 12, 2014, AIA Standard Form of Agreement (where the basis of payment is a Stipulated Sum) between Owner and Contractor in the amount of $8,288,000. The Construction Contract requires CSGConst to achieve Substantial Completion within 365 days (12 months). Retainage is 10% until the project is 50% complete, with none thereafter. The Construction Contract provides for compliance with Federal Labor Standards and Wage Determination Requirements pursuant to the Davis‐Bacon Act as well as the Section 3 Clause.

2. General contractor fees are within the 14% maximum per Rule.

3. The Hard Cost Contingency for this development is equal to 5% of the total construction contract amount.

4. Payment and Performance Bonds are paid outside of the GC Contract.

5. SMG ordered a Capital Needs Assessment from ConstruVision, Inc. (“CV”). Complete results are set forth in Section C of this credit underwriting report.

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JUNE 3, 2014

GENERAL DEVELOPMENT COSTS: Applicant CostsRevised

Applicant Costs

Underwriters

Total Costs ‐ CUR

Cost Per

Unit

HC Ineligible

Costs ‐ CUR

HOME Ineligible

Costs ‐ CUR

Accounting Fees $45,000 $40,000 $40,000 $455

Appraisal $12,500 $6,000 $5,500 $63

Architect's and Planning Fees

Architect's Fee ‐ Green Initiative

Architect's Fee ‐ Landscape

Architect's Fee ‐ Site/Building Design $15,000 $56,000 $56,000 $636

Architect's Fee ‐ Supervision $10,000 $14,000 $14,000 $159

Building Permits $132,000 $308,000 $308,000 $3,500

Builder's Risk Insurance $74,800 $50,000 $50,000 $568

Capital Needs Assessment/Rehabilitation

Demolition paid outside Const Contract

Engineering Fees $15,000 $10,000 $10,000 $114

Environmental Report $10,000 $15,000 $15,000 $170

Federal Labor Standards Monitoring

FF&E paid outside Construction Contract

FHFC Administrative Fees $38,310 $42,000 $42,872 $487 $42,872

FHFC Application Fee $6,500 $3,000 $6,500 $74 $6,500 $3,000

FHFC Credit Underwriting Fee $23,500 $33,000 $21,941 $249 $21,941

FHFC HC Compliance Fee (HC) $103,744

FHFC Other Processing Fee(s)

Impact Fee $545,600 $429,250 $429,250 $4,878

Lender Inspection Fees / Const Admin $24,000 $38,000 $38,000 $432

Green Building Cert. (LEED, FGBC, NAHB)

Home Energy Rating System (HERS)

Insurance

Legal Fees $125,000 $100,000 $100,000 $1,136 $67,000

Local Subsidy Underwriting Fee

Market Study $5,000 $7,500 $4,500 $51

Marketing and Advertising $50,000 $40,000 $40,000 $455 $40,000 $40,000

Plan and Cost Review Analysis $2,500 $1,800 $20

Property Taxes $25,000 $15,000 $15,000 $170

Soil Test $10,000

Start‐Up/Lease‐up Expenses

Survey $25,000 $25,000 $25,000 $284

Tenant Relocation Costs

Title Insurance and Recording Fees $120,000 $100,000 $100,000 $1,136 $67,000

Traffic Study

Utility Connection Fees $176,000 $12,500 $12,500 $142

Soft Cost Contingency $30,000 $30,000 $28,200 $320

Other: Lender Legal

Other: Lender Due Diligence

Other: Syndicator Due Diligence

Other: OGC Construction Monitoring

Other:

$1,624,454 $1,374,250 $1,364,063 $15,501 $245,313 $43,000Total General Development Costs:

Notes to the General Development Costs: 1. SMG has adjusted the Appraisal line item to equal the actual invoice amount.

2. The FHFC Administrative Fee is based on 8% of the recommended annual allocation of HC.

EXHIBIT B of 38



JUNE 3, 2014

3. The FHFC Application Fee reflects the actual amount of the combined Application Fee(s) for the Non‐Competitive MMRB and HOME loan programs.

4. The FHFC Underwriting Fee reflects the actual amount of the combined underwriting fee for the MMRB, HOME and HC programs.

5. SMG has adjusted the Market Study line item to equal the actual invoice amount.

6. SMG has adjusted the Plan and Cost Review line item to equal the actual invoice amount.

7. Other General Development Costs are based on the Applicant’s estimates, which appear reasonable.


Applicant Costs

Underwriters

Total Costs ‐ CUR

Cost Per

Unit

HC Ineligible

Costs ‐ CUR

HOME Ineligible

Costs ‐ CUR

Construction Loan Application Fee

Construction Loan Underwriting Fee

Construction Loan Origination Fee $77,000 $85,000 $85,000 $966

Construction Loan Commitment Fee

Construction Loan Closing Costs

Construction Loan Interest $262,000 $264,000 $264,000 $3,000 $66,000

Construction Loan Servicing Fees

Permanent Loan Application Fee

Permanent Loan Underwriting Fee

Permanent Loan Subsidy Layering Review

Permanent Loan Commitment Fee $253,000

Permanent Loan Origination Fee $57,000 $53,000 $53,000 $602 $53,000

Permanent Loan Closing Costs $90,000 $90,000 $1,023 $90,000

Permanent Loan Interest

Permanent Loan Servicing Fee

FINANCIAL COSTS:

FHFC Bond Application Fee

FHFC Bond Underwriting Fee $21,250 $21,250 $241 $21,250

FHFC Bond Subsidy Layering Review

FHFC Bond Origination Fee $42,000 $47,500 $540 $47,500

FHFC Bond Commitment Fee

FHFC Bond Trustee Fee $12,000 $10,500 $119 $10,500

FHFC Bond Credit Enhancement Fee

FHFC Bond Rating Fee

FHFC Bond Closing Costs $177,750 $177,750 $2,020 $177,750

FHFC Bond Interest

FHFC Bond Servicing Fee

Reserves ‐ Operating Deficit $208,000 $282,692 $282,692 $3,212 $282,692 $282,692

Reserves ‐ Debt Service Coverage

$857,000 $1,027,692 $1,031,692 $11,724 $748,692 $282,692Total Financial Costs: Notes to the Financial Costs:

1. The Construction Loan Origination Fee is 1.0% of the loan amount per the CITI proposal.

2. The Permanent Loan Origination Fee is 1.0% of the loan amount per the CITI proposal.

3. FHFC Bond Origination Fee is equal to 40 basis points of the MMRB amount plus $13,500 in related expenses.

EXHIBIT B of 38



JUNE 3, 2014

4. The FHFC Bond Trustee Fee is equal to $9,500 for acceptance and counsel fee plus $1,000 in related expenses.

5. Bond Closing Costs include, but are not limited to, fees and expenses of the Issuer, Real Estate Counsel, Bond Counsel, Disclosure Counsel, and the Rating Agency as well as arbitrage calculations, cash flow verification, the Fiscal Sufficiency Determination, and TEFRA fees.

6. The Operating Deficit Reserve equal to four months of stabilized operating expenses, replacement reserve deposits and “hard pay” debt service, currently estimated at $282,692, is required by Stratford to be paid from the equity installment payable after rental achievement, permanent loan conversation and Forms 8609. The reserve will be held by Stratford throughout the compliance period.


Applicant Costs

Underwriters

Total Costs ‐ CUR

Cost Per

Unit

HC Ineligible

Costs ‐ CUR

HOME Ineligible

Costs ‐ CUR

Brokerage Fees ‐ Building

Building Acquisition Cost

Other:

Other:

Other:

$0 $0 $0 $0 $0 $0Total Non‐Land Acquisition Costs:

NON‐LAND ACQUISITION COSTS

Notes to the Non‐Land Acquisition Costs:

1. Captiva Cove II is new construction. There are no Non‐Land Acquisition Costs.


Applicant Costs

Underwriters

Total Costs ‐ CUR

Cost Per

Unit

HC Ineligible

Costs ‐ CUR

HOME Ineligible

Costs ‐ CUR

$10,570,454 $11,174,342 $11,168,155 $126,911 $1,074,005 $405,692

Developer Fee $1,834,000 $1,960,497 $1,959,191 $22,264

Other: Brokerage Fees ‐ Land

Consultant Fees

Excess Acquisition Costs

Excess Land Value $192 $2

Guaranty Fees

Other:

Other:

Other:

$1,834,000 $1,960,497 $1,959,383 $22,266 $0 $0

Developer Fee on Acquisition of Buildings

OTHER DEVELOPMENT COSTS

Development Cost Before Developer Fee

and Land Costs

Developer Fee to fund Operating Debt

Reserve

Total Other Development Costs:

Notes to the Other Development Costs:

1. Excess Land Value – see discussion below.

EXHIBIT B of 38



JUNE 3, 2014

2. Developer Fees shown above are within the Rule for tax exempt bond transactions.


Applicant Costs

Underwriters

Total Costs ‐ CUR

Cost Per

Unit

HC Ineligible

Costs ‐ CUR

HOME Ineligible

Costs ‐ CUR

Brokerage Fees ‐ Land

Land Acquisition Costs

Land $2,500,000 $2,510,192 $2,510,000 $28,523 $2,510,000

Land Lease Payment

Land Carrying Costs

Other:

Other:

Other:

$2,500,000 $2,510,192 $2,510,000 $28,523 $2,510,000 $0Total Acquisition Costs:

LAND ACQUISITION COSTS

Notes to the Land Acquisition Costs:

1. Applicant submitted a Simple Form Purchase Agreement, executed November 11, 2013, with Captiva Associates, L.L.C., seller, in the amount of $2,510,192. Captiva Associates, L.L.C., is a related entity. The Closing Date is on or prior to December 31, 2014.

2. Clobus appraised the Development Site at an “As‐Is” value of $2,510,000, which is slightly less that than the Purchase Price. Accordingly, SMG has reflected the incremental amount as a sub‐set of Developer Fee.

$14,904,454 $15,645,031 $15,637,538 $177,699 $3,584,005 $405,692TOTAL DEVELOPMENT COSTS:

EXHIBIT B of 38



JUNE 3, 2014

Operating Pro forma

ANNUAL PER UNIT

$876,120 $9,956

$0 $0

$0 $0

$15,840 $180

$54,780 $623

$0 $0

$0 $0

$13,200 $150

$959,940 $10,908

Economic Loss ‐ Percentage: $0

Phys ica l Vacancy Loss ‐ Percentage: 3.0% ($28,798) ($327)

Col lection Loss ‐ Percentage: 2.0% ($19,199) ($218)

$911,943 $10,363

Ground Lease $0 $0

Sub‐Ground Lease $0 $0

$93,671 $1,064

$52,800 $600

Other $0 $0

Management Fee ‐ Percentage: 5.0% $45,597 $518

$39,600 $450

$99,000 $1,125

$72,600 $825

$8,800 $100

$22,000 $250

$46,200 $525

$0 $0

$0 $0

$0 $0

$0 $0

$26,400 $300

$506,668 $5,758

$405,275 $4,605

$322,419 $3,664

$7,871 $89

$0 $0

$0 $0

$0 $0

$0 $0

$0 $0

$0 $0

$330,290 $3,753

$74,985 $852

Miscel laneous

Total Effective Gross Revenue

Fixed:

Rea l Estate Taxes

OPERATING PRO FORMA

Gross Potentia l Renta l Income

Less :

Gross Potentia l Income

Other Income:

Washer/Dryer Renta ls

Cable/Satel l i te Income

Rent Concess ions

Alarm Income

INCO

ME

Rent Subs idy (ODR)

Anci l lary Income ‐Parking

Other Fees ‐ Interes t Rate Cap Escrow

Res ident Programs

Contract Services

Securi ty

Other‐Pest Control

Al l Other Mortgages

Reserve for Replacements

Fourth Mortgage

Fi fth Mortgage

Total Expenses

Net Operating Income

Debt Service Payments

Fi rs t Mortgage

Second Mortgage

Third Mortgage

Other Fees ‐ Agency/Trustee/Servicer

Total Debt Service Payments

Cash Flow After Debt Service

DEB

T SER

VICE

EXPENSES

Uti l i ties

Marketing and Adverti s ing

Maintenance and Repairs

Grounds Maintenance and Landscaping

Insurance

Variable:

Genera l and Adminis trative

Payrol l Expenses

EXHIBIT B of 38



JUNE 3, 2014

1.257

1.227

1.227

1.227

1.227

1.227

1.227

55.6%

87.2%

Debt Service Coverage Ratios

Operating Expense Ratio

Break‐Even Ratio

DSC ‐ Fi rs t Only (incl . Negative Arbi trage)

DSC ‐ Fi rs t and Second

DSC ‐ Al l Other Mortgages

Financial Ratios

DSC ‐ Al l Mortgages and Fees

DSC ‐ Fi rs t, Second and Third

DSC ‐ Fi rs t, Second, Third, and Fourth

DSC ‐ Fi rs t, Second, Third, Fourth, and Fi fth

Notes to the Operating Pro forma and Ratios:

1. Florida Housing’s MMRB Program does not impose Rent Restrictions, however Captiva Cove II will receive HOME funding and HC (both of which will impose Rent Restrictions) in conjunction with the Tax‐Exempt Bond Financing. The Rent Roll below compares Year 2014 Maximum HC Rents published by FHFC, less applicable Utility Allowances as required by the HC Program and applicable HOME Rents. Utility Allowances are from a schedule for the Broward County Housing Authority effective July 1, 2013. Management will pay for water/sewer service and trash removal. No Manager/Employee units are contemplated in the Rent Roll. Clobus projects the Subject Development to achieve maximum allowable rents. Seltzer’s rental assumptions are the lesser of Maximum HC or HOME Rents, the Appraiser’s projections or Management expectations. The rent roll is shown below:

MSA/County: Fort Lauderdale / Broward

Annual

Rental

Income

$35,280

$163,704

$67,968

$331,392

$49,320

$228,456

CU Rents

$588

$718

$708

$863

$822

$1,002

$766

$863

$889

$1,002

Units AMI%

50%

60%

50%

60%

50%

60%

765

765

1027

1027

Utility

Allow

$58

$58

$68

$718$718

$708

$863

$822

$1,002

Net HC

Rent

$588

Appraiser

Rents

$637

$776

$931

$897

$1,063

3.0

5

19

8

32

5

$695

$834

$964

Square

Feet

1201

Gross HC

Rent

$646

$776

Bed

Rooms

2.0

$1,077

2.0

2.0

1.0

1.0

2.0

2.0

1.0

$766

$863

Bath

Rooms

1.0

RD/HUD

Cont

Rents

Applicant

Rents

$637

$718

$1,2193.0 1201192.0

$889

$1,002

High

HOME

Rents

Low

HOME

Rents

$884

$75

$68

$75

$876,12088 88264

2. Applicant plans on renting Washers and Dryers and providing Alarms to the residents of Captiva Cove II Apartments at their option. Washer/Dryer Income is based upon a penetration rate of approximately 95% (83 units) at $55 per month. Alarm Income is based upon a penetration rate of approximately 50% (44 units) at $25 per month. Both assumptions appear reasonable and are supported by Clobus’, April 30, 2014, Appraisal.

3. Miscellaneous Income includes Application Fees, Cancellation Fees, Late Fees, Forfeitures, Vending and Other Income to total approximately $180 per unit per year, which is supported by Restricted Rent Comparables.

4. Vacancy Loss (3.0%) and Collection/Concession Loss (2.0%) projections are supported by Clobus.

EXHIBIT B of 38



JUNE 3, 2014

5. An April 14, 2014, Management Agreement with CMS (a related entity) reflects a 5.0% Management Fee based upon Gross Collections, which Management Fee is typical for similar developments.

6. Replacement Reserves of $300 per unit per year which meets or exceeds FHFC Rule minimum reserve requirements. Stratford requires annual adjustments based upon the greater of 3% or Consumer Price Index (“CPI”). SMG underwrites the Subject Development using an annual adjustment of 3.00%.

7. Other Operating Expense estimates are supported by the Clobus Appraisal and/or Market Comparables.

Note: The estimated cost associated with Resident Programs committed in Applicant’s MMRB Application are de minimis and are included in General and Administrative Expense. Many Resident Programs are provided without charge by local governmental or charitable organizations.

8. A 15‐year Income and Expense Projection is attached to this Credit Underwriting Report as Exhibit 1.

EXHIBIT B of 38

SMG

JUNE 3, 2014

Section B

MMRB and HOME Program Loan Conditions

HC Allocation Contingencies

EXHIBIT B of 38

MMR, HOME AND HC CREDIT UNDERWRITING REPORT SMG

CAPTIVA COVE I I PAGE B-1

JUNE 3, 2014

Special Conditions

This recommendation is contingent upon the review and approval of the following items by SMG and Florida Housing at least 30 days prior to real estate loan closing. Failure to receive approval of these items within this time frame may result in postponement of the bond pricing date. For competitive bond sales, these items must be reviewed and approved prior to issuance of the Notice of Bond Sale.

1. Confirmation (as an addendum to the Plan and Cost Analysis) that site plans and architectural drawings account for all Required and Optional Amenities and Features selected, as detailed in Exhibit 2.

2. FHFC and Special Counsel review of the status of the litigation involving the Principals (and various other related party entities) to assess any potential negative impact on the General Partner’s ability to perform its duties and financial exposure to Defendants. Should there be a determination of potential negative impact, FHFC, Special Counsel and Credit Underwriter, shall recommend measures to mitigate such risk.

3. A firm commitment from CITI to privately place or purchase the MMRB with terms and conditions that are not substantially different from those utilized in this report.

4. Receipt and satisfactory review of financial statements and/or tax returns for all Guarantors meeting the Rule requirements.

5. Principals provide standard FHFC Guarantees subject only to the following: execution of a liquidity maintenance agreement requiring that the Principals maintain an aggregate net worth of $10,000,000 and liquidity of not less than $1,000,000.

General Conditions

This recommendation is contingent upon the review and approval of the following items by SMG and Florida Housing at least 30 days prior to real estate loan closing. Failure to receive approval of these items within this time frame may result in postponement of the bond pricing date. For competitive bond sales, these items must be reviewed and approved prior to issuance of the Notice of Bond Sale.

1. Borrower to comply with any and all recommendations noted in the plan and cost analysis.

2. Signed and sealed survey, dated within 90 days of closing, unless otherwise approved by Florida Housing, and its legal counsel, based upon the particular circumstances of the transaction. The Survey shall be certified to Florida Housing and its legal counsel, as well as the title insurance company, and shall indicate the legal description, exact boundaries of the Development, easements, utilities, roads, and means of access to public streets, total acreage and flood hazard area, and any other requirements of Florida Housing.

3. Final “as permitted” (signed and sealed) Site plan plus Building Plans and Specifications showing all features and amenities committed to in the application(s). The Geotechnical Report must be bound within the final Plans and Specifications.

4. Building permits and any other necessary approvals and permits (e.g., final site plan approval, water management district, Department of Environmental Protection, Army Corps of Engineers, Department of Transportation, etc.). Acceptable alternatives to this requirement are receipt and

EXHIBIT B of 38



JUNE 3, 2014

satisfactory review of a letter from the local permitting and approval authority that the above referenced permits and approvals will be issued upon receipt of applicable fees (with no other conditions), or evidence of 100% lien‐free completion, if applicable. If a letter is provided, copies of all permits will be required as a condition of the first post‐closing draw.

5. Final sources and uses of funds itemized by source and line item, in a format and in amounts approved by the Servicer. A detailed calculation of the construction interest based on the final draw schedule (see below), documentation of the closing costs, and draft loan closing statement must also be provided. The sources and uses of funds schedule will be attached to the Loan Agreement as the approved development budget.

6. A final construction draw schedule showing itemized sources and uses of funds for each monthly draw. MMRB and HOME Program Loan Proceeds shall be disbursed pro rata with other funding sources during the construction or rehabilitation phase, unless otherwise approved by the Credit Underwriter. The closing draw shall include appropriate backup and ACH wiring instructions.

7. During construction/ rehabilitation, the developer is only allowed to draw a maximum of 50% of the total developer fee during construction/rehabilitation, but in no case more than the payable developer fee, which is determined to be “developer’s overhead”. No more than 35% of “developer’s overhead” during construction/ rehabilitation will be allowed to be disbursed at closing. The remainder of the “developer’s overhead” will be disbursed during construction/ rehabilitation on a pro rata basis, based on the percentage of completion of the development, as approved and reviewed by FHFC and Servicer. The remaining unpaid developer fee shall be considered attributable to “developer’s profit” and may not be funded until the development has achieved 100% lien free completion, and retainage has been released.

8. Evidence of general liability, flood (if applicable), builder’s risk and replacement cost hazard insurance (as certificates of occupancy are received) reflecting Florida Housing as Loss Payee / Mortgagee, with coverages, deductibles and amounts satisfactory to Florida Housing.

9. If the development is not 100% lien‐free completed, 100% Payment and Performance (“P&P”) Bonds or a Letter of Credit (“LOC”) in an amount not less than 25% of the construction contract is required in order to secure the construction contract between the general contractor and the Borrower. In either case, Florida Housing must be listed as co‐obligee. The P&P bonds must be from a company rated at least “A‐“by A.M. Best & Co. with a financial size category of at least FSC VI. Florida Housing and/or legal counsel must approve the source, amount(s) and all terms of the P&P bonds or LOC. If the LOC option is utilized, the LOC must contain “evergreen” language and be in a form satisfactory to the Servicer, FHFC, and its Legal Counsel.

10. Architect, Construction Consultant, and Borrower certifications on forms provided by Florida Housing will be required for both design and as‐built with respect to Section 504 of the Rehabilitation Act, the Americans with Disabilities Act, and Federal Fair Housing Act requirements, as applicable.

11. A copy of an Amended and Restated Limited Partnership Agreement reflecting purchase of the HC under terms consistent with the assumptions contained within this Credit Underwriting Report. The Amended and Restated Limited Partnership Agreement shall be in a form and of financial substance satisfactory to Servicer and to FHFC and its Legal Counsel.

EXHIBIT B of 38



JUNE 3, 2014

12. Satisfactory resolution of any outstanding past due or non‐compliance notices applicable to the development team by closing of the loan(s).

This recommendation is contingent upon the review and approval of the following items by Florida Housing and its legal counsel at least 30 days prior to real estate loan closing. Failure to receive approval of these items within this time frame may result in postponement of the bond pricing date. For competitive bond sales, these items must be reviewed and approved prior to issuance of the Notice of Bond Sale.

1. Documentation of the legal formation and current authority to transact business in Florida for the Borrower, the general partner/principal(s)/manager(s) of the Applicant, the guarantors, and any limited partners of the Applicant.

2. Signed and sealed survey, dated within 90 days of closing, unless otherwise approved by Florida Housing, and its legal counsel, based upon the particular circumstances of the transaction. The Survey shall be certified to Florida Housing and its legal counsel, as well as the title insurance company, and shall indicate the legal description, exact boundaries of the Development, easements, utilities, roads, and means of access to public streets, total acreage and flood hazard area, and any other requirements of Florida Housing.

3. An acceptable updated Environmental Audit Report, together with a reliance letter to Florida Housing, prepared within 90 days of closing, unless otherwise approved by Florida Housing, and legal counsel, based upon the particular circumstances of the transaction. Borrower to comply with any and all recommendations noted in the Environmental Assessment(s) and Update and the Environmental Review, if applicable.

4. Title insurance pro‐forma or commitment for title insurance with copies of all Schedule B exceptions, in the amount of the MMRB Loan naming FHFC as the insured. All endorsements required by FHFC shall be provided.

5. Florida Housing and its legal counsel shall review and approve all other lenders closing documents and the limited partnership or other applicable agreement. Florida Housing shall be satisfied in its sole discretion that all legal and program requirements for the Loans have been satisfied.

6. Evidence of general liability, flood (if applicable), builder’s risk, and replacement cost hazard insurance (as certificates of occupancy are received) reflecting Florida Housing as Loss Payee / Mortgagee, with coverages, deductibles and amounts satisfactory to Florida Housing.

7. Receipt of a legal opinion from the Applicant’s legal counsel acceptable to Florida Housing addressing the following matters:

a. The legal existence and good standing of the Borrower and of any partnership or limited liability company that is the general partner of the Borrower (the "GP") and of any corporation or partnership that is the managing general partner of the GP, of any corporate guarantor and any manager.;

b. Authorization, execution, and delivery by the Borrower and the guarantors, of all Loan documents;

c. The Loan documents being in full force and effect and enforceable in accordance with their terms, subject to bankruptcy and equitable principles only;

EXHIBIT B of 38



JUNE 3, 2014

d. The Borrower's and the guarantor's execution, delivery and performance of the loan documents shall not result in a violation of, or conflict with, any judgments, orders, contracts, mortgages, security agreements or leases to which the Borrower is a party or to which the Development is subject to the Borrower’s Partnership Agreement and;

e. Such other matters as Florida Housing or its legal counsel may require.

8. Evidence of compliance with local concurrency laws.

9. UCC Searches for the Borrower, its partnerships, as requested by counsel.

10. Any other reasonable conditions established by Florida Housing and its legal counsel.

Additional Conditions

This recommendation is also contingent upon the following additional conditions:

1. Compliance with all provisions of Sections 420.507 and 420.509, Florida Statutes, Rule Chapter 67‐21, F. A. C., Sections 420.507(22) and 420.5087, Florida Statutes, Rule Chapter(s) 67‐48, 53, & 60 F.A.C., RFA 2013‐010, and any other State and Federal requirements.

2. Acceptance by the Borrower and execution of all documents evidencing and securing the MMRB and HOME Loans in form and substance satisfactory to Florida Housing, including, but not limited to, the Promissory Note(s), the Loan Agreement(s), the Mortgage and Security Agreement(s), and the Land Use Restriction Agreement(s).

3. If MMRB funds are used for construction or rehabilitation, all amounts necessary to complete construction must be deposited with the Bond Trustee prior to Loan Closing, or any phased pay‐in of amount necessary to complete construction shall be contingent upon an unconditional obligation, through a Joint Funding Agreement or other mechanism acceptable to Florida Housing, of the entity providing HC Equity payments (and evidence that 100% of such amount is on deposit with such entity at Loan Closing) to pay, regardless of any default under any documents relating to the HC as long as the First Mortgage continues to be funded.

4. If applicable, receipt and satisfactory review of Financial Statements from all Guarantors dated within 90 days of Real Estate Closing.

5. If applicable, Guarantors are to provide the standard FHFC Construction Completion Guarantee, to be released upon lien free completion as approved by the Servicer.

6. Guarantors are to provide the standard FHFC Operating Deficit Guarantee to be released upon achievement of an average 1.15 DSC on the First Mortgage (MMRB Program Loan), 90% Occupancy and 90% of Gross Potential Rental Revenue, all for twelve (12) consecutive months certified by an independent Certified Public Accountant (“CPA”). Notwithstanding the above, the Operating Deficit Guarantee shall not terminate earlier than three years following the final certificate of occupancy.

7. Guarantors are to provide the standard FHFC Operating Deficit Guarantee to be released upon achievement of an average 1.15 DSC on the combined First Mortgage (MMRB Program Loan) and HOME Loan, 90% Occupancy and 90% of Gross Potential Rental Revenue, all for twelve (12) consecutive months certified by an independent CPA. Notwithstanding the above, the Operating Deficit Guarantee shall not terminate earlier than three years following the final certificate of occupancy.

EXHIBIT B of 38



JUNE 3, 2014

8. Guarantors are to provide the standard FHFC Environmental Indemnity.

9. Guarantors are to provide the standard FHFC Guaranty of Recourse Obligations.

10. A mortgagee title insurance lender’s policy naming Florida Housing and the Trustee as the insured second mortgage holder in the amount of the Loan is to be issued immediately after closing. Any exceptions to the title insurance policy must be acceptable to Florida Housing or its legal counsel. All endorsements that are required by FHFC are to be issued and the form of the title policy must be approved prior to closing.

11. Property tax and hazard insurance escrows are to be established and maintained by the First Lender or the Servicer. In the event the reserve account is held by Florida Housing’s loan servicing agent, the release of funds shall be at Florida Housing’s sole discretion.

12. Replacement Reserves in the amount of $300 per unit per year will be required to be deposited on a monthly basis into a designated escrow account, to be maintained by the First Mortgagee or Florida Housing’s loan servicing agent. However, Applicant has the option of to prepay Replacement Reserves. New construction developments shall not be allowed to draw during the first five (5) years after closing or until the establishment of a minimum balance equal to the accumulation of five (5) years of replacement reserves per unit. The reserve shall be adjusted based on a capital needs assessment (“CNA”) beginning no later than the 10th year after the first residential building receives a certificate of occupancy, a temporary certificate of occupancy, or is placed in service, which ever is earlier, the Initial Replacement Reserve Date. A subsequent CNA and reserve adjustment is required no later than the 15th year after the Initial Replacement Date and every five (5) years thereafter.

13. ContruVision, Inc., or other construction inspector acceptable for Florida Housing, is to act as Florida Housing’s inspector during the construction period.

14. A minimum of 10% retainage holdback on all construction draws until the Development is 50% completed, and 0% retainage thereafter is required. Retainage will not be released until successful completion of construction and issuance of all certificates of occupancy.

15. Completion of a Davis‐Bacon Federal Standards pre‐construction conference.

16. Satisfactory evidence of compliance with the Davis‐Bacon Act, other applicable Federal Labor standards and Section 3 during the construction of this development. Evidence of compliance must be through satisfactory completion of a compliance audit by Florida Housing and its authorized subcontractor.

17. Satisfactory completion of a pre‐loan closing compliance audit conducted by Florida Housing or its Servicer, if applicable.

18. Any other reasonable requirements of the Servicer, Florida Housing or its legal counsel.

EXHIBIT B of 38



JUNE 3, 2014

Housing Credit Allocation Recommendation

Seltzer Management Group, Inc. recommends a preliminary annual Housing Credit allocation of $535,900. Please see the HC Allocation Calculation section of this report for further details.

Contingencies

The HC allocation recommendation is contingent upon the receipt and satisfactory review of the following items by SMG and the Florida Housing Finance Corporation by the deadline established in the Preliminary HC Allocation. Failure to submit these items within this time frame may result in forfeiture of the HC Allocation.

1. All items listed under the Special Conditions section of the Loan Conditions to Close.

2. Receipt and satisfactory resolution of any outstanding past due items or non‐compliance issues according to the FHFC Past Due and/or Non‐Compliance Reports.

3. Any reasonable requirements of Florida Housing and/or SMG.

EXHIBIT B of 38

Exhibit 1

Captiva Cove II

15 Year Income and Expense Projection

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

$876,120 $893,642 $911,515 $929,746 $948,340 $967,307 $986,653 $1,006,386 $1,026,514 $1,047,045 $1,067,985 $1,089,345 $1,111,132 $1,133,355 $1,156,022

$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

$15,840 $16,157 $16,480 $16,810 $17,146 $17,489 $17,838 $18,195 $18,559 $18,930 $19,309 $19,695 $20,089 $20,491 $20,901

$54,780 $55,876 $56,993 $58,133 $59,296 $60,482 $61,691 $62,925 $64,184 $65,467 $66,777 $68,112 $69,474 $70,864 $72,281

$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

$13,200 $13,464 $13,733 $14,008 $14,288 $14,574 $14,865 $15,163 $15,466 $15,775 $16,091 $16,413 $16,741 $17,076 $17,417

$959,940 $979,139 $998,722 $1,018,696 $1,039,070 $1,059,851 $1,081,048 $1,102,669 $1,124,723 $1,147,217 $1,170,162 $1,193,565 $1,217,436 $1,241,785 $1,266,620

Economic Loss ‐ Percentage:

Physical Vacancy Loss ‐ Percentage: 3.0% ($28,798) ($29,374) ($29,962) ($30,561) ($31,172) ($31,796) ($32,431) ($33,080) ($33,742) ($34,417) ($35,105) ($35,807) ($36,523) ($37,254) ($37,999)

Collection Loss ‐ Percentage: 2.0% ($19,199) ($19,583) ($19,974) ($20,374) ($20,781) ($21,197) ($21,621) ($22,053) ($22,494) ($22,944) ($23,403) ($23,871) ($24,349) ($24,836) ($25,332)

$911,943 $930,182 $948,785 $967,761 $987,116 $1,006,859 $1,026,996 $1,047,536 $1,068,487 $1,089,856 $1,111,653 $1,133,886 $1,156,564 $1,179,696 $1,203,289

$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

$93,671 $96,481 $99,376 $102,357 $105,428 $108,590 $111,848 $115,204 $118,660 $122,219 $125,886 $129,663 $133,552 $137,559 $141,686

$52,800 $54,384 $56,016 $57,696 $59,427 $61,210 $63,046 $64,937 $66,885 $68,892 $70,959 $73,088 $75,280 $77,539 $79,865

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Management Fee ‐ Percentage: 5.0% $45,597 $46,509 $47,439 $48,388 $49,356 $50,343 $51,350 $52,377 $53,424 $54,493 $55,583 $56,694 $57,828 $58,985 $60,164

$39,600 $40,788 $42,012 $43,272 $44,570 $45,907 $47,284 $48,703 $50,164 $51,669 $53,219 $54,816 $56,460 $58,154 $59,899

$99,000 $101,970 $105,029 $108,180 $111,425 $114,768 $118,211 $121,758 $125,410 $129,173 $133,048 $137,039 $141,150 $145,385 $149,746

$72,600 $74,778 $77,021 $79,332 $81,712 $84,163 $86,688 $89,289 $91,968 $94,727 $97,568 $100,495 $103,510 $106,616 $109,814

$8,800 $9,064 $9,336 $9,616 $9,904 $10,202 $10,508 $10,823 $11,148 $11,482 $11,826 $12,181 $12,547 $12,923 $13,311

$22,000 $22,660 $23,340 $24,040 $24,761 $25,504 $26,269 $27,057 $27,869 $28,705 $29,566 $30,453 $31,367 $32,308 $33,277

$46,200 $47,586 $49,014 $50,484 $51,999 $53,558 $55,165 $56,820 $58,525 $60,281 $62,089 $63,952 $65,870 $67,846 $69,882

$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

$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

$26,400 $27,192 $28,008 $28,848 $29,713 $30,605 $31,523 $32,469 $33,443 $34,446 $35,479 $36,544 $37,640 $38,769 $39,932

$506,668 $521,412 $536,589 $552,213 $568,295 $584,851 $601,893 $619,436 $637,495 $656,086 $675,224 $694,924 $715,205 $736,083 $757,576

$405,275 $408,770 $412,196 $415,548 $418,821 $422,008 $425,103 $428,100 $430,991 $433,770 $436,430 $438,962 $441,359 $443,612 $445,714

$322,419 $322,419 $322,419 $322,419 $322,419 $322,419 $322,419 $322,419 $322,419 $322,419 $322,419 $322,419 $322,419 $322,419 $322,419

$7,871 $7,871 $7,871 $7,871 $7,871 $7,871 $7,871 $7,871 $7,871 $7,871 $7,871 $7,871 $7,871 $7,871 $7,871

$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

$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

$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

$330,290 $330,290 $330,290 $330,290 $330,290 $330,290 $330,290 $330,290 $330,290 $330,290 $330,290 $330,290 $330,290 $330,290 $330,290

$74,985 $78,480 $81,906 $85,259 $88,531 $91,718 $94,814 $97,810 $100,702 $103,481 $106,140 $108,672 $111,069 $113,323 $115,424

1.257 1.268 1.278 1.289 1.299 1.309 1.318 1.328 1.337 1.345 1.354 1.361 1.369 1.376 1.382

1.227 1.238 1.248 1.258 1.268 1.278 1.287 1.296 1.305 1.313 1.321 1.329 1.336 1.343 1.349

1.227 1.238 1.248 1.258 1.268 1.278 1.287 1.296 1.305 1.313 1.321 1.329 1.336 1.343 1.349

1.227 1.238 1.248 1.258 1.268 1.278 1.287 1.296 1.305 1.313 1.321 1.329 1.336 1.343 1.349

1.227 1.238 1.248 1.258 1.268 1.278 1.287 1.296 1.305 1.313 1.321 1.329 1.336 1.343 1.349

1.227 1.238 1.248 1.258 1.268 1.278 1.287 1.296 1.305 1.313 1.321 1.329 1.336 1.343 1.349

1.227 1.238 1.248 1.258 1.268 1.278 1.287 1.296 1.305 1.313 1.321 1.329 1.336 1.343 1.349

55.6% 56.1% 56.6% 57.1% 57.6% 58.1% 58.6% 59.1% 59.7% 60.2% 60.7% 61.3% 61.8% 62.4% 63.0%

87.2% 87.0% 86.8% 86.6% 86.5% 86.3% 86.2% 86.1% 86.0% 86.0% 85.9% 85.9% 85.9% 85.9% 85.9%

Operating Expense Ratio

Break‐Even Ratio

Rent Subsidy (ODR)

Ancillary Income‐Parking

Miscellaneous

Ground Lease

Sub‐Ground Lease

Other

Reserve for Replacements

Debt Service Coverage Ratios

DSC ‐ First and Second

DSC ‐ All Other Mortgages

DSC ‐ All Mortgages and Fees

Financial Ratios

DSC ‐ First, Second and Third

DSC ‐ First, Second, Third, and Fourth

DSC ‐ First, Second, Third, Fourth, and Fifth

Cash Flow After Debt Service

Fourth Mortgage

Fifth Mortgage

All Other Mortgages

DSC ‐ First Only (incl. Negative Arbitrage)

DEB

T SERVICE Second Mortgage

Third Mortgage

Other Fees ‐

Other Fees ‐ Agency/Trustee/Servicer

Total Debt Service Payments

First Mortgage

Total Expenses

Net Operating Income

Utilities

Marketing and Advertising

Maintenance and Repairs

Grounds Maintenance and Landscaping

Resident Programs

Debt Service Payments

Payroll Expenses

Rent Concessions

Alarm Income

Gross Potential Income

Less:

Total Effective Gross Revenue

Fixed:

Real Estate Taxes

EXPEN

SES

Insurance

Variable:

General and Administrative

Contract Services

Security

Other‐Pest Control

FINANCIAL COSTS:

OPERATING PRO FORMA

Gross Potential Rental Income

Other Income:

Washer/Dryer Rentals

INCOME

Cable/Satellite Income

Seltzer Management Group, Inc. Page 1 of 1 06/03/14

EXHIBIT B of 38

MMRB, HOME and HC CREDIT UNDERWRITING REPORT SMG

CAPTIVA COVE II EXHIBIT 2, PAGE 1

June 3, 2014

CAPTIVA COVE II

2014-110B/2014-298H

DESCRIPTION OF FEATURES AND AMENITIES Captiva Cove II Apartments consists of 88 units in 4 residential buildings. Unit Mix:

24 One bedroom/one bath units consisting of 765 square feet of heated and cooled living area

40 Two bedroom/two bath units consisting of 1,027 square feet of heated and cooled living area

24 Three bedroom/two bath units consisting of 1,201 square feet of heated and cooled living area

88 Total Units The development is to be constructed in accordance with the final plans and specifications approved by the appropriate city or county building or planning department or equivalent agency, and approved as reflected in the Pre‐Construction Analysis prepared for Florida Housing or its Servicers, unless a change has been approved in writing by Florida Housing or its Servicer. The Development will conform to requirements of local, state and federal laws, rules, regulations, ordinances, orders and codes, Federal Fair Housing Act and Americans with Disability Act (”ADA”), as applicable. Applicant commits to provide the following: MMRB Optional Features and Amenities for All Developments, six points required:

30 Year expected life roofing on all buildings (2 points)

Emergency call service in all units (3 points)

Each unit wired for high speed internet (1 point)

Green Building Features:

Programmable thermostat in each unit

Install daylight sensors, timers or motion detectors on all outdoor lighting attached to buildings

FL Yards and Neighborhoods certification on all landscaping

EXHIBIT B of 38



June 3, 2014

Low‐flow water fixtures in bathrooms – WaterSense labeled products or the following specifications:

o Toilets: 1.6 gallons/flush or less; and o Faucets: 1.5 gallons/minute or less; and o Showerheads: 2.2 gallons/minute or less.

Low‐VOC paint for all interior walls (50 grams per liter or less for flat paint; 150 grams or less for non‐flat paint)

Resident Programs:

Resident Activities: To be planned, arranged, provided and paid for by Applicant or

Management Company and held between the hours of 9:00a.m. and 9:00p.m. These activities will be an integral part of the management plan. There will be varied activities that bring residents together and encourage community pride; fostering a sense of community through a gathering of residents on a regularly scheduled basis for holidays, special occasions, community picnics, newsletters, children’s special functions, etc.

HOME Required Construction Features and Amenities: All Applicants will be required to provide the following General Features and Accessibility, Universal Design and Visitability Features:

Termite prevention; Pest control; Window covering for each window and glass door inside each unit; Cable or satellite TV hook‐up in each unit and, if the Development offers cable or satellite TV

service to the residents, the price cannot exceed the market rate for service of similar quality available to the Development’s residents from a primary provider of cable or satellite TV;

Full‐size range and oven in all units; At least two full bathrooms in all 3 bedroom or larger new construction units; and Bathtub with shower in at least one bathroom in at least 90% of the

new construction non‐Elderly units.

Accessibility, Universal Design and Visitability Features: All units of the proposed Development must meet all federal requirements and state building code requirements, including the following:

2012 Florida Accessibility Code for Building Construction as adopted pursuant to Section 553.503, Florida Statutes;

The Fair Housing Act as implemented by 24 CFR 100; Section 504 of the Rehabilitation Act of 1973; and

Titles II and III of the Americans with Disabilities Act of 1990 as implemented by 28 CFR 35, incorporating the most recent amendments, regulations and rules.

EXHIBIT B of 38



June 3, 2014

For purposes of the Housing Credit Program, a Housing Credit allocation shall be deemed “Federal financial assistance” within the meaning of that term as used in Section 504 of the Rehabilitation Act of 1973 as implemented by 24 CFR Part 8 for all Housing Credit Developments.

All new construction units that are located on an accessible route must have the following features and all rehabilitation units that are located on an accessible route must include as many of the following features as are structurally and financially feasible within the scope of the rehabilitation work utilizing a capital needs assessment performed during the credit underwriting process:

Primary entrance door shall have a threshold with no more than a ½‐inch rise; All door handles on primary entrance door and interior doors must have lever handles; Lever handles on all bathroom faucets and kitchen sink faucets; Mid‐point on light switches and thermostats shall not be more than 48 inches above

finished floor level;

Cabinet drawer handles and cabinet door handles in bathroom and kitchen shall be lever or D‐pull type that operate easily using a single closed fist.

All new construction units must include the following General Features and Green Building Features: General Features in all Family Demographic Developments:

Provide reinforced walls for future installation of grab bars that meet or exceed 2010 ADA Standards for Accessible Design around each tub/shower unit in each dwelling unit. At the request of and at no charge to a resident household, the Development shall purchase and install grab bars around each tub/shower unit in the dwelling unit. The product specifications and installation must meet or exceed 2010 ADA Standards for Accessible Design. The Development shall inform a prospective resident that the Development, upon a resident household’s request and at no charge to the household, will install grab bars around a dwelling unit’s tub/shower unit, pursuant to the 2010 ADA Standards. At a minimum, the Development shall inform each prospective lessee by including language in the Development’s written materials listing and describing the unit’s features, as well as including the language in each household’s lease.

Green Building Features in all Family and Elderly Demographic Developments:

Low or No‐VOC paint for all interior walls (Low‐VOC means 50 grams per liter or less for flat; 150 grams per liter or less for non‐flat paint);

Low‐flow water fixtures in bathrooms—WaterSense labeled products or the following specifications: o Toilets: 1.6 gallons/flush or less, o Faucets: 1.5 gallons/minute or less, o Showerheads: 2.2 gallons/minute or less;

Energy Star qualified refrigerator; Energy Star qualified dishwasher;

Water heating minimum efficiency specifications (choose gas, electric, gas tankless, or boiler/hot water maker):

EXHIBIT B of 38



June 3, 2014

o Gas:

• 30 gal = .63 EF; or

• 40 gal = .61 EF; or

• 50 gal = .59 EF; or

• 60 gal = .57 EF; or

• 70 gal = .55 EF; or

• 80 gal = .53 EF; or o Electric:

• 30 gal = .94 EF; or

• 40 gal = .93 EF; or • 50 gal = .92 EF; or • 60 gal = .91 EF; or • 70 gal = .90 EF; or • 80 gal = .89 EF; or

o Tankless gas water heater: minimum .80 EF; or o Boiler or hot water maker:

• < 300,000 Btu/h: 85% Et (thermal efficiency); or • 300,000 Btu/h or higher: 80% Et;

Energy Star qualified ceiling fans with lighting fixtures in bedrooms; Air Conditioning minimum efficiency specifications (choose in‐unit or commercial):

o In‐unit air conditioning: minimum 14 SEER; or o Central chiller AC system—based on size:

• 0‐65 KBtuh: Energy Star certified; or

• • >65‐135 KBtuh: 11.3 EER/11.5 IPLV; or

• • >135‐240 KBtuh: 11.0 EER/11.5 IPLV; or

• • >240 KBtuh: 10.6 EER/11.2 IPLV. HOME Additional Green Building Features, ten points required:

Programmable thermostat in each unit (2 points)

Humidistat in each unit (2 points)

Eco‐friendly cabinets – formaldehyde free, material certified by the Forest Stewardship Council (3 points)

FL Yards and Neighborhoods certification on all landscaping (2 points)

Install daylight sensors, timers or motion detectors on all outdoor lighting attached to buildings (2 points)

EXHIBIT B of 38


CAPTIVA COVE I I MAY 30, 2014 EXHIBIT 3, PAGE 1

COMPLETENESS AND ISSUES CHECKLIST

DEVELOPMENT NAME: Captiva Cove II _________________

DATE: June 3, 2014 _____

In accordance with applicable Program Rule(s), the Applicant is required to submit the information required to evaluate, complete, and determine its sufficiency in satisfying the requirements for Credit Underwriting to the Credit Underwriter in accordance with the schedule established by the Florida Housing Finance Corporation (“Florida Housing” or “FHFC”). The following items must be satisfactorily addressed. “Satisfactorily” means that the Credit Underwriter has received assurances from third parties unrelated to the Applicant that the transaction can close within the allotted time frame. Unsatisfactory items, if any, are noted below and in the “Issues and Concerns” section of the Executive Summary.

CREDIT UNDERWRITING

REQUIRED ITEMS:

STATUS NOTE

Satis. /Unsatis.

1. The development’s final “as submitted for permitting” plans and specifications.

Note: Final “signed, sealed, and approved for construction” plans and specifications will be required thirty days before closing.

Satis. 1

2. Final site plan and/or status of site plan approval. Satis.

3. Permit Status. Satis.

4. Pre‐construction analysis (“PCA”). Satis. 1

5. Survey. Satis.

6. Complete, thorough soil test reports. Satis.

7. Full or self‐contained appraisal as defined by the Uniform Standards of Professional Appraisal Practice.

Satis.

8. Market Study separate from the Appraisal. Satis.

9. Environmental Site Assessment – Phase I and/or Phase II if applicable (If Phase I and/or II disclosed environmental problems requiring remediation, a plan, including time frame and cost, for the remediation is required). If the report is not dated within one year of the application date, an update from the assessor must be provided indicating the current environmental status.

Satis.

10. Audited financial statements for the most recent fiscal year ended or acceptable alternative as stated in the Rule for credit enhancers, Applicant, general partner, principals, guarantors and general contractor.

Satis. 2

11. Resumes and experience of Applicant, general contractor and management agent.

Satis.

EXHIBIT B of 38



12. Credit authorizations; verifications of deposits and mortgage loans. Satis.

13. Management Agreement and Management Plan. Satis.

14. Firm commitment from the credit enhancer or private placement purchaser, if any.

Satis. 3

15. Firm commitment letter from the syndicator, if any. Satis. 3

16. Firm commitment letter(s) for any other financing sources. Satis.

17. Updated sources and uses of funds. Satis.

18. Draft construction draw schedule showing sources of funds during each month of the construction and lease‐up period.

Satis.

19. Fifteen‐year income, expense, and occupancy projection. Satis.

20. Executed general construction contract with “not to exceed” costs. Satis.

21. HC ONLY: 15% of the total equity to be provided prior to or simultaneously with the closing of the construction financing.

Satis.

22. Any additional items required by the credit underwriter. Satis.

NOTES AND APPLICANT’S RESPONSES:

1. SMG has not received a PCA confirming that all Required and Optional Features and Amenities selected, and detailed in Exhibit 2, are reflected in the site plans and or architectural drawings.

Applicant’s Response: Plans and specifications are being updated to reflect all such Features and Amenities.

2. Audited financial statements for the most recent fiscal year ended or acceptable alternatives as stated in the Rule have not been provided for CSG, and Mr. Lopez, Ms. Mades, Mr. Wolfe, and Mr. Meyers, individually.

Applicant’s Response: The statements presented were certified as true and correct.

3. The credit enhancement and HC Equity proposals from Citi and Stratford, respectively, are not firm commitments.

Applicant’s Response: Firm commitments not materially different from the assumptions used in this CUR will be provided at closing.

EXHIBIT B of 38



HC Allocation Calculation

$15,637,538

Less Land Cost ($2,510,000)

Less Federa l Funds $0

Less Other Inel igible Cost ($1,074,005)

Less Disproportionate Standard $0

$12,053,533

100.00%

130.00%

Qual i fied Bas is $15,669,593

3.42%

$535,900

Section I: Qualified Basis Calculation

Development Cost

Tota l Qual i fied Bas is

Appl icable Fraction

DDA/QCT Bas is Credi t

Annual Hous ing Credi t Al location

Hous ing Credi t Percentage

Notes to the Qualified Basis Calculation:

1. Other Ineligible Costs consist primarily of FHFC Administrative and Application Fees, Marketing/Advertising, the Operating Deficit Reserve required by the HC Syndicator, and portions Legal Fees, Title and Recording Fees, Costs of Issuance, Permanent Loan Origination Fee, Construction Loan Interest and Operating Deficit Reserve. See the HC Ineligible Costs column of the Uses of Funds schedule within Section A of this Credit Underwriting Report.

2. The Subject Development has a 100% Set‐Aside; the Applicable Fraction is therefore 100.00%.

3. This Subject Development is located in Broward County, a Difficult to Developer Area (“DDA”). Therefore, the 130% DDA Basis Credit has therefore been applied.

4. Per Florida Housing Rule, 15 basis points are added to the actual percentage reported (3.27%) as of the date of invitation to credit underwriting for 4% Housing Credits. For purposes of this report, a Housing Credit Percentage of 3.42% is applied.

$15,637,538

Less Mortgages ($8,567,993)

Less Grants ($500,000)

$6,569,545

99.99%

$0.9500

$6,916,002

$691,600

Section II: Gap Calculation

Tota l Development Cost (Including Land and Inel igible Costs )

Equi ty Gap

Percentage to Investment Partnership

HC Syndication Pricing

HC Required to Meet Gap

Annual HC Required

Notes to the Gap Calculation:

EXHIBIT B of 38



1. Mortgages are the MMRB, FHFC HOME, and Broward County HOME. The Grant is from AHS.

2. HC Syndication Pricing and Percentage to Investment Partnership are based upon the May 15, 2014, proposal from Stratford.

$12,053,533

Plus Land Cost $2,510,000

$14,563,533

$8,500,000

Less Debt Service Reserve $0

Less Proceeds Used for Costs of Is suance $0

Plus Tax‐exempt GIC earnings $0

$8,500,000

58.36%

Section III: Tax‐Exempt Bond 50% Test

Tax‐Exempt Proceeds Used for Bui lding and Land

Proceeds Divided by Aggregate Bas is

Tota l Depreciable Cost

Aggregate Bas is

Tax‐Exempt Bond Amount

Notes to 50% Test:

1. SMG estimates the Tax‐Exempt MMRB loan amount to be 58.36% of Depreciable Development Costs plus Land Acquisition Costs. If, at the time of Final Cost Certification, the Tax‐Exempt Bond Amount is less than 50%, developer fees will have to be reduced by an amount to ensure compliance with the 50% Test. That may, in turn, result in a reduction to HC Equity.

$535,900

$691,600

$535,900

HC per Qual i fied Bas is

Section IV: Summary

HC per Appl icant Request

HC per Gap Calculation

Annual HC Recommended

NOTES TO THE SUMMARY:

1. The Annual HC Recommended is based on the Qualified Basis Calculation.

EXHIBIT B of 38

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