Business Plan

Introduction

The Wasatch Choice 2040 Consortium (the “Consortium”) is in the final year of its $5 million Sustainable Communities Grant Program. Awarded in 2010 from the Department of Housing and Urban Development, the grant provided resources that produced a “tool box” of accessible programs for use by communities to plan a better future for their residents. These tools are located on a publicly accessible website and include: a Form Based Code manual, a Regional Housing Plan and Regional Analysis of Fair Housing Choice, an Illustrative Planning Process, and models of transit oriented development types, among others.

The next step in the process is to utilize these tools to spur development and effectively create sustainable communities through Equitable Transit‐Oriented Development (ETOD). Equitable Transit Oriented Development (ETOD) can be defined as development which prioritizes social equity as a key component of TOD implementation. It aims to ensure that all people along a transit corridor, including those who are low income, have the opportunity to reap the benefits of access to health clinics, fresh food markets, human services, schools, childcare centers, and easy access to employment opportunities offering living wages. By developing or preserving affordable housing and encouraging locating jobs near transit, equitable TOD can minimize the burden of housing and transportation costs for low income residents and generate healthier residents, vibrant neighborhoods and strong regional economies.”

Some of the capital necessary to bring new ETOD development to fruition, however, is missing. Communities need access to funds to allow for development that will enhance their community and provide equitable development, serving the needs of a broad range of people. Projects should meet the needs of local citizens and utilize public transit to maximize its ability to serve as a reliable and affordable transportation choice for everyone.

A loan fund task force was created by the Consortium to help craft the structure, size, operation and conditions of a TOD fund, that once established, would incentivize ETOD around public transit stops.


Executive Summary

The $30 million Utah Equitable TOD Loan Fund (the “Fund” or “TOD Fund”) is being created to provide patient and flexible financing to allow developers to purchase and/or develop property near public transportation throughout the Wasatch Front Region. The Fund’s objective is to promote the development of affordable housing located within ½ mile of transit stops including commuter‐rail, light‐rail, bus rapid transit, and core UTA bus service.

The TOD Fund will be structured using a participation model, and managed by the Utah Center for Neighborhood Stabilization (UCNS). Both nonprofit and for‐profit developers will be able to
access the Fund’s resources. The Fund will serve as a “one‐stop shop” for affordable housing projects, providing an acquisition and predevelopment source of capital to allow developers to secure key properties, and construction financing for these same projects. Whereas some geographies may have a greater need to target a lower AMI, other areas have already established enough housing to accommodate the deeper targets, and are looking to bring more market rate units to the area.

To ensure that the Fund will be relevant and financially viable, UCNS has engaged in extensive analysis and other preliminary work to assess the Fund’s prospects, including:

  • Preliminary Fund Structural Analysis and Capital Raising – UCNS consulted Fund counsel and potential Fund participants to discuss structural options for the Fund. The objective was to customize a structure to support the multiple needs of TOD projects, as well as to ensure market acceptance among capital providers.
  • Market Analysis – UCNS hired a third party to conduct a market analysis, of which the results were shared with capital providers and further established the market demand for the proposed products.
  • Preliminary Project Pipeline and Outcomes Analysis – The Fund has assembled a $58.3MM pipeline of potential deals. The pipeline consists of six projects with 534 rental housing units, all of which are affordable units, in the amount of $49.3MM, and two projects for predevelopment and acquisition in the amount of $9MM.
  • Financial Modeling – UCNS has modeled the Fund to assess its financial viability. The Fund has been structured to be self‐sufficient, after the start‐up phase, which will require grant support to pay for one‐time costs of approximately $339,000.

This business plan will describe the key elements of the Fund’s structure and operations and will describe the Fund participant’s strategies for marketing its products and assessing the Fund’s success. The plan will lay out the following items: Fund Structure, Operating Plan, Financial Plan, Marketing Plan, and Assessment of Success.


Fund Description

The Utah Equitable TOD Loan Fund (Fund) will have an initial two year origination period and a total term of five years, with the intent of renewing these terms annually. The Fund is made possible by support of $5 million from the State of Utah Division of Housing and Community Development, and $2 million from Salt Lake County. Envision Utah, Morgan Stanley, Synchrony Financial, Zions Bank, the Utah Center for Affordable Housing and other partners have also made this fund possible.

Mission

Provide affordable housing, both homeownership and rental, within one half mile of high capacity transit and/or high frequency transit that meets housing needs for households earning less than 80%, with a priority given to developers targeting 50% or below of area median income (AMI). Exceptions to the distance requirement (within ½ mile) may be approved by the Credit Committee.

To the extent possible, the Fund supports the following principles:

  • Ensures that current residents, businesses and other community members benefit as their communities change and grow, rather than being displaced to areas that offer fewer opportunities.
  • Seeks to ensure that new growth creates housing choices affordable to socially and economically diverse populations, opportunities for community businesses and institutions to thrive, and employment opportunities that pay a living wage.
  • Empowers communities and builds local capacity to actively participate in planning and policy making processes.
  • Promotes sustainability throughout the design, construction and operation of affordable housing.

Fund Priorities

The Fund has established the programmatic targets listed below in order to promote equitable TOD across the Wasatch Front. The Fund will meet the following targets, which will be measured at the Fund level:

  1. Affordable Housing – The Fund will have a target that 100% of the housing units financed by the Fund, in aggregate, should be designated for residents with household income equal to or less than 80% of Area Median Income. For rental projects, at least 60% of the total units produced by the Fund will be for residents at 60% AMI or below. For homeownership projects, all of the homes produced should be for residents at 80% AMI or below. In addition, the Fund will ensure that all rental units/homes meet the above affordability requirements for at least 15 years, and will defer to lengthier or more restrictive requirements from other sources. The Fund should give consideration to the preservation of affordable housing and new construction of units. The Fund will be open to catalytic opportunities in weaker real estate markets where mixed‐use development may create opportunities to revitalize distressed neighborhoods, and will allow for specific exceptions serving higher income households than stated above where a demonstrated community need and established community policy exists and is applicable, and where such uses remain consistent with regulatory restrictions on all Fund sources.
  2. Complementary Neighborhood Uses – The Fund will not directly provide loans to nonhousing projects, such as child care centers, health clinics, community facilities, neighborhood retail, food markets and other uses, but will actively seek to develop partnerships so others can fund those complementary uses. The above uses, however, can be funded as the mixed‐use component of an affordable housing project that meets Fund criteria.
  3. Geographic Diversity – The Fund will make every effort to ensure that the projects supported by the Fund represent the diverse geography of Utah.
  4. A Needs Test – The Fund must assist in the creation of affordable housing that the market would not otherwise create, as opposed to simply lowering the cost for developers. For example, during project underwriting, UCNS must demonstrate that the flexible terms and pricing of Fund products help make the project feasible, or assist the developer in accelerating the development schedule of the project and delivering deeper community benefits or community benefits that may not otherwise have occurred for an indeterminate period of time without Fund financing. The needs test will be included in the Fund’s underwriting criteria.
  5. High Quality Transit Service – All projects must be generally within half a mile of quality transit service, which includes light rail, bus rapid transit, etc., with exceptions at the discretion of the Advisory Committee. The Fund will consider transit mode and frequency when assessing transit quality. Exceptions to the distance requirement (within 1/2 mile) can be approved by the Credit Committee.

Geographic Eligibility

The Fund will finance affordable housing projects within the state of Utah.

Key Partners

The Loan Fund materialized from discussions among thought leaders along the Wasatch Front who are looking to prepare for the expected population growth in Utah over the next few decades. These thought leaders are interested in preserving and creating equitable spaces to prevent those in lower income brackets from being pushed out further from jobs, services and housing. The organizations involved in the conceptualization and creation of the fund will continue to play a vital role as the Fund is closed and utilized. Key partners include the following:

  • State of Utah Olene Walker Housing Loan Fund (“OWHLF”): OWHLF provided $5 million of top loss seed money for the Fund’s creation. OWHLF supports quality affordable housing options that meet the needs of Utah’s individuals and families. OWHLF administers multiple programs throughout the state aimed to achieve its goal of creating quality affordable housing for Utah’s low income populations. The lending experience of the organization is vast and ranges from financing multi‐family projects to rural self‐help projects. OWHLF is considered one of Utah’s largest tools for creating affordable housing.
  • Salt Lake County Division of Community Resources and Development (SL County): SL County had assembled $2 million from its partner cities to serve as top loss capital for the Fund, and has been heavily involved in its conceptualization.
  • Utah Center for Neighborhood Stabilization (“UCNS”): UCNS will serve as the manager and originator for the Fund. UCNS stabilizes neighborhoods through its subsidiary organizations by providing single and multi‐family affordable housing, neighborhood revitalization, and small business lending and investing.
  • Zions Bank: Zions Bank will serve as the loan servicer for the Fund’s loan portfolio.

Fund Counsel

The Fund Counsel is Bocarsly Emden Cowan Esmail & Arndt LLP in association with Rosenblum Goldenhersh, P.C as selected through an RFQ.

Fund Structure and Capital Raising

The Fund will be structured as a participation model managed by UCNS or its affiliated CDFI. All of the Fund loans will be originated by the Fund LLC, with other lenders and top loss providers participating in those originated loans. The Fund Manager has formed an LLC to allow the senior lenders to pool their funds and participate in Fund loans as a group rather than individually. The Fund will have four products: a predevelopment loan product, an acquisition loan product (with possible predevelopment uses), and a construction loan product.

Loan Product Funding ‐ UCNS will launch and operate a $30 million revolving loan pool for TOD loans in the Wasatch Front. UCNS has the following three sources of top loss funds available for these loan products:

  • OWHLF non‐federal funds – The Fund has $2.5 million available to serve as a top loss on loans.
  • OWHLF federal HOME dollars – The Fund has $2.5 million available to serve as a top loss on loans. However, these funds are more restrictive and carry the requirements of the federal HOME program with them.
  • Salt Lake County Top Loss Funds – The Fund has $2 million available to serve as a top loss on loans made for projects in unincorporated Salt Lake County.

UCNS, as Fund Manager, will designate one of the three above sources to serve as a top loss for each loan made through the program. The top loss will apply to each loan and will vary on a project‐by‐project basis and not have a pooled risk feature. Generally, the top loss percentage for each loan will be 20% for early loans and less for construction loans, and adjusted up or down based on the risk profile of the particular loan. Each loan will have one additional source in it:

  • Senior Lender funds – Initially it is anticipated that three banks – Morgan Stanley, Synchrony Financial and Zions Bank– will provide the remainder of the capital (up to 80%) for each loan and be in a senior position. UCNS may consider creating a separate LLC for the senior lenders to lend into at a ‘Fund” level, and then have the LLC participate in the senior position in each one of the project loans. This may be easier for the banks to accomplish given regulatory and efficiency requirements.

The following chart illustrates how the products will be funded:

Partner Shares Total Commitment Risk Position % of Each Loan
UCNS Class B $7,000,000 First Loss Varies by loan and project
Private Capital Class A $23,000,000 Second Loss Varies by loan and project
Total $30,000,000 100%

 

Loan Products/Underwriting Criteria

The Fund’s target borrowers will primarily be experienced nonprofit or for‐profit developers, municipal agencies and joint ventures comprised of such entities, with track records of developing affordable rental housing, including supportive housing. However, the Fund will be open to lending to a diversity of borrowers who meet or exceed the Fund’s underwriting requirements. The Fund will make loans to high‐quality TOD projects targeted to delivering the maximum number of affordable housing units and/or the highest level of neighborhood benefits.

The Fund will seek to serve as a “one stop shop” through project completion and deliver acquisition and predevelopment loans to encourage the development of affordable housing projects as well as construction for the same projects. UCNS is an experienced underwriter of all of the proposed Fund products. They will provide their standard underwriting diligence for the Fund, with special attention given to entitlement risk, as well as to community and public sector support, both monetary and political. For certain products, the Fund may require demonstrated public sector support through cash delivered at closing or a commitment to fund during the construction or permanent phase of the project. Although the Fund will not originate permanent loans directly, it will explore “preferred partner” relationships with permanent lenders that will offer competitive options and a continuum of financing products to borrowers.

The Fund estimates variable interest rates will range between 2.00% and 3.25%, based on a blended cost of capital. An origination fee that ranges between 0.75% ‐ 1.25% will also be added to each loan. Origination fees will be split between the originator (UCNS) and the Servicer (Zions Bank) with .25% of each loan origination fee going to Zions Bank and the balance to UCNS. Borrowers receive a blended floating rate. The following table provides an overview of the projected terms of each loan:

Low Income Housing Tax Credit Projects

Acquisition Pre‐Development Construction
Term up to 36 months up to 24 months up to 24 months
(with Possible 12‐Mo Ext)
Rate* Note Rate = 90d L + 3.25% Note Rate = 90d L + 3.25% Note Rate = 90d L + 2.25%
Amortization Interest Only Interest Only Interest Only
Fee 1.25% 1.25% 1.25%
LTV 90% 90% 90%
LTC 90% 90% 90%
Min Loan $250,000 $100,000 $3,000,000
Max Loan $2,000,000 $400,000 $15,000,000
Recourse Full to borrower and guarantors
(unless borrower is non‐profit, in
which there may be no guarantors)
Full to borrower and guarantors
(unless borrower is non‐profit, in
which there may be no guarantors)
Full to borrower and guarantors
(unless borrower is non‐profit, in
which there may be no guarantors)
Min DSCR N/A N/A Pro forma 1.20x (at 6.5% and 30 yr am)
Min DY N/A N/A Pro forma 9.10%
Financials Borrower ‐ 3 yrs GAAP and TR’s
Guarantor ‐current FS and 3 yrs TR
Borrower ‐ 3 yrs GAAP and TR’s
Guarantor ‐current FS and 3 yrs TR
Borrower ‐ 3 yrs GAAP and TR’s
Guarantor ‐current FS and 3 yrs TR
Contractor N/A N/A Licensed GC w/ experience commensurate to project
Personal Guarantees All individuals w/ =>20% ownership in borrower All individuals w/ =>20% ownership in borrower All individuals w/ =>20% ownership in borrower

*The loan servicer would receive an upfront 0.25% fee on all loan types with the exception of construction loans, in which the servicer would receive 0.50% fee.

Conventional Projects

Acquisition Pre‐Development Construction
Term up to 36 months up to 24 months up to 24 months
(with Possible 12‐Mo Ext)
Rate Note Rate = 90d L + 3.4% Note Rate = 90d L + 3.4% Note Rate = 90d L + 3.0%
Amortization Interest Only Interest Only Interest Only
Fee 0.75% ‐ 1.25%* 0.75% ‐ 1.25%* 0.75 – 1.25%*
LTV 85% 75% 80%
LTC 85% 75% 80%
Min Loan $500,000 $100,000 $3,000,000
Max Loan $3,500,000 $400,000 $15,000,000
Recourse Full to borrower and guarantors Full to borrower and guarantors Full to borrower and guarantors
Min DSCR N/A N/A Pro Forma 1.20x (at 6.5% and 30 yr am)
Min DY N/A N/A 9.10%
Financials Borrower ‐ 3 yrs GAAP and TR’s
Guarantor ‐current FS and 3 yrs TR
Borrower ‐ 3 yrs GAAP and TR’s
Guarantor ‐current FS and 3 yrs TR
Borrower ‐ 3 yrs GAAP and TR’s
Guarantor ‐current FS and 3 yrs TR
Contractor N/A N/A Licensed GC w/ experience commensurate to project
Personal Guarantees All individuals w/ =>20% ownership in borrower All individuals w/ =>20% ownership in borrower All individuals w/ =>20% ownership in borrower

*The loan servicer would receive an upfront 0.25% fee on all loan types with the exception of construction loans, in which the servicer would receive 0.50% fee.

Predevelopment

Loan proceeds may be used for a broad range of activities, including but not limited to: architecture, engineering, environmental studies, soils reports, surveys, market studies, appraisals, deposits or other site control expenses, escrow, title, and brokers fees, hazard insurance, liability insurance, property taxes, site security, financing fees, and debt service expenses.

Acquisition

Loan proceeds may be used for the acquisition of vacant land and/or real property and lot development expenses. A maximum of $400,000 of loan proceeds may be used for predevelopment costs. The high LTV will reduce the need for developers to line up multiple sources of financing, enabling them to make offers on available land quickly.

Construction

Loan proceeds may be used to pay costs of development and construction and will require all land use and permit approvals in place prior to closing. Facilities are disbursed on a draw‐down basis, are interest only with an interest reserve included in the loan budget, and intended to advance the project to completion of construction.


Operating Plan

The Fund will be managed by UCNS, or a local CDFI affiliate in Salt Lake County. The idea is for the Fund to offer acquisition and predevelopment loans to a project, which are then taken out by a separate construction loan from the Fund. The OWHLF funds and the County of Salt Lake funds will be retained and managed by UCNS in separate accounts. The private lenders will lend through the LLC to each of the individual TOD loans. The LLC will be managed by UCNS or its affiliate, with each lender having a Credit Agreement between it and the LLC. The acquisition, predevelopment and construction products will be revolving. The senior lenders’ (or LLC’s) commitment will operate like a line of credit and will be drawn as project loans are approved and funded, and repaid when loans repay. The funding partners will receive the appropriate security interests or real estate collateral, depending on the final structure.

Fund Management and Governance

The Fund will have a management and governance structure that has proved successful in past CDFI‐managed funds. This structure includes an Advisory Committee to provide strategic guidance and assess the Fund’s progress against its programmatic objectives, as well as a more formal Fund governance model that includes Fund Manager, Fund Advisory Committee, a Pricing Committee and a Credit Committee. The processes involved in Fund decision‐making will be determined by various thresholds, which will be clearly defined in the Fund legal documents.

Fund Advisory Committee
The Fund will appoint an Advisory Committee to provide programmatic guidance and advice to UCNS during the life of the Fund.

Composition of Committee
The Committee will consist of 5 ‐ 9 members including representatives appointed by each of the Class “A” Lenders, with an additional 2 – 4 at large members including a State of Utah representative and additional representative as appointed by the Class “A” Lenders. The Fund Manager (UCNS) will be an ex officio member. The chair will rotate on one‐year terms. The Committee will assure that the fund is continuing to meet its mission and is in compliance with all required reporting. The Committee will meet quarterly during the first year of the Fund and semi‐annually thereafter. Each Committee member will have a term of three years, which may be renewed.

Committee Responsibilities
The Committee will serve as ambassadors for the Fund to the public and provide strategic and programmatic advice and guidance to the Fund. The Committee will also serve as a forum to discuss substantive matters that may affect the Fund or its mission. The Committee will serve solely in an advisory capacity and will not have any legally binding authority on the Fund. The Committee will not review individual project transactions, nor will it have credit authority to approve/disapprove individual transactions or make any changes to the Fund’s legal structure or procedures.

Fund Manager
UCNS will serve as the Fund Manager and will be responsible for raising capital, developing Fund legal documents, and closing of the financing structure. UCNS also will manage the Fund’s day-to‐day operations, including the credit process, financial management and reporting.

Sub‐Servicer
Zions Bank will be the Sub‐Servicer for the Fund and will be responsible to the Fund parties for the servicing of all underlying project loans, including disbursement of construction loans. The Fund will create a Loan Originating and Servicing Manual that outlines the Fund’s policies and procedures for servicing loans.

Pricing Committee
The Fund will establish a Pricing Committee responsible for setting rate and fee levels for its products based upon current cost of funds, market conditions and other factors that may vary over time and impact facility pricing. The Pricing Committee will meet annually (or as otherwise determined necessary) and shall be comprised of representatives from the Four Class “A” Lenders, each of whom will appoint one committee member.

Credit Committee
The Fund will establish a Credit Committee to approve all prospective project loans, and to help determine a course of action for delinquent loans. The Credit Committee shall be comprised of five members including representatives appointed by each of the Class “A” Lenders, UCNS, and a member to be approved by the Class “A” Lenders. The committee may be expanded to seven or nine members as needed and determined by its members.

A quorum will be three members, with approval of loans requiring three or more members voting in favor of the loan (or greater than 50% of the committee members if the total number of members is increased). If a member is not available to meet, approval or disapproval of the loan can be e‐mailed or otherwise communicated in writing prior to the credit committee meeting. Non‐conforming loans will be an exception and will acquire at least 75% of the members to approve the loan.

The Credit Committee will approve the mix of funds from the Fund participants that will comprise each loan as part of their review of loan requests.

Project Loans – Origination
The Fund will be able to make loans that fit the Fund’s programmatic priorities. Project loans will be accepted on a rolling basis. Due to the nature of acquisition lending, a Request for Proposals (RFP) process is not anticipated. UCNS will prepare an underwriting package, and manage the Fund credit approval process. Project loans will either “conform” to the Fund’s underwriting criteria or will be “non‐conforming.” UCNS, as Fund Manager, will create Project Underwriting Checklists (PUCs) for each Fund loan product. Loan requests will be compared to the PUC for that product to determine conformity. The Credit Committee approval process of Conforming and Non‐Conforming Project Loans is as follows:

  1. UCNS prepares an Underwriting package for Credit Committee approval. UCNS determines whether the Project Loan is Conforming or Non‐Conforming to Underwriting Criteria based on a PUC. Underwriting package includes the credit memo and all attachments. Original materials such as appraisals, environmental, etc. will be made available to the Credit Committee upon request.
  2. If the Project Loan is considered Non‐Conforming, UCNS prepares a cover memo describing the ways in which the Project Loan is Non‐Conforming to the relevant PUC. UCNS delivers the Underwriting Package to the Credit Committee for review, including the cover memo for Non‐Conforming loans. Non‐conforming loans and exceptions to policy may require a higher level of approval
  3. UCNS will schedule a monthly Credit Committee to review the Underwriting package. Underwriting packages will be delivered to the loan committee 7 days prior to the scheduled meeting. During those 5 business days, members of the Credit Committee can ask for more information, if necessary, or ask clarifying questions of UCNS about the Project Loan request. Committee members that are not able to attend the meeting may either approve or deny the loans prior to the meeting

Project Loans ‐ Post Origination
As the Sub‐Servicer, Zions Bank will assure the timely repayment of interest and principal, and the correct reporting of project loan information in order to protect the quality of the Fund’s portfolio. The Servicing Manual outlines the responsibilities of management, reporting and servicing.

Project Loans ‐ Delinquency
In an event of loan delinquency, the following process will be employed:

  • UCNS will notify Lenders in the event any loan is more than 15 days delinquent;
  • The Loan Servicer will address the delinquency for up to 90 days;
  • Upon completion of the Loan Servicer period to address, UCNS will have 60 days to prepare and submit a workout plan to the Credit Committee for review and approval.

Fund Reporting and Risk Management

As the Fund Manager, UCNS will be responsible for managing the overall risk of the Fund and for providing a series of reports to the capital partners and the Advisory Committee regarding the
Fund’s performance.

Portfolio Management

The Fund Manager will monitor the overall risk profile of the Fund, which will be determined by reviewing the types of project loans that are made throughout the life of the Fund. When reviewing the Fund’s portfolio of loans, the Fund Manager will consider several risk factors, including the following:

  • The balance between various project loans originated by the Fund;
  • The mix of loan types, such as acquisition, predevelopment and construction loans;
  • The diversification of geography, so that the Fund has loans throughout the State;
  • Concentration to a single borrower, which will be limited to $20MM;
  • Delinquency, overall and by product type;
  • Loses, overall and by product type;
  • Financial performance of loans including % complete vs % disbursed, actual lease up versus pro forma lease up, actual debt service coverage ratio vs pro forma, etc.
  • On a quarterly basis, after the first year of the Fund’s operations, outstanding Delinquent project loans shall be less than or equal to ten percent (10%) of the aggregate committed balance of all project loans; and
  • At all times and as of any date of determination, the cumulative loss ratio, measured as a) the cumulative write offs on Project Loans divided by b) the cumulative Project Loan commitments made or guaranteed by the Fund, shall not exceed five percent (5%).

Quarterly Reports

UCNS will be responsible for providing the following reports to capital partners and the Advisory Committee on a quarterly basis, unless otherwise noted within 45 days of quarter end:

  • Portfolio monitoring report that describes outstanding loans and loan performance, including a description of portfolio diversification and other key credit risk factors as agreed to by the Fund’s capital partners; loans that have been approved but have not yet closed; and loans that are awaiting approval.
  • Delinquency report noting any events of default, occurrence of any servicer trigger event, and occurrence of any material adverse change for project loans.
  • Report to the Advisory Committee discussing the Fund’s performance as compared to programmatic priorities, to be discussed at Advisory Committee meetings. These reports will be provided on a quarterly basis for the first year after the Fund closes and on a semiannual basis thereafter.
  • Other information as reasonably requested from Fund capital partners.

Financial Plan

The Consortium has modeled the Fund so that it will be self‐sufficient after the initial startup period, which is supported by grant funding. The startup period consists of a 6‐month period to complete the business model, raise grant and loan capital, and structure/close the Fund. Funding for startup costs and ongoing Fund operations is described below.

Start‐Up Period

The Fund start‐up budget is projected to be $339,000. The sources of this $XX are as follows:

Projected Sources of Income (dollar amount)
CIT 35,000
Zions 7,000
Morgan Stanley 45,000
GE – Requested 45,000
Zions – Requested 38,000
UCNS 100,000
Fees, Interest Income or UCNS 69,000
TOTAL 339,000

 

The uses of the grant funds can be divided into three major categories:

  • Development of the Fund business plan and financial model ($40,000) – Tasks include the creation and negotiation of a Fund business plan with all Fund parties, including the development of underwriting criteria, loan products, a demand analysis and marketing plan. The Fund also has run several different financial scenarios to ascertain the best financial model for the Fund, both from a product offering and a self‐sufficiency perspective.
  • Raising of grant and loan capital for the Fund ($10,000) – This consists of preparation of all funding applications and underwriting packages for potential lenders/investors, and funder/investor negotiations during the documentation process.
  • Structuring and closing the Fund ($289,000) – Expenses include $60,000 in legal costs to structure and close the Fund, and to pay the costs of any necessary legal opinions. Other costs include potential LLC startup expenses, such as the provision of adequate liquidity ($100,000) in the LLC to cover any early operating losses of the Fund, which typically occur in years 1 and 2 until the Fund has made enough project loans to support itself. In addition, UCNS, as Fund Manager, will receive $60,000 to pay for a staff person to manage the fund and underwrite the transactions.

Ongoing Operations

The fund has been modeled so that it will be self‐sufficient after the initial startup period. The Administrative Agent will receive .50% of the loan origination fee and an interest write‐up on the grant funds.


Marketing Plan

A Market Study has been completed and confirms the need in the market for affordable rental housing around TOD sites. Since 2000 renter occupied units have grown at a 2.1 percent annual compound
growth rate whereas owner occupied units have grown at 1.25 percent annually and the trend is expected to continue through 2016. The economic, demographic and market fundamental are positive
for the rental market.

UCNS will continue to discuss the TOD fund with lenders, affordable housing developers, groups that serve low to moderate income residents, local and state governments, housing finance agency and
other interested parties. The initial interest in the fund has been very positive and will continue as the fund becomes fully operational.


Evaluation

UCNS will track a range of outcomes to determine how the Fund is performing relative to its mission and stated priorities. As outlined above, those priorities include a concentration on the
development of affordable housing, an emphasis on geographic diversity, and a requirement that all projects be located near quality transit. Based on these four overarching priorities, the
UCNS will track outcomes according to the following metrics:

Affordable Housing

UCNS will track, at a minimum, the following metrics related to the development of affordable housing through Fund financing:

  • Number and percent of units designated for residents with household income equal to or less than 60 percent of AMI
  • Number and percent of units designated for residents with household income equal to or less than 50 percent of AMI
  • Total Development Cost (TDC) of each project financed
  • Number and percent of units designated for supportive housing residents who are formerly homeless with special needs
  • Number and percent of units designated for residents with household income equal to or less than 30% of AMI

Geographic Diversity

To ensure geographic diversity of Fund financing, UCNS will track, at a minimum, the following metrics:

  • Number of municipalities in which projects have received Fund financing
  • Number of loans and dollar amount of Fund financing in each municipality

High Quality Transit

To assess the extent to which Fund projects provide access to high quality transit, UCNS will track, at a minimum, the following metrics:

  • Distance of each project from quality transit service
  • Type of transit service accessible near each project site (light rail, bus rapid transit, etc.)
Utah Center for Neighborhood Stabilization

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