24 - Laserfiche WebLink

H Analyze.Advise.Act. 700 South Flower Street,Suite 2995, Los Angeles,CA 90017 T: 310-581-0900 F: 310-581-0910 I www.hraadvisors.com MEMORANDUM To: Oscar Orci, City of Long Beach From: HR&A Advisors, Inc. Date: February 4, 2021 Re: Analysis of a Proposed Moderate-Income Housing Transaction for the Oceanaire Property Introduction Purpose of the Analysis HR&A Advisors,Inc.("HR&A")was engaged by the City of Long Beach(the"City" or"Long Beach") to conduct detailed and independent programmatic and financial review of a proposed project to convert an existing 216-unit Class A multifamily building called the Oceanaire and located at 150 West Ocean Boulevard in the City, to moderate-income housing using a tax-exempt bond financing structure, which also qualifies the Oceanaire for ad valorem property tax abatement during the term of the financing (the"Transaction").The Transaction proponents,California Statewide Communities Development Authority's Community Improvement Authority ("CSCDA") and Waterford Properties ("Waterford") brought the proposal to the City in October 2020. At a meeting on November 17, 2020, the City Council directed Long Beach Development Services staff to provide a detailed review and recommended action for City Council consideration. HR&A's analysis supports the City staff analysis by reviewing the terms of the Transaction, potential benefits and risks, and provides recommendations if the City Council is inclined to proceed with the Transaction. HR&A's analysis included several approaches to fully understand the scope and implications of the Transaction. HR&A first conducted a detailed review of draft Transaction documents provided by CSCDA to City staff and available related documentation a similar transaction that recently closed its financing in Anaheim. HR&A also met with Transaction proponents several times to better understand their assumptions, expectations, and projections within the Transaction underwriting process. In addition, HR&A conducted independent research using third party sources, including CoStar real estate data, HUD databases, interviews with California Department of Housing and Community Development ("HCD"), and city staff reports related to other similar proposals in Anaheim, Carson and San José. Finally, HR&A also drew on its 40 years of experience advising cities and other public agencies across the U.S. on affordable housing programs and finance, and other consulting experience for the City. HR&A completed an initial evaluation of the proposed Transaction in a memorandum dated January 13, 2021, which City staff shared with the Transaction proponents. On January 19,the Transaction proponents provided comments on HR&A's initial analysis along with a new market study and an updated financial model, which they further updated on January 21. They also agreed to make several changes to the Transaction including an increase to the percentage of units at the lower end of the moderate-income affordability range; increasing the financial commitment to property maintenance capital expenditures; a faster pace to conversion of all units to moderate-income; reducing some Transaction fees; making payment of the City's annual monitoring fee; and reimbursing City costs to review the proposed Transaction.This memo considers the new information provided to HR&A and the revised and new Transaction commitments. The analysis in this memo provides perspective on several critical topics focusing on the City's potential benefits from the Transaction and,the recent improvements notwithstanding, how the deal structure could be adjusted to better protect the City's interests.These topics include further enhancing the affordability benefits of the Transaction; market conditions that could reduce the City's affordability and fiscal benefit; and the financial benefits to the Transaction proponents. New York I Dallas I Los Angeles I Raleigh I Washington DC