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July 1, 2020
The Honorable Phil Mendelson, Chairman
Councilof the District of Columbia
1350 Pennsylvania Avenue, N.W., Suite 402
Washington, DC 20004
Dear Chairman Mendelson:
Pursuant to D.C. Official Code 42-2702.07, and on behalf ofthe BoardofDirectors (the
Board)ofthe District of Columbia Housing Finance Agency (the Agency), you are hereby
notified that on June 30, 2020, the Board enacted an Supplemental Eligibility Resolution for tax-
exempt and/or taxable multifamily housing mortgage revenue bond financing in an amount not
to exceed $7,200,000 due to increased construction costs related to the new construction and
equipping of South Capitol (the Development). The Development is expected to be located at
4001 South Capitol Street, SW, Washington, DC 20032, in Ward 8. After completion, the
Development is expected to consist of approximately one hundred ninety-five (195) residential
rental units.
A copyof the Eligibility Resolution for the DC Council's review is enclosed as Exhibit A. A
detailed description of the Development and its intended benefits are provided in the
development financing memorandum enclosed as Exhibit B, If you have any questions, please
contact me at (202) 777-1600.
Sincerely,
Enclosures
eecuea
815 Florida Avenue NW, Washington DC 20001-3017 eocuea
EXHIBIT A
 DCHFA Resolution No. 2020-15
South Capitol Multifamily
Supplemental Eligibility
Resolution
DISTRICT OF COLUMBIA HOUSING FINANCE AGENCY
RESOLUTION AS TO THE ELIGIBILITY OF SOUTH CAPITOL MULTIFAMILY
FOR ADDITIONAL TAX-EXEMPT AND/OR TAXABLE MULTIFAMILY
HOUSING MORTGAGE REVENUE BOND FINANCING
WHEREAS, the District of Columbia Housing Finance Agency (the
Agency) received a request on January 27, 2017 from Cityinterests, LLC and
The Michaels Development Company Partners (the "Applicant) that the Agency
provide bond financing for South Capitol Multifamily, which upon completion is
expected to consist of one hundred ninety-five (195) residential units; and will be
located at 4001 South Capitol Street, SW, Washington, DC 20032, Ward8 (the
Project");
WHEREAS, pursuant to the Eligibility Resolution No. 2015-21 adopted by
the Agency on November 24, 2015 (the, Original Eligibility Resolution), the
Agency determined that the Project and its financing met the requirements of the
District of Columbia Housing Finance Agency Act, D.C. Law 2-135, as amended,
D.C. Code 42-2701.01 et sea. (the, Act");
WHEREAS, on January 30, 2017, for the benefit of South Capitol
Improvements LLC, a limited liability company, organized under the laws of the
State of Delaware (the Borrower), the Agency issued its District of Columbia
Housing Finance Agency Multifamily Housing Mortgage Revenue Bonds (South
Capitol Multifamily Project), Series 2017Ain the principal amount of $9,420,000
and Multifamily Housing Mortgage Revenue Bonds (South Capitol Multifamily
Project), Series 2017 Bin the principal amount of $20,580,000 (collectively, the
Bonds) to finance a portion of the Project;
WHEREAS, the Borrower has recently informed the Agency that due to an
increase in construction costs for the project additional financing is required; the
Borrower requests additional financing in an amount not to exceed $7,200,000
through the offering of the Agency's Tax-Exempt and/or Taxable Multifamily
Housing Mortgage Revenue Bonds (the Additional Bonds")
WHEREAS, the Borrower has elected, pursuant to Section 142 of the
Internal Revenue Code of 1986, as amended (the "Code), to set aside at least
forty percent (40%) of the units for households at or below sixty percent (60%) of
the area median income, adjusted for family size (AMI);
WHEREAS, the Borrower is eligible for Low Income Housing Tax Credits
pursuant to Section 42 of the Code, and has elected to set aside at least forty
percent (40%)ofthe units at the Project for households at or below sixty percent
(60%) of AMI; and
WHEREAS, this resolution (the "Supplemental Eligibility Resolution")
supplements the Original Eligibility Resolution in order to recommend the
issuance of the Additional Bonds on parity with or subordinate to the Bonds in an
amount not to exceed $7,200,000, in one or more series, for the benefit of the
Borrower.
NOW THEREFORE, BE IT RESOLVED by the Board of Directors of the
Agency (the Board) that:
1. Pursuant to the Original Eligibility Resolution, the Board previously
 determined that the Project and its financing by the Agency will
meet the requirements of the Act.
. Final approvalof any additional financing pursuant to this
Supplemental Eligibility Resolution shall be subject to such terms,
conditions and documentation acceptable or deemed necessary by
the Agency.
. This reservation of volume cap in the additional amount of
$7,200,000 to the extent available to the Agency, is for a period of
twelve (12) months which period may be extended at the sole
discretion of the Board.
. Adoption of this Supplemental Eligibility Resolution shall not
constitute a commitment from the Agency to issue the Additional
Bonds or to provide additional financing for the Project.
. The Interim Executive Director/CEO is authorized to undertake
such actions as are required to be taken pursuant to the Act and
the regulations of the Agency, including the selection of bond
professional services.
The Interim Executive Director/CEO is hereby authorized and
directed to send to the Chairman of the Council of the District of
Columbia written notification of the adoption of this Supplemental
Eligibility Resolution as required by D.C. Code 42-2702.07.
. This Supplemental Eligibility Resolution shall take effect
immediately
8. The Original Eligibility Resolution remains in full force and effect,
except as supplemented by this Supplemental Eligibility Resolution.
DCHFA Resolution No. 2020-15
ADOPTED ON JUNE 30, 2020
AT A SPECIAL MEETING
OF THE BOARD OF DIRECTORS.
ROLL CALL VOTE:
Buwa Binitie : APPROVED
Stephen M. Green : APPROVED
Scottie Irving : APPROVED
Stanley Jackson : APPROVED
Heather Howard =: APPROVED
EXHIBIT B
 MULTIFAMILY UNDERWRITING MEMORANDUM
SUPPLEMENTAL BOND ELIGIBIITY RESOLUTION
SOUTH CAPITOL MULTIFAMILY
4001 SOUTH CAPITOL STREET S.W. (Ward 8)
WASHINGTON, DC 20032
195 UNITS
DEVELOPER(S)/OWNERS:
The Michaels Development Company
NEW CONSTRUCTION
NOT TO EXCEED $7,200,000
Christopher Miller
Date: June 30, 2020
4001 SOUTH CAPITOL STREET S.W.
TRANSACTION SUMMARY: The Multifamily Lending and Neighborhood Investment underwriting staff
recommends that the District of Columbia Housing Finance Agencys (DCHFA or the Agency) Board of Directors
(the Board) approve a Supplemental Eligibility Resolution in the AMOUNT NOT TO EXCEED $7,200,000 to finance
an increase in construction costs for South Capitol Multifamily (the Project) located at 4001 South Capitol Street
S.W. (Square 6172, Lots 815 and 816), Washington, DC in the Bellevue neighborhood.
Pursuant to Eligibility Resolution No. 2015-21, which was adopted by the Agency on November 24, 2015 (the
Original Eligibility Resolution), the Agency determined that the Project and its financing met the requirements of
the District of Columbia Housing Finance Agency Act. On February 10, 2017, for the benefit of South Capitol
Multifamily, the Agency issued Multifamily Housing Mortgage Revenue Bonds Series 2017 A in the principal
amount of $9,420,000 and Series 2017 B in the principal amount of $20,580,000 (collectively, the initial bond) to
finance a portion of the Project.
The additional project costs have increased total basis by an estimated $15,195,085 to $73,556,553 for this project
and the $30,000,000 initial bond is below 50% of the increased total basis. As a result, the initial bond issued in
February of 2017 will no longer pass the 50% test required for tax-exempt bonds issued by DCHFA.
PROJECT DESCRIPTION:
The Project consists of five floors of residential living space above ground floor retail. The Project entailed the
acquisition of land, demolition of existing buildings, and construction of a six story multifamily building that will
have 195 affordable residential rental units. The project has a mix of one to three bedroom units serving incomes
from 30% to 60% of Median Family Income, including 40 permanent supportive housing units. The project also has
5,000 square feet of community space that includes a Good Foods Market and a new office for the local Advisory
Neighborhood Commission. The community space is owned by the same entity as the residential owner and the
spaces have leases that do not generate income for the project.
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The Project sponsor is South Capitol Improvements LLC (the Owner or Sponsor). The managing member is
South Cap Manager LLC (Managing Member) which is ultimately controlled by Michaels Development Company
L.P. (Michaels). Bank of America, N.A., through Prestige Affordable Housing Fund XXIV, LLC, is the 99.99% limited
partner tax credit investor in this transaction and will fund the additional LIHTC equity. Michaels is the guarantor
for this transaction. CityIntersts LLC was previously part of the ownership structure as a co-developer at the
original closing but has left the development team. Subsequent to the departure of CityInterests, Better
Tomorrows, a 501c3 founded by Michaels, was admitted to the general partnership.
PROJECT STATUS:
Construction for the project began shortly after closing in February 2017 and the development team has since
encountered a number of problems that delayed the delivery and increased the budget of the project. The primary
cause of the delays and cost increase was the quality of the building framing work completed by the initial
subcontractor. The original framing subcontractor was ultimately terminated due to non-performance and entire
areas of framing were required to be removed under the supervision of architects, structural engineers, and code
inspection officials. The construction team completed the framing by creating a partnership between a local
framing subcontractor and a more experienced framer with experience remediating prior work. The construction
delays related to the framing also caused delays with electrical, plumbing, and drywall and led to the need to rebid
the contracts. In addition to the framing issues, the project has also experienced cost overruns and delays due to
additional environmental contamination of the site, groundwater issues, and the onset of the COVID pandemic.
Preleasing for the project is underway and the project has received over 2,000 applications for the 195 units. The
first three residential floors are substantially complete and new residents are expected to begin moving in by the
middle of July. The fourth and fifth floors of residential units will be completed by the end of July and residents are
expected to begin moving in before the end of summer. The Good Foods Market is also on track to deliver in July.
LOAN STRUCTURE:
The Structure for the Supplemental Bond anticipates JPMorgan Chase Bank, N.A. as the purchaser. The terms are
still under negotiation and will be finalized prior to final bond. The timing of the request is due to the need to close
on the supplemental bonds prior to redemption of the Series B bonds in order to meet the 50% test. The Series B
bonds are scheduled to be redeemed on October 1, 2020. JP Morgan has indicated their intent to issue Series C
and Series D bonds to allow the project to remain in compliance with the 50% test. The increased bonds are
supported by an increase in net operating income due to an expected tax abatement from the addition of Better
Tomorrows and increases in LIHTC rents from original closing. The Series C supplemental bond has an underwritten
loan amount of $1.9 million, an interest rate of 4.45% inclusive of DCHFAs 40 basis points long term issuer fee, a
term of 18 years, and an amortization term of 35 years. The Series D supplemental bond will cover construction
sources and uses and will be redeemed with either tax credit equity or a bridge loan from the tax credit investor.
The remaining sources for the project include: an HPTF loan from DHCD, a DMPED Neighborhood Prosperity Fund
grant, a Federal Home Loan Bank of Pittsburgh Affordable Housing Program grant, deferred developer fee, interim
income, an environmental escrow from the seller, and sponsor equity. The sponsor has invested in excess of $9
million of sponsor equity in the project to cover the increased costs and complete construction of the building.
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COMBINED SUPPLEMENTAL & INITIAL BOND SOURCES AND USES
South Capitol Multifamily Supplemental - Supplemental Bond Sources and Uses
Source Amount Use Amount
DCHFA Supplemental Loan: 1,911,337 Acqusition: -
DMPED: 880,000 Construction: 10,957,594
Deferred Developer Fee: 1,885,484 Soft Costs: 785,518
LIHTC Equity: 2,241,371 Financing Fees: 3,387,785
Other Perm Equity Sources: 8,276,893 Reserves and Escrows: 64,187
Total Sources: 15,195,085 Total Uses: 15,195,084
South Capitol Multifamily Supplemental - Permanent and Supplemental Sources and Uses
Source Amount Use Amount
DCHFA Senior Loan: 9,420,000 Acquisition: 5,343,777
DCHFA Supplemental: 1,911,337 Construction: 52,430,481
DHCD: 25,138,557 Soft Costs: 5,099,672
DMPED: 880,000 Financing Fees: 7,375,716
Other Perm Debt Sources: - Developer Fee: 2,500,000
LIHTC Equity: 25,477,282 Reserves and Escrows: 806,906
Deferred Developer Fee: 2,002,484
Other Perm Equity Sources: 8,726,893
Total Sources: 73,556,553 Total Uses: 73,556,553
FINANCIAL ASSUMPTIONS
Permanent Loan All-In Interest Rate 4.45%
Permanent Loan Amortization 35 years
Permanent Loan Term 18 years
Minimum Amortizing DSCR 1.15
EQUITY STRUCTURE:
The equity investor, Bank of America N.A., has indicated their interest in providing additional equity to the project
in conjunction with the increased tax-exempt bonds but has not provided terms on the additional tax credit equity
investment. The underwritten investor pay rate at closing of $1.105 has been revised down to $1.00 per credit to
reflect downward adjusters due to delays in delivering units. The downward adjustment is offset by the increased
equity generated by the projects additional eligible basis due to the increased costs. Michaels will ultimately be
responsible for any shortfalls in the equity through an increase in the sponsor equity remaining in the project.
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LIHTC Calculation Acquisition Construction
Eligible Basis $63,900,737
HTC Deduction $0
Adjusted Basis $63,900,737
Projected Applicable Fraction 100.0%
QCT 130%
Projected LIHTC Qualified Basis $83,070,959
$83,070,959
Tax Credit Rate 3.07%
Annual LIHTC Amount $2,550,278
L.P. Ownership 99.90%
Investor Pay Rate $ 1.00
Projected LIHTC Investor Equity $25,477,282
TIMELINE TO CLOSING
DCHFA Initial Credit Approval 06/30/2020 (Expected)
TEFRA Hearing TBD
Stage III Application Submitted TBD
TEFRA Mayoral Approval TBD
Completion of third party reports Complete
Construction Contract Finalized Complete
Lender Approvals TBD
Investor Approval Complete
Permit Complete
DCHFA Board Meeting-Final Bond 9/24/2020 (Expected)
Close 9/29/2020 (Expected)
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SUMMARY/CONCLUSION/RECOMMENDATION
Payment of the increased construction expenses and ensuring the 50% test for tax-exempt bonds is met, are two
critical milestones that must be achieved in order to successfully deliver completion of the Project. Overall, the
Project will provide much needed amenities, including a community grocery store, and affordable housing to the
Bellevue neighborhood. The Multifamily and Neighborhood Investment underwriting staff recommends that the
Board authorize the initial credit approval of the supplemental bonds in an amount not to exceed $7,200,000 to
finance the increase in construction costs for the subject property.
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