HFA
9 oc wousina ewance Noy
March 30, 2021
The Honorable Phil Mendelson, Chairman
Council of 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 of the Board of Directors (the
Board) of the District of Columbia Housing Finance Agency (the Agency), you are hereby
notified that on March 23, 2021, the Board enacted an Eligibility Resolution for tax-exempt
and/or taxable multifamily housing mortgage revenue bond/obligation financing in an amount
not to exceed $52,500,000 for the Kenilworth 166 project (the Development). The
Development will be located at 4501 Quarles Street, NE, Washington, DC 20019, in Ward 7
which, after completion is expected to consist of one hundred sixty-six residential rental units.
A copy of the Eligibility Resolution for the City 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.
cocuea
815 Florida Avenue NW, Washiirngton DC 20001-9017 eocnra
2 so"
EXHIBITA- Eligibility Resolution
 DCHFA Resolution No. 2021-03
Kenilworth 166
Eligibility Resolution
DISTRICT OF COLUMBIA HOUSING FINANCE AGENCY
RESOLUTION AS TO THE ELIGIBILITY OF KENILWORTH 166 FOR TAX-
EXEMPT AND/OR TAXABLE MULTIFAMILY HOUSING MORTGAGE
REVENUE BOND FINANCING
WHEREAS, the District of Columbia Housing Finance Agency (the
Agency") received a request in January 2019 from the Michaels Development
Company |, LP, The Warrenton Group, LLC, and the District of Columbia
Housing Authority (collectively, the Applicant) that the Agency provide new
construction financing for Kenilworth 166, which, upon completion, is expected to
consist of one hundred sixty-six (166) residential units and will be located at 4501
Quarles Street, NE, Washington, DC 20019, Ward 7 (the Project);
WHEREAS, the Applicant 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 Applicant is eligible for Low Income Housing Tax Credits
pursuant to Section 42 of the Code, and has elected to set aside one hundred
percent (100%) of the units at the Project for households at or belowsixty
percent (60%) of AMI;
WHEREAS, the Agency has conducted a preliminary review of the
request for financing of the Project in order to determine, among other things,
that the Project and the financing requested therefor, comply with the
requirements of the District of Columbia Housing Finance Agency Act, D.C. Law
2-135, as amended, D.C. Code 42-2701.01etsea. (the Act);
WHEREAS, the Applicant has requested financing in an amount not to
exceed $52,500,000 through an offering of the Agency's Tax-Exempt and/or
Taxable Multifamily Housing Mortgage Revenue Bonds (the Bonds") for the
financing, including the financing of reasonably related and subordinate facilities
and any permissible reimbursement expenses of the Project;
WHEREAS, all or a portion of the Project may be financed with proceeds
of the Agency's Tax-Exempt Multifamily Housing Mortgage Revenue Bonds, and
such portion that is not financed with the Agency's Tax-Exempt Multifamily
Housing Mortgage Revenue Bonds may be financed with proceeds of the
Agency's Taxable Multifamily Housing Mortgage Revenue Bonds;
WHEREAS, Agency staff recommends the issuance of the Bonds in an
amount not to exceed $52,500,000, in one or more series, for the benefit of the
Applicant or other related entity affiliated with or related to the Applicant that will
own and operate the Project (the Borrower"); and
WHEREAS, providing the financing requested for the Project will confer a
public benefit and serve the public interest by lowering the cost of andexpanding
available housing opportunities for low and moderate income residents of the
District of Columbia (the District), all in accordance with and in furtherance of
the purposes of the Act in the following manner:
1. Making available approximately one hundred sixty-six (166) units,
one hundred percent (100%) of which are estimated to be
affordable to households with incomes at or below sixty percent
(60%) of AMI;
 2. Providing opportunities for construction jobs to District residents by
requiring that the Applicant and the Borrower give priority to District
residents; and
3. Contributing to the overall social and economic improvement of the
Lily Ponds/Kenilworth-Parkside neighborhood.
NOW THEREFORE, BE IT RESOLVED by the Board of Directors of the
Agency (the Board) that:
1. Based upon a review of the request by Agency staff as it relates to the
Project, the report on such review to the Board, the favorable
recommendation of the Executive Director/CEO, and upon due
deliberation and consultation with Agency staff, the Board hereby
determines that, based on the requirements of eligibility for financing
by the Agency, the Project and its financing by the Agency will meet
the requirements of the Act.
2. Final approval of any financing shall be subject to such terms,
conditions and documentation acceptable or deemed necessary by the
Agency.
3. This reservation of volume cap in the amount of $52,500,000, 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.
4. Adoption of this Eligibility Resolution shall not constitute a commitment
from the Agency to issue the Bonds or to provide financing for the
Project.
5. The 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 tax professional services.
6. The Executive Director/CEO is hereby authorized and directed to send
to the Chairperson of the Council of the District of Columbia written
Notification of the adoption of this Eligibility Resolution describing the
nature of the Project and the benefits designed to result therefrom as
required by D.C. Code 42-2702.07.
7. This Eligibility Resolution shall take effect immediately.
DCHFA Resolution No. 2021-03
ADOPTED ON March 23, 2021
AT A MEETING OF THE BOARD OF DIRECTORS.
ROLL CALL VOTE:
Buwa Binitie 3 APPROVED
Stephen M. Green RECUSED
Scottie Irving ABSENT
Stanley Jackson APPROVED
Heather Howard =: APPROVED
Secretary to the Board
EXHIBITB - Underwriting
 MULTIFAMILY UNDERWRITING MEMORANDUM
INDUCEMENT RESOLUTION
KENILWORTH 166
4501 Quarles Street, NE, Washington, DC 20019
166 UNITS
DEVELOPERS:
The Michaels Development Company
The Warrenton Group
District of Columbia Housing Authority
NEW CONSTRUCTION
NOT TO EXCEED BONDS $52,500,000
Maximum LTV: 90%, Minimum Debt Service: 1.15x
Rodney Dew
DATE: 3/23/21
 exe
TRANSACTION SUMMARY:
The Multifamily Lending and Neighborhood investments ("MLNI) underwriting staff requests an approval
of an inducement resolution from the District of Columbia Housing Finance Agency's (DCHFA or the
Agency") Board of Directors (the Board) for the issuance of tax-exempt bonds in an amount not to
exceed $52,5000,000 to finance a portion of the costs to construct 166.units at Kenilworth
166 (the Site
or Property). The sponsorwaspreviously approved fora McKinney Act loan in the amo of$1,000
unt ,000
and will repay the balance at closing. has requested a McKinney Act loan to assist with the
predevelopment costs at this stage of the project to pay for architectural, engineering, permitting and
legal costs. The project was awarded $17,597,387 in Housing Production Trust Fund (HPTF)
in the last
NOFA round.
The previous improvements onthe site were nine existingbuildings containing 89 residential units, owned
and managed by the DC Housing Authority ("DCHA). Through a competitive RFP process in 2012, DCHA
selected Michaels Development Company (Michaels) and The Warrenton Group "TWG") as co-
developers. DCHA, in coordination with the tenants and the Kenilworth Courts Residents Council, has
completed a phased relocation plan and begun demolition/disposition and site work. DCHA will enter a
long-term (99 year) ground lease with the owner entity.
The proposed Project is the development of 166 affordable units in the Lily Ponds/ Kenilworth-Parkside
neighborhood of Ward 7. The subject will be the first of three phases in the redevelopment of the 290-
unit Kenilworth-Parkside public housing complex, which was originally built in the 1950s. Upon
completion, there will be a total of 530 housing units, including the subjects proposed 166 units, Phase Il
and II will begin coordinating later in the calendar year.
ee
SHFA :
The Project will consist of a forty-two (42) unit mid-rise 4-story elevator senior (55+) building, a sixty-five
(65) unit mid-rise 4-story elevator family building, forty-four (44) townhomes and fifteen (15) stacked
townhome flats. All 166 units will be restricted to residents earning 50% of Area Median Income (AMI)
with seventeen (17) of the units set aside as Permanent Supportive Housing (PSH) units receiving Local
Rent Supplement Program (LRSP) Vouchers.Of the 17 PSH units, seven (7) will be seniors. Supportive
services for the PSH units will be provided by Open Arms Housing. Better Tomorrows will also provide
Supportive services to the non-PSH tenants at the property. 101 units will receive Local Blended Sul
("LBS") rental subsidies to be paid usinga combination of DCHA HUDsubsidies. The OCHA blended subsidy
will be replaced at conversion with a RAD contract with HUD to mitigate the risk of using local subsidy.
DCHFA will require preliminary approval of the RAD contract by HUD prior to closing.
The Site is adjacent to 1,200 acres of National Park land along the Anacostia River. The Deanwood Metro
is the closest metro to the site, located approximately 1/3 mile to the east of the site across |-295. Other
neighborhood features include the Kenilworth Aquatic Gardens, the Anacostia Bike Trail and the nearby
National Arboretum. In addition, Department of Parks and Recreation ("DPR) has undertaken the
rehabilitation of the former Kenilworth Elementary School, two blocks south of the site, as the new
Kenilworth Recreation center featuring large fitness center and multipurpose rooms as well as a new
kitchen used for teaching nutrition, cooking and meal preparation.
Property amenities will include on-site management office, a fitness room, a club/multipurpose room, a
business/network center, on-site laundry, on-site secured bike storage as well as landscaped areas, bike
Parking and on-site shared car service. Each unit will have a stackable washer/dryer. The 65-unit family
building will have 27 tuck-under parking spaces. The townhomes and stacked townhome flats will have
separate parking spaces. Security will be provided via 2 24-hour armed guards, an audio/video entry panel
at each multifamily building main entrance, interior and exterior mounted security cameras and key-card
readers. DCHAs police force will also patrol the project to supplement. A security budget of $183,000 per
annum has been underwritten in the operating expenses.
The capital stack for the Development will consist of permanent financing in the approximate amount of
$21,150,497, $17,597,387 HPTF loan, $35,585,087 in Low Income Housing Tax Credit or LIHTC Equity,
$4,000,000 in Deputy Mayor for Planning and Economic Development DMPED New Communities
demolition and infrastructure loan, $1,480,984 HUD Working Capital Reserve Return and $5,126,715 in
Deferred Developer Fee. The total development cost is $84,940,669 ($511,691/unit), inclusive of hard and
soft costs, developer and financing fees, reserves and escrows.
The new owner and borrowing entity (Borrower) for the proposed transaction is Kenilworth
Revitalization 1 JV LLC. The 0.009% managing memberofthe borrowing entity will be a to-be formed joint
venture between Michaels/TWG and DCHA at 70% and 30% interest, respectively. The members of the
70% managing member will be Michaels with a 60% interest and TWG with a 40% interest. Michaels
Development Company will be the guarantorofthe Project. At closing, the borrowing entity will admit a
99.99% tax credit investor member, expected to be Berkadia, into the partnership to facilitate the LIHTC
equity investment.
SHEA :
The remaining members of the development team will consist of Bozzuto Construction Company
(Bozzuto) as General Contractor, Torti Gallas Urban as Architect, Michaels Management Affordable as
Property Manager, Open Arms Housing as PSH Service Provider and Better Tomorrows as non-PSH Service
Provider.
STRENGTHS/ RISKS (KEY MITIGANTS):
RISK:
1, Operating Risk: The property will be a large, scattered building project co isting of two
multifamily buildings as well as townhomes.
Operating Risk Mitigant: The sponsor and development team are experienced in
developing and managing complex affordable properties. DCHA is the current owner and
manager of the property and will continue to remain in the ownership structure.
2. Subsidy Risk: 101 units will receive Local Blended Subsidy (LBS) rental subsidies to be paid using
a combination of DCHA HUD subsidies. The DCHA blended subsidy will be placed at conversion
with a RAD contract with HUD.
Mitigant: The agency will work with the financing partners to determine an approval
threshold that gives comfort for the execution of the subsidy swap. The approval may
come in the form of written confirmation from HUD that the RAD will be closed before
conversion, or a preliminary CHAP prior to closing.
STRENGTHS:
1, Sponsorship/Guarantor:_ Michaels Development Company ("Michaels") is an experienced
developer, property manager and service provider in the Washington, DC area. In the past five
years, Michaels has successfully completed over 9,500 units across 61 properties in the United
States. Michaels has developed three properties in the District, Wardman Court, a DCHFA-
financed development that was completed in 2003 and construction is underway at their second
and third DC projects, South Capito! Multifamily and Ainger Place.
2, CommunitySupport: The development team has received support from DMPED through the New
Communities Initiative via a $4MM infrastructure loan as well as through DCHAs commitment to
renovate and retain the affordability at the property. The Kenilworth Courts Residents Relocation
Committee will assist with the resident relocation and return.
3. Deeply affordable units: 100% of the units will be restricted at 50% AMI with 17 units set aside
as PSH units further restricted at 30% AMI receiving LRSP vouchers. Additionally, 101 units will
receive Local Blended Subsidy of ACC and MTW funds administered by DCHA undera Section 8
contract.
CONSTRUCTION AND PERMANENT LOAN STRUCTURE
The Development will be financed through the issuance of $42,000,000 in DCHFA tax exempt bonds (all
will be short-term bonds). The developer has selected a Freddie TEL execution with Grandbridge for
permanent debt, Truist/Suntrust as the construction lender, and Berkadia as the tax credit syndicator.
SHEA
 There is no acquisition cost as DCHA is contributing the land, estimated to be worth $4,600,000 as of the
January 3, 2018 appraisal prepared by Novogradac.
SUMMARY OFCONSTRUCTION SOURCESAND USES:
Total Tax-ExemptBonds $42,000,000| Acquisition
Taxable Construction Debt $4,277,674| Construction $52,552,414
DHCD - HPTF $17,597,387| Soft Costs $11,003,676
Equity Bridge Loan $7,000,000| Financing $8,187,990
LHTC Syndication Proceeds $5,803,063| Developer Fee $4,934,043
Total Construction Sources _ $76,678,124| Total Construction Uses $76,678,124
SUMMARYOFPERMANENTSOURCES AND USES:
Ast Mortgage $21,150,497| Acquisition $0
DHCD HPTF $17,597,387| Construction $52,552,414
LIHTC Syndication Proceeds $35,585,087| Soft Costs $11,003,676
DMPED $4,000,000| Financing $8,187,990
Deferred Developer Fee $5,126,715| Developer Fee $4,934,043
HUD Working Capital Return $1,480,984| Reserves and Escrows $3,135,831,
|Total Permanent Sources $84,940,669| Total Permanent Uses $84,940,669
FINANCIAL ASSUMPTIONS:
[Permanent Loan Allin interest Rate ee
Permanent Loan Amortization _
[Permanentloan Term
Minimum Amortizing DSCR (YR 3)_
DCHFA FEE SCHEDULE:
Application Fee $42,000
Financing Fee $840,000
Issuer's Counsel $40,000
DCHFA LIHTC Allocation Fee $233,368
DHCD LIHTC Allocation Fee $155,579
Construction Monitoring Fee $525,524
DHCFA Bond Admin Fee (Short Term, Construction) $364,866
HCFA Bond Admin Fee (Long Term, Permanent) $233,368

SHEA 5
[Total Fees