1

San Francisco Rental Assistance Demonstration Program (RAD) ConversionNomination PacketTable of Contents

Background ……………………………………………………………………………………………....1

The RAD Conversion’s Key Dates……………………………………………………………………….1

Description of Properties…………………………………………………………………………………2

Amount and Type of Financial Resources ……………………………………………………………… 2

Program Innovations…………………………………………………………………………………….. 4

Breakdown and Characteristics of the Residents……………………………………………..………… 4

Resident Services…………………………………………………………………………………………4

Resident Impacts……………………………………………………………………………………….....5

Goals, Objectives, and Long-range Benefits ………………………………………………..……….…..6

Industry Partners and Their Roles………………………………………………..………………….…...6

Key Implementation Strategies ………………………………………………..……….………………..7

Role of the Community and Elected Officials .………………………………………………..………... 8

Challenges………………………………………………………………………………………............. 9

Financial Appendices

Portfolio Sources & Uses by Phase .………………………………………………..……....... 11

Before and After Photographs .………………………………………………………………..…….….15

Map of San Francisco RAD Projects ………………………………………………………..…….…... 17

Press Releases

City of San Francisco, November 3 2016, “Mayor’s Office Completes Transfer of Public Housingto Community-Based Management” .…………………………………………………….….... 18

Media Stories

“BofA Merrill Lynch, developers and S.F. hatched largest affordable housing deal in history,” SFBusiness Times, March 25, 2016.…………………………………………………….…........... 23

“SF Tries a New Model for Public Housing,” San Francisco Chronicle, November 5, 2016.. .25

“San Francisco to Turn Much Public Housing Over to Private Owners,” Laura Kusisto, WallStreet Journal, November 3, 2016,.…………………………………………………….…....... 28

“San Francisco Rehabilitates Public Housing in Largest RAD Deal to Date,” Mark O’Meara,Novogradac Journal of Tax Credits, January 2017. ……………………….…………............. 30

1

San Francisco’s RAD Portfolio Conversion

Background:

When the San Francisco Housing Authority (SFHA) was first declared “troubled” by HUD in December2012, Mayor Edwin Lee kicked of a citywide Public Housing Re-Envisioning Process to identifystrengths, challenges, and a path forward for the beleaguered agency. Six months later, over a hundredrepresentatives from 72 different organizations including residents, non-profit service providers,affordable housing developers, local labor unions, and private sector development experts, along with 20City departments and representatives from United States Department of Housing and Urban Development(HUD) had met a total of 18 times to discuss strategies for improving the delivery of services to publichousing residents in the face of declining federal funding and a history of local mismanagement. Thecommunity support for the Re-Envisioning process set the stage for the RAD transformation and theteamwork it has required.In 2015, as a result of federal underfunding, the San Francisco Housing Authority (SFHA)’s capital repairbacklog was over $270 million, with growth projections of over $5 million per year. With only $10million annually in HUD capital repair funding, it would have taken SFHA 50 years to restore itsportfolio to a basic level of decency. At the same time, public housing, which is often the last barrierbetween severe hardship or homelessness for its residents, was acutely needed to help mitigate theimpacts of economic displacement from San Francisco’s white-hot housing market.

Doing nothing while the housing decayed further was not an option. Accessing the extraordinaryresources necessary to preserve the units was imperative. But San Francisco’s high construction andoperating costs made any solution to SFHA’s challenges elusive. Led by Mayor Edwin Lee, the Citynegotiated a unique, San Francisco-only structure with HUD that allowed maximization of federal RentalAssistance Demonstration (RAD) program subsidies across 28 projects, utilizing San Francisco’s robustaffordable housing development infrastructure.

Though the project functioned as one portfolio from HUD’s standpoint, it closed as 28 separate butsimultaneous transactions, half of them in November 2015 and half in October 2016. The closingsinvolved 28 partnerships, 28 separate financings and document sets, and 28 building permits.

The RAD Conversion’s Key Dates:

2012 – SFHA declared troubled by the U.S. Department of Housing Development

Spring 2013 - Mayor Lee convenes “Re-Envisioning” process, a citywide conversation aboutfuture of SFHA; begins negotiations with HUD to preserve and protect the units at risk

September 2013 – SFHA and MOHCD apply to HUD for RAD portfolio award for 41 projectsincluding 29 public housing properties, six HOPE VI projects, and six phases of HOPE SF publichousing revitalization at Hunters View and Alice Griffith

January 2014 – HUD makes RAD portfolio award

April 2014 – Eight developer teams selected through a competitive RFQ process to develop, ownand operate the 28 projects

February 2015 – MOHCD and HUD conclude negotiations regarding the financing structure,allowing MOHCD to combine RAD program rents with traditional Housing Choice Voucher(HCV) rents across the portfolio, expanding the amount of supportable property rehabilitation

2

June 2015 – Bank of America Merrill Lynch selected as portfolio construction lender and taxcredit investor, with Freddie Mac as permanent lender

November 2015 – Phase I (1,422 units in 14 projects) closes; City of SF issues over $362 millionin tax exempt bonds; $219,925,334 in rehabilitation commences.

October 2016 – Phase II (2,058 units in 14 projects) closes; City of SF issues almost $700 millionin tax exempt bonds; $475,083,216 in rehabilitation commences.

Description of Properties

SFHA’s public housing properties were acquired and built over a 75-year period and reflect broadvariations in building type, neighborhood, and age:

951 Eddy, the oldest property, was built in 1900 and acquired by SFHA in the 1970s.

Holly Courts, the first public housing built west of the Mississippi River, was constructed bySFHA as public housing in 1942 and is eligible for listing on the National Register of HistoricPlaces.

Ping Yuen and Ping Yuen North were designed and constructed in 1970 specifically to houseresidents of San Francisco’s Chinatown. They are also eligible for listing on the NationalRegister.

Robert B. Pitts, a 203 unit building, was built in 1991.

Twelve of the 28 projects were found to have contributory historic value and as a result any façadeimprovements were reviewed and approved by Preservation Planners at the SF Planning Department.

The most typical typology for properties housing senior and disabled residents is the mid-rise tower, oftenin a “brutalist” concrete style. Average project size in the senior disabled sites is 106 units; with thesmallest project containing 42 units (462 Duboce) and the largest containing 276 units (320-330Clementina). Family projects are typically walk-up townhome or garden apartment styles, and have anaverage of 182 units. The smallest family project is Holly Courts (118) and the largest is

Prior to RAD conversion, the SFHA properties were in fair to poor shape. Years of deferred maintenancedue to inadequate funding from HUD affected building wide systems and many properties were operatingwith their original plumbing, sewer, electrical, mechanical and seismic systems. Unit and common areafinishes needed replacement and upgrade. The number of units accessible to people with disabilities(physical, sight and hearing) was inadequate to meet the legal requirements and to meet the needs of apopulation that was aging in place.

Given the tremendous need – originally estimated by SFHA over its entire portfolio at $270 million butlater discovered to be over $1 billion – a triage approach was developed for the RAD properties thatwould ensure that basic and urgent needs could all be addressed at all sites, and that other owner upgradeswould be completed in an equitable manner. The triage approach incorporated the following priorities inorder:

1) Life safety issues: seismic deficiencies, pervasive mold and mildew often caused by dry rot orinadequate ventilation, sewer upgrades, unsafe elevators, outdated or malfunctioning fire alarmsystems, fire damaged units, missing sprinkler systems; accessibility upgrades (the number ofADA units was increased at every property to meet (and in some cases exceed) the City of SanFrancisco’s more stringent requirements)

2) Building envelope needs: roofing, waterproofing to address water intrusion, new windows toaddress water intrusion and meet requirements for energy upgrades

3

3) Common areas. Many sites lacked adequate property management, social services, andcommunity building space. RAD conversion provided an opportunity to provide these spaces inresponse to tenant needs.

4) Unit upgrades. Countertops, cabinets, flooring and appliances were replaced where items had metthe end of their useful life and/or posed quality of life issues for residents.

The average amount of rehabilitation per RAD unit, across phases and building types, is $199,000.Construction contracts ranged in size from $7 million to $79 million.

Amount and Type of Financing Resources:

The Total Development Cost for the RAD portfolio is over $2 billion. See Appendices at p. 11 for projectdetail, by phase.

Principal financing sources include:

Tax exempt construction debt. Over $1 billion in debt issued by the City and County of SanFrancisco, purchased by Bank of America Merrill Lynch, the construction lender on all projects.Construction interest rate for both phases was 30-Day LIBOR plus up to 2%.

Soft debt. $20 million in soft debt provided by Bank of America Merrill Lynch at 0% for an 18year term.

Tax credit equity. Bank of America Merrill Lynch selected as the tax credit investor on allprojects, with a strong bid of $1.23 per credit for Phase I, and $1.22 for Phase II. However, thesize of the Phase II projects exceed BAML’s available equity, and Aegon stepped in as investorfor three Phase II projects, at varying pay-in rates.

SFHA Seller Carryback Loan. SFHA provided $697 million in 55-year seller loans at the AFR forthe improvements on all properties, as well as $27 million for 55-year permanent loans at 3%.Loans repaid through residual receipts with the exception of $15,000-per-project ‘must-pay’ debtpayment each year. In Phase I, residual receipts payments shared with City pari passu; in PhaseII, residual receipts payments split 50/50 with City.

Permanent Tax Exempt Debt. Freddie Mac provided permanent loan commitments for allprojects. Interest rate set at 10 Year US Treasury rate plus 2%-2.4%, for amortization periodsranging from 15 to 35 years..

City Soft Loans: $89 million in soft debt from the City and County of San Francisco at 0%interest. Each dollar of soft City debt leveraged over $22 of other financing sources.

A single financial consultant, California Housing Partnership Corporation (CHPC), acted as the overallportfolio consultant as well as the consultant to each individual transaction. CHPC was critical indeveloping and negotiating the financial terms of the SF portfolio with HUD, which essentially pooledand redistributed all of the RAD and non-RAD PBV resources available to the portfolio, and distributedthese across the projects in such a way that maximized capital resources and ensured each property wasadequately subsidized. The complex challenge at the heart of this exercise -- ensuring not only that the

SAN FRANCISCO RAD CONVERSION

Total by Phase

Total

Units MOHCD Loan

SFHA Seller

Carryback

Loan

SFHA Perm

Loan

Permanent

Tax-Exempt

Debt

Accrued

Interest

DDF/GP

Capital

Tax Credit

Equity

TOTAL

PERMANENT

SOURCES

Tax Exempt

Construction

Debt

PHASE I 1422 39,002,592 245,064,676 22,900,000 83,038,000 12,504,597 7,000,002 284,061,174 672,098,749 362,349,000

PHASE II 2058 50,231,581 452,923,645 4,195,000 248,581,500 23,178,896 35,201,057 531,137,537 1,345,449,216 697,292,000

TOTAL 3480 89,234,173 697,988,321 27,095,000 331,619,500 35,683,493 42,201,059 815,198,711 2,017,547,965 1,059,641,000

Permanent Sources of Funds

4

portfolio as a whole was feasible, but that as each of the 28 projects was feasible for the long term, to thesatisfaction of financial partners as well as the owners -- was conducted within the limitations of the RADstatute and regulations.

Program Innovations.

Beyond the structuring of the financial transactions, the RAD conversion has allowed for new methods ofproject management, construction procurement, and service delivery. For example, recognizing that thevolume of projects and the limited pool of General Contractors familiar with affordable housing occupiedrehab could severely impact subcontractor bid coverage, the City hosted a RAD Phase I contractor“mixer” to encourage participation from a wide swathe of subcontractors. Services staffing and fundingare standardized across the projects to maintain equity and fairness regardless of the developer’s servicesapproach. Bundling of projects has allowed for economies of scale when approvals – e.g., BuildingDepartment, Mayor’s Office on Disability, Planning Department – but also required substantialcoordination and staff support. Rapid conversion and implementation schedules led to the creation of adeveloper cohort, in a number of RAD Working Groups, that gathered to brainstorm and developconsensus on all angles of RAD including relocation planning, housing retention strategies, lease andhouse rules language, and best practices for services.

Breakdown and Characteristics of the Residents

Preservation and rehabilitation under RAD meets San Francisco’s goals to preserve units that areaffordable to extremely low income households in perpetuity. Extraordinary market pressures haveresulted in the displacement of many vulnerable and lower income City residents. Preservation of 3,480deeply subsidized units eliminates the risk of displacement for current households and will ensure theunits will continue to serve as resources for San Francisco’s neediest citizens. As administrator of theProject-Based Vouchers (PBVs) that are in place on every unit, SFHA maintains site-based waiting listsfor all RAD projects. SFHA’s preferences system ensures that priority for RAD units will be granted firstto households displaced by eviction, homeless households, veterans, and victims of domestic violence.All RAD residents will pay 30% of their income for rent and will be at or below 50% Area MedianIncome.

Of the 3,480 units in the RAD portfolio, 63% (2,192 units in 22 projects) are designated for extremelylow income seniors and disabled individuals, most of whom are on fixed incomes such as Social Security.The remaining 37% (1,288 units in 7 projects) are in family projects, in units ranging from one-bedroomto five-bedroom apartments. While the federal public housing program allows residents to earn up to 80%of the median income, the income of SFHA households have averaged $16,405. Approximately 89% ofRAD households are at or below 30% of AMI, which in San Francisco in 2016 was $22,600 for a singleadult and $32,300 for a family of 4.

Racially and ethnically, residents of the RAD projects mirror the demographics of the City’s low incomeresidents, and are 38% Caucasian, 32% Black, and 26% Asian; of the total, 12% are Hispanic.

Resident Services.

Former public housing projects that have converted to RAD now have, for the first time, a dedicatedfunding stream that provides residents with service connection and referral, health and wellness activities,housing stability, and community building. Services and activities at the senior sites include coffee hours,exercise classes, public health nurse visits, support groups, community celebrations, nutrition classes, andgames. Family site services include family literacy nights, outings, youth activities, nutrition classes,

5

community gardening programs, and exercise classes. Referral to case management, mental health andsubstance abuse, and other more comprehensive services is available at all sites. During thepredevelopment period, the Mayor’s Office of Housing and Community Development provided funds forfamily site services and augmented funds that had previously been provided by the City’s Department ofAging and Adult Services at some of the senior/disabled sites. After conversion to RAD, serviceconnectors are funded by each site’s operating budget at a ratio of one service provider for every 75 units,with additional City funds from contracts with the Human Services Agency supporting program costs andsupervision at both the family and senior/disabled sites.

Resident Impacts

The portfolio conversion to RAD under an accelerated schedule required extensive, consistent andsensitive messaging to thousands of public housing residents about the impacts of conversion on theirlives. Given the rapid advancement of gentrification and displacement in San Francisco, resident anxietywas heightened. Lead staff from the SF Housing Authority (Commissioners and staff), Mayor’s Office ofHousing and Community Development (leadership and staff), service providers, developer projectmanagers, legal and anti-eviction organizations, and resident-led organizations all participated in forming,carrying and disseminating a simple yet powerful message to residents about RAD:

No displacement of existing residents.

No rescreening of existing residents.

Method of rent calculation will not change.

If any relocation is required, it will be temporary.

Once residents’ principal concerns were addressed, the developer teams could more easily focus onaddressing resident needs through the provision of direct services on site and involving residents indiscussions of construction scope. Developers and their services teams also worked to prepare residentsfor the transition to a new form of subsidy, a new property management team, a new lease, new houserules, and, in some cases, short-term off site relocation. This work with residents was broad and deep andwas standardized across the portfolio to the extent possible.

RAD conversion has stabilized residents’ housing while reducing isolation caused by poverty and limitedresources. Due to declining operating and capital subsidies from the federal government, San Francisco’spublic housing residents for many years endured deferred maintenance and minimal propertymanagement services. Conditions at SFHA properties continued to deteriorate as projects aged and repairfunds declined. The RAD conversion has made available over $700 million for rehabilitation and repair atthe sites. Improved housing means improved health, safety and habitability, and allows residents to focuson their other life goals. With the assistance of service partners, post-RAD conversion residents are lessisolated, better connected to the City safety and services network, and more integrated into the broaderSan Francisco affordable housing network. By ending isolation and bringing residents into the larger SFcommunity, RAD allows residents to become more involved – not only in the development andconversion of their own property but also in issues of importance to the larger community. Seniorresidents can age in place in their newly improved housing units with the support of services and propertymanagement staff.

6

Goals, Objectives and Long-Range Benefits

The principal goal of the RAD portfolio program is the improvement and long-term preservation of 3,480units of housing serving extremely low income San Francisco.

Objectives and measurable outcomes are wide-ranging, addressing human needs, program planning, andfinancial feasibility. They include:

Maintain the diversity of the existing public housing stock which is located in desirable anddiverse neighborhoods across San Francisco, including the Castro District and Lower PacificHeights

Maintain San Francisco’s socio economic, racial and ethnic diversity

Stem outmigration of African American families displaced by gentrification

Ensure 99 years of affordability through long-term ground leases

Guarantee equitable access to RAD resources by all public housing projects regardless ofindividual property conditions or history

Increase property management staffing to ensure safe, sound and supportive buildingenvironments

Create or enhance community spaces where residents can gather

Integrate public housings residents into San Francisco’s affordable housing network so they canbenefit from resources and community building

Offer optional resident support services and youth programming

Leverage San Francisco’s significant CRA opportunities when selecting the lender/investor teamin order to maximize the amount of resources available to improve the housing Leverage scarcesoft city debt to the extent possible

Create a national model for RAD conversion

Renovate properties and fund reserves in order to achieve a 20 year useful life

Design a portfolio-wide implementation program that ensures equal treatment of residents, equalresources at sites, and consistency with RAD program regulations and values

Assist residents through the transition to RAD

Support residents to retain their housing through timely and consistent rent payment

Generate prevailing wage construction opportunities for SFHA residents and other disadvantagedSF residents

Support SFHA staff who are transitioning or terminating their employment by creating jobs,offering severance payments, and re-training as appropriate

Industry Partners and Their Roles

Financing partners.

City Role.

The City played a unique role in the RAD portfolio transaction. Beyond its customaryroles as bond issuer, project manager, and soft lender, and led by Mayor Ed Lee, theMayor’s Office of Housing and Community led the $2 billion RAD transaction whichinvolved 28 limited partnerships, 8 developer teams, 10 service providers, hundreds ofbuilding consultants and general contractors and subconsultants, and over a dozen Cityagencies. All in all, over 1,000 distinct individuals touched the RAD transaction – not tomention the thousands of residents who participated in the development of work scopes,

7

house rules, and services. In its leadership role, the City established the “one deal, 28executions” concept and designed a ‘plug and play’ deal structure that despite limitedstaffing resources and an expedited schedule, closed on time. MOHCD staff developedthe services staffing model and strategy and worked tirelessly at all sites to ensure thenecessary City contracts were developed to fund the most responsive and appropriateresident services. City staff also negotiated with developers and residents to createequitable resident screening policies, lease and house rules documents, housing retentionstrategies, and tenant leadership structures across the portfolio. The City was primarilyresponsible for negotiations with HUD regarding the RAD transaction and, on behalf ofthe RAD developers, closed the 28 individual transactions directly with HUD.

Lenders/Investors.

As the lead lender and investor, Bank of America Merrill Lynch showed a deepcommitment to solving the challenges of an immense transaction and achieving asuccessful closing. While BAML is the sixth largest bank in the world, it had notundertaken a complex portfolio transaction of this kind. Lead staff designed andimplemented an approach that featured its most talented staff, achieved economies ofscale, and streamlined approval processes. The historic tax credit equity terms providedby BAML have demonstrated its confidence in the RAD program and the City of SanFrancisco, and positioned it as a national leader in RAD transactions.

While Aegon joined the transaction relatively late in the second phase and contributedequity to just three Phase II projects, it demonstrated flexibility and cooperation in orderto ensure that Phase II closed on time.

Freddie Mac. As the permanent lender on all 28 transactions, Freddie Mac committedover $330 million in first mortgages and dedicated its resources to meeting theaccelerated schedule and intense volume of transactions.

SF Housing Authority.

As MOHCD’s key partner, SFHA filled a huge financial, coordinating, and residentcoordination role. SFHA is not part of the RAD partnership entities, but as the owner ofthe land on which all RAD projects are situated, SFHA is ultimately the steward andguardian of the San Francisco RAD 99-year affordability requirement. As a soft lender,SFHA is also jointly responsible, with the City, for monitoring developer performanceand housing quality for a 55-year period. As the long time landlord of the public housingthat converted to RAD, the SFHA helped craft the resident communications strategy andbring that to the sites and the residents. Lastly, as the administrator of the Project BasedVouchers that subsidize 100% of the 3,480 RAD units, SFHA holds a key role indeveloping and processing waiting lists; ensuring compliance with occupancy andhabitability standards; income verification of residents; and payment of landlords.

Financial Consultant.

As stated above on page 3, A single financial consultant, California Housing PartnershipCorporation (CHPC), acted as the overall portfolio consultant as well as the consultant toeach individual transaction. CHPC was doubly tasked in ensuring not only that the

8

portfolio as a whole was feasible, but that as each of the 28 projects was feasible for thelong term, to the satisfaction of financial partners as well as the owners.

Key Implementation Strategies.

As stated above, equity was a key principle and strategy for RAD development and implementation. Incoordinating the work of eight development teams in diverse neighborhoods and in properties withdiverse levels of resident stability and building deterioration, the City applied the financing principle of“one deal, 28 executions” to the implementation of RAD. With the tireless help of Enterprise CommunityPartners, MOHCD convened key members of each developer team and lead tenant representatives in acohort that met regularly to create consensus on all matters affecting the RAD transition and the residents:

the services staffing model and funding

resident screening policies presenting the fewest barriers to housing possible

new lease and house rules documents

housing retention strategies

relocation benefits, approaches, and priorities

lease-up of vacant units to future applicants by SFHA

RAD resident protections (required by HUD, further extended and deepened in San Francisco)included in all communications, leases, addenda, ground leases, and loan documents

Role of the Community and Elected Officials

Any undertaking as deep and broad as the RAD transformation requires a huge commitment from allstakeholders. The leadership of Mayor Lee, beginning in late 2012 when the SF Housing Authority wasdeclared ‘troubled,’ set the tone for what was to become a herculean effort on the part of all participants:funders, residents, developers, City approval agencies, current and future property managers, relocationconsultants, service providers, and attorneys.

Eight RAD developer teams were identified relatively late the process and completed the conversion onan accelerated timeline. Enterprise Community Partners convened the developers through a complex“working group” process to create consensus and consistency across the projects on implementationchallenges and resident communications. The San Francisco Mayor’s Office of Housing and CommunityDevelopment contributed critical staffing, predevelopment financing, critical bridge financing to SFHA,and permanent soft loans totaling almost $80 million. Other City departments (Human Services,Department of Building Inspection, Planning Department, Department of Environment, City Attorney,Public Works Department) provided timely service and support despite the high volume of projects andhigh level of complexity, all moving on the same schedule. The state Tax Credit Allocation Committee(TCAC) and the California Debt Limit Allocation Committee (CDLAC) partnered with the City onfinding ways to manage the extensive workload caused by 28 projects, adapting timelines andassignments as needed to meet the ambitious schedule.

With few exceptions, the conversion to RAD has been applauded as a sound, equitable solution to aprofound problem for which no other solution was identified. Certainly RAD building neighbors havebeen pleased by the availability of funds to repair and maintain the often dilapidated public housing sitesthat converted to RAD. Though some community advocates have expressed concerns over what has beencharacterized as the ‘privatization’ of public housing, the San Francisco RAD program’s commitment to99 years of affordability has assuaged these reservations. Deep-held fears of displacement of lower

9

income people – often anchored in residents’ recent memories of other public housing ‘improvement’projects that did result in displacement and the splintering of communities -- have been laid to rest thanksto the RAD cohort’s commitment to equity across projects, to housing retention, and to a ‘screen-in’policy framework that will ensure the very lowest income San Franciscans can continue to access thedeep subsidies provided at the RAD sites.

Challenges.

Without belaboring the sheer effort and chutzpah required by the San Francisco RAD portfolioconversion, it is a fact that this historic endeavor did strain the people and the institutions that wereresponsible for its implementation. Another challenge was the ‘all-for-one’ aspect of the work, whichsometimes ran counter to one of the developer teams’ skill sets, which is to innovate and negotiate theirindividual deals. The ‘all-for-one’ schedule meant that any straggler project manager had the potential todelay the entire closing and implementation – a circumstance that did not come to pass, though it mighthave. Lastly, the RAD portfolio was simply too large for its own good, straining the resources of thelender/investor institution identified for the portfolio, and requiring an infusion of additional equityinvestment from another party close to the Phase II closing. This had the potential to delay the entirePhase II closing, but it did not. Delay risk translates to interest rate risk, and while interest rates did riseslightly before the Phase II closing, they rose much higher the week after the closing. Three weeks afterthe closing, Donald J. Trump was elected, and the equity markets tumbled.

10

FINANCIAL APPENDICES

Phase I Portfolio Summary

Phase II Portfolio Summary

SF RAD PORTFOLIO

Phase I Portfolio Summary -- FINAL

11/23/2015

Updated ProjectTotal

UnitsStaff Units

Average

RAD Rent

Permanent Tax-

Exempt Debt

MOHCD Predev

Loan

Seller Carryback

Loan

MOHCD Gap

Loan*

Accrued

Interest

SFHA Perm

LoanDDF/GP Capital

Tax Credit

Equity

TOTAL

SOURCES

11/23/15 990 PACIFIC AVENUE 92 1 1,064 7,020,000 8,500,000 17,940,000 2,540,821 1,114,224 0 500,000 29,078,186 66,693,231

11/23/15 227 BAY STREET 50 1 1,124 1,151,000 947,117 8,175,000 2,781,173 455,211 400,000 500,000 10,489,884 24,899,385

11/23/15 ROBERT B. PITTS 201 2 701 14,706,000 0 32,054,517 1,622,886 1,578,952 0 500,000 32,606,721 83,069,076

11/23/15 939-951 EDDY STREET 62 1 797 1,989,000 1,143,016 7,400,000 1,768,432 285,270 500,000 500,000 9,781,536 23,367,255

11/23/15 430 TURK STREET 89 0 1,052 2,982,000 1,344,599 12,925,000 1,354,444 553,621 2,500,000 500,000 15,560,015 37,719,679

11/23/15 666 ELLIS STREET 99 0 1,082 3,388,000 1,296,753 14,375,000 1,941,615 862,021 600,000 500,000 16,241,364 39,204,753

11/23/15 HOLLY COURTS 118 1 703 10,150,000 0 27,457,957 0 1,411,339 2,500,000 500,000 27,099,440 69,118,736

11/23/15 462 DUBOCE AVENUE 42 1 1,038 444,000 1,025,231 6,734,587 8,385,005 346,158 0 500,000 13,480,177 30,915,158

11/23/15 255 WOODSIDE AVENUE 109 1 1,116 4,448,000 282,676 20,100,000 0 1,033,140 4,900,000 500,000 21,515,277 52,779,093

11/23/15 25 SANCHEZ STREET 90 1 1,112 3,060,000 1,144,207 16,000,000 33,684 822,400 5,000,000 500,000 17,890,434 44,450,725

11/23/15 1880 PINE STREET 113 1 1,053 8,753,000 0 13,796,519 0 650,046 0 500,000 15,171,481 38,871,046

11/23/15 345 ARGUELLO STREET 69 1 1,162 3,974,000 1,000,911 10,780,000 1,044,231 507,918 800,000 500,000 13,269,622 31,876,682

11/23/15 491-31st AVENUE 75 1 1,255 6,039,000 0 10,026,096 0 450,924 0 500,000 11,636,365 28,652,385

11/23/15 HUNTERS POINT EAST/WEST 213 2 785 14,934,000 845,790 47,300,000 0 2,431,220 5,700,000 500,000 51,115,451 122,826,461

PHASE I TOTALS 1,422 14 83,038,000 17,530,300 245,064,676 21,472,291 12,502,443 22,900,000 7,000,002 284,935,952 694,443,664

Permanent Sources of Funds

SF RAD PORTFOLIO

Phase I Portfolio Summary -- FINAL

11/23/2015

Updated ProjectTotal

UnitsStaff Units

Average

RAD Rent

Acquisition

CostsHard Costs

Hard Cost

ContingencyFinancing Costs

Accrued

InterestSoft Costs Developer Fee Rent Reserve Other Reserves TOTAL USES

11/23/15 990 PACIFIC AVENUE 92 1 1,064 18,428,500 27,608,340 4,226,942 1,892,088 1,114,224 9,320,808 2,500,000 921,648 680,682 66,693,231

11/23/15 227 BAY STREET 50 1 1,124 8,786,500 7,755,334 1,197,990 878,633 455,211 2,760,841 2,500,000 203,518 361,357 24,899,385

11/23/15 ROBERT B. PITTS 201 2 701 36,284,000 27,719,277 4,185,000 2,580,249 1,578,952 5,048,881 2,500,000 1,525,669 1,647,049 83,069,076

11/23/15 939-951 EDDY STREET 62 1 797 8,078,000 7,105,555 1,077,713 655,003 285,270 2,846,770 2,500,000 350,276 468,668 23,367,255

11/23/15 430 TURK STREET 89 0 1,052 15,890,625 11,306,523 1,712,938 1,015,826 553,621 3,221,544 2,500,000 497,103 1,021,499 37,719,679

11/23/15 666 ELLIS STREET 99 0 1,082 15,389,375 12,734,959 1,926,669 1,328,703 862,021 2,869,007 2,500,000 844,980 749,039 39,204,753

11/23/15 HOLLY COURTS 118 1 703 32,840,000 19,167,663 2,903,870 2,203,775 1,411,339 5,941,329 2,500,000 1,148,579 1,002,182 69,118,736

11/23/15 462 DUBOCE AVENUE 42 1 1,038 9,067,000 11,555,505 1,750,596 1,252,456 346,158 3,663,530 2,500,000 322,504 457,409 30,915,158

11/23/15 255 WOODSIDE AVENUE 109 1 1,116 25,665,000 13,813,725 2,092,616 1,748,701 1,033,140 3,954,638 2,500,000 889,401 1,081,872 52,779,092

11/23/15 25 SANCHEZ STREET 90 1 1,112 21,565,000 11,018,181 1,669,119 1,527,095 822,400 3,754,892 2,500,000 703,386 890,651 44,450,724

11/23/15 1880 PINE STREET 113 1 1,053 17,577,750 10,135,782 1,532,472 1,278,967 650,046 3,873,803 2,500,000 336,076 986,150 38,871,046

11/23/15 345 ARGUELLO STREET 69 1 1,162 11,909,500 10,395,154 1,571,700 965,911 507,918 3,193,584 2,500,000 206,211 626,704 31,876,682

11/23/15 491-31st AVENUE 75 1 1,255 12,596,250 7,845,274 1,152,929 932,486 450,924 2,486,450 2,500,000 65,986 622,086 28,652,384

11/23/15 HUNTERS POINT EAST/WEST 213 2 785 54,345,000 41,764,063 6,297,662 3,439,796 2,431,220 8,780,383 2,500,000 1,490,638 1,777,698 122,826,460

PHASE I TOTALS 1,422 14 288,422,500 219,925,334 33,298,216 21,699,690 12,502,443 61,716,460 35,000,000 9,505,974 12,373,046 694,443,663

Uses of Funds

SF RAD PORTFOLIO

Phase II Portfolio Summary

10/11/2016

Updated ProjectTotal

UnitsPBV Units

RAD

Units

Staff

Units

Permanent Tax-

Exempt Debt

MOHCD Predev

Loan

Seller Carryback/

SFHA Perm Loan

MOHCD Gap

Loan

Accrued

Interest

MOHCD/AHP

LoanDDF/GP Capital

Tax Credit

Equity

TOTAL

SOURCES

10/6/16 PING YUEN 234 72 161 1 28,326,000 0 68,160,000 4,737,522 3,605,745 0 2,710,100 65,379,428 172,918,795

10/6/16 PING YUEN NORTH 200 87 112 1 28,775,000 0 61,870,000 3,893,831 4,021,550 0 3,110,100 58,026,308 159,696,789

10/7/16 WESTSIDE COURTS 135 52 82 1 17,184,000 9,264,380 26,920,000 0 1,531,075 0 3,700,000 36,959,431 95,558,886

10/2/16 1750 MCALLISTER 97 55 42 0 9,603,000 0 22,661,312 0 1,020,789 970,000 2,060,989 24,055,846 60,371,936

10/4/16 ROSA PARKS I 203 101 101 1 24,106,000 0 32,404,142 0 1,527,045 0 2,970,100 45,047,377 106,054,664

10/5/16 350 ELLIS 96 49 47 0 12,428,000 5,778,734 17,475,000 0 993,891 1,320,000 2,871,086 26,510,239 67,376,950

10/6/16 320 AND 330 CLEMENTINA 276 161 113 2 26,576,000 0 36,071,853 0 1,817,120 0 2,250,100 47,786,201 114,501,274

10/5/16 ALEMANY 150 64 84 2 28,300,000 3,828,778 51,008,000 0 2,735,304 0 3,500,100 56,542,617 145,914,799

10/4/16 3850 18TH STREET 107 51 55 1 8,610,000 0 22,545,473 0 790,312 0 2,040,742 23,377,219 57,363,746

10/6/16 MISSION DOLORES 91 46 44 1 9,930,000 0 19,655,011 0 734,606 0 2,070,211 22,196,266 54,586,093

10/1/16 1760 BUSH STREET 108 63 44 1 8,719,500 0 19,658,707 0 610,470 0 1,869,700 19,114,276 49,972,654

10/1/16 JFK TOWER 98 55 42 1 11,254,000 0 21,129,147 0 961,376 0 2,277,258 23,759,806 59,381,587

10/3/16 2698 CALIFORNIA 40 17 22 1 3,420,000 485,000 11,180,000 2,847,704 417,853 400,000 930,471 13,172,316 32,853,343

10/11/16 WESTBROOK APARTMENTS 223 84 137 2 31,350,000 16,705,632 46,380,000 0 2,411,760 0 2,840,100 69,210,205 168,897,697

PHASE II TOTALS 2,058 957 1,086 15 248,581,500 36,062,524 457,118,645 11,479,057 23,178,896 2,690,000 35,201,057 531,137,537 1,345,449,215

Permanent Sources of Funds

SF RAD PORTFOLIO

Phase II Portfolio Summary

10/11/2016

Updated ProjectTotal

UnitsPBV Units

RAD

Units

Staff

Units

Acquisition

CostsHard Costs

Hard Cost

ContingencyFinancing Costs

Accrued

InterestSoft Costs Developer Fee Rent Reserve Other Reserves TOTAL USES

10/6/16 PING YUEN 234 72 161 1 69,954,000 53,707,074 7,925,007 7,917,947 3,724,025 19,787,635 6,000,000 1,586,837 2,316,271 172,918,795

10/6/16 PING YUEN NORTH 200 87 112 1 65,890,104 48,536,245 7,615,997 7,623,997 4,129,013 16,364,633 6,000,000 1,502,702 2,034,099 159,696,790

10/7/16 WESTSIDE COURTS 135 52 82 1 27,623,000 40,190,537 5,812,731 3,744,316 1,531,075 8,190,226 6,000,000 1,144,171 1,322,831 95,558,886

10/2/16 1750 MCALLISTER 97 55 42 0 25,480,750 18,677,032 2,452,294 2,257,887 1,020,789 4,191,968 4,060,989 755,885 1,474,342 60,371,936

10/4/16 ROSA PARKS I 203 101 101 1 34,406,875 39,410,475 5,942,949 4,304,547 1,527,045 10,961,412 6,000,000 1,639,831 1,861,530 106,054,664

10/5/16 350 ELLIS 96 49 47 0 18,236,875 27,955,672 4,230,034 2,902,623 993,891 6,730,196 4,871,086 406,094 1,050,480 67,376,950

10/6/16 320 AND 330 CLEMENTINA 276 161 113 2 42,156,875 38,089,634 5,747,855 5,269,904 1,817,120 11,383,135 6,000,000 1,809,948 2,226,804 114,501,274

10/5/16 ALEMANY 150 64 84 2 52,306,200 53,615,727 7,773,695 5,991,251 2,735,304 13,260,521 6,000,000 270,647 3,961,454 145,914,800

10/4/16 3850 18TH STREET 107 51 55 1 24,640,550 16,470,304 2,304,551 2,031,634 790,312 5,627,741 4,100,742 390,741 1,007,171 57,363,746

10/6/16 MISSION DOLORES 91 46 44 1 21,389,975 17,609,113 2,426,848 1,936,641 734,606 5,209,768 4,070,219 284,120 924,803 54,586,093

10/1/16 1760 BUSH STREET 108 63 44 1 21,892,750 14,030,195 2,115,006 1,507,805 610,470 3,907,619 3,919,700 1,107,453 881,655 49,972,653

10/1/16 JFK TOWER 98 55 42 1 25,460,250 17,166,191 2,554,675 2,312,417 976,376 5,028,484 4,277,258 692,514 913,423 59,381,587

10/3/16 2698 CALIFORNIA 40 17 22 1 11,489,500 10,102,274 1,458,153 1,099,598 417,853 4,179,310 2,930,471 296,781 879,404 32,853,343

10/11/16 WESTBROOK APARTMENTS 223 84 137 2 47,569,500 79,522,743 11,111,873 6,255,627 2,411,760 11,895,352 6,000,000 1,857,070 2,273,772 168,897,697

PHASE II TOTALS 2,058 957 1,086 15 488,497,204 475,083,216 69,471,667 55,156,193 23,419,639 126,717,999 70,230,465 13,744,792 23,128,039 1,345,449,214

Uses of Funds

15

RAD Phase I Photographs – Before and After RAD Conversion

1. 227 Bay Street (Chinatown Community Development Center)

2. Hunters Point East West (John Stewart Company)

16

3. Holly Courts (BRIDGE Housing and Bernal Heights Neighborhood Center)

District 7 District 10

District 2

District 1

District 4 District 8

District 9

District 6

District 11

District 5

District 3

µ

0 1 20.5 Miles

RAD Projects byPhase and Housing TypeProject Phase & Type

Phase I (Senior/Disabled)Phase I (Family)Phase II (Senior/Disabled)Phase II (Family)

Number of Units24 - 7475 - 124125 - 174175 - 224

225 - 276

Supervisorial Districts

18

FOR IMMEDIATE RELEASE

Thursday, November 3, 2016Contact: Mayor’s Office of Communications, 415-554-6131

*** PRESS RELEASE ***MAYOR’S OFFICE COMPLETES TRANSFER OF PUBLIC

HOUSING TO COMMUNITY-BASED MANAGEMENTNew community-based management to complete over $700 million in repairs and improvements

to San Francisco Public Housing

San Francisco, CA—Mayor Edwin M. Lee announced the completion of the historic transfer ofownership of all 29 public housing sites and nearly 3,500 units from the San Francisco HousingAuthority (SFHA) to community-based affordable housing teams as part of the Mayor’s 2013Re-Envisioning Public Housing Plan and the Department of Housing and Urban Development’sRental Assistance Demonstration Program (RAD).

With the transfer of ownership and management now complete, all 29 buildings and units canbegin repairs to address critical life safety issues such as seismic deficiencies, pervasive moldand mildew, dry rot, deficient elevators, water intrusion, fire alarm systems, fire damaged units,missing sprinkler systems.

“Once again San Francisco is at the forefront of creating innovative solutions to makegovernment programs work better and benefit our most vulnerable residents,” said Mayor Lee.“For decades, San Francisco’s public housing has been under-funded, but today we take asignificant step towards revitalizing and rebuilding distressed public housing for our extremelylow-income families and residents. This milestone marks the end of many months of hard workby the City and our many partners.”

In 2014, led by Mayor Lee, the City and HUD worked together to address both the seriousconditions of disrepair in the public housing stock as well as the region’s extremely highconstruction costs. By allowing the City to blend two separate kinds of rental subsidies acrossthe portfolio, the City and SFHA, in partnership with eight different community-based,affordable housing development teams, were able to maximize all available financial resourcesfor the project. Bank of America Merrill Lynch (BAML) led the $2.2 billion financing,including $1.06B in tax-exempt construction debt, $331 million in tax-exempt permanent debt,and $816 million in tax credit equity with Aegon. This resulted in one of the country’s largestand most complex RAD financial transactions, which also included BAML working withFreddie Mac and five other participant Banks.

“Bank of America Merrill Lynch is pleased to continue its work with the City of San Franciscoand the San Francisco Housing Authority on the second phase of SF-RAD,” said Maria Barry,Bank of America Merrill Lynch community development executive. “Our team provided acomprehensive financing solution to rehabilitate nearly 3,500 affordable housing units, utilizinga combination of construction debt, permanent debt, tax-credit equity, subordinate forgivable

19

debt and financing for services for the tenants as part of our continued commitment to help createsafe and strong communities.”

“All San Franciscans deserve safe, affordable housing to live in and raise their families,” saidOlson Lee, Director of the Mayor’s Office of Housing and Community Development. “Bytransferring the ownership and management of San Francisco’s public housing to ourcommunity-based partners, we have permanently preserved the affordability of these buildings,giving our most vulnerable residents assurances they can remain in San Francisco.”

The new owners, who specialize in affordable housing, are now in the process of completingover $700 million in deferred repair and capital needs, stabilizing residents’ tenancies withprofessional management and support services, and preserving the units as decent and affordablehousing for the City’s most vulnerable residents, including seniors, disabled people, and families.Half of the projects transferred ownership in November 2015; the other half closed in October2016.

“Under the leadership of our Mayor, distressed public housing is being transformed andpreserved to provide better living conditions, connections to services and community basedmanagement for our lowest income San Francisco residents,” said Barbara Smith, AuthorityActing Executive Director. "It's a powerful example of what Housing Authorities and citiesacross the country can achieve for our communities through innovative collaborations likethese.”

In addition to building improvements, properties converting to RAD will, for the first time, havea dedicated funding stream that can provide residents with service connection and referral, healthand wellness activities, housing stability, and community building. These services are beingfunded through project operations and by a historic $2.8 million tax-credit equity contributionfrom Bank of America Merrill Lynch. Services and activities at the senior sites include coffeehours, exercise classes, public health nurse visits, support groups, community celebrations,nutrition classes, and games. Family site services include family literacy nights, outings, youthactivities, nutrition classes, community gardening programs, and exercise classes. Referral tocase management, mental health and substance abuse, and other more comprehensive services isavailable at all sites. RAD also provides for rigorous tenant protections and ensures a right toreturn for residents who may need to move temporarily while their units are rehabbed.

“Few communities have the will and talent to pull this off, and the rewards will be immense:high quality, well-managed housing for very low income individuals and families, affordable fordecades and decades to come,” said Donald Falk, CEO of the Tenderloin NeighborhoodDevelopment Corporation. “The complexity and challenges of organizing a billion-plus dollarrenovation of a citywide portfolio of buildings highlights the capacity of the San Franciscoaffordable housing community, including nonprofit developers, city staff, contractors, architectsand many others.”

Improved housing means improved health, safety and habitability, and allows residents to focuson their other life goals. With the assistance of service partners, post-RAD conversion residents

20

are less isolated, better connected to the City safety and services network, and more integratedinto the broader San Francisco affordable housing network.

###

21

BofA Merrill Lynch, developers andS.F. hatched largest affordablehousing deal in historySan Francisco Business Times

Mar 25, 2016, 3:00am PDT

Mary Ann AzevedoContributorSan Francisco Business Times

When the city of San Francisco decided to transfer ownership of more than 1,400 public housingunits from the scandal-ridden San Francisco Housing Authority to local nonprofit housingdevelopers, there was concern that the process would be too complex.

The problems were evident: decades of underfunding and mismanagement had left SanFrancisco’s public housing units as decrepit and unsafe, with tenants complaining of mold,rodents and leaks.

The goal was to transform and rehabilitate the units into up-to-date and well-managed low-income housing for San Francisco residents.

Under a federal program passed in 2012, the city was finally able to bring in a private-sectorfunding partner: Bank of America Merrill Lynch ultimately served as both an investor and lenderin the San Francisco Rental Assistance Demonstration (SF-RAD) project in 2015.

SF-RAD ended up being the single largest affordable housing transaction in history andrepresented the collaboration between Bank of America Merrill Lynch and the San FranciscoMayor’s Office; San Francisco Housing Authority; Freddie Mac; Enterprise CommunityPartners; and seven development partners.

In an effort to streamline the process, BofA came up with the solution of treating it as one largeproject versus 14 separate projects. It is the first city known to approach RAD in this way.

22

BofA ultimately provided a combination of construction debt, permanent debt, tax-credit equity,$20 million in subordinate forgivable debt and some $2 million in financing for services fortenants.

The transaction – which closed in November 2015 — involved seven development teams,including Chinatown CDC, Related California, TNDC, Bridge Housing, Mercy HousingCalifornia and John Stewart Co. Those nonprofit developers will oversee the upgrades and thenmanage the properties.

In the second phase of SF-RAD, another 2,000 units in an additional 14 properties will beaddressed. Together the two phases will mean over $1 billion in net new funding resulting inabout $750 million in improvements to outdated buildings that make up the bulk of SanFrancisco’s public housing.

Bank of America Vice President Ari Beliak said the bank made it a condition of its proposal thatthe transaction be completed as a single transaction.

“We had to close a number of transactions in a short period of time,” he said. “I don’t think itcould have been done any other way.”

The bank created a template document that removed 80 percent of the negotiation that occurs ina normal closing. In total, the bank had over 50 team members who worked on the deal, withabout 20 working on it on a daily basis for several months.

“It took a major commitment from all parties to get it done,” Beliak said. “And it was importantto us to help the tenants in the transition from public housing to private (nonprofit) developers,and in understanding the new rules.”

Olson Lee, executive director of the mayor’s housing office, acknowledges there was concernamong the tenants that they would be evicted and the properties would be sold off to market-ratedevelopers.

“We had to assure them that one of the RAD principles was that there was no rescreening oftenants,” he said. “This was a way of preserving existing affordable housing for the future, andwe had no intention of displacing anybody.”

Lee agrees that overall, everyone tried to simplify the process as much as possible.

“This would be a huge, huge lift for any community to do, especially with multiple developersand scattered sites,” he said. “Our staff negotiated very hard with the developers and everybodycooperated.”

SF-RAD overall

Size: 1,400 units

23

Location: 15 properties throughout San Francisco

Value:$770 million, including about $80 million from Freddie Mac

Seller: S.F. Housing Authority

Buyer: Nonprofit developers listed below

Law firm: Lubin Olsin & Niewiadomski

SF-RAD PHASE I

Key: Location, developers, architects, brokers, size

CHINATOWN

227 Bay St. and 990 Pacific Ave.: Chinatown Community Development Center, AmOne for BayStreet and BBI for Pacific Avenue, Gelfand Partners Architects, 50 units for Bay and 92 units forPacific

WESTERN ADDITION

Robert B. Pitts at 1180 Scott St.: Related California and Tabernacle CDC, Nibbi, GelfandPartners Architects, 201 units

939-951 Eddy St.: Tenderloin Neighborhood Development Corp, Transworld, Paulett TaggartArchitects, 62 units

TENDERLOIN/SOMA

666 Ellis St.: Community Housing Partnership, D&H, Paulett Taggart Architects, 99 units

430 Turk St.: Tenderloin Neighborhood Development Corp., Fineline, Gelfand PartnersArchitects, 89 units

BERNAL HEIGHTS

Holly Courts: 100 Appleton, Bernal Heights Housing Corporation and Bridge Housing Corp.,Fineline, Gelfand Partners Architects, 118 units

MISSION/CASTRO

25 Sanchez St.: MEDA and Bridge Housing Corp., Fineline, Barcelon Jang, 90 units

462 Duboce: Fineline, 42 units

255 Woodside: Fineline, 109 units

24

CALIFORNIA AVE. CORRIDOR

1880 Pine: Mercy Housing California and Japanese American Religious Federation, Nibbi,Paulett Taggart Architects, 113 units

345 Arguello: Mercy Housing California, Nibbi, Barcelon Jang, 69 units

491 31st Ave.: John Stewart Co., Nibbi, Gelfand Partners Architects, 75 units

BAYVIEW

Hunters Point East/West: John Stewart Co. and SF Housing Development Corp. and RelatedCalifornia and Ridgepoint Non-Profit Corp., Cahill, Saida + Sullivan, 213 units

25

SF tries a new model for publichousingThe San Francisco Chronicle

November 5, 2016 Updated: November 6, 2016 4:40pm

Photo: Michael Macor, The Chronicle

A tenant walks through the Rosa Parks apartments in S.F.

San Francisco’s Housing Authority has completed the transfer of the last of the city’s

public housing to private developers. It’s a huge shift for the troubled agency, which,

thanks to bad management as well as serious federal disinvestment, has struggled for

decades to keep the housing units in habitable condition.

It’s also a huge shift for some of San Francisco’s poorest residents during an

unprecedented housing crisis. The Housing Authority has relinquished control of

nearly 3,500 units to private management since 2014.

San Francisco took advantage of a new program from the federal Department of

Housing and Urban Development, teaming up with affordable housing developers and

banks to upgrade the city’s badly deteriorating public housing stock.

26

The program came about because there is an estimated $26 billion worth of deferred

maintenance on public housing nationwide — and due to the constraints of the

program, no way for cities to tap into other sources of funding. Cities were being

forced to tear down their public housing as it became inhabitable.

“Congress was not funding public housing,” said Lydia Ely, senior project manager

for the mayor’s office of housing and community development. “We had to leverage

outside funding — we used subsidies coming in from HUD to get mortgages on these

properties that allowed us to pay for $700 million worth of repairs. We couldn’t

entertain losing these units.”

PUBLIC HOUSING

SF’s public housing is now all privately run

27

Need for decent public housing hits home with Mayor Lee

San Francisco’s financial transaction, which included billions of dollars in financing

from six different banks, was a highly complex one. But it will result in the

rehabilitation of all the units, now close to completion, and Mayor Ed Lee’s office

insists that the residents will have 99 years of guaranteed subsidized housing. The new

owners are bringing supportive services like exercise classes and case management to

the units, too.

The residents’ early reviews have been positive, and the previous state of San

Francisco’s public housing was absolutely shameful. Most of the new owners are

nonprofit developers of affordable housing who already have strong track records for

working in San Francisco, and Ely says the for-profit developers had to partner with

community developers to be part of the deal.

“These are not carpetbaggers coming to our community to take advantage of these

opportunities,” Ely said.

Will it work? In the short term, the results are already proving better than the status

quo. In the long term, the program’s success will depend on how much oversight

HUD, the Housing Authority and City Hall choose to exercise over the bank loan

terms and the developers’ management. Considering the size and complexity of this

transfer — not to mention the vulnerabilities of the residents — none of the original

housing institutions can afford to be disengaged.

28

San Francisco to Turn Much PublicHousing Over to Private OwnersEffort to attract needed investment in properties will leave city owning just 60

unitsSan Francisco is turning over its last big chunk of public housing to private owners in an effort to attract badly

needed private-sector investment in the properties. PHOTO: BLOOMBERG NEWS

Wall Street Journal

By LAURA KUSISTO

Nov. 3, 2016 11:30 a.m. ET 2 COMMENTS

San Francisco officials are expected to announce Thursday that the city is turning over its last big

chunk of public housing to private owners, part of a multiyear effort to attract badly needed

private-sector investment in the properties.

In recent weeks, the San Francisco Housing Authority has transferred 2,058 housing units to

private developers and nonprofits.

After the latest wave of transactions, the city is slated to own just 60 units, down from 6,500

several years ago.

The buyers are mostly nonprofit affordable-housing developers. They usually pay little but agree

to make needed repairs to the properties and take over maintenance.

Officials feared units would continue to become uninhabitable due to disrepair. “Because rental

costs in San Francisco are so high, the mayor and his staff really knew that if we didn’t take

action and dramatic action we really couldn’t replace these units after they were lost, said Kate

Hartley, deputy director of housing at the Mayor’s Office of Housing and Community

Development.

As part of the latest agreements, the new owners are required to make about $750 million of

improvements, including mold abatement, upgrading elevators, replacing fire alarm systems,

outfitting buildings to withstand earthquakes and installing missing sprinkler systems. One

building with plumbing dating to 1940 will get an upgrade.

29

Faced with mounting repair backlogs, housing authorities across the U.S. are seeking private

investors through the federal Rental Assistance Demonstration program.

The program, established in 2012, converts buildings from public housing to the Section 8 rental-

subsidy program, which makes it easier for the new owners to use debt and tax credits to pay for

the repairs.

Some cities, like San Francisco, also elect to turn over ownership and management to private

companies and nonprofits, with agreements in place to keep the buildings affordable.

Tenant advocates are worried that it will be harder to hold the new owners accountable. They

also fear the arrangements will be a slippery slope toward higher rents.

“There’s a lot of concern,” said Jessica Cassella, a staff attorney at the National Housing Law

Project, “mainly because it’s a very new program and it’s still working out some of the kinks.”

San Francisco has been among the most active participants.

While housing authorities across the U.S. have generated $3.2 billion of investment in public

housing through the program, $1.1 billion of that has been in San Francisco.

“There’s a lot of demand to participate in the program…to solve the problem of this incredibly

depressing deferred maintenance problem that is occurring in our public housing stock,”

said Tom Davis, director of the office of recapitalization at the Housing and Urban Development

Department.

Mercy Housing, a nonprofit public-housing group, is taking over ownership of 320 units, many

in San Francisco’s tony Pacific Heights neighborhood.

Doug Shoemaker, president of Mercy Housing California, acknowledged that some tenants are

nervous. But he said many have greeted the arrival of new management with relief.

“Every single unit of affordable housing feels like something we need to covet...It’s just so

important that we get this right,” Mr. Shoemaker said. “This is a fairly seismic shift.”