Construction Gap Financing

Agency: City of Cleveland
State: Ohio
Type of Government: State & Local
NAICS Category:
  • 236220 - Commercial and Institutional Building Construction
Posted Date: Apr 16, 2020
Due Date: Jul 1, 2020
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RFPs/RFQs: Construction Gap Financing

Title:
Construction Gap Financing
Description:

The City of Cleveland will make $1.4 million available to invest in housing development projects, on a competitive basis, through the Department of Community Development’s (CD) 2020 Construction Gap Financing (CGF) program.

A construction cost gap exists in many Cleveland neighborhoods. This “Gap” is the difference between current market values and the development and construction costs for rehabilitation or new construction of modest quality housing. The Program will focus initially on single family for sale housing. All neighborhood housing types may be considered in an expanded program, with the understanding that single family values are tied to overall investment and market values in a neighborhood.

The Program Goal is to stimulate and sustain private construction investments in local housing markets. The intent of the program is to provide subsidy to a limited number of projects that produce quality housing and establish higher market values for new or renovated housing in a neighborhood. The program will require and prioritize projects that make a strong positive visual impact in a neighborhood. This visual impact will contribute to improved local market values and encourage additional investment.

Development cost data, operating forecasts, and sales assumptions will be evaluated by the City to verify financing gaps. Sales prices and as-completed appraisals cannot exceed $250,000.

Opening Date/Time:
Monday, April 13, 2020 - 8:00am
Closing Date/Time:
Wednesday, July 1, 2020 - 5:00pm
Dep/Div:
Community Development
Contact Name:
Anthony Thornton
Contact Phone:
(216) 664-4059
Contact Fax:
(216) 664-4006
Meeting:
No meeting

Attachment Preview

City of Cleveland
Frank G. Jackson, Mayor
________________________________________________________________________________________
TO:
FROM:
DATE:
SUBJECT:
Housing Developers
Tania Menesse, Director
Department of Community Development
April 13, 2020
2020 Construction Gap Financing Program
Notice of Funding Availability (NOFA)
Housing Development Projects
*******************************************
The City of Cleveland will make funds available to invest in housing development projects, on a competitive
basis, through the Department of Community Development’s (CD) 2020 Construction Gap Financing (CGF)
program.
A construction cost gap exists in many Cleveland neighborhoods. This “Gap” is the difference between
current market values and the development and construction costs for rehabilitation or new construction
of modest quality housing. The Program will focus initially on single family for sale housing. All
neighborhood housing types may be considered in an expanded program, with the understanding that single
family values are tied to overall investment and market values in a neighborhood.
The Program Goal is to stimulate and sustain private construction investments in local housing
markets. The intent of the program is to provide subsidy to a limited number of projects that produce
quality housing and establish higher market values for new or renovated housing in a neighborhood. The
program will require and prioritize projects that make a strong positive visual impact in a neighborhood.
This visual impact will contribute to improved local market values and encourage additional investment.
Development cost data, operating forecasts, and sales assumptions will be evaluated by the City to verify
financing gaps. Sales prices and as-completed appraisals cannot exceed $250,000.
The City will prioritize projects that:
1. have low acquisition costs relative to renovation or building costs;
2. are strategically important; and
3. are forecast to establish higher comparable sales and close the gap between development costs and
market values for subsequent projects in a target area.
The City will evaluate Projects against the following thresholds prior to making awards and negotiating
contracts:
Project Eligibility
Location, site plans, and construction plans are sufficiently detailed and meet all City
requirements and Property Standards; and
Project is feasible based on financial projections, financial commitments, appraisal, site
control and forecast timeline.
Developer Experience and Capacity
Development team members have documented roles in successful projects since 2016.
Financial capacity, including sufficient working capital, established through independent
financial statements and tax returns. City may require additional information including
asset verification.
Vacant rehabilitated properties and building sites must have been vacant for at least one year
prior to application. Funds are not available for demolition or for rehabilitation where tenants
have been displaced.
The City has made $1.4 million available for award. The Opening Date for the first round of
Construction Gap Financing program proposals is April 13, 2020. Proposals will be accepted on a
rolling basis through July 1, 2020. Awards and future rounds are contingent on funding availability.
Applications will be reviewed, and an award decision made within two calendar months of submission.
The City of Cleveland reserves the right to amend or cancel this NOFA, prior to the due date and time, if it
chooses to do so for any reason. The City of Cleveland reserves the right to accept and/or reject any or all
proposals submitted for consideration or to negotiate separately in any manner necessary to serve the best
interests of the City. Any changes to this NOFA will be posted to the City’s website:
http://www.city.cleveland.oh.us/CityofCleveland/Home/Government/CityAgencies/Finance/RFP
List of Attachments
Attachment A – Submission Requirements Checklist
Attachment B – Priority Development Area Map
Attachment C – Environmental Reports
Attachment D – Property Standards
Submission and Selection Process Overview:
All requests for assistance from the Construction Gap Financing program must follow the CGF Excel
Workbook Format. All applicable requested information must be provided. Any additional
information that can assist in the evaluation of the proposal may be included. Please see Attachment A
for a checklist of the required submission documentation.
A Construction Gap Financing For-Sale Application workbook can be obtained by emailing a
request to CD-DND@city.cleveland.oh.us
A Construction Gap Financing Rental Application workbook can be obtained by emailing a
request to CD-DND@city.cleveland.oh.us
Proposals must be submitted as an electronic copy on a disk or flash drive. All required original signed
documents must be submitted in hard copy original format.
2
Proposals may be emailed to CD-DND@city.cleveland.oh.us or delivered to:
City of Cleveland
Department of Community Development
Attn: Housing Development Office
601 Lakeside Avenue, Room 320
Cleveland, Ohio 44114-1070
A review committee, consisting of the Director of Community Development, the Commissioner of
Neighborhood Development, and other appropriate City staff members, will make funding
recommendations. Applications will be reviewed and an award decision made within the two calendar
months from the date of submission.
Your first point of contact on project questions and the proposal process should be one of the following staff
members:
Michael McBride: (216-664-2005) mmcbride@city.cleveland.oh.us
Anthony Thornton: (216-664-4059) athornton@city.cleveland.oh.us
Daniel DeAngelo (CD and City site and building requirements for investment): (216-664-4036)
ddeangelo@city.cleveland.oh.us
Underwriting Policies and Loan Terms for Construction Gap Financing
Gap Financing. CGF funds are considered gap financing, and are available for projects financed with a
majority of funding from other sources, including loans, grants, and equity. The program is intended to
close a gap in local markets where there is limited investment in new and renovated housing due to low
sales values. See page 4 for funding limits.
Procurement. City will determine reasonableness of all development costs. To determine the
reasonableness of each cost element, City may require applicant to compare the cost element with a third
party, fair market price quotation for that cost element. If applicant does not use multiple third-party price
quotations to verify cost elements, then the City reviewer may conduct a cost analysis using appropriate
cost estimating manuals or services. Properties are not eligible if the chain of title includes purchase and
sales transfers within a year at prices that exceed the direct cost of holding and transfer, unless seller made
significant improvements.
Change Orders. City contract may require approval of change orders above a threshold amount.
Construction contracts must specify that change orders will be for the cost of the work plus a fee not to
exceed a guaranteed maximum price.
Title Insurance Loan Policy in favor of the City in the amount of City funds provided will be required.
Cost Certification and Repayment Terms. After project completion as a condition of contract close out,
borrower will be required to submit a cost certification with documentation sufficient to the City prepared
by an accountant or internal bookkeeper for both actual project costs and actual sources of funds. A portion
of the surplus due to lower costs or higher sources will be required as a repayment of City loan balance.
3
Construction Gap Financing (CGF) Program Guidelines
Eligible Participants
Developers may be for-profit or non-profit entities or individuals.
Eligible Housing Project Types
New Construction or Rehabilitation of existing structures for the following:
1) Single-Family homes (sale to owner-occupants will be prioritized)
2) Please consult with the Department of Community Development for other eligible project types.
Eligible Locations
All properties must be located within the incorporated areas of the City. See Attachment B for a map of
priority development areas.
Eligible Uses of CGF Funds
Funds can be used as short-term or long-term secured financing for project development costs. All costs,
including soft costs, must be tied to specific housing addresses. Costs may include, but are not limited to:
1) costs of land assemblage;
2) Building acquisition (purchase price cannot include mark-up to short term owner/seller of
unimproved property);
3) demolition and site preparation;
4) site improvements;
5) construction costs;
6) costs of obtaining permits, zoning approvals, etc.;
7) consultant, architectural, legal, audit, mortgage and other fees; and
8) carrying charges and costs of financing.
Eligible Project Related Soft Costs
These costs must be reasonable and necessary costs associated with the financing or development (or both)
of new construction, rehabilitation, or acquisition of housing assisted with CGF funds. These include:
Project-specific fees (such as private lender origination fees, credit reports, fees for title evidence,
fees for recordation and filing of legal documents, building permits, attorney’s fees, private appraisal
fees, and fees for an independent cost estimate);
Architectural, engineering, or related professional services required to prepare plans, drawings, or
specifications of a project;
Preparation of work write-ups, work specifications, and cost estimates or review of these items if an
owner has had them independently prepared;
Construction inspection and oversight;
Project document preparation;
Costs to inspect property for compliance with property standards or to conduct a visual assessment
for deteriorated paint;
Cost of inspection units for the presence of lead hazards or defective paint; and
Contractor Overhead and Profit (limited)
Developer fees (limited).
4
NOTE: Indirect costs are not eligible soft costs. Applicants should request only the level of funding
necessary to carry out their projects. CGF funds must be used in combination with other proposed funding
sources to complete the proposed activities within the contract period.
Green Building Standards
All residential development projects receiving direct assistance from the City of Cleveland are required to
meet the Cleveland Green Building Standard, which aims to conserve natural resources, provide healthy
indoor air quality and reduce ongoing residential operating costs. Because these standards are subject
to periodic updating, it is critical that applicants verify current requirements, available here.
Minimum Funding Amount
The minimum forecast CGF award amount for any project is $5,000 per unit.
Maximum Funding Amount
Projects will be eligible for up to $40,000 per unit in construction loan financing. Loan forgiveness will be
limited to $30,000 per unit for new construction and up to $40,000 per unit for rehabs. Forgiveness will be
in the form of debt that converts to developer write-down/grant.
The Department of Community Development may make conditional awards early in the project
development process to assist the developer in seeking firm commitments from other funding sources.
Determination of CGF Assistance
The level of CGF assistance will be based on the City’s underwriting review of the project, verified financing
gap or project need, assessment of reasonable return to owner, and assessment of project risk.
When allocating funds, CGF considers the total amount of assistance from both public and private sources
needed to ensure project feasibility. Applicants must request only the amount of CGF funds needed as gap
financing to make the project feasible. Requesting funds for administration is not allowed; however,
applicants may request funds for reasonable developer fees and other professional fees and soft costs.
City contract may limit use of City funds to certain line items in order to facilitate the administration of
periodic disbursements.
Method of Selection and Criteria
The City of Cleveland will review all Construction Gap Financing applications and consider the
following when making an award decision:
Non-Financial Factors
1) Assessment of market demand and needs assessments for the project
2) Extent to which the project meets the City’s Property Standards (see Attachment D).
3) Relationship to a strategic approach to revitalization in the area surrounding the project. Projects
which are an integral part of a credible, comprehensive neighborhood revitalization strategy will
have an advantage.
4) The housing is located in close proximity (either via walking or public transit) to employment and
educational opportunities and/or commercial centers.
5) The project will support the development of mixed-income communities.
5

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