c Sanctuary 9PercentCompetitiveApplicationNarrative Final.docx

9% housing credit application narrative

Project Name: Project Name: Sanctuary on Potomac Project Address: 1280 S. Potomac Street, Aurora, CO 80012 Sanctuary on Potomac is part of a transformational housing and treatment model for people who are experiencing homelessness and have mental illness by co-locating three critically important social determinates of health: affordable housing, mental health services, and affordable health care. The development is located on a safety net campus and will feature 43 one-bedroom units of permanent supportive housing (PSH), mental health services (including crisis stabilization, respite care and substance use treatment), and community health care services.

Best Practice, Design: Sanctuary on Potomac incorporates the housing first model and trauma informed design to create permanent supportive housing with interiors that are protective, light-filled, and open. The 36,349 square foot building will also provide direct access to nature. Davis Partnership has worked extensively with WellPower Denver to build other PSH in the metro area, and we chose this team for their ability to harness the power of design to stabilize and transform lives. The one-bedroom units will have central air conditioning, blinds, vinyl tile floors, a refrigerator, stove/oven, dishwasher, microwave, and be fully furnished. The four-story, two elevator building will feature a lobby and reception area, administrative offices, a community room, wellness room, and a safe courtyard. Forty-five spaces of surface parking will serve staff and visitors, and a parking easement has been executed between AHA and AMHR to conform with City parking requirements. The building will have limited access entries, surveillance cameras, and on-site security staff after hours.

Sanctuary will have a slab on grade foundation and use wood frame construction for walls, stairs, and the roof. The exterior membrane of the roof will be a 60 mil TPO. Building systems will conform to the National Green Building Standards, Bronze tier, and appliances will be Energy Star rated. Five percent of units will be ADA type A, and all units will incorporate universal design elements. Exterior materials will include brick, stucco, and metal siding. Landscaping includes a private courtyard, garden beds and greenspace.

The campus is in a commercial and medical corridor zoned MU-OI Mixed Use – Office/Institutional District allowing for residential uses as well as office, medical, institutional, and commercial. The Potomac Campus Housing-Aurora Housing Authority-Site Plan was approved by Aurora’s Planning Commission in November 2023. The Infrastructure Site Plan for the campus will receive a building permit in the Spring of 2024, and five months of construction are estimated for the work to be completed. This timing will ensure that AHA has a buildable site before our tax credit closing.

The site has excellent connections to public transportation. The location provides convenient RTD Route 11 bus service running every 30 minutes to destinations throughout Aurora, with connections throughout the MSA. The Florida light rail station is 0.3 miles southeast. The H and R Lines provide service to destinations throughout the Denver MSA.

Financing for the project will come from a first mortgage, tax credit equity, City of Aurora, Arapahoe County, Colorado Division of Housing, and Aurora Housing Authority. The City of Aurora has awarded Aurora Housing Authority $1.0 M in ARPA funds for predevelopment expenses for Sanctuary, and Arapahoe County has committed $1.2 M in HOME ARP, with another $600,000 in HOME forthcoming. Public support for this campus is significant. Aurora Mental Health and Recovery has assembled $7.0 M in ARPA from City of Aurora, $5.0 M in ARPA from Arapahoe County, and $1.3 M in ARPA from Adams County to support the development of this campus. AHA will purchase the land and pay a pro rata share of the site improvements totaling $1.0 M. Aurora Mental Health is dedicating Arapahoe County ARPA dollars to the infrastructure work anticipated to cost $3.6 M, this includes infrastructure for Sanctuary.

Aurora Housing Authority has dedicated 43 project-based vouchers to Potomac and anticipates all residents will have little or no income when moving in. To allow for longevity and income progression, the AMI targeting will include 33 units at 30% of AMI and 10 units at 50% of AMI. This dedication will allow for a streamlined referral of clients from Aurora Mental Health and Recovery to housing.

Best Practice, Services. Robust services will be offered on-site. Aurora Mental Health and Recovery will provide clinical case management, and Aurora Housing Authority will provide housing stability case management through the Family Services department. Services will be paid for by a tenant services reserve funded with the 5% developer fee boost, Medicaid billed through Aurora Mental Health, and the Colorado Division of Housing Tenant Support Services funding. The staffing model was designed after consultation with PSH operators including WellPower and Catalyst Housing.

Since our last application, Sanctuary has received $1.2 million additional funding from Arapahoe County. The development also received planning commission approval for the site plan. A parking easement was recorded confirming 27 parking spaces adjacent to our building, and 18 spaces on the larger campus.

QAP Conformance: Sanctuary on Potomac will serve persons experiencing homelessness as defined in Section 5.B 5. Aurora Mental Health and Recovery identified 4,400 individuals receiving treatment in 2022-23 who were unhoused. This number speaks to the crisis of homelessness among those struggling with mental illness.

Market Conditions. The primary market area (PMA) for the subject’s homeless units is equal to the city of Aurora. Aurora Mental Health and Recovery will refer clients to Sanctuary on Potomac. Sanctuary on Potomac and all other homeless units planned or under construction would have to capture a total of 13.1% of the income- and size-qualified homeless renter households in the PMA to attain full occupancy. The vacancy rate at the permanent supportive housing developments was 4.4% in July 2023. The managers of PSH projects noted that vacancies are filled as fast as possible through the CES process or waitlist applicants, but tenant screening procedures can slow this process. The PSH property in the PMA had stable occupancy between 96% and 100% over the last year, while six PSH properties outside the PMA were steady at or near 100% or between 97% and 100%. According to the Point in Time Report 2023, Aurora had 572 people experiencing homelessness and 163 of these were unsheltered. One in four of these people is chronically homeless and 26% self-reported a mental health concern as a barrier to housing. AHA confirmed with Prior and Associates in January 2024, that market conditions have not changed since the time of the last study, and currently the overall surveyed occupancy rate for all PSH comps in Aurora and Denver is 91%.

Proximity to TC Properties. There are only two existing rental projects in Aurora that strictly serve the Homeless: Renaissance Veterans Apartments at Fitzsimons (59 units) and Providence at the Heights (49 units). Renaissance is located 4.7 miles North of Sanctuary and units are reserved exclusively for homeless veterans. Providence is located 1.7 miles to the Northeast of Sanctuary. Given that Aurora is the third largest city in the metropolitan area, the current inventory of 108 PSH units is severely inadequate.

Project Readiness. Aurora Housing Authority has executed a purchase agreement with Aurora Mental Health and Recovery. The Campus Infrastructure Site Plan was submitted in June 2023 and approval is projected to occur in Spring of 2024. AHA has 50% Design Development drawings and our application for a site plan was recommended for approval by the Aurora Planning and Zoning Commission at a public hearing on November 21, 2023.

Financial Feasibility. The success of PSH is dependent on three factors, the cost of construction of the building, funding and strength of services, and location suitability. Sanctuary on Potomac is strong in all three areas. The project budget provides for the construction of the building, complete building furnishings, robust security features and staffing ratios that consider the realities of operating a building for formerly homeless persons suffering from mental illness. Sources include tax credit equity, a first mortgage, and funding support from Colorado Division of Housing, Arapahoe County, and City of Aurora. The Authority also committed 43 project-based vouchers to the project to ensure a predictable income stream for the property and long-term stability for residents.

Operational staffing will be supplemented by housing stability and clinical case management. Funding for these positions will come from the $235,000 developer boost (5%), from Medicaid reimbursement billed by Aurora Mental Health and Recovery, and by TSS support from the Colorado Division of Housing.

Track Record Development/Management Team. Our team is accomplished and ambitious in carrying out our mission. Our executive Director, Craig Maraschky, has led AHA for 16 years and has served in leadership roles with Housing Colorado and Colorado NAHRO. Craig was recognized as an outstanding legislative advocate by the National Association of Housing and Redevelopment Officials (NAHRO) in 2021. Dayna Ashley-Oehm leads a development team with six years at the agency. She is supported by a growing team of visionary problem solvers including Sarah Vogl, Martin Petrov, and Heidi Mitchell. Les Arney leads our finance team and for 16 years has ensured our Authority’s financial success. Our property management team is led by Cindy Gonzalez, who has been with the agency for over a decade. Property maintenance is under the leadership of Steven Romero. Adding to our strength is the financial consulting of Mark Welch.

The agency has 72 new units under construction, is poised to close on a re-sydication of 86 units in Spring 2024, and just opened 100 units at Walden35 on time and within budget. This speaks to the leadership of the organization, its financial strength, and the capacity of its staff to respond to the growing need for housing in Aurora. AHA owns and manages 969 units of affordable housing in 11 properties. Of these, 315 new units were brought online in the last six years, and 68 were modernized through an extensive rehabilitation effort. AHA has worked closely with the City to implement its new Housing Strategy, and amend the zoning code/UDO to include concessions for affordable housing development.

Clinical case management services for our residents at Sanctuary on Potomac will be provided by Aurora Mental Health and Recovery, another agency that has been serving the community since 1975. Aurora Mental Health and Recovery is licensed by Colorado Department of Human Services as the Community Mental Health Center dedicated to serve the City of Aurora. Not only will our residents have clinical supports, but they will be directly adjacent to the Crisis Center offering crisis walk-in, stabilization, detox, Connect2Care, respite, and enhanced substance use treatment services in one location. The agency also has expertise with Medicaid billing and will assist AHA to bill back eligible services for our residents.

Project costs. Sanctuary is made possible by the vision of Aurora Mental Health and Recovery to include permanent supportive housing on site. However, the size of the parcel allows for only 43 units, and the small number of units contributes to a high cost per unit. We are not able to provide economies of scale at this location, but we do have institutional support both from the City and from Aurora Mental Health for the creation of this sometimes controversial housing form.

Our confidence in our budgeted construction costs of $14,085,959 is sound due to the fact our general contractor, Denueve Construction, has priced a 50% Design Development set of architectural drawings with input from subs. This budget was re-examined for the current application and still holds.

Site suitability. The location gets a high walk (47) and transit score (49) compared to many Aurora locations. A HUD environmental assessment has been completed by City of Aurora staff, and the existing building on site has been demolished in readiness for new development. Sanctuary is within a half mile of a bus stop, light rail station, hospital, medical clinic, convenience store, neighborhood shopping center, Walmart and middle school, and within one mile of a grocery store, shopping mall, elementary school, high school, childcare center, park and recreation center.

Waive Underwriting Criteria. AHA is requesting a cost basis waiver for Sanctuary on Potomac to fund a tenant services reserve fund of $235,000. The request will maximize the tax credit request to $1,450,000. All of the requested increase will be exclusively directed toward the funding of this tenant reserve. Staffing ratios required by DOH (1:15) along with the opportunity to have an equity investor participate in the funding of these needed services will benefit the overall project.

Market/Parking Study Findings. The market study confirmed that homelessness is increasing in Aurora, that the community has a small inventory of PSH units, and that this development should be able to lease up in two months and, once leased, maintain a stabilized occupancy rate of 97%, and a yearly turnover rate of 15%. We have negotiated a shared parking agreement with Aurora Mental Health for additional parking on the campus.

Phase I. No recognized environmental conditions were noted on the site in the Phase I.

Cost Drivers/Cost Containment. Sanctuary on Potomac is hampered from an economic cost perspective by its size. We can fit only 43 units on site, and this drives up costs per unit. AHA will also staff the property with a full-time property manager and maintenance technician. For a project of this size, we would usually split an FTE between properties to obtain a staffing ratio of 1:100. That is not feasible for a project serving a vulnerable and demanding population. We also have increased costs associated with providing overnight security. From a design perspective, since we are not fronting Potomac with our building, the City required additional architectural detail, adding costs to the project. We have explored cost containment measures throughout the design, but we have not identified any significant savings that are not currently reflected in the construction budget. In the future, there may be opportunities for potential savings with energy efficiency and resiliency programs through the new federal initiatives derived from the Inflation Reduction Act and Bipartisan Infrastructure Law.

Community Outreach. As we are working in partnership with Aurora Mental Health and Recovery, we participated in the Planning Commission approval process for the master site plan. That process required outreach to adjoining neighbors and a public comment process. Planning Commission approved our site plan and no public opposition to the plan was registered.

Equity/ Mobility. Coupling community mental health care with stable housing will offer a rare chance for households to combat inequity and realize personal and economic opportunity. Aurora’s diverse population will be well served with housing, clinical care, and site-based services in one location. Homelessness affects employment and economic success, and Sanctuary will eliminate homelessness for its residents, thus improving multiple economic outcomes.

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