ANNUAL REPORT ’ 15 Merritt Community Capital Corporation
Cover Profile
AMENITIES: Activity room, lounge area, wellness clinics, enrichment activities, green resident trainingand engagement, secure entries, secure parking, transportation services, close to retail services, medicalfacilities, public transportation, parks and services.
Eden Issei Terrace HAYWARD, CA
RESIDENTS: Senior ACCOMMODATIONS: 100 Units
DEVELOPER: Eden Housing Inc. FINANCING: $6.7 Million, Fund XV
TYPE: Rehabilitation
Access:
Opportunity
Cover Profile
Merritt Community Capital believes opportunity begins when people have asafe, healthy and affordable place to call home. Working as a team with our outstandingpartners Merritt develops projects that are financially and physically sustainable for thelong run. In so doing, we provide economic security and a stable foundation on whichindividuals and communities can thrive.
Collaborating with our experienced partners, we have been able to revitalize Californiacommunities and provide quality homes for families, seniors, and those with specialneeds. Relationships built on decades of reliability and expertise allow Merritt to developprojects that prosper during the 15-year Low Income Housing Tax Credit (LIHTC)Compliance Period. Our talented team of industry professionals is responsible forproperties from inception through asset and portfolio management.
Merritt Community Capital creates opportunity by opening doors to affordable housing.
Doors to Opportunity are Built through Partnerships
Woodbridge Village Apartments, St. Helena
O U R M I S S I O NMerritt Community Capital Corporation’s mission is to provide equity capital foraffordable housing throughout California and to revitalize neighborhoods through theconstruction, rehabilitation and long-term asset management of these properties.
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In 2015, the Low Income Housing Tax Credit (LIHTC) market produced anotherin a long line of outstanding performances. The market was characterized by an abundance of equity, as the demand for Low Income Housing Tax Creditinvestment opportunities increased to levels not seen since 2006. In spite of cuts in Redevelopment and otherfunding sources, we were able to secure a pipeline of outstanding project investments. While many yield-motivatedinvestors, including the insurance industry, have shown some reluctance to invest at returns below 5% and werenot as active in the 2014 market, banks seeking safe and sound investments and CRA Investment credit morethan offset the absence of yield-only motivated investors and we expect the current trend to continue as long asthe Federal Reserve keeps interest rates at historic low levels. As many large money center banks are movingto direct or propriety fund structures, we are increasing our focus on serving the tax and CRA needs of regionaland foreign banks that are new to the LIHTC program.
In Congress, the pending Presidential race will postpone any potential for major tax reform. Last year the HouseWays and Means Committee produced its first draft of tax reform that maintained the LIHTC, Speaker Ryandelayed any further consideration of the draft bill. As any action on a tax bill not likely in the near term, bills toenhance the Housing Credit are under active consideration and we need to be prepared to make our case forprogram improvements when and if Congress takes action on these proposals.
Merritt Community Capital continues to play an increasingly significant role in the California affordable housingmarketplace. Fund XVIII closed in early 2016 at $75.5 million. At the close of 2015, we reported Net Assets in excessof $9 million, an increase of over $1.6 million from 2014. Fund XVIII is fully invested in seven projects throughout thestate in a mix of new construction and acquisition with rehabilitation developments. The outlook for 2016 is for anincrease in the project pipeline that will support a higher level of investor interest in Merritt Funds as we continue toincrease our outreach to new investors, both in the financial markets and other sectors within the California economy.
LEADERSHIP MESSAGE FROM THE PRES IDENT AND CHAIRMAN OF THE BOARD
MERRITT COMMUNITY CAPITAL CORPORATION 3
JEFF BENNETTBoard Chairperson
The Merritt Capital Scholarship program with two Bay Area universities, California State University East Bay andSan Francisco State University, is now in its eight year and continues to provide financial support to qualified studentsseeking a career in Community Development and Affordable Housing. We have expanded the program to providescholarship support in the Graduate School of Urban Affairs at San Francisco State University. Needless to say, as thecost of tuition at our State Universities continues to rise, the Merritt Scholarship Program is providing real and tangiblesupport for students in need.
In California, we continue to push for a response to theelimination of Redevelopment Agencies by the Governor. Our efforts have focused on the creation of a permanentsource of State support based on a $75.00 fee on mostrecorded real estate transactions. While the bill hasbeen introduced for the third year in a row, the supermajority needed to secure passage is still not present inthe Legislature. Other measures, including an increasein the State Tax Credit and the allocation of Cap and Tradefunding, are moving ahead.
As Merritt Community Capital concludes its 26th yearas the only Tax Credit equity source devoted exclusivelyto meeting the affordable housing needs of Californians,we look forward to the addition of several outstandingproperties to our portfolio while successfully transitioningout of those properties and funds that have completedtheir 15 year compliance period.
BERNARD T. DEASYPresident
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Merritt Capital Opens Doors to Opportunity
Merritt Community Capital was founded in 1989 by the City of Oakland.
In1995 Merritt separated from the City and hired an independent staff.
The combined funds have financed 7,926 affordable homes since 1989.
Since 1989 a total of $714.4 million has been invested.
In 2009 Merritt established business scholarship funds for bothSan Francisco State University and California State East Bay.
17 Merritt Scholars have attended San Francisco State University.
11 Merritt Scholars have attended California State East Bay.
Over $185,000 has been spent on the scholarship program to date.
MERRITT COMMUNITY CAPITAL CORPORATION 5
“Merritt’s AssetManagement teamstrives to meetthe needs of ourresidents as wellas our investors.”Maria DuarteDirector of Asset ManagementMerritt Community Capital
Asset Management and Disposition MERRITT STAFF
CONTINUING EDUCATION: LIHTC operation and updates in California
RESPONSIBILITIES: Monitor properties to assure physical and financialcompliance with LIHTC. Perform regular health and safety inspections ofproperties, ensure accurate resident qualifications, monitor financial perform-ance of projects. Update proprietary database program to assist in analysisand quick response by investors. As property ends 15-year complianceperiod, Merritt transfers partnership interest to project general partner.
LIHTC COMPLIANCE PERIOD: 15 years UNITS MANAGED: 6,216
MERRITT TRAINING MODULES: LIHTC Introductory — Advanced
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Number of MerrittProperties by County
Merritt Capital funds invest in affordable housingproperties throughout the state of California and addressa wide variety of housing needs. From San Diego toEureka, we have partnered in the creation of familyhousing, senior developments, single-room occupancyhotels, special needs housing and supportive housingprojects. In 2015, we entered into 9 project partnershipsadding 909 units to Merritt’s portfolio and to California’squality affordable housing.
Portfolio Profile
AlamedaAdeline Lofts**
Ashland VillageBaywood ApartmentsCalifornia Hotel**
Cathedral GardensDrasnin ManorEC MagnoliaEden HouseFargo Senior ApartmentsFuller LodgeHarris CourtHarrison Street Senior HousingHismen Hin-nu Terrace**
Issei TerraceJosephine Lum LodgeKent GardensLorenzo Creek ApartmentsMadison Park Apartments**
Marcus Garvey Commons**
Olive TreeRedwood LodgeSan Pablo Hotel**
Sequoia ManorShattuck Senior Homes
ButteParadise Community Village
Contra CostaGolden OaksRiverhouse Hotel**
The Oaks ApartmentsValley Vista Senior HousingWest Rivertown Apartments
El DoradoKelly Ridge Apartments
HumboldtEureka Family Housing
KernMadison Place Apartments**
Los AngelesColumbus ApartmentsCoronado PlacePanorama View ApartmentsPark PlazaSecond Avenue ApartmentsWadsworth Park Apartments
MarinBelvedere Place ApartmentsPoint Reyes Family HomesToussin Senior Apartments
NapaArroyo Grande VillasMagnolia Park ApartmentsOak Creek TerracePalisades ApartmentsStonebridgeWoodbridge Village
OrangeBel’Age Manor ApartmentsBonterra Apartments
PlacerMcAuley Meadows Senior Apartments
SacramentoArdenaire ApartmentsFoothill FarmsLand Park WoodsQuinn CottagesSierra Vista HousingWashington Plaza
* Through 12/31/15
Investments in 113 Properties in 26 California Counties*
** Merritt assigned partnership interests to project General Partner at the end of the LIHTC compliance period.
MERRITT COMMUNITY CAPITAL CORPORATION 7MERRITT COMMUNITY CAPITAL CORPORATION 7
Acquisition Highlights
Property Name City County Type Population #Units
Rotary Plaza South San Francisco San Mateo Acq/Rehab Senior 181
Mayberry Court San Diego San Diego Acq/Rehab Family 70
Bridge Ocean View Pacifica San Mateo Acq/Rehab Senior 100
Foothill Farms Sacramento Sacramento Acq/Rehab Family 98
Land Park Woods Sacramento Sacramento Acq/Rehab Family 75
Golden Oaks Oakley Contra Costa Acq/Rehab Senior 50
The Oaks Walnut Creek Contra Costa Acq/Rehab Family 36
Villa La Esperanza Goleta Santa Barbara Acq/Rehab Family 83Town Park Towers San Jose San Jose Acq/Rehab Senior 216
AlamedaAdeline Lofts**
Ashland VillageBaywood ApartmentsCalifornia Hotel**
Cathedral GardensDrasnin ManorEC MagnoliaEden HouseFargo Senior ApartmentsFuller LodgeHarris CourtHarrison Street Senior HousingHismen Hin-nu Terrace**
Issei TerraceJosephine Lum LodgeKent GardensLorenzo Creek ApartmentsMadison Park Apartments**
Marcus Garvey Commons**
Olive TreeRedwood LodgeSan Pablo Hotel**
Sequoia ManorShattuck Senior Homes
ButteParadise Community Village
Contra CostaGolden OaksRiverhouse Hotel**
The Oaks ApartmentsValley Vista Senior HousingWest Rivertown Apartments
El DoradoKelly Ridge Apartments
HumboldtEureka Family Housing
KernMadison Place Apartments**
Los AngelesColumbus ApartmentsCoronado PlacePanorama View ApartmentsPark PlazaSecond Avenue ApartmentsWadsworth Park Apartments
MarinBelvedere Place ApartmentsPoint Reyes Family HomesToussin Senior Apartments
NapaArroyo Grande VillasMagnolia Park ApartmentsOak Creek TerracePalisades ApartmentsStonebridgeWoodbridge Village
OrangeBel’Age Manor ApartmentsBonterra Apartments
PlacerMcAuley Meadows Senior Apartments
SacramentoArdenaire ApartmentsFoothill FarmsLand Park WoodsQuinn CottagesSierra Vista HousingWashington Plaza
San BernardinoCitrus Grove Apartments
San DiegoMayberry Townhomes
San FranciscoAntonia ManorArnett Watson ApartmentsCanon Barcus Community HouseKlimm ApartmentsLyric Hotel**
Maria ManorNamiki ApartmentsNotre Dame ApartmentsPlaza & Ramona Apartments**
Rich Sorro Commons**
Rosa Parks II
San JoaquinGrant Village Townhomes**
Union Court Apartments
San Louis ObispoPismo Creek BungalowsCourtland Street
San MateoGreenridge Apartments**
Light Tree Apartments**
Main Street Park**
Ocean ViewRedwood OaksRotary PlazaSchool House Station**
Santa BarbaraDahlia Court IISt. Vincent’s GardensVilla La Esperanza
Santa ClaraBella TerraHomeSafe Santa ClaraHomeSafe San JoseMonte Alban ApartmentsParkview FamilyParkview SeniorPensione EsperanzaSierra VistaTown Park TowersVilla Garcia
Santa CruzJardines Del Valle**
SolanoBurgess Point ApartmentsFairfield Senior ManorMarina Vista I**
Marina Vista II**
The Village ApartmentsUnion Square II
ShastaHotel ReddingLorenz Hotel
SonomaAcacia Lane Senior ApartmentsCasa Grande Senior ApartmentsKellgren Senior ApartmentsPapago Court**
Paulin Creek Apartments**
Rowan CourtSonoma Creekside
VenturaLos Feliz II
YoloNew HarmonyWest Capitol Courtyard II
2015 LIHTC Syndications
Stonebridge Apartments ST. HELENA, NAPA COUNTY
RESIDENTS: Family ACCOMMODATIONS: 80 Units
AMENITIES: Community room with kitchen, television, library, piano, computer stations and Internet access.Beautiful community gardens, BBQ and picnic areas. Children’s play areas for toddlers and adolescents withlarge soccer field and basketball courts. Two laundry facilities and covered parking.
DEVELOPER: EAH FINANCING: $5.9 Million, Fund XVII
TYPE: Rehabilitation
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MERRITT COMMUNITY CAPITAL CORPORATION 9
Woodbridge Village Apartments ST. HELENA, NAPA COUNTY
RESIDENTS: Senior ACCOMMODATIONS: 50 Units
AMENITIES: Private entrances, balconies, and back yards. Easy access to highways, clubhouse, laundryfacilities, parking and picnic area. Woodbridge Village is a peaceful environment in a park-like setting,dominated by majestic trees, many lawns, shrubs and beautiful flowers.
DEVELOPER: TerraCorp Financial, Inc. FINANCING: $3.25 million, Fund XV
TYPE: Rehabilitation
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AMENITIES: Large community lounge, outdoor courtyard with fire pit, BBQ; support programs for servicecoordination and life-skills training; walkable midtown neighborhood. Energy efficient green appliances.Some parking on-site, with light rail a block away. Downtown and Capital Park views. Pet friendly.
Washington Plaza SACRAMENTO, SACRAMENTO COUNTY
RESIDENTS: Senior ACCOMMODATIONS: 76 Units
DEVELOPER: BRIDGE Housing FINANCING: $9.3 Million, Fund XVI
TYPE: Rehabilitated
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1989 Oakland HousingPartnership AssociatesBank of AmericaBank of the WestBramalea Pacific, Inc.Dreyer’s Grand Ice Cream, IncFirst Nationwide BankPG&E CorporationQuaker Oats
1991 Oakland HousingPartnership AssociatesBank of AmericaBank of the WestBay View Capital CorporationDreyer’s Grand Ice Cream, Inc.Fannie MaeFreddie MacUnion Bank
1992 Oakland RegionalHousing PartnershipAssociatesBank of AmericaBank of CaliforniaBank of the WestBay View Capital CorporationFannie MaeFirst Interstate BankFreddie MacPG&E CorporationSanwa Bank CaliforniaUnion Bank
1994 Oakland RegionalHousing PartnershipAssociatesBank of AmericaBank of CaliforniaBank of the WestFannie MaeFirst Interstate BankFreddie MacHome Savings of AmericaPG&E CorporationSanwa Bank CaliforniaUnion Bank
Merritt CommunityCapital Fund VBank of AmericaBank of the WestFannie MaeFreddie MacHome Savings of AmericaPG&E CorporationSanwa Bank CaliforniaUnion Bank of CaliforniaWells Fargo Bank
Merritt CommunityCapital Fund VIBank of AmericaBank of the WestComerica BankFannie MaeFreddie MacSanwa Bank CaliforniaUnion Bank of CaliforniaUnited Commercial BankWells Fargo Bank
Merritt CommunityCapital Fund VIIBank of AmericaBank of the WestComerica BankDowney Savings and LoanFannie MaeFreddie MacSanwa Bank CaliforniaSilicon Valley BankUnion Bank of CaliforniaWashington MutualWells Fargo BankWestAmerica Bank
Merritt CommunityCapital Fund VIIIBank of AmericaBank of the WestFannie MaeFreddie MacUnion Bank of CaliforniaWashington MutualWells Fargo Bank
Merritt CommunityCapital Fund IXBank of AmericaBank of the WestFannie MaeFreddie MacUnion Bank of CaliforniaWashington MutualWells Fargo Bank
Merritt CommunityCapital Fund XBank of AmericaBank of the WestFannie MaeFreddie MacWashington MutualWells Fargo Bank
Merritt CommunityCapital Fund XIBank of AmericaBank of the WestFannie MaeFreddie MacSilicon Valley BankWashington MutualWells Fargo Bank
Merritt CommunityCapital Fund XIIBank of AmericaBank of the WestSilicon Valley BankWells Fargo BankWestamerica Bank
Merritt CommunityCapital Fund XIIIBank of AmericaCity National BankComerica BankFirst Republic BankSilicon Valley BankWells Fargo BankWestAmerica Bank
Merritt CommunityCapital Fund XIVBank of AmericaBank of the WestCity National BankComerica BankFirst Republic BankSilicon Valley BankWells Fargo Bank
Merritt CommunityCapital Fund XVBank of AmericaBank of MarinBank of the WestBoston Private BankCity National BankComerica BankFarmers & MerchantsFirst Republic BankRedding Bank of CommerceSilicon Valley BankWells Fargo Bank
Merritt CommunityCapital Fund XVIBank of America Merrill LynchBank of MarinBank of the WestBoston Private BankCalifornia BankCity National Bank Comerica BankFirst Republic BankPacific Western BankSilicon Valley BankUmpqua Bank Wells Fargo Bank
Merritt CommunityCapital Fund XVIIBank of America Merrill LynchBank of the WestBank of the Internet Federal BankBoston Private BankCity National BankComerica BankFarmers and MerchantsFirst Republic BankPacific Western BankSilicon Valley BankTriCounties BankUmpqua Bank
Fund Investors
Merritt Capital has opened doors to over 7,926
2,265
$234.4
Seniors
31 PROPERTIES
MILLION FINANCEDBY MERRITT FUNDS
16 COUNTIES
UNITS
3,834
$334.6
Family
62 PROPERTIES
MILLION FINANCEDBY MERRITT FUNDS
20 COUNTIES
UNITS
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Merritt Capital has opened doors to over 7,926
1,110
$111.4
14 PROPERTIES
MILLION FINANCEDBY MERRITT FUNDS
7 COUNTIES
UNITS
717
$34
SRO
6 PROPERTIES
MILLION FINANCEDBY MERRITT FUNDS
3 COUNTIES
UNITSSingle RoomOccupancy
Special Needs
MERRITT COMMUNITY CAPITAL CORPORATION 13
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Between 2012-2104 Merritt closed three successive record funds in a row with Merritt Community Capital FundsXIV at $73 million, XV at $72 million and XVI at $80.5. In 2015 Merritt closed Fund XVII at $61 million; significantlymore equity funding could have been raised but Merritt was limited by the size of the pipeline. The pipeline wassmaller for Fund XVII because, although several strong lower tier proposals were made by Merritt, bank directinvestors bid the projects more aggressively. Merritt currently expects to secure $60 to $70 million in tax creditequity in support of outstanding affordable housing developments and to close its newest fund by the first quarterof 2016. Merritt has successfully completed the 15-year compliance period and transferred its interest in 24properties. Subsequently, the investor partnerships were terminated.
* PG&EHF is a single investor fund and invested in projects from 1997-2002.
** Investor partnerships were dissolved.
38.5
20.5 20.5
2729.8
44 43 42
28.5
48
42.7
80.5
73
61
$10,000
0
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
1989-94* V VI VII PG&EHF* VIII IX X XI XII XIII XIV XV XVI XVII
FUNDS
Equity InvestmentsTotal Capital Raised (EQUITy IN MILLIONS $000’s)
Current Assets 2015 2014
Cash $ 1,193,315 $ 866,308Accounts Receivable 277,884 1,807Notes Receivable 0 4,514,168Due from Affiliates – Current Portion 16,989,638 10,819,641Prepaid Expenses 17,880 16,230
Total Current Assets $ 18,478,717 $ 16,218,154
Other AssetsInvestment in Upper Tier Limited Partnerships (975,973) (356,463)Due from Affiliates – Net of Current Portion 3,557,393 374,526Property and Equipment 13,965 13,259
Total Other Assets $ 2,595,385 $ 31,322
Total Assets $ 21,074,102 $ 16,249,476
Current Liabilities 2015 2014
Accounts Payable and Accrued Expenses $ 0 $ 8,898Due to Affiliates – Current Portion 4,981,322 5,637,043Deferred Revenue – Current Portion 45,063 45,063Notes Payable – Current Portion 0 0Line of Credit Payable 7,000,000 3,000,000
Total Current Liabilities $ 12,026,385 $ 8,691,004
Long-term LiabilitiesDeferred Revenue – Net of Current Portion $ 45,066 $ 90,129
Total Long-term Liabilities
Total Liabilities $ 12,071,451 $ 8,781,133
Total Net Assets – Unrestricted $ 9,002,651 $ 7,468,343
Total Liabilities and Net Assets $ 21,074,102 $ 16,249,476
Merritt Community Capital CorporationUnconsolidated Balance SheetDECEMBER 31, 2015
MERRITT COMMUNITY CAPITAL CORPORATION 15
F I N A N C I A L H I G H L I G H T S
Statements of Activities 2015 2014
IncomePartnership Fees $ 4,451,080 $ 3,242,826Direct Investment Services Fees 667,005 161,155Interest Income 3,577 2,065Other Income 41,127 41,656Write off of Investment in Project Limited Partnership 0 43,537
Total Income $ 5,162,789 $ 3,491,239
ExpensesSalaries and Benefits $ 1,854,204 $ 1,694,894Office Rent and Parking 114,691 121,293Office Expense 72,943 65,199Dues and Subscriptions 21,686 31,370Travel and Conferences 121,585 112,022Marketing 131,235 139,973Insurance and Taxes 18,281 8,597Professional Fees 565,168 528,637Bad Debt 109,178 0
Total Operating Expenses $ 3,008,971 $ 2,701,985
Change in Net Assets Before Share of Upper Tier Limited Partnership's Losses 2,153,818 789,254Share of Upper Tier Limited Partnership Losses 619,510 91,611
Change in Net Assets 1,534,308 697,643
Net Assets – Beginning of Year 7,468,343 $ 6,770,700
Net Assets – End of Year $ 9,002,651 $ 7,468,343
Merritt Community Capital CorporationUnconsolidated Statement of Income and ExpenseDECEMBER 31, 2015
62% 4%
7%
4%4%
19%
SALARIES
PROFESSIONAL FEES
MARKETING
OFFICE RENT AND PARKING
OFFICE EXPENSES/OTHER
TRAVEL AND CONFERENCES
Total Expenses
86%
1%
13%
PARTNERSHIP FEES
SERVICE FEES
INTEREST AND OTHER INCOME
Total Revenue
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Jeff Bennett, ChairpersonVice PresidentCommunity Lending DivisionWells Fargo Bank
Christine Carr, Vice ChairpersonCommunity Development Finance ManagerSilicon Valley Bank
Richard Power, TreasurerPartnerCarle, Mackie, Power & Ross LLP
Jacquelynne M. Jennings, SecretaryAttorney at LawSchiff Hardin LLP
John DentonDirector, Community Development FinanceBank of the West
Nick GriffinDirector of Asset ManagementResources for Community Development
Wendy JacqueminVice President, Community ReinvestmentCity National Bank
Emily MartinPrincipalE Martin Consulting
Jim MatherChief Lending OfficerHousing Trust Silicon Valley
Andrea UrsilloPortfolio Manager Team LeadBank of America Merrill Lynch
Merritt Staff
Board of Directors2015
WRITER/EDITOR: SABRINA MORENO-DOLAN DESIGN: LISA EDSON DESIGNPHOTOGRAPHY: ETHAN PINES PHOTOGRAPHy
Top row, L to R:
Nedrah Elm, Asset ManagerSabrina Moreno-Dolan, Director of OperationsBarney Deasy, PresidentDenise Wright, Administrative AssistantKaren Smyda, Director of AcquisitionsDan Kiernan, CFO
Bottom row, L to R:
Suzanne Vice, Aquisition OfficerBirute Skurdenis, Asset ManagerMatthew Haas, Director of Investor Relations& Fund ManagementKristy Ball, Asset ManagerMaria Duarte, Director of Asset Management