Subject: MULTIFAMILY HOUSING INVESTMENT BANKING SERVICES UNDERWRITING POOL

Council District: City-Wide

RECOMMENDATION

Approval of the multifamily housing underwriting eligible list to be used for the selection of investment banking firms for the period of April 14, 2003 to December 31, 2004 to provide investment banking, underwriting and remarketing services related to the issuance of multifamily housing revenue bonds by the City of San Jose.

BACKGROUND

Given the rental housing market in San Jose and the large number of housing developers seeking the City’s assistance in issuing multifamily housing revenue bonds, the Finance and Housing Departments created an eligible list of qualified underwriting firms for multifamily housing projects. The first eligible list was established for the period of October 29, 1996 to January 1, 2000 and the second eligible list was established for the period of January 1, 2000 to December 31, 2002. The creation of the eligible list has resulted in an efficient use of staff resources in addition to allowing the City to expedite requests from developers for City assistance in the issuance of multifamily housing bonds.

ANALYSIS

On March 20, 2003, the Finance Department issued a Request for Proposals (“RFP”) to 45 experienced investment banking firms for the purpose of establishing a new eligibility list. These firms were invited to respond to the RFP for the purpose of developing an underwriting pool. The list will be used to assist the City in the formulation of debt financing strategies and establish a list of eligible underwriters and remarketing agents for a variety of multifamily housing projects over the next two years.

The City received 14 responses to the request for proposals for Investment Banking Services. The written responses were reviewed by the evaluation committee consisting of representatives from the Finance and Housing Departments and with the technical assistance from our financial advisor. The following criteria were used in the evaluation of the written proposals:

· Experience and qualifications of firm with respect to multifamily housing projects

· Examples of experience underwriting various credit enhancement vehicles

· Current experience as remarketing agent for California tax-exempt multifamily variable rate financings

· Lead banker experience

· Principals assigned to project teams

· Fees

· Overall experience and qualifications of the firm

It is currently projected that over the next two years, the City will process and review approximately nine to twelve requests for assistance in issuing multifamily housing revenue bonds for both new projects and refundings. Based on the evaluation committee’s review and evaluation of the proposals and the desire to limit the number of investment banking firms on the eligibility list sufficient to provide adequate coverage for the anticipated number of housing projects, the Finance and Housing Departments are recommending the following firms for inclusion in the City’s multifamily housing underwriting eligible list for the period of April 14, 2003 to December 31, 2004:

· Banc of America Securities

· E.J. De La Rosa & Co. Inc

· Newman & Associates

· RBC Dain Rauscher

· Red Capital Markets, Inc.

· UBS PaineWebber

This list represents a balance of national, regional and minority-controlled firms. As such, the list should be responsive to the varied needs of the developers that typically seek to do business with the City.

Selection for participation on individual financing projects will be made by the Finance Department in coordination with the Housing Department. Underwriters will be selected from the eligible list by the Finance Department staff for approval by the City Council based on the following criteria:

· Experience in type of multifamily financing proposed

· Timeline to complete the project

· Size of the project

· Complexity of the bond financing

· Distribution of business among members within the underwriting eligible list

PUBLIC OUTREACH

The request for proposals for Investment Banking Services was mailed to 45 experienced banking firms throughout the United States.

FISCAL IMPACT

All underwriting work will be performed on a contingency basis; payment will occur upon the successful sale and closing of the bonds.

COORDINATION

The preparation of this report has been prepared by the Finance Department in coordination with the Housing Department and the City Attorney’s Office.

CEQA

Not applicable. This is not a project.

SCOTT P. JOHNSON

Director, Finance Department

LESLYE CORSIGLIA

Director, Housing Department