Loading...
HomeMy WebLinkAboutRDA Packet 2000/01/11 ~~f? -=..--- -~:;¡:.~ - CllY OF TUnDAY, JANUARY 11, 2000 CHUlA VISTA COUNCIL CHAMBERS 6:00 P.M. PUBLIC SERVlCn BUILDING (_ED lATELY FOLLOWING TNE CITY COUNCIL MEETING) ADJOURNED MEETING OF THE REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA CALL TO ORDER 1. ROLL CALL Agency Members Davis, Moot, Padilla, Salas, and Chair/Mayor Horton ORAL COMMUNICATIONS This is an opportunity for the general public to address the Redevelopment Agency on any subject matier within the Agency's jurisdiction that is not an item on this agenda. (State law, however, generally prohibits the Redevelopment Agency from taking action on any issues not included on the posted agenda.) If you wish to address the Agency on such a subject, please complete the "Request to Speak Under Oral Communications Form" available in the lobby and submit it to the Secretary to the Redevelopment Agency or City Clerk prior to the meeting. Those who wish to speak, please give your name and address for record purposes and follow up action. 'tollUoJI."of,',J- The items listed in this section of the agenda are expected to elicit substantial discussions and deliberotions by the Council, staff, or members of the general public. The items will be considered individually by the Council and staff recommendations may in certain cases be presented in the alternative. Those who wish to speak, please fill out a Request to Speak form available in the lobby and submit it to the City Clerk prior to the meeting. 2. AGENCY RESOLUTION CONDITIONALLY APPROVING FINANCIAL ASSISTANCIIN THE FORM OP A RESIDUAL RECIIPT LOAN PROM THE LOW AND MODERATE INCOMI HOUSING FUND IN AN AMOUNT NOT.TO.EXCIID S1,387,152 TO CHELSEA INVESTMENT CORPORATION FOR THI ACQUISITION AND REHABILITATION OP PEAR TREE MANOR APARTMENT5-0n 12/7/99, the Council and Housing Authority held a public hearing to consider the issuance of tax exempt obligations to finance the Chelsea Investment Corporation (Chelsea) acquisition and rehabiiitation of a 119 unit compiex known as Pear Tree Manor located at 1025 Broadway, Chelsea is in the process of preparing an application for an allocation of the 2000 state ceiling on private activity bonds for multi-family rehabilitation projects from the California Debt Limit Allocation Committee (CDLAC), The application process is competitive and needs to demonstrate readiness to complete the project and strong support from the community. Staff has reviewed Chelsea's most recently submitted pro forma which indicates an approximate financing gap of$1,387,152. Staff is recommending approval of the resolution in order for Cheisea to submit an application to CDLAC by the 2/15/2000 deadline, [Community Development Director] 4/5TH5 VOTE REQUIRED Staff Recommendation: Agency adopt the resolution, OTHER BUSINESS 3. DIRECTOR'S REPORT(S) 4. CHAIR(S) 5. AGENCY MEMBER CO_INTS ADJOURNMENT The meeting will adjourn to a regularly scheduled Redevelopment Agency meeting on January 18, 2000 at 6:00 p.m., immediately following the City Council meeting, in the City Council Chambers. T' ". - - - REDEVELOPMENT AGENCY AGENDA STATEMENT ITEM No. .:L MEETING DATE 01/11/00 ITEM TITLE: RESOLUTION CONDITIONALLY APPROVING FINANCIAL ASSISTANCE IN THE FORM OF A RESIDUAL RECEIPT LOAN FROM THE LOW AND MODERATING INCOME HOUSING FUND IN AN AMOUNT NOT TO EXCEED $1,387,152 TO CHELSEA INVESTMENT CORPORATION FOR THE ACQUISITION AND REHABILITATION OF PEAR TREE MANOR APARTMENTS SUBMITTED BY: COMMUNITY DEVELOPMENT DIRECTOR L~f-<\ ~ ~ ¡' REVIEWED By: EXECUTIVE DIRECTOR~~ (4/ST"8 VOTE: VES..1L. No--> On October 19, 1999, the City of Chula Vista received a request, including a preiiminary proforma, from Chelsea Investment Corporation (Chelsea) to conduct a pubiic hearing to consider the issuance of tax exempt obligations to finance the acquisition and rehabilitation of a 119 unit complex known as Pear Tree Manor Apartments located at 1025 Broadway (locator map attached as Exhibit A), The proposai indicated the Chuia Vista Housing Authority will be the vehicle for applying for approximately $6,5 million in private activity bonds from the Caiifornia Debt Limit Allocation Committee (CDLAC), On December 7, 1999, the City Council and Housing Authority held a public hearing to consider the issuance of tax exempt obligations to finance Pear Tree Manor Apartments. Staff did not incorporate within the previous staff report any request for City financial assistance since negotiations with Chelsea were still underway. Chelsea is in the process of preparing an appiication for an allocation of the 2000 state ceiling on private activity bonds for multi-family rehabilitation projects from the California Debt Limit Allocation Committee (CDLAC). The appiication process is a very competitive one, and requires the need to demonstrate readiness to complete the project and strong support from the community. If successful in obtaining a bond commitment from CDLAC, the developer plans to come back to the Authority to request final approval for the issuance of the bonds, Staff has reviewed Chelsea's most recently submitted proforma indicating an approximate financing gap of $1,387,152. in order to make this acquisition and rehabilitation project feasible, staff is recommending that the Redevelopment Agency conditionally approve providing financial assistance in the amount of $1,387,152 for this project. This preiiminary action is necessary in order for Chelsea to submit an application to the California Debt Limit Allocation Committee (CDLAC) by the February 15, 2000 deadline. The tax credit allocation will be used to substantially finance the estimated $10.2 million dollar project. If successfui in obtaining an allocation from CDLAC, staff expects to return to the Redevelopment Agency in April 2000 requesting final approval for financial assistance, That the Redevelopment Agency of the City of Chula Vista conditionally approve financial assistance in the form of a residual receipt loan from the Low and Moderate Income Housing Fund in an amount not to exceed $1,387,152 to Chelsea Investment Corporation for the acquisition and rehabilitation of the Pear Tree Manor Apartments. c:2-1 T' ". - PAGE 2, ITEM - MEETING DATE 01/11/00 The Housing Advisory Commission approved to conditionally fund the project at the meeting of December 15, 1999, If the Redevelopment Agency loan is conditionally approved, the Housing Advisory Commission will review the developer agreement prior to submittal for Redevelopment Agency consideration. The City's State-mandated Housing Element requires the provision of housing for all economic groups and to distribute affordable housing developments throughout the City's jurisdiction. The City's strategy to implement this mandate, the "Affordable Housing Program", is to require 10 percent (10%) of any new subdivision in excess of fifty (50) units to be made affordable for low and moderate income families (5% low and 5% moderate) and to balance affordable housing development throughout the City in the form of new development and rehabiiitation of the existing housing stock. The Proposed Proiect The Pear Tree Manor Apartment complex is located in the western portion of the City consisting of 119 units and is a project in need of rehabilitation. Chelsea, a highiy regarded and experienced development company, plans to substantially upgrade the interior and exterior of the buildings, The proposed Pear Tree Manor Apartment project offers one pool, increased open space, a recreation area, a classroom for residents, storage areas, laundry rooms, and garages. The proposed unit mix and sizes are as follows: Five (5) One Bedroom units measuring 650 square feet; One Hundred Nine (109) Two Bedroom units measuring 850 square feet; and Five (5) Three Bedroom units measuring 1040 square feet. Rehabilitation Efforts Chelsea has provided a preliminary estimate for the level of interior rehabilitation to be up to $15,000 per unit. This amount falls within the industry standard for rehabilitation projects of this size, The scope of work is considered to be extensive rehabilitation and will include interior painting, new carpeting, new cabinets, new appliances, blinds, sinks, vinyl flooring, and bathroom renovation, The exterior of the building will be painted, repair fascia boards, replace exterior window border, repair existing roof, and replace gutters and downspouts, The landscaping, tot lots and pool area will be upgraded. Although the City has been successful in helping to produce affordable housing through new construction in the eastern portion of the City, this project represents an opportunity for acquisition and rehabilitation of a large multi- family rental project on the western side of the City, While the units are being rehabilitated, the Crime Free Multi-Housing Program developed by the Chula Vista Police Department will be implemented. A main component of the Crime Free Multi-Housing Program will be to obtain cooperation of Chelsea to make recommended improvements to the complex in an effort to reduce the rate of break- ins and to establish a friendly association with the police officers and apartment residents in creating a safe living environment for the Pear Tree Manor Apartment residents, Relocation Issues In discussions with Chelsea, it has been determined that the rehabilitation effort will be phased and Chelsea will make every effort not to disrupt the families. In the event a particuiar unit will require substantial rehabilitation, the tenant will be provided lodging or financial assistance for lodging on a temporary basis, 02-d).. T. ~ - - - PAGE 3, ITEM - MEETING DATE 01/11/00 Proposed Financina of the Proiect Financing and development of this project will be a joint private/public partnership, It is currently estimated that the proposed total project cost will be approximately $10.2 million, Sources of funding for the project will include approximately $5,32 million in bond proceeds, $2.87 million in tax credit equity from private investors, and $2,1 million from other sources including a $1,39 million loan from the Redevelopment Agency. Chelsea also anticipates applying for additional funds from the State Department of Housing and Community Development, aiong with other sources of funding, If successful, the funds will be used to enhance the amenities of the complex, Staff has evaluated the current proforma submitted by Chelsea indicating a financing gap in the amount of $1,387,152 which represents a financing gap of $11,656 per unit (and does not include the $250,000 deferred developer fee), Staff supports providing a Redevelopment Agency loan to fill the financing gap. Financial assistance will be subject to negotiation of satisfactory terms of the Regulatory Agreement and Loan Agreement and the approval of such terms and documents by the Authority and the Agency, Table 2 identifies the financing resources and total project cost per unit for Pear Tree Manor Apartments, Staff is recommending that the Redevelopment Agency provide financial assistance in the form of a residual receipt loan in an amount not to exceed $1,387,152. This amount is reasonable given the debt service coverage ratio of the project and a maximum tax credit allocation amount. The Agency's assistance equates to $11,656 per unit and amounts to a leveraging of $7,35 to $1 of City funds, This leveraging ratio is calculated by dividing the total project cost of $10,189,676 by the amount of the Redevelopment Agency loan of $1,387,152, Proiect Development Costs Development costs are one of the key variables determining the need for subsidies. It is important that those costs be reasonable, At a total project cost of approximately $10.2 million including land, the average unit cost of approximately $86,000 is consistent with typical affordable multi-family rehabilitation within the County. The Pear Tree Manor Apartments is a family complex, which is a larger and older building requiring substantial upgrades to meet current building code standards. The rehabilitation of existing housing stock is an important and necessary 1 Due to the limited availability of bond financing from CDlAC and the large number of applications competing for an allocation, CDlAC has imposed a "taxable tail" to the bond allocation, This taxable tail is the portion of the bond allocation that will be taxable, This amount could range between 1D% and 15% of the allocation. The remaining 85% to 9D% of the bond allocation will be tax exempt. It is very difficult for developers to find investors to agree to purchase the taxable portion of the bond allocation, The use of taxable tails is a way to leverage limited pubiic resources, 02-..3 T' ". - PAGE 4, ITEM - MEETING DATE 0'1' '100 component of the City's affordable housing strategy of increasing affordable housing opportunities and revitalizing neighborhoods throughout the City. Table 1 on the following page delineates the entire deveiopment project costs associated with the Pear Tree Manor Apartments. Table 1 Development Costs Amount Per Unit Land/Acquisition Costs $6,267,000 $52,664 Rehabiiitation Costs $1,761,200 $14,800 Soft Costs $50,000 $420 Hard Costs $264,180 $2,220 Deveioper Fee $574,180 $4,825 Construction interesUFees $488,603 $4,105 Other Costs (Fees) $247,305 $2,078 Permanent Financing Costs $214,892 $1,806 Reserves $221,816 $1,864 Appraisai/Legai/Architec1urai $100,500 $845 Total $10,189,676 $85,627 Income and Rent Restrictions All the units will be affordable to low income households, It is the intent that these low-income units will satisfy the requirements of the City's program for the provision of affordable housing for multi-famiiy rentai units on the western side of the City, Of the 119 units, 20% (24 units) will be rent restricted to households whose income is at or below 50% of the Area Median Income (AMI) as determined by HUD and 80% (95 units) will be rent restricted for households earning 60% of AMI. Of the 119 units, 24 will be affordable to households at 50% of the median income, which is currently $26,250 for a househoid size of four. The remainder of the units (95) will be affordable to househoids at 60% of median income, which is currently $31,500 for a household size of four, It is proposed that the rents on the 5 - 1 bedroom units will range from $492 to $591/month, Rents on the 109 - 2 bedroom units will range from $591 to $709/month and rents on the 5 - 3 bedroom units will range from $682 to $819/month. Income and rent restrictions for Pear Tree Manor Apartments wili be maintained for a period of no less than 52 years, exceeding the 33-year term of the bond, Although Chelsea surveyed the income stream of the residents through their due diligence process, there may be a small number of household with incomes exceeding the income requirement. Those households wili be phased out through attrition. c:L -c¡ T - .,., - PAGE 5, ITEM - MEETING DATE 01/'1/00 Undue Gain It is important that any financial assistance provided has the effect of making the units more affordabie and not creating undue gain for any party. The developer will receive a "Developer Fee" estimated at $574,180 or approximately 5% of total project costs and consists of profit and overhead for developing the project. Chelsea has agreed to defer $250,000 of their developer fee over a six-year period in order to make up the remaining financing gap in financing the project. A review of acquisition rehabiiitation projects throughout the County which have been financed by the same method had developer fees ranging from 5% to 8% of total project costs. This puts Chelsea's proposal within a reasonable developer fee range, which is supported by an industry standard, The developer's fee is highly regulated by CDLAC guidelines. Rental Income Analysis According to the current proforma provided by Chelsea, Pear Tree Manor Apartments expect to accumulate approximately $899,494 per year in gross receipts, After all operating expenses of $423,777 and debt service payments of $438,414 have been paid, it is anticipated that there will be approximately $37,303 available in residual receipts after year one which will be applied toward repayment of the deferred developer fee, It is anticipated that the Redevelopment Agency will begin seeing repayment of the interest in year six and repayment of principal in year ten, The proposed Redevelopment Agency residual receipt loan has a term of fifty two years with simple interest accruing at six percent per annum and staff has negotiated to receive 90% of the residual receipt income. In addition, the Redevelopment Agency is next in line for repayment after the operating expenses, debt service and deferred developer fees have been paid, Citv Risks and Mitiaation Measures There are two areas of risk which the Agency needs to be cognizant. On the following page these risks and measures have been identified which staff has incorporated into the transaction to reduce these risks: Risk One - No ReDavment of Aaencv Loan, The Agency will be providing $1,387,152 in the form of a 6 percent simple interest loan to the developer to assist with the development costs of the project. Repayment of the loan will be made from ninety percent (90%) of the residual receipts, which is the amount left over after ail expenses are deducted from the income received, Mitigation: The Developer and its joint venture partners have significant experience and an excellent track record with this type of development project. Risk Two - Subordination of Aaencv Loan: It is expected that the Agency loan will be subordinate to the permanent bank loan on the property, Should the developer or a subsequent owner be unable to perform under the conditions of the loan, the Agency will not be responsible for repayment of the loan. However, the Agency loan wili be in jeopardy of being repaid, Mitigation: The presence of other major financial commitments, such as the tax credit investments, means that other stakeholders depend on the short and long-term success of the project. By its nature, affordable housing presents some, but very limited market risk because of the deeply discounted rents. Finally, while the Agency is vulnerable due to its subordinate financing, it helps to attract the necessary private financing. 02-:) TH ~ - PAGE &, ITEM- MEETING DATE 01/"/00 Redevelopment AQencv Loan Terms and Conditions The Agency loan of $1 ,387,152 will be made on the following terms: 1, The loan repayment will be secured by a Deed of Trust recorded against the property, 2. The term of the loan shall be fifty two (52) years, 3. The outstanding balance shall accrue with simple interest at 6% per annum. 4. Payment of principal and interest on the Agency loan shall be made, on an annual basis, out of a fund equal to ninety percent (90%) of the "Residual Receipts", rental income from the project minus debt service and reasonabie operating expenses, 5, Developer will be required to operate the project consistent with the Regulatory Agreement covenants imposed by the Agreement. 6, Chelsea will apply for tax credits from the California Debt Limit Allocation Committee 7. Chelsea wiil provide 20% of the units (24 units) to households earning at or under 50% AMI. The remaining units (95 units) will be provided to households earning at or below 60% AMI. 8. In the event a current tenant does not meet the income requirement, that tenant will be phased out of the complex through attrition. Summarv It is staffs recommendation that the Agency adopt the resolution conditionally approving financial assistance of $1,387,152 to Chelsea for the acquisition and rehabilitation of the 119 unit Pear Tree Apartments for the foilowing reasons: . The proposal's effectiveness in serving the City's housing needs and priorities as expressed in the Housing Element of the General Plan and the HUD Consoiidated Plan, . The proposal's development and operating feasibility, financing sources and the role of the City and the Agency in providing financial assistance or incentives, . It is the intent of the City to attempt to provide affordable housing opportunities to households earning at or below 50% of AMI in order to receive future Fair Share credits. The Pear Tree acquisition project is proposed by Chelsea, a development organization committed to affordable housing, The financing structure of the project is sound. The proposed Agency assistance meets the Agency's underwriting goals of reasonable project costs and leveraging of Agency resources, The project's unit mix and affordabiiity support the Agency housing goals. If ultimately approved, the loan amount of $1 ,387,152 will be drawn from the Low/Moderate fund (current balance of $4.3 million), Since staff is not requesting an appropriation of funds at this time the only fiscal impact of approving this resolution will be staff time involved in the preparation and review of the loan agreements, staff reports and monitoring activities for program compliance. Funds for staff services are budgeted in the staff services portion of the Housing Division budget. In the event Chelsea receives an ailocation from CDLAC, staff will return to the Redevelopment Agency sometime in April 2000 to appropriate funds for the Pear Tree Manor Apartment project. 02 -C, ~ ' ~ - - - RESOLUTION NO, RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA CONDITIONALLY APPROVING FINANCIAL ASSISTANCE IN THE FORM OF A RESIDUAL RECEIPT LOAN FROM THE LOW AND MODERATE INCOME HOUSING FUND IN AN AMOUNT NOT TO EXCEED $1,387,152 TO CHELSEA INVESTMENT CORPORATION FOR THE ACQUISITION AND REHABILITATION OF PEAR TREE MANOR APARTMENTS WHEREAS, Chelsea Investment Corporation is proposing an acquisition/rehabilitation project involving a 119 unit family apartment complex known as Pear Tree Manor Apartrnents located at 1025 Broadway; and WHEREAS, Chelsea Investment Corporation ("Developer") will apply for tax credits from the California Debt Limit Allocation Committee (CDLAC) for the Project; and WHEREAS, Developer has requested financial assistance from the Redevelopment Agency ("Agency") in the form of a residual receipt loan in an amount not to exceed $1,387,152 in Low and Moderate Income Housing funds to be used for gap financing for the Project; and WHEREAS, the rehabilitation of multifamily rental units like Pear Tree Manor Apartments ("Project") is consistent with and called for by the City's General Plan Housing Element, Consolidated Plan, and California Health And Safety Code; and WHEREAS, the Agency desires to provide Developer with a residual receipt development loan in an amount not to exceed $1,387,152 to be used for gap financing for the Project and; WHEREAS, the use of said funds for the acquisition and rehabilitation of the Project complies with all applicable laws pertaining to the use of Low and Moderate Income Housing funds; and WHEREAS, the Agency provision offunds to the Project will improve the City's supply of multifamily rental housing through rehabilitation activities; and WHEREAS, the Housing Advisory Comrnission, upon hearing and considering all testimony, if any, of all persons desiring to be heard, at the meeting of December 15, 1999, approved conditionally funding the project; and WHEREAS, the loan agreement setting forth the terms for the residual receipt loan to the Project in an amount not to exceed $1,387,152 is in process of negotiation and will be brought forward for Agency consideration at a later date, NOW, THEREFORE, BE IT RESOLVED by the Redevelopment Agency of the City of Chula Vista does hereby conditionally approve a residual receipt loan in an amount not to exceed $1,387,152 from the Agency's Low and Moderate Income Housing Set-Aside fund to Developer for the acquisition and rehabilitation ofthe Project subjectto the Agency's approval of ól.-Î T' ". - an Affordable Housing Cooperation and Loan Agreement which shall include, at a minimum, the following terms and conditions: 1, The loan will be secured by a Deed of Trust and Promissory Note for the property on behalf of the Redevelopment Agency of the City of Chula Vista, 2, The term of the loan shall be for fifty-two (52) years, 3. The outstanding balance shall accrue with simple interest at 6 percent per ann urn, 4, Payment of principal and interest on the Agency loan shall be made, on an annual basis, out of a fund equal to ninety percent (90%) of the "Residual Receipts", rental income from the Project minus debt service and reasonable operating expenses, 5. Developer will be required to operate the Project consistent with the Regulatory Agreement required by the affordability and use covenants imposed by the Agreement. 6, The Agreement shall include and such additional terms and conditions consistent herewith required by the Agency. 7, Developer shall provide 20% of the units to household earning at or below 50% of the area median income, The remaining units shall be provided to households earning at or below 60% of the area median incorne, 8. In the event a current tenant does not meet the affordability requirement, said tenant shall be phased from the complex through attrition, 9. This conditional approval remains subject to final approval by the Agency in its sole discretion, Presented by Approved as to form by ~ ~ Chris Salomone Director of Community Development [Atwood] H:\HOME\COMMDEVlRESOS\Pear Tree Conditional Approval Resolution ~-y T' ". - EXHIBIT A ~ ë m ~ ê~ ~. h¡~ .~~ [ ..Q ( ) ~ ~ c: ;:, ~ 8 T' TT' - .,-