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HomeMy WebLinkAbout2009/10/27 Item 8 CHULA VISTA REDEVELOPMENT AGENCY AGENDA STATEMENT ITEM TITLE: SUBMITTED BY: REVIEWED BY: OCTOBER 27, 2009, Item '6 JOINT RESOLUTION OF THE REDEVELOPMENT AGENCY A1'\'D CITY COUNCIL OF THE CITY OF CHULA VISTA CONDITIONALLY APPROVING A LOAN FROM THE LOW A.ND MODERATE INCOME HOUSING FUl'm IN AN AMOUNT NOT-TO-EXCEED $4,000,000 AND AMENDING AN AGREEMENT TO POST SECURITY TO ALLOW THE EASTLAKE COMPANY, IN SATISFACTION OF THEIR AFFORDABLE HOUSING OBLIGATION FOR EASTLAKE III, TO PROVIDE THE CITY WITH FINANCIAL ASSISTANCE FOR THE DEVELOPMENT OF A 143-UNIT PROJECT FOR LOWER-INCOME HOUSEHOLDS, THE LAND~S II AT WINDING WALK /' DEPUTY CITY MANAGE DEVELOPMENT SERVICES DIRECTOR CITY MANAGER~ 4/STHS VOTE: YES D NO I X I SUMMARY Chelsea Investment Corporation (CIC) and Brookfield Shea have proposed the development and construction of a 143-unit affordable housing development for low income households, known as The Landings II (the "Project"), The Project is located at the northwest corner of Discovery Falls Drive and Crossroads Street within the Winding Walk master planned community and exceeds the affordable housing requirement for the community. Previously, the City approved a loan of $2.4 million from its HOME Funds and considered a $2 million contribution from The Eastlake Company ("Eastlake") in satisfaction of their affordable housing obligation for Eastlake III. With the current financial market, the funding gap for the Project has increased. To finance the Project, CIC is requesting that the Redevelopment Agency of the City of Chula Vista consider a pre-commitment of a $4 million loan from its Low and Moderate-Income Housing Fund ("Housing Fund"). Staff is also recommending that the Council amend an Agreement to Post Security to receive the $2 million contribution from EastIake. 8-1 October 27, 2009 Item Sf' Page 2 of9 ENVIRONMENT AL. REVIEW The Environmental Review Coordinator has reviewed the proposed project for compliance with the California Environmental Quality Act (CEQA) and has determined that the proposed project was adequately covered in previously adopted Final Second Tier Environmental Impact Report, EIR 01-02. Thus, no further CEQA review or documentation is necessary. RECOMMENDATION The Redevelopment Agency and the City Council adopt the resolution. BOARDS/COMMISSION RECOMMENDATION On September 30, 2009, the Housing Advisory Committee voted to recommend the conditional approval of a $4 million loan from the Agency's Low and Moderate Income Housing funds and an amendment to the Agreement to Post Security to allow The EastJake Company to assist in the financing of the Landings II. On October 6, 2009, the Chula Vista Redevelopment Advisory Corporation recommended the Redevelopment Agency conditionally approve $4 million in financial assistance from the Agency's Low and Moderate Income Housing Fund. DISCUSSION Background Brookfield Shea Otay, LLC, master developer for Otay Ranch Village 11 (aka Winding Walk), is required to provide 207 total affordable units (92 low-income and 115 moderate-income) within its Neighborhood R-19 in satisfaction of its obligations under the City's Balanced Communities Policy of the Housing Element. The Landings apartment development, located on the northeast comer of Eastlake Parkway and Discovery Falls Road, was completed by Chelsea Investment Corporation ("CIC") and provides 92 affordable rental units for lower income households. The remaining balance of the affordable housing obligation (115 units) was contemplated as affordable housing for moderate income households. Due to the current financial climate, the Project is infeasible to finance as a moderate income development. In order to satisfy the moderate income obligation and to obtain necessary financing for a project, Brookfield Shea has alternatively proposed the construction of a 143-unit rental development affordable for lower income households, known as The Landings II (the "Project"). They have again partnered with CIC to construct and operate the Project. It will be located on the adjoining lot to the 92-unit Landings I Affordable Apartments constructed and completed in November 2008. For purposes of this report Landings I will refer to the 92-unit affordable rental development and Landings II will refer to the proposed 1 43-unit development which is the subject of the requested actions. 8-2 October 27, 2009 Item g Page3of9 Table 1: Winding Walk Affordable Housing Obligation Low Income 92 Landings I Moderate Income 115 Landings II Market Rate 37 Landings fI TOTAL )39 7'- _.j) CIC is currently in the process of securing financing for the Project and has requested direct financial assistance from the Redevelopment Agency and City. The City and the Housing Authority have taken previous actions to financially support the development of the Landings II. On June 9, 2009, the City Council adopted Resolution No. 2009-132 executing a loan agreement for $2,400,000 from the City's HOME Investment Partnership Program 'for the development of the Project. The City Council and. the Housing Authority by Council Resolution 2009-131 and HA Resolution 2009-038 supported CIC's application to the California Debt Limit Allocation Committee (CD LAC) for $39 million from the 2009 state ceiling on private activity bonds for multi- family projects. Additional funding is currently needed to close the remaining financing gap for the Project. The Applicant Chelsea Investment Corporation has developed several projects in Chula Vista, primarily in eastern Chula Vista, to satisfy developer inclusionary housing requirements (Teresina Apartments, Rancho Buena Vista Apartments, Villa Serena and The Landings I). CIC has over 5,100 housing units in its portfolio. The company has a strong and experienced team of professionals. CIC has successfully managed low income housing units for over 20 years. The PropertY The Landings II development will be built within the Winding Walk master planned community (aka Otay Ranch Village 11) in eastern Chula Vista. The lower-income units will satisfy the requirements of the City's Program for the provision of affordable housing. The development will be located at the northwest corner of Discovery Falls Drive and Crossroads Street on a lot adjacent to Landings I. The Project is a continuation of design and development of the Landings I. All 143-townhome style lmits are 3- bedroom and will be aflordable to very low and low income households. Project amenities will be shared with Landings I and include a pool, spa, clubhouse, and a tot lot. The Proposal All 143 units will be rented on a rent restricted basis to households whose income is at or below 50 and 60 percent (%) of the Area Median Income as determined by U.S. Department of Housing and Urban Development (HUD). This Project will provide a balance of housing opportunities and fulfill a need in Chula Vista for large family rental 8-3 October 27, 2009 Item? Page 4 of9 housing, particularly in the neighborhoods east ofInterstate 805, as outlined in the City of Chula Vista 2005-2010 Housing Element. Income and Rent Restrictions Per Brookfield Shea's Affordable Housing Agreement for the inclusionary obligation, a minimum of 115 units must be affordable to moderate income households. Due to the financing CIC is pursuing, the Project will exceed these minimum requirements and provide 28 more units and deeper affordability (very low and low income). Table 2: Landings Affordable Units 3 Bd/2 Ba 28 50% $44,600 $1,010 $?,060 3 Bd/2 Ba 114 60% $53,500 $1,?25 $2,060 MGR 1 N/A N/A N/A N/A Total 143 ' ~' ".1" CIC proposes to maintain the income and rent restnctlOns for The Landings II for a period not less than fifty-five years, exceeding the 30-year term required by the Bond tinancing and the Winding Walk SPA Affordable Housing Program. The income and rent restrictions outlined above are to be incorporated into the Regulatory Agreement for the Redevelopment Agency Loan, which will be recorded against the property. Compliance with the income and rent restrictions will be subject annually to a regulatory audit and annual tiLX credit certification. CIC will maintain strict property management policies and procedures to ensure that income and rent restrictions will be maintained for the full 55-year compliance period, and will bind all subsequent owners of The Landings II, so that the commitment remains in force regardless of ownership. Proposed Financin2 ofProiect Financing and development of The Landings II is proposed as a Jomt private-public partnership. CIC will be using Tax Exempt Multi-Family Revenue Bonds and Low Income Housing Tax Credit financing to support the majority of the estimated $50,327,730 ($351,940 per unit) cost of constructing the Project (see Attachment 2). The Housing Authority of the City of Chula Vista expressed its intent to issue up to $39 million in private placement bonds, which is the projected maximum construction loan. The permanent bond loan is estimated at approximately $15.7 million. eIC has prepared an application for Bonds to be submitted in October 2009. Chelsea Investment Corporation will then be eligible to apply for approximately $15.3 million in Low Income Housing Tax Credits. The permanent bonds and Tax Credits would cover over 53 percent of the estimated cost. 8-4 October 27, 2009 [tem~ Page 5 of9 With rents restricted at very low and low income levels, the net operating income is insut1icient to support a loan large enough to cover all the Project costs. Under the current market, loan financing is extremely limited, if even available, for larger loans. Therefore, the Project has a tinancing gap of approximately $12.1 million. It is proposed that the remaining tinancing gap will be met by a combination of a contribution from the master developer/contractor ($2,600,000), a deferral of crc's fee for the project ($ 1 ,085,51 0), and City and Agency assistance. The City and crc have already executed a loan for $2,400,000 from the City's HOME funds. To further close the gap, C]C has reqnested direct financial assistance of $4 million from the Redevelopment Agency and directing a $2,000,000 contribution from The Eastlake Company to the Project. City and Agency AssisTance The City previously approved tinancial-assistance in the form of a $2.4 million loan from its HOME funds_ Principal and the three percent (3%) simple interest on the loan will be amortized over tifty-five years and repaid in annual installments from any cash surplus. Since approval of the City loan, C]C has requested additional financial assistance from the Redevelopment Agency. The current recessionary circumstances along with a tightening of capital for construction and permanent financing and tax credit equity have necessitated adjustments to the financing structure for the Project. Therefore, crc's previous assumptions for loan financing and Tax Credits have been reduced and a larger tinancing gap remains. With limited sources for tinancing the Project, crc has requested that the Redevelopment Agency provide a loan of $4 million to the Project. ]n general, the first priority for the Redevelopment Agency is to provide tinancial assistance to those residential projects located within the Redevelopment Project Area. Given its requirements under State Redevelopment law to ensure that 15 percent of all newly constructed residential units are affordable to low and moderate income households, referred to as the Agency's rnclusionary Housing obligation, the Agency must leverage, to the greatest extent feasible, its resources. The Agency may provide assistance to projects outside of the area. However, the Agency only receives a one (1) unit credit for every two (2) units located outside of the Project Area. Therefore, the Agency's participation in the Landings [] project will provide a credit of 71 units towards the Agency's obligation and equates to $56,338 for each affordable unit. With few properties within the Redevelopment Project Areas zoned for residential use, limited opportunities exist to produce housing. Multifamily housing that could be rehabilitated to revitalize the area and offer affordable housing are outside of the project areas. New opportunities for residential development are primarily available through mixed used development pennitted within the major commercial corridors of the Project Areas. 8-5 October 27,2009 Item-L Page 60f9 The Agency has seen the development of only a few affordable housing communities within its Project Areas. With smaller lot sizes and limited opportunities, projects have been smaller in scale and required significant subsidies. Table 3: Affordable Housing in Redevelopment Project Areas Trollev Terrace Trollev Trestle Brisa del Mar Seniors on Broadwav Los Vecinos HOME HOME & Redev Hsg Redev Hsa Redev Hsz Redev Hs 896.905 551.020 1,500.000 3,511.195 5.680.000 The last affordable housing development completed in the Project Area was Los Vecinos Apartments, which opened in May 2009. This project received a $5,680,000 in financial assistance from the Housing Funds and equated to a subsidy of $135,238 per unit. While the Agency would receive only half credit for The Landings II development, the Agency receives significant benefit from this type of larger scale development opportunity. Even at half credit, the proposed 143 units become 71 units of credit far greater than the typical development seen in the Project Area. Use of the Housing Funds for this project is cost effective, with a lower level of subsidy than the most recent developments and assists the Agency in meeting the proportionality requirements for spending of its Housing funds towards very low and low income family households. Lastly, there is no other affordable housing proposed or anticipated for the near future within the Project area or outside. The Landings II represents a present opportunity to increase the City's affordable housing stock for very low and low income households, particularly in the eastern area of the community. The Landings II has received all necessary entitlements and the majority of financing is in process. It is anticipated that the current economic conditions will continue for the next 12 to 18 months. Financing of residential projects will, therefore, continue to be difficult to obtain with limited, if any, opportunities to provide new affordable housing units citywide. . As specified in the City's Housing Element, the Regional Housing Needs Assessment estimates a total need of 6,549 new housing units for very low and low-income households. By using City and Agency funds to assist these lower income households, the City and Agency are able to make progress towards its Housing Element goals and Redevelopment Inclusionary/Funding obligations. Staff is recommending total financial assistance of $6.4 million, including the $2.4 million already approved by the City and the $4 million from the Agency. The City and Agency funding would leverage $1 of our resources to $8 in private investment. The Project would be able to serve 28 very low income and 114 low income households in. excess of the affordability requirements of State Redevelopment law and Brookfield Shea's obligations. 8-6 October 27, 2009 Item-L Page 7 of9 Form of Redevelopment Agency Assistance - Low ivlod Income Housing Funds The proposed Agency loan of $4 million from its Low and Moderate Income Housing fund will assist in providing a total of 28 units for very low income households and 114 units for low income. The loan is considered to be permanent financing for the project, with a below market interest rate. It will be secured by a note and deed of trust recorded against the property: " The required loan documents will be presented to the AgencY for approval at such time 11nal approval of the issuance of the bonds and the related bond/loan documents are requested. Staff proposes two percent (2%) simple interest on the loan with principal and interest amortized over a 20-year period. Payments on the loan would be in equal consecutive monthly installments. Monthly payments are estimated at $20,235. Repayment is expected to be made in full by 2029. The Housing Fund" will to be able to sustain the proposed $4,000;000 loan to Cle. The nature of providing assistance to the deveiopment of affordable housing projects is cyclical. Normally, Housing Fund Reserves are accumulated over a period of years in order to build up sufficient reserves to provide assistance to developers of affordable housing projects. The Agency currently has available approximately $9 million to assist in the development of affordable housing opportunities. While the development and its financing is being considered now, disbursement of the loan proceeds will occur at conversion of the construction loan to permanent financing anticipated in FY 2011-12. Based upon estimated projections of revenue and expenditures, including the proposed loan for the Landings II, the ending fund balance for FY 20] 1-12 is projected at $8.6 million. The Agency will see repayment of the CIC loan beginning in FY 2012-13 and will be considered additional revenue. Based upon the timing of the disbursement of the loan and anticipated loan repayments, there remains a significant fund balance each fiscal year to consider additional affordable housing proposals (see Table 4 below). The current state of lending and equity markets is making underwriting residential development deals much more difficult. No other affordable housing developments have been proposed to staff at this time. Staff does not foresee any tangible deals closing in the next 12-18 months. Given the timing of the disbursement of the .loan and few development opportunities, the Agency will have additional time to accumulate sufficient reserves for any future opportunities. Affordahle Rousing Credits With an obligation to provide only 115 moderate income units, The Landings II will provide a surplus of 28 units. These surplus units could be used as a potential source of additional funding by making these surplus units available as "affordable housing credits". Other developers could provide financial assistance in exchange for the use of such credits to satisfy their respective affordable housing obligations. 8-7 October 27, 2009 Item~ Page 80f9 The Amendment The Eastlake Company (Eastlake) entered into an agreement with the City to provide 25 additional low income affordable units as a result of a 494 residential unit increase from the 2006 SPA plan amendment. Since Eastlake no longer owns residential land to provide these affordable units, the agreement offers alternative options to provide off-site affordable units in eastern Chula Vista. Eastlake has expressed their willingness to provide the remaining $2 million financing gap for The Landings II in exchange for receiving the affordable housing credits towards their own obligation. The use of the credits would complete the financing necessary for The Landings II and provide Eastlake with a flexible option for meeting their obligations. Staff is recommending an amendment to the Agreement to Post Security to allow The Eastlake Company to provide a financial contribution to the City for the Project. The proposed amendment would require Eastlake to pay the City $2 million and would provide Eastlake \vith 25 low- income housing credits, which Eastlake could use to meet its .current or future affordable housing obligations, or transfer to another entity, to satisfy that entity's affordable housing obligation within the City. If Eastlake chooses to transfer the credits, the City would be required to approve the transfer. The approval could not be umeasonably withheld and would require a finding that the transfer was in the public's interest. DECISION MAKER CONFLICT Staff has reviewed the property holdings of the City Council and Redevelopment Agency Members and has found no property holdings within 500 feet of the boundaries of the property which is the subject of this action. CURRENT YEAR FISCAL IMPACT The loan amount of $4,000,000 is available from the Redevelopment Agency's Low and Moderate Income Housing funds. The loan proceeds will be used for costs related to the development of the Landings. The required loan documents and appropriation of the funds will be presented to the Agency for approval at such time final approval of the issuance of the bonds and the related bond/loan documents are requested, anticipated in February 2010. The current fund balance available for affordable housing opportunities is approximately $10 million. A $2.9 million Low & Mod Set Aside Loan of the Redevelopment Agency may be necessary to make the Agency's payment on the Supplemental Educational Revenue Augmentation Funds (SERAF). Proposed legislation would give the Redevelopment Agency authority to borrow $1.2 million more from the Low and Moderate Income Fund to make the full $4.1 million SERAF payment. Even after these loans, there is still sufficient fund balance to carry out affordable housing projects considering net annual revenue will increase the fund balance. 8-8 October 27,2009 Item-L Page90f9 Table 4: Redevelopment Housing Fund Beginning Fund Balance $10,226,942 $ 9,133,454 $10,394,976 $8,612,608 $12,130,293 Gross Housing Set-Aside 2,750,512 2,805,522 2,861,632 2,918,865 2,977,242 Landings Debt Service 242,820 242,820 ERAF Repayment 1,000,000 1,500,000 Total Projected Resources $12,977,454 511,938,976 $13,256,608 $12,774293 $16,850,355 A vg. Administrative Expenditures 638,000 638,000 638,000 638,000 638,000 Other Operating Expenditures 6,000 6,000 6,000 6,000 6,000 Potentia] ERAF Loan 3,200,000 900,000 Landings II Loan 4,000,000 Total Projected Expenditures 5 3,844,000 5 1,544,000 S 4,644,000 5 644,000 5 644,000 Projecred Ending Fund Balance $ 9,133,454 $] 0,394,976 5 8,6]2,608 $12,]30,293 $16,206,355 The project will pay all associated development and processing fees to the City as such fees are required, This is estimated to be over $4,000,000, ONGOlNG FISCAL IMPACT CIC will make monthly payments on the Agency Loan, Monthly loan payments are estimated at approximately $20,235, Any repayment of principal and interest shall be made available for the development of future affordable housing opportunities, It is anticipated in FY 2010-11, the Redevelopment Agency may need to borrow part of the 20% set-aside allocation to its Low and Moderate Income Housing Fund (I-lousing Fund) in order to make the FY 201 lSERAF payment of approximately $900,000 to the State, Funds will be available to carry out future affordable housing activities with existing fund balance and repayment of the CIC loan and RDA loans, ATTACHMENTS L Locator Map 2, Summary of Sources and Uses Prepared by: Leilani Hines, Principal Project Coordinator, Development Services Department 8-9 Locator Map Attachment 1 The Landings II at Winding Walk 8-10 BIRCHR " 5 C o , E R " The Landings I & II 2122 Burdock Way The Landings II at Winding Walk PROFORMA SUBSIDY ANALYSIS Cost Funds Project Cost Financing Gap land Purchase Construction Contingency Perm its & Fees Interest/Fees, Financing Costs Design/Engi neeri ng Developer Fees Reserves, Legal, Other Sources of Funds Tax Credit Equity Tax Exempt Bonds-Permanent Loan Subordinate Bond Subtotal $ 50,327,727 Subsidies $280,000 $36,464,932 $1,283,000 $5,375,391 $2,552,701 $350,000 $2,500,000 $1,521,703 City Loan City (Eastlake Co ~ Aft Hsg Credits) RDA Loan Developer Contribution (Shea) Deferred Developer Fee TOTAL $ 50,327,727 $ Cost per Unit @ 143 Units City HOME Subsidy per Unit @ 11 Units RDA Subsidy per Unit@ 142 City HOME Leveraging RDA Leveraging TOTAL City/RDA Leveraging 8-11 $15,426,000 $11,416,217 $11,400,000 $ 38,242,217 $ $2,400,000 $2,000,000 $4,000,000 $2,600,000 $1,085,510 50,327,727 $ 12,085,510 $ $ $ 351,942 218,182 28,169 $1 to $21 $ 1 to $13 $1 to $ 8 RESOLUTION NO. 2009- (COUNCIL RESOLUTION NO. 2009---.J JOINT RESOLUTION OF THE REDEVELOPMENT AGENCY AND CITY COUNCIL OF THE CITY OF CHULA VISTA CONDlTIONALL Y APPROVING A LOAN FROM THE LOW AND MODERA.TE INCOME HOUSING FUND IN AN AMOUNT NOT- TO-EXCEED $4,000,000 AND AMENDING AN AGREEMENT TO POST SECURITY TO ALLOW THE EAST LAKE COMPANY, IN SATISFACTION OF THEIR AFFORDABLE HOUSING OBLIGATION FOR EAST LAKE lil, TO PROVIDE THE CITY WITH FINANCIAL ASSISTANCE FOR THE DEVELOPMENT OF A 143-UNIT PROJECT FOR LOWER-INCOME HOUSEHOLDS, THE LANDINGS II AT WINDING WALK WHEREAS, California Health and Safety Code Sections 33334.2 and 33334.6 authorize and direct the Redevelopment Agency of the City of Chula Vista (the "Agency") to expend a certain percentage of all taxes which are aIlocaied to the Agency pursuant to Section 33670 for the purposes of increasing, improving and preserving the community's supply of low and moderate income housing available at affordable housing cost to persons and families of low- and moderate-income, lower income, and very low income; and - WHEREAS; pursuant to applicable law'the Agency has established a Low and Moderate , Income Housing Fund (the "Housing Fund"); and ' WHEREAS, pursuant to Health and Safety Code Section 33334.2(e), in carrying out its affordable housing activities, the Agency is authorized to provide subsidies to or for the benefit of very low income and lower income households, or persons and families of low or moderate income, to the extent those households cannot obtain housing at affordable costs on the open market, and to provide financial assistance for the construction and rehabilitation of housing which will be made available at an affordable housing cost to such persons; and WHEREAS, pursuant to Section 334IJ(b), the Agency is required to ensure that at least 15 percent of all new and substantiaIiy rehabilitated dwelling units developed within a Project area under the jurisdiction of the Agency by private or public entities or persons other than the Agency shall be available at affordable ho~sing._~ost.!o ,persons and families of low or moderate income; and '., , WHEREAS, Chelsea Investment Corporation (the "Developer," or "CIC") proposes to construct a 143-unit multifamily rental development, with units affordable to very low households at 50 percent of the Area Median Income (AMI) and to low households at 60 percent " of the Area Median Income (AMI) within the Winding Walk master planned community on a vacant site (Lot I of Map No. 15479) located east of Eastlake Parkway south of Birch Road and north of Crossroads Street in the City of ChuIa Vista ("Project," or "Landings II"); and 8-12 RDA Resolution No. 2009- Page 2 WHEREAS, crc contemplates a total project budget of approximately $50,327,730 for the Project and intends to finance The Landings II using: (i) a construction and permanent loan tinancing funded by the issuance of Bonds by the Chula Vista Housing Authority; (ii) four percent (4%) tax credit equity (the "Tax Credits"); (iii) master developer land/contractor fees; (iv) deferred developer fee; and, (v) a City Loan. WHEREAS, financing in the total amount of$6 million is still necessary in order to make the Project feasible; and WHEREAS, the Agency has determined, based on the evaluation of the development budget, 55-year operating pro forma, sources and uses for the Project, that additional financing is appropriate and necessary in order to make the Project feasible; and WHEREAS, the Agency wishes to provide Developer with a loan of four million dollars ($4,000,000) from its Housing Fund to assist with the financing gap for the construction of the Project; and WHEREAS, in order to carry out and implement the Redevelopment Plan for the Agency's redevelopment projects and the affordable housing requirements and goals thereof, the Agency proposes to enter into a Loan Agreement (tlie "Loan Agreement") with the Developer, pursuant to which the Agency would make a loan to the Developer (the "AgenciLoan"), and the' Developer would agree to develop all of the apartment units in the Project for occupancy of very low and lower income households and reni those units at an. affordable housing cost; and WHEREAS, the Agency Loan Agreement will \e;"erage the investment of the Agency by requiring the Developer to obtain additional financing for the construction and operation of the Project through such resources as Multifamily Housing Revenue Bonds and "3% Tax Credits" to be generated by the Project; and WHEREAS, in accordance with California Health and Safety Code Section 33334.2 (g), staff is recommending that the Agency find and determine that even though the Project is to be located outside the City's redevelopment project areas, those areas will benefit through the creation of jobs in the project area and elsewhere in the City by providing housing for persons who work within the City's redevelopment project areas, and through the policies served by dispersing affordable housing throughout the jurisdiction rather than clustering it all in one area; and WHEREAS, the Agency has adopted an Implementation Plan pursuant to Health and Safety Code Section 33490, which sets forth the objective of providing housing to satisfy the needs and desires of various age, income and ethnic groups of the community; and WHEREAS, on April 8, 2008, the City Council approved execution of an "Agreement to Post Security for Affordable Housing Obligation" (the "Agreement") wherein the parties to the Agreement acknowledged and agreed to the requirement of twenty-five (25) low income housing units (the "Housing Obligation") as a result of the development of an 18.4 acre parcel within Eastlake III as a 494-unit senior housing complex ("Seniors Project") and The Eastlake 8-13 RDA Resolution No, 2009- Page 3 Company ("Eastlake") agreed to post a bond for the benefit of the City to secure satisfaction of , the Housing Obligation prior to issuance of any building permits for the Seniors Project; and WHEREAS, Section I of the Agreement specifies that Eastlake may construct the Housing Obligation on another site within the City, subject to the City's approval, or pay to the City an amount of $3, I 05,500 in lieu of constructing the Housing Obligation; and WHEREAS, the Project will provide 28 units of low income housing, in excess of the required liS-unit moderate-income housing obligation; and WHEREAS, Eastlake wishes to provide the City $2 million to assist with the financing gap, for the construction of the residential, units of the Project in satisfaction of its Housi[\g Obligation as a result of the Seniors Project; and WHEREAS, the parties to the Agreement desire fo amend the Agreement to secure satisfaction of the 25-Unit Housing Obligation and to facilitate development of the Project; and WHEREAS, the proposed amendment would, among other things: (i) require Eastlake to pay the City $2 million; (ii) provide Eastlake with 25 low-income housing credits, which Eastlake could use to meet its current or future affordable housing obligations, or transfer to another entity, to satisfy that entity's affordable housing obligation within the City; and (iii) allow Eastlake to transfer the credits, subject to the CitY's approval; the City's approval of such a transfer would require a finding that the transfer was in the public's interest; and WHEREAS, the City has adopted a Housing Element of the General Plan which sets forth the objective of providing balanced and varied housing opportunities throughout the City to , satisfy the needs and desires of various age, income and ethnic groups of thc community, and which specifically provides for the construction of new affordable rental housing units through City assistance; and WHEREAS, on the 30th day of September, 2009, the City's I-lousing Advisory Commission, held a public meeting to consider said request for financial assistance; and WHEREAS, the Housing Advisory Commission, upon hearing and considering all testimony, if any, of all persons desiring to be heard, and considering all factors relating to the requ~st for the Agency Loan, has recommended to th'e Agency that a loan be approved and the Agreement be amended to allow a contribution from The Eastlake Company on the condition that all other necessary financing be secured for the Project; and WHEREAS, on the 8th day of October, 2009, the Chula Vista Redevelopment Corporation (CYRC), held a public meeting to consider said request for an Agency Loan; and WHEREAS, the CYRC, upon hearing and considering all testimony, if any, of all persons desiring to be heard, and considering all factors relating to the request for an Agency Loan has recommended to the Agency that the loan be conditionally approved subject to the Ao'ency's approval of an affordable housiIlg regulatory and'loan agreement; and e> _~.~__: . ".. 8-14 RDA Resolution No. 2009- Page 4 WHEREAS, the Environmental Review Coordinator reviewed the proposed Project for compliance with the California Environmental Quality Act (CEQA) and has determined that the proposed project was adequately covered in previously adopted Final Second Tier Environmental Impact Report, EIR 01-02. Thus, no further CEQA review or documentation is necessary. NOW, THEREFORE, THE REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA does hereby conditionally approve a loan in an amount not-to-exceed $4,000,000 from the Agency's Low and Moderate Income Housing Fund to Developer for the construction of the Project subject to the Agency's approval of an affordable housing regulatory and loan agreement -and, at a minimum, the following terms and conditions: 1. Developer shall secure all other financing necessary for the acquisition and development of the Project. 2. Developer shall enter into a regulatory and loan agreement with the Agency to be considered at a later date by the Redevelopment Agency. The approval of this agreement remains subject to final approval by the Redevelopment Agency which retains its sole and unfettered discretion as to that decision. 3. The loan repayment 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 and recorded against the Project property. 4. The term of the loan shall be twenty-five (25) years at 1 % simple interest. 5. Developer will be required to operate the Project consistent with the Regulatory Agreement required by the Project's tax credit financing, and the Agency's Low/Mod financing, the covenants imposed by these Agreements, and any other Project requirements. 6. The Agency Loan is based upon the assumptions presented within the sources and uses of funds, development budget, development proforma and other information tiled with the Affordable Housing Review Application for the Project as submitted and reviewed by the Development Services Department. The Agency assistance is a maximum level of participation. It is expected that any substantive revisions in such financing assumptions which would lead to an increase in other resources available, would therefore reduce the . level of the Agency Loan. 8-15 RDA Resolution No. 2009- Page 5 BE IT FURTHER RESOLVED THAT THE CITY COUNCIL OF THE CITY OF CHULA VISTA, approves the "First Amendment to the Agreement to Post Security for Affordable Housing Obligation," a copy of which is on file in the Office of the City Clerk. Gary Halbert, AICP, PE Deputy City ManagerIDirector of Development Services Presented by 8-16 THE ATTACHED AGREEMENT HAS BEEN REVIEWED AND APPROVED AS TO FORM BY THE CITY A TTORNEY'S OFFICE AND WILL BE FORMALLY SIGNED UPON APPROVAL BY HE CITY C UNCIL Z ~ / ,", J~ H,~"~ Bart C. lVliesfeld City Attorney { Dated: 10/22-/09 I I AMENDMENT TO AGREEMENT TO POST SECURITY FOR AFFORDABLE HOUSING BETWEEN THE CITY OF CHULA VISTA AND THE EASTLAKE COl\lIPANY, LLC 8-17 AMENDMENT TO AGREI~MENT TO POST SECURITY FOR AFFORDABLE HOUSING This First Amendment to the "Agreement To Post Security For Affordable Housing Obligation" (the "First Amendment") is entered into by and between the City of Chula Vista, a California municipal corporation and charter city (the "City"), The EastLake Company, LLC, a California limited liability company, as successor-in-interest to EastLake Development Company, a California general partnership ("EastLake") and PRII Windstar Pointe Master, LLC, a Delaware limited liability company ("Windstar") and/or its successors or assignees (these entities may be referred to, collectively, as the "Parties," or each individually, as a "Party"). This First Amendment shall be effective as of the date last signed by the Parties (the "Effective Date") and is entered into with respect to the following recited facts:. RECITALS A. WHEREAS, on April 8, 2008, the City Council approved execution of an Agreement to Post Security for Affordable Housing Obligation (the "Agreement") between the Parties wherein, Parties acknowledged and agreed to the requirement of twenty-five (25) low income housing units (the "Housing Obligation") as a result of the development of an ] 8.4 acre parcel within Eastlake III as a 494-unit senior.housing complex ("Seniors Project") and Eastlake . agreed to post a bond for the benefit of the City to secure satisfaction of the Housing Obligation prior to issuance of any building permits for the Seniors Project. B. WHEREAS, Section I of the Agreement specifies that Eastlake may construct the Housing Obligation on another site within the City, subject to the City's approval, or pay to the City an amount of $3, I 05,500 in lieu of constructing the Housing Obligation. C. WHEREAS, on August 1,2005, the Design Review Committee (DRC) reviewed and approved proposed site plans and architectural elevations for the development of a total of 239 units for Neighborhood R-19 (Lots I and 2 of Map No.15479), known as The Landings, within thc Winding Walk master planned community to satisfy the 92-unit low- and ll5-unit moderate-income housing obligations of the community. Chelsea Investment Corporation (CrC) has completed the construction of 92 low income units of The Landings on Lot 2 of Map No. 15479 to satisfy the low incomc housing obligations of the Winding Walk master planned community. D. WHEREAS, CIC is now proposing the second phase of The Landings consisting of a 143 unit multifamily rental development, with units atTordable to very low-income households at 50 percent of the Area Median Income (AMI) and to low-income households at 60 percent of the Area Median Income (AMI) (The Landings II) on a vacant site (Lot I of Map No. 15479) located east of Eastlake Parkway south of Birch Road and north of Crossroads Street in the City of Chula Vista ("Project") in satisfaction of the remaining 115 unit moderate income housing obligation. The Project will provide 28 units of low income housing, in excess of the required 115-unit moderate-income housing obligation. E. million for WHEREAS, crc contemplates a total project the Project and intends to finance The Landings budget of approximately $49.3 II using: (i) a construction and 8-18 permanent loan financing funded by the Chula Vista Housing Authority (ii) four percent (4%) tax credit equity (the "Tax Credits"); (iv) deferral of one million Two Hundred Seventy Six Thousand and Noll 00 Dollars ($1,276,000.00) of the developer fee (the "Deferred Developer Fee"); (v) a City Loan; and, (vi) a Chula Vista Redevelopment Agency Loan. F. WHEREAS, on February 3, 2009, the City adopted Resolution 2009-019 approving a $2.4 million loan and on May 12, 2009, the Housing Authority adopted Resolution 2009-039 expressing its intent to issue an aggregate principal amount not to exceed $42 million of tax exempt bonds for the development of The Landings II. G. WHEREAS, additional financing in the amount of $2 million is necessary In order to make the Project feasible; and H. WHEREAS, Eastlake wishes to provide the City $2 million to assist with the financing gap for the construction of the residential units of the Project in satisfaction of its Housing Obligation as a result of the Seniors Project. 1. WHEREAS, the Parties to this First Amendment desire to enter into this First Amendment to the Agreement as hereinafter provided to secure satisfaction of the 25-Unit Requirement and to facilitate development of the Project. J. WHEREAS, the City Council has found that this First Amendment is consistent with the City's Housing Element and all other applicable policies and regulations of the City. NOW, THEREFORE, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereto hereby agree to a First Amendment to the Agreement to Post Security for Affordable Housing Obligation, which shall amend the Agreement as follows: I. Incorporation of Recitals. The foregoing Recitals are incorporated in this First Amendment and made a part hereof by this reference to the same extent as if set forth herein in full. 2. Amendments. (a) Section 1.1 of the Agreement is deleted in its entirety and replaced with the following: ADD: 1.1 Housing Obligation. The Parties acknowledge and agree that 'the affordable housing requirement associated with the Winds tar Project is the construction of25 Low Income housing Units (the "Housing Obligation"). (b) Section 1.2 of the Agreement is deleted in its entirety and replaced with the following: 8-19 ADD: 1.2 Satisfaction of Housing Obligation. a. Low Income I-lousing Credits. Development of The Landings II, consisting of a 143 unit multifamily rental development, in satisfaction of the remaining lIS-unit moderate income housing obligation of the Winding Walk master planned community will create 28 units of low incomc housing, in excess of the required obligation (the "Low Incomc Housing Credits"). Parties agree to Eastlake's acquisition of 2S of the Low Income Housing Credits in accordance with the terms and conditions set forth herein. b. Payment for Low Income Housing Credits. Eastlake shall pay to City a total of $2 million for the ownership, transfer and use of twenty-five Low Income Housing Credits. c. Ownership, Transfer and Use of Low Income Housing Credits. Eastlake shall own and control the Low Income Housing Credits, to use in satisfaction of the Obligation, as identified in this Agreement. City accepts and acknowledges each Low Income Housing Credit as the cquivalent of providing one unit of low incomc housing in the City. If after Eastlake executes this Agreement and satisfies its obligations under the Agreement, Eastlake's Housing Obligation decreases as a result of the approval and construction of less than the 494-units associated with the Seniors Project, Eastlake may: 1) apply any remaining Low Income Housing Credit against any future obligation to provide low and/or moderate income housing units as a result of a residential project developed, constructed or owned by Eastlake; or 2) convey the credit to another person or entity to be used by that other person or entity against its obligation to provide low and/or moderate income housing units in the City of Chula Vista, subject to the approval of the City, whose approval shall not be unreasonably withheld. The City will advise all future applicants of a project with an affordable housing obligation of the availability of these credits. . d. Schedule. Parties agrec to the following schedule for satisfying the Eastlake Housing Obligation: 1. .Priorto Janu~~y 1,2010, Eastlake shall: I) Deposit with the City . .. $ I million, and 2) Post a Bond in the amount of $1 million. 2. Prior to the issuance of the building permit for the 100th residential unit for The Landings II, Eastlake shall deposit with the City the remaining balance of One Million and 00/1 00 dollars. City shall immediately release the Bond upon satisfactory payment of the one million dollar balance. 8-20 (c) Section 2 of the Agreement is deleted in its entirety and replaced with the following: ADD: 2. BONDED SECURITY. 2.1 In order to secure satisfaction of the Housing Obligation, Eastlake agrees to post a Bond for the benefit of the City. The Bond is to be posted in accordance with the schedule outlined in Subsection 1.2.d. of this Agreement. The terms of the Bond shall include the following and in a form satisfactory to the City Attorney's Office: a. The Bond shall be in the amount of One Million and 00/100 dollars, as set forth in Section 1.2.d.l; b. The Bond shall be for a term of two years; c. The Bond shall be released only upon payment of One Million and DOll 00 dollars, as set forth in Section 1.2.d.2; d. The Bond shall provide for immediate payment of the Bond proceeds to the City if: (i) Eastlake does not satisfy the Bond conditions within the schedule set forth in 1.2.d., above; or (ii) the Low Income Housing Credits are not produced and available from The Landings II by December 31, 20 II, which ever occurs first. Furthermore, if Eastlake does not satisfy its obligations under this Agreement, as amended, prior to expiration of the bond, the bond shall either be replaced with a substitute bond ina form acceptable to the City, or the bond proceeds shall be paid to the City, at the City's discretion; e. The Bond surety shall be subject to approval by City; f. The Bond shall additionally secure costs and reasonable expenses and fees, including attorneys' fees, which may be incurred by the City in enforcing the Bond obligation; and g. The Bond shall comply with all other bonding requirements of the City in effect at the time the Bond is issued. 2.2. The City -agrees to process building permit applications for the Windstar Project once the cash payment and Bond is posted with the City. The City has the absolute and unfettered right to withhold the issuance of any building permits for any residential unit within the Seniors Project if Eastlake is not in compliance with the terms and/or obligations of this Agreement. 8-21 (d) Windstar as follows: Section 3.3.2 of the Agreement IS amended to revIse the address for To Windstar: PRIl Windstar Pointe Master LLC c/o Prudential Investment Management 4 Embarcadero Center, Suite 2700 San Francisco, CA 94111 Attn: Timothy F. Hennessey 3. Earlv Termination. This Amendment shall automatically terminate in the event Eastlake does not acquire the Low Income Housing Credits for its use in satisfYing its Housing Obligation in the manner set forth in this Agreement In such event, Eastlake shall fulfill its Housing Obligation in accordance with the Agreement, as it existed prior to this Amendment. 4. No Other Changes. This Amendment changes only those sections of the Agreement specifically identified in Sections I through 2, above. No othcr changes to the Agrecment are contemplated or intended by this Amendment. The balance of the Agreement shall remain unchanged and in full force and effect. 5. Capacity of Parties. Each signatory and Party to this Amendment warrants and represents to the other Parties that it has legal authority, capacity and direction from its principal to enter into this Amendment, and that all resolutions or other actions have been taken so as to enable it to enter into this Amendment. [SIGNATURE PAGE TO FOLLOW] 8-22 SIGNATURE PAGE TO FIRST AMENDMENT TO AGREEMENT TO POST SECURITY FOR AFFORDABLE HOUSING OBLIGATION The Parties have signed this Amendment by and through the signatures of their authorized representatives, as set forth below: CITY The EastLake CITY OF CHULA VISTA, a California municipal corporation and charter city Cheryl Cox, Mayor THE EASTLA MPANY, LLC, Californif Ii it i, ity c/~, ' By: /" " Wilham T. strel, esident/CEO R'~~L~/ De i Roth-Klingner Ice PreSident /0////61 a By: Dated: Dated: ATTEST: WINDST AR 'PRIl WTNDST AR POINTE MASTER LLC a Delaware limited liability company City Clerk APPROVED AS TO FORM: By: Windstar Pointe LLC a California limited liability company Its Manager By: Windstar Communities LLC a California limited liability company Its Manager City Attorney By: Name: Title: Dated: 8-23 10/22/2009 07.40 FAX SIGNA PAGE AGREEMENT T FIRST AM"E ME."H TO POST SECURITY FOR rrORDABLE HOUSING OBLIGA nON ed this Amendment by Jn~ through the signal1!res of their au~\lOrizcd forth below: I I EASTLAK,E I . I TIlE EASTLAKE COMPANY, LLC. . I CEllifornia limited liability company I I Jay: [ , i [Datod: i ! Wl~DSTAR I ! PRU WINDSTAR rOINTE MASTER U.C I.' a Delaware limited liabilily complmY ,By: Wino..tar Poi-ute:: LLC I a California limited liabiliry company f llSMa.nager , ! By: Windstar Cornm\lnitie:s LLC I a California limited liabUit}' company I~k. I e: ~ RkIlAM}"l_ IT;Ue;~. , ~I D.t<d: I tit y" 'j I (' I , I I I I i CITY William T. Ostrem, Prt:llidcnt/CEO The parti es have:: gj' representatives, as ~ . CITY OF CHULA Vt corporation and charter: By: Jo'lmes D. Sand I~ City Mmagcr Datod: ATTEST: City Clerk APPROVED AS TO f . Ciry Attorney 8-24 141002/002 '", ,f. .,~..~ >;. !t~"'.~:'?'~ .. ".' ~;'. \:., .. :,' ,.:;:"., ,'.~.;" ..:=.... ,,' , ."', ..... ;." '.<~<.:'it:. ~:~ , ,',.. ...,.'. . .". ,,"', ,'):;~"~VL<;';~ ,...:...i.'....,. . . ~. :.~~:..:t ~;:~:tf.;.~"~r~; ...., .,~..:.:,:.;:!;ii,ii:I";,~;~ ..~\~.:; ;.. .'-' :,:'. ",:. ' .... ~, :.' ~. "'..r ; .: ~ ~ '.' :"'. "',;, . . '.~ '''''';'. ".::'.;;j.;.: .. .' ,. .' ".:.>. .' :~..'.;.~~.: ~'j\... '.' ,;.::', ~ .,.... ::::.'.;.\~ :. Lr":":'~(~. .~;:~~. . . .~' .~ ~~:~ ?.)I~:):'\L: " " .. . .'f.'" ~ ..' " ;:: ~ ';: " ' '. ~. '.:~ '. : '':' ,,~-... . ........ .".- '," ..':. ",.,' .;..... .'. -::<<~" '..",; ;f~ ~;.~ . ....~ ~':~}: :'>: . . .....~ ".: . ~-. ~;\. ':.,.,',.....,.. .~ .~<: ;.~: ',' ,". .::,' ""'.' . ,..~. , ". . ...~, .,.,>.... '. "';", ,., . ,.'. '. ~ '. ~ .... ,..;.. :;"i ':".~ ; ..,,.. ....., .. '. :," .. ................ .f[i~j~tf!l~~ .......... . ..>;.~~~~ '';-.' ",;, .....".,. .... "...-,. ',,,':" :.." '..... .:.," ":":Y~~'.~W:'.~< ".' <.,. ~ c.;'.' '. 'I:: .'. . ~.' .. . ..:i,:::,~::,}t:;:{(;;~ . " ',,\ " STATE OF Ca..-~'V1~ COUNTY OF ;l ~ ) ) ) ss: On ncLJvA ~, 202l-.before me, ):d{}'1Ub~ L. lYt{i..~ . ' notary public, personally appeared ~ 1_ ' 1-1---. ct.. /.y -+-e.: - 0 , who proved to me on the basis of satisfactory evidence to be the perso~ose nam ~ S@ subscribed to the within instrument and acknowledged to me that he/she~xecuted the same in his/her/@authorized capacit~ and that by his/her~signatur~on the instrument the perso~ or the entity upon behalf of which the perso@acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. @'SllVANAC.BRAZEll ...... . ~ Commission # 1636064 ~ ..... Notary Public . California ~ J ~ San Diego County f '~-.~~o~m. ExplresF~ 1':. 2O~O id"u(1AVI) C !-3-J~ Notary Public - -.", 8-25 Item 8, Landings, $4 Million Loan Request Add.', tlOICt:U \V'-tDr/'v'-CLnoy> ..lo/~7/0q ib ~ l) t<;~\ btPtd e~ da..L's r ~ \ {CDlM"cJ YnO'Y'~' 11-.oJ\lf>vr:J Conditions: 1. Developer makes best efforts to secure 35 year Ilnancing. which should result in up to a $1 Million reduction in City funding ancl provides evidence to City to this effect. 2. City funds are takeout only and placed at the time of placement of thc pcrmanent loan. 3. City loan amortization is extended to 25 years and intcrest rate increased to 3.6% resulting in the same payment levcl as 2% over 20 years. 4. City loan is reduced by the unused contingency and no eontingcney transferred to pay any budgeted deferred developer fee. 5. Developer to work with statT on some reasonable form of rcview of contingency approval during dcvelopment to ensure contingency is not used for non-esscntial development costs and llnalloan amount is reduced as much as possible. Referral for Staff: I. Develop some guidance on sue of Redevelopment Set Aside Funds transfer outsidc of western Chula Vista. 2. Come back with a work program IDr possible expansion of RDA areas to inelude multifamily zoned areas.