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Home My WebLink AboutApprove a Commitment of Redevelopment Agency Housing Set Asi REQUEST FOR REDEVELOPMENT AGENCY A TION MEETING DATE: 04/07/08 DEPARTMENT ID NUMBER: ED 08-16 Council/Agency Meeting Held: DO Deferred/Continued to: Approved ❑ Conditionally Approved ❑ Denied &-Pvty I rk's SO natur =7-0 1 t / Council Meeting Date: April 7, 2008 Department ID Number: ED 08-16 CITY OF HUNTINGTON BEACH REQUEST FOR REDEVELOPMENT AGENCY ACTION SUBMITTED TO: HONORABLE CHAIRMAN AND REDEVELO ME T AGENCY MEMBERS SUBMITTED BY: PAUL EMERY, Interim Executive Director i PREPARED BY: STANLEY SMALEWITZ, Deputy Executive Director/Director of `5y Economic Development SUBJECT: Commitment of Redevelopment Housing Set Aside Funds for Acquisition of Wycliffe Gardens Statement of Issue,Funding Source,Recommended Action,Alternative Action(s),Analysis,Environmental Status,Attachment(s) Statement of Issue: The Agency Board is asked to approve a commitment of Redevelopment Housing Set Aside Funds for the acquisition of the 185-unit Wycliffe Garden Senior Apartments, located at 18765 Florida Street. The apartment complex is "at-risk" for expiration of the housing affordability covenants. Funding Source: Funding will be through the Redevelopment Agency Housing Set Aside Funds in an amount not to exceed $2.16 million. Funding will be used towards the acquisition of Wycliffe Garden Senior Apartments. Once the acquisition is in escrow, staff and the owner will develop a building rehabilitation budget and the creation of an Owner Participation Agreement (the OPA). If the acquisition does not proceed, the Agency will not be required to release any funds. Recommended Action: Motion to: 1. Approve a commitment of RDA funds in an amount not to exceed $2.16 million, authorize the Interim Executive Director to execute documents confirming this commitment, and direct staff to move forward with the preparation of an OPA that will delineate the acquisition and rehabilitation assistance using Housing Set Aside Funds to be provided for the Wycliffe Garden Senior Apartments. 3/25/2008 3:11 PM MEETING DATE: 04/07/08 DEPARTMENT ID NUMBER: ED 08-16 Alternative Action(s): Do not approve the commitment of Redevelopment Housing Set Aside Funds and direct staff not to move forward with the OPA. Analysis: Wycliffe Huntington Gardens is a 185 unit, 14-story apartment complex with one-bedroom and studio apartments that is comprised of very low-income seniors through the United States Department of Housing and Urban Development (HUD) Section 8 affordable housing program. The complex was built in 1970 with a HUD Section 231 loan, which created a deed restricted use by HUD for 30-years. The current owners have paid the Section 231 loan to HUD, and the deed restriction for affordability was removed this year. The Section 8 assistance contract will expire in October 2008, and the building could be at risk of conversion to market rate apartments if not preserved via some assistance, such as this proposal. HUD and the California Department of Housing and Community Development (HCD) have contacted the City regarding the apartment complex being "at-risk" of conversion. Due to the notice, this project has been discussed in the proposed Housing Element (Goal 1.6) and the Housing Strategy. Due to the units being "at-risk," the City will be able to count the 185 units towards the Regional Housing Needs Assessment (RHNA) goals. Due to the "at-risk" status, the City has been contacted by numerous non-profit housing developers. The owner of the building selected to negotiate with the current property managers of the facility, Living Opportunities Management Company (LOMCO). LOMCO was selected due to their relationships with the Wycliffe residents and commitment to affordable housing. LOMCO is committed to providing affordable housing for elderly, disabled, and/or low-income persons. This commitment includes providing services designed to meet physical, social, and psychological needs, and to promote the health, security, happiness, and usefulness for all residents living in facilities owned and managed by LOMCO. In addition, LOMCO has teamed with a non-profit, Las Palmas Housing and Development Corporation, for project assistance, including working capital and management for this project. The two organizations have formed a non-profit entity called Huntington Beach Senior Housing. L.P. On March 19, 2008, Economic Development Staff met with LOMCO to discuss the proposed project. Staff was informed of the sellers and buyers entering into a 45-day escrow. In order to close the escrow within the seller's required time frame of April 14, 2008, the buyer intends to obtain a private bridge loan for approximately $10 million to $12 million, and the seller will carry back a loan for $12 million and the buyer equity of $500,000 to acquire the property. Due to the current status of the housing market, LOMCO's bank, Wells Fargo, is concerned with financing the $12 million bridge loan without the Redevelopment Agency's commitment of financing. The Agency's commitment would be a future loan for up to $2.160 million at 5% interest rate. LOMCO is in the process of securing permanent financing, which will include the rehabilitation of the 38-year old building. LOMCO will be applying for 9% State Tax Credits (not a bond), a private loan, and the Agency assistance. LOMCO is already in MEETING DATE: 04/07/08 DEPARTMENT ID NUMBER: ED 08-16 discussion with HUD to seek approval for an extension of the HUD Section 8 rental assistance program to make all 185 units at Wycliffe Huntington Gardens affordable to senior households earning less than half the Orange County median income. Once the bridge financing is secured and LOMCO owns the property, the rehabilitation of the property will be finalized. Currently, it is estimated at $2.1 million to rehabilitate both the exterior and interior. Significant modernization and refurbishment are planned focusing on energy efficiency and creating a more tenant-friendly environment. The rehabilitation will include new heating and cooling systems, elevator system, secure entrances and exits, exterior painting, new roofing, and common area upgrades. This acquisition and rehabilitation project is an opportunity for the City to improve and preserve 185 units of very affordable housing, enhancing the quality of life for a significant number of very low-income seniors. The developer has affordable housing experience, having managed this property for the last 28 years, and is committed to the City's goal of providing high quality and affordable housing for seniors. The Agency's Board approval of the commitment of redevelopment funds will allow the developer to close the escrow in a timely manner and allow to proceed with the application for the Federal 9% Tax Credits. Strategic Plan Goal: This project will help meet the City of Huntington Beach Strategic Plan Goal L-3, "Preserve the quality of our neighborhoods," by enhancing the quality of existing housing and providing affordable housing. Environmental Status: Categorically excluded under the National Environmental Protection Act (NEPA). Categorically exempt under the California Environmental Quality Act (CEQA), Section 15061(b)(3). Attachment(s): City Clerk's Page Number No. Description 1 Keyser Marston Memo regarding Wycliffe Project ATTACHMENT # 1 B9 KEYSER MARSTON ASS®CLkTES ADVISORS IN PUBLIC/PRIVATE REAL ESTATE'D EVE LOPM ENT MEMORANDUM ADVISORS IN:REAL ESTATETo: Kellee Fritzal, Deputy Director REDEVELOPMENT City of Huntington Beach AFFORDABLE HOUSING ECONOMIC DEVELOPMENT From: Kathleen Head SAN FRANCISCO A.JERRY KEYSER Andrea Castro TIMOTHYC.KELLY KATE EARLE FUNK DEBBIE M.KERN Date: March 25, 2008 ROBERTJ.WETMORE LOSANGELES Subject: Wycliffe Huntington Gardens: Preliminary Financial Gap Analysis CALVIN E.HOLLIS.11 KATHLEEN H.HEAD TAMES A.RABE PAULC;.ANDERSON At your request, Keyser Marston Associates, Inc. (KMA) conducted a preliminary GREGORY D.Soo-HBO KEVIN E.ENGSTROM financial gap analysis for development of a 185-unit acquisition and rehabilitation project JULIE L.ROMEY (project) proposed for the property located at 18765 Florida Street(Site). The purpose SAN DIEGO of the preliminary financial gap analysis is to determine the amount of local public GERALD M.TRIMBLE assistance required to make the proposed acquisition and rehabilitation of the Project PAUL C.MARRA financially feasible. Huntington Beach Senior Housing, LP' (Developer) is proposing to acquire the existing apartment building and rehabilitate the entire Project. Additionally, the Developer is proposing to impose long-term income and affordability covenants on all 185 units in the Project. The Developer anticipates receiving the following funding sources to complete the Project: 1. It is anticipated that Wells Fargo Bank will provide a conventional permanent loan totaling $18.0 million. 2. The Developer plans to apply for Federal Low Income Housing Tax Credits (Tax Credits) that are competitively awarded by the California Tax Credit Allocation I Huntington Beach Senior Housing, LP,Is a limited partnership formed by Living Opportunities Management Company(LOMCO)and Las Palmas Housing Corporation for the development of the Project. 500 SOUTH GRAND AVENUE,SUITE 1480 > LOS ANGELES,CALIFORN[A 90071 > PRONE 213 622 8095 > FAX 213 622 S204 0803048.HB.ADC:KHH W W W.KEYS ERMARSTON.COM 14066.005.012 I To: Keilee Fritzal, City of Huntington Beach March 25, 2008 Subject: Wycliffe Huntington Gardens: Prelim. Financial Gap Analysis Page 2 j Committee (TCAC). The Tax Credits have an estimated net syndication value of $9.6 million. 3. The Developer is proposing to defer$971,000 of the"Developer Fee"amount that is included in the Project's acquisition and rehabilitation cost budget. 4. The Developer has applied to the United States Department of Housing and Urban Development (HUD)for Project Based Section 8 (Section 8)rental assistance. The outside funding sources total $28.58 million and the Developer estimates the total Project costs at$30.74 million. The Developer is requesting the Huntington Beach Redevelopment Agency (Agency) to provide $2.16 million in assistance to fill the remaining financial gap. This assistance is proposed to be funded with property tax increment housing set-aside (Set-Aside)funds. The Developer's assistance request is equal to the Developer's current estimate of the Project's rehabilitation costs. However, it is our understanding that the Developer has not yet completed a formal physical needs assessment of the property. As such, there is the potential for the actual rehabilitation costs to exceed the Developer's current cost estimates. This would in turn increase the Project's financial gap. While additional Tax Credit proceeds could be obtained to fill a portion of the increased gap, it is likely that the Agency would.also be asked to provide additional funding. The KMA preliminary analysis of the Developer's proposed development budget indicates that the Project will need at least$2,16 million in Agency assistance. This equates to less than $12,000 per unit, which is a dramatically smaller gap than has been evidenced by acquisition rehabilitation projects assisted by the Agency. Even if the rehabilitation costs are ultimately higher than the current estimates, it is the KMA conclusion that it would be financially prudent to provide the assistance required to make the Project financially feasible. i 0803048,H8.A0C:KHH 14066.005,012 RCA ROUTING SHEET INITIATING DEPARTMENT: Economic Development SUBJECT: Loan Commitment for Redevelopment Housing Set Aside Funds COUNCIL MEETING DATE: April 7, 2008 RCA ATTACHMENTS STATUS Ordinance (w/exhibits & legislative draft if applicable) Attached ❑ Not Applicable Resolution (w/exhibits & legislative draft if applicable) Attached Not Applicable ❑ Tract Map, Location Map and/or other Exhibits Attached ❑ Not Ap licable Contract/Agreement (w/exhibits if applicable) Attached ❑ (Signed in full by the City Attorney) Not Applicable Subleases, Third Party Agreements, etc. Attached ❑ (Approved as to form by City Attorne ) Not Applicable Certificates of Insurance (Approved by the City Attorney) Attached ❑ Not Ap licable Fiscal Impact Statement (Unbudgeted, over $5,000) Attached ❑ Not Applicable Bonds (If applicable) Attached ❑ Not Applicable Staff Report (If applicable) Attached ❑ Not Applicable Commission, Board or Committee Report (If applicable) Attached ❑ Not Ap licable Findings/Conditions for Approval and/or Denial Attached ❑ Not Applicable EXPLANATION FOR-MISSING ATTACHMENTS Keyser Marston Memo will be here at 5 pm REVIEWED RETURNED FORWARDED Administrative Staff ) 0'P ) De ut City Administrator Initial City Administrator Initial City Clerk ( ) EXPLANATION FOR RETURN OF ITEM: (Below Space For City Clerk's Use •