COUNCIL
DISTRICT 7
It is recommended that the City Council adopt a resolution:
1. Approving business terms for an acquisition/predevelopment loan of up to $2,450,000 to ROEM Development Corporation, or its designated partnership, for a 61-unit housing development affordable to very low–income senior households on a 1.55-acre site located at 1275 McLaughlin Avenue, south of Owsley Avenue.
2. Finding that the use of 20% Housing Funds for the project is of benefit to the Redevelopment Project Areas in San Jose.
BACKGROUND
On April 19, 2001, Roem Development Corporation submitted a loan application to the Housing Department for the acquisition, construction and permanent financing of the McLaughlin Avenue
Apartments. The development consists of 60 one-bedroom units and one two-bedroom unit. The sponsor is requesting $2,450,000 in City financing for acquisition and predevelopment expenses.
The sponsor is seeking City financing to purchase the site and finance predevelopment expenses in the short term. Staff will come back to the Council for approval of construction/permanent loan business terms at a later date.
A commitment of funds at this time is necessary to demonstrate City participation in the project for a tax credit application being submitted to the California Tax Credit Allocation Committee (CTCAC) in June 2001.
The proposed development is located on a 1.55-acre site at 1275 McLaughlin Avenue, south of Owsley Avenue. The site is currently improved with a former industrial building and yard, and an abandoned single-family home.
In the current funding proposal, the sponsor intends to fund the project through a combination of Low-Income Housing Tax Credit equity, a conventional loan, developer equity and City loan proceeds.
The current financing proposal is based upon an affordability mix of 45% of the units at 45% of Median Income, 54% of the units at 50% of Median Income and one unrestricted manager’s unit. The total cost to acquire the property and construction of the improvements is estimated to be $11,046,701.
In accordance with the Replacement Housing Plan, Downtown Development Projects, adopted by the Redevelopment Agency Board in January 2000 and the Replacement Housing Plan, Hellyer-Piercy Improvement District, adopted by the Redevelopment Agency Board in February 2001 (“Plans”), the 60 units affordable to very low-income households to be constructed as part of this development are to be designated as available to satisfy the Agency’s Replacement Housing obligation as described in the Plans.
The attached fact sheets detail the financing that the sponsor is proposing.
No neighborhood meetings have been held, but the public will have the opportunity to speak at the noticed public hearings before the Planning Commission and the City Council as part of the PD Zoning approval process.
The City’s deed of trust and 55-year affordability restrictions will be recorded on the property and may be subject to subordination to senior lenders as permitted by State law.
ND
The preparation of this report has been coordinated with the Office of the City Attorney.
The recommended project is not located within a Redevelopment Project Area. Thus it is required that the City make a finding, on behalf of the Redevelopment Agency, that any such project which utilizes redevelopment funds is a benefit to redevelopment areas.
Since rental housing for very-low persons and households is identified as vital to support the City's economic growth, much of which is planned to occur in Downtown and industrial redevelopment project areas, staff recommends that the City Council find that the use of any 20% Housing Funds for the McLaughlin Avenue Senior Apartments Development to be a benefit to these redevelopment project areas.
Funding for the project is available in the Housing Department’s Fiscal Year 2000-01 Budget.
LESLYE CORSIGLIA
Acting Director of Housing
Attachment
Development Team
Developer: ROEM Development Corporation
Architect: James Guthrie & Associates
Contractor: To Be Determined
Property Manager: To Be Determined
Project Characteristics
Project Location: 1275 McLaughlin Avenue, south of Owsley Avenue
Acreage: 1.55 acres
Council District: 7
Project Type: Senior rental
Group Served: Very-low income households
Number of Units: 61 (60 very low-income, and 1 unrestricted Manager’s unit)
Bedroom Mix and
Monthly Rent:
|
|
1 BR |
2 BR |
|
VLI (45% AMI) |
27@ $700 |
|
|
VLI (50% AMI) |
33 @ $782 |
|
|
Unrestricted |
|
1 @ $1636 |
|
|
|
|
Other Amenities: Community Room, Manager’s office and laundry facilities
Estimated Project Cost: $11,046,701
Cost per Unit: $181,093
City Subsidy: up to $2,450,000
City Subsidy per Unit: $40,833
Leverage Per Subsidized Unit: 4.43 to 1
Land Appraised Value: $2,710,000 (Cushman & Wakefield, April 26, 2001)
Acquisition/Predevelopment Loan
Terms and Conditions
Acquisition/Predevelopment
Loan Amount: $2,450,000
Term: 24 months
Interest Rate: 4%,
simple
Security: Recorded First Deed of
Trust
Repayment: City Construction Loan
Loan to Value: Less than
100%
Recourse: The
City’s Acquisition/Predevelopment loan will be recourse
Subordination: As allowed
by State law
Affordability Restrictions: 55-year
Affordability Restrictions for 60 of the units to be recorded on the property
at the time of acquisition, and may be subordinated as permitted by State law.
Loan Conditions:
1. Sponsor will apply for a 9% tax credit allocation from the California Tax Credit Allocation Committee in June 2001.
2. In the event the project does not receive a tax credit allocation, the sponsor must provide an alternative financing structure that is acceptable to the Housing Department.
3.
The project
sponsor must obtain a building systems and structural analysis acceptable to
the Housing Department.
4.
Environmental
clearance for potential asbestos contamination and mitigation plan must be
submitted and approved by the Housing Department, prior to any demolition of
existing structures.
5.
Final scope
of work for project construction to be reviewed and approved by the Housing
Department.
Planning Issues
GP Designation: High Density Residential (25-40 DU/AC)
PD Rezoning Status: Council to approve on May 15, 2001
PD Permit Status Pending
Building Permits: Pending
Relocation Needed: Not
applicable.
Toxic Issues: A Phase I was completed by Purcell, Rhoades & Associates on April 25, 2001. The consultant observed isolated oil and grease stains on the concrete slab, a hazardous waste locker that did not contain any chemical materials, a chemical locker that contained retail size containers of fuel and solvent cleaners; a 50 gallon drum that was labeled as hydraulic fluid; and smaller drums labeled as oil and grease. There was no indication of a valve or grate at the latter location that would suggest a buried tank. There was no indication of asbestos containing materials present within the warehouse. No further action is recommended for this portion of the site. The use of pesticides and/or herbicides at the site area was common for the region and there is no indication that the site would have any greater potential for contamination from their use than at other areas. The orchard use of the site ceased at least 40 years ago. There is a low potential for significant impact from pesticides and/or herbicides at this site and no further action is recommended. There is the possibility of asbestos containing materials being present in the house. Demolition contractors should be informed of the possibility of the presence of asbestos containing materials and a certified asbestos inspector should review, sample and test, as necessary to determine what level, if any, mitigation is required for proper demolition and disposal of building materials at this site. No further studies were recommended.
Estimated Project Development Timeline
May 9, 2001 Planning Commission PD Zoning Hearing
May 15, 2001 Anticipated PD Zoning Approval by City Council
May 29, 2001 Anticipated City Council Approval of Business Terms for an Acquisition Loan
June 2001 Anticipated Close of Acquisition City Loan
June 2001 Application for Tax Credit Allocation
August 2001 Anticipated Announcement of Tax Credit Allocations
August 2001 Anticipated City Council Approval of Business Terms for the Construction/Permanent Loan
October 2001 Anticipated Building Permit Approval
October 2001 Anticipated Start of Construction
October 2002 Anticipated Completion of Construction