SUBJECT: APPROVAL OF BUSINESS TERMS FOR AN
ACQUISITION/ PREDEVELOPMENT LOAN TO JSM ENTERPRISES, INC., OR ITS DESIGNATED
PARTNERSHIP, FOR THE DEVELOPMENT OF THE PROPOSED NORTH WHITE ROAD FAMILY
APARTMENTS PROJECT
COUNCIL DISTRICT: 5
RECOMMENDATION
It is recommended that the City Council adopt a resolution:
1. Approving business terms for an acquisition/predevelopment loan of up to $8,000,000 to JSM Enterprises, Inc., or its designated partnership, for the development of the 157-unit North White Road family project with units affordable to low- and very low-income households on a 3.83-acre site located on the east side of North White Road, approximately 450 feet north of McKee Road.
2. Approving an additional $1,985,000 for construction financing for a total fund reservation of up to $9,985,000 for the project.
BACKGROUND
In April 2001, JSM Enterprises, Inc. completed its application to the Housing Department for the development of a 157-unit housing project consisting of 54 one-bedroom, 54 two-bedroom, and 48 three-bedroom units affordable to low- and very low-income households and one unrestricted two-bedroom manager's unit.
The sponsor is seeking City financing to purchase the site and finance predevelopment costs.
ANALYSIS
The proposed project will be constructed on a 3.83-acre site located on the east side of North White Road, approximately 450 feet north of McKee Road. An appraisal has been completed for three of the four parcels that comprise the site. The land purchase price of $2,804,000 for the three parcels is supported by an appraised value of $3,240,000 completed by Hulberg and Associates on October 8, 2000. An appraisal supporting the purchase price of approximately $1,953,000 for the fourth parcel will be a condition of funding the City loan.
The sponsor
will be seeking permanent financing for the project with an allocation of
tax-exempt bonds and 4% tax credits.
The sponsor will apply to the California Debt Limit Allocation Committee
for an allocation of tax–exempt bonds in June 2001. Should the project receive an allocation, the sponsor would then
secure construction and permanent financing commitments.
The sponsor intends to utilize City funds for the acquisition of the land and predevelopment costs. The Housing Department is recommending that the City provide an acquisition/ predevelopment loan of up to $8,000,000 for both land acquisition including closing costs ($4,850,000) and anticipated predevelopment expenses ($3,150,000). When the sponsor secures all construction and permanent financing commitments, staff will return to the City Council for approval of City construction and permanent loan business terms.
The attached
Fact Sheets detail the proposed business terms for the City’s acquisition/
predevelopment loan. The affordability
mix shown in the Fact Sheets is based on the project receiving an allocation of
tax-exempt bonds.
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 48 units affordable to
very low-income households and the 108 units affordable to low-income
households to be constructed as a part this development are to be designated as
available to satisfy the Agency's Replacement Housing obligation as described
in the Plans.
PUBLIC OUTREACH
The sponsor hosted a neighborhood meeting on April 12, 2001, that was held at Sheppard Middle School. Representatives from the Office of Council District 5 and staff from the Planning, Building and Code Enforcement Department and Public Works Department were among the attendees. The project sponsor and City Department staff described the proposed project and responded to questions and concerns.
COORDINATION
Preparation of this memorandum was coordinated with the Office of the City Attorney and the Department of Planning, Building and Code Enforcement.
COST
IMPLICATIONS
The acquisition and predevelopment costs for this project will be funded out of the Housing Department's Fiscal Year 2000-2001 budget.
REDEVELOPMENT PROJECT AREA FINDINGS
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- and low-income families and
households is identified as vital to support the City’s economic growth, much
of what 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 North White Road Family Apartments project to be a
benefit to these redevelopment project areas.
CEQA
ND adopted by
Director of Planning. Protest of ND
filed, to be considered by Planning Commission on May 9, 2001. The Planning Commission must uphold adoption
of the ND for the project to have environmental clearance.
LESLYE CORSIGLIA
Acting Director of Housing
North White Road Family Apartments
Fact Sheet
Development Team
Developer: JSM Enterprises, Inc.
Architect: Ko Architects, Inc.
Contractor: Branagh Inc.
Property Manager: California Real Estate Management
Project Characteristics
Project Location: East Side of North White Road, approximately 450 feet north of McKee Road
Acreage: 3.83 acres
Council District: 5
Project Type: Family Rental
Group Served: Low- and very low-income households
Number of Units: 157 (108 low-income, 48 very low-income; 1 unrestricted manager's unit)
Bedroom Mix and
Monthly
Rent: 1
BR 2 BR 3BR
LI (60% AMI) 37 @ $989 38 @ $1,176 33 @ $1,357
VLI (50% AMI) 17 @ $818 16 @ $970 15 @ $1,119
Unrestricted 1 Mgr Unit
Other Amenities: Elevators; furnished recreation building with TV room, exercise room and community kitchen; two fully-equipped playground areas; secured covered parking structure serviced by 3 elevators; laundry rooms and landscaped courtyard. Unit amenities include refrigerator, stove, dishwasher, air-conditioning and built-in storage room on balcony/patio area.
Estimated Total Project Cost: $36,132,000
Estimated Cost Per Unit: $230,140
Anticipated City Subsidy
at Permanent Loan: up to $9,985,000
Anticipated City Subsidy
per Unit at Permanent Loan: $64,006
Anticipated Leverage Per Unit
for Permanent Loan: 2.61 to 1
Land Appraised Value: $3,240,000 (Covers three of four parcels) Hulberg and Associates October 8, 2000. Appraisal for fourth parcel is in progress.
Acquisition/Predevelopment Loan Terms and Conditions:
Loan Amount: $8,000,000
Term: 24 months
Interest Rate: 4%, simple
Security: Recorded First Deed of Trust
Repayment: City Construction Loan
Loan to Value: 154% based on combined land appraised value of three parcels and purchase price of fourth parcel.
Recourse: The loan shall be recourse.
Subordination: As allowed by State law.
Affordability Restrictions: 55-year Affordability Restrictions for 108 low- and 48 very low-income units to be recorded on the property at the time of acquisition, and may be subordinated as permitted by State law.
Conditions:
1. At the time of closing of the City's loan for this project, no default is present under any loan documents executed by the following entities: JSM Enterprises, Inc., or its designated partnership (Borrower) or any affiliate or associate of the Borrower.
2. Borrower shall submit an application to the California Debt Limit Allocation Committee (CDLAC) at the first funding round for which the proposed project is eligible.
3. The City's future permanent loan commitment shall be contingent on the Borrower's ability to maximize all available financing sources, including senior permanent loan, tax credit equity and/or grants.
4. In the event the project does not receive an allocation of tax-exempt bonds from CDLAC the Borrower must provide an alternative financing structure that is acceptable to the Housing Department.
5. Borrower shall submit an asbestos containing materials and lead-based paint remediation and demolition plan acceptable to the City.
6. Land appraisal acceptable to the City that supports the purchase price of Parcel 599-01-061 for approximately $1,953,000.
7. The City’s future Construction and Permanent loan commitment shall be subject to the City’s review and approval of Borrower’s project proforma and financing commitments.
Planning Issues
GP Designation: High Density Residential (25-50 DU/AC)
PD Rezoning Status: Anticipated to be approved on May 15, 2001.
PD Permit Status Pending
Building Permits: Pending
Article XXXIV Status: Authority from Measure D (1994) is available
Toxics Issues: A Phase I was completed by Marc Papineau, REA on October 6, 2000, and updated on December 20, 2000. The consultant concluded (1) The southeastern portion of the property at 400 N. White Road had been used as a potted plant nursery in the early 1950’s. No part of the property has been an orchard since 1953 (based upon review of aerial photographs) or since 1926 (based upon interview of a knowledgeable party). (2) Non-commercial vehicle maintenance had been performed at 412 and 420 N. White Road. There was no visible evidence of environmental impairment, such as apparent staining or deliberate dumping to a ditch or dry sump. It was recommended that the rear shed area at 412 N. White Road should be observed again after the owner has removed the early model truck and other items from the floor. The same comment applies generally to 420 N. White Road and the location of stored waste oil and a tractor. (3) Used tires; containers of coolant and waste oil; used batteries; all operable and inoperable vehicle; the mobile home trailer; firewood and clay pots; soil piles; soil piles; empty containers and drums (if any); leftover paints, herbicides and insecticides (if any), should be removed by the owners. Household hazardous wastes may be disposed upon appointment at the Household Hazardous Waste Program administered by Santa Clara County. (4) Septic tanks and wells, if any, will require appropriate abandonment and backfilling or well destruction under applicable regulations enforced by Santa Clara County and the Santa Clara Valley Water District.
A subsequent Phase II investigation of soil or ground water was not recommended based upon the research and findings of the Phase I investigation.
A pre-demolition asbestos survey is required for existing buildings that occupy the site. The consultant anticipates that the houses at 402, 412 and 420 N. White Road are likely to have lead-based paint. An ACM and LBP remediation and demolition plan acceptable to the City will be a condition of City loan funding.
Estimated Project Development Timeline
May 15, 2001 Anticipated
City Council Approval of PD Zoning
May 22, 2001 Anticipated City Council Approval of Acquisition/ Predevelopment Loan Business Terms
June 1, 2001 Deadline to submit Application to CDLAC
July, 2001 Anticipated Close of Acquisition/ Predevelopment Loan
August 2001 Anticipated Announcement of CDLAC Allocation
November 2001 Anticipated Start of Construction
June 2003 Anticipated Completion of Construction