COUNCIL DISTRICT: 77
It is recommended that the City Council hold a public hearing and adopt a resolution:
1. Approving a Disposition and Development Agreement (DDA) between the City of San José and Roberts Avenue, Inc., or its designated affiliate, for the acquisition and development of a 100-unit senior housing on 2.13 acres of City-owned property, located on Roberts Avenue between Vintage Way and Mistflower Drive.
2. Approving business terms for an acquisition loan in an amount not to exceed $2,277,222, a construction/permanent loan of up to $6,100,000 (which includes the acquisition loan of $2,277,222 and predevelopment loan of $625,000) and a conditional grant of up to $1,500,000 for the acquisition and development of the project.
3. Authorizing the Director of Housing to negotiate and execute all necessary documents evidencing the subject DDA with Roberts Avenue, Inc., or its designee, including loans, deeds, and other related agreements on behalf of the City related to the housing development.
BACKGROUND
On June
27, 2000, the City
Council selected Bridge Housing Corporation as the developer of the
Roberts Avenue senior housing project.
It also approved a predevelopment loan in the amount of $500,000 to
Bridge Housing Corporation.
On
May 29, 2001, the City Council approved a fund reservation for a loan in the
amount of up to $6,100,000, a conditional grant of up to $1,500,000 and an
increase in the Predevelopment Loan for a total amount of $625,000 for the
subject property. These actions allowed
Bridge Housing Corporation, of which Roberts Avenue, Inc. is an affiliate, to
submit a complete application to the California Housing Finance Agency (CHFA) and to the
California Debt Limit Allocation Committee (CDLAC) for a tax-exempt bond
allocation.
The
noticed public hearing procedure is required for the sale or conveyance of the
subject parcel since it was acquired by the Housing Department from the City
with 20% Housing Redevelopment Funds.
This Notice of Public Hearing was published on July 30, 2001 and August
6, 2001. A summary report of this DDA
has been completed by Keyser Marston Associates, Inc., pursuant to Section
33433 of California Redevelopment law.
The results of that analysis are part of the public hearing packet for
this matter and have been incorporated into the subject report.
The subject DDA addresses approximately 2.13 acres of City-owned property located on Roberts Avenue between Vintage Way and Mistflower Drive. Roberts Avenue, Inc. intends to acquire the site from the City for the construction and permanent financing of 100 units of senior housing affordable to extremely low- and very low-income persons or households.
Roberts Avenue, Inc. submitted an application to the California Debt Limit Allocation Committee (CDLAC), through the California Housing Finance Agency (CHFA), for an allocation of tax-exempt bonds. CDLAC staff is recommending an allocation for this project that will be considered on their August 21, 2001 meeting. If an allocation is awarded from this application, the beginning of construction of the project is expected to occur within 120 days of the notice of the bond allocation.
PROJECT BUDGET
AND ANALYSIS OF THE TRANSACTION
A.
Summary of the Proposed Transaction
On June 27, 2000, the City Council selected BRIDGE Housing Corporation (BRIDGE) to develop the Roberts Avenue Senior Housing Project on City-owned property. At the same time, the City Council approved a predevelopment loan in the amount of $500,000 to BRIDGE to move forward with project planning and financing activities.
On May 29, 2001, the City Council approved a fund reservation for a loan in an amount of up to $6,100,000 and a conditional grant in an amount of up $1,500,000 to Roberts Avenue, Inc. (an affiliate of BRIDGE) for the acquisition, predevelopment, construction and permanent financing of the proposed Roberts Avenue Senior Housing project. The City Council also approved an increase in the predevelopment loan amount to a total of $625,000; which will be repaid by the City’s $6.1 million loan.
B.
Housing Development Budget and Sources of Funds
The total project cost is estimated at $18,371,658. The permanent financing package includes first-mortgage financing consisting of tax-exempt bonds issued by CHFA of approximately $5,600,000, tax-credit equity investor payment of approximately $4,368,127, a Federal Home Loan Bank/Affordable Housing Program (AHP) grant of approximately $300,000, the proposed City loan of up to $6,100,000, and the proposed City conditional grant of up to $1,500,000 to fund extremely low-income (ELI) units. This grant to the project from the Redevelopment Agency’s 20% Supplement funds will subsidize rents in at least 15 of the units for households that are at or below 30% of the Area Median Income (AMI). These funds are made in the form of a grant to the developer to comply with the regulations governing tax-exempt bond proceeds, which is the Redevelopment Agency’s source of funds.
C.
Financial Analysis and Restricted Rent Levels
The proposed transaction involves the sale of City-owned land for an acquisition amount of $2,277,222, which represents the market value as supported by an appraisal performed for the City by Cushman & Wakefield as of April 9, 1999. A City note in the amount of $6,100,000 will be provided to the developer under the terms of the City’s loan and grant agreements.
With two (2) unrestricted manager units, 83 units will be rented to senior households within the very low-income category and 15 units will be for extremely low-income seniors. Project rents and operating costs will be based on the requirements of the State Tax-Credit Allocation Committee (TCAC) program. Since repayments to the City’s loan will be minimal, because of the anticipated very low-income TCAC rents, the value of the City’s investment in this project is essentially the long-term provision of affordable units to very low-income seniors. The City has recorded 55-year affordability restrictions on the property.
D. Proposed
Business Terms of the DDA
Acquisition
Loan
Borrower: An affiliate of Roberts Avenue, Inc. a California nonprofit corporation
Loan Amount: $2,277,222.00
Term: 24 Months
Interest rate: No interest
Construction
Loan and Conditional Grant
Loan Amount: $6,100,000 (includes the $2,277,222 acquisition and the $625,000 predevelopment loan amounts)
Term: 24 Months
Interest: 4% per year simple interest
Grant Amount: $1,500,000
Grant Condition: Maintain affordability for 55 years
Permanent
Loan and Conditional Grant (carried over from construction)
Loan Amount: $6,100,000 (includes the $2,277,222 acquisition and the $625,000 predevelopment loan amounts)
Term: 55 years
Interest rate: 4% per year simple interest with unpaid accrued interest compounding to principal at the end of each year.
Repayment: Residual receipts of 75% of net cash flow, less an annual partnership management fee in years 1 to 15 of $20,000 per year. Net cash flow payments in excess of outstanding interest to apply to loan principal. Full repayment of all principal and interest due at maturity.
Loan to Value: Between 80% and 90% after the final capital contribution payment.
Recourse: The City’s permanent loan shall be non-recourse.
Subordination: As allowed by State law.
Affordability: The City’s 30-year Affordability Restrictions will be amended to run for 55 years and require that 83 of the units be affordable to very low-income households, 15 units will affordable to extremely low-income households, and 2 manager units will be unrestricted.
Security: The City’s loan will be secured by a second deed of trust during the construction period and permanent loan period. A Promissory Note containing the above repayment provisions will be executed and 55-year Affordability Restrictions will continue to run with the property.
Grant Amount: A grant amount of up to $1,500,000 will be provided to the borrower to provide for at least 15 of the housing units to be at or below 30% of AMI.
Grant Condition: Maintain affordability for 55 years.
ANALYSIS
The PD Rezoning for the Roberts Avenue Senior Housing was approved by the City Council on March 20, 2001.
The project consists of 100 units of senior housing and parking to be constructed on a 2.13-acre parcel located on Roberts Avenue between Vintage Way and Mistflower Drive.
As noted above, the purchase price for the senior portion of the land has been set at $2,277,222. This value is supported by an appraisal performed for the City of San José by Cushman & Wakefield as of April 9, 1999. The City owns the subject property and intends to sell it to the sponsor for the development of the Roberts Avenue Senior Housing development. The total project cost is estimated at $18,371,658. The permanent financing package includes first- mortgage financing of approximately $5,600,000, tax-credit equity investor payment of approximately $4,368,127, a Federal Home Loan Bank/Affordable Housing Program (AHP) grant of approximately $300,000, the proposed City loan of up to $6,100,000, and the proposed City conditional grant of up to $1,500,000 to fund extremely low-income (ELI) units.
It is anticipated that the construction will begin in November 2001 and that the project will be ready for occupancy in late 2002.
The sponsor has hosted
two community outreach meetings on December 13, 2000 and February 21, 2001, at
the R. F. Kennedy Elementary School. Also, the
PD permit process for this project will require a public hearing with notices
sent to
surrounding
residents.
LEGAL ISSUES
A tax
regulatory agreement with 55-year affordability requirements will be recorded
on the property with the issuance of bonds.
The closing of the City’s acquisition loan will include the recordation
of 55-year affordability restrictions against the property.
The preparation of this
report has been
coordinated with the Office of the City Attorney.
Funds not already disbursed are available in the Housing Department’s Fiscal Year 2001-02 budget.
CEQA
ND.
LESLYE
CORSIGLIA
Acting Director of Housing