SUBJECT: APPROVAL OF BUSINESS TERMS FOR A CONSTRUCTION
AND PERMANENT LOAN TO FIRST COMMUNITY HOUSING, OR ITS DESIGNATED PARTNERSHIP,
FOR THE DEVELOPMENT OF THE BETTY ANNE GARDENS FAMILY APARTMENTS
COUNCIL DISTRICT: 5
RECOMMENDATION
It is recommended that the City Council adopt a resolution approving business terms for a construction/permanent loan of up to $5,129,744 to First Community Housing, or its designated partnership, for the development of a 76-unit family rental housing development affordable to extremely low-, very low- and low-income households on a 4.11-acre site located at 945 and 955 North King Road (“Project”).
BACKGROUND
On September 5, 2000, the City Council adopted a resolution to approve business terms for an acquisition and predevelopment loan of up to $2,265,630 and a conditional loan of up to $934,370 to subsidize 8 extremely low-income units for the Betty Anne Gardens Apartments development. On April 23, 2001, under the Director of Housing’s delegation of authority, the acquisition and predevelopment loan was increased by $226,000, from $2,265,630 to $2,491,630.
On October 4, 2001, First Community Housing, or its designated partnership (“Developer”) will be submitting an application to the California Debt Limit Allocation Committee (CDLAC) for an allocation of tax-exempt bonds.
Developer will secure construction and permanent financing commitments and is seeking approval of a City construction/permanent loan of up to $5,129,744.
On September 25, 2001, the City staff will recommend to the City Council hold a TEFRA Hearing for the issuance of up to $10,000,000 of tax-exempt multifamily housing revenue bonds(“Bonds”) to finance the construction of the Project.
The approval
to issue the tax-exempt bonds and other recommendations related to the bonds
will be completed under a separate report to the City Council on September 25,
2001. The sole purpose of this report
is to establish the business terms for the Housing Department’s construction
/permanent loan to the project.
Project costs are estimated to be $17,569,664. In addition to the funds available from bond proceeds, the Developer will apply for an allocation of 4% tax credits under the California Tax Credit Allocation Committee’s (CTCAC) non-competitive funding application.
In conjunction with the closing of the bond financing, the City’s acquisition/predevelopment loan, which has a current outstanding balance of approximately $2,265,630, will roll into a construction loan during the construction period.
Staff is
recommending approval of business terms for a City construction/permanent loan
of up to $5,129,744.
Refer to the
attached Fact Sheets for complete business terms for the City
construction/permanent loan and related planning issues.
PUBLIC OUTREACH
The Developer held a neighborhood meeting on June 6, 2000 at the local Denny’s restaurant. Members of the City Planning Department were among the attendees. The Developer presented site plans and described details of the proposed Project. The Developer and Planning Department staff addressed all concerns raised by the neighborhood residents. Notice of a TEFRA Hearing for the project’s bond financing was published on September 7, 2001 and will be heard by the City Council on September 25, 2001.
COORDINATION
Preparation of this memorandum was coordinated with the Office of the City Attorney.
COST
IMPLICATIONS
The additional $2,638,114 for the proposed construction/permanent loan for the project, over and above the funding for the acquisition/predevelopment loan, is available in the Housing Department’s Fiscal Year 2001-2002 budget.
LESLYE CORSIGLIA
Acting Director of Housing
Betty Anne Gardens Family Apartments
Development Team
Developer: First Community Housing or its designated partnership
Architect: Jerome King, AIA Architects
Contractor: Branagh Construction
Property Manager: John Stewart Company
Project Location: 945 and 955 North King Road
Council District: 4
Project Type: Family rental
Group Served: Extremely low-, very low- and low-income households
Number of Units: 76 (8 extremely low-; 15 very low- and 53 low-income households)
Other Amenities: Community room, computer room, laundry facilities, play area and walking paths.
Estimated Total Project Cost: $17,569,664
Estimated Cost Per Unit: $231,180
Conditional Loan Subsidy: $934,370 (for eight ELI units)
Anticipated City Subsidy
at Permanent Loan: up to $5,129,744
Conditional Loan Subsidy
per ELI unit: $116,796
Anticipated City Subsidy
per Unit at Permanent Loan: $75,437
Proposed Source of Funds (Construction)
Lender/Investor Repayment Type Amount Status
Bonds Interest Payment $9,008,009 Proposed
City of San Jose Interest accrued $5,129,744 Proposed
City of San Jose Grant $ 934,370 Committed
General Partner Equity $ 3,638 Committed
Tax Credit Investor Capital Contributions (Equity) $ 100,000 Proposed
Total $15,175,761
Proposed Source of Funds (Permanent)
Bonds Amortized $7,686,316 Proposed
City of San Jose Residual receipts $5,129,744 Proposed
City of San Jose Grant $ 934,370 Committed
Income during Lease-Up $ 60,000 Proposed
General Partner Equity $ 3,638 Committed
Tax Credit Investor Capital Contributions (Equity) $3,719,234 Proposed
Total $17,533,302
Construction/Permanent Loan Terms and Conditions:
Loan Amount: Up to $5,129,744
Term: 24 months
Interest Rate: 4% simple
Security: Subordinated Recorded Deed of Trust
Repayment: City Permanent Loan
Recourse: The loan shall be recourse.
Subordination: As allowed by State law.
Affordability Restrictions: 55 year Affordability Restrictions for all of the units were recorded on the Property at the time of acquisition, and may be subordinated as permitted by State law.
Conditions:
1. Standard conditions and documentation
requirements for the Housing Department apply.
2. Prior to close of the Construction Loan,
the following are required:
a.
Proforma
Budget acceptable to Housing Department
b.
Tax Credit
Investor must be acceptable to Housing Department.
c.
Contractor
and construction contract must be acceptable to Housing Department.
d.
Negotiation
of final permanent City subsidy amount, which is not to exceed $5,129,744 and
permanent repayment terms on City loan.
During Permanent Phase
Loan Amount: Up to $5,129,744
Term: Up to 40 years
Interest Rate and Repayment: 4% simple
Security: Subordinated Recorded Deed of Trust
Recourse: The loan shall be non-recourse.
Subordination: As allowed by State law.
Affordability Restrictions: 55-year Affordability Restrictions for all of the units were recorded on the Property at the time of acquisition, and may be subordinated as permitted by State law.
Conditions:
Permanent Loan Conditions will be similar to
Construction Loan Conditions.
Planning Issues
GP Designation: Medium High Density Residential (12-25 DU/AC)
Medium Density Residential (8-16 DU/AC
Public Park and Open Space
PD Rezoning Status: Approved
Building Permits: Pending
Article XXXIV Status: Authority from Measure D (1994) is available
Estimated Project Development Timeline
October 2, 2001 Anticipated City Council Approval of Construction/ Permanent Loan
October 4, 2001 Deadline for Application to CDLAC
December 13, 2001 Anticipated Announcement of CDLAC Allocation
March 2002 Anticipated Issuance of Bonds and Loan Closing
March 2002 Anticipated Start of Construction
July 2003 Anticipated Completion of Construction