SUBJECT: APPROVAL OF BUSINESS TERMS FOR A CONSTRUCTION
AND PERMANENT LOAN TO ROEM DEVELOPMENT CORPORATION, OR ITS DESIGNATED
PARTNERSHIP, FOR THE DEVELOPMENT OF THE GADBERRY COURT SENIOR 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 $3,600,000 to ROEM Development Corporation, or its designated partnership, for the development of a 55-unit senior housing development with 54 units affordable to senior households and one unrestricted manager’s unit on a 1.07-acre site located on the north side of Alum Rock Avenue, on the block bounded by Highway 680 and Alexander Avenue (“Project”).
BACKGROUND
On June 6, 2000, the City Council adopted a resolution to approve business terms for an acquisition and predevelopment loan of up to $1,800,000 and a grant of up to $450,000 to subsidize 5 extremely low-income units for the Gadberry Court Senior Apartments development.
On October 4, 2001, ROEM Development Corporation, 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 $3,384,000 during the construction and lease-up phases, and a loan of up to $3,600,000 during the permanent phase.
City staff has recommended that the City Council hold a TEFRA Hearing on September 25, 2001 for the issuance of up to $8,000,000 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 $9,147,733. 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 $1,613,592, will roll into a construction loan during the construction period.
Staff is
recommending approval of business terms for a City construction/permanent loan,
which will consist of a construction loan commitment of up to $3,384,000 and a
permanent loan commitment of up to $3,600,000.
The City’s permanent loan amount consists of the City’s construction
loan of up to $3,384,000 and estimated accrued construction-period interest of
$216,000.
Refer to the
attached Fact Sheets for complete business terms for the City
construction/permanent loan and related planning issues.
PUBLIC OUTREACH
Public hearings were held when the PD Rezoning for this Project went before the Planning Commission on April 25, 2000, and before the City Council on May 2, 2000. 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 $1,800,000 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
Attachments
Gadberry
Senior Apartments
Fact Sheet
Development Team
Developer: ROEM Development Corporation or its designated partnership
Architect: James Guthrie and Associates Architects
Contractor: ROEM Builders, Incorporated
Property Manager: John Stewart Company
Project Location: North side of Alum Rock Avenue on the block bounded by
Highway 680 and Alexander Avenue
Acreage: 1.07
Council District: 5
Project Type: Senior rental
Group Served: Extremely- and very low-income households
Number of Units: 55 (5 extremely low-, 49 very low-income households, and
1 unrestricted manager’s unit)
Other Amenities: Community room, library area, computer room, hobby room and a landscaped courtyard.
Estimated Total Project Cost: $9,147,733
Estimated Cost Per Unit: $166,322
City Grant Subsidy: $450,000 (for five ELI units)
Anticipated City Subsidy
at Permanent Loan: up to $3,600,000
City Grant Subsidy per ELI unit: $90,000
Anticipated City Subsidy
per Unit at Permanent Loan: $78,261 (exclusive of inclusionary and manager’s units)
Proposed Source of Funds (Construction)
Lender/Investor Repayment Type Amount Status
Bonds Interest Payment $3,935,000 Proposed
City of San Jose Interest accrued $3,384,000 Proposed
City of San Jose Grant $ 450,000 Committed
Tax Credit Investor Capital Contributions $1,162,733 Proposed
Total $8,931,733
Proposed Source of Funds (Permanent)
Bonds Amortized $3,815,000 Proposed
City of San Jose Residual receipts $3,600,000 Proposed
City of San Jose Grant $ 450,000 Committed
Tax Credit Investor Capital Contributions $2,345,620 Proposed
Total $10,210,620
Construction/Permanent Loan Terms and Conditions:
Loan Amount: Up to $3,384,000
Term: 24 months
Interest Rate: 4% simple
Security: Subordinated Recorded Deed of Trust
Repayment: City Permanent Loan, Including Accrued Construction Interest
Recourse: The loan shall be recourse.
Subordination: As allowed by State law.
Affordability Restrictions: 55 year Affordability Restrictions for the 54 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 City
b.
Tax Credit
Investor must be acceptable to the City
c.
Contractor
and construction contract must be acceptable to the City
During Permanent
Phase
Loan Amount: Up to $3,600,000
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 54 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) and General Commercial with a Neighborhood Business District Overlay
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