SUBJECT: APPROVAL OF BUSINESS TERMS FOR A CONSTRUCTION
AND PERMANENT LOAN TO FIRST COMMUNITY HOUSING, OR ITS DESIGNATED PARTNERSHIP,
FOR THE DEVELOPMENT OF EL PASEO STUDIOS
COUNCIL DISTRICT: 1
RECOMMENDATION
It is recommended that the City Council adopt a resolution approving business terms for a construction/permanent loan of up to $4,019,475 to First Community Housing, or its designated partnership, for the development of a 98-unit studios development affordable to low-, very low- and extremely low-income households on approximately .50-acre site located at the easterly corner of Hamilton and Campbell Avenues (“Project”).
BACKGROUND
On June December 12, 2000, the City Council adopted a resolution to approve business terms for an acquisition and predevelopment loan of up to $2,220,800, a grant of up to $999,200 to subsidize 10 extremely low-income units, and an additional reservation of up to $1,715,000 for construction financing for the El Paseo Studios development.
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 $3,877,448 during the construction and lease-up phases, and a loan of up to $4,019,475 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 $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 $15,072,431. 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 $2,183,231, 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 $3,877,448 and a
permanent loan commitment of up to $4,019,475.
The City’s permanent loan amount consists of the City’s construction
loan of up to $3,877,448 and estimated accrued construction-period interest of
$142,027.
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 September 20, 2000 at Castro Middle School. Attendees included the Councilmember, neighborhood residents and City staff. The architect and Planning Department staff addressed questions and concerns. 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
No additional
funding for the project is being recommended.
LESLYE CORSIGLIA
Acting Director of Housing
El Paseo Studios Studios
Fact Sheet
Development Team
Developer: First Community Housing, or its designated partnership
Architect: Jerome King, AIA
Contractor: Branagh Construction
Property Manager: John Stewart Company
Project Location: Easterly corner of Hamilton and Campbell Avenues
Acreage: .50-acre
Council District: 1
Project Type: Studios
Group Served: Low-; very low- and extremely low-income households
Number of Units: 98 (10 extremely low-, 46 very low-and 42 low-income households)
Other Amenities: Furnished community room with community kitchen, exercise facility, computer center, centralized laundry facility, landscaped courtyard and storage facilities.
Estimated Total Project Cost: $15,072,431
Estimated Cost Per Unit: $155,800
City Grant Subsidy: $999,200 (for ten ELI units)
Anticipated City Subsidy
at Permanent Loan: up to $4,019,475
City Grant Subsidy per ELI unit: $99,916
Anticipated City Subsidy
per Unit at Permanent Loan: $45,676
Proposed Source of Funds (Construction)
Lender/Investor Repayment Type Amount Status
Bonds Interest Payment $8,740,094 Proposed
City of San Jose Interest accrued $3,877,448 Proposed
City of San Jose Grant $ 999,200 Committed
Tax Credit Investor Capital Contributions $ 100,000_ Proposed
Total $13,716,742
Proposed Source of Funds (Permanent)
Bonds Amortized $5,921,000 Proposed
City of San Jose Residual receipts $4,019,475 Proposed
City of San Jose Grant $ 999,200 Committed
General Partner Equity $ 10,286 Proposed
Tax Credit Investor Capital Contributions (Equity) $4,122,469 Proposed
Total $15,072,430
Construction/Permanent Loan Terms and Conditions:
Loan Amount: Up to $3,877,448
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 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
During Permanent
Phase
Loan Amount: Up to $4,019,475
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 25-40du/ac
PD Rezoning Status: Approved
Building Permits: Approved
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