SUBJECT: APPROVAL OF BUSINESS TERMS FOR A
CONSTRUCTION/ PERMANENT LOAN TO ROEM DEVELOPMENT CORPORATION, OR ITS DESIGNATED
PARTNERSHIP, FOR THE DEVELOPMENT OF THE ROSE AVENUE SENIOR APARTMENTS
COUNCIL DISTRICT: 5
SNI AREA: 680 East Valley Communities
RECOMMENDATION
It is recommended that the City Council adopt a resolution approving business terms for a construction loan of up to $4,149,000 and a permanent loan of to $4,633,000 to ROEM Development Corporation, or its designated partnership, for the development of a 66-unit senior housing development with 65 units affordable to senior households and one unrestricted manager’s unit on a 1.35-acre site located at 3071 Rose Avenue between Capitol Avenue and South White Road (“Project”).
BACKGROUND
On January 23, 2001, the City Council adopted a resolution to approve business terms for an acquisition and predevelopment loan of up to $2,775,000 for the Rose Avenue 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 $4,149,000 during the construction and lease-up phases, and a loan of up to $4,633,000 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 $7,000,000 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 $12,254,000. 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 $2,548,000, 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 $4,149,000 and a
permanent loan commitment of up to $4,633,000.
The City’s permanent loan amount consists of the City’s construction
loan of up to $4,149,000, accrued construction-period interest of approximately
$526,000 on the City’s loan and an anticipated City loan paydown of
approximately $218,000 from tax credit equity.
Refer to the
attached Fact Sheets for complete business terms for the City
construction/permanent loan and related planning issues.
PUBLIC OUTREACH
The sponsor hosted a neighborhood meeting on October 19, 2000, which was held at the office of ROEM Development Corporation at 1895 Dobbin Drive. Representatives from the Office of Council District 5 and staff from the Planning, Building and Code Enforcement Department were among the attendees. Public hearings were held when the PD Rezoning for this project went before the Planning Commission on November 15, 2000 and before the City Council on November 21, 2001. 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 $1,374,000 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
Rose Avenue 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: 3071 Rose Avenue between Capitol Avenue and South White Road
Acreage: 1.35 acres
Council District: 5
Project Type: Senior rental
Group Served: Very low-income households
Number of Units: 66 (65 very low-income 1-bedroom units, and
1 unrestricted 2-bedroom manager’s unit)
Other Amenities: Furnished community room with community kitchen and entertainment room, elevator, laundry facility on each floor and landscaped courtyard.
Estimated Total Project Cost: $12,253,950
Estimated Cost Per Unit: $185,666
Anticipated City Subsidy
at Permanent Loan: up to $4,633,000
Anticipated City Subsidy
per Unit at Permanent Loan: $71,277
Proposed Source of Funds (Construction)
Lender/Investor Repayment Type Amount Status*
Bonds Interest Payment $ 4,800,000 P
City of San Jose Interest Accrued $ 4,149,000 P
Tax Credit Investor Capital Contributions $ 1,483,000 P
Total $10,432,000
Proposed Source of Funds (Permanent)
Bonds Amortized $ 4,625,000 P
City of San Jose Residual Receipts $ 4,633,000 P
Tax Credit Investor Capital Contributions $ 2,996,000 P
Total $12,254,000
Construction/Permanent Loan Terms and Conditions:
Loan Amount: Up to $4,149,000
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 65 units were recorded on the Property at the time of acquisition, and may be subordinated as permitted by State law.
Conditions for Approval:
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 the City
b.
Tax Credit
Investor must be acceptable to the City
c.
Contractor
must be acceptable to the City
d.
Negotiation
of final permanent City subsidy amount, which is not to exceed $4,633,000, and
permanent repayment terms on City loan.
During Permanent
Phase:
Loan Amount: Up to $4,633,000
Term: Up to 40 years
Interest Rate and Repayment: 4% simple, Residual Receipts
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 65 of the units were recorded on the Property at the time of acquisition, and may be subordinated as permitted by State law.
Conditions:
Conditions similar to Construction Loan apply.
Planning Issues
GP Designation: Medium Density Residential (8 DU/AC)
PD Rezoning Status: Approved
PD Permit 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 Business Terms
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
April 2003 Anticipated Completion of Construction