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 $1,800,000 to ROEM Development Corporation, or its designated partnership, for the development of the 55-unit Gadberry Court housing development with 54 units affordable to very low- and extremely low-income 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.
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 conditional loan of up to $450,000 to subsidize six extremely low-income units for the Gadberry Court Senior Apartments development.
In June 2001, the Developer applied to the California Tax Credit Allocation Committee (TCAC) for an allocation of 9% tax credits. In October 2001, the Developer was informed by TCAC that the project was awarded an allocation.
Developer will secure construction and permanent financing commitments and is seeking approval of a City construction/permanent loan of up to $1,800,000.
Project costs are estimated to be $10,139,105. In addition to the City loan, the Developer will secure a first mortgage and tax credit equity commitments. It is anticipated that Sun America will provide the loan commitment as well as the tax credit equity.
Staff is recommending approval of business terms for a City construction/permanent loan of up to $1,800,000. The City’s acquisition/predevelopment loan, which has a current outstanding balance of approximately $1,613,592, will roll into a construction/permanent loan and additional proceeds will be provided up to $186,408.
Refer to the
attached Fact Sheets for complete business terms for the City construction/
permanent loan and related planning issues.
The conditional loan of $450,000, which will convert to a grant after 55
years, has already been disbursed and is not, therefore, addressed in the Fact
Sheets.
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.
COST
IMPLICATIONS
The
acquisition and predevelopment costs for this project were funded out of the
Housing Department’s Fiscal Year 1999-2000 Budget and from the Redevelopment
Agency’s Supplemental Funds to the Housing Department for five of the six
extremely low-income units. Additional
City funding that remains to be disbursed during construction will be funded
out of the Housing Department’s Fiscal Year 2001-2002 Budget.
COORDINATION
Preparation of this memorandum was coordinated with the Office of the City Attorney.
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 (6 extremely low-, 48 very low-income households, and
1 unrestricted manager’s unit) (9 are RDA project area inclusionary units)
Bedroom Mix and
Monthly
Rent: I BR 2
BR
VLI (50% AMI) 37 @ $785 2 @ $942
VLI (45% AMI) 9 @ $703
ELI (30% AMI) 6 @ $458
Unrestricted 1 Mgr Unit
Other Amenities: Community room, library area, computer room, hobby room and a landscaped courtyard.
Estimated Total Project Cost: $10,139,105
Estimated Cost Per Unit: $184,347
City Grant Subsidy: $450,000 (for five of the six ELI units)
Anticipated City Subsidy
at Permanent Loan: up to $1,800,000
City Grant Subsidy per ELI unit: $90,000
Anticipated City Subsidy
per Unit at Permanent Loan: $45,000 (exclusive of inclusionary extremely low-income and unrestricted manager units)
Proposed Source of Funds (Construction)
Lender/Investor Repayment Type Amount Status
Construction Lender Interest Payment $4,100,000 Proposed
City of San Jose Interest accrued $1,800,000 Proposed
City of San Jose Conditional Grant $ 450,000 Committed
Tax Credit Investor Capital Contributions $2,615,051 Proposed
Total $8,965,051
Proposed Source of Funds (Permanent)
Permanent Lender Amortized $2,950,000 Proposed
City of San Jose Residual receipts $1,800,000 Proposed
City of San Jose Conditional Grant $ 450,000 Committed
Tax Credit Investor Capital Contributions $4,939,105 Proposed
Total $10,139,105
Construction/Permanent Loan Terms and Conditions:
Loan Amount: Up to $1,800,000
Term: 24 months
Interest Rate: 4% simple
Security: Subordinated Recorded Deed of Trust
Repayment: Full principal amount to be paid by City Permanent Loan, accrued interest to be paid from other sources of funds
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.
Negotiation
of final permanent City subsidy amount, which is not to exceed $1,800,000, and
repayment terms on City loan.
c.
Any changes
to City loan terms and conditions requested by lenders or tax credit investors
are subject to the review and approval of the Housing Department.
During Permanent
Phase
Loan Amount: Up to $1,800,000
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 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. Prior to
conversion to a Permanent Loan, the following are required:
a. Project cost
savings (the difference between the budgeted project cost as reported in the
final Project Summary approved by the Housing Department, and the final costs
incurred, as evidenced by a CTCAC basis audit and cost certification) will be
distributed as follows: 100% shall be applied to reduce interest on the City’s
loan, then any remaining amount to principal on City’s loan.
b. All refundable
deposits and fees shall be first applied to reduce interest on the City loan,
then any remaining amount to principal on the City loan.
c. Any surplus
funding from tax credit equity or permanent loan financing shall be applied
first to reduce interest on the City loan, then any remaining amount to
principal on the City loan.
2. The Project
will be allowed a Partnership Management Fee, to be identified as a permitted
Expense for purposes of calculating net cash flow, in an amount and term
that is acceptable to the Housing Department.
3. Any changes to
City loan terms and conditions requested by lenders or tax credit investors
will be subject to the review and approval of the Housing Department.
GP Designation: Medium High Density Residential (12-25 DU/AC) and General Commercial with a Neighborhood Business District Overlay
PD Rezoning Status: Approved
PD Permit Status: Approved
Building Permits: Pending
Article XXXIV Status: Authority from Measure D (1994) is available
November
27, 2001 Anticipated
City Council Approval of Construction/Permanent Loan Business Terms
December
2001 Anticipated
Start of Construction
March 2002 Anticipated
Completion of Construction