SUBJECT: APPROVAL OF BUSINESS TERMS FOR A
CONSTRUCTION/ PERMANENT LOAN TO ROEM DEVELOPMENT CORPORATION, OR ITS DESIGNATED
PARTNERSHIP, FOR THE DEVELOPMENT OF THE ROSE GARDENS SENIOR HOUSING
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 and permanent loan of up to $2,775,000 to ROEM Development Corporation, or its designated partnership, for the development of the 66-unit Rose Gardens senior housing development with 65 units affordable to very low-income 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.
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 Gardens senior housing development.
In October 2001, ROEM Development Corporation, or its designated partnership (“Developer”), was awarded an allocation of 9% tax credits from the California Tax Credit Allocation Committee for the project.
The Developer has secured construction and permanent financing commitments and is seeking approval of a City construction/permanent loan of up to $2,775,000.
Project costs are estimated to be $12,085,000. In addition to the City loan, the Developer will secure a first mortgage and tax credit equity commitment. 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 $2,775,000. The City’s
acquisition/predevelopment loan, which has a current outstanding balance of
approximately $2,548,000, will roll into a construction/permanent loan and
additional proceeds of $227,000 will be provided for a total City loan of up to
$2,775,000.
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. The project sponsor and Planning Department staff described the proposed project and were available to address questions and concerns.
COST IMPLICATIONS
The acquisition and predevelopment costs for this project were funded out of the Housing Department’s Fiscal Year 2000-2001 Budget. 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
Rose Gardens Senior Housing
Fact Sheet
Development Team
Developer: ROEM Development Corporation, or its designated partnership
Architect: James Guthrie and Associates
Contractor: ROEM Builders
Property Manager: John Stewart Company
Project Characteristics
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 unrestricted manager's unit)
Bedroom Mix and
Monthly
Rent: 1
BR 2 BR
VLI (45% AMI) 32 @ $703
VLI (50% AMI) 31 @ $785 2 @ $942
Unrestricted 1 Mgr Unit
Other Amenities: Elevator; furnished community room with TV room, fireplace and computer learning center; washer and dryer on each floor and landscaped courtyard.
Estimated Total Project Cost: $12,086,000
Estimated Cost Per Unit: $183,121
Anticipated City Subsidy
at Permanent Loan: up to $2,775,000
Anticipated City Subsidy
per Unit at Permanent Loan: $42,692
Proposed Source of Funds (Construction)
Lender/Investor Repayment Type Amount Status*
Construction Lender Interest Payment $ 5,110,000 P
City of San Jose Interest Accrued $ 2,775,000 P
Tax Credit Investor Capital Contributions $ 2,872,000 P
Total $10,757,000
Proposed Source of Funds (Permanent)
Permanent Lender Amortized $ 3,580,000 P
City of San Jose Residual Receipts $ 2,775,000 P
Tax Credit Investor Capital Contributions $ 5,730,000 P
Total $12,085,000
Construction/Permanent Loan Terms and Conditions:
Loan Amount: Up to $2,775,000
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 the 65 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 the City
b.
Negotiation
of final permanent City subsidy amount, which is not to exceed $2,775,000, 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 $2,775,000
Term: Up to 40 years
Interest Rate and Repayment: 4%, 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:
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 the 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 are subject to the
review and approval of the Housing Department.
Planning Issues
GP Designation: General Commercial (within a transit-oriented development corridor)
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
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