HomeMy WebLinkAbout1997-07-08; City Council; 14258; Laurel Tree Apartments- ., . .
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WY OF CARLSBAD - AGENbA BILL
TITLE:
LAUREL TREE APARTMENTS
CITY MGR.
RECOMMENDED ACTION:
That the City Council ADOPT Resolution No. 93- 5,3/ , APPROVING actions recommended by the
Housing Commission allowing the MAAC Project to access developer contributions for the purchase of the
Laurel Tree Apartments site in the event that the Apartments do not receive Tax Credit financing.
ITEM EXPLANATION
The Laurel Tree Apartments is a proposed 138 unit family apartment community located at the northeast
corner of the future intersection of Alga and Cobblestone Roads in the Southwest Quadrant. As an
affordable community, Laurel Tree represents a Combined lnclusionary Housing Project as defined in the
City’s lnclusionary Housing Ordinance. As a Combined Project, these units will satisfy the inclusionary
housing obligations of two developments also located in the Southwest Quadrant - Poinsettia Shores
(Kaiza) and Mariner’s Point (Lennar). These developers entered into agreements with the City and the
affordable project developer (MAAC Project, Inc.) committing $3.4 million in subsidy to the Laurel Tree
project. If the subject project does not proceed, the developers are, alternatively, required to purchase
Affordable Housing Credits in the Villa Loma project in an amount which currently would be a total
payment of approximately $4.0 million.
The Laurel Tree Apartments has received all of its required development approvals and has all of its’
necessary financing commitments with the exception of Tax Credits. These commitments amount to over
$5 million in subsidy, including $700,000 of financial assistance authorized by the City Council and the
Housing and Redevelopment Commission.
MAAC Project is applying once again for a Tax Credit allocation in June 1997. Because the competition
may be less intense in this round and with a reduction in the amount of Credits requested, MAAC is
optimistic. Receipt of the Tax Credits will allow the affordable apartments to proceed as originally
approved. In the event the Tax Credits are not received, however, the apartment project will remain
financially infeasible, and MAAC’s purchase option on the site will expire at that time.
The action proposed within this report provides a plan for preserving the land for the Laurel Tree project if
it is unsuccessful in obtaining Tax Credits in the June 1997 round. As explained in the attached Housing
Commission Staff Report, this option retains the project site by acquisition with developer contributions,
and keeps open the options of 1) processing the project as affordable for-sale condominiums, 2) seeking
Tax Credits again, or 3) exploring other apartment financing options. A condominium alternative would
require processing new plans and resolving what has become an industry-wide issue of condominium
liability. The for-sale units would continue to meet the required inclusionary affordability requirement and
be consistent with City Housing Element goals. The prospects for further attempts to obtain Tax Credits
for apartment financing (if the June round is unsuccessful) will depend on an allocation “lottery” system in
which more attempts improve the chances, but uncertainty remains.
If the City Council does not wish to retain the site in order to continue the pursuit of the approved
apartment plan or a condominium alternative, the City can exercise its option to require the obligated
developers to purchase Affordable Housing Credits in lieu of the construction of units on the Laurel Tree
site. Staff continues to believe that the “service enhanced” affordable apartments, as approved, is the
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. I. PAGE 2 OF AGENDA BILL Nu. lU,m25b a
preferred alternative and that it is in the City’s interest to allow the site to be retained in order to continue
efforts to finance the project. If the affordable condominium alternative becomes feasible, this would also
represent the construction of new units satisfying City needs, goals and lnclusionary Ordinance
requirements. In either event, staff is confident that a project will ultimately be financed and built on the
site. Any option that utilizes developer payments to further the Laurel Tree project preserves the ability of
the City to sell Affordable Housing Credits in the Villa Loma Apartments to other housing developers in the
future.
On May 8, 1997, the Housing Commission considered this matter and recommended (8-O) the option of
supporting acquisition of the Laurel Tree site. In addition, they supported the option of affordable for-sale condominiums if Tax Credits cannot be obtained for the apartment project. At the time the Housing
Commission acted it was uncertain whether the option to purchase the site could even be extended through the June 1997 Tax Credit application round, but this has been accomplished between MAAC and
the landowner. The purchase option now extends to time of notification regarding Tax Credit awards,
expected to be August 1997.
In summary, if MAAC does not receive approval of its application for Tax Credits in the next round of competition, they will lose their option to buy the site. To retain the site, a purchase immediately following
Tax Credit notification would be required. MAAC will need to access the developer contributions to
purchase the site, and once the developer contributions are accessed, the developers would be released
from further obligation under their Affordable Housing Agreements.
If MAAC receives the tax credits in this next round, they will move forward to develop the original
apartment project.
FISCAL IMPACT
With this action there is no additional financial commitment required of the City or the Redevelopment Agency beyond the $700,000 previously authorized by the City Council and Housing and Redevelopment
Commission subject to the other project financing being obtained. If approved by Council, the developer payments will be accessed to purchase the Laurel Tree site (if the tax credit application is not successfully
funded this summer). No funding will be required from the City for purchase of the site.
EXHIBITS
1. City Council Resolution No. 93- 5.7 /
2. Housing Commission Staff Report, dated May 8, 1997 w/attachments
3. Excerpts of Draft Housing Commission Minutes, dated May 8, 1997
CITY COUNCIL RESOLUTION NO. 9 7 - 5 3 1
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CARLSBAD, CALIFORNIA, APPROVING ACTIONS
RECOMMENDED BY THE HOUSING COMMISSION TO
PROVIDE SUPPORT FOR THE PURCHASE OF THE
LAUREL TREE SITE AND DEVELOPMENT OF
AFFORDABLE FOR-SALE CONDOMINIUMS AS AN
ALTERNATIVE TO THE LAUREL TREE AFFORDABLE
APARTMENTS IN THE EVENT THAT THE APARTMENT
PROJECT DOES NOT RECEIVE NECESSARY FINANCING
THROUGH THE TAX CREDIT PROGRAM.
CASE NAME: LAUREL TREE APARTMENTS
WHEREAS, the City of Carlsbad has identified a need to provide housing
which is affordable to households of low-income in a variety of different
forms throughout the City; and
WHEREAS, a project, known as “Laurel Tree Apartments” is an approved 138
unit family apartment community located at the northeast corner of the future intersection of
Alga and Cobblestone Roads in the Southwest Quadrant which as a combined project, these
units will satisfy the inclusionary housing obligations of two developments also located in the
Southwest Quadrant - Poinsettia Shores (Kaiza) and Mariner’s Point (Lennar) which will
provide housing affordable to low income households; and .
WHEREAS, the City of Carlsbad’s comprehensive financial analysis of the
approved apartments or a condominium project alternative concludes that City financial
participation in the project is necessary, appropriate and exceeded by the public benefit
received by the City; and
WHEREAS, the affordability level and the unit mix of the condominium project
alternative is consistent with the City of Carlsbad’s Housing Element objectives, Consolidated
Plan, and Inclusionary Housing Ordinance.
CC RESO NO.
PAGE 1
WHEREAS, as recommended by the Housing Commission, allowing the
! MAAC Project to immediately access the developer contributions for purchase of the subject
~ property for the projects, and supporting the development of affordable for-sale
condominiums as an alternative to the Laurel Tree Affordable Apartments in the event that
the apartments do not receive necessary financing through the Tax Credit Program, and is
consistent with the affordable housing goals and objectives established by the City of
Carlsbad; and
NOW, THEREFORE, BE IT HEREBY RESOLVED by the City Council as
follows:
1. The foregoing recitations are true and correct.
2. The City Council continues to support the approved Laurel Tree apartment
project as the preferred option for development according to existing, approved agreements,
including the application for Tax Credits in June 1997 and hereby reconfirms its commitment
of $700,000 in financial assistance for the project from the Redevelopment Agency’s Low and
Moderate Income Housing Fund ($500,000) and the City’s Housing Trust Fund ($200,000).
3. Alternatively, if Tax Credits are not received and the apartment project,
therefore, remains infeasible for development, the City Council supports the option of
developing at least 135 affordable for-sale condominiums, subject to subsequent City
development reviews and approvals, which will satisfy the inclusionary housing
requirements of the private housing developers Lennar and Kaiza.
4. The City Council hereby APPROVES the following actions related to the
Laurel Tree Apartments and the condominium option, if necessary due to an inability to
obtain necessary funding for the apartment project:
a. Confirm commitment of $700,000 of financial assistance, subject to
approval of remaining required financing for the project.
CC RESO NO.
PAGE 2
- A
b. Contributing developers (Kaiza and Lennar) may make payments in the
total amount of $3.4 million and be granted release from the
inclusionary obligations, per agreements with the City.
C. Allow MAAC Project, the non-profit housing developer, to use
contributions developer payments ($3.4 million) to acquire the land for
the subject project upon notification that its June 1997 Tax Credit
application is unsuccessful, and to pay other development costs, as
appropriate.
d. Subject to consultation with, and approval by the City Attorney,
authorize the City Manager to approve all appropriate and required
agreements with MAAC which provide for the land and remaining
balance of developer payments to be conveyed or returned to the City
of Carlsbad if either the apartments or condominiums do not proceed to
construction by December 31, 1997, subject to an extension of time
granted by the City Council.
PASSED, APPROVED, AND ADOPTED at a regular meeting of the City
Council of the City of Carlsbad, California, held on the 8th day of July ,1997, by the
following vote, to wit:
AYES: Council Members Lewis, Finnila, Nygaard, Kulchin, and Hall
NOES: None
ABSENT: None
ABSTAIN: None
ATTEST:
ALETHA L. RAbTENKRANZ, City Clerk \
(SEAL)
CC RESO NO.
PAGE 3
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Lie City of Cadsbad Housing & Redevelopment DepaHment
A REPORT TO THE HOUSING COMMISSION
Item No. 2
DATE:
SUBJECT:
Staff: Evan E. Becker
Housing 6 Redevelopment Director
MAY 8,1997 .
LAUREL TREE APARTMENTS - Request for
recommendation to City Council regarding options for
proceeding with the development of the Laurel Tree
Apartments affordable housing project.
I. RECOMMENDATION
That the Housing Commission ADOPT Resolution No. 97-005, recommending to
the City Council specific actions regarding the development of the Laurel Tree
Apartments affordable housing project.
II. PROTECT BACKGROUND
The Laurel Tree Apartments is a proposed 138 unit family apartment community
located at the northeast corner of the future intersection of Alga and Cobblestone
Roads in the Southwest Quadrant. The project is an affordable community
which represents a Combined Inclusionary Housing Project as defined in the
City’s Inclusionary Housing Ordinance. As a Combined Project, the Laurel Tree
Apartments will satisfy the inclusionary housing obligations of two
developments also located in Southwest Quadrant - Poinsettia Shores (Kaiza)
and Mariner’s Point (Lennar). Per agreements with the City and the non-profit
developer, the MAAC Project, these two developers are committed to providing
a total of $3.4 million in subsidy to the Laurel Tree project. Also according to the
agreements, if the Laurel Tree project does not proceed, the developers are
required alternatively to purchase Affordable Housing Credits in the Villa Loma
project at the established price. Currently this would be a total payment of
approximately $4 million.
The Housing Commission, City Council and Housing and Redevelopment
Commission have taken a number of previous actions regarding Laurel Tree
. LAUREL TREE APAftTMENlS- . . . ‘. -. MAY 8,1997
PAGE 2 I . . I
Apartments. These actions have included all required development approvals,
the agreements with Kaiza and Lennar regarding their participation in a
Combined Project, and City financial commitments to the project in the amount
of $700,000.
Current Project Status
Laurel Tree has been unsuccessful in three attempts to secure its primary subsidy
financing - the Low Income Housing Tax Credits. The Housing Commission and
City Council have been kept abreast of the changes in the State Tax Credit
allocation system which has been and continues to be very unresponsive to the
San Diego region. Despite strong efforts, including those of the City Council, the
system continues to be inequitable in its allocations. Currently the system is
simply a lottery for projects meeting certain threshold requirements.
While everything remains in place for Laurel Tree to proceed with the exception
of the Tax Credit allocation, one key aspect of the project is of concern. The
option on the Laurel Tree site held by MAAC expires on May 28,1997. It has
been extended twice previously and it may not be possible to extend the option
again.
The City agreements with the participating developers, Kaiza and Lennar,
require the project to commence and the developer payments to be made by
September 30, 1997, otherwise the developers are obligated to purchase
Affordable Housing Credits in lieu of supporting the Laurel Tree project. The
City, at its sole discretion, has the ability to grant time extensions, under these
agreements.
MAAC ProposaI
The MAAC Project is very committed to continuing an aggressive effort to get
the Laurel Tree Project financed and under construction. Not including the
City’s financial commitment, the project has over $4 million in other subsidy
commitments in place. In addition, MAAC and its partners have invested
$300,000 in the project to this point.
In a letter attached as Exhibit “A”, MAAC has proposed a Laurel Tree strategy
consisting essentially of the following:
0 Call in the letter of credit financial commitments from Kaiza and
Lennar and utilize a portion of the funds to immediately exercise the
option to purchase the Laurel Tree site. Retain the remainder of the
funds for project construction and permanent financing.
. * LAUREL TREE APARTMEWS -4 * . ‘, -. MAY 8,1997
‘* PAGE 3 I I
0 Apply once again in the June, 1997 round for Tax Credits. If
successful, proceed as planned with the development of the Laurel
Tree affordable apartment community.
0 If unsuccessful in receiving a Tax Credit allocation, proceed with the
development of Laurel Tree as a for-sale condominium community
using committed subsidy funds for “silent second” financing for low-
income buyers.
Analysis of Options
The following options, including the MAAC proposal, are presented with a
summary of the key considerations related to each:
OPTION 1 - THE MAAC PROPOSAL
As described above, this option secures the project site which may be at risk. It
allows another opportunity to access the Tax Credit allocation and learn the
results quickly. These steps give the project another opportunity to proceed as
planned, i.e. as a very affordable apartment community with amenities such as a
day care facility. This outcome would satisfy the participating developer
obligations as planned, with their payments of $3.4 million going into the project.
This would constitute the end of the developers’ obligations. Since the
developers’ alternative to supporting Laurel Tree is to purchase Affordable
Housing Credits, this option preserves the Credits for sale to others along with
the opportunity to generate income for other projects over and above the
developers’ payments to Laurel Tree.
There would be the continuing risk of not receiving the Tax Credit allocation. In
this case, the condominium alternative would go forward. While no alternative is
without risk, MAAC has presented preliminary information indicating that this
alternative would be feasible at affordable price levels with no additional
subsidy (see Exhibit “B”, Condominium Proforma). While the for-sale affordable
condominiums do not serve as high a need priority as the more affordable
apartments, they are a Housing EIement objective as well as an acceptable
product for inclusionary purposes. A condominium alternative would require
additional planning and approvals.
OPTION 2 - CONDOMINIUM DEVELOPMENT
This option is to proceed immediately to caIl in the developers’ payments,
purchase the site and proceed immediately to the condominium alternative
without pursuing the Tax Credits necessary to develop the project as apartments.
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LAUREL TREE APARTMUrCPL
MAY 8,1997
PAGE 4
In terms of securing the site and calling in the developer subsidy, this option
mirrors Option 1. However, with this Option the approved apartment project is
abandoned along with any attempt to obtain the Tax Credits through the June,
1997 lottery. Giving up the apartment plan sacrifices a significant investment to
this point as well as a product which serves the City’s highest need priority. The
condominium project would require additional work, but appears to be a feasible
alternative. This product is consistent with City Housing Element goals and ,as
proposed, is acceptable for satisfying the inclusionary obligation.
OPTION 3 - DEVELOPER PURCHASE OF AFFORDABLE HOUSING
CREDITS
If nothing is done to move the Laurel Tree project forward, (e.g., the site is no
longer available) the City has the option of requiring Kaiza and Lennar to
purchase Affordable Housing Credits in the Villa Loma project.
This option would result in payments from the developers of approximately $4
million for Credits, as opposed to the $3.4 million in support they would have
been required to provide directly to the Laurel Tree project. While this option
appears to produce greater revenue that could be used for affordable housing,
the City loses the future ability to sell $4 million in Credits to others. Therefore,
this option has a “value” of $4 million in comparison to a potential value of $7.2
million under options 1 and 2 in which the developers’ payments to Laurel Tree
($3.4 million) are in addition to the potential revenue of $4 million from the sale
of Credits to others. Perhaps the more important consideration under this option
is that a “monetary” solution does not build housing units, and the difficult task
of finding a project opportunity still remains.
111. SUMMARY
The Laurel Tree project is at a crossroads which requires some decision as to how
to proceed. The two key goals tied to this decision are 1) the goal of producing
needed affordable housing and 2) the goal of satisfying the inclusionary housing
obligations of two developers. It is desirable to accomplish both of these goals in
the most effective way.
Given the significant investment to date in the Laurel Tree project by all the
involved parties and the priority need that the currently approved project will
serve, staff believes the MAAC proposal deserves strong consideration.
Essentially, the proposal secures the site, allows an additional (and fairly
immediate) opportunity for the approved project to proceed, and offers a
reasonable “back-up” alternative in the event the current plan does not receive
financing. The key actions in implementing this option are to call in the
developer payments to effect the land purchase and structure that transaction
with MAAC. As this option is proposed, neither the approved apartment plan
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. . IAIJREL TREE APARTMEW?- -. . . MAY 8,1997 . . PAGE 5
nor the alternative condominium plan require any additional financial
commitment from the City.
ATTACHMENTS
1. Housing Commission Resolution No. 97-005
2. Exhibit “A” - Letter from MAAC
3. Exhibit “B” - Condominium Proforma
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HOUSING COMMISSION RESOLUTION NO. 97-005
A RESOLUTION OF THE HOUSING COMMISSION OF
THE CITY OF CARLSBAD, CALIFORNIA TO
RECOMMEND TO THE CITY COUNCIL THE APPROVAL
OF AN OPTION TO ALLOW THE LAUREL TREE
DEVELOPMENT TEAM/MAAC PROJECT TO RECEIVE
PAYMENTS OF APPROXIMATELY $3.4 MILLION FROM
THE PRIVATE DEVELOPERS PARTICIPATING IN THE
COMBINED INCLUSIONARY HOUSING PROJECT
KNOWN AS THE LAUREL TREE APARTMENT PROJECT
IN ORDER TO ACQUIRE PROPERTY AND CONTINUE
EFFORTS TO OBTAIN PROJECT FINANCING AND TO
RELEASE THE DEVELOPERS (KAIZA AND LENNAR)
FROM FURTHER INCLUSIONARY HOUSING
OBLIGATIONS.
WHEREAS, the Housing and Redevelopment Commission has
previously approved a financial commitment of $700,000 of redevelopment
housing set-aside and Housing Trust funds to the Laurel Tree Apartment project
conditioned upon the project receiving the necessary land use approvals and other
financing; and
WHEREAS, the Laurel Tree Apartment project has previously
received necessary local entitlements from the City of Carlsbad; and
WHEREAS, the Laurel Tree Apartment project has previously
received necessary land use approvals from the California Coastal Commission;
and
WHEREAS, the Laurel Tree Development Team has made three
unsuccessful attempts to obtain needed financing through the Low-Income
Housing Tax Credit Program to finance the subject project; and
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HC Resolution No. 97-005
Page 2
WHEREAS, the purchase option on the land identified for the subject
project is due to expire on May 28, 1997 and the MAAC Project needs to
maintain site control to make an additional application for Low-Income Housing
Tax Credits for the affordable apartment project; and
WHEREAS, the Laurel Tree Development Team is committed to an
aggressive effort to obtain the project financing and begin construction on the
Laurel Tree Apartment Project but needs assistance from the City of Carlsbad to
allow for immediate purchase of the property for the subject project through the
use of a portion of the $3.4 million committed to the project from the private
developer participants known as Kaiza Poinsettia Corporation and Lennar Inc.; and
WHEREAS, the Laurel Tree Development Team has agreed to
exercise the existing purchase option on the site selected for the Laurel Tree
Apartment Project and then transfer title to the property to the City of Carlsbad as
a condition of the financial assistance agreement between the City and the Laurel
Tree Development Team and lease the property back from the City for the
purposes of project development and operations; and
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HC Resolution No. 97-005
Page 3
WHEREAS, the Housing Commission believes that the City should
assist the Laurel Tree Development Team to ensure site control by receiving
payments via letter of credit financial commitments or through other acceptable
means, in the amount of $3.4 million, from Kaiza and Lennar and to utilize a
portion of the funds to immediately exercise the option to purchase the Laurel
Tree Site and transfer the remainder of the funds to the City for eventual use in
project construction and permanent financing; and
WHEREAS, if the Laurel Tree Development Team’s pursuit of tax
credit financing is again unsuccessful, the Team has agreed to proceed with the
actions necessary to develop the Laurel Tree for-sale condominium project, which
will include no less than 135 units of affordable housing.
NOW, THEREFORE, BE IT HEREBY RESOLVED by the Housing
Commission of the City of Carlsbad, California, as follows:
1. The above recitations are true and correct.
2. The Housing Commission hereby recommends that the City Council
release Kaiza and Lennar from further inclusionary housing obligations
once they provide their payments in the amount of $3.4 .million to the
Laurel Tree Project to allow for the immediate purchase of the site for
the Laurel Tree Apartment project and to establish a fund for
construction and permanent financing for the project.
3. The Housing Commission recommends to the City Council that the City
Manager, or his designee, upon consultation with the City Attorney be
authorized to execute documents required for the City of Carlsbad to
release the subject developers from their lnclusionary Housing Obligation
immediately upon action from the developers to provide their financial
commitment to the Laurel Tree Project .
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HC Resolution No. 97-005
Page 4
4. The Housing Commission recommends to the City Council that the City
Manager, or his designee, upon consultation with the City Attorney be
authorized to execute documents required for the City of Carlsbad to
assume ownership of the property for the Laurel Tree Project, upon
purchase by the MAAC Project, and to accept the remaining funds from
the developers (Kaiza and Lennar) to establish a construction and
permanent financing fund for the Laurel Tree Project.
5. The Housing Commission recommends to the City Council that if the
Laurel Tree Development Team finds that tax credit financing is not
available to the Laurel Tree Apartment Project that the MAAC Project be
permitted to proceed with the actions necessary to process the Laurel
Tree for-sale condominium project, which will include no less than 135
affordable housing units, utilizing the existing site and financing
commitments previously approved, including the developer payments
from Kaiza and Lennar.
PASSED, APPROVED, AND ADOPTED at a regular meeting of the
Housing Commission of the City of Carlsbad, California, held on the 8th day of
May, 1997, by the following vote, to wit:
AYES: Schlehuber, Wellman, Scarpelli, Escobedo, Rose, Latas,
Walker, Noble
NOES: None
ABSENT: Calverley
ABSTAIN: None /1Lp MICHAEL SCH EHUBER, Chairperson
Housing Commission
ATTEST:
EVAN E. BECKER
Housing and Redevelopment Director
Community Builders m 619-595-7077 m April 14, 1997 0 827 PM u 214
,- - EXHIBIT A
Metropolitan Area Advisor Committee 170 Fourth Avenue l San Diego, CA 92101 l (619 595-?072 l (619) 595?tY7’7
)vlEblORAh’DC~
DATE:
TO:
April 14, 199?
Evan Becker, City of Carlsbad
FROM: Sylvia Martinez
k44AC Project
RE: Laurel Tree Apartments - Affordable Housing Project ____________-___________________________-----------------------------------------------------------------
This memo serves to provide you with information and recommendations for dealing with the recent news regarding the Laurel Tree Apartments project. We are grateful for your desire to look at the alternatives and we commit ourselves to remaining your active partner in this process.
Status --
1. The Laurel Tree Apartments project drew #109 out of a possible #l?l in the CTCAC
lotterv held on April 8th in Sacramento. Thus, although the project met or exceeded all requiiements of the project, is is highly unlikely that it will receive funding in this highly competitive allocation process.
2. The current purchase option agreement for the property only allowed one more attempt to acquire CTCAC funding. The option expires on the date of the formal CICAC award
meeting (currentIy projected as 5i28@7), unless escrow has been opened before that date.
3. The current agreements v.+h the developers (Kaiza and Bramalea) are open until 9130!9?.
Both developers will need to renew their letters of credit on or near 6/30X.
4. The AHP ($552:000) and HOME ($548,248) awards are still available under a scenario that proposes a fourth CTCAC application on June 30, 1997.
5. h44AC has incurred substantial predevelopment expenses in bring this project thus far. These costs include the expense of processing the changes in zoning, general plan, coastal commission zoning etc, as well as the costs of designing the project until it met the qualifications of the HOME, AHP, and CTCAC applications. The total cost of these expenses is approximately $3OO,OC0. Bank of America Community Development Bank extended $9O,ooO of this funding in the form of a recourse loan The Local Initiatives Support Corporation extended $100,080 of this funding in a recourse loan, and S25,OOO in a recoverable grant. Other funding has been paid by k&UC, Catellw, or is in the form of
accounts payable to our vendors.
Priorities for a Solution:
1. Land The first priority is to stabilize the land so that other alternatives can be acted upon. Without a purchase or other stabilization of the land. all of the partners - the City. MAX (and its
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Community Builders m 6 1 g-595-7077 @j April 14, 1997 0 8:27 PM 0 3/4
creditors), Catellus, Kaiza, and BramalealLcnoar suffer substantial loss of opportunity and
expenses.
2. Creation of Affordable Housing
The best of all solutions is one that ends with the creation of a minimum of 135 affordable units that satisfy the inclusionary housing goals of the City. Such a solution also resolves the
difficulties of Kaiza and Bramalea and meets the mission goals of h44AC.
3. Recovery of Predevelopment Expenses
An important prioriv is to find a solution that keeps MAAC! whote for its good faith effort to
advance funds and incur debt on this project. In many other cities, it is the locality that
incurs some or all of this predevelopment risk Since the City of Cadsbad has incurred no
predevelopment risk up to this point, it would be preferrable to obtain a solution where
M4AC has the utmost opportunity to regain its losses.
4. Interests of Kaiza and BramaleaLennar
Kaiza and BramaleaiLennar are strongly interested in maintaining the co&unit funding under the current Laurel Tree scenario. Because of their patience and good will in working with us
thus far: it is important to try to keep them at this lower, but substantial: level of
commitment.
ALTERNATIL’ES
An important piece of any alternative is for MAAC to act on its purchase option agreement before the expiration date, and to attempt an additional CTCAC application. This application
would be due on 6!30!9?, and we can expect that the lottery would be held on or near
7i 1597. This is a very short time frame.
In the event that Laurel Tree received a favorable number, the project could proceed as
planned. In the event that the project receives an unfavorable number, one of the following solutions could be acted upor~
J . Purchase property with proceeds from KaizaiBramalea current letters of credit. MA4C
uses residual to create a silent second oroeram within an affordable condominium proiect on
&he site.
pros: cant:
135 tits of affordable housing created
Predevelopment costs may be recovered Kaiza/Bramalea pay preferred amount
and arc relieved of on going obligation
2. Immediate resale of the property to a third party. at a price that ensures recoveexf advanced pmpment funds.
Ror: cau: Redevelopment costs may be recovered No affordable housing aeated Kaiza/Bramalea forced to pay alternative amount
l&4AC is strongly interested in pursuing the Condominium alternative, combined with a lease!purchase
program that may allow us to exceed even the projected affordability levels. We believe that this
alternative provides the best of all solutions for the various parties. However, the City needs to remain
an active supporter by allowing Kaiza and BramaleaiLennar to complete their inclusionary housing obligation at the Laurel Tree rate, under either scenario.
Community Bulders
. . .
M 61 g-595-7077
.L
w Apt-d 14,1997 Q) 8:27 PM
-
u 4/4
Please see the attached pro forma for an idea of how the condominium alternative might pencil out. For
many reasons, this could be a very attractive project for the City to consider. Please note that the proposal is for townhome-style condominiums.
M-UC, along with Bank of America and LISC, would like to meet with you, the City Manager, and
other City officials as soon as possible regarding the condominium alternative. We also need to inform
Kaiza and BramaleaiLennar regarding our plans very soon. Time is very much of the essence.
Please let us know your thoughts as soon as possible.
CATELLUS RESIDENTIAL GROUP
LAUREL TREE CONDOMINIUMS PROFORMA PROFIT ANALYSIS
MAY 16,1997
I I I 1
GENERAL INFORMATION PLAN 1 PLAN 2 PLAN3 / WTDAVG PSF
I I I I !
Plotting / # of Units
% Mix
Square Footage
’ Value Ratio
Onsites/SF
~FINANCL~L ANALYSIS:
[Revenue:
Base Sales Price
View Premiums Affordability Deduction
Total Revenue
1 costs:
1000 Land 1500 Bonds and Fees
2000 Offsite Improvements
2300 Common Area 2500 Engineering
Finished Lot Cost
/ 20 / 87 28 i
14.8% ( 64.4% 20.7% j 950 I 1,200 1,375 / 1,199
$147.37 1 $133.33 $133.09 j $134.92
S45.00 ! $45.00 $45.00 / $45.00
! I
I
$140,000 1 $160,000 $183,000 1 $161,807
0 0 01 0 (31,187) (32,184) (38,984) (33,447
108,813 I 127,816 I 144,016 128,361
I I I 10,370 j 10,370 10,370 I 10,370 19,754 I 19,754 19,754 j 19,754
1,148 i 1,148 1,148 I 1,148
01 01 01 0 2,259 I 2,259 / 2,259 2,259
33,532 33,532 ) 33,532 33,532
3000 Onsites - Direct
3900 Lot Improvements
4000 Construction Indirects
5000 Project Development 5900 Overhead
6000 Financing
6800 Property Taxes
7000 Model I Sales Complex
8000 Sales and Marketing
Contingency
Total Costs
42,750 ~ 54,000
15,384 18,071
6,600 6,600
6,617 6,617
9,604 11,281
7,390 8,681 451 530
I 1,758 2,065
I 5,285 6,208
I 5,343 ; 6,276 I 134,715 ’ 153,861
Redevelopment Set Aside - (5,185) (5,185 Developer Participation - L (25,389) (25,389
Net Costs 104,141 j 123,287
d !-
I -.- .._____-
N_ET PROFIT 34,672 s4,529 _----_-.
L
i
L
t
L
61,875 53,967 20,362 18,148 6,600 6,600
6,617 ; 6,617
12,711 i 11,329
9,781 8,718
597 I 532
2,327 I 2,074 6,995 ! 6,234 7,071 / 6,303
168,468.; 154,054
(5,lSqj
(25,389);
(5,185
(25,389
137,894 : 123,480
S6.122 S4,880
TOTAL
135
100.0%
161,900
$134.92
$45.00
$134.92 S21.844,OOO
0.00 0 (27.89: (4,515,319:
107.03 17,328,681
8.65
16.47
0.96
0.00
1.88
27.96
1,400,OOo
2,666,856
155,000
0 305,000
4,526,856
45.00 15.13
5.50
5.52
9.45
7.27
0.44
1.73
5.20
5 26 L
128.46
7,285,500
2,450,OOO
891,000
893,293
1,529,423
1.176,940
71,837
280,000 841,615
850,852
20,797f17
(4.32 (700.000 (21.17 (3,427,500
102.96 16,669,817
4.07 S658,864
EXHlBlr;B
c
7 ! I / !
i- I i- c I i
I
I 7 j I
%
SALES :
I
/ ~ I
I !
I 1
~ :
126.1% /
0.0% /
-26.1%, :
100.0% -1
I 8.1% I
15.4% i : 0.9% :
0.0% j 1.8% 8 ;
26.1%
42.0%
14.1%.
5.1%;
5.2% I ~
8.8% I 6.8%
0.4%
1.6%
4.9%
4.9% -f
120.0%
-4.0%
-19.8% -
96.2% ’
3.80% ’
-__- ___
c:Liata\projeasUaurrlti-lti t\ k4
F =
,&EL TREE CONDOMINIUMS PROFORMA ASSUMPTlONS ‘IMAY 16, 1997 C:\DATAWROJECTSILAURELTRWl~SAL.‘AQt4
R-my 092lo AM
---_ PROPERlY SUMMARY [SOURCES AN0 USES -__
Numbef Of units 135 units USES: eeLL!on law AWS 7.620 Net 11.500 Gmsr Pmpuly Acquisition 10,370 1.100.~ MN 17.3 dU 11.7 dU thd cons- 63,656 11320.575 63.92
emdew 66% AiEfL~VCo~~~lS 9,320 I,256206 7.T? Pam’& L Fees 20.742 2.600.189 17.30 -- 11,329 1.629.423 9.45 IDEw~OPMENTSC~~EDULE MukuinQ cab 6,724 1.177.636 7.27
~lnrvno h 0th~ son cost5 9,713 1.311.218 6.10 pmpd CmmenI Year Jan-97 new T&l Pmjac, Us*, 154.054 20.797.317 126.46
Stmi Pmdawbpmmt My-97 SW PmdwebpmNIt (Months) *pndw SOURCES:
Acquisitbn ol LmW sap.97 aal con- Loan 74% LTV 16.236.202 FinallciilQ Palbd WnthS) 1 llnmca Mealftq Costs paid in EsaDW 433.815
Prnmct Financina Corndoted W-97 lunds oamsus Land coflblbutbn 0 siik-k fwbd ihkwis) F,“irh Sim I SW MOdeIS
Lag betwuen Models 6 Phase I Start start Phase I unit Cwlsbwtkan Total Conrfn&bn Phasas Months per ConsltucJjon Phase T&l Cc,“sb”cttml Period (MonthS)
cmllnbti~~cam Of occuPancY stirior sa1.s
UN1 salas w Manm Monlhs par suer phase 1 To(el Sales Pedod (Months) 24 sales Pmperty seu-out Aup2WOr&ul
3 sitwmrk Jaw96 mcdels 0 Isa Jan-96 pn;sel
4pnuu 7 phase 3omstr
JuC2DOO finish Au@96 ull
6.0 absorb 5.6
Camsus Land Mmit&atbn CateSur Equ6y - up hunt CUalhh EqUy - construction matching Fbambl Padnor Equity - constr. matching oevr(opsr Parwpa(ion - up hwlt Redevelopmen Set Aside - up fmnt
T&l Conrtmct,on Sources
Radewlopmmt Sat As* - back end Equity R~ayment to Cabllus
Tat4 Pmjoct Sources
Agency Homebuyer Dormpayment Ass~stanu, T&a, Redevelopment Agency Psniapabon
0 0 0 0 0 0 0 25,369 3,427.sca 5.185 7w.m 20.797.317
0
: 20.797317
0 5.165 7w.owo
FINANCING ASSUMPTlONS lSALES EXPENSEASSlJMPTlONS .HUO MEDIAN INCOME GUIDEUNES
A&E Loa” Inkmst Rate
Cmsvuction Loan Intemst Rate
LIEOR 6.00%
Point Margin 2.W%
*xuss covwaQs 0.25% Consbucbon Loan Points h Fees
O.W% 6.25%
1.50%
Bmkers Commwbnr Escrow Closing Carts Transfer Tax Wamnty Resmve Litigalbn Reserve
0.00% $1.600 1.10% SO O.W%
SAN DIEGO COUNTY. effectWe Decambw27.1998 Family Size: Medm Income: 1 Person 2 Person xz 3 Parson S43:7w 4 Person 545.800 Maximum Lou, D Market Ww 60.0% LTV Maximum Loam ta Tot4 Cost 65.0% LTC Construmon L0m Payoff Pmmium 110.0%
Finanti PuVm Pmfermd Return O.W%
tiOMEBUYEFl FINANCING ASSUMPTiONS
Mottgaga Lpan Intamst Rate 7.75%
PMI wrcentaoa mte O.W%
5 PenoIl 552.500 6 Person s56.400 7 Parson WO.3W 6 Person 364.200
Finanu Pvblu PmM Pmticipabon 0.00% Htird lnsunnu Rte O.W% Fiimu Pamw PmM met 0 Pmpmty Tu rate 1.20% Fllance Parbw IRR 0% NA Monthly HOA dues S1W.W E*r Pmfd Pafticipawn O.W% Honlebuyer Duwnpaymsnt S.W%
Avwago Parsons par Bedmom 1.5
Housing Pmt as % of Income 33%
!UN,T MIX L PRlClNG
PRODUCT: !!fLau eL4tu eLANA raTAL
^%YWY / (VW kw 0 : 0 0 0 0 0 0 70.00% (lm 2 3 : 0 0 80.00% :/ 14 (IN 16 76 25 0 0 : 121
lW.oo% (modWU*) 0 0 0 0 0 0 0 0
IL
0.0% 10.4% 66.6%
0.0% MUM Rata 0 0 0 0 0 0 0 I 0 0.0% - P
0%
9%
O.W%
Total Units % Mix BedmOms Bathmms
UNIT SQUARE FOOTAGE TOTAL SQUARE FEET
Bass MuhU v*w View Pnmum Adjusted Market Value Market Value .I % of AMI
Mmlm VahB per Sf
20 14.6% 2.;
950 19,ow
s140.000 0.0% s14o.wo
99.26% 5147
67 64.4% 3 2.5
1.2w 104.400
s1w.ooo 0.0% s1w,ooo
97.04% $133
20.7z 2.:
1.375 36.500
S163.000
0.0% Sl63,WO 66.55% 5133
0
0.0% 0 0.0
0 0
so 0.0% so 0.00% so
0.0: 0.0: 0.0:
0 0 0 0.0 0.0 0.0
0 0 0 0 0 0
so so so 0.0% 0.0% 0.0% so so so 0.00% 0.00% O.W% so so so
04 0.0% 1; 0 0.0
0 0
so 0.0% so O.W% so
135 lW.O%
1.133 avg. St 161.900 tohlsf
S161.807 avQ.bare 0.0% so S161.607 av~.vslw
1135 avg.psf
Appraised Valw p+r Unit Avg. Premium per UnP Adjusted Apprned Valw
s14o.wo s1w,ooo
s,4o.d s1w.cci
5170,cca
s170,cci
so 0 so
so 0 so
s159.111 appmlrNi
5159.111 avg. adj.
[PROJECT PROF,TABlUlY
UNIT SALES PRICE 50% Alfordabh hmv lov)
e!Ab!l E!lAlYz
so so
70%AfbrdaMa ilowi 94.957 111.6is 60% Aflwdabia O-4 110.353 129.656 100% Alfwdabh (moderUe) 0 0 Market Rata 0 0
TOU Saks Pmcnds S2.176.261 s11.119.961
Redwalopnrmt Pmcmads (u~hont w back- Tou( Pt+Ct D.WkPfMnt CpSb (!Ws DW.@.r Ovedwd) Dwebpef Ovoti~ad 6 ConUW Management Fees
Fmancml Partner Pmfwmd Return Payments
PROJECT SURPLUS (SHORTFALL) PROFlT
Project Pmfd %
Intemal Rate of Rahnm
eLAu nxALmcunil
so so so so so so so so 126.276 0 0 0 0 0 1.575.366 112.526 146.145 0 0 0 0 0 15.753.295 130.193 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
s4.032.459 so so so so so Sl7.326.661 Sl26.Y31
S4.127.500 30,574 (SlQ.267.894) (142.725) (sl.529.423) (11.329) so 0
856.664 4.660
3.60%
NA
- ~ : -- __ -
.LKtRE- CONDOMINIUMS -__ R”NTA7-rze-A. 05116197
OS:50 AM
,CONSTRUCTtON ASSUMPTIONS I
~CONSTRUCTION I SALES PHASE TIMING
CONSTRUCTtON Duration SALES Duration
aact Eiaisho s&t Eioishlmonthsl
Sitework 10/01/97 01/01/98 3
Models 01/01/98 OS/O1198 7 Models 08/02/98 0
Phase 1 01/01/98 08/01/98 7 Phase 1 08/01/98 02lo1199 6
Phase 2 07101 I98 ozo1/99 3 Phase 2 02JOll99 08/01/99 6
Phase 3 01101/99 08101 I99 Phase 3 08/01/99 02/01/2000 6
Phase 4 07101199 02/01/2000 7 Phase 4 02/01/2000 07/01/2000 5
Build Out 12lOll99 07/0112000 7 Build Out 07/01/2000 08/01/2000 1
Total 10/01/97 07/01/2000 33 08lOZ98 08/0112000 24
UNIT MIX BY CONSTRUCTION PHASE ____ -- -_--~ --________-.
-
Models
Phase 1
Phase 2
Phase 3
Phasa 4
Build Out
Total Units
%
1 0
5 5 ii
5 22
4 20
0 0
0 0
0 0
0 0 0 1
20 87
14.8% 84.4%
1 0
7 0
7 0
7 0 6 0
0 0
0 0
0 0
0 0
0 0
28 0
20.7% 0.0%
0 0 0 0 0 0 0 0 0
0 0 0
0 0 0
0 0 0
0 0 0
0 0 0 0 0 0 0 0 0
0
0.0% 0.0: 0.0:
-j 24L 0 0.0%
01 1.5%
01 2 25.2%
25.2%
:i ii 25.2%
01 30 22.2%
0; 0 0.0% oi 0 0.0% 01 0 0.0%
Oi 0 0.0%
Oi
!;---------07% O’l 135 units
0.0% :,
HOMEBUYER AFFORDABILITY ANALYSIS
Bedrooms
Bathrooms
Maximum Family Size (Persons)
Median Income Level
Mortgage Calculation
Affordability Percentage
Sales Price
Downpayment Assistance
Buyers Cost
Homebuyer Downpmt
Mortgage Amount
Homebuyer Monthly Costs
2
2.0
3.0
43,700
2
70%
94,957
0 94,957
3
2.5
4.5
50,550
3
80%
129,858
0 129.658
4
2.5
8.0 0.0 0.0 0.0 0.0 0.0 56,400 0 0 0 0 0
2 3 3 6 8 6
70% 80% 80%
126,276 0 0 0 0 0 0 0 0 0 0 0 126.276 0 0 0 0 0
(4,748) (6,483) (6,314) 0 0 0 0 0
90,209 123,175 119.962 0 0 0 0 0
Mortgage 7.75% 846 882 859 0 0 0 0 0
Ph.41 o.ooYo 0 0 0 0 0 0 0 0
Hazard Insurance 0.00% 0 0 0 0 0 0 Property Taxes 1.20% 95 130 126 0 x 0 i 0
HOA dues 100 100 100 0 0 0 0 0 Total Monthly Cost 841 1,112 1,088 0 0 0 0 0
Affordability Calculation
Total Annual Cost
Housing Cost Coverage
Supportable Income Level
% Affordability
10,095 13.345 13.028 0 0 0 0 0
33% 33% 33% 33% 33% 33% 33% 33% 30,590 40,440 39,480 0 0 0 0 0 70.00% 80.00% 70.00% 0.00% 0.00% 0.00% 0.00% 0.00%
. HOUSING COMMISSION MINUTES
May 8,1997
Page 4 DRAFT
Catholic Charities has secured a bank loan. This in partnership with the loan is what Catholic Charitie
the owners. Sister DuVall pointed out that it costs Catholic Charities $10,000 per year to operate La P
tremendous benefit to the community. In addition, Catholic Charities is included in the Ci
fits in the services that have been outlined. Catholic Charities is currently carrying a $170,
according to Sister DuVall, and it is not financially possible for them to enter into a deal op
deficit for the City, and then have to repay the loan. Sister DuVall does not antici a revenue-rich project
and expects it to be revenue-negative. Sister DuVall pointed out this project is c the Housing Trust Fund
and access by non-profits. She added that Catholic Charities is willing to make ent and recognizes that it
will have to do some serious fund raising and grant writing to operate this fa She stated that Catholic Charities
needs to have $10,000 forgiven and needs to have the loan forgive d of time so not to add to its current
deficit.
ACTION: Motion by Commissioner duly seconded, to adopt Resolution No. 97-004
recommending approval o stance for the purpose of acquiring property located at
2472-2478 Impala Driv Posada de Guadalupe Homeless Shelter.
, Rose, Scarpelli, Schlehuber, Walker, Wellman
otion by Commissioner Calverley, and duly seconded, to amend condition #2 on
2 of Resolution No. 97-004 deleting the forgiveness provision.
ABSTAIN:
Escobedo, Noble, Rose, Scarpelli, Schlehuber, Walker, Welhnan
None
2. LAUREL TREE APARTMENTS - Request for recommendation regarding options for proceeding with the
development of the Laurel Tree Apartments Affordable Housing Project.
Mr. Becker reviewed the background of the request and stated that the option on the site of the Laurel Tree property is
expiring. It has been extended a number of times, but it is expiring May 28, 1997, which puts the project in jeopardy.
In order to proceed with any kind of strategy--tax credits, obtaining the financing to do the project, etc.--some action
has to be taken to retain the site. Staff is recommending what the non-profit developer--the MAAC project--has
proposed, which is to take action to acquire the site. With control of the site, MAAC can apply again for the tax credit
fmancing, which would allow the project to go forward as the Commission had approved it and supported it in the past
with Housing Trust Funds as well as tax increment financing. However, if getting the Low Income Tax Credit is
unsuccessful, Staff is proposing a backup option, which is to process the project as a for-sale condominium project
which would still meet the City’s Inclusionary requirements and would be feasible according to what analysis MAAC
has done.
For the benefit of the new Commissioners, Mr. Becker gave a review of the Laurel Tree Project. Mr. Becker stated that
the three players involved in the Laurel Tree Project are MAX project, which is the non-profit developer of the
project, and two developers--Kaiza Poinsettia Corporation and the Lennar Corporation--who are satisfying their
affordable housing requirement through the Laurel Tree Project. They are doing that for their respective projects,
which are Poinsettia Shores and Mariner’s Point--two projects located in the southwest quadrant. The developers are
tied into the project through financial participation and have letters of credit posted with MAAC to provide $3.4 million
of financing for the Laurel Tree Project. The agreement the City has with them acknowledges that agreements are in
place that are satisfactory to MAAC to provide the money, and in return for providing support to the Laurel Tree
Project, they will satisfy their affordable housing obligation. It is a three-party situation with the City mainly in an
. HOUSING COMMISSION MINUTES
May 8,1997
Page 5
agreement regarding the Inclusionary obligations of the developers, and the developers in a relationship with MAAC
helping the Laurel Tree Project to come about. In addition, there is other financing coming into the project by way of
tax credits and other subsidy sources that are committed to the project. The Affordable Housing Program (HP) and
Home Funds (a HUD program) have already committed over $1 million to the project. The City’s direct support that
has been approved by the Commission and City Council for the project is $700,000; $500,000 from Low Income
Housing Set Aside Funds from redevelopment and $200,000 from the Housing Trust Fund.
Mr. Becker went over the range of options being presented by MAAC to the Commission. The MAAC proposal
involves taking advantage of the developer payments or letters of credit that have been posted, and calling those in to
buy the land to be in a position to apply for tax credits again in June. In addition, there is a backup option in the event
that the tax credit support for the approved apartment project does not materialize. According to Mr. Becker, you
cannot get money if you do not have site control. In addition, taking the opportunity to apply for tax credits again
would allow the project to be financed as planned and approved as a department project. While this is the fourth round
of tax credits, it is coming pretty quickly on the heels of the last one. It preserves a great deal of investment already
committed to the project as approved, e.g., the million dollars in Affordable Housing Program money, HOME money,
goes away if this project as approved goes away. The project as approved is rated as the City’s highest need priority. If
this does not materialize, there is a legitimate, feasible backup that would be acceptable in the context of satisfying the
developer’s Inclusionary Housing obligations at affordable purchases as a condo project. The project would have to go
through processing and receive another set of development approvals. When the developers’ money is taken and the
letters of credit are cashed, the City will not get their money unless they are released from their obligation; which is
involved in all of these cases.
If nothing happens on the Laurel Tree site, the only other option for the developers under the City-developer agreement
is that they are forced to buy credits in the City’s Villa Loma Project. That would involve paying the going price,
which is about $30,00O/unit, and that would mean that they would pay to the City $4 million. The City would in effect
have a monetary solution to this. In other words, if Laurel Tree is abandoned, the City gets $4 million. The credits
would be sold. The 13.5 credits would no longer be available to sell to anyone else. If the developer money is
associated with Laurel Tree, the $3.4 million contribution, the City can also go ahead later and sell the credits and raise
the additional $4 million for other affordable housing projects.
On the range of alternatives, one that relates primarily to giving up in effect on the approved project and another
attempt at the tax credit financing, is to go to the condominium option and begin processing that right away. In terms
of actions, that still requires calling the developer payments in, releasing them from their obligation, using that to
preserve the site, and process the condo alternative right away. It does have the advantage of preserving the site for a
project. It looks to be a feasible alternative and MAAC has used the City’s acceptable purchase price limits at
approximately 70 to 80 percent of medium levels. Given that level of income being served, and it being
homeownership, it is certainly a Housing Element objective and it satisfies Inclusionary obligations, but it is a lesser
priority in terms of the Housing Element and the Comprehensive Plan. It would take additional processing, meaning
additional time. There would be lost investment and subsidy in the condo project, and MAAC and their partners have
significant dollars invested in the apartment design that would be lost. This has been a special project from the
standpoint of who has undertaken or shouldered the burden of pre-development expenses. The City has made a
commitment of money that goes in if the project happens: $300,000 or more has been invested by a combination of
MAAC, the local initiative support corporation (non-profit that provides seed money and pre-development expenses to
non-profit developers), and Bank of America. That is essentially money that would be lost in this in addition to the
other subsidies already mentioned. The release of the developer obligations would happen under this alternative; and
since this does develop a project on the site using the developer’s $3.4 million, the City still is not selling affordable
housing credits. Those are still preserved to sell to someone else.
Mr. Becker said that the last alternative is to abandon the project, because if nothing is done and the option lapses, as it
does automatically on the day the announcement is made that the City is not getting credit, then there will be no project
HOUSING COMMISSION MINUTES
May 8,1997
Page 6
on the site. The only alternative the City has then is to force the developers under the agreement to buy the affordable
housing credits. In that case, the financial plus is that the City gets $4 million, but the credits are no longer available to
sell to others. More importantly, no units are constructed, and the issue that is companioned with this is that the City is
“chasing” another project somewhere and going through all this again to try to find a good site, a good developer, and
put all those ingredients together again to do an affordable project. The net loss of potential income means that instead
of selling credits to somebody else for the 4 million over a period of time and having 3.4 million in subsidy put into the
Laurel Tree Project, the City is just getting $4 million. That’s 4 million versus potentially 7.4 million.
Staff feels that the MAAC proposal is a reasonable one. The thing in particular that it does is to preserve the
opportunity for the City to keep the project that has been approved with its large amount of subsidy and which has been
deemed very desirable by the Commission and the Council. Mr. Becker reported that HUD has chosen to take the
Laurel Tree Project and advertise it on their WWW home page as one of the best practices/projects of any city in the
country (HUD also mentioned the Villa Loma Project). In their minds, having the private folks tied into the project
with the developers, and using the different funding sources the City is using, is a pretty strong and creative thing for a
City to be able to do.
Chairman Schlehuber asked if there were any questions of Staff
Commissioner Walker asked if the project does not get the tax credits in June, does it automatically go to the condo
option.
Mr. Becker responded that yes, it would go to the condominium alternative. If at that point, given that the City will
own the site, if there was a desire on the part of the Housing Commission and the City Council to discuss another
alternative, that would certainly be possible. If the City takes the money from the developers and releases them from
their obligation, there is a risk the City will not get a project done. The worst case is that the City still has their 3.4
million and Laurel Tree just didn’t happen, and the City can still sell affordable housing credits, which is not a bad
outcome. Even if the tax credits are not forthcoming, there is a good alternative that has a high degree of certainty.
Commissioner Latas asked if the MAAC project would be renewed after it expires on May 28.
Mr. Becker responded that the renewal is doubtful; but the alternative is to buy the property, which is the prime
element in the recommendation. In terms of the mechanics, MAAC would buy the property. Previously approved as a
part of this is the City having title to the property, similar to the way Villa Loma was done with a long-term ground
lease to the project. There would ultimately be a transfer of the property to the City; however, MAAC holds the option,
therefore, they are the ones who would execute it with the money that they call in with the developers.
Commissioner Calverley commented that the estimated finished lot cost with no fees is $47,633, which is more than
twice the viable market price. She asked what the chances were of allowing the developer to come in, put money in a
pot, work with MAAC to find another piece of property that is being sold at market value, and be able to put this
product up for less money. Commissioner Calverley feels the property is overpriced.
Mr. Becker said that Sylvia (MAAC) will address the costs. In terms of the overall total costs, generally, those are in
line with the City’s prototype costs used for the size of units involved. Mr. Becker said it is the costs that are in there
that take you from the unimproved site to the figure of $47,633. The $10,000 per unit is simply the approximate per
unit cost for the land.
Commissioner Calverley asked if the City can pull the letters of credit, continue to work with MAAC, and work at a
different site.
. . HOUSING COMMISSION MINUTES
May 8,1997
Page 7
Mr. Becker responded that it is possible to work with a different site. All the developer needs is a release, and they are
counting on investing $3.4 million to get that. The money is not necessarily tied to the Laurel Tree site, although it is
the approved project. If the issue is a cost issue in their proforma, they will address that.
Commissioner Latas asked if the City can apply for tax credits without blue prints.
Mr. Becker responded that the program requires all local approvals of a project.
Chairman Schlehuber opened the public testimony and invited the applicant to speak.
Ms. Sylvia Martinez, MAAC Project, 1770 Fourth Avenue, San Diego, CA 92 101 addressed the Commission about
some of the issues brought up by the Commissioners. Ms. Martinez described the project as a service-enhanced project
with 138 units for small and large families in Carlsbad. It will have an on-site subsidized child care center that will
serve 40 to 50 children, as well as a service center with things like a computer learning center, on-site counseling,
recreational activities for children, and other social services for adults and children.
Regarding the tax credit program, Ms. Martinez stated that the next application opportunity will be some time in
December of 1997 or January 1998. MAAC is willing to keep working on the project; however, the two developers,
Kaiza and Bramalea have made their financial commitment in the form of letters of credit, and their annual letters of
credit; so every year they need to be renewed. Constantly renewing these obligations has become part of the obstacle.
The City’s obligation has held strong; but there is no guarantee these other obligations (the HP, the HOME) can be
renewed in perpetuity because everyone wants to see their money go to the purpose for which it is served. MAAC is
committed to doing the project, and as a non-profit, MAAC’s priority is to do this kind of affordable rental project that
serves the under-served population of working low-income families.
Ms. Martinez said that with the condo option, MAAC would maintain the number of units to be fair to the developers
who paid per unit to participate in this program. The City is looking at getting approximately 138 units of affordable
housing and MAAC feels an obligation to meet the City’s requirements and the developers’ requirements.
In terms of potentially looking at another site, Ms. Martinez said that there are a couple of issues involved. One is that
the Inclusionary Housing Program that the City of Carlsbad has put in place is quadrant-based; so MAAC would be
trying to find a piece of property within the existing quadrant. To site the project completely different woule destroy
the element of integration that is an important part of the City’s Inclusionary Housing Plan. This particular quadrant is
seeing a lot of building right now, so availability on the same size and scale could be a problem.
In terms of the costs, Ms. Martinez stated that the proforma shows MAAC is meeting the affordability requirements for
the Carlsbad project and MAAC is trying to maintain as much as possible some of the design approvals and scale
already received for the apartments.
Ms. Martinez stated that MAAC has competed three times under three different criteria for the tax credit option. The
first time MAAC scored too low; the second time MAAC was on the waiting list; and the third time MAAC received an
unfavorable lottery number in a lottery system. What is different about June 30? The rules are not changing this time.
Ms. Martinez explained that five out of the seven San Diego projects did receive funding this round. MAAC analyzed
and found two reasons why those projects received funding, even if they had lottery numbers not as good as Laurel
Tree’s. First, there is now a geographic allocation that gives San Diego County access to a set of money. Seven
applications from San Diego County were put in during the last round, and in the next round, MAAC anticipates that
only three applications will be put in; therefore, the odds are even better at accessing that San Diego County allocation.
Second, the five projects were all similar in that they did not request State tax credits as well as Federal tax credits. The
two that did not receive funding, including Laurel Tree, requested State and Federal tax credits. It appears that the
State tax credits were a real barrier to getting funded. A much larger project than Laurel Tree in San Marcos with a
HOUSING COMMISSION MINUTES
May 8,1997
Page 8
worse lottery number than Laurel Tree is getting funding because there was a provision made not to use State tax
credits. MAAC is committed to removing those State tax credits in two ways: (1) MAAC is reassessing its developer
fee and taking some of it out; (2) MAAC is being more aggressive in terms of the investment into the tax credits.
Recalling Villa Loma, Ms. Martinez mentioned that Edison Capital invested in the tax credits. MAAC is getting the
word out that it needs a lot of money for the tax credits because it needs to make up the deficit that has resulted from
not having the State tax credits. MAAC feels it will be successful with this.
Ms. Martinez said that MAAC is working with the land owner and thinks that if he sees commitment from the Housing
Commission and the City Council to look at some of these long-term options, that he will work with MAAC on
extending to meet the June 30 deadline. The owner has had the option open with no money down for two and one-half
years and it is time to make a commitment. Ms. Martinez added that the condo backup plan gives some certainty in the
event that the tax credits do not come through. It tries to provide an alternative that meets the participating developers’
requirements, meets the City’s requirements, and also makes a creative use of the property.
Chairman Schlehuber asked if there were questions of Ms. Martinez.
Commissioner Welhnan asked if MAAC would be the developer of the condominium option. Ms. Martinez responded
that yes, and that MAAC has done both attached and detached affordable homeownership products. MAAC has been
working with Catellus Residential Group, and they would probably stay in as well.
Commissioner Welhnan asked if there was anything the citizens of Carlsbad could do to help with the coming round of
tax credits to be successful. She also asked if MAAC would try again in December for the tax credits if they are
unsuccessful in June; or would this Resolution automatically force MAAC to do the condominium development.
Ms. Martinez responded that the most important thing is to stabilize the property because without the property there are
no options. It’s a matter of being able to have the opportunity to go forward. In response to the second question,
Ms. Martinez said the Commission could take this up again in July, and MAAC would be open to keep trying because
it is their priority also to create the affordable rental project.
Commissioner Scarpelli asked if the other social aspects would remain with the condo option.
Ms. Martinez responded that because of the additional requirements to provide certain amenities for the condominium
project, including splitting the lots and adding garages, the child care center would be lost. Some of the funding would
also be lost that is internal to the project. With a rental project, there is operating income every year that helps sustain
those services including the child care center. With the sale of a product, there is some loss of control. In addition,
Ms. Martinez said the on-site service center would have to be looked at because, again, there would not be an on-going
operating stream.
Commissioner Calverley asked if there has been an appraisal on the property and a layout on the condominium option.
Ms. Martinez responded that there has not been an appraisal of the property. MAAC has done a density study and the
condos will probably be stack flats, not town homes, which is a marketing issue rather than a feasibility issue.
There being no other persons desiring to address the Commission on this topic, Chairman Schlehuber declared the
public testimony closed and opened the item for discussion among the Commission members.
Chairman Schlehuber and Commissioners Scarpelli, Escobedo, Noble, and Welhnan expressed their support for the
project with all its amenities.
HOUSING COMMISSION MINUTES
May 8,1997
Page 9
ACTION:
VOTE:
AYES:
NOES:
ABSTAIN:
Motion by Commissioner Noble and duly seconded, to adopt Resolution No. 97-005
recommending to the City Council the approval of an option to allow the Laurel Tree
Development Team/A&UC Project to receive payments of approximately $3.4 million from the
private developers participating in the combined Inclusionary Housing Project known as the
Laurel Tree Apartment Project in order to acquire property and continue efforts to obtain
project financing and to release the developers (Kaiza and Lennar) from further Inclusionary
Housing obligations.
8-O-O
Escobedo, Latas, Noble, Rose, Scarpelli, Schlehuber, Walker, Welhnan
None
None
- Approve final guidelines of the
satisfy the Inclusionary Housing
Evan Becker st guidelines Staff has put together reflect what the Housing Commission approved at the
cker said the City Attorney does not want anybody to think that there is any right created by
the guidelines, and the
they adopt the guidelines.
units, the City Attorney has be made that ultimately it is the decision of the Council to accept
second dwelling units as an altemati oses of the Inclusionary obligation. Lastly, Mr. Becker said the City
Attorney’s office wanted it to be made th respect to the size of the units, that there is some flexibility
with guidelines. The City Attorney wa g the Commission does in terms of recommendations to the
City Council. In addition, Mr. Becker state portant that the Commission knows how the Council feels
about the guidelines so they do not get applied
Chairman Schlehuber asked if there were any questions o
There was some discussion regarding Mr. Becker’s comments.
There being no other persons desiring to address the Commission on c Chairman Schlehuber declared the
public testimony closed and opened the item for discussion among the C
Commenting on the monitoring guideline, Commissioner Wellman said that she
representative sample rather than just 20 percent of the units in order to obtain enou
ike Staff to monitor a
VOTE:
AYES:
NOES:
ABSTAIN:
Housing Commission guidelines for the development of second dwe
of Carlsbad as related to satisfaction of the Inclusionary Housing requirement
developers.
8-O-O
Escobedo, Latas, Noble, Rose, Scarpelli, Schlehuber, Walker, Welh-nan
None
None
ANNOUNCEMENTS:
None
. . . -
i: ..j:: AU RECEIVED
MAAC .@&JECT C',&;+ymy . . . . . . .._ i... . . . . . ..i . . . . . . . . . . . . . . .
A MULTI-PURPO@ SOC&L SERfICE AGENCY L d i. .:j; .:- ..g:; :: - ..-. jg; . . . . . . ../.................. . . . . . . . . . . . . . . . . . . . . . . . . . . . ::: :-::
COMMUNITY DEVELOPMENT DEPARTMENT qz
1770 Fourth Avenue, San Diego, CA 92101 L&d&..- *ro
July 2, 1997
Mayor Claude Lewis
City of Carlsbad 1200 Carlsbad Village Drive Carlsbad, CA 92008
Re: Laurel Tree Apartments Affordable Housing Project
Dear Mayor Lewis: -
I write to provide information regarding the upcoming agenda item regarding the Laurel
Tree Apartments, which is scheduled for a July 8, 1997 hearing.
In this agenda item, we ask the Council for approval of certain steps that form a backup
plan in the event that we do not receive tax credits in our fourth attempt, scheduled for July 15, 1997. The most critical step is to allow the purchase of the Laurel Tree property, so that alternatives can be explored regarding the development of an affordable housing project on the site.
The landowner of the property has been extremely patient in holding his land, with no - remuneration, for the past three years. In the meantime, the development team of MAAC
and Catellus have invested a considerable amount of time and money into the
predevelopment of the project in gaining land use approvals on the site. If the current
purchase option agreement expires in late August, as is scheduled, both the Laurel Tree
development team and the City lose the opportunity to realize their investments and create
affordable housing.
The backup plan provides that the City, at no out-of-pocket cost to itself, draws down the existing letters of credit from the inclusionary housing developers (Kaiza Poinsettia and Lennar), to purchase the land and create a fund for the development of an affordable housing project on the Laurel Tree site. At that point, several options can be considered,
including a fifth tax credit application. conversion to an affordable homeownership program, or alternative financing.
It is important to reiterate that this is a backup plan, to protect the options of both the City and the Development Team. We have reason to believe that this fourth try at tax credits will prove successful, as \ve have revised the financing to eliminate the state tax credit request which held us back last round. San Diego County now has a regional allocation
which allowed us to receive financing for four projects last round, more than we had received in the past two years combined. However, we want to be prepared for every eventuality, especially where it concerns a project that has received such high support from the Council in the past.
Richard Juaru Charles W. Flscks Sylwa Manincz Jcnmfcr Somers i:/\x
(6 19) 59.5-7070 (619) si-7071 (619) 595-7072 (619) 595-7073 (619) 35.7077
SAN DtF?CX3 COWSORTiLW & f’RlVATE iNfWSTRY cC>LMX> SAN DIEGO
m~ca~oFlAL(u COUNTY CAP
Letter to Mayor Lewis July 2, 1997 Page Two
I know the Carlsbad housing program received national recognition from HUD recently for the creative financing of the Villa Loma project, as well as Laurel Tree. Such recognition does not come to cities that are not flexible, forward-thinking, and responsive to the challenges of meeting the housing needs of their citizens. I congratulate you and hope that your support of this project will continue your history of efforts to be on the forefront of
the affordable housing field here in San Diego County.
In the event that we do not have a chance to meet before the meeting, please do not hesitate
to contact me if you have further questions or concerns. Thank you again for all your past and current support of this project.