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HomeMy WebLinkAbout2012-11-06; City Council; 21028; Carol Harding Acquisition Affordable Housingrpov^ CITY COUNCIL AGENDA BILL 17 AB# 21,028 Title APPROVAL OF FINANCIAL ASSISTANCE FOR THE CAROUHARDING ACQUISITION AND REHABILITATION AFFORDABLE HOUSING DEVELOPMENT DEPT. HEAD(g^-^ MTG. 10/23/12 Title APPROVAL OF FINANCIAL ASSISTANCE FOR THE CAROUHARDING ACQUISITION AND REHABILITATION AFFORDABLE HOUSING DEVELOPMENT CITY ATTY. DEPT. HNS Title APPROVAL OF FINANCIAL ASSISTANCE FOR THE CAROUHARDING ACQUISITION AND REHABILITATION AFFORDABLE HOUSING DEVELOPMENT CITY MGR. RECOMMENDED ACTION: That the City Council adopt Resolution No. 2012-235 APPROVING a request to provide financial assistance to the partnership of C&C Development and Irvine Housing Opportunities in the form of a residual receipts loan of $7,408,000 from the Housing Trust Fund, and to authorize the Housing and Neighborhood Services Director in coordination with the City Attorney to negotiate and prepare the related loan documents for execution prior to acquisition and rehabilitation of 42 dwelling units (21 duplexes) to be rent-restricted for low income households on property located in the historic Barrio neighborhood ofthe Village Area. ITEM EXPLANATION: An affordable housing partnership - C&C Development and Irvine Housing Opportunities - recently contracted with a private property owner to purchase 21 duplexes (42 units total) with addresses on Carol Place, Harding Street and Magnolia Avenue (site map attached) in the historic Barrio neighborhood ofthe Carlsbad Village Area. The development partnership intends to acquire the duplexes, substantially rehabilitate them and then rent-restrict all ofthe units to provide affordable housing for lower income households. The partnership has requested financial assistance from the City of Carlsbad for the subject project. The 3.39 acre site is located in close proximity to Jefferson School and is located within the general boundaries of 1-5 (east), Carol Placen"amarack Avenue (south), Jefferson Street (west) and Magnolia Avenue (north). The proposal is unique because it is not being built as a result of a master development inclusionary housing requirement. The units provided will be above and beyond those anticipated as part ofthe inclusionary housing program. The development consists of a 42 existing rental units (2 bedroom/1 bath), single story with one car garages. The units are in need of substantial exterior and interior rehabilitation. Attached are renderings of the exterior improvements proposed for the units. Proposed amenities to be added include: enhanced landscaping for each unit, a community garden feature, a children's play area, and a new community room with laundry facilities and an on-site manager's office. FOR CITY CLERKS USE ONLY. COMMISSION APPROVED ACTION: DENIED • CONTINUED TO DATE SPECIFIC CONTINUED TO DATE UNKNOWN ^Nov. 6, 2012 • CONTINUED • RETURNED TO STAFF • WITHDRAWN • OTHER-SEE MINUTES • AMENDED • / Page 2 The project will have the following affordability levels: • 5 units for households earning 50% of the San Diego County Area Median Income (AMI); • 36 units will be affordable to households earning 60% of AMI; • 1 unit will be for an on-site property manager. Financial Assistance As part of the project financing, the Developer is requesting that the City provide a residual receipts loan in the rounded amount of $7,408,000, or $176,380 per unit. Staff is proposing that the Housing Trust Fund be the source of funds used ifthe Council approves the requested loan. In addition to the City's financial participation, the Developer Intends to obtain equity through the tax credit program and the issuance of tax exempt bonds. The financial details of the subject project are provided below. Development Partnership C&C Development is a full service Real Estate Development Company with over 30 years of experience. The principals and senior management staff of C&C Development take a "hands on" approach to all aspects ofthe real estate development process: acquisition, entitlement, financing, construction, management and ownership. Irvine Housing Opportunities (IHO) is a non-profit organization originally formed in July, 1976 to assist the City of Irvine to produce affordable housing and meet its related obligations. IHO has expanded Its boundaries of service and its staff provides considerable experience and expertise in the development and long term management of affordable housing for lower income households. Recent experience includes projects in the cities of San Marcos, Fullerton, Santa Ana, Yorba Linda and Orange. Uses and Sources of Funds The total cost ofthe proposed project is estimated to be $15.5 million, inclusive ofthe value of the land and improvements ($8,450,000). Based on a detailed review ofthe costs, the total per unit cost of $369,119 is generally consistent with more recent affordable multi-family developments within the City when consideration is given to the higher land cost west of 1-5 and the required relocation and other rehabilitation and financing costs. The following chart provides a breakdown of the project costs, or uses of funds. USES OF FUNDS Expense Total Amount Per Unit Cost Land (incl. escrow costs, etc.) $8,450,000 $201,190 Construction/Rehabilitation $3,122,888 $74,354 Indirect/Soft Costs $1,722,381 $41,009 Developer Fee $1,600,000 $38,095 Development (incl. reserve & contingency) $291,510 $6,940 Lender Fees, Interest & Financing Costs $316,288 $7,530 Total Uses of Funds $15,503,067 $369,118 Pages The following chart provides a breakdown of the permanent sources of funds for the proposed development. The sources of funding forthe proposed project are 1) proceeds from the sale of tax credits to a limited partnership; 2) tax exempt bond proceeds; 3) residual receipts loan from the City of Cartsbad; and 4) deferred developer fee & general partner equity. Source Total Amount Per Unit Tax Credit Investor Equity $4,374,692 $104,159 Tax Exempt Bonds $3,312,250 $78,863 City Contribution $7,407,158 $176,360 Deferred Developer Fee/Other $408,967 $9,737 - 'r> <-M^M'-^W^I^ Financial Assistance Documents As proposed and if approved, the City assistance ($7,408,000) will be provided in the form of a residual receipts loan secured by a note and deed of trust. The outstanding principal and accrued interest on the City loan will be amortized over a fifty-five year period and repaid from surplus cash in equal annual installments comprised of principal and interest. In the event that there is not adequate cash surplus to pay an annual installment, the outstanding balance shall accrue with simple interest at 3% per annum. The terms of the City assistance is the same loan structure that has been utilized for each previous affordable housing project developed in the City of Carlsbad. In order for the project to receive the $7,408,000 loan, the Developer is required to enter into loan and regulatory agreements with the City of Cartsbad. As one of the actions set forth within this report, the City Council is being asked to authorize the City Manager and Housing and Neighborhood Services Director in coordination with the City Attorney to negotiate and prepare the required loan documents for execution by the City and the Developer. The required documents are explained further below: 1. Loan Agreement states the terms and conditions relating to the City's loan. 2. Regulatory Agreement records the terms of affordability and the operational requirements for the project. 3. Promissory Note is executed by the Developer and expresses their intent to repay the loan. 4. Deed of Trust is recorded against the property to secure the City/Agency's interest in the subject property and related improvements. It is important to also note that the City will ultimately be required to subordinate the subject documents to the senior lien holder(s). If approved, the attached resolution authorizes the City Manager, or designee, to execute subsequent loan documents and subordination agreements. While the loan and related subordination documents will not return to the City 3 Page 4 Council for review and approval. Staff will take the necessary steps to insure that the documents provide the City with adequate security, notice and cure ability. The loan and subordination documents will be reviewed by, and be subject to final approval by the City Attorney, acting as legal counsel for the City Council. HOUSING COMMISSION RECOMMENDATION ON FINANCIAL ASSISTANCE At their meeting on October 16, 2012, the Housing Commission reviewed the request from the Developer for financial assistance in the rounded amount of $7,408,000. The Commission recommended (5-0) that the City Council approve the loan from the Housing Trust Fund for the noted project. STAFF RECOMMENDATION The proposed request for financial assistance was reviewed by the Housing Policy Team (stafO, and by the City's Economic Development Team. The Teams are both supportive of the financial assistance from the City and the project itself. The proposed project will provide for the following public benefits: 1. Physical enhancement of a deteriorating neighborhood in the Historic Barrio neighborhood ofthe Village Area; 2. Rehabilitation of existing dwelling units to improve livability for the residents; 3. Diversity of housing opportunities for lower income households; 4. Addressing social issues in the area (such as those caused by crime and poverty) by enforcing rules, selecting good tenants, having an on-site property manager, increasing disposable income through reduced rents, and providing economic development opportunities to enhance the quality of life for residents living in the units; 5. Additional units to count for affordable housing development in the Housing Element; 6. Encouraging future new development and upgrading the area further, as well as providing for desirable amenities to support economic development (micro-enterpnse loans for new resident businesses) and encouraging a sustainable community (community garden). ENVIRONMENTAL REVIEW The project is exempt from the California Environmental Quality Act (CEQA) per CEQA Guidelines Section 15194 - Affordable Housing. The financial assistance from the City of Carlsbad will be used by the developer to acquire existing residential units and rehabilitate them, and then to rent-restnct the units to be affordable to lower income households. This proposed project was reviewed pursuant to the California Environmental Quality Act (CEQA). The City Planner has determined that the proposed project is exempt from additional environmental review per Section 15194 (affordable housing exemption) of CEQA because the project site is 1) no larger than five acres, 2) is in an urbanized area, and 3) the project site has been previously developed for qualified urban uses (residential). The project also consists ofthe construction, conversion, or use of residential housing consisting of 100 or fewer units that are affordable to low-income households, and the developer will legally commit to ensure the continued availability and use of the housing units for lower income households for a penod of at least 30 years at monthly costs deemed to be affordable rent for lower income households. Page 5 FISCAL IMPACT: The financial assistance in the form of a $7,408,000 residual receipts loan will be provided from the Housing Trust Fund, which has a current undesignated fund balance of approximately $18.3 million. These funds may be used for affordable housing purposes only; these are not general fund monies that may be used for other services or projects. EXHIBITS: 1. City Council Resolution No. 2012-235 . to approve financial assistance for the Carol/Harding Acquisition and Rehabilitation Affordable Apartment Development 2. Project Location Map 3. Proposal Letter from Development Team 4. Project Rehabilitation Concept Illustrations/Photos 5 10 11 12 13 1 RESOLUTION NO. 2012-235 2 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, TO APPROVE A RESIDUAL RECEIPTS ^ LOAN AND APPROPRIATE HOUSING TRUST FUNDS IN THE AMOUNT OF $7,408,000 TO PROVIDE FINANCIAL ASSISTANCE TO THE PARTNERSHIP OF C&C DEVELOPMENT AND IRVINE 5 HOUSING OPPORTUNITIES FOR THE ACQUISITION OF FORTY- TWO (42) EXISTING RENTAL UNITS (21 DUPLEXES) TO BE 6 RESTRICTED FOR LOW AND MODERATE INCOME AFFORDABLE HOUSING WITHIN THE NORTHWEST QUADRANT 7 OF THE CITY OF CARLSBAD. 8 APPLICANT; C&C DEVELOPMENT AND IRVINE HOUSING OPPORTUNITIES 9 WHEREAS, C&C Development and Irvine Housing Opportunities (IHO) have partnered and have proposed to acquire 21 duplexes rental residential units (42 total units), complete some minor health and safety improvements, and convert them to rent-restricted affordable housing for low and moderate income households on Harding Street, Carol Place and Magnolia Avenue in 14 the historic Barrio neighborhood ofthe Village Area within the Northwest Quadrant ofthe City 15 of Carlsbad; and 16 WHEREAS, C&C Development and IHO have requested that the City of Carlsbad provide financial assistance in the form of a property acquisition loan that will convert to a residual receipts permanent loan to assist in the development of a new, higher density affordable housing rental complex upon the property at a future date yet to be determined; and WHEREAS, C&C Development and IHO have proposed and will commit to obtain additional financing (from a private lender) to complete the property acquisition and initially provide for minor interior improvements (approximately $15,000 to $20,000 total) to said 42 units to address immediate health and safety issues, and overall clean-up of the exterior of the 25 properties; and 26 WHEREAS, C&C Development and IHO have proposed and will commit to income and 2'7 rent- restricfions on the existing 42 residential units upon close of escrow and will also proceed 28 1 19 20 21 22 23 24 1 immediately with designing a higher density rental development and applying for development 2 permits and required financing, with no additional cash assistance from the City of Carlsbad, for ^ the new construction of a larger apartment development at a future date yet to be determined; and WHEREAS, the public benefits ofthe proposed project include physical enhancement of a deteriorating neighborhood in the historic Barrio neighborhood of the Village area through clean-up of property and minor rehabilitation of existing dwelling units to improve the health and safety of the residents, and to add to the diversity of housing opportunities for low and moderate income households within the City of Carlsbad through the rent restrictions to be set 1Q forth in the regulatory agreement between City and developer; and 11 WHEREAS, the proposed acquisition will support the City's desire to encourage the 12 construction of additional new units to be affordable to low and moderate income households 1^ and to increase the inventory of low and moderate income affordable units within the City at a future date in time; and WHEREAS, on the 16th day of October, 2012, the City of Carlsbad Housing Commission did hold a public meeting to consider the request for City financial assistance for the acquisition of said 42 lower income-restricted affordable housing apartment units by the affordable housing developer partnership of C&C Development and IHO, and subsequentiy 15 16 17 18 19 2Q recommended approval of the request for assistance; and 21 WHEREAS, the City Council did hold, on the date of this resolution, a public meeting 22 and encouraged public participation prior to its consideration of said request for City financial 23 assistance for the acquisition of said 42 rental units (21 duplexes) to provide for low and moderate income-restricted affordable housing apartment units by the affordable housing 25 developer partnership of C&C Development and IHO; and 26 WHEREAS, at said public meeting, upon hearing and considering all testimony, if any, 27 " 28 1 of all persons desiring to be heard, said City Council considered all factors relating to the 2 request for financial assistance; and, ^ WHEREAS, the City Council intends to approve a residual receipts loan and the appropriation and expenditure of $7,408,000 from the Housing Trust Fund for the purposes of providing loan proceeds to the partnership of C&C Development and IHO to assist in the acquisition of 42 existing rental units within the historic Barrio neighborhood ofthe Village Area and to subsequently rent restrict said units for affordability to low and moderate income persons/families, and with the commitment from said development partnership that efforts will IQ be immediately initiated to complete the acquisition of all properties required for a larger project 11 at a later date, and design and process applications for land use entitiements and other permits 12 and financing for this larger affordable rental project to be constructed at a later date on the ^ ^ property to be acquired with this assistance. NOW, THEREFORE, BE IT HEREBY RESOLVED by the City Council of the City of Carlsbad, Califomia, as follows: 1. The above recitations are true and correct. 15 16 17 18 2. The request for City financial assistance is consistent with the goals and objectives of the City of Carlsbad's Housing Element, CDBG/HOME Consolidated Plan, and the Carlsbad General Plan. 20 3. The request for City financial assistance will assist the affordable housing developer to acquire a total of 42 existing two bedroom rental units (21 duplexes) 21 within the historic Barrio neighborhood of the Village Area and subsequently income and rent restrict them to be affordable for low and moderate income households. The project, therefore, has the ability to effectively serve the City's housing needs and priorities as expressed in the Housing Element and the CDBG/HOME Consolidated Plan 24 25 4. That the City financial assistance to acquire the rental units noted above is approved subject to the developer's proposal and agreement to move forward in a 26 diligent manner to complete acquisition of all properties required to develop a larger, higher density affordable rental development (of approximately 140 rental 27 28 1 units or thereabouts) on the identified site no later than eighteen months from the date ofthe approval ofthe loan agreement with the City or such other time period 2 as determined by the City Council, and then to subsequently design and obtain all required permits and financing to construct said larger, higher density affordable ^ rental project within a reasonable period of time as determined by the City Council and set forth within the loan agreement. 4 5 5. That the City Council authorizes the City Manager, or designee, including the Housing and Neighborhood Services Director, in coordination with the City 6 Attomey to negotiate and prepare all loan documents related to provision of the City financial assistance to fund the subject residual receipts '7 acquisition/permanent loan to the partnership of C&C Development and Irvine Housing Opportunities to provide for the subject low and moderate income- ^ restricted affordable housing project through acquisition of existing rental units, ^ and to retum said documents to the City Council for review and authorization to execute prior to close of escrow on said property. 10 That the City Council authorizes the City Manager, or designee, to execute 11 subsequent subordination agreement(s) subordinating the City's Regulatory Agreement and Deed of Tmst to the Deed of Tmst for acquisition to permanent 12 lenders, as required, subject to review and approval by the City Attomey, and subject to the City Manager finding that no other private financing that does not require subordination is reasonably available, and the loan amount subordinated j4 to by the City does not exceed $3.2 million dollars unless good cause is demonstrated to the City Manager to exceed this amount. 15 .. That the City Council authorizes the Finance Director to appropriate and disburse 16 the loan proceeds as set forth within this approval in the total amount of $7,408,000, and appropriately account for the residual receipts permanent loan to 1^ the partnership of C&C Development and Irvine Housing Opportunities for the subject affordable housing project, and as set forth in the approved loan documents and upon confirmation that the developer has a letter of commitment 19 from a private lender to provide the balance of funds required for said property acquisition 20 " 21 //// //// 23 //// 24 //// 25 //// 26 //// 27 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PASSED, APPROVED, AND ADOPTED at a regular meeting of the City Council of the City of Carlsbad, Califomia, held on the 6* day of November, 2012, by the following vote, to wit: AYES: Council Members Hall, Kulchin and Blackbum NOES: Council Members Douglas and Packard ABSENT: None ABSTAIN: None ATT HALL, MAYOR ATTEST: ISTANT CITY CLERK (SEAft EXHIBIT 2- Initial Acquisition Total Land Area- Approximately 3.39 acres I I Properties Under Contract Owners Interested in Receiving Offers 33l09ap^^NJl7:i20y 7 10"«W elev 66 fl \0 EXHIBIT 3 IrvineHousingOpporrunities C&C Development July 24, 2012 Ms. Debbie Fountain City of Carlsbad Housing and Neighborhood Services Director Carlsbad, CA 92008 RE: Carol Place and Harding Street Duplexes Ms. Fountain, We are pleased to present an opportunity for C&C Development (C&C) and Irvine Housing Opportunities (IHO) to partner with the City of Carlsbad to acquire and rehabilitate the 21 duplexes located at Carol Place and Harding Street into a quality, affordable rental community. C&C and IHO propose partnering with the City to restrict 100% of the units to households earning between 50% and 60% AMI. We have included for discussion, a pro forma for the proposed project. The remainder of proposal contains detailed information concerning the project, its financing and C&C and IHO's extensive experience in successfully developing and managing similar affordable communities. We believe that this project and location, as proposed, provides for the following benefits to the City and its residents: The opportunity to assist in satisfying the City's affordable production requirements. • The acquisition and rehabilitation of problem properties by a qualified affordable housing developer. • The ability to prevent the existing owner from selling off the duplexes on a individual basis, which would create additional issues for the City and the surrounding neighborhood. • Provides for a quality living environment for future residents. We appreciate your consideration and look forward to the opportunity of partnering with the City. As you review this proposal, please do not hesitate to contact us with any questions. We welcome any insight or suggestions that you may have. Sincerely, Todd Cottle C&C Development PatWhitaker Irvine Housing Opportunities EXHIBIT Conceptual Elevation A NEW DORMER NEW BRICK WAINSCOT NEW GARAGE DOOR ' NEW WOOD SIDING NEW SHUTTER 1^ Conceptual Elevation B I NEW WOOD SIDING NEW BRICK WAINSCOT ' NEW GARAGE DOOR NEW SHUTTER NEW ENTRY DOOR <jSf%> CITY OF Tothemcfflbmofthe: Am C n A m CITY COUNCIL, ^ CARLSBAD ACM±:^M^A^CC Date40pcCity Manager Memorandum c. L^y(M»^toD*A. October 1,2012 . To: Lisa Hildabrand, City Manager ©JC- tJkh^ From: Debbie Fountain, Housing and Neighborhood Services Director -\ttZ% jL^6>«fi^p'^'^^**^ Re: NEW AFFORDABLE HOUSING DEVELOPMENT - ACQUISITION & REHABILITATION PROJEa; CAROL PLACE & HARDING STREETS; HISTORICAL ^ARRJOJiST^lCT^^ , The following information is provided to brief the City Council on a proposal submitted by a private developer to enhance the Historical Barrio District ofthe Village Area, and to renovate existing housing to provide affordable housing for lower income households. This project has received support from the city staff teams for affordable housing policy, economic development (including Urban Place), and Envision Carlsbad. Staff also discussed the project concept with a property owner (Mario Monroy) in the area who is supporting market rate development to ensure there is not a conflict ifthe City were to support and pursue this project. The property owner was supportive and felt that housing for all Income levels was still needed in the area. The next step is to present this project to the Housing Commission for review and a recommendation on October 11, 2012. It will ultimately be presented to the City Council by the end of October, 2012 for approval or other action. The developer intends to submit a tax credit application to the State on October 26*^ ifthe City Council approves the assistance for the project. The City of Carlsbad received a proposal from Irvine Housing Opportunities, a non-profit affordable housing developer/operator in partnership with C&C Development, a real estate development company specializing in affordable housing. The proposed project is to purchase 21 existing duplexes (42 dwelling units total) on Carol Place and Harding Street from the single owner and rehabilitate them. The partnership would then deed- and rent-restrict the units for low and very low income households for at least 15 years (to meet tax credit requirements). The partnership is willing to then move forward to demolish the existing units and construct a large multifamily (rental) mixed income development (replacing the lower income affordable units within the larger project); it is anticipated that the property could accommodate 140 to 175 units with the proposed new zoning under review and in process for increased density In the area and a street vacation. See attached exhibits for conceptual rehabilitated exterior elevations and a site map. The developer has also proposed a community garden feature and offered to implement a micro-enterprise loan program for its residents to help them start their own businesses or assist vvith buying equipment for a job (such as work boots, tools, etc.) The total project cost is estimated at $15.5 million to acquire and substantially rehabilitate the existing units. The development partnership has requested financial participation by the City of Housing & Neighborhood Services 2965 Roosevelt St., Suite B I Carlsbad, CA 92008 I 760-434-2810 I 760-720-2037 fax I www.carlsbadca.gov City Manager - Carol/Harding Memmo October 1, 2012 Page 2 Carlsbad in the amount of $7.4 million. This amounts to an initial subsidy from the City of approximately $176,000 per unit (for 42 units). Based on conversations with the developer, the ultimate city subsidy per unit would be approximately $42,300 to $53,000 per unit with the larger multifamily project. The developer has indicated that no additional cash assistance would be required from the City for the future (Phase 2) project. However, a street vacation would be needed and yvpuld be considered a city contribution for the project; this will allow the project to compete well in another tax credit application to obtain the needed equity to construct the new, larger development. The Council, however, will not be asked to approve the street vacation at this time. The Council will be asked to approve the $7.4 million in financial assistance to allow the first phase (acquisition and rehabilitation of 42 units) ofthe project to move forward in CY 2013. If approved, the current requested assistance will be funded from the Housing Trust Fund, which has a current cash balance of approximately $19.9 million. Staff is also researching the use of CDBG/HOME funds to finance a portion of the project. Benefits ofthe development include: • Physical enhancement of a deteriorating neighborhood in the Historical Barrio District of the Village Area; • Rehabilitation of existing dwelling units to improve livability for the residents; • Diversity of housing opportunities for lower income households; • Addressing social issues in the area (such as those caused by crime and poverty) by enforcing rules, selecting good tenants, having an on-site property manager, increasing disposable income through reduced rents, and providing economic development opportunities to enhance the quality of life for residents living in the units. • Additional units to count for affordable housing development in Housing Element; • Encouraging future new development and upgrading the area further, as well as providing for desirable amenities to support economic development (micro-enterprise loans for new businesses) and encouraging a sustainable community (community garden). This report is provided for information purposes at this time. No action is requested. The project will be presented to the City Council with a recommendation from the Housing Commission. If there are any concerns with moving this project forward, please let me know as soon as possible so that I may inform the developer to discontinue its efforts to purchase the property and move forward with this project. You, Fountain Cc: John Coates, Assistance City Manager Gary Barberio, Community and Economic Development Director ^ dwh- CITY OF ^ CARLSBAD Memorandum October 23, 2012 Agcncteltemi ^ For the memben of tht: CITY COUNCIL ACML^DCM^CAj^CCjj^ Dat«J2(fgClly Manager ?g> To: From: Re: Mayor and City Council Acting City Manager Request from Applicant for Agenda Item Continuance: Approval of a Residual Receipts Loan (AB 21,028) The City Manager's office has received a request from applicant Pat Whitaker, CEO of Irvine Housing Opportunities, to continue agenda item #21,028 Approval of a Residual Receipts Loan, to the regular council meeting of November 6, 2012. Please let me know if you have any questions about this information. Cc: Lorraine Wood, City Clerk Ron Ball, City Attorney Cynthia Haas, Deputy City Manager Kristina Ray, Communications Manager JC/src Date: ^ 2^ Distributio City Clerk Asst. City Clerk Deputy Clerk Book City Hall 1200 Carlsbad Village Drive I Carlsbad, CA 92008 I 760-434-2820 I 760-720-9461 fax I www.carlsbadca.gov CARLSBAD CITY OF Memorandum October 23, 2012 All Receive-Agenda Item # ^ For Ihe Infonnation ofthe: CITY COUNCIL . Asst. CM_ _CAL/CC iX DateJ^^g^fetyManagerj^ To: From: Re: Mayor and City Council Acting City Manager Approval of a Residual Receipts Loan (AB 21,028) - Additional Information Agenda Bill 21,028 is scheduled for your consideration on the Oct. 23, 2012 Council Agenda. Council requested additional information about this Item during the Monday, Oct. 22, 2012 briefings. The attached additional information is in response to those requests. Please find attached the following: • Answers to questions asked during the Oct. 22, 2012 briefings • Carlsbad Affordable Housing Developments Subsidy Matrix • Summary of Carol-Harding Acquisition and Rehabilitation Financial Assistance Request • PowerPoint presentation that was reviewed at the Oct. 16, 2012 Housing Commission meeting • Summary report of Oct. 16, 2012 Housing Commission meeting Please let me know if you have any further questions about the information. Attachments (5) Cc: Lorraine Wood, City Clerk Ron Ball, City Attorney Cynthia Haas, Deputy City Manager Kristina Ray, Communications Manager JC/src Date: /Q/CRS/^^ Distributkm: City Clerk _:: Asst. City Clerk : Deputy Clerk I Book : City Hall 1200 Carlsbad Village Drive I Carlsbad, CA 92008 I 760-434-2820 I 760-720-9461 fax I www.carlsbadca.gov Carol & Harding Acquisition and Rehabilitation Financial Assistance Request Questions St Answers Q. The process for approval ofthe requested assistance appears to be accelerated. What is the reason? A. The proposal was originally submitted last year (2011). However, the offer to sell the property was withdrawn by the seller. Therefore, staff discontinued discussions with the development team. The seller approached the development team again in June, 2012 (or thereabouts) and indicated that the seller was now prepared to sell the property again. The development team submitted their new proposal on July 24, 2012 to the City, and had an executed purchase agreement with KoyI Real Estate Ventures to acquire the 21 duplexes owned by the limited partnership. Before submitting to City Council for consideration, staff has been reviewing the project proposal, proforma and other project data, checking references, discussing the details with the development team, and taking other actions to ensure that the project is appropriate for Carlsbad and that the financial assistance Is warranted. It took a couple of months to complete the staff review and for staff to develop Its recommendations to the City Council. The seller indicated that escrow needed to close on the property by the end of December, 2012 due to concerns about potential changes In the capital gains tax. To date, the property owner has not been willing to extend the close date without additional payments, which ultimately increases the price of the property. The development team has spoken to the property owner several times about reducing the purchase price or granting some additional extensions without additional cost. This, however, is simply a business transaction for the seller and there is no willingness by the seller to reduce the price. The seller has indicated that there are other buyers with offers submitted as back up ifthe development team does not proceed. In order for escrow to be closed by the end of December, several actions need to happen. First, the City must make its financial commitment so that the development team can apply for tax -credits on October26th, and then hold the bond hearing in November. Once the developer is assured that all funding willixejytade available, the team can move forward to acquire the "property." ' " 'L's^JP f^ct, an acce\m3ll0pt^bess that is guided by the various application periods for tax credits, bonjJ^^^iQ^ei^ajid ||^|iroperty acquisition contract. This, however, is not uncommon foraffordable hjugi^g^prt^^j;^ has happened in the City several times before this project. Outside forces 6nlh require to accelerate its process for a project to successfully .receive outside funding, anfl^l^re successful completion ofthe project. Q. Who will issue the bonds for the proposed project? A. The California Municipal Finance Authority (CMFA) has agreed to issue the tax exempt bonds forthe proposed project. CMFA is a third party, joint powers authority based in Carlsbad. It is highly experienced in originating bonds for affordable housing developments, and has done so previously in Carlsbad for City-assisted affordable housing developments. The City also has the option to issue the bonds, and has done so on several occasions for affordable housing. Q. How does the City know that It is not paying too much to assist the project? Why does the developer have no investment of its own in the proposed project? A. The City reviews the proformas thoroughly, and completes a comparison analysis to other affordable housing developments to ensure that the costs seem fairly comparable and not out of line with the Industry standards. Affordable housing developments often cost more than market rate development for a couple of reasons. The financing is fairly complicated and has substantial process associated with it, which is costly. There are also additional costs associated with relocation, public hearings, prevailing wages, and funding applications that do not apply to market rate housing. Ali ofthe affordable housing proformas are also reviewed by several agencies and underwriters. Comfort often comes from knowing that there are many "eyes" on the proforma and development team beyond those of the City. There are a number of other checks and balances, and other investors beyond the City. It is not uncommon for affordable housing developments to have no or very little private equity within them. In this proposed project, the developer is proposing to use the development fee generated for the project ($1.6 million), and reinvest it within the community to purchase the remaining 5 duplexes on the block as they become available to ensure that the larger project can be developed in 15 years ifthe project approvals are received. A portion ofthe developer fee is also deferred and repaid over an approximately 11 year period. It is also important to note that the developer fee will be paid through the tax credit proceeds, it is not paid through the city assistance. The City funding goes directly to acquisition and rehabilitation ofthe units. Q. Is a public hearing required before the funds can be approved? A. No. The funding source is the Housing Trust Fund. It may only be used for affordable housing purposes and does not require a public hearing to approve the assistance. However, the assistance Is approved during a public meeting, and there could be some funding sources that do require a public hearing prior to approval, such as HOME or CDBG funds or the issuance of tax exempt bonds. This project will have a public hearing on the tax exempt bonds to be Issued by CMFA; the hearing known as a TEFRA hearing must be held by the City Council. It is anticipated in November, 2012. The assistance was discussed by the Housing Commission during a public meeting, and will be considered by the City Council during a public meeting. Q. Will all of the units qualify for the Housing Element? A. Initially, staff determined that the units could not be used to meet RHNA, but that they could be used to satisfy a Housing Element program to provide for additional affordable housing opportunities within Carlsbad. Acquisition and rehabilitation of existing rental units is set forth in the Housing Element as a program for producing additional affordable housing opportunities beyond new construction. New construction Is only one program within the Housing Element, but obviously a very important program for meeting RHNA requirements. However, more recently, there has been additional discussion that acquisition and rehabilitation of units could be used to meet RHNA if there is appropriate evidence that the units are currently market rate and will be converted to a long-term guaranteed affordability, which is the case forthe proposed project. Ifthe determination is reversed at a later date, and we are unable to count the units for new construction we will still be able to count them in our inventory of affordable housing because the units will be income and rent restricted for affordability to low income households (60% of AMI). They will not be subject to market forces, and will remain affordable for 55 years. This provides for a long term contract of affordability, which is one ofthe requirements for determining that a City has a legitimate inventory of affordable housing. Q. What happens If the City does not approve the financial assistance for the project in the amount requested? Can the City Implement other programs to address the deterioration of the rental units? A. The project will not be able to move forward, and the affordable units will not be made available at the identified location. The city assistance is critical to the successful financing of the development. The properties will most likely be purchased individually by other owners and remain rented at rates not affordable to low income households. It is very unlikely that there will be much done in the way of rehabilitation ofthe units, and they will continue to be rented as is. It is also unlikely that there will be any on site management of the rental units. Currently, there are only a few owner occupants in this area. The residential units are primarily rentals. Staff does not believe that the property in the identified neighborhood will be considered desirable for development of luxury apartments or condominiums. Therefore, it is anticipated that the neighborhood will most likely remain as it is, with some new ownership. A suggestion has been made that the City consider implement of a program similar to the City of Los Angeles which requires that multi-family rental properties with two or more units be inspected on a scheduled basis. Inspections are completed by the Los Angeles Housing Department to ensure that the rental units are safe and habitable. Under the program in Los Angeles, rental properties are inspected and required to meet City and State codes regarding issues of maintenance, use or habitability. Property owners are typically given 30 days to have any required repairs completed. Ultimately, non-compliance can end up as a criminal complaint. Property owners are charged $35.52 per unit, per year, whether or not units are inspected during that year. The fee is paid to the Los Angeles Housing Department. The above program was suggested to address "slum landlord" situations or other deferred maintenance issues that might result in a reduced quality of life for residents and/or blight within a neighborhood. The thought was that rather than provide financial assistance tothe subject project, perhaps the City should become more aggressive in code enforcement efforts related to residential rental properties and require the property owners to pay for that enforcement. This is an option for the Council to consider. It will not ultimately provide for affordable housing opportunities, but it will address the other issues identified for this neighborhood related to the deteriorated homes. Affordable Housing Developments City of Carlsbad Subsidy Summary Rental Developments (October, 2012) Apt Project Date # of Units Per Unit Subsidy Inclusionary Project? Villa Loma 1994 344 $12,444 Yes Laurel Tree 1994 138 $5,072 Yes Rancho 1998 116 $10,000 Yes Carrillo Poinsettia 1998 92 $12,000 Yes Station Vista Las 1999 28 $15,241 Yes Flores La Paloma 2002 180 $11,500 Yes IVIariposa 2002 106 $10,000 Yes Cassia 2005 56 $49,702 No Heights Hunters 2005 168 $11,500 Yes Pointe • Glen Ridge 2007 78 $13,000 Yes Tavarua 2011 50 $75,000 No Note: We have helped finance some ownership product as well: Laguna Pointe (3) - $70,000 unit Village By the Sea (11) - $20,000 unit Bressi Ranch (100) - $20,000 unit Roosevelt Garden (11) $142,000 unit Carol-Harding Acquisition and Rehabilitation Financial Assistance Request October, 2012 Financial Assistance Request: Irvine Housing Opportunities in partnership with C&C Development have requested $7.4 million from the City of Carlsbad to assist with the financing of a proposed project to purchase 21 existing duplex units in the historic Barrio Neighborhood ofthe Village Area and substantially rehabilitate them; total of 42 units (2 bedroom, 1 bath) to be deed and rent restricted for low and very low income households for 55 years. The project will also be financed with tax exempt bond proceeds and tax credit equity. The development partnership is also proposing to add a community room, community garden feature, play area, and offered to implement a micro-enterprise loan program for its residents to help them start their own business or assist with buying equipment for a job (such as work boots, tools, etc.). Development Team: Irvine Housing Opportunities is a non-profit affordable housing development company established in 1976. Initially, the company worked with the Irvine Company to build affordable housing and subsequently began development affordable housing on its own. The company has over 35 years of experience providing affordable housing opportunities for low income households. The company also offers services to empower residents, strengthen families, restore dignity, encourage independence and enrich the community. C8iC Development is a private, for-profit developer that specializes in the development and rehabilitation of affordable rental housing for families and seniors. The company is committed to providing high quality, low-cost developments with responsive management services to create enjoyable and productive living environments. C&C Development partners with Cities, Counties, and Community Organizations to create affordable housing through the development, acquisition, and redevelopment of affordable housing projects for moderate, low, to very low income residents. The company has over 30 years of experience in providing affordable housing opportunities to low and moderate income households. Advance Property Services is a wholly owned subsidiary of C&C Development and handles the property management, tenant screening and qualification, and annual Income verification of all tenants. The team will own and manage the rental units as a long-term partnership. The team has never sold one ofthe affordable projects that they have developed. The development team is well respected In the affordable housing industry. They have partnered recently with the cities of San Marcos, Fullerton, Santa Ana, Orange and Yorba Linda. The team has a reputation for providing quality affordable housing and managing the units well for the long term. Reference checks indicate that the development team is capable, honest, easy to work with and responsive to city direction. No cautions or concerns were shared with staff during the reference checks. Development Proposal Details: Acquire & rehabilitate the 21 duplexes; 42 units total Rent-Restrict affordable to households at 60% of AMI; as an example, for a household of 4, the maximum income would be $48,200 840 square foot units; 2 bedroom/1 bath; single car garage and driveway space for parking Current Rents: $1,395 and $1,495 Proposed new affordable rents: $868 to $1,049 Complete rehabilitation ofthe interiors ofthe duplex units and update the 1950s exterior facades with a "beach cottage" design incorporating sustainable building features. Construct a new 2000 square foot community room and leasing office with a laundry room on a portion ofthe vacant parcel that fronts Magnolia Avenue Improve remainder of vacant lot with passive open space and a community garden Merge existing 21 lots to form 3 larger lots to assist in better long-term control Support residents through ongoing social services delivered at the new community center Implement a micro-enterprise loan fund; provide small and new business loans to residents of the local community Potential Future Development Opportunitv: • Initial acquisition of the 21 duplexes will provide control of all by 5 duplexes fronting Carol Place and Harding Street • Development team will continue to work to acquire the remaining 5 duplexes (through the use ofthe developer fee received on the first phase project) • After the initial tax credit compliance period (15 years), there will be an opportunity to redevelop the entire, approximately 7 acres combined parcel into a new, mixed income development • At 20 dwelling units/acre, the site could yield approximately 140 units • The existing affordable units would be absorbed into this new larger project; new market rate condominiums and/or apartment homes could be built at that time (after 15 years). Financial Anaivsis: Sources Amount Per Unit Uses Amount Per Unit Bonds $3,312,250 $78,863 Acquisition $8,450,000 $201,190 Tax Credit $4,374,692 $104,159 Rehabilitation $3,122,888 $74,354 City $7,407,158 $176,360 Soft Costs $1,722,381 $41,009 Deferred Developer Fee/ General Partner Equity $408,967 $9,737 Financing Costs $316,288 $7,530 Development Costs/Reserves $291,510 $6,940 Developer Fee $1,600,000 $38,095 Total $15,503,067 $369,119 $15,503,067 $369,119 Property acquisition costs supported by a fair market analysis. The properties (all 21 lots with duplexes on each) were appraised at a total of $8.5 million; land value was $2.5 million 3.39 acres ($738,000/acre for land only) According to recent apartment market updates: san diego apartment values have increased to levels consistent with their peak in 2007; the trend is expected to continue in the near term creating more opportunities for sellers. While the real estate market is showing an increasing demand from investors to acquire apartments in San Diego County, financing remains challenging with many lender requirements being onerous. Year to date average cap rate for market rate apartments in San Diego County Is estimated by some real estate experts at approximately 5.35%. Buyers typically look for a higher cap rate & sellers seek a lower rate. The cap rate for the proposed affordable project is estimated at 3.24%. This is because the rents are much lower to be affordable to lower income households, but buyer is still expected (by seller) to pay market rate for property. This is a fairly typical situation for affordable developments, which is why they require subsidies and fewer loans on the property. Relocation expenses of approximately $300,000 included in overall costs; anticipate that 7 resident households will need to be permanent relocated; the remainder will only temporarily be relocated during construction (approximately 3 to 4 months) Developer fee of $1.6 million is approximately 10% of total project costs (including land); It is consistent with city policies and the fee allowed through the tax credit program; it is included in eligible basis for tax credits, and will be paid over time through tax credit equity; the deferred fee is paid over approximately 11 years through surplus cash. Developer will use portion of developer fee to purchase remaining 5 duplexes to allow for larger development at a later date. • Per unit cost is high at $369,119, but fairly consistent with other affordable housing developments throughout the City. The most recent affordable development, 50 units of senior only low income affordable housing, Tavarua Apartments, on Harding Avenue were budgeted to cost $382,560. Since 2007, affordable housing developments have had a per unit cost well over $300,000; Glen Ridge Apartments in Robertson Ranch were budgeted at approximately $320,000. Funds for financial assistance (loan) will come from Housing Trust Fund (which has a current balance per Finance of $18.3 million Assistance to be provided in the form of a residual receipts loan (sometimes known as a surplus cash loan); 3% Interest; 55 years; same structure as all other loans provided by City. The loan agreement will include a requirement that excess proceeds for construction or other development costs be returned to the City according to its ratio of contribution (i.e, 50%). The funds will not be released until such time as all other funds are received to complete the acquisition and rehabilitation; the funds are typically released through escrow and/or as construction proceeds. Benefits of proposed development: • Achieve the dual purpose of providing high quality affordable housing for low income households and breathing new life into a deteriorating area from both a physical and social standpoint. • Provides the unique opportunity to purchase 21 duplexes from a single owner within one neighborhood • Enables long-term control, stability and maintenance within the historic Barrio neighborhood of the Village Area • Address issues of crime in the area: 203 calls for police services in 2011; stolen vehicles, criminal threats, vandalism, and extra patrol requests (34 total) which indicates that residents do not feel safe in the neighborhood. • Provide diversity of housing opportunities • Additional units to count for affordable housing development • Encouraging future new development and upgrading of the area • Desirable amenities added: community garden, community center, micro-enterprise loans for new businesses or assistance with job equipment Q. Who will issue the bonds for the proposed project? A. The California Municipal Finance Authority (CMFA) has agreed to issue the tax exempt bonds for the proposed project. CMFA Is a third party, joint powers authority based in Carlsbad. It Is highly experienced in originating bonds for affordable housing developments, and has done so previously in Carlsbad for City-assisted affordable housing developments. The City also has the option to issue the bonds, and has done so on several occasions for affordable housing. Q. How does the City know that it is not paying too much to assist the project? Why does the developer have no investment of its own in the proposed project? A. The City reviews the proformas thoroughly, and completes a comparison analysis to other affordable housing developments to ensure that the costs seem fairly comparable and not out of line with the industry standards. Affordable housing developments often cost more than market rate development for a couple of reasons. The financing is fairly complicated and has substantial process associated with it, which is costly. There are also additional costs associated with relocation, public hearings, prevailing wages, and funding applications that do not apply to market rate housing. All ofthe affordable housing proformas are also reviewed by several agencies and underwriters. Comfort often comes from knowing that there are many "eyes" on the proforma and development team beyond those ofthe City. There are a number of other checks and balances, and other investors beyond the City. It is not uncommon for affordable housing developments to have no or very little private equity within them. In this proposed project, the developer is proposing to use the development fee generated for the project ($1.6 million), and reinvest it within the community to purchase the remaining 5 duplexes on the block as they become available to ensure that the larger project can be developed in 15 years ifthe project approvals are received. A portion ofthe developer fee is also deferred and repaid over an approximately 11 year period. It is also important to note that the developer fee will be paid through the tax credit proceeds. It is not paid through the city assistance. The City funding goes directly to acquisition and rehabilitation ofthe units. Q. Is a public hearing required before the funds can be approved? A. No. The funding source is the Housing Trust Fund. It may only be used for affordable housing purposes and does not require a public hearing to approve the assistance. However, the assistance is approved during a public meeting, and there could be some funding sources that do require a public hearing prior to approval, such as HOME or CDBG funds or the Issuance of tax exempt bonds. This project will have a public hearing on the tax exempt bonds to be issued by CMFA; the hearing known as a TEFRA hearing must be held by the City Council. It is anticipated in November, 2012. The assistance was discussed by the Housing Commission during a public meeting, and will be considered by the City Council during a public meeting. Q. Will all of the units qualify for the Housing Element? A. Initially, staff determined that the units could not be used to meet RHNA, but that they could be used to satisfy a Housing Element program to provide for additional affordable housing opportunities within Carlsbad. Acquisition and rehabilitation of existing rental units is set forth in the Housing Element as a program for producing additional affordable housing opportunities beyond new construction. New construction is only one program within the Housing Element, but obviously a very important program for meeting RHNA requirements. However, more recently, there has been additional discussion that acquisition and rehabilitation of units could be used to meet RHNA if there is appropriate evidence that the units are currently market rate and will be converted to a long-term guaranteed affordability, which is the case for the proposed project. Ifthe determination is reversed at a later date, and we are unable to count the units for new construction we will still be able to count them in our inventory of affordable housing because the units will be income and rent restricted for affordability to low income households (60% of AMI). They will not be subject to market forces, and will remain affordable for 55 years. This provides for a long term contract of affordability, which is one ofthe requirements for determining that a City has a legitimate inventory of affordable housing. Q. What happens if the City does not approve the financial assistance for the project in the amount requested? Can the City Implement other programs to address the deterioration of the rental units? A. The project will not be able to move forward, and the affordable units will not be made available at the identified location. The city assistance is critical to the successful financing of the development. The properties will most likely be purchased individually by other owners and remain rented at rates not affordable to low income households. It is very unlikely that there will be much done in the way of rehabilitation ofthe units, and they will continue to be rented as is. It is also unlikely that there will be any on site management ofthe rental units. Currently, there are only a few owner occupants in this area. The residential units are primarily rentals. Staff does not believe that the property in the identified neighborhood will be considered desirable for development of luxury apartments or condominiums. Therefore, it is anticipated that the neighborhood will most likely remain as it is, with some new ownership. A suggestion has been made that the City consider implement of a program similar to the City of Los Angeles which requires that multi-family rental properties with two or more units be inspected on a scheduled basis. Inspections are completed by the Los Angeles Housing Department to ensure that the rental units are safe and habitable. Under the program in Los Angeles, rental properties are inspected and required to meet City and State codes regarding Issues of maintenance, use or habitability. Property owners are typically given 30 days to have any required repairs completed. Ultimately, non-compliance can end up as a criminal complaint. Property owners are charged $35.52 per unit, per year, whether or not units are inspected during that year. The fee is paid to the Los Angeles Housing Department. The above program was suggested to address "slum landlord" situations or other deferred maintenance issues that might result in a reduced quality of life for residents and/or blight within a neighborhood. The thought was that rather than provide financial assistance to the subject project, perhaps the City should become more aggressive in code enforcement efforts related to residential rental properties and require the property owners to pay for that enforcement. This is an option for the Council to consider. It will not ultimately provide for affordable housing opportunities, but it will address the other issues identified for this neighborhood related to the deteriorated homes. Affordable Housing Developments City of Carlsbad Subsidy Summary Rental Developments (October, 2012) Apt Project Date # of Units Per Unit Subsidy Inclusionary Project? Villa Loma 1994 344 $12,444 Yes Laurel Tree 1994 138 $5,072 Yes Rancho Carrillo 1998 116 $10,000 Yes Poinsettia Station 1998 92 $12,000 Yes Vista Las Flores 1999 28 $15,241 Yes La Paloma 2002 180 $11,500 Yes Mariposa 2002 106 $10,000 Yes Cassia Heights 2005 56 $49,702 No Hunters Pointe 2005 168 $11,500 Yes Glen Ridge 2007 78 $13,000 Yes Tavarua 2011 50 $75,000 No Note: We have helped finance some ownership product as well: Laguna Pointe (3) - $70,000 unit Village By the Sea (11) - $20,000 unit Bressi Ranch (100) - $20,000 unit Roosevelt Garden (11) $142,000 unit Carol-Harding Acquisition and Rehabilitation Financial Assistance Request October, 2012 Financial Assistance Request: Irvine Housing Opportunities in partnership with C&C Development have requested $7.4 million from the City of Carlsbad to assist with the financing of a proposed project to purchase 21 existing duplex units in the historic Barrio Neighborhood ofthe Village Area and substantially rehabilitate them; total of 42 units (2 bedroom, 1 bath) to be deed and rent restricted for low and very low income households for 55 years. The project will also be financed with tax exempt bond proceeds and tax credit equity. The development partnership is also proposing to add a community room, community garden feature, play area, and offered to implement a micro-enterprise loan program for its residents to help them start their own business or assist with buying equipment for a job (such as work boots, tools, etc.). Development Team: Irvine Housing Opportunities is a non-profit affordable housing development company established in 1976. Initially, the company worked with the Irvine Company to build affordable housing and subsequently began development affordable housing on its own. The company has over 35 years of experience providing affordable housing opportunities for low income households. The company also offers services to empower residents, strengthen families, restore dignity, encourage independence and enrich the community. C8iC Development is a private, for-profit developer that specializes in the development and rehabilitation of affordable rental housing for families and seniors. The company is committed to providing high quality, low-cost developments with responsive management services to create enjoyable and productive living environments. C&C Development partners with Cities, Counties, and Community Organizations to create affordable housing through the development, acquisition, and redevelopment of affordable housing projects for moderate, low, to very low income residents. The company has over 30 years of experience in providing affordable housing opportunities to low and moderate income households. Advance Property Services is a wholly owned subsidiary of C&C Development and handles the property management, tenant screening and qualification, and annual income verification of all tenants. The team will own and manage the rental units as a long-term partnership. The team has never sold one of the affordable projects that they have developed. The development team is well respected in the affordable housing industry. They have partnered recently with the cities of San Marcos, Fullerton, Santa Ana, Orange and Yorba Linda. The team has a reputation for providing quality affordable housing and managing the units well for the long term. Reference checks indicate that the development team is capable, honest, easy to work with and responsive to city direction. No cautions or concerns were shared with staff during the reference checks. Deveiopment Proposal Details: Acquire & rehabilitate the 21 duplexes; 42 units total Rent-Restrict affordable to households at 60% of AMI; as an example, for a household of 4, the maximum income would be $48,200 840 square foot units; 2 bedroom/1 bath; single car garage and driveway space for parking Current Rents: $1,395 and $1,495 Proposed new affordable rents: $868 to $1,049 Complete rehabilitation ofthe interiors ofthe duplex units and update the 1950s exterior facades with a "beach cottage" design incorporating sustainable building features. Construct a new 2000 square foot community room and leasing office with a laundry room on a portion ofthe vacant parcel that fronts Magnolia Avenue Improve remainder of vacant lot with passive open space and a community garden Merge existing 21 lots to form 3 larger lots to assist in better long-term control Support residents through ongoing social services delivered at the new community center Implement a micro-enterprise loan fund; provide small and new business loans to residents of the local community Potential Future Development Opportunity: • Initial acquisition of the 21 duplexes will provide control of all by 5 duplexes fronting Carol Place and Harding Street • Development team will continue to work to acquire the remaining 5 duplexes (through the use ofthe developer fee received on the first phase project) • After the initial tax credit compliance period (15 years), there will be an opportunity to redevelop the entire, approximately 7 acres combined parcel into a new, mixed income development • At 20 dwelling units/acre, the site could yield approximately 140 units • The existing affordable units would be absorbed into this new larger project; new market rate condominiums and/or apartment homes could be built at that time (after 15 years). Financial Anaivsis: Sources Amount Per Unit Uses Amount Per Unit Bonds $3,312,250 $78,863 Acquisition $8,450,000 $201,190 Tax Credit $4,374,692 $104,159 Rehabilitation $3,122,888 $74,354 City $7,407,158 $176,360 Soft Costs $1,722,381 $41,009 Deferred Developer Fee/ General Partner Equity $408,967 $9,737 Financing Costs $316,288 $7,530 Development Costs/Reserves $291,510 $6,940 Developer Fee $1,600,000 $38,095 Total $15,503,067 $369,119 $15,503,067 $369,119 Property acquisition costs supported by a fair market analysis. The properties (all 21 lots with duplexes on each) were appraised at a total of $8.5 million; land value was $2.5 million 3.39 acres ($738,000/acre for land only) According to recent apartment market updates: san diego apartment values have Increased to levels consistent with their peak in 2007; the trend is expected to continue in the near term creating more opportunities for sellers. While the real estate market is showing an increasing demand from investors to acquire apartments in San Diego County, financing remains challenging with many lender requirements being onerous. Year to date average cap rate for market rate apartments in San Diego County Is estimated by some real estate experts at approximately 5.35%. Buyers typically look for a higher cap rate & sellers seek a lower rate. The cap rate for the proposed affordable project is estimated at 3.24%. This is because the rents are much lower to be affordable to lower income households, but buyer is still expected (by seller) to pay market rate for property. This is a fairly typical situation for affordable developments, which is why they require subsidies and fewer loans on the property. Relocation expenses of approximately $300,000 included in overall costs; anticipate that 7 resident households will need to be permanent relocated; the remainder will only temporarily be relocated during construction (approximately 3 to 4 months) Developer fee of $1.6 million is approximately 10% of total project costs (including land); it is consistent with city policies and the fee allowed through the tax credit program; it is included in eligible basis for tax credits, and will be paid overtime through tax credit equity; the deferred fee is paid over approximately 11 years through surplus cash. Developer will use portion of developer fee to purchase remaining 5 duplexes to allow for larger development at a later date. Per unit cost is high at $369,119, but fairly consistent with other affordable housing developments throughout the City. The most recent affordable development, 50 units of senior only low income affordable housing, Tavarua Apartments, on Harding Avenue were budgeted to cost $382,560. Since 2007, affordable housing developments have had a per unit cost well over $300,000; Glen Ridge Apartments in Robertson Ranch were budgeted at approximately $320,000. Funds for financial assistance (loan) will come from Housing Trust Fund (which has a current balance per Finance of $18.3 million Assistance to be provided in the form of a residual receipts loan (sometimes known as a surplus cash loan); 3% interest; 55 years; same structure as all other loans provided by City. The loan agreement will include a requirement that excess proceeds for construction or other development costs be returned to the City according to its ratio of contribution (i.e, 50%). The funds will not be released until such time as all other funds are received to complete the acquisition and rehabilitation; the funds are typically released through escrow and/or as construction proceeds. Benefits of proposed development: • Achieve the dual purpose of providing high quality affordable housing for low income households and breathing new life into a deteriorating area from both a physical and social standpoint. • Provides the unique opportunity to purchase 21 duplexes from a single owner within one neighborhood • Enables long-term control, stability and maintenance within the historic Barrio neighborhood of the Village Area • Address issues of crime in the area: 203 calls for police services in 2011; stolen vehicles, criminal threats, vandalism, and extra patrol requests (34 total) which indicates that residents do not feel safe in the neighborhood. • Provide diversity pf housing opportunities • Additional units to count for affordable housing development • Encouraging future new development and upgrading of the area • Desirable amenities added: community garden, community center, micro-enterprise loans for new businesses or assistance with job equipment C E |.i < S ^ -S — to Q. £ ^ .2 X 3 cr rs CM H O CNJ o JD O o (0 u Site Location and Description of Existing Conditions • 21 Duplexes plus vacant parcel located in the Historic Barrio Neighborhood of the Village Area • Total of42-2 bedroom units at 840 sf • Constructed in 1953 and situated on 339 acres • Each duplex is on own lot with private backyard • Parking at 2:1 ratio with private garage and driveway space for each unit • Owned by a single, private owner, the individual lots provide the current owner the option to sell each duplex on an individual basis, • Located near Jefferson Elementary and Carlsbad High School, shopping, parks, beach access and the Village • Monthly rents: $1,300 to $1,495 Existing Photos Existing Photos Existing Photos Developer Experience Irvine Housing Opportunities Development APS Ac^vmed Prop^ Sdrvioas Irvine Housing Opportunities, Inc. (IHO) is a hands-on, mission- driven, nonprofit developer committed to improving the quality of life of our residents through an array of dynamic services that empower residents, strengthen families, restore dignity, encourage independence, and enrich the community. We are passionate about community development, housing for veteran families, linking housing with economic opportunities, and working with government partners to develop excellent communities. C&C Development specializes in the development and rehabilitation of affordable rental housing for families and seniors. We are committed to providing high quality, low-cost developments with responsive management services to create enjoyable and productive living environments. We are committed to the enhancement of our communities through their aesthetics, economic vitality, and by our leadership and active participation in community affairs. Advanced Property Services, LLC (APS), a wholly owned subsidiary of C&C Development, handles the property management, tenant screening and qualification, and annual income verification of all tenants- APS is a fair but strict management company that manages properties to the highest standards possible to provide a quality living environment. We have undertaken and successfully completed a number of large scale neighborhood revitalization developments involving single and multiple owners across scattered sites. Developer Experience - continued Together, we view this project as a long-term partnership between C&C, IHO and the City of Carlsbad. We have never sold one of the affordable projects that we have developed. Following are examples of previously completed projects. Developer Experience: Previously Completed Projects Developer Experience: Previously Completed Projects i I I i i i I t Developer Experience: Previously Completed Projects Developer Experience: Neighborhood Revitalization 4 Wilshire & Minnie Neighborhood Development Proposal • Acquire and rehabilitate the 21 duplexes (42 units) into a quality, affordable housing community to families earning less than 60% of AMI for a period of 55 years • Reduce existing monthly rents to $868 - $1,049 to provide residents with additional discretionary income that can be spent at local stores, restaurants and on other services within the Village/Barrio area • Completely rehabilitate the Interiors of the duplexes and update the 1950's exterior facades with a "beach cottage" design incorporating sustainable building features • Construct a new, approximately 2,000 sf Community Room and Leasing Office with a Laundry Room on a portion of vacant parcel that fronts Magnolia Avenue • Balance of vacant lot will be improved with passive open space and Community Garden • C&C and IHO will work with the City of Carlsbad to merge the existing individual lots to form three larger lots to assist in providing long-term control to the City and prevent the duplexes from being sold as Individual parcels • Residents will be supported through ongoing social services delivered at the new Community Center • IHO's micro-enterprise loan fund will further support economic development by providing small and new business loans to residents of the local community Community Center and Leasing Office Site Plan Building Elevations Following Rehabilitation NEW DORMER NEW SRICK WAINSCOT N£W WOOD SIDING NEW GARAGE DOOR NEW ENTRY DOOR NEW SHUTTER Building Elevations Following Rehabilitation NEW WOOD SIDING NEW BRICK WAINSCOT NEW OARAGE DOOR NEW SHUTTER NEW ENTRY DOOR -a I f I t 1 I Buiiding Elevations Following Rehabilitation NEW WOOO SIDING r- • — ^ ! ' \ i NEW BRICK WAINSCOT NEW GARAGE DOOR NEW SHUTTER NEW ENTRY DOOR Phase 2: Potential Redevelopment • The initial acquisition of the 21 duplexes will provide control of all but 5 duplexes fronting Carol Place and Harding Street • C&C and IHO will contmue working to acquire these 5 remaining duplexes • Following the Initial tax credit j compliance period, there will be an • opportunity to redevelop the entire, approximately 7-acre combined parcel j into a new; mixed-income development • At 20 dwelling units to the acre, the site could yield approximately 140 units This larger development would enable the retention of the existing affordable units while providing an opportunity to develop market rate condominiums and/or apartment homes Project Benefits • Allows the City to use its Affordable Housing Resources to achieve the dual purposes of: o Providing affordable housing, and o Rehabilitating a problem area • Provides the unique opportunity to acquire 21 duplexes within one neighborhood, eliminating risks associated with selling off the individual duplexes to different owners • Enables long-term control, stability and maintenance within the Historic Barrio Neighborhood • Creates opportunity to redevelop the existing site into a higher density, mixed-income residential development following the acquisition ofthe 5 remaining duplexes • The project is located within walking distance to schools, parks, shopping and the Village » Neighborhood will undergo major rehabilitation induding the complete renovation of the interior, exterior and landscaping and addition of Community Room and Community Garden ' The building facades will feature a "beach cottage" design ' Provides the City the opportunity to partner with a development team: o Experienced in the revitalization of troubled neighborhoods o Committed to improving the quality of life of the residents and community o With strong management practices that will Implement a variety of resident rules, regulations and occupancy controls o Committed to the long-term success of this project, its residents and the City of Carlsbad Questions? DEVELOPING AFFORDABLE HOUSING Irvine Housing Opportunities, Inc. 2192 Dupont Drive, Suite 105 Irvine, CA 92612 (949) 863-9740 Patricia C. Wliitaker, CEO Development C&C Development 14211 Yorba Street, Ste. 200 Tustin,CA 92780 (714) 288-7600 Todd Cottle, Principal Housing ELixd BTeijSHlboxrli.ood Sexn^lces Item. M^o. 1 DATE: October 16,2012 SUBJECT: CAROL AND HARDING DUPLEX ACQUISITION AND REHABILITAITON- RECOMMENDATION OF APPROVAL TO THE CITY COUNCIL TO PROVIDE $7,408,000 IN FINANCIAL ASSISTANCE FOR THE ACQUISITION AND REHABILITATION OF TWENTY-ONE DUPLEX RENTAL UNITS (42 UNITS TOTAL) RESTRICTED FOR LOW INCOME FAMILY HOUSEHOLDS IN THE HISTORIC BARRIO NEIGHBORHOOD OF THE VILLAGE AREA OF THE NORTHWEST QUADRANT OF THE CITY. I. RECOMMENDATION That the Housing Commission ADOPT Resolution No. 2012-006, recommending APPROVAL to the City Council to provide $7,408,000 in financial assistance from the Housing Trust Funds for acquisition and rehabilitation of 21 duplexes (42 units total) to provide affordable rental apartments restricted to low income family households in the historic Barrio neighborhood of the Village Area in the northwest quadrant of the City of Carlsbad. II. PROJECT BACKGROUND The subject properties are located on Carol Place, Magnolia Avenue and Harding Street in the neighborhood historically known as the Barrio, near the Jefferson Elementary School. There are 21 duplexes (42 units total) available for acquisition from a single, private owner. C&C Development in partnership with Irvine Housing Opportunities has proposed to acquire the subject duplex properties, with the assistance of the City, and then substantially rehabilitate them. All of the units would then be rent restricted and affordable to low income households at 50% and 60% of the San Diego County Area Median Income. The properties were originally constructed in 1953 and are situated on 3.39 acres on the outer limits of the Barrio neighborhood. The duplexes are in close proximity to Jefferson Elementary School, within walking distance of Carol and Harding Duplexes October 16, 2012 PAGE 2 Carlsbad High School and commercial services including a grocery store, and near the Village of Carlsbad. The development team proposes to spend approximately $75,000 per unit to substantially renovate, rehabilitate and update the noted units. The team will own and manage the properties for the long term. Attached is a site map of the properties and renderings of the proposed exterior renovations. IILDEVELOPMENT TEAM A partnership team of C & C Development and Irvine Housing Opportunities will acquire, rehabilitate, own, and manage the affordable housing development. The team is experienced and has recognized expertise m developing high-quality affordable apartment communities for households at all income levels, while also enhancing their quality of life. This is the first affordable housing development in Carlsbad for thds team. However, they are well established within the affordable housing development industry and have worked with several California cities and non-profit organizations to produce quality residential developments for several decades. IV. FINANCIAL ASSISTANCE A, Cost Reasonableness The developer has provided a detailed development proforma for review which is summarized below. Since development costs are one of the key variables determining the need for subsidies, it is important that those costs be reasonable. At approximately $15.5 million, including the cost ofthe land, the average unit cost of $369,120 is, in fact, high but reasonable when consideration is given to the requirement to pay state prevailing wage rates, the continuing high cost of land in the coastal area, and the costs of construction. In addition, there are relocation costs (approximately $300,000) associated with the project that must be factored into the rehabilitation costs. B. Undue Gain It is important that any financial assistance have the effect of making the units more affordable and not creating undue gain for any party. The Developer will receive a "Developer Fee" of $1.6 million or approximately! 0% of total project costs (including land). The developer fee is fairly consistent with other affordable housing projects in Cailsbad and equal to tlie 10% cap deemed to be acceptable to the City. It is reasonable in hght of the project size, affordability and financing complexity. C. Subsidy Analysis The Developer is proposing to finance the project with $3,049,920 in tax exempt bond proceeds, $4,374,692 in tax credit financing and deferring a portion of their developer fee ($408,967) until adequate cash flow is available to pay it through rental income. The developer is requestmg an additional $7,407,158 from the City of Carlsbad to assist in financing the acquisition and rehabilitation ofthe duplex units. This request amounts to approximately 51% ofthe total revenue required to fund this project. Staff is recommending that direct financial assistance be provided to the project in the amount requested by the development team. This direct financial assistance will equate to approximately $176,000 per affordable unit. The $176,000 per unit is the largest amount provided to date by the City to finance a proposed affordable housing project, with the exception that comparable assistance was provided to several low income residents of Rancho Carlsbad to convert their mobile home pad from rental to ownership. Routinely, staff would not support or recommend this level of subsidy for a low income affordable development. However, there are some unique and special circumstances associated with this project which meet a number of city goals and are consistent with the future vision for the Barrio neighborhood. As a result, the Housing Policy and Economic Development Teams for the City have reviewed the request and supported this recommendation to the Housing Commission. Staff believes that the greater amount of assistance is warranted for the following reasons: 1. The project is being developed in the northwest quadrant and outside of the City's Inclusionary Housing Program, which means the project can be used as a combined affordable housing development for the purpose of purchase of credits by other developers in the Northwest Quadrant. This will allow for higher density market rate residential units to develop within the Barrio and Village areas by providing an option to satisfy their inclusionary in an off-site location.. With this project and the completion ofthe Tavarua Senior Affordable Apartments on Harding Street, there will be approximately 120 housing credits available for inclusionary housing purposes in the Northwest Quadrant. This will allow for the development of approximately 680 market rate residential units within the Northwest Quadrant, which includes the Barrio neighborhood and the Village Area. These "credit" units are and will be greatly needed by the development community upon rebound of the economy and to allow for higher density market rate housing to be developed in the Northwest Quadrant in the future. This is especially important for the Barrio and Village areas since higher density housing is desirable for both these areas, and it would be costiy for developers to provide the low income affordable housing within their development. This provides a reasonable off-site solution for the inclusionary housing obligations, which is generally deemed desirable by private developers. 2. The additional units will also help in the City's efforts to meet its housing goals for low income affordable housing units. The rents will be restricted on 42 units for affordability purposes to low income households at 50% and 60% of the area median income. This is lower than the requirements of the Inclusionary Housing Program and will assist the City in meeting the needs of the lower income family households in need of affordable housing. In addition, the developer is considering providing some units for veterans and their families. There are many veterans of the current Afghanistan and Iraq wars that are in need of affordable housing for them and their families. This would be an ideal location to meet the needs of this special population. 3. The development will provide for the long term maintenance of a higher density residential development on the periphery of the Barrio neighborhood as desired by the residents, and if redeveloped at a later date to a much higher density development it will be consistent with the new proposed higher density residential zoning for this area. 4. The property is adjacent to Interstate 5 and will be less desirable for market rate residential development. It, however, is an ideal site for affordable housing due to its proximity to the elementary school and commercial services, as well as within walking distance of a variety of other services including recreational. 5. The location of the units has been historically an area of higher crime for the BaiTio neighborhood due to its proximity to Interstate 5 and otiier related issues. With strong management and implementation of various residency rules as well as better background checks on the residents, the affordable housing manager will be able to better coordinate with the Police Department and Housing and Neighborhood Services to work to clean up this area fi-om both a physical and social standpoint. The development team has developed expertise in "turning around" deteriorating areas and revitalizing the area through well-managed residential development. 6. Updating the physical appearance of the units will help to enhance the physical appearance of this area, and signal to the Barrio neighborhood that there are developers willing to invest in the area and willing to address complex social issues. 7. Enhancing the affordability of the residential units will allow its residents to have more disposable income that can be spent witiiin local retail stores, restaurants and to obtain other services within the City, and more specifically within the Village/Barrio. 8. The developer has indicated an interest in continuing to work witii tiie city to acquire additional property within the neighborhood and to ulthnately produce higher density market rate housing in the form of condos or luxury apartments, while maintaining the affordable component being addressed at this time. This acquisition and rehabilitation could be considered Phase I of a long term project to add more residential units to the area that would ultimately include market rate mixed with the low income affordable units. Following is a summary of the sources and uses of funds based on the estimated development costs and the proposed financing structure. The developer's detailed profomia is attached as Exhibit 2: SUMMARY PROFORMA USES OF FUNDS TOTAL PER UNIT Land acquisition $8,450,000 $201,190 Constmction costs $3,122,888 $74,354 Indirect/Soft costs $1,722,381 $41,009 Developer Fee $1,600,000 $38,095 Development costs $291,510 $6,940 Financing costs $316,288 $7,530 TOTAL $15,503,067 $369,118 PERMANENT SOURCES OF FUNDS TOTAL PER UNIT Tax Exempt Bond Funds $3,312,259 $78,863 City Contribution $7,407,158 $176,360 Tax Credit Investor Equity $4,374,692 $104,159 Deferred Development Fee/Equity $408,967 $9,737 Total Sources $15,503,067 $369,119 D. Form of Assistance City cash assistance will be in the form of a residual receipts loan secured by a note and deed of trust. The loan will begin accruing after the completion of construction of the improvements. The outstanding principal and accrued interest on the City loan will be amortized over a 55 year period, and paid from cash surplus in equal annual installments consisting of principal and interest. In the event that there is not adequate cash surplus to repay the City/Agency loan, the outstanding balance shall accrue with simple interest at 3% per annum. The financial assistance will be provided from the Housing Trust Fund.. E. Security The Developer will be required to provide completion bonds to both the City and the permanent lender to insure that construction is completed. Risk In its role as a lender to the project, the City is exposed to three risks inherent to real estate development. These risks generally include 1) predevelopment (project does not get to construction), 2) construction (project cannot be completed, cost overruns, contractor problems), and 3) operation (revenues do not cover expenses). Adding to this risk, any City financial assistance will be subordinated to conventional or other primary financing. A number of factors mitigate the risks. First, the development team has a strong track record with similar affordable housing projects. The presence of other major financial commitments, such as a tax credit investment, is also key as this means that other stakeholders depend on the success of the project both short and long term. Finally, the position of City and other subordinated financing is a feature that helps attract the necessary private financing in the short and long term. V. FINANCIAL ASSISTANCE AGREEMENT With a recommendation from the Housing Commission and approval of the City Council appropriate documents, including a Financial Assistance Agreement, Regulatory Agreement, Promissory Note and Deed of Trust, will be prepared and executed to set forth the terms of the financial assistance and its repayment. VI SUMMARY AND STAFF RECOMMENDATION It is the role of the Housing Commission to make financial assistance recommendations to the City Council based on several considerations with respect to affordable housing projects. These are: • The proposal's effectiveness in serving the City needs and priorities as expressed in the Housing Element of the General Plan and the Consolidated Plan. • The proposal's consistency with the City's affordable housing policies and ordinances as expressed in the Housing Element and Inclusionary Housing Ordinance. • The proposal's development and operating feasibility, emphasizing the development team capacity, financing sources and the role of the City in providing financial assistance or incentives. The Carol Place and Harding Street duplex acquisition and rehabilitation project is proposed by a capable development team that is committed to affordable housing. The financing structure of the project is sound. The proposed City assistance meets the City's three key underwriting goals of a strong borrower, reasonable project costs and appropriate leveraging. The project quality demonstrates good design and appropriate location. City housing goals are supported by the project's unit mix and affordability. In addition, there are several other neighborhood enhancement goals met with the proposed project. It is tiie Affordable Housing Policy Team's (staff) recommendation that tiie Housing Commission approve tiie resolution of support recommending to tiie City Council tiiat the City provide a total of $7,407,160 in financial cash assistance to the Carol/Harding Duplex Acquisition and Rehabilitation project witiiin tiie northwest quadrant of the City of Carlsbad. VIII. EXHIBITS 1. Housing Commission Resolution No. 2012-006 2. Site Map 3. Conceptual renderings of exterior rehabilitation A. ^ '^"^ CITY OF ^CARLSBAD Memorandum All Receive-Agenda Item # / For the Information ofthe: OTY COUNCIL Asst. CM_CA1^CC^ DateJJm2Ci^ Maiiager^jC^ November 6; 2012 To: From: Re: John CoateS; Acting City Manager Debbie Fountain, Housing and Neighborhood Services Director^ REVISED RESOLUTIONS FOR CAROL/HARDING FINANCIAL ASSISTANCE - ITEM #17 - AGENDA ITEM #21,028 Attached please find revised City Council Resolution No. 2012-235 forthe 1) original developer proposal for financial assistance from the City for acquisition and substantial rehabilitation and for the 2) alternate proposal for acquisition of property to initiate a new construction project. The resolutions were revised to correct the proposal references, to identify the alternate developer proposal, and to add specific conditions related to subordination ofthe City loan, use ofthe property and the financial assistance, and other related project issues. If the City Council approves the developer request for financial assistance for affordable housing purposes, staff will request that the Council either adopt the identified resolution for the original proposal or the alternate proposal with the revisions set forth in this memo and attachments. Attachments cc: Ron Ball, City Attorney Lorraine Wood, City Clerk Date: /l/^^/^y Distribution: City Clerk Asst. City Clerk Deputy Clerk Book Housing 8i Neighborhood Services 2965 Roosevelt St., Suite B I Carlsbad, CA 92008 I 760-434-2810 I 760-720-2037 fax I www.carlsbadca.gov 1 I RESOLUTION NO. 2012-235 2 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, TO APPROVE A RESIDUAL RECEIPTS ^ LOAN AND APPROPRIATE HOUSING TRUST FUNDS IN THE AMOUNT OF $7,408,000 TO PROVIDE FINANCIAL ASSISTANCE TO THE PARTNERSHIP OF C&C DEVELOPMENT AND IRVINE HOUSING OPPORTUNITIES FOR THE ACQUISITION AND REHABILITATION OF FORTY-TWO (42) RENTAL UNITS TO BE 6 RESTRICTED FOR LOW INCOME AFFORDABLE HOUSING WITHIN THE NORTHWEST QUADRANT OF THE CITY OF 7 CARLSBAD. 8 APPLICANT: Ci&C DEVELOPMENT AND IRVINE HOUSING OPPORTUNITIES 9 WHEREAS, C&C Development and Irvine Housing Opportunities (IHO) have partnered and have proposed to acquire and substantially rehabilitate 21 duplex (42 total) rental residential units and convert them to rent-restricted affordable housing for lower income households on Harding Street, Carol Place and Magnolia Avenue in the historic Barrio neighborhood of the 14 Village Area within the Northwest Quadrant of the City of Carlsbad; and 15 WHEREAS, C&C Development and IHO have requested that the City of Carlsbad 16 provide financial assistance in the form of an acquisition and rehabilitation/construction loan jn 17 the amount of $7.408>000 that will convert to a residual receipts permanent loan to assist in the ^ ^ development of a new affordable housing rental opportunity eemfilex within Carlsbad; and WMBREAS. C & C Development and IHO have estimated that the total cost of said 10 11 12 13 19 20 21 22 23 24 propertv acquisition and substantial rehabilitation is approximatelv $15.5 million and have proposed and will commit,to obtain additional financing (from non-city sources) to complete the propertv acquisition and invest a minimum of $75,000 in direct construction/rehabilitation for each rental unit, and obtain financing for other related development costs such as indirect/soft 25 costs, developer fee, and general development costs. 26 WHEREAS, the public benefits of the proposed project include physical enhancement of 27 a deteriorating neighborhood in the historic Barrio neighborhood of the Village area. 28 2 3 4 5 6 7 8 9 13 14 15 16 17 18 19 24 25 26 27 28 rehabilitation of existing dwelling units to improve livability for the residents, diversity of housing opportunities for lower income households, and additional units to count asjm for affordable housing opportunity development for the City of Carlsbad's Housing Element; and WHEREAS, the proposed acquisition and rehabilitation project will also encourage future new development and upgrading of the neighborhood fiarther, as well as providing for desirable amenities to support economic development (with implementation of a micro- enterprise loans i^rogram to residents for new businesses) and encouraging a sustainable community (addition of a community garden). 10 WHEREAS, on the 16th day of October, 2012, the City of Carlsbad Housing 11 Commission did hold a public meeting to consider the request for City financial assistance for 12 the acquisition and substantial rehabilitation of said 42 lower income-restricted affordable housing apartment units by the affordable housing developer partnership of C&C Development and IHO, and subsequently recommended approval of the request for assistance; and WHEREAS, the City Council did hold, on the date of this resolution, a public meeting to consider public comment on said request for City financial assistance for the acquisition and rehabilitation of said 42 lower income-restricted affordable housing apartment units by the affordable housing developer partnership of C&C Development and IHO; and, 20 WHEREAS, at said public meeting, upon hearing and considering all testimony, if any, 21 of all persons desiring to be heard, said City Council considered all factors relating to the 22 request for financial assistance; and, WHEREAS, the City Council intends to approve approved a residual receipts loan and the appropriation and expenditure of $7,408,000 from the Housing Trust Fund to the partnership of C&C Development and IMP for the purposes of providing loan proceeds to assist in the acquisition and substantial rehabilitation of 42 low income senior reotricted units of rental 1 23 24 25 27 28 housing units within the historic Bamo neighborhood of the Village area> and rent-restricting 2 said units to be affordable to fei^^m=y lower and low income persons/families^ to the partnership 3 of C&C Devclopmont and IHO. ' NOW, THEREFORE, BE IT HEREBY RESOLVED by the City Council of the City 5 of Carlsbad, Califomia, as follows: 1. The above recitations are true and correct. 6 7 .. 2. The request for City financial assistance is consistent with the goals and 8 I objectives ofthe City of Carlsbad's Housing Element, Consolidated Plan, and the ^ I Carlsbad General Plan. 10 3. The request for City financial assistance will assist the affordable housing developer to acquire and substantially rehabilitate the interior and exterior of a total of 42 two 11 bedroom rental units and rent restrict them lor affordability to lower income households on property located within the historic Barrio neighborhood ofthe Village 12 Area.low income restricted affordablo apartment unitti. The project, therefore, has the ability to effectively serve the City's housing needs and priorities as expressed in the 1 ^ Housing Element and the Consolidated Plan. 14 4. That the City Council authorizes the City Manager, or designee, including the 15 Housing and Neighborhood Services Director, in coordination with the City Attomey to negotiate and prepare for City Manager execution all loan documents related to 16 ' provision of the City financial assistance to fund the subject residual receipts acquisition/rehabilitation/permanent loan to the partnership of C&C Development and 17 Irvine Housing Opportunities for development of the subject low income-restricted affordable housing project through acquisition and rehabilitation, and to return said 18 19 documents to the City Council for review and authorization to execute prior to close of escrow on said property. 20 5. That the City Council authorizes the City Manager, or designee, to execute subsequent subordination agreement(s) subordinating the City's Regulatory 21 Agreement and Deed of Trust to the Deed of Trust for acquisition and rehabilitation/constmction and permanent lenders, as required, subject to review and 22 approval by the City Attomey, and subject to the City Manager finding that no other financing that does not require subordination is reasonably available and the loan amount subordinated to by the City does not exceed $3.2 million dollars unless good cause is demonstrated to the City Manager to exceed this amount.T 6. That the City Council authorizes the Finance Director to appropriate and disburse expend the loan proceeds as set forth within this approval in the total amount of 26 ' $7,408,000, and appropriately account for the residual receipts constmction/permanent loan to the partnership of C&C Development and Irvine 1 2 3 4 //// //// 5 //// 6 //// 7 //// 8 //// 9 //// 10 //// 11 //// 12 //// 13 //// 14 ilR 15 'M 16 IM 17 IM 18 M 19 M 20 IM 21 M 22 M 23 M 24 •11 25 26 27 28 Housing Opportunities for the subject affordable housing project, and as set forth in the approved loan documents and upon confirmation that the developer has a letter of commitment from a private lender to provide the balance of funds required for said propertv acquisitionr 1 PASSED, APPROVED, AND ADOPTED at a regular meeting of the City 2 Council of the City of Carlsbad, Califomia, held on the 6th2^ day of November October, 2012, 3 by the following vote, to wit: 4 5 AYES: 6 NOES: 7 ABSENT: 8 ABSTAIN: 9 10 13 14 11 MATT HALL, MAYOR 12 ATTEST: 15 LORRAINE WOOD, CITY CLERK 16 17 18 19 (SEAL) 20 21 22 23 24 25 26 27 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Alternate Proposal RESOLUTION NO. 2012-235 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, TO APPROVE A RESIDUAL RECEIPTS LOAN AND APPROPRIATE HOUSING TRUST FUNDS IN THE AMOUNT OF $7,408,000 TO PROVIDE FINANCIAL ASSISTANCE TO THE PARTNERSHIP OF C&C DEVELOPMENT AND IRVINE HOUSING OPPORTUNITIES FOR THE ACQUISITION OF FORTY- TWO (42) EXISTING RENTAL UNITS (21 DUPLEXES) TO BE RESTRICTED FOR LOW AND MODERATE INCOME AFFORDABLE HOUSING WITHIN THE NORTHWEST QUADRANT OF THE CITY OF CARLSBAD. APPLICANT: C&C DEVELOPMENT AND IRVINE HOUSING OPPORTUNITIES WHEREAS, C&C Development and Irvine Housing Opportunities (IHO) have partnered and have proposed to acquire 21 duplexes rental residential units (42 total units), complete some minor health and safety improvements, and convert them to rent-restricted affordable housing for low and moderate income households on Harding Street, Carol Place and Magnolia Avenue in the historic Barrio neighborhood of the Village Area within the Northwest Quadrant of the City of Carlsbad; and WHEREAS, C&C Development and IHO have requested that the City of Carlsbad provide financial assistance in the form of an property acquisition loan that will convert to a residual receipts permanent loan to assist in the development of a new, higher density affordable housing rental complex upon the property at a future kter date vet to be determined; and WHBRRAS, C&C Development and 1110 have proposed and will commit to obtain additional financing (from a private lender) to complete the property acquisition and provide for minor interior improvements (approximately $15,000 to $20.000 total) to said 42 units to address imme ?diaie health and safety issues, and overall clean-up ofthe exterior ofthe properties; and WH1'.REAS. C&C Development and IHO have proposed and will commit to income and rent- restrictions on the existing 42 residential units upon close of escrow and will also proceed immediately with designing a higher densitv rental development and applying for development 1 permits and required financing, with no additional ca.sh assistance from the Citv of Carlsbad, for 2 the new construction of a larger apartment development at a future date yet to be determined: and 24 25 26 27 28 WHEREAS, the public benefits of the proposed project include physical enhancement of a deteriorating neighborhood in the historic Barrio neighborhood of the Village area through clean up of property and ^ minor rehabilitation of existing dwelling units to improve the health and safety of the residents, and to add to the diversity of housing opportunities for low and moderate income households within the City of Carlsbad through the rent restrictions to be set forth in the regulatory agreement between City ^md developer; and 10 WHEREAS, the proposed acquisition will support the City's desire to encourage the 11 construction of additional new units to be affordable to low and moderate income households 12 and to increase the inventory of low and moderate income affordable units within the City at a fiiture date in time; and WHEREAS, on the 16th day of October, 2012, the City of Carisbad Housing Commission did hold a public meeting to consider the request for City financial assistance for the acquisition of said 42 lower income-restricted affordable housing apartment units by the affordable housing developer partnership of C&C Development and IHO, and subsequently recommended approval of the request for assistance; and 13 14 15 16 17 18 19 20 WHEREAS, the City Council did hold, on the date of this resolution, a public meeting 21 and encouraged public participation prior to its consideration of said request for City financial 22 assistance for the acquisition of said 42 low and moderate income-restricted affordable housing 23 apartment units by the affordable housing developer partnership of C&C Development and IHO; and, WHEREAS, at said public meeting, upon hearing and considering all testimony, if any, of all persons desiring to be heard, said City Council considered all factors relating to the 1 request for financial assistance; and, 2 WHEREAS, the City Council intends to approve approved a residual receipts loan and the appropriation and expenditure of $7,408,000 from the Housing Tmst Fund for the purposes of providing loan proceeds to the partnership of C&C Development and IHO to -assist in the acquisition of 42 existing rental units within the historic Bamo neighborhood ofthe Village Area and to subsequently rent restrict said units for alTordability to low and moderate income roctricted units of rentnl bnn^in^y fnr Inwc^r and moderate income persons/families, and with the commitment from said development partnership that efforts will be immediately initiated to design and process applications for land use entitiements and other pemiits and financing for a larger alTordable rental project to be constructed at a later date on the propertv to be acquired with this assistance, to tho partnorohip of C&C Devolopment and IHO. NOW, THEREFORE, BE IT HEREBY RESOLVED by the City Council of the City of Carisbad, Califomia, as follows: 1. The above recitations are true and correct. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 21 22 23 24 27 28 2. The request for City financial assistance is consistent with the goals and objectives of the City of Carisbad's Housing Element, CDBG/HOME Consolidated Plan, and the Carisbad General Plan. 20 3. The request for City financial assistance will assist the affordable housing developer to acquire a total of 42 existing two bedroom affordable apartment rental units within the historic Barrio neighborhood of the Village Area and subsequently and income and rent restrict them to be affordable for low and moderate income households. The project, therefore, has the ability to effectively serve the City's housing needs and priorities as expressed in the Housing Element and the CDBG/HOME Consolidated Plan. 4. That the City Council authorizes the City Manager, or designee, including the 25 Housing and Neighborhood Services Director, in coordination with the City Attomey to negotiate and prepare for City Manager execution all loan documents 26 ' related to provision of the City financial assistance to fund the subject residual receipts acquisition/permanent loan to the partnership of C&C Development and 1 Irvine Housing Opportunities to provide for the subject low and moderate income-restricted affordable housing project through acquisition of existing rental 8 12 14 IIII 15 IIII 16 IIII 17 18 "" 19 //// 20 //// 21 //// III 22 iin 23 24 IIII 25 IIII 26 IIII 21" • 28 2 units, and to return said documents to the City Council for review and ^ authorization to execute prior to close of escrow on said propertv 4 5. That the City Council authorizes the City Manager, or designee, to execute subsequent subordination agreement(s) subordinating the City's Regulatory 5 Agreement and Deed of Tmst to the Deed of Tmst for acquisition to permanent lenders, as required, subject to review and approval by the City Attomey, and 6 subject to the City Manager finding that no other financing that does not require subordination is reasonably available and the loan amount subordinated to by the ^ Citv does not exceed $3.2 million dollars unless good cause is demonstrated to the Citv Manager to exceed this amount. 9 6. That the City Council authorizes the Finance Director to appropriate and disburse the loan proceeds as set forth within this approval in the total amount of 10 $7,408,000, and appropriately account for the residual receipts permanent loan to the partnership of C&C Development and Irvine Housing Opportunities for the ^ subject affordable housing project, and as set forth in the approved loan documents and upon confirmation that the developer has a letter of commitment from a private lender to provide the balance of funds required for said property \ 3 acquisition MATT HALL, MAYOR 1 2 3 PASSED, APPROVED, AND ADOPTED at a regular meeting of the City 4 Council of the City of Carlsbad, Califomia, held on the 6^^ day of November^ 2012, by the 5 following vote, to wit: 6 7 AYES: 8 NOES: 9 ABSENT: 10 ABSTAIN: 11 12 13 14 15 16 17 LORRAINE WOOD, CITY CLERK 18 19 20 21 (SEAL) 22 23 24 25 26 27 28 ATTEST: <^ *^%> CITY OF V CARLSBAD Memorandum November 1, 2012 Date: ll/^ (^y OiftrilMitkMK ' Ctty Clerk Asst. City Cterk _: DeputyClerk ; Book for tilt nembcficfte CITYCOUNCn* . To: From: Re: John Coates, Acting City Manager Debbie Fountain, Housing and Neighborhood Services Direct CAROL/HARDING ACQUISITION - OPTIONAL PROJECT PROPOSAL On Tuesday, November 6, 2012, the City Council will consider the financial assistance request from C&C Development and Irvine Housing Opportunities for $7.4 million for the acquisition and rehabilitation of 21 duplexes in the historic Barrio neighborhood ofthe Village Area. This item was continued from the City Council meeting of October 23, 2012 at the developer's request. In addition to the acquisition and substantial rehabilitation proposal, the development team has an optional proposal it would like to submit to the City Council for consideration on November The developer had intended to acquire the subject property, substantially rehabilitate the interior and exterior of the units, and then maintain it as an affordable housing development for approximately 15 years. The developer intent was then to construct a larger development of approximately 140 units on the site (with additional property) if all approvals could be obtained and additional equity raised to do so. The idea was for a two phase project. The city contribution would remain the same for either project, with the addition of a street vacation with the larger project (but no additional cash). At this time, the developer would like to offer an alternative for consideration by the City Council on November 6th. The developer is willing to acquire the property by the middle of February, 2013, complete some minor rehabilitation (health and safety improvements and clean up only; no exterior improvements), restrict the units to low income affordability but then move forward with obtaining the approvals necessary to construct the larger project. The funding amount ($7,408,000) required from the City will remain the same, and will be used to assist in the acquisition ofthe property only. The development team will obtain additional financing from Bank of America to complete the acquisition and minor rehabilitation. Once entitlements are approved for the larger project, the developer will then apply for tax credit equity and a conventional loan to construct new units. It is anticipated by the development team that the new larger project would begin construction within 3 to 5 years, with final construction complete within 4 to 6 years (ifthe project receives all of its approvals, including general plan amendments and coastal commission approval to increase the residential density within this area ofthe City). At this time, however, the developer is only requesting funding Housing & Neighborhood Services 2965 Roosevelt St., Suite B I Carisbad, CA 92008 I 760-434-2810 I 760-720-2037 fax 1 www.carisbadca.gov J. Coates November 1, 2012 Page 2 from the City to complete aqquisition af the pt^plltf. 1^entity I^Sljndil is not being asked to consider action on the new (jonstruction project. T^^^eiW^i^B^CXj/ironmental review for the larger project will be processed separately. It is anticipated tf^jt^Qcjeveloper will also request a street vacation at a later d|te f^rflTe larger project. The developer pro forma indicates that the larger (new construction) project will cost approximately $41.3 million. The breakdown of costs and sources are as follows: Costs Total Cost Cost per Unit Land & Demolition $9,965,000 $71,178 Construction $20,829,259 $148,780 Soft Costs (incl. city fees) $6,121,520 $43,725 Relocation $1,300,000 $9,285 Developer Fee $2,000,000 $14,285 Development/Deferred $723,990 $5,171 Financing $420,503 $3,003 Total $41,360,272 $295,430 Sources Total Subsidy per Unit Conventional Loan $7,533,270 $53,809 City of Carisbad (acquisition) $7,400,000 $52,857 City of Carlsbad (street vacation) $1,750,000 $12,500 Tax Credit Equity $24,677,002 $176,264 Total $41,360,272 $295,430 Note: The subsidy of the City is estimated at approximately 22% of total costs (incl. land). Risk Anaivsis All ofthe city funds will be used for acquisition ofthe propert:y; this means the City funds will be disbursed to the project before any assurances are provided that the tax credit equity funding will be available for the new construction project or that the new construction project is approved. The property will be used in its current state, with some minor improvements and clean up, until such time as permits are approved and issued for construction of a new larger (140 unit) apartment development. At that time, the development team would move forward to relocate the current tenants and begin the new construction project. If the permits or additional funds (9% Tax Credit Equity) are not approved for any reason for the future new construction project, the worst case scenario is that the existing units will continue to be owned and operated by the development team and made available at an affordable rental rate for low income households for 55 years. At that time, the development team would J. Coates November 1, 2012 Page 3 apply to the State for an allocation of 4% Tax Credits and Tax Exempt Bonds to complete the more substantial rehabilitation originally anticipated on the residential units and to construct the additional amenities (community building, play area, etc.). It is also important to note that the City will be required to subordinate its Deed of Trust position to any private lender in order to obtain the remaining funds required for acquisition of the property and health and safety improvements to the units. Bank of America has provided the development team with a letter of commitment and intends to be the private lender for the remaining funds required under this proposal. This is subordination requirement is a standard condition where a private lender (such as a financial institution) has provided funding to a development, even if that funding is less than the City financial assistance to the project. Ifthe City does not subordinate, the development team will not receive the required private financing. In the loan agreement, procedures are set forth for notice of defaults and rights by the City to cure any loan default to protect its financial position; these terms ofthe loans assist in the effort to mitigate any risk associated with subordination of a city loan to the private lender. With this proposal, the City Council is being asked to approve the funding for acquisition of the property with the understanding that Ifthe new construction project is unable to move forward for any reason to completion that the following will occur: 1. The development team will retain ownership ofthe subject property and operate a 42 unit rental development at affordable rates for low income eligible households for 55 years, with minimal improvements until such time as the developer can apply to the State for an allocation of 4% Tax Credits and Tax Exempt Bonds. 2. That the$7.4 million residual receipts loan from the City will remain as a permanent loan (55 years) to the developer and paid over time from surplus cash generated from the operation of the rental units. There will be no accelerated payment of the city loan if the larger development is unable to move forward to completion for any reason. This alternate proposal from the developer will be presented to the City Council during the presentation by the development team and city staff at the City Council meeting on November 6, 2012. An alternate resolution (also #2012-235) will be presented to City Council at that time if the Council would prefer to approve this alternate proposal rather than the original proposal submitted by the developer and set forth within the submitted agenda bill (#21,028), originally dated October 23, 2012. The alternate resolution is attached for review. The environmental review determination (project exemption) set forth in the original agenda bill (#21,028) remains the same for this alternate proposal. J. Coates November 1, 2012 Page 4 If you have questions regarding the alternate proposal, please let me know. Attachments 1. City Council Resolution No. 2012-235 (Alternate Proposal) to approve financial assistance from the City for C&C Development and Irvine Housing Opportunities to acquire property at Carol and Harding Place, and then pursue construction of a new higher density apartment project at a later date. 2. Sales Comparables for other properties recently purchased in the area. 3. Agenda Bill No. 21,028 with original proposal from the subject development team. Cc: City Attorney Assistant City Attorney, Jane Mobaldi Finance Director Altemate Proposal RESOLUTION NO. 2012-235 2 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, TO APPROVE A RESIDUAL RECEIPTS ^ LOAN AND APPROPRIATE HOUSING TRUST FUNDS IN THE . AMOUNT OF $7,408,000 TO PROVIDE FINANCIAL ASSISTANCE TO THE PARTNERSHIP OF C&C DEVELOPMENT AND IRVINE 5 HOUSING OPPORTUNITIES FOR THE ACQUISITION OF FORTY- TWO (42) RENTAL UNITS (21 DUPLEXES) TO BE RiESTRICTED 6 FOR LOW AND MODERATE INCOME AFFORDABLE HOUSING WITHIN THE NORTHWEST QUADRANT OF THE CITY OF 7 CARLSBAD. 8 APPLICANT: C&C DEVELOPMENT AND IRVINE HOUSING OPPORTUNITIES 9 18 19 20 21 22 23 WHEREAS, C&C Development and Irvine Housing Opportunities (IHO) have partnered and have proposed to acquire 21 duplexes rental residential units (42 total units), complete some minor improvements, and convert them to rent-restricted affordable housing for low and 10 11 12 2^ moderate income households on Harding Street, Carol Place and Magnolia Avenue in the 14 historic Barrio neighborhood of the Village Area within the Northwest Quadrant of the City of 15 Carlsbad; and 16 WHEREAS, C&C Development and IHO have requested that the City of Carisbad provide financial assistance in the form of an acquisition loan that will convert to a residual receipts permanent loan to assist in the development of a new, higher density affordable housing rental complex upon the property at a later date; and WHEREAS, the public benefits of the proposed project include physical enhancement of a deteriorating neighborhood in the historic Barrio neighborhood of the Village area, rehabilitation of existing dwelling units to improve the health and safety of the residents, and 24 diversity of housing opportunities for low and moderate income households within the City of 25 Carlsbad; and 26 WHEREAS, the proposed acquisition will support the City's desire to encourage the 2^ construction of additional new units to be affordable to low and moderate income households 28 1 and to increase the inventory of low and moderate income affordable units within the City at a 2 future date in time; and ^ WHEREAS, on the 16th day of October, 2012, the City of Carlsbad Housing Commission did hold a public meeting to consider the request for City financial assistance for the acquisition of said 42 lower income-restricted affordable housing apartment units by the affordable housing developer partnership of C&C Development and IHO, and subsequentiy recommended approval of the request for assistance; and WHEREAS, the City Council did hold, on the date of this resolution, a public meeting 4 5 6 7 8 9 IQ and encouraged public participation prior to its consideration of said request for City financial 11 assistance for the acquisition of said 42 low and moderate income-restricted affordable housing 12 apartment units by the affordable housing developer partnership of C&C Development and IHO; 1 ^ and, WHEREAS, at said public meeting, upon hearing and considering all testimony, if any, of all persons desiring to be heard, said City Council considered all factors relating to the request for financial assistance; and, WHEREAS, the City Council approved a residual receipts loan and the appropriation and expenditure of $7,408,000 from the Housing Trust Fund for the purposes of providing loan proceeds to assist in the acquisition of 42 low and moderate income restricted units of rental 21 housing for lower and moderate income persons/families to the partnership of C&C 22 Development and IHO. 23 NOW, THEREFORE, BE IT HEREBY RESOLVED by the City Council of the City of Carlsbad, Califomia, as follows: 25 1. The above recitations are tme and correct. 26 " 27 28 15 16 17 18 19 20 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 //// 21 //// 22 //// 23 //// 24 25 //// 26 //// 27 //// 28 2. The request for City financial assistance is consistent with the goals and objectives of the City of Carlsbad's Housing Element, CDBG/HOME Consolidated Plan, and the Carlsbad General Plan. 3. The request for City financial assistance will assist the affordable housing developer to acquire a total of 42 two bedroom affordable apartment units and rent restrict them to be affordable for low and moderate income households. The project, therefore, has the ability to effectively serve the City's housing needs and priorities as expressed in the Housing Element and the CDBG/HOME Consolidated Plan. 4. That the City Council authorizes the City Manager, or designee, including the Housing and Neighborhood Services Director, in coordination with the City Attomey to negotiate and prepare for City Manager execution all loan documents related to provision of the City financial assistance to fund the subject residual receipts acquisition/permanent loan to the partnership of C&C Development and Irvine Housing Opportunities to provide for the subject low and moderate income-restricted affordable housing project through acquisition. 5. That the City Council authorizes the City Manager, or designee, to execute subsequent subordination agreement(s) subordinating the City's Regulatory Agreement and Deed of Tmst to the Deed of Tmst for acquisition to permanent lenders, as required, subject to review and approval by the City Attomey, and subject to the City Manager finding that no other financing that does not require subordination is reasonably available. 6. That the City Council authorizes the Finance Director to appropriate and disburse the loan proceeds as set forth within this approval in the total amount of $7,408,000, and appropriately account for the residual receipts permanent loan to the partnership of C&C Development and Irvine Housing Opportunities for the subject affordable housing project, and as set forth in the approved loan documents. PASSED, APPROVED, AND ADOPTED at a regular meeting of the City Council of the City of Carlsbad, Califomia, held on the 6'^ day of November^ 2012, by the following vote, to wit: 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AYES: NOES: ABSENT: ABSTAIN: ATTEST: MATT HALL, MAYOR LORRAINE WOOD, CITY CLERK (SEAL) Sales Comparables Carol and Harding Duplexes Address 21 Duplexes Carol and Harding Comparables Address 1. 3812-3814 Jefferson 2. 2646 Jefferson 3. 3724-3726 Jefferson 4. 996-998 Pine 5. 2620-2622 Roosevelt Streeet Units Sales Date Sales Price Price/Unit Yr. Built $ale Type 42 N/A $8,450,000 $ 201,190 1953 Standard Units Sales Date Sales Price Price/UPit Yf. BMIH $9«g Typg 2 3/16/2011 $ 426,000 $ 213,000 1953 Standard 2 4/29/2011 $ 423,000 $ 211,500 1950's Est. Short 2 6/2/2011 $ 385,000 $ 192,500 1953 Standard 2 6/24/2011 $ 416,000 $ 208,000 1950's Est. Standard 11 1/31/2012 $2,275,000 $ 206,818 1970's Standard BumVisti Ligcon Laguna Dr COMPARABLE PROPERTY PHOTO ADDENDUM Borrower: KOYL File No,: 1108004U Property Address: 3772-3774 HARDING ST Case No.: KOYL/OWNER Citv: CARLSBAD State: CA Zip: 92008 Lender: IRVINE HOUSING OPPORTUNITIES COMPARABLE SALE 3724-3726 JEFFERSON ST CARLSBAD Sale Date: COE 06-02-11 Sale Price: $ sss.ooo COMPARABLESALE 3812-3814 JEFFERSON ST CARLSBAD Sale Date: COE 03-16-11 Sale Price: $ 426,000 COMPARABLE SALE 2646 1& 2 JEFFERSON ST CARLSBAD Sale Date: COE 04-29-11 Sale Price: $ 423,000 SUMMARY OF A FULL APPRAISAL REPORT KOYUOWNER Small Residential Income Property Appraisal Report pneNo. iio8oo4u Thefewe 6 compirabteptopetliescutTenllyolteedtosaleintesulHectneiohbDrho^ 599 000 10$ 3.595.000 ThBTiiie 7 comoaiable sales In he subjednemhbwhoodwAin tie past twelve rah sale price from S 385.000 ioS 1.795.000 FEATl.mE 1 SUBJECT COMPARABLE SALE NO. 1 COMPARABLE SALE NO. 2 COMPARABLE SALE NO. 3 f A AiMress CARLSBAD 3724-3726 JEFFERSON ST CARUSBPO 3812-3814 JEFFERSON ST CARLSBAD 2646 1&2 JEFFERSON ST CARLSBAD PranmivtoSubiect 0.06 MILES W 0.07 MILES SSW 1.05 MILES NW SelePtice $ EST MKT VAL $ 385.000 S 426,000 $ 423.000 Sale Price/Gtoss Bldo. Area $ 0.00 sq. II % 229.17 sq. It i 258.60 sqk S 316.62 sq.k Gross MonWyRenl $ Z790 $ 3.000 $ 3.000 $ 3,000 Gross Rent MuKMIer N/A 128.33 142.00 141.00 PrfcePerUnil $ N/A $ 192,500 % 213.000 S 211.500 Price Pel Room S N/A $ 48.125 i 53.250 t 60.429 Price Pet Bedroom $ S 96.250 $ 106,500 S 141.000 Rent Control riVes [X]NO 1 lYes IXINO [ lYes fxiNo riYes (XINo Data Source($) INSPECTION FACL/DQ/MLS FACL/DQ/MLS FACL/DQ/MLS Verilicalion Sowce($) FACUDQ/ MLS#110023887/OOC«203417 MLS#100067833/DOC#139832 MLS«100066647/DOC«224733 VALUE ADJUSTMENTS DESCRIPTION DESCRPTION «(-)/dustmen! OESCRPTION •(-iAdustntem DESCRIPTION i(-)AdNment Sale 01 Financing Concessions N/A ALL CASH Aa CASH CTNL{CONV) $319,500 ALL CASH ALL CASH Dale of Sale/Time N/A COE 06-02-11 COE 03-16-11 COE 04-29-11 localion AVG/BKS FRWY AV6/N0 BACKING -11.500 AVG/NO BACKING -13.000 AVG/NO BACKING •12.500 LeasehoWFee Simple FEE FEE FEE FEE Site 6.322/95HUTILITY 6.320/95% UTL 6.293/95% UTL 6.307/95% UTL +2,000 View NO VIEW NO VIEW NO VIEW NO VIEW Design (Style] CONTEMPORY CONTEMP CONTEMP CONTEMP OuaWyol Constmction AVG AVG AVG AVG Actual Aoe 58/EFF 25-30 5a/EF 25-30 61/EF 25-30 11/EF5-10 -20.000 Condition AVERAGE AVERAGE AVERAGE AVERAGE Gross Building Area 1.632 1.680 1.648 1.336 1 Unit Breakdown TOM ttm. BHhs rou Mm. Tolll una. Toil j Unil»l 4 2 1 4 2 1 4 2 1 4 2 1 Unit«2 4 2 1 4 2 1 4 2 1 3 1 1 +5.000 Unil«3 UnH«4 • Basement Description SIMAiPGRADES MOREUPGRADES -10.000 UPGRADES Basement Finished Rooms NONE NONE NONE NONE Functional UtiOty AVERAGE AVERAGE AVERAGE AVERAGE HeadnDTCoolinfl WF/NONE WF/NONE FAU/NONE -10.000 WF/NONE Energy Efficient Hems NONE NONE NONE NONE Parking 0nK)ft Site 2 GARAGES 2 GARAGES 2 GARAGES 2 GARAGES Po(ch/Pat)o/Deck NONE SIMILAR SIMILAR NONE FIREPLACE NO FIREPLACE NO FIREPLACE NO FIREPLACES NO FIREPLACES PROXTO OCEAN .6 MILES SIMILAR SIMILAR SIMILAR DOM/USTTOSALE N/ADAYS/N/A% 21 DAYS/86% 61 DAYS/85% 168 DAYS/94% Net Adjustment (Total) n. ixi-$ 11.500 \U 1x1-$ 33.000 1 U Ixl-$ 25.500 Adjusted Sale Prne ofComparaliies N«tA4. -30H H GfossAtn. ao% % $ 373.500 NctAig. -7.7% % GrossAtfl. 7.7% % S 393,000 NetAdj. -«.0% % GrossAdl 9.3% H $ 397.500 Adl Plice Per Unit (M.S»Cenp/«olCanpUnlisl S 186.750 $ 196.500 $ 198.750 AdI. Price Pel Room (M.SPcor*/soican*ROOKS) t 46.688 $ 49,125 i 56.786 $ 93.375 i 96.250 S 132.500 Value Per Unit $ 194,000 X 2 Units =S 388,000 Value Per GBA i 268.00 X 1.632 GBA =$ 437.376 Value Per Rm. $ 50.866 X 8 Rooms c$ 406.928 Value Per Bdrms. $ 108.041 X 4Bdrms. =$ 432.164 Summaiy of Sales Comparison Approach including reconcaiaiion of the above indicaiors ol value. CONSIDERED THE MOST SIMILAR FROM THE SUBJECTS NEIGHBORHOOD THE COMPARABLE SALES UTILIZED IN THE REPORT WERE A DILIGENT SEARCH WAS MADE FOR RECENT SALES COMPARABLES SIMILAR TO THE SUBJECT IN SQUARE FOOTAGE. BACKING TO THE FREEWAY. AGE AND CONDITION AND FEW WERE FOUND AND THAT IS THE REASON FOR THE SALES COMPARABLE UTILIZED. Indkialed Value by Sales Comparison Aooroach $ 399.000 Total gross monttily tent $ 2.790 X gross rent mulllpllet(6RM) 145.00 404.550 Indfcated value by Bie Income Approach I Comments on meome approach indudngieconciliatwn of die CRM MOST WEIGHT WAS GIVEN TO THE SALES COMPARISON APPROACH WITH SUPPORT I GIVEN WITH THE GROSS RENT MULTIPLYER UNIT OF COMPARISON Indicted Value by. Sales Cemp«rt«oiiAwly»l»t 399,000 Income Approach t 404.550 CoatAppfeachQI developed) S 389,000 IN THIS /VPPRAISAL EQUAL WEIGHT WAS GIVEN SALES ONE. TWO. THREE AND FOUR. THE SALES COMPARISON APPROACH WAS I ADJUSTED BY THE INCOME APPROACH AND THE COST APPROACH TO DETERMINE THE FINAL ESTIMATE OF VALUE. i This appraisal is made Ix) "as Is,* (_J subject to completlan pei plans and spscilicatnns on the basis of a hypothetical condition tut Aie improvements have been completed, i Q sutiject to Ihe toliowing repairs or alterations on the basis of a hypothetical condition that the lepairs or alteiatwns have been completed, or O subject to ttie lolkming tequired ! Inspection based on the extiaordmiy assumption Biat flie condition or delciency does iwt requite alteration a THE APPRAISAL IS MADE 'AS IS' WITH NO CONDITION MADE. SEE USPAP IDENTIFICATION PAGE FOR INTENDED USE OF THIS REPORT. Baced on a complete visual Inspeetion of the interior and exterior areas of the subject property, defined ecopc of worl(, sMtam cnt o( Mtumptlons and limiting eonditlone, and appraiser's ecrtilieatlon, my (our) opinion ofthe market value, a* defined, of the reel property that ii the subject of ihic report is t 395,000 Mol AUGUST 25. 2011 .wWem«tliedleetMi»pectlonaBd«ie««eetivedMe«fthl>appfl»al. ; Hhrdi: FradCtUKFonnn Ma«200S TRUMAN E. BAILEY COMPARABLE PROPERTY PHOTO ADDENDUM Borrower: KOYL File No.: 1108004U Propertv Address: 3772-3774 HARDING ST C^se No.: KOYUOWNER City: CARLSBAD state: CA Zio: 92008 Lender: IRVINE HOUSING OPPORTUNITIES COMPARABLE SALE 996-998 PINE AVE CARLSBAD Sale Date: COEO6-24-11 Sale Price: $ 416,000 COMPARABLE SALE #5 Sale Date: Sale Price: $ COMPARABLE SALE 1t6 Sale Date: Sale Price: $ SUMMARY OF A FULL APPRAISAL REPORT Small Residential Income Property Appraisal Report KOYL/OWNER Fie No. 1108004U FEATURE 1 SUBJECT COMPARABLE SALE NO. 4 COMPARABLE SALE NO. S COMPARABLE SALE NO. 6 I A Address CARLSBAD 996-998 PINE AVE CARLSBAD ProMmily to Subject 0.54 MILES NNW Sale Price $ ESTNBCrVAL $ 416.000 S $ Sale Price/Gross Bkfg. Area S 0.00 tq-l $ 339.59 sq. II $ sq It J SQ.ll Gross Monthly Rent $ 2,790 $ 2.425 $ % Gross Rent MuttpSec N/A 171.55 Plice Pel Unit $ N/A S 208,000 $ $ Price Per Room S N/A S 59.429 S $ • Price Per Bedroom $ $ 138.667 $ $ Rent Control 1 "lYes fxlNo DYOS (XINO f lYes HNO ( lYes I INO Data Source(s) INSPECTION FACL/DQ/IVn.S Verification Source(s) KN.S*100071969^OC#320786 VALUE ADJUSTMENTS DESCRIPTCN OESCRIPTION +(-)AdjusBnent DESCRIPTION *(•) Adjustment OESCRPTION t(-] AdjustmeM Sale or Financing Concessnns N^A .. ALL CASH ALL CASH DakofSalerrime N/A COE 06-24-11 Location AVG/BKS FRWY SIMILAR LcasehokVFee Simple FEE FEE sue 8.322«5%UTILITY 17.46»95% UTL -22.500 View NO VIEW NO VIEW Design (Style) CONTEMPORY CONTEMP Oualty of Constiuction AVG AVG /MualAge 58«FF 25-30 81/EF 40-45 +15.000 Condition AVERAGE AVERAGE Gross BuiUkig Area 1.632 1.225 +20.500 UnkBieakdown Tow tin*. B«hs Toul Mm. Sdu Toul Bdtfls. smii Tod Bdiiw. Bahs Unit«l 4 2 1 3 1 1 +5,000 Unit«2 4 2 1 4 2 1 Unlt«3 Unit* 4 Basement Description SIFiUUPGRAOES i Basement Finished Rooms NONE NONE Functional Utility AVERAGE AVERAGE Heating/Cooling WF/NONE WF/NONE Energy Efficient Items NONE NONE Parkkio On/Off Site 2 GARAGES 2 GARAGES n PorcWPalio/Deck NONE PATIO SLAB •2,000 H FIREPUCE NO FIREPUCE 1 FIREPUCE m PROXTO OCEAN .6 MILES SIMILAR H DOM/LIST TO SALE N/A DAYS/N/A% 180DAYS«5% ffi Net AdjustmeM (Total) 1x1+ 11-$ 16,000 (Nil-s 11+ 11-$ Adjusted Sale Price olCompataMes NelA4 3.8% % GnwAdi. 16.^ % $ 432,000 NctAdi. % Oro^AdL > H $ NetAdj. % GiossAdt. % $ Adj. Price Per Unit (Mi.srconw/«oicBwuiiitt) S 216.000 $ $ Adj. Price Per Room (Mspcow/iticaeipiiooim) $ 61.714 S S Adl Price Per Bdrm. (Mj.spconwrfoiconpBidtoemii $ 144.000 $ $ ITEM SUBJECT COMPARABLE SALE NO. 4 COMPARABLE SALE NO. 5 COMPARABLE SALE NO. 6 Dale of Prior Sale/Transfer UNKNOWN/BUILT BY THE NONE/STANDARD SALE Price of Prni Saterrransfer OWNER IN 1953 Data Sowce(s) CR/FACL/DQ//MLS CR/FACUDQ//MLS Effective Dale of Data Souice(s) AUGUST 25. 2011 AUGUST 25, 2011 Summaiy of Sales Comparison Approach. See Attached... Summaiy of Sales Comparison Approach. Apartment Name Street City, State County APN Site Size (acres) Zoning No. of Units Rentable Area (SF) Year Built Parking Quality Condition Buyer Seller Sale Date ^ Marketing Time Property Rights Condition of Sale Cash Equivalency Pi iifHTly l)i->ci'ip|j(iii Carlsbad Village Apartments 2620-2622 Roosevelt Street Carlsbad, CA San Diego 203-102-28 0.62 Multifamily U 9,960 1970s Surface Average Average Seville Holdings LLC Keith & Sara Harrison 01/31/12 8 months Fee Simple Market Yes Bed/Bath I'UDItlf Ji: l-Apiiisc Sales Price Gross Scheduled Income Miscellaneous Income Total Gross Income Vacancy Factor Effective Gross Income Estimated Expenses Net Operating Income iiiiinciiii li)Uii-alnr.s CITY COUNCIL AGENDA BILL AB# 21.026 Title APPROVAL OF FINANCIAL ASSISTANCE FOR THE CAROUHARDING ACQUISITION AND REHABIUTATION AFFORDABLE HOUSING DEVELOPMENT DEPT. HEAD(\yt>^ MTG. ^0l23l^2 Title APPROVAL OF FINANCIAL ASSISTANCE FOR THE CAROUHARDING ACQUISITION AND REHABIUTATION AFFORDABLE HOUSING DEVELOPMENT CITY ATTY, DEPT. HNS Title APPROVAL OF FINANCIAL ASSISTANCE FOR THE CAROUHARDING ACQUISITION AND REHABIUTATION AFFORDABLE HOUSING DEVELOPMENT CITY MGR. ^ RECOMMENDED ACTION; That the City Council adopt Resolution No. 2012-235 APPROVING a request to provide financial assistance to the partnership of C&C Development and Irvine Housing Opportunities in the form of a residual receipts loan of $7,408,000 from the Housing Trust Fund, and to authorize the Housing and Neighborhood Services Director in coordination with the City Attorney to negotiate and prepare the related loan documents for execution prior to acquisition and rehabilitation of 42 dwelling units (21 duplexes) to be rent-restricted for low income households on property located in the historic Barrio neighborhood of the Village Area. ITEM EXPLANATION: An affordable housing partnership - C&C Development and In/ine Housing Opportunities - recently contracted with a private property owner to purchase 21 duplexes (42 units total) with addresses on Carol Place, Harding Street and Magnolia Avenue (site map attached) in the historic Barrio neighborhood of the Carlsbad Village Area. The development partnership intends to acquire the duplexes, substantially rehabilitate them and then rent-restrict all of the units to provide affordable housing for lower income households. The partnership has requested financial assistance from the City of Carlsbad for the subject project. The 3 39 acre site is located in close proximity to Jefferson School and is located within the general boundaries of 1-5 (east), Carol Place/Tamarack Avenue (south), Jefferson Street (west) and Magnolia Avenue (north). The proposal is unique because it is not being built as a result of a master development inclusionary housing requirement. The units provided will be above and beyond those anticipated as part of the inclusionary housing program. The development consists of a 42 existing rental units (2 bedroom/1 bath), single story with one car garages. The units are in need of substantial exterior and interior rehabilitation. Attached are renderings of the exterior improvements proposed for the units. Proposed amenities to be added include: enhanced landscaping for each unit, a community garden feature, a children's play area, and a new community room with laundry facilities and an on-site manager's office. DEPARTMENT CONTACT: Debbie Fountain 760-434-2815 debbie.fountain@carlsbadca.aov COMMISSION ACTION: APPROVED • CONTINUED TO DATE • SPECIFIC DENIED • CONTINUED TO DATE • UNKNOWN CONTINUED • RETURNED TO STAFF O WITHDRAWN • OTHER-SEE MINUTES • AMENDED • Page 2 The project will have the following affordability levels: • 5 units for households earning 50% of the San Diego County Area Median Income (AMI); • 36 units will be affordable to households earning 60% of AMI; • 1 unit will be for an on-site property manager. Financial Assistance As part of the project financing, the Developer is requesting that the City provide a residual receipts loan In the rounded amount of $7,408,000, or $176,380 per unit. Staff is proposing that the Housing Trust Fund be the source of funds used if the Council approves the requested loan. In addition to the City's financial participation, the Developer intends to obtain equity through the tax credit program and the issuance of tax exempt bonds. The financial details of the subject project are provided below. Development Partnership C&C Development is a full service Real Estate Development Company with over 30 years of experience. The principals and senior management staff of C&C Development take a "hands on" approach to all aspects ofthe real estate development process: acquisition, entitlement, financing, construction, management and ownership. Irvine Housing Opportunities (IHO) is a non-profit organization originally formed in July, 1976 to assist the City of Irvine to produce affordable housing and meet its related obligations. IHO has expanded its boundaries of service and its staff provides considerable experience and expertise in the development and long term management of affordable housing for lower income households. Recent experience includes projects in the cities of San Marcos, Fullerton, Santa Ana, Yorba Linda and Orange. Uses and Sources of Funds The total cost of the proposed project is estimated to be $15.5 million, inclusive of the value of the land and improvements ($8,450,000). Based on a detailed review of the costs, the total per unit cost of $369,119 is generally consistent with more recent affordable multi-family developments within the City when consideration is given to the higher land cost west of 1-5 and the required relocation and other rehabilitation and financing costs. The following chart provides a breakdown of the project costs, or uses of funds. USESpOFFUNCRt.:^ ^7^- Expense Total Amount Per Unit Cost Land (incl. escrow costs, etc.) $8,450,000 $201,190 Construction/Rehabilitation $3,122,888 $74,354 Indirect/Soft Costs $1,722,381 $41,009 Developer Fee $1,600,000 $38,095 Development (incl. reserve & contingency) $291,510 $6,940 Lender Fees, Interest & Financing Costs $316,288 $7,530 Total Uses of Funds $16,503,067 $369,118 Page 3 The following chart provides a breakdown of the permanent sources of funds for the proposed development. The sources of funding for the proposed project are 1) proceeds from the sale of tax credits to a limited partnership; 2) tax exempt bond proceeds; 3) residual receipts loan from the City of Carlsbad; and 4) deferred developer fee & general partner equity. iw^s«MiiM Source Total Amount Per Unit Tax Credit Investor Equity $4,374,692 $104,159 Tax Exempt Bonds $3,312,250 $78,863 City Contribution $7,407,158 $176,360 Deferred Develooer Fee/Other $408,967 $9,737 Financial Assistance Documents As proposed and if approved, the City assistance ($7,408,000) will be provided in the form of, a residual receipts loan secured by a note and deed of trust. The outstanding principal and accrued interest on the City loan will be amortized over a fifty-five year period and repaid from surplus cash in equal annual installments comprised of principal and interest. In the event that there is not adequate cash surplus to pay an annual installment, the outstanding balance shall accrue with simple interest at 3% per annum. The terms of the City assistance is the same loan structure that has been utilized for each previous affordable housing project developed in the City of Carlsbad. In order for the project to receive the $7,408,000 loan, the Developer is required to enter into loan and regulatory agreements with the City of Carlsbad. As one of the actions set forth within this report, the City Council is being asked to authorize the City Manager and Housing and Neighborhood Sen/ices Director in coordination with the City Attorney to negotiate and prepare the required loan documents for execution by the City and the Developer. The required documents are explained further below: 1. Loan Agreement states the terms and conditions relating to the City's loan. 2. Regulatory Agreement records the terms of affordability and the operational requirements for the project. 3. Promissory Note is executed by the Developer and expresses their intent to repay the loan. 4. Deed of Trust is recorded against the property to secure the City/Agency's interest in the subject property and related improvements. It is important to also note that the City will ultimately be required to subordinate the subject documents to the senior lien holder(s). If approved, the attached resolution authorizes the City Manager, or designee, to execute subsequent loan documents and subordination agreements. While the loan and related subordination documents will not return to the City Page 4 Council for review and approval, Staff will take the necessary steps to insure that the documents provide the City with adequate security, notice and cure ability. The loan and subordination documents will be reviewed by, and be subject to final approval by the City Attorney, acting as legal counsel for the City Council. HOUSING COMMISSION RECOMMENDATION ON FINANCIAL ASSISTANCE At their meeting on October 16, 2012, the Housing Commission reviewed the request from the Developer for financial assistance In the rounded amount of $7,408,000. The Commission recommended (5-0) that the City Council approve the loan from the Housing Tmst Fund for the noted project. STAFF RECOMMENDATION The proposed request for financial assistance was reviewed by the Housing Policy Team (staff), and by the City's Economic Development Team. The Teams are both supportive of the financial assistance from the City and the project itself. The proposed project will provide for the following public benefits: 1. Physical enhancement of a deteriorating neighborhood in the Historic Barrio neighborhood of the Village Area; 2. Rehabilitation of existing dwelling units to improve livability for the residents; 3. Diversity of housing opportunities for lower income households; 4. Addressing social issues in the area (such as those caused by crime and poverty) by enforcing rules, selecting good tenants, having an on-site property manager, increasing disposable income through reduced rents, and providing economic development opportunities to enhance the quality of life for residents living in the units; 5. Additional units to count for affordable housing development in the Housing Element; ' 6. Encouraging future new development and upgrading the area further, as well as providing for desirable amenities to support economic development (micro-enterprise loans for new resident businesses) and encouraging a sustainable community (community garden). ENVIRONMENTAL REVIEW The project is exempt from the California Environmental Quality Act (CEQA) per CEQA Guidelines Section 15194 - Affordable Housing. The financial assistance from the City of Carlsbad will be used by the developer to acquire existing residential units and rehabilitate them, and then to rent-restrict the units to be affordable to lower income households. This proposed project was reviewed pursuant to the California Environmental Quality Act (CEQA). The City Planner has determined that the proposed project is exempt from additional environmental review per Section 15194 (affordable housing exemption) of CEQA because the project site is 1) no larger than five acres, 2) is in an urbanized area, and 3) the project site has been previously developed for qualified urban uses (residential). The project also consists of the construction, conversion, or use of residential housing consisting of 100 or fewer units that are affordable to low-income households, and the developer will legally commit to ensure the continued availability and use of the housing units for lower income households for a period of at least 30 years at monthly costs deemed to be affordable rent for lower income households. Page 5 FISCAL IMPACT: The financial assistance in the fonn of a $7,408,000 residual receipts loan will be provided from the Housing Trust Fund, which has a current undesignated fund balance of approximately $18.3 million. These funds may be used for affordable housing purposes only; these are not general fund monies that may be used for other sen/ices or projects. EXHIBITS: 1 City Council Resolution No. 2012-235 . to approve financial assistance for the Carol/Harding Acquisition and Rehabilitation Affordable Apartment Development 2. Project Location Map 3. Proposal Letter from Development Team 4. Project Rehabilitation Concept Illustrations/Photos 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 RESOLUTION NO. 2012-235 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, TO APPROVE A RESIDUAL RECEIPTS LOAN AND APPROPRIATE HOUSING TRUST FUNDS IN THE AMOUNT OF $7,408,000 TO PROVIDE FINANCIAL ASSISTANCE TO THE PARTNERSHIP OF C&C DEVELOPMENT AND IRVINE HOUSING OPPORTUNITIES FOR THE ACQUISITION AND REHABILITATION OF FORTY-TWO (42) RENTAL UNITS TO BE RESTRICTED FOR LOW INCOME AFFORDABLE HOUSING WITHIN THE NORTHWEST QUADRANT OF THE CITY OF CARLSBAD. APPLICANT; C&C DEVELOPMENT AND IRVINE HOUSING OPPORTUNITIES WHEREAS, C&C Development and Irvine Housing Opportunities (IHO) have partnered and have proposed to acquire and substantially rehabilitate 21 duplex (42 total) rental residential units and convert them to rent-restricted affordable housing for lower income households on Harding Street, Carol Place and Magnolia Avenue in the historic Barrio neighborhood of the Village Area within the Northwest Quadrant of the City of Carlsbad; and WHEREAS, C&C Development and IHO have requested that the City of Carlsbad provide financial assistance in the form of an acquisition and rehabilitation/construction loan that will convert to a residual receipts permanent loan to assist in the development of a new affordable housing rental complex within Carlsbad; and WHEREAS, the public benefits of the proposed project include physical enhancement of a deteriorating neighborhood in the historic Barrio neighborhood of the Village area, rehabilitation of existing dwelling units to improve livability for the residents, diversity of housing opportunities for lower income households, and additional units to count for affordable housing development for the City of Carlsbad's Housing Element; and WHEREAS, the proposed acquisition and rehabilitation project will also encourage future new development and upgrading of the neighborhood further, as well as providing for (o 4 5 6 7 8 9 10 desirable amenities to support economic development (micro-enterprise loans to residents for 2 new businesses) and encouraging a sustainable community (community garden). 3 WHEREAS, on the 16th day of October, 2012, the City of Carlsbad Housing Commission did hold a public meeting to consider the request for City financial assistance for the acquisition and substantial rehabilitation of said 42 lower income-restricted affordable housing apartment units by the affordable housing developer partnership of C&C Development and IHO, and subsequently recommended approval of the request for assistance; and WHEREAS, the City Council did hold, on the date of this resolution, a public meeting to consider said request for City financial assistance for the acquisition and rehabilitation of said 11 42 lower income-restricted affordable housing apartment units by the affordable housing 12 developer partnership of C&C Development and IHO; and, ^3 WHEREAS, at said public meeting, upon hearing and considering all testimony, if any, ^ ^ of all persons desiring to be heard, said City Council considered all factors relating to the request for financial assistance; and, WHEREAS, the City Council approved a residual receipts loan and the appropriation and expenditure of $7,408,000 fi-om the Housing Trust Fund for the purposes of providing loan proceeds to assist in the acquisition and substantial rehabilitation of 42 low income senior- restricted units of rental housing for very low and low income persons/families to the partnership 21 of C&C Development and IHO. 22 NOW, THEREFORE, BE IT HEREBY RESOLVED by the City Council of the City 23 of Carisbad, Califomia, as follows: 24 1 xhe above recitations are true and correct. 2. The request for City financial assistance is consistent with the goals and 2^ objectives of the City of Carlsbad's Housing Element, Consolidated Plan, and the Carlsbad General Plan. 27 28 15 16 17 18 19 20 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 //// 18 //// 19 20 //// 21 //// 22 //// 23 //// 24 //// 25 //// 26 //// 27 28 3. The request for City financial assistance will assist the affordable housing developer to acquire and rehabilitate a total of 42 two bedroom low income-restricted affordable apartment units. The project, therefore, has the ability to effectively serve the City's housing needs and priorities as expressed in the Housing Element and the Consolidated Plan. 4. That the City Council authorizes the City Manager, or designee, including the Housing and Neighborhood Services Director, in coordination with the City Attomey to negotiate and prepare for City Manager execution all loan documents related to provision of the City financial assistance to fund the subject residual receipts acquisition/rehabilitation/permanent loan to the partnership of C&C Development and Irvine Housing Opportunities for development of the subject low income-restricted affordable housing project through acquisition and rehabilitation. 5. That the City Council authorizes the City Manager, or designee, to execute subsequent subordination agreement(s) subordinating the City's Regulatory Agreement and Deed of Trust to the Deed of Trust for acquisition and rehabilitation/construction and permanent lenders, as required, subject to review and approval by the City Attomey, and subject to the City Manager finding that no other financing that does not require subordination is reasonably available. 6. That the City Council authorizes the Finance Director to appropriate and expend the loan proceeds as set forth within this approval in the total amount of $7,408,000, and appropriately account for the residual receipts construction/permanent loan to the partnership of C&C Development and Irvine Housing Opportunities for the subject affordable housing project, and as set forth in the approved loan documents. PASSED, APPROVED, AND ADOPTED at a regular meeting of the City Council of the City of Carlsbad, California, held on the 23rd day of October, 2012, by the follov^ng vote, to wit: AYES: NOES: ABSENT: ABSTAIN: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 ATTEST: 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MATT HALL, MAYOR LORRAINE WOOD, CITY CLERK (SEAL) irutui! Acquisition .Q rctai Land Area- Approximate.y 3.39 aa.. Properties under Contract Owners Interested in Receiving Offers £XHi8n" 3 1 1 IrvincHousingOpportuniries Development July 24, 2012 Ms. Debbie Fountain City of Carlsbad Housing and Neighborhood Sen^ices Director Carlsbad, CA 92008 RE: Carol Place and Harding Street Duplexes Ms. Fountain, We are pleased to present an opportunity for C&C Development (C8iC) and Irvine Housing Opportunities (IHO) to partner with the City of Carlsbad to acquire and rehabilitate the 21 duplexes located at Carol Place and Harding Street into a quality, affordable rental community, C&C and IHO propose partnering with the City to restrict 100% of the units to households earning between 50% and 60% AMI. We have included for discussion, a pro forma for the proposed project. The remainder of proposal contains detailed information concerning the project, its financing and C&C and IHO's extensive experience in successfully developing and managing similar affordable communities. We believe that this project and location, as proposed, provides for the following benefits to the City and its residents: • The opportunity to assist in satisfying the City's affordable production requirements. • The acquisition and rehabilitation of problem properties by a qualified affordable housing developer. • The ability to prevent the existing owner from selling off the duplexes on a individual basis, which would create additional issues for the City and the surrounding neighborhood. • Provides for a quality living environment for future residents. We appreciate your consideration and look forward to the opportunity of partnering with the City. As you review this proposal, please do not hesitate to contact us with any questions. We welcome any insight or suggestions that you may have. Sincerely, Todd Cottle C&C Development Pat whitaker Irvine Housing Opportunities n Conceptual Elevation A N£W OORMtR N€W WOOD SiDiNG NEW BRrCK WAINSCOT NEW GARAGE DOOR NEW ENTRY DOOR NEW SHUTTER Conceptual Elevation B A is. NEW BRICK WAINSCOT NEW GARAGE DOOR NEW SHUTTER NEW ENTRY DOOR 2 ofthe: ^ . M> A 1-^ will VrVWI-^CIL^ ^ CARLSBAD ^^^^^^ Memorandum c L^viMiUtuw><^ ^ 'Ti^ r.TY OF Tb the membm ofthe! /SrP^ ^ ' J1 ? ^ . ^ CITY COUNCIL. October 1,2012 ^| ^ ^^^^ To: Lisa Hildabrand, City Manager <?-t '^^^^^'^^L.,,^ From: Debbie Fountain, Housing and Neighborhood Services Director ^-^fiu^ ^,.eiMUs^r^^*M Re: NEW AFFORDABLE HOUSING DEVELOPMENT - ACQUISITION & REHABILITATION PROJEa; CAROL PLACE & HARDING STREETS; HISTORICAL BARmO^ICT|JlC^ . The following infornnatlon Is provided to brief the City Council on a proposal submitted by a private developer to enhance the Historical Barrio District of the Village Area, and to renovate existing housing to provide affordable housing for lower Income households. This project has received support from the city staff teams for affordable housing policy, economic development (including Urban Place), and Envision Carisbad. Staff also discussed the project concept with a property owner (Mario Monroy) In the area who is supporting market rate development to ensure there Is not a conflict ifthe City were to support and pursue this project. The property owner was supportive and felt that housing for all income levels was still needed in the area. The next step Is to present this project to the Housing Commission for review and a recommendation on October 11,2012. It will ultimately be presented to the City Council by the end of October, 2012 for approval or other action. The developer intends to submit a tax credit application to the State on October 26^ ifthe City Council approves the assistance for the project. The City of Carlsbad received a proposal from Irvine Housing Opportunities, a non-profit affordable housing developer/operator in partnership with C&C Development, a real estate development company specializing In affordable housing. The proposed project is to purchase 21 existing duplexes (42 dwelling units total) on Carol Place and Harding Street from the single owner and rehabilitate them. The partnership would then deed- and rent-restrict the units for low and very low income households for at least 15 years (to meet tax credit requirements). The partnership is willing to then move forward to demolish the existing units and construct a large multifamily (rental) mixed income development (replacing the lower income affordable units within the larger project); it is anticipated that the property could accommodate 140 to 175 units with the proposed new zoning under review and in process for increased density in the area and a street vacation. See attached exhibits for conceptual rehabilitated exterior elevations and a site map. The developer has also proposed a community garden feature and offered to implement a micro-enterprise loan program for its residents to help them start their own businesses or assist with buying equipment for a job (such as work boots, tools, etc.) The total project cost is estimated at $15.5 million to acquire and substantially rehabilitate the existing units. The development partnership has requested financial participation by the City of Housing & Neighborhood Services 2965 Roosevelt St., Suite B I Carlsbad, CA 92008 I 760-434-2810 I 760-720-2037 fax | www.carl5badca.gov City Manager - Carol/Harding Memmo October 1, 2012 Page 2 Carisbad in the amount of $7.4 million. This amounts to an initial subsidy from the City of approximately $176,000 per unit (for 42 units). Based on conversations with the developer, the ultimate city subsldy per unit would be approximately $42,300 to $53,000 per unit with the larger multifamily project. The developer has Indicated that no additional cash assistance would be required from the City for the future (Phase 2) project. However, a street vacation would be needed and would be considered 9 city contribution for the project; this will allow the project to compete Vk/ell in another tax credit application to obtain the needed equity to construct the new, larger development. The Council, however, will not be asked to approve the street vacation at thjs time. The Council will be asked to approve the $7.4 million in financial assistance to allow the first phase (acquisition and rehabilitation of 42 units) ofthe project to move forward in CY 2013. If approved, the current requested assistance will be funded from the Housing Trust Fund, which has a current cash balance of approximately $19.9 million. Staff is also researching the use of CDBG/HOME funds to finance a portion ofthe project. Benefits ofthe development Include: • Physical enhancement of a deteriorating neighborhood in the Historical Barrio District of the Village Area; Rehabilitation of existing dwelling units to improve livability for the residents; Diversity of housing opportunities for lower Income households; Addressing social Issues in the area (such as those caused by crime and poverty) by enforcing rules, selecting good tenants, having an on-site property manager, increasing disposable Income through reduced rents, and providing economic development opportunities to enhance the quality of life for residents living In the units, • Additional units to count for affordable housing development in Housing Element; • Encouraging future new development and upgrading the area further, as well as providing for desirable amenities to support economic development (micro-enterprise loans for new businesses) and encouraging a sustainable community (community garden). This report is provided for information purposes at this time. No action is requested. The project will be presented to the City Council with a recommendation from the Housing Commission. If there are any concerns with moving this project forward, please let me know as soon as possible so that I may Inform the developer to discontinue its efforts to purchase the property and move forward with this project. Fount^*^ l^^-*^ Cc: John Coates, Assistance City Manager Gary Barberio, Community and Economic Development Director Carol and Harding Acquisition & Rehabilitation Loan Debbie Fountain Housing & Neighborhood Services Director Project Proposal Overview •Purchase 21 existing duplexes in the historic Barrio neighborhood of the Village Area •Total 42 units – 2 bedroom/1 bath •Substantially rehabilitate units – interior and exterior; income & rent restrict (60% of AMI); add amenities; on-site manager •Development Team – C & C Development and Irvine Housing Opportunities (IHO) •Financial Assistance requested: $7.4 million Financial Analysis Sources Amount Per Unit Uses Amount Per Unit Bonds $3,312,250 $78,863 Acquisition $8,450,000 $201,190 Tax Credits $4,374,692 $104,159 Rehab $3,122,888 $74,354 City $7,407,158 $176,360 Soft Costs $1,722,381 $41,009 Deferred Dev Fee $408,967 $9,737 Financing $316,288 $7,530 Dev/Reserve $291,510 $6,940 Dev Fee $1,600,000 $38,095 Total $15,503,067 $369,119 $15,503,067 $369,119 Analysis of Financial Request •Acquisition costs supported by fair market appraisal by professional, neutral appraiser •Relocation expenses - $300,000; 7 permanently displaced/relocated •Developer fee $1.6 million; 10% of total costs; paid through tax credit equity; deferred fee paid over approx. 11 years •Developer to use portion of fee to purchase remaining 5 duplexes as they become available •Per unit cost ($369,119) is high, but comparable Deal Points •Financial assistance provided by Housing Trust Fund; $18.3 million available •Residual receipts loan; 3% interest; 55 year term •All funds must be committed before city funds provided through escrow and/or disbursed as construction progress payments •All units will be income & rent restricted (60% of AMI affordability) •Units will be substantially rehabilitated; amenities will be added; economic development tools will be implemented Public Benefits of Project •Dual purpose of providing affordable housing & breathing new life into a deteriorated area •Long term control, stability & maintenance of rental development •Unique opportunity to redevelop a neighborhood in need •Address issues of crime in the area •Provide diversity of housing opportunities •Add units to affordable housing inventory •Encourage future new development & upgrading of area •Add desirable amenities Housing Commission •Housing Commission reviewed and considered the request on October 16, 2012 •Commission recommended approval of the financial assistance; 4-0 (Andrews, absent) •Commission felt that the project was needed in this neighborhood and supported the financial assistance request Council Action Recommended •Adopt City Council Resolution No. 2012-235 approving a request to provide financial assistance to the partnership of C&C Development and Irvine Housing Opportunities in the form of a residual receipts loan of $7,408,000 from the Housing Trust Fund. Carol and Harding Duplex Apartments Development Proposal November 6, 2012 Site Location and Description of Existing Conditions •21 Duplexes plus vacant parcel located in the Historic Barrio Neighborhood of the Village Area •Total of 42 -2 bedroom units at approximately 840 sf •Constructed in 1953 and situated on 3.39 acres •Each duplex is on own lot with private backyard •Parking at 2:1 ratio with private garage and driveway space for each unit •Owned by a single, private owner, the individual lots provide the current owner the option to sell each duplex on an individual basis. •Located near Jefferson Elementary and Carlsbad High School, shopping, parks, beach access and the Village •Monthly rents: $1,300 to $1,495 Jefferson St. Harding St. Magnolia Ave. Carol Pl. Jefferson Elementary Existing Photos Irvine Housing Opportunities, Inc. (IHO) is a hands-on, mission- driven, nonprofit developer committed to improving the quality of life of our residents through an array of dynamic services that empower residents, strengthen families, restore dignity, encourage independence, and enrich the community. We are passionate about community development, housing for veteran families, linking housing with economic opportunities, and working with government partners to develop excellent communities. C&C Development specializes in the development and rehabilitation of affordable rental housing for families and seniors. We are committed to providing high quality, low-cost developments with responsive management services to create enjoyable and productive living environments. We are committed to the enhancement of our communities through their aesthetics, economic vitality, and by our leadership and active participation in community affairs. Advanced Property Services, LLC (APS), a wholly owned subsidiary of C&C Development, handles the property management, tenant screening and qualification, and annual income verification of all tenants. APS is a fair but strict management company that manages properties to the highest standards possible to provide a quality living environment. Developer Experience Irvine Housing Opportunities We have undertaken and successfully completed a number of large scale neighborhood revitalization developments involving single and multiple owners across scattered sites. Together, we view this project as a long-term partnership between C&C, IHO and the City of Carlsbad. We have never sold one of the affordable projects that we have developed. Following are examples of previously completed projects. Developer Experience - continued Developer Experience: Previously Completed Projects Developer Experience: Previously Completed Projects Developer Experience: Previously Completed Projects Townsend & Raitt Neighborhood 817 S. Townsend, Santa Ana Courtyard Apartments 977 N Highland, Orange Wilshire & Minnie Neighborhood 1235 S. Wilshire, Santa Ana Hoover & Wilson Neighborhood 1120 N. Lemon, Orange Developer Experience: Neighborhood Revitalization- Rehabilitation •Acquire and rehabilitate the 21 duplexes (42 units) into a quality, affordable housing community to families earning less than 60% of AMI for a period of 55 years •Reduce existing monthly rents to $868 - $1,049 to provide residents with additional discretionary income that can be spent at local stores, restaurants and on other services within the Village/Barrio area •Completely rehabilitate the interiors of the duplexes and update the 1950’s exterior facades with a “beach cottage” design incorporating sustainable building features •Construct a new, approximately 2,000 sf Community Room and Leasing Office with a Laundry Room on a portion of vacant parcel that fronts Magnolia Avenue •Balance of vacant lot will be improved with passive open space and Community Garden •C&C and IHO will work with the City of Carlsbad to merge the existing individual lots to three larger lots to assist in providing long-term control to the City and prevent the duplexes from being sold as individual parcels •Residents will be supported through ongoing social services delivered at the new Community Center •IHO’s micro-enterprise loan fund will further support economic development by providing small and new business loans to residents of the local community Option 1- Rehabilitation Proposal Community Center and Leasing Office Site Plan Building Elevations Following Rehabilitation Building Elevations Following Rehabilitation Option 2 / Phase 2: New Construction •The initial acquisition of the 21 duplexes will provide control of all but 5 duplexes fronting Carol Place and Harding Street. •C&C and IHO will work to acquire these 5 remaining duplexes using C&C and IHO funds. •Provides the opportunity to redevelop the entire, parcel into a new multifamily community. •The site could yield approximately 140 units. •This larger development would enable the production of additional affordable units beyond the acquisition/ rehabilitation proposal. •The density proposed is consistent with the proposed land use change identified in the Envision Carlsbad Process. •Projected that construction could commence as early as 3 years. Rehabilitation- Option 1 •Neighborhood will undergo major rehabilitation including the complete renovation of the interior, exterior and landscaping and addition of Community Room and Community Garden •The building facades will feature a “beach cottage” design New Construction- Option 2 •Creates opportunity to redevelop the existing site into a higher density, mixed-income residential development following the acquisition of the 5 remaining duplexes and the contribution of the street. •Allows the City to use its Affordable Housing Resources to achieve the dual purposes of: o Providing affordable housing, and o Transforming a problem area •Provides the unique opportunity to acquire 21 duplexes within one neighborhood, eliminating risks associated with selling off the individual duplexes to different owners •Enables long-term control, stability and maintenance within the Historic Barrio Neighborhood •Provides the City the opportunity to partner with a development team: o Experienced in the revitalization of troubled neighborhoods o Committed to improving the quality of life of the residents and community o With strong management practices that will implement a variety of resident rules, regulations and occupancy controls o Committed to the long-term success of this project, its residents and the City of Carlsbad Project Benefits Questions? Irvine Housing Opportunities, Inc. 2192 Dupont Drive, Suite 105 Irvine, CA 92612 (949) 863-9740 Patricia C. Whitaker, CEO C&C Development 14211 Yorba Street, Ste. 200 Tustin, CA 92780 (714) 288-7600 Todd Cottle, Principal Comparable Sales Carol and Harding Duplexes Address Units Sales Date Sales Price Price/Unit Yr. Built Sale Type SF/Unit 21 Duplexes Carol and Harding 42 N/A 8,450,000$ 201,190$ 1953 Standard 816 Comparables Address Units Sales Date Sales Price Price/Unit Yr. Built Sale Type SF/Unit 1. 3812-3814 Jefferson 2 3/16/2011 426,000$ 213,000$ 1953 Standard 824 2. 2646 Jefferson 2 4/29/2011 423,000$ 211,500$ 1950's Est.Short 668 3. 3724-3726 Jefferson 2 6/2/2011 385,000$ 192,500$ 1953 Standard 840 4. 996-998 Pine 2 6/24/2011 416,000$ 208,000$ 1950's Est.Standard 613 5. 2620-2622 Roosevelt Streeet 11 1/31/2012 2,275,000$ 206,818$ 1970's Standard 905 Map of Comparable Sales 1 2 3 4 5 Subject Property Developer Experience: Neighborhood Revitalization- New Construction San Marcos Fitzpatrick Townhomes- 78 units Parkview Apartments- 84 units El Dorado Apartments- Approximately 70 units Carol and Harding Acquisition and/or Rehabilitation Financial Assistance Request Debbie Fountain Housing & Neighborhood Services Director Project Proposal Overview •Purchase 21 existing duplexes in the historic Barrio neighborhood of the Village Area •Total 42 units – 2 bedroom/1 bath •Substantially rehabilitate units – interior and exterior; income & rent restrictions; add amenities; on-site manager •Development Team – C & C Development and Irvine Housing Opportunities (IHO) •Financial Assistance requested: $7.4 million Financial Analysis Sources Amount Per Unit Uses Amount Per Unit Bonds $3,312,250 $78,863 Acquisition $8,450,000 $201,190 Tax Credits $4,374,692 $104,159 Rehab $3,122,888 $74,354 City $7,407,158 $176,360 Soft Costs $1,722,381 $41,009 Deferred Dev Fee $408,967 $9,737 Financing $316,288 $7,530 Dev/Reserve $291,510 $6,940 Dev Fee $1,600,000 $38,095 Total $15,503,067 $369,119 $15,503,067 $369,119 City Subsidy = 48% of total sources; $176,360 per unit Analysis of Financial Request •Acquisition costs supported by fair market appraisal by professional, neutral appraiser •Relocation expenses - $300,000; 7 permanently displaced/relocated •Developer fee $1.6 million; 10% of total costs; paid through tax credit equity; deferred fee paid over approx. 11 years •Developer to use portion of fee to purchase remaining 5 duplexes as they become available •Per unit cost ($369,119) is high, but comparable Deal Points •Financial assistance provided by Housing Trust Fund; $18.3 million available •Funds used to purchase property •Residual receipts loan; 3% interest; 55 year term •All units will be income & rent restricted for affordability •Units will be substantially rehabilitated; amenities will be added; economic development tools will be implemented •Must hold for 15 years; Phase 2- move forward to obtain approval and financing to construct larger rental project after 15 years Housing Trust Fund •The funds can only be used for affordable housing purposes; not general fund •Where do the funds come from? –Developer AH Impact and In-Lieu Fees –Housing Credit Purchases –Housing Loan Payments –Housing Grants –Administrative Fees (Bonds) –Interest Earnings Public Benefits of Project •Dual purpose of providing affordable housing & breathing new life into a deteriorated area •Long term control, stability & maintenance of rental development •Unique opportunity to redevelop a neighborhood in need •Address issues of crime in the area •Provide diversity of housing opportunities •Add units to affordable housing inventory •Encourage future new development & upgrading of area •Add desirable amenities Housing Commission •Housing Commission reviewed and considered the request on October 16, 2012 •Commission recommended approval of the financial assistance; 4-0 (Andrews, absent) •Commission felt that the project was needed in this neighborhood and supported the financial assistance request Developer - Optional Proposal •City assistance to close escrow and purchase the subject property by February, 2013 •Complete minor rehabilitation (health and safety only); clean-up; no exterior improvements •Affordable rent restrictions for low and moderate income households •Move forward to design and permit a larger apartment complex at a future date; begin new construction 3 to 5 years. New Construction Pro Forma Costs Total Per Unit Sources Total Per Unit Land/Demo $9,965,000 $71,178 Conventional $7,533,270 $53,809 Construction $20,829,259 $148,780 City (land) $7,400,000 $52,857 Soft (incl fees) $6,121,520 $43,725 City (street vacation) $1,750,000 $12,500 Relocation $1,300,000 $9,285 Tax Credits $24,677,002 $176,264 Dev Fee $2,000,000 $14,285 Development $723,990 $5,171 Financing $420,503 $3,003 Total $41,360,272 $295,430 Total $41,360,272 $295,430 City subsidy (land & street vacation) = 22% of total sources; $65,357 per unit Risk Analysis Risk Mitigation City in first with funds for property acquisition Existing units will continue to be rented for affordable housing for low/moderate income; can be substantially rehabilitated at later date No assurances of project or funding approval for larger rental project at future date 42 units of affordable housing provided regardless & 4% tax credit program is not competitive; more likely to be approved for rehab funds City will be required to subordinate to private lender with less investment Notice of defaults and right to cure for City; private lender underwriting review Council Action Recommended •Adopt City Council Resolution No. 2012-235, as revised and presented by staff, approving a request to provide financial assistance to the partnership of C&C Development and Irvine Housing Opportunities in the form of a residual receipts loan of $7,408,000 from the Housing Trust Fund for property acquisition. •Identify whether the approval is for the original proposal (acq/substantial rehab) or alternate proposal (acq/new construction)