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HomeMy WebLinkAbout2012-02-14; City Council; 20803; LOAN AGREEMENT RANCHO CARRILLO AFFORDABLECITY OF CARLSBAD - AGENDA BILL DEPT. DIRECTOIl CITY ATTORNEY CITY MANAGER REQUEST TO APPROVE AMEND- MENTS TO THE LOAN AGREEMENT DOCUMENTS FOR THE RANCHO CARRILLO AFFORDABLE APARTMENT PROJECT TO REFLECT CHANGES IN THE DEVELOPER PARTNERSHIP AND LOAN MODIFICATIONS RECOMMENDED ACTION: That the City Council ADOPT Resolution No. 2012-030 to APPROVE a request to revise the Rancho Carrillo Affordable housing project loan agreement documents to reflect changes in the membership of the Carlsbad Family Housing Partnership, and to amend the loan agreement for the Rancho Carrillo Affordable Apartment Project to allow requested loan modifications. ITEM EXPLANATION: The Rancho Carhllo Affordable Apartment Project is located at the southeast corner of Palomar Airport Road and Melrose Drive, at 6053 Paseo Acampo. The project was developed in 1999 to satisfy a portion ofthe inclusionary housing requirement for the Rancho Carrillo Master Plan. The 116 unit apartment development was completed in January of 2000 and is fully occupied. On February 17, 1998, the City Council agreed to provide a $1,160,000 loan to Carlsbad Family Housing Partnership, the project owner and developer, to assist in the financing for construction of said project. At the time the financial assistance was approved, the Council also approved the related loan documents. These documents included the Loan Agreement, Deed of Trust, Promissory Note, Regulatory Agreement and Declaration of Restrictive Covenants, setting forth the terms ofthe assistance and project affordability requirements. In addition to the City loan, the project was financed with Low Income Housing Tax Credits, a loan from the California Housing Finance Agency (CalHFA), and a Master Developer loan. USA Properties Fund, Inc., Avanath Capital and Riverside Charitable Corporation intend to acquire the partnership interests of Carlsbad Family Housing Partnership. With the acquisition, the following partnership changes will occur: Member From To Administrative General Partner Barone Galasso & Associates USA Carlsbad Managing General Partner Pacific Housing Inc. Riverside Charitable Corporation Sole Limited Partner California Tax Credit Fund III, and BCCC, Inc. Avanath Carlsbad LP DEPARTMENT CONTACT: Debbie Fountain 760-434-2815; Debbie.fountain@carisbadca.gov FOR CITY CLERKS USE ONLY. COUNCIL ACTION: APPROVED DENIED CONTINUED WITHDRAWN AMENDED SI • • • • CONTINUED TO DATE SPECIFIC • . CONTINUED TO DATE UNKNOWN • RETURNED TO STAFF • OTHER-SEE MINUTES • Page 2 In addition to the above noted partnership change, the Carlsbad Family Housing Partnership has also requested approval of some loan agreement modifications which include: 1. Restructuring of the loan as an amortized payment schedule rather than a function of Surplus Cash, and confirmation ofthe debt; 2. Deletion of requirements for reports and accounting for surplus cash; 3. References to the Master Developer will be deleted because the Master Developer loan will be repaid at close of escrow; 4. Notice address will be changed to reflect the change in partnership members; and 5. Other miscellaneous modifications to reflect the change in partnership. All other terms ofthe original loan agreement and related documents, including the regulatory agreement will remain in full force and effect. The loan modifications are being supported by staff because they allow for a set annual payment of principal and interest, and will no longer have a loan payment based on surplus cash. This allows for a more guaranteed loan payment schedule. The change in partnership and the modification of the City's loan agreement will also result in approximately $350,000 of general rehabilitation in the apartment complex, which will be focused on enhancements to the community recreation/meeting areas within existing available space and overall updating of the property. The new partnership will also introduce a comprehensive social services program that is currently lacking at the property. These actions benefit both the development and the City's affordable housing program. Staff is recommending approval ofthe loan modifications and the request for the partnership change, and to allow the assumption and modification ofthe loan as noted above. Staff is requesting the City Council's authorization for the City Manager to prepare and execute the appropriate documents to approve the changes noted herein. Fiscal Impact There is no additional fiscal impact associated with the requested action to approve the partnership change for the Carlsbad Family Housing Partnership, or to approve the requested loan agreement modifications. The unpaid principal balance of the loan to the Partnership is $1,157,584. The unpaid interest is $191,868. The unpaid interest will be fully repaid at close of escrow of this transaction. The first amortized payment will be paid in full in January, 2013. The annual loan payment is estimated at $43,000. Environmental Impact Pursuant to Public Resources Code section 21065, this action does not constitute a "project" within the meaning of CEQA in that it has no potential to cause either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment, and therefore does not require environmental review. Page 3 Exhibits 1. City Council Resolution No. 2012-030 approving amendments to the loan documents to reflect partnership changes and loan modifications forthe Carlsbad Family Housing Partnership 2. Draft First Amendment to Loan Agreement between City of Carlsbad and Carlsbad Family Housing Partnership, and letter from James Barone of Barone Galasso & Associates requesting said modifications in the terms ofthe loan and approval of partner membership changes. 18 19 20 21 22 23 24 1 RESOLUTION NO. 2012-030 2 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, TO APPROVE A REQUEST TO 3 AMEND THE LOAN AGREEMENT WITH CARLSBAD FAMILY HOUSING PARTNERSHIP TO RESTRUCTURE SAID LOAN, 4 AND TO ALLOW FOR A CHANGE IN PARTNERSHIP MEMBERS. 5 APPLICANT: CARLSBAD FAMILY HOUSING PARTNERSHIP CASE NO: SDP 97-15 6 • 7 8 9 10 11 12 13 WHEREAS, Carlsbad Family Housing Partnership has developed 116-apartment units affordable to lower income households as a means to satisfy a portion of the affordable housing obligation for the Rancho Carrillo Master Plan as permitted by Carlsbad Municipal Code Section 21.85 of the City's Inclusionary Housing Ordinance; and WHEREAS, the City Council did, on the 17*^ day of February, 1998, hold a public 14 meeting to consider a request for City financial assistance for the construction of said 15 116 affordable housing apartment units by the affordable housing owner, Carlsbad 16 Family Housing Partnership; and WHEREAS, at said public meeting, the City Council did approve documents related to provision of the City assistance, including but not limited to a Loan Agreement, Promissory Note, Deed of Trust, and Regulatory Agreement and Declaration of Restrictive Covenants, in substantially the form presented to the Housing Commission on February 12,1998, and subject to the review by the City Attorney; and WHEREAS, Carlsbad Family Housing Partnership has requested, and the City of Carlsbad agrees to, amend the original loan agreement to make some modifications to 25 the terms of said loan, and to allow a change in partner members for the Carlsbad 26 Family Housing Partnership 27 28 LI 1 NOW, THEREFORE, BE IT HEREBY RESOLVED by the City Council of the City 2 of Carlsbad as follows: 1. The above recitations are true and correct. 2. That based on the information provided within the City Council staff report and the comments provided during the public meeting of the City Council, the City Council hereby APPROVES the request to amend the loan agreement and related documents by and between the City of Carlsbad and the Carlsbad 9 Family Housing Partnership, and to accept and approve the partnership 10 member changes. 11 3. That the City Council authorizes the City Manager or designee to execute the First Amendment to the Loan Agreement and related documents, in 13 substantially the form presented to the City Council as approved by the City 14 Attorney. 15 16 17 18 23 24 25 26 27 28 // // 19 // 20 // 21 // 22 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 on the 14**^ day of February 2012, by the following vote to wit: AYES: Council Members Hall, Kulchin, Blackburn, Douglas, Packard. NOES: None. ABSENT: None. \TT(HALL, Mayor MATT(HALL, Mayor ATTEST: LORfRAINE M. WOOD, City Clerk Exhibit 2 Draft Agreement RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: Cityof Carlsbad City Clerk's Office Attn: City Clerk 1200 Carlsbad Village Drive Carlsbad. CA 92008 (Space above for Recorder's Use) FIRST AMENDMENT TO THE LOAN AGREEMENT (Carlsbad Family Housing Partnership- Rancho Carrillo) This First Amendment to the Loan Agreement and ("First Amendment") is made and entered into this day of ,2012, by and between the City of Carlsbad, a municipal corporation ("City") and Carlsbad Family Housing Partnership, a Califomia limited partnership ("Owner"). RECITALS A. WHEREAS, Lender and Borrower entered into that certain Affordable Housing Loan Agreement (Financing Agreement) dated as of January 8, 1999 (the "Loan Agreement"), pursuant to which Lender made a Loan to Borrower in the original principal amount of $1,160,000 (the "City Loan"). Except as otherwise provided herein, all capitalized terms appearing in this Agreement have the same meaning as in the Loan Agreement; B. WHEREAS, in addition to executing the Loan Agreement, Borrower executed certain other related documents of even date in connection with the Loan, including a Promissory Note (the "City Note"), a Regulatory Agreement and Declaration of Restrictive Covenants as amended by that certain First Amendment to the Regulatory Agreement and Declaration of Restrictive Covenants (the "City Regulatory Agreement"), and a Deed of Trust, which encumbers certain real property located in the City of Carlsbad, County of San Diego, State of Califomia (the "Property") (collectively, the "Loan Documents"); C. WHEREAS, Pacific Housing, Inc., a Califomia nonprofit public benefit corporation ("Pacific"), Barone Galasso & Associates Incorporated, a Delaware corporation ("BOA"), BCCC, Inc., a Massachusetts corporation ("BCCC"), The Califomia Corporate Tax Credit Fund 111, a Massachusetts Limited Partnership, Fund" and collectively with Pacific, BOA and BCCC, the "Existing Partners"), have entered into a sale of their interests on the Carlsbad Family Housing Partnership (the "Interest Sale") with USA Carlsbad, Inc., a Califomia corporation ("USA Carlsbad") in that certain Partner Interest Purchase and Sale Agreement dated as of December 19, 2011 (the "Purchase Agreement") pursuant to which the Existing Partners shall sell their respective partnership interests in the Borrower to the USA Carlsbad, Inc. .and certain designees thereof 2/2/2012 ^ 7 D. WHEREAS, subsequent to the Interest Sale, USA Carlsbad shall act as the administrative general partner of the Borrower, Riverside Charitable Corporation, a Califomia nonprofit public benefit corporation ("Riverside") shall act as the managing general partner of the Borrower, and Avanath Carlsbad, LLC, a Delaware limited liability company ("Avanath" and collectively with USA Carlsbad and Riverside, the "New Partners") shall act as the limited partner of the Borrower; and E. WHEREAS, in connection with the Interest Sale, the Lender and the Borrower have agreed to amend certain terms of the City Loan, including, without limitation, to provide that for the remainder of the Term, the Borrower shall make annual payments to the Lender of $43,093.08 with all unpaid amounts payable upon the end of the Term, all as more fully set forth herein. NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Confirmation of Debt. Borrower and Lender hereby ratify, reaffirm and confirm the Loan Documents are in full force and effect and, except to the extent amended or modified by this First Amendment, have not been otherwise amended or modified. Lender hereby confirms that as ofthe date of this First Amendment, (i) the outstanding principal balance ofthe City Loan is $1,157,548.41, (ii) the Term ofthe City Loan ends on December 28, 2055, (iii) all interest due on the City Loan as ofthe date hereof has been paid in fiill, and (iv) the Borrower is not in default under any term or condition of the Loan Documents. 2. Lender Consent to Interest Sale. The Lender hereby consents to (allow the obligations ofthe Existing Partners to be assumed in full by the New Partners;. 3. Amendments to Loan Agreement. (a) Section 4.3 ofthe Loan Agreement is hereby rescinded in its entirety and replaced with the following: "4.3. Repayment. On the fifteenth day of January of each year commencing upon January 15, 2013, the Borrower shall pay to Lender an amount equal to $43,093.08, which amount shall first be applied to any accrued and unpaid interest and thereafter to outstanding principal. Any portion of the principal and interest on the City Loan not sooner paid shall be due and payable upon the earlier of (i) the occurrence of an Event of Default hereunder; (ii) expiration of the Term; or (iii) sale or transfer of the Developer other than a transfer described in Section 4.5 below." (b) Section 4.14 of the Loan Agreement is hereby rescinded in its entirety. (c) The reference to the "Master Developer" in Section 8.15 of the Loan Agreement is hereby deleted. 2/2/2012 ^ (d) The notice address for the Borrower set forth in Section 10.3 of the Loan Agreement is hereby deleted and replaced with the following: Carlsbad Family Housing Partnership c/o USA Carlsbad, Inc. 2440 Professional Drive Roseville, CA 95661 Attn: Steven Gall With a Copy to: Avanath Carlsbad, LLC c/o Avanath Affordable Housing I, LLC 2211 Michelson, Suite 830 Irvine, CA 92612 Attention: Ron Juskiewicz 4. Limited Partner Provisions. (a) Section 9.7 of the Loan Agreement is hereby rescinded in its entirety and replaced with the following: "9.7. Removal of General Partner by Limited Partner. The City agrees that the removal of any general partner of the Borrower by the limited partner of Borrower pursuant to the terms of the Borrower's limited partnership agreement will not in and of itself constitute a default under any of the City Loan Documents or allow acceleration ofthe City Loan. If any other entity, which is not either the limited partner or one of its affiliates, becomes a general partner of Borrower, the limited partner shall obtain the approval of the City of such replacement general partner within three (3) months thereafter, which approval shall not be unreasonably withheld." (b) The reference to "Boston Capital" in Section 10.5 of the Loan Agreement shall be replaced with "Avanath" so that Avanath is the sole third party beneficiary ofthe Loan Agreement with respect to Section 9.2 and Section 9.7. 5. Median Income. For the purposes of the Loan Documents, the term "Median Income" shall mean the median gross yearly income adjusted for actual household size, in the County of San Diego, Califomia, as determined fi-om time to time by the U.S. Department of Housing and Urban Development pursuant to Section 8(f)(3) of the United States Housing Act of 1937, as amended. In the event that such income determinations are no longer published, or are not updated for a period of at least eighteen (18) months, the City shall provide the Owner with other income determinations which are reasonably similar with respect to methods of calculation to those previously published by HUD, unless the federal Low Income Housing Tax Credit 2/2/2012 (LIHTC) program utilizes different area median income limits, in which event the LIHTC program area median income limits shall be utilized. 6. No Other Changes. Except as expressly provided in this First Amendment, the Loan Agreement and all of the other Loan Documents shall remain unchanged and in full force and effect. 7. Effective Date. This First Amendment shall be effective upon execution of this First Amendment by all parties as set forth in the date and year first above written. IN WITNESS WHEREOF, the City and Owner have executed this First Amendment by duly authorized representatives, CARLSBAD FAMILY HOUSING PARTNERSHIP, a Califomia limited partnership By: By: Titie: Date: By: Riverside Charitable Corporation, Inc., a Califomia nonprofit public benefit corporation, Managing General Partner USA Carlsbad Properties Fund, Inc., a Califomia Corporation Administrative General Partner (Proper notarial acknowledgment of execution by Owner must be attached) Chairman, president or vice-president and secretary, assistant secretary, CFO or assistant treasurer must sign for corporations. Otherwise, the corporation must attach a resolution certified by the secretary or assistant secretary under corporate seal empowering the officer(s) signing to bind the corporation.) By: Titie: Date: By: Avanath Carlsbad, LLC, a Delaware limited liability company, Sole Limited Partner By: Titie: Date: 2/2/2012 ID CITY OF CARLSBAD, a municipal corporation By: Lisa Hildabrand, City Manager Date: APPROVED AS TO FORM: By: Jane Mobaldi Assistant City Attomey Date: 01/06/99 Rancho Carrillo Regulatory Agreement EXHIBIT A Property Description Lot 207 ofCarlsbad Tract 97-02 Rancho Carrillo Villages "A Through D" according to Map No. 13582 filed with the County Recorder of San Diego County on June 10, 1998. BARONE GALASSO & ASSOCIATES, INC January 23,2012 Ms. Debbie Fountain Director of Housing & Neighborhood Services City of Carlsbad 2965 Roosevelt Street, Suite B Carlsbad, CA 92008 Dear Ms. Fountain: As you know, Rancho Carrillo is a 116-unit family affordable housing project located at 6053 Paseo Acampo. The property was built in 1999 and financed with Low Income Housing Tax Credits, debt issued by the Califomia Housing Finance Agency (CHFA), a Master Developer Loan and Purchase Price Loan, and a City of Carlsbad loan. We are presently under contract to sell the partnership interest in the property as follows. USA Properties Fund, Inc. ("USA"), Avanath Capital ("Avanath"), and Riverside Charitable Corporation ("RCC") are acquiring the partnership interests of Carlsbad Family Housing Partnership, a California Limited Partnership (the "Partnership") which owns the Rancho Carrillo Apartments. USA Carlsbad will replace Barone Galasso & Associates, Inc., a Delaware Corporation as the Administrative General Partner of the Partnership. Riverside Charitable Corporation, a California nonprofit public benefit corporation will replace Pacific Housing, Inc., a California nonprofit public benefit corporation as the Managing General Partner of the Partnership. Avanath Carlsbad LP, LLC will replace The California Corporate Tax Credit Fund III and BCCC, Inc., a Massachusetts Corporation and will be the sole limited partner of the Partnership. 92101 (Please see attached organization chart). The purchase price ofthe interests in the Partnership is $10,900,000 of which $3,550,000 shall be paid in cash by USA/Avanath with the remainder being outstanding Partnership debt at closing. At closing, the [ si9.232.2100 existing $6,200,000+/- CalHFA loan and the $1,160,000 City of Carlsbad loan will remain as Partnership obligations. Concurrently with closing, the Partnership shall pay approximately $180,000 of accrued interest on the City Loan and existing Partnership debt held by D.R. Horton will be retired. 1528 India Street San Diego California Fax 232.2 127 ,S '2. The. proposed City of. Carlsbad Loan Modification Agreement, as drafted by USA's attomey, reflects the terms of a loan assumption under this stmcture. Specifically, the proposal includes restructuring the loan as an amortized payment schedule rather than a function,of Surplus Cash as cun-ently modeled. The Loan Modification Agreement is reattached for your review. We greatly appreciate your consideration of the above. We look fonward to working with you to develop , a timeline and approval process for the proposed City of Carlsbad loan modification and, as has been discussed, we are targeting a February 14"" 2012 City Council hearing.. Please feel free to contact me with any questions. • Sincerely, Carlsbad Family Housing Partnership \' • . ~ . , • • James V. Barone Barone Galasso & Associates, Inc. cc: Michelle Keldorf Steve Gall • Page 2 '