HomeMy WebLinkAbout2022-09-08; Housing Commission; ; Request from USA Properties Fund for an increase in the loan from the Housing Trust Fund for the Marja Acres Senior Apartments (DEV 16-038)Meeting Date: September 8, 2022
To: Housing Commissioners
From: Mandy Mills, Housing Services Manager
Staff Contact: Mandy Mills, Housing & Homeless Services Director
mandy.mills@carlsbadca.gov, 442-339-2907
Subject: Request from USA Properties Fund for an increase in the loan from the
Housing Trust Fund for the Marja Acres Senior Apartments (DEV 16-038)
Recommended Action
Adopt a resolution recommending that the City Council approve an increase of $65,000 in the
loan from the Housing Trust Fund to USA Properties Fund for construction of the 46-unit Marja
Acres affordable senior apartments.
Executive Summary
USA Properties Fund, Inc. (USA Properties), has partnered with NUWI Carlsbad, LLC (NUW) to
construct the affordable housing portion of the Marja Acres mixed-use project. Marja Acres was
approved by the City Council 2020, receiving a density bonus and certain development
concessions and incentives to provide 46 senior apartments affordable to lower-income
seniors. To provide additional public benefit to the Carlsbad community and to secure tax-
exempt bond and tax credit equity financing, the applicant proposed to deepen the project’s
affordability by providing five of the housing units to extremely low-income seniors. To help
achieve these goals, USA Properties requested a loan from the city’s Housing Trust Fund. The
City Council approved an original loan for $650,000 on Oct. 12, 2021. Since then, economic
conditions have changed dramatically which have impacted project financing. USA Properties
has requested the city consider an increase in the loan from the Housing Trust Fund to support
the development of the project.
Discussion
On Nov. 3, 2020, the master developer, New Urban West, received approval to demolish an
existing home, its accessory structures and three commercial buildings located on the south
side of El Camino Real just east of Kelly Road and build a mixed- use project consisting of 248
townhomes, a 47-unit affordable senior apartments (46 lower-income plus 1 manager’s unit)
and 10,000 square feet for specialty commercial uses (Location Map-Exhibit 2).
The 46 senior apartments, all one-bedroom and approximately 535 s.f. in size, are located
within the commercial portion of the site as a mixed-use development. A total of 10,000 square
feet of specialty retail and restaurant are also proposed for two buildings on the commercially-
designated portion of the site. Nine common recreation areas provide active and passive spaces
throughout the project, including one area designated for the senior affordable apartments.
Sept. 8, 2022 Item #1 Page 1 of 4
In exchange for the affordable housing, the developer received a 35% density bonus under
state law, as well as a number of concessions, incentives, and modifications to development
standards. The city’s approval requires that 37 of the apartments be affordable to very low-
income senior households (up to 50% area median income) and 9 apartments be affordable to
low-income senior households (up to 60% area median income). This requirement fulfills the
state density bonus and city inclusionary housing obligations.
NUW is partnering with USA Properties to construct the affordable senior apartments. USA
Properties will own and operate the Marja Acres senior apartments. The company has
extensive experience with market rate and affordable housing, and expertise in senior
apartment communities throughout California and Nevada. USA Properties owns and manages
the Carrillo Ranch affordable apartments in Carlsbad.
USA Properties received a bond allocation and tax credits in June 2022 which will finance the
majority of the project’s cost. Additional funding for the development costs will come from the
master developer, a deferral of the developer fee, and a soft loan from the City’s Housing Trust
Fund. Both the Housing Commission and City Council reviewed and approved a request from
USA Properties for a $650,000 loan from the city’s Housing Trust Fund. In exchange, the
developer will deepen the affordability of five apartments to serve extremely low-income
seniors (up to 30% area median income). Because the developer is required to provide the units
at a very low-income average level, the subsidy analysis was limited to only 5 units that were
deepening in affordability to the extremely low-income level. The staff report from Aug. 12,
2021 is included as Exhibit 3 and includes a thorough subsidy analysis and review of
conformance with City Council Policy No. 90.
Project financing details have significantly changed over the last year based on increased
construction costs and rising interest rates. The city’s Housing Policy Team, composed of
representatives from Finance, Community Development, Housing Services, and the City
Attorney’s office, reviewed the project financing in July 2021 and again in July 2022 with
updated information provided by the developer. Construction costs have increased
approximately 20% which, along with other cost increases, increased the total development
cost in the amount of $2.7m (approximately 17%). Additionally, interest rates increased which
decreases the amount of financing to the project. While some other financing sources have
increased, the net increase in financing sources to the project is approximately $781,000, which
creates a new financing gap. Although city staff acknowledges the increase in the overall
financing gap, the subsidy amount is limited to 5 units at extremely low-income levels.
Per City Council Policy Statement No. 90, Housing Trust Fund dollars shall not be used to satisfy
a development's housing requirement but may be used to assist in exceeding the requirement.
Because the applicant is required to provide 46 units at a very low-income average level, city
staff examined the gap analysis only above and beyond the requirement. Based on
considerable increases in construction costs and other market conditions, we recommend an
increase in $65,000 to the original loan amount from the Housing Trust Fund to support the
development.
Sept. 8, 2022 Item #1 Page 2 of 4
Below is a summary of the change in the proposed sources and uses of funds:
SUMMARY PROFORMA
SOURCES OF FUNDS
2021 TOTAL 2022 TOTAL CHANGE
Senior Loan $4,625,000 $4,140,000 -$485,000
Net operating income during
construction
197,187 288,057 90,870
Tax Credit Equity 7,393,959 7,935,990 542,031
USA MFD – deferred developer fee 609,645 758,341 148,696
City of Carlsbad loan 650,000 650,000 0
New Urban West (master developer) 2,350,000 2,835,000 485,000
TOTAL SOURCES $15,825,791 $16,607,388 $781,597
PERMANENT USES OF FUNDS
2021 TOTAL 2022 TOTAL CHANGE 2022 PER
UNIT
Construction (incl. bonds) $7,997,749 $9,583,550 $1,585,801 $203,905
Construction general conditions 840,000 780,000 (60,000) 16,596
Contractor overhead & profit 279,685 607,413 327,728 12,924
Construction contingency 799,775 1,097,096 297,321 23,342
Financing costs 886,349 984,049 97,700 20,937
Other transaction costs 2,938,124 3,274,627 336,503 69,673
Developer fee 2,084,109 2,262,082 177,973 48,129
TOTAL USES $15,825,791 $18,588,817 $2,763,026 $395,507
Fiscal Analysis
The total recommended loan amount of $715,000 would be drawn from the city’s Housing
Trust Fund (Fund 133), which is restricted to affordable housing and homelessness-related
projects, programs and services. Through the end of 2021, the Housing Trust Fund has an
available balance of $7.3 million.
Next Steps
The Housing Commission recommendation and staff analysis of the additional financial
assistance request will be forwarded to the City Council for their consideration. If the request is
approved by the City Council, staff will begin negotiations with USA Properties and execute all
appropriate documents necessary to provide the financial assistance.
Environmental Evaluation
The City Council certified an environmental impact report, and adopted candidate findings of
fact and mitigation monitoring and reporting program for the Marja Acres development project
on Nov. 3, 2020 (City Council Resolution No. 2020-215). As an integral component of the overall
Marja Acres development, the senior affordable apartments were adequately evaluated by the
certified EIR and is subject to applicable mitigation monitoring and reporting requirements. No
further environmental review is required.
Sept. 8, 2022 Item #1 Page 3 of 4
Public Notification and Outreach
Public notice of this item was posted in keeping with the state’s Ralph M. Brown Act and it was
available for public viewing and review at least 72 hours before the scheduled meeting date.
Exhibits
1.Housing Commission resolution
2.Location map
3.Aug. 12, 201 Housing Commission Staff Report
Sept. 8, 2022 Item #1 Page 4 of 4
EXHIBIT 1
RESOLUTION NO. 2022-05
A RESOLUTION OF THE HOUSING COMMISSION OF THE CITY OF CARLSBAD,
CALIFORNIA RECOMMENDING THAT THE CITY COUNCIL APPROVE AN
INCREASE OF $65,000 IN THE LOAN FROM THE HOUSING TRUST FUND TO
USA PROPERTIES FUND FOR MARJA ACRES SENIOR APARTMENTS (DEV 16-
038)
WHEREAS, NUWI Carlsbad, LLC (New Urban West or NUW) sought the city’s approval to build a
mixed-use project consisting of 248 townhomes, 46 affordable senior apartments (plus an unrestricted
manager’s unit) and 10,000 square feet for specialty commercial uses located on property commonly
known as Marja Acres, on the south side of El Camino Real just east of Kelly Road; and
WHEREAS, the City Council approved said development, including the affordable senior
apartments on Nov. 3. 2020; and
WHEREAS, USA Properties Fund, Inc. has partnered with NUW to build the Marja Acres
affordable senior apartments; and
WHEREAS, USA Properties Fund requested financial assistance for the construction of 46
apartment homes to be affordable to extremely low, very low, and lower-income households; and
WHEREAS, the request for financial assistance was submitted to the City of Carlsbad’s Housing
Commission for review and consideration at their public meeting on Aug. 12, 2021, on which date said
Commission recommended that the City Council approve the requested financial assistance in the
amount of $650,000; and
WHEREAS, the City Council approved $650,000 in Housing Trust Fund assistance on Oct. 12,
2021, in order to create additional public benefit by serving extremely low-income seniors and improve
project competitiveness for tax exempt bond and tax credit equity financing; and
WHEREAS, the city’s Affordable Housing Policy Team evaluated the subsequent financial
assistance request on Aug. 2, 2022, and recommended that it be forwarded to the Housing Commission
for their consideration and recommendation to the City Council; and
WHEREAS, the Housing Commission considered the financial assistance request, staff
evaluation and recommendation, and the testimony of all persons desiring to be heard on the matter
at their regular meeting on Sept. 8, 2022.
EXHIBIT 1
NOW, THEREFORE, BE IT RESOLVED by the Housing Commission of the City of Carlsbad,
California, as follows:
1. That the above recitations are true and correct.
2. That the request for additional financial assistance from USA Properties Fund, Inc. is
consistent with the goals, objectives and programs of the City of Carlsbad's Housing
Element, City Council Policy No. 90 guidelines, and the city’s Housing Trust Fund
underwriting practices.
3. That the request for financial assistance will assist the affordable housing developer in
constructing a total of 46 apartment units affordable to extremely low, very low, and
low income senior households, plus one unrestricted manager’s apartment. Specifically,
the assistance will result in deeper affordability levels by providing five extremely low-
income (30% AMI), 36 very low-income (50% AMI), and five low-income (60% AMI)
senior apartments.
4. That, based on information provided in the Housing Commission staff report and
considering testimony of all persons desiring to be heard at the Sept. 8, 2022 public
meeting, the Housing Commission hereby recommends that the City Council approve an
additional amount of $65,000 in financial assistance from the Housing Trust Fund to USA
Properties Fund, Inc., subject to the following conditions:
a. The financial assistance shall be in the form of a residual receipts loan for a term of
55 years at three percent simple interest per annum. Said loan shall be secured by a
promissory note and deed of trust.
b. The financial assistance is conditional and contingent upon USA Properties Fund, Inc.
receiving all other necessary funding commitments identified in the financial
assistance application including private loans, tax credit financing, master developer
contribution, and deferred developer fees.
c. The city’s commitment of funds will be maintained for a period of twenty-four
months upon City Council’s approval. The funding commitment will expire at the end
of this term unless developer has secured all other necessary funding, has executed
a loan agreement with the city, and the project is ready to construct; or unless a time
extension is granted by the City Council.
EXHIBIT 1
PASSED, APPROVED AND ADOPTED at a Meeting of the Housing Commission of the City of
Carlsbad on the 8th day of September 2022, by the following vote, to wit:
AYES:
NAYS:
ABSENT:
JOHN NGUYEN-CLEARY, CHAIRPERSON
CARLSBAD HOUSING COMMISSION
ATTEST:
Mandy Mills
Housing & Homeless Services Director
Exhibit 2
Marja Acres Senior Apartments Location Map
Senior Apartments
Marja Acres
Additional Request from
Housing Trust Fund
Mandy Mills,
Housing & Homeless Services Director
Sept. 8, 2022
TODAY’S PRESENTATION
•Project Background
•Subsidy Analysis
•Staff recommendation
Marja Acres
•20.65 acres on 2 parcels
•Designated as an underutilized
housing opportunity site in the
City of Carlsbad General Plan
•Zoned for residential &commercial use
Major Employment Corridor
+
Healthcare &Services
Airport, Hospitality,
Businesses
Major Community Amenities,
Attractions and Recreation
Recreation
School
School
Daycare
Services
Carlsbad Village
+
Retail,Business,
Professional
Services Schools
SITE
CHARACTERISTICS
248 market rate townhomes
Designated for high density
residential & commerical
Marja Acres
+20.5 acres
Mixed-use
AFFORDABLE SITE
CHARACTERISTICS
46 units
Onsite community space
& services
3 stories
Affordability mix for seniors
Marja Acres
Rancho Carillo Apartments
116 affordable apts.
Applicant Background
•Extensive experience
•Positive local project
history
Marja Acres
2020
Planning
Commission
Approval
2018-2019
Project design &
environmental
review
OCT 2022
City Council
considers
2021
Housing
Commission
Approval
2017
Initial project
design
2019-2020
Environmental
process
Marja Acres
SEPT 2022
Housing
Commission
considers
2021
City Council
approval
Table 1 –Rent Ranges
Income
group
Extremely
Low
(30% AMI)
Very Low
(50%
AMI)
Low
(60%
AMI)
Market
rate
Required 0 units 37 units 9 units
Proposed 5 units 36 units 5 units
Rents -1 Br $607 $1,040 $1,257 $1,900-
$2,300
Marja Acres
Marja Acres
SUMMARY PROFORMA
SOURCES OF FUNDS
2021 TOTAL 2022 TOTAL CHANGE
Senior Loan $4,625,000 $4,140,000 -$485,000
Net operating income during construction 197,187 288,057 90,870
Tax Credit Equity 7,393,959 7,935,990 542,031
USA MFD –deferred developer fee 609,645 758,341 148,696
City of Carlsbad loan 650,000 650,000 0
New Urban West (master developer)2,350,000 2,835,000 485,000
TOTAL SOURCES $15,825,791 $16,607,388 $781,597
PERMANENT USES OF FUNDS
2021 TOTAL 2022 TOTAL CHANGE
Construction (incl. bonds)$7,997,749 $9,583,550 $1,585,801
Construction general conditions 840,000 780,000 (60,000)
Contractor overhead & profit 279,685 607,413 327,728
Construction contingency 799,775 1,097,096 297,321
Financing costs 886,349 984,049 97,700
Other transaction costs 2,938,124 3,274,627 336,503
Developer fee 2,084,109 2,262,082 177,973
TOTAL USES $15,825,791 $18,588,817 $2,763,026
SUBSIDY ANALYSIS
City Council Policy 90
Public benefit
Housing Element
Risk
Marja Acres
NEXT STEPS
LOAN & BOND
DOCUMENTS
CONSTRUCTIONCITY COUNCIL
CONSIDERS
FUNDING
REQUEST
Marja Acres
STAFF RECOMMENDATION
•Recommend City Council approve an
addition of $65,000 loan to USA
Properties for the development of
Marja Acres Apts.
Marja Acres