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Home My WebLink About2023-05-09; City Council; ; Transfer of the Managing General Partner Interest for the Vista Terrace Apartments from Solutions for Change, Inc. to Kingdom Development, Inc.CA Review RK _ Meeting Date: May 9, 2023 To: Mayor and City Council From: Scott Chadwick, City Manager Staff Contact: Mandy Mills, Housing & Homeless Services Director mandy.mills@carlsbadca.gov, 442-339-2907 Subject: Transfer of the Managing General Partner Interest for the Vista Terrace Apartments from Solutions for Change, Inc. to Kingdom Development, Inc. District: N/A Recommended Action Adopt a resolution authorizing the transfer of the Managing General Partner interest for the Vista Terrace Apartments from Solutions for Change, Inc. to Kingdom Development, Inc. Executive Summary In 2012, the city of Carlsbad provided a $780,000 loan from Federal HOME Investment Partnership funds to Solutions for Change for the purchase and rehabilitation of a 47-unit apartment complex at 786 Postal Way in the city of Vista. Vista Terrace Apartments provided affordable housing for families graduating from Solutions’ homeless prevention program. Solutions is withdrawing its ownership interest in its housing assets and has requested the transfer of the managing general partnership interest to Kingdom Development, Inc. Any assignment of the managing general partner requires the approval of the City Council under the regulatory agreement the City Council previously approved for the project. Discussion Background The city first allocated an initial amount of HOME funding in 2011 to assist Solutions for Change in the development of affordable housing. HOME is the largest federal block grant to state and local governments designed exclusively to create affordable housing for low-income households. The city does not directly receive or administer the HOME grant, but the city was able to identify an eligible project for a HOME funding allocation as a member of the HOME Consortium. The city typically invests affordable housing funds only within the city of Carlsbad. Solutions looked for a project in Carlsbad for nearly two years but was unable to identify a cost-effective May 9, 2023 Item #5 Page 1 of 5 site because of the high cost of land in the city. Due to requirements tied to the HOME funds, Solutions would lose a portion of its allocation unless the funds were used before July 2013. Staff recommended the City Council approve the use of the Solutions HOME fund allocation for Vista Terrace Apartments because it helped meet a regional need of serving individuals experiencing homelessness. The project also received tax credits, tax exempt bond financing and rental assistance. The project operated successfully until 2020. At that time, the County of San Diego determined that tenant applicants must come off a central county-wide waiting list as opposed to just being graduates of the Solutions program. The county also would not allow Solutions to have a requirement of sobriety as a condition to providing housing. Solutions did not want to operate its affordable housing projects according to the new requirements, so the project did not receive rental assistance revenue from the county for a couple years. Without that at revenue, the project was unable to remain fiscally sound. In 2022, Solutions’ Board of Directors decided that the new requirements for tenant selection and occupancy were not compatible with the organization’s mission and operating philosophy and chose to move completely away from all government funded-residential programs. Solutions for Change is now asking for the city’s consent to the transfer of the managing general partnership interest for the Vista Terrace Apartments to another entity, Kingdom Development, Inc. Kingdom Development has committed to operate the Vista Terrace apartment project as affordable housing for 46 families ranging from extremely low income to low income. The corporation will follow the County of San Diego’s waiting list requirements, which stabilizes the project with guaranteed rental income. New managing general partner City staff has conducted due diligence of Kingdom Development to determine its capacity to assume the managing general partner role and operate the property in accordance with regulatory requirements. Kingdom Development, Inc. is a 501(c)(3) California nonprofit public benefit corporation founded in 2015. It develops affordable housing in partnership with for-profit and nonprofit developers. Since 2017, it has obtained an ownership interest in more than 1,400 units in California, Missouri and Florida and currently has 800 more units under construction in California. Staff have concluded that Kingdom Development has the professional expertise to operate the project in good standing and consistent with all regulatory agreement provisions. Other funders Any assignment of the managing general partner must be approved by the City Council under the regulatory agreement previously approved by the City Council. This project has multiple funders and consent to the transfer must be received by all parties. Solutions is in the process of obtaining consent from all funders. No objections have been raised so far, but some entities are requiring proof of consent from other funders. • The California Tax Credit Allocation Committee has already provided its approval. • The underlying Affordable Housing Program lender, JP Morgan, is in the process of reviewing the request. Consent is expected shortly. May 9, 2023 Item #5 Page 2 of 5 • The housing authority administering the project based rental assistance, the Housing Authority of the County of San Diego, received all the requested information and is in the process of reviewing. Consent is expected shortly. • The tax-exempt bond issuer, the California Municipal Finance Authority, has notified the California Debt Limit Allocation Committee. Consent is expected shortly. • The residual receipts lender, the California Department of Housing and Community Development received all the documents it requested and is in the process of reviewing. Consent is expected shortly. • The investor limited partner, Richman, has received the request, but is waiting to provide consent until written consent have been obtained from all lenders. Fiscal Analysis There is no city fiscal impact with this action. A loan was provided to this property in 2012 from HOME funds administered by the County of San Diego. As the funds are administered by the County of San Diego, any loan repayment is returned to the county as income to the HOME Consortium. The loan is secured by a deed of trust recorded against the property. Next Steps City staff will prepare a consent to transfer and execute any other documents related to the transfer of the managing general partner interest for the Vista Terrace Apartments from Solutions for Change, Inc. to Kingdom Development, Inc., with review and approval of the City Attorney. Environmental Evaluation This action does not constitute a project as defined under the California Environmental Quality Act in accordance with Public Resources Code Section 21065, in that these actions may not cause a direct physical change in the environment or a reasonably foreseeable indirect physical change in the environment. Exhibits 1. City Council resolution May 9, 2023 Item #5 Page 3 of 5 RESOLUTION NO. 2023-122 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, AUTHORIZING THE TRANSFER OF MANAGING GENERAL PARTNER INTEREST FOR THE VISTA TERRACE APARTMENTS FROM SOLUTIONS FOR CHANGE, INC. TO KINGDOM DEVELOPMENT, INC. WHEREAS, the City of Carlsbad provided a HOME Investment Partnership Funds loan in the amount of $780,000 to Solutions for Change, Inc. to assist in the acquisition and rehabilitation of a 47- unit apartment complex located at 786 Postal Way in the City of Vista, known as the Vista Terrace Apartments to provide affordable housing; and WHEREAS, Solutions for Change, Inc. has requested that the city consent to transfer the managing general partnership interest for the Vista Terrace Apartments from Solutions for Change, Inc. to Kingdom Development, Inc.; and WHEREAS, Kingdom Development, Inc. has committed to operate the project as affordable housing for extremely low, very low and low income households, as outlined in existing regulatory agreements recorded against the property; and WHEREAS, city staff has conducted due diligence on Kingdom Development, Inc. and has determined they have the professional expertise to operate the project in good standing and consistent with all regulatory agreement provisions. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follows: 1.That the above recitations are true and correct. 2.That the City Council authorizes the City Manager, or his designee, to execute any documents necessary to transfer the Managing General Partner interest for the Vista Terrace Apartments from Solutions for Change, Inc. to Kingdom Development, Inc. after review and approval of the City Attorney. Exhibit 1 May 9, 2023 Item #5 Page 4 of 5 PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of Carlsbad on the 9th day of May, 2023, by the following vote, to wit: AYES: NAYS: ABSTAIN: ABSENT: Blackburn, Bhat-Patel, Acosta, Burkholder, Luna. None. None. None. KEITH BLACKBURN, Mayor P� SHERRY FREISINGER, City Clerk f l.., (SEAL) May 9, 2023 Item #5 Page 5 of 5