REPORT TO THE CITY COUNCIL
FROM: JENNIFER K. CLARK, Director
Planning and Development Department
BY: PHIL SKEI, Assistant Director
Planning and Development Department
CORRINA NUNEZ, Project Manager
Housing and Community Development Division
SUBJECT
Title
Approve a Community Development Block Grant loan Agreement in the amount of $1,243,000 with Fresno Avalon Commons Phase II, LP, for property acquisition of the project site located at 7521 N. Chestnut Avenue, Fresno, CA 93720 (District 6)
Body
RECOMMENDATION
Staff recommends Council approve a Community Development Block Grant (CDBG) loan Agreement (Exhibit “A”- CDBG Agreement) in the amount of $1,243,000 with Fresno Avalon Commons Phase II, LP, for property acquisition of the Avalon Commons Phase II site located at 7521 N. Chestnut Avenue, Fresno, CA 93720.
EXECUTIVE SUMMARY
If approved as recommended, Fresno Avalon Commons Phase II, LP, will execute a CDBG loan Agreement in the amount of $1,243,000 with the City for property acquisition of the Avalon Commons Phase II project site. The estimated development cost is $32,416,466 for 44 one-, two-, and three-bedroom units for low-income households whose income ranges from 30 percent to 80 percent of the area median income for Fresno County, and one manager unit. Avalon Commons Phase II will be situated at the far north end of the site adjacent to Avalon Commons Phase I that is currently underway and located at the northwest corner of N. Chestnut Avenue and E. Alluvial Avenue in northeast Fresno. Approval of the CDBG loan Agreement will help the City of Fresno meet its timeliness test.
BACKGROUND
On May 19, 2023, the Housing and Community Development Division released a 2023-2024 Notice of Funding Availability (NOFA) for the creation of new affordable housing projects or substantial rehabilitation of existing housing. In response to the NOFA, the City received several applications, one of which was the Avalon Commons Phase II project that is being recommended to receive $1,243,000 in CDBG Program funding for property acquisition of the site. The Better Business Act does not apply as the proposed funding was offered through a NOFA.
After preliminary underwriting and technical assessment of the applications, the Avalon Commons Phase II project was determined to be one of the most shovel ready and is therefore being recommended for funding in the amount of $1,243,000. The CDBG loan will be made at 2 percent interest, hold a no worse than 4th position lien, be repaid from residual receipts, with the balance of principal and interest due in full at the 55-year maturity date.
Avalon Commons Phase II project cost is estimated at $32,416,466: $25,655,892 construction loan, $2,517,574 tax credit equity, $3 million City Local Housing Trust Fund loan, and $1,243,000 CDBG Program loan. (Exhibit “B” - Project Budget). The construction cost per square foot for a residential unit is estimated at $569 ($23,228,457 / 40,782 square feet) which was derived from the total development cost, less the costs for specialized professional services, reserves as a condition financing, application fees, costs associated with submitting funding applications, on- and off-site improvements, etc.
Residential units will be contained within five two-story garden style structures at the northwest corner of N. Chestnut Avenue and E. Alluvial Avenue (Exhibit “C” - Project Location Map). Phase I includes a 3,429 square foot community room which will be shared with Phase II and serve as a resource center with management offices, a multi-purpose room, kitchen, restroom facilities, half-court basketball court(s), onsite laundry, and a recreation area. In addition, construction materials will be durable and environmentally friendly and incorporate accessibility features. The City’s Housing and Community Development Division will inspect the completed property annually for housing quality standards and overall property management.
Phase II will consist of 44 affordable rental units (12 one-bed/one-bath, 17 two-bed/one-bath, and 15 three-bed/two-bath) and one on-site manager unit. Unit sizes will range from approximately 650 square feet for a one-bedroom, 850 square feet for a two-bedroom, and 1,050 square feet for a three-bedroom. Seven units will be CDBG-assisted floating units (4 three-bed/two-bath and 3 two-bed/one-bath) and be reserved as affordable units available to lower income households for a period of 55 years through a declaration of restrictions recorded on the property. Qualifying tenants’ income will range from 30 percent to 80 percent of the area median income for Fresno County. Proposed rents will range from $292 to $1,494 per unit depending on bedroom size and location within the property and subject to change to allowable rents at the time of initial lease up. Ten percent, or four units, will be reserved for individuals with mobility impairment and four percent, or two units, will be reserved for individuals with communication impairment.
The ownership structure consists of Fresno Avalon Commons Phase II, LP, a California limited partnership; a to-be identified tax credit investor will serve as the limited partner; Silvercrest, Inc., a nonprofit affiliate of Housing Authority will serve as the Managing General Partner; and Fresno Avalon Commons Phase II, LLC, will serve as the Administrative General Partner of which the Housing Authority of the City of Fresno is the sole member and Manager.
Project team members currently consists of Ballard Spahr, LLP (attorney) Novogradac, LLP (CPA), California Housing Partnership (financial consultant), James G. Palmer (Appraiser), R.L. Davidson (Architect), Melas Engineering (Energy Consultant), Laurin & Associates (Market Analyst), and GSF Properties (Property Management Company).
Over the past 60 years, the Housing Authority has constructed, rehabilitated, managed, and owned thousands of affordable housing units for lower income households. As part of its mission to create vibrant communities, the Housing Authority provides service-rich social programs to its residents to help promote self-sufficiency. Some of the Housing Authority’s most recent projects include the Fenix Apartments in the Lowell neighborhood, City View Apartments at Van Ness Avenue and Inyo Street in downtown Fresno, Monarch at Chinatown at F Street and Mariposa Street, and Avalon Commons Phase I, which is currently under construction with a completion date of October 2024.
The approximate completion date of the Avalon Commons Phase II project is September 1, 2027. In the event an extension of time is needed, the CDBG Agreement provides for an administrative extension of up to 180 days for unforeseen delays. Any extension of time requested by the developer beyond the 180 days requires an amendment to the Agreement which will be brought forth to the Council for consideration.
Once completed, Avalon Commons Phase II will assist the City of Fresno with its affordable housing goals as identified in the 2015-2023 Housing Element of the 2035 General Plan, 2020-2024 Consolidated Plan, 2023-2024 Annual Action Plan, and 2023-2025 One Fresno Housing Strategy. In addition, Phase II is expected to make a positive impact on the surrounding neighborhood by offering new, quality, durable, affordable housing at a long-time vacant and undeveloped parcel at N. Chestnut Avenue and E. Alluvial Avenue in northeast Fresno.
ENVIRONMENTAL FINDINGS
On, or about, June 25, 2021, the applicant requested a Streamlined Ministerial Approval of the project pursuant to Government Code section 65913.4. As a ministerial approval, the Planning and Development Department determined that the project as described is exempt from the California Environmental Quality Act (CEQA) under Sections 15268 and 15300.1 of the CEQA Guidelines. The approval authorizes the construction of a gated multifamily residential development consisting in total of 105 units situated in 21 one- and two-story apartment buildings. The development also includes varying amenities and on-and off-site improvements such as landscaping, parking, pool, and play areas.
In addition, and as required for the use of federal funding, a National Environmental Policy Act assessment for the project activities was completed on January 18, 2023, and resulted in a Finding of No Significant Impact. On March 20, 2023, the project received U.S. Department of Housing and Urban Development authorization to use grant funds for the proposed Avalon Commons Phase I and Phase II projects. An administrative amendment to the environmental assessment was completed for the additional federal funding to Phase II.
LOCAL PREFERENCE
Local preference was not used based on conditions of federal funding.
FISCAL IMPACT
The CDBG Program funds for the proposed Avalon Commons Phase II Project were appropriated in the 2024 Planning and Development Department Budget.
Attachments:
Exhibit A - CDBG Agreement
Exhibit B - Project Construction Budget
Exhibit C - Project Location Map