REPORT TO THE CITY COUNCIL
January 15, 2015
FROM: JENNIFER K. CLARK, Director
Development and Resource Management Department
SUBJECT
Title
Actions pertaining to Annadale Housing Partners' Loan
1. RESOLUTION - Approving the assignment of Annadale Housing Partners' $2,996,720 loan to Allied Argenta Affordable Housing, LLC or its designated non-profit partner and conversion of the loan to a 55-year residual receipts loan at three percent interest
2. Authorize City Manager to execute assignment and loan documents
Body
RECOMMENDATION
Staff recommends the City Council adopt a resolution approving the assignment of the Annadale Housing Partners' $2,996,720 loan to Allied Argenta Affordable Housing, LLC (Allied) or its designated non-profit partner and conversion of the loan to a 55-year residual receipts loan at 3% interest; and authorize the City Manager to execute the assignment and loan documents, subject to approval as to form by the City Attorney.
EXECUTIVE SUMMARY
On December 5, 2014, Allied informed the Development and Resource Management Department it was proposing to acquire and rehabilitate the KingsView Manor and KingsView Estates property, two affordable housing complexes located in southwest Fresno. Both complexes are currently owned by the Annadale Housing Partners. If Allied pursues its acquisition/rehabilitation project as proposed, staff recommends that the City Council approve the assignment of the loan to Allied or its non-profit partner and convert the $2,996,720 balloon loan to a 55-year residual receipts loan at 3% interest.
BACKGROUND
On December 5, 2013, the City Council approved the restructure of the $2,996,720 loan for the Annadale Housing Partners to eliminate the accrued interest and late fees. The restructure was requested to reduce debt on the property and thereby obtain tax credits to redevelop both complexes. In accordance with the Council-approved Note terms, the restructured loan was to be paid-in-full on or before December 1, 2017 (Exhibit A).
At that time, Council determined the restructure of the Note was subject to the terms of the Better Business Act ("Act") but eligible for an exception since the City did not reasonably expect repayment under the terms and conditions of the Note, and the Note was essentially a grant but structured as a loan to meet the Low Income Housing Tax Credit ("LIHTC") requirement for debt service on the property. Thereafter, Council invoked the exception to the Act by a supermajority of five votes. As such, the exception to the Act still applies.
Since execution of the $2,996,720 Superseded and Restated Note, the newly proposed development partner that was to join the Annadale Housing Partners entity, backed out of the proposed redevelopment project. At that time, the remaining members decided to sell the property to a housing development agency that was able to acquire and rehabilitate the KingsView Manor and KingsView Estates units and property.
After the property was listed for sale by the Annadale Housing Partners, Allied submitted a $7.3 million bid to acquire the property. Both parties have entered into a Purchase and Sale Agreement to purchase the property and are currently in escrow with a close date of four to six months. Allied has not completed an appraisal of the property but plans to do so prior to submittal of an application for LIHTC.
Allied anticipates that 4% tax credits will provide a majority of the financing necessary to complete the proposed acquisition/rehabilitation project. Other proposed financing sources include tax-exempt bonds issued, HOME Program loan funds, Federal Home Loan Bank of San Francisco Affordable Housing Program funds or other forms of subordinate gap financing, and deferred developer fees. The total project cost is estimated at $22 million or approximately $100,000 per unit.
If staff's recommendation is approved, the City will allow for the assignment of the $2,996,720 Annadale Housing Partners' loan to Allied or its non-profit partner. Staff is also recommending approval to delete item number six of the Superseded and Restated Note so that Allied may submit an application for HOME Program funds to help complete the financing of its proposed project. Staff's recommendation also includes the conversion of the balloon loan to a 55-year residual receipts loan at 3% interest. The loan terms may need to be adjusted slightly to be compatible with any proposed senior lender requirements. Allied's initial request was for the $2,996,720 loan to be forgiven; however, Allied has since been informed that the City's federal dollars available for new construction or major rehabilitation of affordable housing are provided in the form of a low interest, long-term loan.
The KingsView Manor and KingsView Estates property have been in need of major rehabilitation and/or redevelopment for years. It is therefore in the City's best interest to assist Allied through assignment and loan restructure.
Allied's proposed improvements to the property are as follows:
Ø Modernize the units by installing new interior and exterior doors, windows, appliances, countertops, flooring, light fixtures, plumbing fixtures, and window treatments
Ø Painting of the interior and exterior
Ø Reduce energy consumption by incorporating energy-efficient items
Ø Increase marketability of the development and provide improved amenities by repairing deferred maintenance items and improving common areas
Ø Preserve the stock of housing units by requiring new affordability restrictions
Ø Improve the design and structures to accommodate seniors and individuals with disabilities
The units are currently occupied with tenants; therefore, rehabilitation will be structured so that current tenants are minimally disturbed. As the units are rehabilitated and ready for occupancy, residents will be moved from their current unit into the newly rehabilitated units. This will minimize the amount of relocation for tenants. It also allows for the rehabilitation to be phased by building and enables tenants from each building to remain close to their current neighbors.
Allied is a southern California-based development team with the expertise and capacity to complete a major rehabilitation project such as this. Allied's experience includes, but is not limited to:
Ø Completion of over $1 billion in real estate transactions
Ø Completion of transactions in over 12 different States
Ø Financing of over $200 million in multifamily housing projects
Ø Management of over 10,000 units in 6 different States
Ø Secured Tax Exempt Bond financing on over 50 projects
Ø Underwritten over 150 Tax Credit properties resulting in over $800 million in equity investments
Ø Worked directly with over 10 Housing Authorities developing financing strategies to meet their capital needs
Ø Has secured millions of dollars in federal, State and foundation grants
ENVIRONMENTAL FINDINGS
This is not a project for purposes of CEQA pursuant to CEQA Guidelines Section 15370.
LOCAL PREFERENCE
Local Preference does not apply because this assignment and conversion does not involve bidding or contracting.
FISCAL IMPACT
There is no current impact to the General Fund; any future residual receipts may be used in the General Fund or affordable housing activities.
Attachments:
Exhibit A - Superseded and Restated Promissory Note