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Appropriation Adjustment, Density Bonus and Development Impact Fee Deferral Agreement for FX Residences December 7, 2021 Page 2 Frances Xavier Residence (renamed to "FX Residences") worked with staff to secure all of their remaining sources of financing in their capital stack as a condition of the Housing Authority's award of funds and Ground Lease, staff is now returning to the Housing Authority / City Council for approval of their Loan Agreement and Ground Lease. Due to additional construction costs associated with the project since approval of the award on January 15, 2019, staff is also recommending to amend their award of funds for an additional $587,000. In addition, staff is also recommending approval of a Density Bonus Agreement required for HomeAid's entitlements to develop FX Residences and a Development Impact Fee Deferral Agreement to offset their costs of construction. A future Subordination Agreement may be necessary at a later date and is included as a Recommended Action. DISCUSSION On January 15, 2019, City Council approved a pre -loan commitment with HomeAid Orange County ("HomeAid") with Mercy House Living Centers ("Mercy House") as the service provider for $1,069,947 in Low and Moderate Income Housing Asset Funds and a 99-year Ground Lease of 801, 807, 809 and 809 '/2 E. Santa Ana Blvd for the development of the Frances Xavier Residence affordable housing project. The $1,069,947 are former redevelopment agency funds held by the Housing Authority acting as the Housing Successor Agency. The funds are generated from proceeds from the sale of former Redevelopment Agency housing assets, residual receipts from former Redevelopment Agency assets (i.e. loans), as well as a portion of the loan repayments from the former Redevelopment Agency to the City. The Housing Authority owns the land at 801, 807, 809 and 809 '/2 E. Santa Ana Blvd after it was transferred by the former Redevelopment Agency. The project was renamed from Frances Xavier Residences to FX Residences after City Council approved the pre -loan commitment. The Staff Report from January 15, 2019 is attached as Exhibit 1 and the pre -loan commitment letter is attached as Exhibit 2. After City Council approves a pre -loan commitment of funding for an affordable housing project, it typically takes a substantial amount of time for a developer to secure their remaining sources of financing in their capital stack. The majority of large multi -family affordable housing projects require Low -Income Housing Tax Credits which are very competitive for the higher value 9% Tax Credits with only two application deadlines a year and more difficult to finance with the lower value 4% Tax Credits. In this case, HomeAid did not apply for Low -Income Housing Tax Credits, but applied for various other sources of financing through the County of Orange, Orange County Housing Finance Trust and Wells Fargo, among other grantees and lenders. After almost three years since HomeAid received a commitment of funding and land from the Housing Authority, HomeAid is prepared to close on their financing and begin construction of the project. In order for HomeAid to develop FX Residences and in accordinace with the pre -loan commitment letter approved by the Housing Authority on January 15, 2019, staff is City Council 16 — 2 12/7/2021