Item 27 - Public Hearing - Approve an Amended and Restated Regulatory Agreement for Garden Court Apartments Rehabilitation Project

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Garden Court Apartments Rehabilitation Project July 16, 2024 Page 2 5. Determine that the approvals and authorizations provided for herein do not constitute a "project" within the meaning of California Public Resources Code § 21065 and authorize filing a notice of exemption based on the "common sense" exemption of 14 C.C.R. § 15061(b)(3) to the extent any activity would be considered a "project" because it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment and the activity is not subject to the California Environmental Quality Act (CEQA). GOVERNMENT CODE 484308 APPLIES: Yes DISCUSSION Garden Court Apartments is an existing 84-unit mixed -income apartment project located at 300 East Santa Ana Boulevard, Santa Ana, CA 92701 (APN 398-323-08) and owned by Orange Housing Development Corporation ("OHDC"). On May 26, 1995, the City of Santa Ana ("City"), the Community Redevelopment Agency, and OHDC entered into an agreement containing covenants that required 41 out of the 84 units on the property to be affordable to families earning 40% of the Area Median Income ("AMI") in perpetuity. The remaining 43 units consist of 42 unrestricted market rate apartments and one manager's unit. The original covenant was entered into as part of a loan the City made for the project under the HOME Investments Partnership Program (24 C.F.R. 92.252) (the "HOME Program"). In February 2024, C&C Development Co., LLC ("C&C") and OHDC approached the City with a proposal to rehabilitate Garden Court Apartments and convert the remaining 42 market rate units at the project to affordable housing units for families earning 80% of the AMI. C&C and OHDC are seeking financing for the rehabilitation. The changes to the existing regulatory agreement are intended to assist with their ability to obtain financing. Thus, as part of this proposal, OHDC and C&C are requesting that the affordability term for the 83 affordable units be set at 55 years, which modifies the existing affordability covenants that require the current 41 affordable units to be restricted in perpetuity. The amended agreement allows a change in the affordability covenants, but it does not contain an obligation to commence or complete the rehabilitation; the intent is that the amendment would assist OHDC and C&C to obtain financing for the rehabilitation. By this amendment, OHDC seeks to establish the restrictions that: (1) increase the affordability levels for the current 41 affordable units from 40% to 60% AMI, and (2) establish the 80% AMI restrictions for the remaining 42 units that are currently unrestricted. OHDC has stated its intention to repay the City's existing outstanding loan balance of $925,851 at the time of their construction loan closing. Until such time as the outstanding loan balance is paid, the City has an existing deed of trust on the Property that secures obligations under the original loan agreement, including federal requirements under the HOME Program. Following a four -month due diligence and negotiation process with C&C and OHDC, staff is requesting approval of an Amended and Restated Agreement Containing Affordable Housing Covenants ("Regulatory Agreement") to allow for the rehabilitation of Garden Court Apartments, subject to