Item HA-03 - Amended and Restated Regulatory Agreement for the Rehabilitation of Garden Court

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Garden Court Apartments Rehabilitation Project July 16, 2024 Page 2 ("Redevelopment Plan"), and a Disposition and Redevelopment Agreement ("DDA") between the Agency and OHDC. Under the DDA, the Agency transferred the property to OHDC, and OHDC agreed to develop the project in accordance with the Redevelopment Plan. As required by state law, the Redevelopment Plan included certain inclusionary housing requirements, which were intended to be satisfied through the affordability covenants set forth in the Original Agreement. Following the dissolution of redevelopment agencies pursuant to California Assembly Bill 1X 26 (2011) and Assembly Bill 1484 (2012), there were numerous questions about the extent to which redevelopment agencies, or their successors, must enforce the inclusionary requirements of California's redevelopment law. This project, however, is located within the Central City subarea of the Redevelopment Plan, which as of July 2, 2017 was no longer effective. Based upon this, the Agency may consent to terminate the Original Agreement because the project is no longer subject to the Redevelopment Plan. The consideration for agreeing to terminate the Original Agreement is the covenant to restrict additional affordable units. 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 OHDC and C&C obtaining financing and subsequent approvals by the City's Planning and Building Agency for the rehabilitation work. In order for the Acting City Manager of the City to execute the Amended and Restated Regulatory Agreement, staff is also requesting approval for the Executive Director of the Housing Authority to consent to the termination of the Original Agreement. The