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HomeMy WebLinkAboutMercy House Community Housing Development OrganizationMAYOR Miguel A. Pulido MAYOR PRO TEM Juan Villages COUNCILMEMBER: Phil Bacerra Cecilia Iglesias David Penaloza Vicente Sarmiento Jose Solodo INSURANCE NOT REQUIRED WORK MAY PROCEED CLERK OF COUNCIL r).1- 17. CITY OF SANTA ANA COMMUNITY DEVELOPMENT AGENCY 20 Civic Center Plaza - M25 . P.O. Box 1988 Santa Ana, California 92702 www.santa-ana.org (714)657-5360 April 7, 2020 Kyle Paine Community -Development Partners 3416 Via Oporto, Suite 301 Newport Beach, CA 92663 Larry Haynes Executive Director Mercy House Living Centers CITY MANAGER Kristine Ridge CITY ATTORNEY Sonia R. Carvalho CLERK OF THE COUNCIL Daisy Gomez Re: Westview House 2530 and 2534 Westminster Avenue, Santa Ana, CA 92701 Pre -Commitment Letter for Inclusionary Housing Funds Loan, HOME Loan, HOME CHDO Loan, and Rental Rehabilitation Program Loan Dear Messrs. Paine and Haynes: Community Development Partners ("CDP"), in partnership with Mercy House Community Housing Development Organization ("Mercy House CHDO'r) (collectively referred to as the "Developer''), requested financial assistance in connection with the proposed development of an eighty-five (85) unit affordable housing complex, with eighty-four (84) units restricted to extremely -low income and very -low income households, to be located at 2530 and 2534 Westminster Avenue, Santa Ana, CA 92701 (APNs 198-132-21 and 198-132-23) ('`Project"). The Project site is located along Westminster Avenue, near North Fairview Street. The Project site is on two (2) contiguous undeveloped parcels and is currently zoned for general commercial. The Project will require a zone change and amendment to the current land -use, among other potential discretionary actions to be determined by the City's Planning and Building Agency. The City of Santa Ana ("City'') has reviewed the Developer's request for assistance, and at the City Council meeting on April 7, 2020, the City Council authorized and approved SANTA ANA CITY COUNCIL Miguel A. Pulido Juan Villages Vicente sarniento David Penaloza Jose Solana Phil Bacerra Cecilia Iglesias Mayor Mayor Pm Tem. Ward 5 Ward 1 Ward! 2 Ward 3 Ward 4 Wald 6 mpulicaRsanta-ana am ivillaoas(dsanlaana.ora vsanaiento@santa-ena.oro dpenalozaAsantaanaam isalari aeanla-ana.pra obacenaQsanta-anaom ciplesiasasanta-an...m Page 12 issuance of this pre -commitment letter evidencing the preliminary award of $3,904,341 in affordable housing funds consisting of (collectively, the "City Assistance"): - A loan in the maximum amount of $1,514,113 from the Inclusionary Housing Fund held by the City for the Project ("Inclusionary Loan"); - A loan in the maximum amount of $1,412,643 from the HOME Investment Partnerships Program ("HOME") funds held by the City for the Project ("HOME Loan"); - A loan in the maximum amount of $591,062 from the HOME Community Housing Development Organization ("CHDO") funds held by the City for the Project ("HOME CHDO Loan"); and, - A loan in the maximum amount of $386,523 from the Rental Rehabilitation Program held by the City for the Project ("RRP Loan"). This letter shall evidence the City's pre -commitment of the City Assistance to the Developer for the Project subject to the conditions described below. City Assistance: The amount of the proposed City Assistance has been determined based upon the City's review of the Developer's request for the receipt of the City Assistance and the development proforma and projected cash flows for the Project submitted by the Developer to the City ("Proforma"). The City Manager has authority to approve revised development proformas and projected cash flows for the Project; provided, however, that the City Assistance is not increased or extended. The City Assistance shall include the following loan terms: • The Inclusionary Loan shall be for a maximum principal amount of $1,514,113, or as much thereof as is disbursed for hard and soft costs in constructing the Project, provided from the Inclusionary Housing Fund. • The HOME Loan and HOME CHDO Loan shall be for a maximum principal amount of $2,003,705, or as much thereof as is disbursed for hard and soft costs in constructing the Project, provided from HOME funds. • The RRP Loan shall be for a maximum principal amount of $386,523, or as much thereof as is disbursed for hard and soft costs in constructing the Project, provided from RRP funds. • 3% simple interest per annum. Page 13 • Repayment from 50% of Residual Receipts (pro-rata with payments due in connection with other financing provided by other public agencies) (after payment of operating expenses, including social services expenses and monitoring fees, debt service, any deferred developer fee, and partnership fees to be described in the Agreement), with the remaining 50% to be disbursed to the Developer. o Any repayments to the soft loans must be based on the pro rata share of all the soft loan balances (the same as the residual receipts splits). The Developer will request a different term for their Rising Tide Loan to match the other terms of their soft debt. • Remaining principal and accrued interest due upon the 55th anniversary of the issuance of Certificate of Occupancy or earlier upon sale, refinancing or default. On that date, the City agrees to review the performance of the Property and consider in good faith any reasonable request by Developer to modify the terms or extend the term of the City Promissory Notes. Additionally, the City will receive 50% of the net proceeds received from any sale or refinancing of the Project in order to repay any outstanding principal or interest due on the City Promissory Notes, after payment of outstanding conventional debt and payment in full of any deferred developer fee and establishment of any reserves and transaction costs. • Cost savings from the Project, if any, will be applied first to pay down the City Assistance, subject to compliance with the Tax Credit Allocation Committee ("TCAC") Regulations and California Health and Safety Code, as applicable. • After all other funding sources have been secured through enforceable funding commitments, a HOME Subsidy Layering Review is required in order to confirm the amount of HOME funds committed to the Project. • An environmental review in compliance with the National Environmental Policy Act is required prior to entering into a Loan Agreement for the HOME funds committed to the Project. The HOME Loan shall also require specific HOME designated units in the Project. Based on a preliminary HOME Cost Allocation Analysis, the City must designate at least nine (9) units in the Project as HOME assisted -units per the following preliminary unit mix: • Three (3) one -bedroom units; • One (1) two -bedroom unit; • Three (3) three -bedroom units; and, • Two (2) four -bedroom units. As least 20% of the HOME designated units must be designated as Low HOME units, This equates to two (2) Low HOME units based on a nine (9) unit HOME requirement. One (1) of the one -bedroom units and one (1) of the four -bedroom units will be designated as the Low HOME units. The remainder of the HOME designated units can be restricted Page 14 as High HOME units. This is subject to change based upon a final HOME Cost Allocation Analysis to be completed after the HOME Subsidy Layering Review has been performed. General Provisions: The City's obligation to provide the City Assistance to the Project is subject to each of the following conditions: • Developer must provide proof that it has secured all of its remaining financing for the development of the Project in the form of enforceable funding commitments, which may include 9% or 4% Federal Low Income Housing Tax Credits, State Housing Tax Credits, a commitment of affordable housing funds from the County of Orange or State of California, Section 8 project -based vouchers from the Orange County or Santa Ana Housing Authority, or any other funding source needed in the Project's capital stack to develop the Project and close on the financing, before staff will return to the City Council for consideration of the Loan Agreements for the City Assistance. • At least 75% of the affordable units (less one (1) managers unit) in the Project will be restricted to extremely low-income households at 30% of the Area Median Income. • The Project consists of twenty-six (26) permanent supportive housing units for chronically homeless individuals and families. All individuals and families shall be referred from the Orange County Coordinated Entry System, and preference should be given to residents of the City of Santa Ana based upon: o Proof of strong ties to the community, to include current residency of an immediate family member — mother, father, sibling, or grandparent in the City of Santa Ana; o Proof that the individual attended a K-12 school in Santa Ana; o Proof that the individual resided on property zoned for residential use in Santa Ana and the individual was on the lease and/or paid utilities necessary for legal use of the property for residential purposes; or o Knowledge — either first-hand or recorded — by the Santa Ana Police Department that the individual has been a member of the Santa Ana homeless community. • The rent standards for the Project must comply with the strictest of the standards imposed by TCAC and the HOME Program regulations, or other funding sources contributed to the Project, as applicable. • All provided funding and Project requirements shall conform to the City's most recently adopted Affordable Housing Funds Policies and Procedures, unless alternative requirements are expressly provided in the executed Loan Agreements for the City Assistance or any other documents related to the development of the Project. Page 15 • Approval of all required entitlements and discretionary actions, to allow the construction of an 85-unit affordable housing complex to be located at 2530 and 2534 Westminster Avenue, Santa Ana, CA 92706, (APNs 198-132-21 and 198- 132-23). • The City's obligation to provide the City Assistance is and shall remain subject to all covenants, conditions, and restrictions set forth in the Loan Agreements, and in particular the City's analysis of the available funding sources and development and operating costs of the Project and the overall economic feasibility of the Project. • Review and approval of the Loan documents evidencing the City Assistance by the City Council including the Loan Agreement(s), Promissory Note(s), Affordability Restrictions and Deed(s) of Trust. • $400,000 of the City's financial assistance will be set -aside as a City -controlled contingency allowance. The City must approve any disbursements from this contingency allowance. Any funds remaining in the contingency allowance at the end of construction must be utilized for a surrounding community benefit at the City's sole discretion, within the guidelines for allowable uses pursuant to the funding source. • $100,000 of the $2.5 million Developer Fee will be contributed to a surrounding community benefit, within the guidelines for allowable uses pursuant to the funding source. Any additional contribution will be allocated from the remainder of the City - controlled contingency allowance. • The City is requiring that any amount of the Developer Fee above $2.5 million to be contributed as Developer Equity. This amount is currently estimated at $1.43 million, or 36% of the total Developer Fee. The Developer Equity should have the following terms: o The Developer Equity will not be secured by a promissory note; o The Developer Equity may only be repaid from the Developer's share of the Project's residual receipts; and o Any portion of the Developer Equity that is not repaid from the Developer's share of the Project's residual receipts may only be repaid upon sale or transfer of the property after the City Loans are repaid in full. • Given that HUD severely limits the restructuring that can occur during the HOME affordability period (e.g. refinancing), the Developer's senior permanent loan term should be at least 20 years. The Developer will request a longer term permanent loan from their senior lender. • Compliance with California Health and Safety Code and applicable regulations set forth in Section 34176. Developer, at its sole cost and expense, will be responsible for securing any and all permits and discretionary approvals that may be required for the Project by the City or any other federal, state, or local governmental entity having or claiming jurisdiction over the Property or Project. Notably, this pre -commitment letter shall not obligate the City or any department thereof to approve any application or request for or take any other action in connection with any planning approval, permit or other action necessary for the construction, rehabilitation, installation or operation of the Project. This pre -commitment letter for the Project will expire on April 7, 2022. If you have any questions or require any additional information regarding this pre - commitment letter, please contact Judson Brown, Housing Division Manager, by telephone at (714) 667-2241 or by e-mail at (brown@santa-ana.org. Sincerely, On behalf of the City of Santa Ana: Kristine Ridge City Manager Attest: ;#isy Gomez Ierk of the Council RECOMMENDED FOR APPROVAL: - Steven A. Mendoza Executive Director Community Development Agency