HomeMy WebLinkAbout03 - REAUTHMFREVBONDSWAKEHAMGRANT
M"~t~G DAB".
AUGUST ~, 201
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REAUTHORIZATION OF MULTI-FAMILY
HOUSING REVENUE BONDS FOR
WAKEHAM-GRANT APARTMENTS
EX~~U~°iV C386~~`TC~Fi
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RG(~RD3NG S~Cfi~TA~Y tJS~ OPIf~Y:
APF'ROV~D
i:~ As Rec4mn7ended
~,1 As Amended
CONT'IPJUEC3 'fO
Adopt a resolution reauthorizing the issuance of multi-family housing
revenue bonds in an aggregate amount not to exceed $8,155,000 for the
Wakeham-Grant Apartments, a California Limited Partnership, and authorize
the Chair, Vice Chair or Executive Director of the Housing Authority to
execute ail documents as necessary.
DISCUSSION
On March 5, 2001 the City Council held a public hearing and authorized
the Housing Authority to issue tax-exempt bonds for the Wakeham-Grant
Apartments. On July 16, 2001 the Housing Authority authorized the
issuance of the tax-exempt bonds in an aggregate principal amount not to
exceed $8,155,000. The bond proceeds are to be utilized for the
acquisition and rehabilitation of 805, 810, 815, 816, 825, 828, 835, and
904 S. Minnie Street (Exhibit 1). This project consists of 127 one- and
two-bedroom units.
Since the Housing Authority approval on July 16, 2001 the primary lender,
Washington--Mutual, has issued their assumption of value and underwriting
for the project that is more conservative than originally estimated by
the developer in the project performa. As a result, the difference in
underwriting assumptions has reduced the amount of funds available far
the project and the planned issuance of bonds cannot be completed as
originally structured. In order to utilize the allocation of bonds, the
developer must finalize their issuance by August 16, 2001. It is not
feasible for the developer to obtain loan approval from another lender
within this timeframe. A new lender would need time to perform due
diligence, underwrite the loan and obtain appraisals.
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Reauthorization of Multi-Family Revenue Bonds -
Wakeham-Grant Apartments
August 6, 20D1
Page 2
Based an this unforeseen circumstance, the developer is considering other
options and alternatives to complete the bond sale far the project.
Those options are 1} request that the Housing Authority issue bonds
within the necessary timeframe required by the California Debt Limit
Advisory Committee (CDLAC} to preserve the allocation and secure a new
lender; or 2} allow the allocation of bond authority to expire and tax
exempt bands will not be sold.
In order to preserve the CDLAC allocation that has been authorized, the
developer has requested that the Housing Authority authorize the issuance
of short-term bonds, the proceeds of which will be deposited in an escrow
account to allow the developer time to secure alternative long-term
financing. The Authority would require the developer to obtain another
lender by March 15, 2002 or the funds deposited into escrow will be used
to repay the bonds. There will be no tax ar financial liability to the
Housing Authority should this occur. The developer would also be
required to pay all of the costs of the escrow financing. Once the
developer secures long-term financing the Housing Authority would proceed
to authorize the re-issuance of bonds. The developer has received
favorable responses from other lenders who are interested in further
dialog and time far due diligence to consider financial support far l~ng-
term financing. If the developer is unable to secure a new lender the
bands will be repaid and the sales transaction will not be completed.
The second option is that the developer relinquishes the option of
issuing bonds by failing to close within the prescribed timeframe. If
this were to occur the developer would not be able to complete the
acquisition of this project. Tt will be infeasible for the developer to
acquire the property and provide the level of rehabilitation and
affordability without the band allocation. The developer could not
reapply for band authority until next year and there is no guarantee that
they would be successful in obtaining another allocation.
Staff recommends that the Authority approve the issuance of bonds to be
deposited into an escrow account in order to preserve the highly
competitive bond authority awarded to this project, The bond proceeds
will be invested in an AAA-rated investment fund. Consistent with the
prior authorization, the Housing Authority will not incur any financial
liability due to the issuance of these tax-exempt bonds. The bond
documents appoint Newman & Associates, Inc. as the underwriter for escrow
financing.
Although all recommended actions of the Housing Authority of the City of
Santa Ana are first reviewed and acted upon by the Redevelopment and
Housing Commission, in this case there is insufficient time to process
this request through standard procedures. Therefore, this action of the
Housing Authority will be processed as an emergency action as required by
state and federal regulations. The Housing Authority declares this to be
an emergency matter under Health and Safety Code Section 34292 in order
for the Housing Authority to take action.
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Reauthorization of Mu~.ta.-~Fama.~.y Revenue Bonds -~
Wakeham-Grant Apartments
August 6, 2001
Page 3
FISCAL IMPACT
There is no fiscal impact associated with this action.
J n P. Reekstin
E ecutive Director
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WAKEHAM -
GRANT t,
APARTMENTS N
McFADDF.I~ AVENUE
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EXHIBIT ]
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