HomeMy WebLinkAbout29A - META HOUSING CORPREQUEST FOR
COUNCIL ACTION
CITY COUNCIL MEETING DATE:
NOVEMBER 3, 2015
TITLE:
AWARD A PRE -LOAN COMMITMENT FOR
META HOUSING CORPORATION
{STRATEGIC PLAN NO. 5,3A; 3C)
:E / e�
CITY MANA R
RECOMMENDED ACTION
CLERK OF COUNCIL USE ONLY:
❑ As Recommended
❑ As Amended
❑ Ordinance on I" Reading
❑ Ordinance on 2"d Reading
❑ Implementing Resolution
❑ Set Public Hearing For
CONTINUED TO
191111114111iS11i 7
Award a pre -loan commitment to Meta Housing Corporation and authorize the City Attorney and the
Community Development Agency to draft loan agreements in an amount not to exceed $4,635,000
for the Santa Ana Arts Collective project that will be conveyed to City Council for approval at a future
date.
COMMUNITY REDEVELOPMENT AND HOUSING COMMISSION RECOMMENDATION
At its regular meeting on October 14, 2015, by a vote of 5:0, the Community Redevelopment and
Housing Commission approved the recommended action.
DISCUSSION
On June 1, 2015, City staff issued a Request for Proposals (RFP) soliciting applications for the
development of an affordable housing project. The RFP indicated that the City would consider
proposals for new construction and/or acquisition and rehabilitation projects. It also indicated that
the City had approximately $1,875,000 in Inclusionary Housing funds; $500,000 in Community
Development Block Grant (CDBG) funds; $830,000 in federal HOME Program funds to be
committed by July 31, 2016; $1,430,000 in federal HOME Program funds to be committed by July
31, 2017; and twenty-four Project -Based Vouchers.
The RFP was published on both the City and Housing Authority's websites; public notice in the
OC Register on June 1, 2015; and electronic letters and hard copy letters announcing its
availability were sent to individuals and firms who had previously requested to be informed of
development opportunities. The Community Development Agency received four proposals
submitted by the deadline which met the application requirements for the RFP.
The criteria used to evaluate proposals included: demonstrated ability of the developer team to
develop (20%); demonstrated ability to manage affordable rental units so as to ensure both
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Award A Pre -Loan Commitment
Meta Housing Corporation/Santa Ana Arts Collective
November 3, 2015
Page 2
ongoing compliance with affordability requirements and long term financial solvency (15%);
demonstrated readiness of the proposed project to proceed (30%); proposed levels of
affordability (15%); extent to which City funds will be leveraged by outside funds as shown by
sources and uses budget (10%); and anticipated cash flows as shown by the pro forma (10%).
For the evaluation of the proposals received under the RFP, staff formed a Review Panel made-
up of senior staff from the Planning and Building Agency, the Community Development Agency,
Keyser Marston Associates Inc., and housing staff from the City of Anaheim. The panel met on
September 29, 2015 to review the proposals and interview the developer teams. Each proposal
was evaluated based on the RFP criteria, with the average scores below:
Proposal Average Score
Meta Housing Corporation / Santa Ana Arts Collective 95.2
C&C Development / Orange Housing Development Corporation 88.8
Jamboree Housing Corporation 86.8
Mary Erickson Community Housing 56.8
The top-rated proposal, Meta Housing Corporation / Santa Ana Arts Collective, was unanimously
recommended by the Review Panel to be submitted to the Community Redevelopment and
Housing Commission for award and recommendation to City Council for final approval.
Project Description
Meta Housing Corporation (Developer) is an affordable housing developer based in Los Angeles,
California, whose mission is to enrich the lives of residents and enhance the larger community.
Started in 1993, the Developer has a successful track record as an affordable housing developer
with over 6,000 residential units developed, including adaptive reuse housing projects, artist
colonies, and transit oriented development projects. Meta Housing has already developed
successful art communities in Burbank, North Hollywood, San Pedro, and Long Beach. The
Developer's projects actively engage their tenants in activities such as, tutoring, wellness, and
the arts. Meta Housing Corporation has received national recognition from the National
Association of Home Builders, the SAGE Award, and the National Endowment for the Arts.
The proposed project, located at 1666 N. Main Street (Exhibit 1), will enhance the connectivity of
the Artist Village in the downtown to the arts and cultural institutions on Main Street including the
Bowers Museum, Kidseum, Discovery Cube, The Wooden Floor, Orange County School of the
Arts, and others. The proposed project, named the Santa Ana Arts Collective would adaptively
reuse a late modern five -story office building and site, into a community gallery and affordable
family development designed for artists of all disciplines. The proposed project would promote
the City's goal of providing long-term affordable housing and meeting the affordable housing
goals as identified in the City's Strategic Plan, Housing Element and Consolidated Five Year
Plan.
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Meta Housing Corporation/Santa Ana Arts Collective
November 3, 2015
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The proposed project would offer a preference to applicants who are artists with a process that
would meet Fair Housing and funding requirements and are working artist families within Santa
Ana. Although an arts population is preferred, this preference will not override the requirement
for long-term financial success. The project includes a community art gallery, an art garden on
the ground floor, a marker space, digital and media lab, music room, performing arts room, and
activity programs.
EngAGE, the project's service provider, will provide high-quality coordination services designed
to improve the quality of life for tenants, including after-school tutoring, computer training,
creativity programs, and other activities. EngAGE provides their services at no cost to the
tenants and have the following goals for their programs: (1) create programs in partnerships with
residents; (2) provide a minimum of two programs per month; and (3) achieve engagement of at
least 40% of residents in at least one program/event per month.
This proposed project will be one of the first projects under the new adaptive reuse ordinance,
the first affordable housing complex with an artist preference, and the first project funded with
Inclusionary Housing funds in the City. The Santa Ana Arts Collective received six letters of
support from the local community and residents that included the Grand Central Art Center,
Orange County School of the Arts, and Media Arts Santa Ana.
The City's financial consultant, Keyser Marston Associates Inc. conducted a financial review of
the proposed project based on its submission to the RFP and will be providing a detailed subsidy
layering analysis once all other financing is in place in accordance with federal regulations.
The proposed unit mix and rent restrictions are as follows:
The total project cost to acquire, rehabilitate and provide the proposed level of affordability in the
building is $26,558,333. The tables below summarize the proposed funding sources and
anticipated costs of the project:
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30% AMI
40% AMI
50% AMI
60% AMI
Unit Size
No.
Units
Proposed
Rent
No.
Units
Proposed
Rent
No.
Units
Proposed
Rent
No.
Units
Proposed Total
Rent
1 Bedroom
4
$527
7
$702
26
$878
---
--- 37
2 Bedroom
1
$633
---
---
6
$1,055
---
--- 7
3 Bedroom
2
$731
---
---
---
---
17
$1,462 19
Total
7
7
32
17
63
The total project cost to acquire, rehabilitate and provide the proposed level of affordability in the
building is $26,558,333. The tables below summarize the proposed funding sources and
anticipated costs of the project:
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Award A Pre -Loan Commitment
Meta Housing Corporation/Santa Ana Arts Collective
November 3, 2015
Page 4
Permanent Funding Sources
Amount
Permanent Loan
3,788,911
City of Santa Ana — HOME
2,260,000
City of Santa Ana — CDBG
500,000
City of Santa Ana — Inclusionary Housing Funds
1,875,000
HCD — Affordable Housing & Sustainable Communities (Cap & Trade Funds)
3,500,000
Tax Credit Equity
14,213,448
Deferred Developer Fee
420,974
TOTAL:
$ 26,558,333
Project Costs
Amount
Land Acquisition Costs
7,255,522
Construction Costs
10,917,565
Architectural & Engineering
830,000
Operating Reserve
219,682
Relocation
782,000
Additional Project Costs
4,553,564
Developer Fee
2,000,000
TOTAL:
$ 26,558,333
The City of Santa Ana funding sources including HOME Program funds, CDBG Program funds,
and Inclusionary Housing funds will be provided by means of a 55 -year City loan carrying a 3
percent interest rate and payable by residual receipts. The loan agreements for these funds will
be conveyed to City Council for approval prior to execution in accordance with each of the
funding requirements.
Execution of these loan agreement documents will be contingent upon completion of the National
Environmental Policy Act (NEPA) and California Environmental Quality Act (CEQA)
requirements, completion of a subsidy layering analysis by the City's financial consultant, and
loan commitments from all other funding sources.
STRATEGIC PLAN ALIGNMENT
The activities covered by this report allow the City to meet Goal #5 (Community Health, Livability,
Engagement & Sustainability), Objective # 3 (Facilitate diverse housing opportunities and support
efforts to preserve and improve the livability of Santa Ana neighborhoods), Strategy A (Continue
to explore options Citywide regarding the re -use of commercial or industrial buildings that are
currently underutilized or vacant for mixed-use residential projects), and Strategy C (Provide that
Santa Ana residents, employees, artists and veterans receive priority for affordable housing
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Award A Pre -Loan Commitment
Meta Housing Corporation/Santa Ana Arts Collective
November 3, 2015
Page 5
created under the City's Housing Opportunity Ordinance or with City funding to the extent allowed
under state law).
FISCAL IMPACT
Funds are available in the HOME Program, CDBG Program, and Inclusionary Housing funds as
follows:
Funding Source
Grant Year
Budgeted in Fiscal Year
Account No.
Amount
HOME Program
Pre -2015
2014-2015
13018780-69152
1,348,972
HOME Program
2015
2015-2016
13018780-69152
911,028
CDBG Program
2015
2015-2016
13518782-69152
500,000
Inclusionary Housing
N/A
2015-2016
41718820-69152
1,875,000
TOTAL: $4,635,000
Prior year HOME Program funds will be carried forward to fiscal year 2015-2016. Funds are
anticipated to be committed in fiscal year 2015-2016 once other project financing is in place for
the project.
APPROVED AS TO FUNDS AND ACCOUNTS:
neSic � �t�
Ke y Reenders Sk� Francisco Gutierrez
Executive Director Executive Director
Community Develop ent Agency Finance and Management Services Agency
KL/JB/NV/11
Exhibit: 1. 1666 N. Main Street Site Map
2. Pre -Loan Commitment
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29A-6
EXHIBIT I
PROPOSED PROJECT LOCATION
1666 NORTH MAIN STREET
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29A-8
MAYOR
Miguel A. Pulido
MAYOR PRO TEM
Vincent F. Sarmiento
COUNCILMEMBERS
Angelica Amezcua
P. David Benavides
Michele Martinez
Roman Reyna
Sal Tinajero
November 3, 2015
CITY MANAGER
David Cavazos
CITY ATTORNEY
Sonia R. Carvalho
CLERK OF THE COUNCIL
Maria D. Huizar
CITY OF SANTA ANA
20 Civic Center Plaza a P.O. Box 1988
Santa Ana, California 92702
Www.santa-ana.oro EXHIBIT 2
Meta Housing Corporation
Attn: Chris Maffris, Senior Vice President
1640 S. Sepulveda Blvd, Suite 425
Los Angeles, CA 90025
SUBJECT: SANTA ANA ARTS COLLECTIVE PROJECT — HOME LOAN PRE -COMMITMENT LETTER
Dear Mr. Maffris:
Meta Housing Corporation, a California corporation ("Developer") has submitted a proposal in response to the City of
Santa Ana's Request for Proposals issued on June 1", 2015 and successfully was awarded financial assistance to the
proposed affordable housing project called the "Santa Ana Arts Collective", which is an affordable, multi -family
adaptive reuse 64 -unit apartment complex located at 1666 North Main Street in Santa Ana, California ("Project"). The
City has reviewed the Developer's requests for assistance and on November 3, 2015 the City Council authorized and
approved issuance of this pre -commitment letter evidencing the preliminary award of the HOME Loan, CDBG Loan
and Inclusionary Housing Loan to the Developer for the Project under 24 CFR 92.504(c)(3) (together, "Santa Ana
Assistance"). The project was awarded a pre -loan commitment of a total of $4,635,000 from the City of Santa Ana,
including $2,260,000 in HOME Investment Partnerships Program (HOME) funding, $500,000 in Community
Development Block Grant (CDBG) funding, and $1,875,000 from the City's Inclusionary Housing Funds. The loan
agreements for these funds require City Council approval prior to execution by the Developer and the City of Santa
Ana.
The purpose of this letter is to provide a pre-comntitment from the City of Santa Ana for a loan of up to $2,260,000
("HOME Loan") from funds received by the City as a participating jurisdiction ("PJ") under the federal
HOME Investment Partnerships Program, in accordance with Title II of the Cranston -Gonzalez National Affordable
Housing Act (42 U.S.C. 12701 12839) and the HOME Program regulations codified at 24 CFR Part 92, as amended
by the "2013 HOME Final Rule" at 24 CFR Part 92 (Complete Rule) (together, the "HOME Program"). Santa Ana
has made the Developer aware of the definition of "commitment" in 24 CFR 92.2 that prohibits the City as a PJ from
providing a commitment (as the tern is defined therein) of HOME Program funds to any specific local project until
"the [City] and project owner [Developer] have executed a written legally binding agreement under which HOME
assistance will be provided to the owner for an identifiable project for which all necessaryfinancing has been
securedd, a budget and schedule have been established, and underwriting has been completed and under which
construction is scheduled to start within twelve months of the agreement date." (Italics added.) Notwithstanding the
definition of "commitment" in 24 CPR 92.2, 24 CFR 92.504(c)(3) authorizes the City to "preliminarily award HOME
funds for a proposed project, contingent on conditions such as obtaining other financing for the project" [italics
added]; however, this section goes on to clearly confine that "[t]his preliminary award is not a commitment to a
project. The written agreement committing the HOME funds to the project must meet the requirements of `conunit to
a specific local project' in the definition of `comm tment' in §92.2 ..." Thus, while this letter is not a commitment of
SANTA ANA CITY COUNCIL
Miguel A. Pulitlo Vincent F. Sarmiento Michele Martinez Angelis Amezcua P. David Benavitles Raman Reyna Sal Tinajero
Mayor Mayor Pro Tem. Ward 1 ! Ward !/a 3 Ward4 ! WardS Wartlfi
MPulido(o)santa-ana are VSarmientonosanta-ana.oro I k ftnez(a)sonta-a_na.ora m tae r ! Daenavides(dsace-,oh, or RRevna(dsanta-ana.oro ! SunaieronDsantd-dna oro
Meta Housing Corporation
Santa Ana Arts Collective
November 3, 2015
Page 2
federal funds as defined under the HOME Program as the term commitment is defined therein, Santa Ana intends that
this letter evidence the City's and Authority's preliminary award of the Santa Ana Assistance to the Developer for the
Project subject to the conditions described below. Further, Santa Ana states its objective for the Developer to satisfy
the provisions of the California Tax Credit Allocation Committee ("TCAC") Regulations, in particular Section 10325,
albeit there is no intention to violate HOME Program requirements, in particular 24 CFR 92.2.
The amount of the HOME Loan to be provided to the Project has been determined based upon Santa Ana's review of
the Developer's proposal for the Santa Ana Assistance and the development proforma and projected cash flows for the
Project submitted by the Developer to Santa Ana as of August 21, 2015 ("Proforma"). The Unit Mix is an important
part of the Developer's proposal to Santa Ana because the Project is intended to serve a target population of Very
Low and Extremely Low Income persons. The project will also provide a preference for artist working families, which
is consistent with the federal regulations at 24 CFR Part 92 and the City's adopted Consolidated Plan. The Community
Development Agency's Executive Director has authority to approve revised development proformas and projected
cash flows for the Project; provided, however, that the Santa Ana Assistance is not materially increased or extended.
The HOME Loan will have the following terms:
• $2,260,000 principal amount, or as touch thereof as is disbursed for hard and soft costs in constricting the
Proj ect;
• 3% simple interest per annum;
• Repayment from 50% of Residual Receipts (after payment of operating expenses, 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;
• Remaining principal and accrued interest due upon the 55" anniversary of the issuance of Certificate of
Occupancy and/or final building permits or earlier upon sale, refinancing or default. Additionally, Santa Ana
will receive 50% of the net proceeds received from any sale or refinancing of the Project, after payment of
outstanding 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 HOME Loan, subject to
compliance with the TCAC Regulations.
The City's obligation to provide the HOME Loan and additional assistance to the Project are subject to each of the
following conditions:
1. Approval of the HOME Loan Agreement by the City Council of the City of Santa Ana.
2. Compliance with the HOME Program, and applicable federal regulations set forth in 24 CFR Part 92 and 24
CFR Part 983.
3. Compliance with and completion of environmental review of the Project pursuant to the California
Environmental Quality Act ("CEQA") and the National Environmental Protection Act ("NEPA") and
approval thereof (the NEPA clearance for the Project is currently not under review by HUD).
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Meta Housing Corporation
Santa Ana Arts Collective
November 3, 2015
Page 3
4. 63 of the 64 "Housing Units" at the Project shall and will be restricted to "Affordable Rent" as defined by the
TCAC Regulations for a period not less than 55 years pursuant to conditions, covenants and restrictions
recorded against the Project in the Official Records, County of Orange, California. One (1) Housing Unit will
be rented to an on-site property manager; the manager's unit will not be rent -restricted. 11 0£ the 64 units will
be HOME -funded units.
5, All Housing Units at the Project must pass Housing Quality Standard and the City's HOME Property
Standards (or other standards as applicable) inspections at the completion of construction, as required by
applicable HUD federal regulations at 24 CFR Part 92.
6. The HOME Loan Agreement will require that, the Developer will not charge more than an Affordable HOME
Rent (at the levels prescribed in the HOME Loan Agreement) for any HOME Unit at the Project,
notwithstanding that the Developer may accept tenants holding Section 8 vouchers or certificates. Thus, the
total per-unit subsidy the Developer will receive under the Section 8 program or other tenant -based or project -
based rental assistance program will be limited to the difference between the Affordable HOME Rent for the
HOME Unit under the HOME Loan Agreement and 30% of the tenant's monthly income. The HOME Loan
Agreement will provide the Community Development Agency Executive Director with authority to waive or
modify this requirement in his or her sole and absolute discretion.
The HOME Loan Agreement shall provide that each of the following conditions shall be met prior to the
disbursement of any portion of the HOME Loan:
a. All grading permits shall have been issued and the City shall have issued a letter stating that building
permits are ready to issue, subject only to payment of fees and the completion of grading of the
Project site.
b. Developer shall have secured all necessary financing and funding for the construction and operation
of the Project. Such financing and funding shall be sufficient to pay all Project development costs,
through lease -up, as set forth in a final budget consistent with the approved Profenna (or as otherwise
approved by Santa Ana).
c. The Developer shall have provided evidence to Santa Ana that the Developer has obtained insurance
policies and certificates or endorsements acceptable to Santa Ana, as described in the HOME Loan
Agreement.
d. The Developer shall have provided construction security in favor of Santa Ana, which may include a
completion guarantee from Meta Housing Corporation and/or a letter of credit and/or performance &
payment bonds from the general contractor for the Project (or some combination of these), in an
amount sufficient to ensure the Project will be completed and placed in service within the time set
forth in the Project schedule approved by Santa Ana.
e. Developer shall submit and obtain Executive Director of the Community Development Agency's
approval of the construction contract, Developer's limited partnership agreement for the limited
partnership entity to be formed to own and operate the Project, and management, marketing and
tenant selection plans for the Project.
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Meta Housing Corporation
Santa Ana Arts Collective
November 3, 2015
Page 4
8. The City's obligation to provide the HOME Loan and additional local assistance to the Project are and shall
remain subject to all covenants, conditions, and restrictions set forth in the HOME Loan Agreement, and in
particular City's analysis of the available funding sources and development and operating costs of the Project
and the overall economic feasibility of the Project.
In addition to the foregoing, notwithstanding any statement set forth in this letter or provisions of the HOME Loan
Agreement, the Developer and the City agree and acknowledge that the HOME Loan Agreement will not constitute a
commitment of federal funds, and that such commitment of funds may occur only upon satisfactory completion of
environmental review and receipt by City, as applicable, for a release of funds from the U.S. Department of Housing
and Urban Development under 24 CFR Part 58, The Developer and the City will further agree in the HOME Loan
Agreement that the provision of any federal funds to the Project is and shall be conditioned on Santa Ana's
determination to proceed with, modify or cancel the Santa Ana Assistance based on the results of a subsequent NEPA
environmental review and the outcome of the Subsidy Layering Review.
In addition to the HOME Loan, the City Council approved a pre -loan commitment to provide the following additional
assistance to the Project:
• Inclusionary Housing Funds Loan in the amount of $1,875,000.
• Community Development Block Grant (CDBG) Loan in the amount of $500,000 for the rehabilitation of the
property.
The Developer will also have to comply with all rules and regulations that pertain to the CDBG Program and the
City's Inclusionary Housing Fund Program for those funds. Loan agreements for these funds will require City Council
approval prior to the execution of the documents.
The Developer and the City are further prohibited from undertaking or committing any federal funds to physical or
choice -limiting actions, including property acquisition, demolition, movement, rehabilitation, conversion, repair or
construction prior to the environmental clearance. The Developer and the City understand that the violation of this
provision may result in the denial of any federal funds under the HOME Loan Agreement.
If you have any questions or require additional information regarding this letter, please contact Natalie Verlinich,
Housing Programs Analyst, at (7 t4) 667-2267 or by email at NVerlinichRsanta-ana.org.
Sincerely,
Judson Brown
Housing Division Manager
cc: Kelly Reenders, Community Development Executive Director
Natalie Verlinich, Housing Programs Analyst
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