HomeMy WebLinkAbout65A - AMCAL INCLUSIONARY FEESREQUEST FOR
COUNCIL ACTION
CITY COUNCIL MEETING DATE:
APRIL 19, 2016
TITLE:
PROPOSAL WITH AMCAL MULTI-
HOUSING, INC. FOR THE AWARD OF
INCLUSIONARY HOUSING IN -LIEU FEES
FOR THE FIRST STREET APARTMENTS
PROJECT AND AUTHORIZE THE
DRAFTING OF A CONDITIONAL LOAN
COMMITMENT LETTER
{STRATEGIC PLAN NO. 5, 3A & 3C}
CITY MANA ER
RECOMMENDED ACTION
CLERK OF COUNCIL USE ONLY:
❑ As Recommended
❑ As Amended
❑ Ordinance on 1" Reading
❑ Ordinance on 2ntl Reading
❑ Implementing Resolution
❑ Set Public Hearing For
CONTINUED TO
FILE NUMBER
Consideration of a staff proposal with AMCAL Multi- Housing, Inc. for the award of inclusionary
housing in -lieu fees for the First Street Apartments project located at 1440 East First Street in Santa
Ana and approve a conditional loan commitment letter in an amount up to $8,900,000.00 that will be
contingent on the City's actual receipt of in -lieu fee payments of $9,695,725.60, or a portion
thereof, or a cash equivalent to the in -lieu fee payments from Heritage Village OC, LLC.
DISCUSSION
On February 2, 2016, the City Council directed the City Manager "to lead discussions with the
developer, AMCAL Multi- Housing, Inc., on a proposal for City Council consideration as to the
affordable housing project to receive the inclusionary housing in -lieu fees" from the Heritage
Village OC, LLC mixed -use development project.
Under Sec. 41- 1904(c)(3) of the City of Santa Ana Housing Opportunity Ordinance, a Developer
shall pay any in -lieu fees in full before issuance of the first building permit for any portion of a
residential project, including any non - residential portions of a mixed -use development. The
Developer may provide input regarding what project the in -lieu fees should be applied towards.
The in -lieu fees collected by the City are City funds over which the City has complete and
absolute discretion.
City staff anticipates executing an Inclusionary Housing Agreement with Heritage Village OC,
LLC for the Heritage Apartments for $9,695,725.60 of in -lieu fees, or a portion thereof, to be
received from the owner before issuance of the first building permit for the project. As stipulated
in the Housing Opportunity Ordinance, Heritage Village OC, LLC may provide input regarding
65A -1
Proposal with AMCAL Multi- Housing, Inc.
April 19, 2016
Page 2
what project the in -lieu fees should be applied towards. Dyer 18 has requested that their in -lieu
fee payment be applied towards the AMCAL Multi- Housing, Inc. ( "Developer ") project located at
1440 East First Street in Santa Ana ( "First Street Apartments "). (Exhibit 1)
Staff's recommended proposal was prepared with the understanding that Heritage Village OC,
LLC will honor the written preference request made by Dyer 18 and Mr. Ryan Ogulnik's
representation at the public hearing at which the Heritage project was approved. Heritage Village
OC has made a written request to pay the in -lieu fees in phases to be timed with the phasing of
the build out of its project. While phasing of development is a common practice and phasing
payments of development fees is also a common practice, the City's Housing Opportunity
Ordinance would have to be amended to allow for such phased payments as requested.
On March 18, 2016, the Community Development Agency received a proposal from the
Developer for the First Street Apartments. The proposal requested $8,900,000 from the Heritage
project's inclusionary housing in -lieu fee payment. Keyser Marston Associates (KMA), a real
estate advisory firm which specializes in structuring affordable housing financing and
implementation transactions, is currently reviewing the proposal and conducting an underwriting
and subsidy layering analysis on behalf of the City that will be completed within 60 days of the
Developer's submission.
The Developer proposes the following deal points for consideration of the First Street
Apartments:
- Developer's Proposal - Request $8.9 million from the In -Lieu Fee Payment from Heritage
Village OC, LLC, which provided a Developer Input Letter supporting the First Street
Apartments by the Developer.
City Response — The City has provided the funding proposal to KMA for underwriting and
subsidy layering analysis.
- Developer's Proposal — On or before April 1, 2016, AMCAL shall submit a full underwriting
package to the City which shall contain project site plans, elevations, unit mixes and
projections (the "Underwriting Package ")
City Response — The City received the Underwriting Package and proposal on Friday,
March 18, 2016.
- Developer's Proposal — Within forty -five (45) days of submission of the Underwriting
Package to the City, City staff shall review the Underwriting Package and City staff and
AMCAL shall mutually agree upon the amount of the In -Lieu Fee which is needed by
AMCAL for the development and construction of the Affordable Project (the "In -Lieu
Assistance Amount ").
65A -2
Proposal with AMCAL Multi- Housing, Inc.
April 19, 2016
Page 3
City Response — The City has asked KMA to conduct the underwriting and subsidy
layering analysis of the Project. The City anticipates sixty (60) days to conduct the
underwriting and come to a mutually agreed upon amount of the In -Lieu Fee for the
Project.
Developer's Proposal — Once AMCAL and City staff have agreed to the In -Lieu Assistance
Amount and a form of commitment letter, City staff will submit the matter to the City
Council for review and approval. Subject to an approval by the City Council, the City shall
issue AMCAL a commitment for the In -Lieu Assistance Amount (the "City Commitment ")
within fifteen (15) days after approval by City Council.
City Response — City Council voted on February 2, 2016 to: "Direct the City Manager to
lead discussions with developer [AMCAL] on a proposal for City Council consideration as
to the affordable housing project to receive in -lieu fees." City staff has drafted a conditional
loan commitment letter (Exhibit 2) that contains everything with the exception of a final
amount of assistance. Once the City receives the analysis report from KMA, City staff and
the Developer will come to an agreement on the In -Lieu Assistance Amount, up to a
maximum of $8,900,000 based upon KMA's analysis.
Developer's Proposal— The City shall have no obligation to fund any amount of the In -Lieu
Assistance until the City has either (i) received the In -Lieu Fees from Heritage Village OC
or (ii) received assurances acceptable to the City that the In -Lieu Fee will be paid upon a
date certain.
City Response — The City shall only disburse funds when the City has received the in -lieu
fee payment, cash or cash equivalent to the in -lieu fee payment from the Heritage project.
- Developer's Proposal— The City shall have no obligation to fund any amount of the In -Lieu
Assistance until AMCAL receives full entitlements for the Affordable Project.
City Response — The Affordable Project is anticipated to receive full entitlements on May
3, 2016, contingent on City Council approval.
- Developer's Proposal— If AMCAL does not receive an allocation of 9% Tax Credits for the
Project within two (2) years of the issuance of the City Commitment, the City may
terminate the City Commitment in its sole and absolute discretion.
City Response — The City's conditional commitment letter and commitment of inclusionary
housing funds for the project will expire two (2) years from issuance of the letter to the
Developer.
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Proposal with AMCAL Multi- Housing, Inc.
April 19, 2016
Page 4
- Developer's Proposal — The City Assistance will be made in the form of a residual receipts
loan made to AMCAL which shall (i) have a term of 55 years, (ii) accrue simple interest at
3% per annum, (iii) be repayable from 50% of project cash flow, and (iv) be documented
using the City's standard form of residual receipts loan documents and regulatory
agreement.
City Response — The City's standard practice is residual receipt loans with 3% interest and
50% repayable from the project cash flow.
- Developer's Proposal — No deferred Developer Fee during the permanent period of the
Project.
City Response — Under the California Tax Credit Allocation Committee regulations, the
proposed Project qualifies for a Developer Fee of up to $2.0 million. However, it is
important to note that only $1.4 million of the Developer Fee can be included in the
Project's eligible Tax Credit basis. In some cases, it would be financially prudent to
require the Developer to defer payment of $600,000 of the Developer Fee, and to recoup
those funds from the cash flow generated by the Project over time. To test this concept,
KMA prepared pro forma analyses for the Project with and without the requirement that
$600,000 of the Developer Fee be deferred. The results of this comparative analysis
indicate that given tiebreaker considerations associated with the competitively awarded
9% Tax Credits, the financial gap is approximately equal under both scenarios. As such, it
is KMA's recommendation that no Developer Fee deferral be required.
On March 28, 2016, the Planning Commission considered the draft mitigated negative
declaration (MND) for the First Street Apartments and unanimously approved a recommendation
to the City Council for the following actions: (1) Approve and adopt the MND and Mitigation
Monitoring Program Environmental Review; (2) Adopt a resolution approving a General Plan
Amendment; and (3) Adopt an ordinance approving Amendment Application. City Council will
conduct its first reading of the First Street Apartments Project and recommended actions on April
19, 2016 with the second reading on May 3; 2016.
Project Description
AMCAL Multi- Housing, Inc. (Developer) was founded in 1978 as an affordable housing developer
with its headquarters in the city of Agora Hills, California, and an Orange County office in the city
of Irvine. The Developer specializes in high - quality, service and amenity- enriched housing for
families and seniors at all ranges of the economic spectrum, from special needs to
homeownership. The Developer has a successful track record with over 4,827 affordable rental
and for -sale units.
The Developer has completed one project in the City of Santa Ana known as Vista Del Rio prior
to the submission of its new proposal. The Vista Del Rio project is a 41 -unit new construction
rental project that serves developmentally disabled persons, located at 1600 W. Memory Lane
and completed in August 2014. The Vista Del Rio project utilized Redevelopment -owned land
and funding from the HOME program ($1,500,000) and three (3) Redevelopment loans (totaling
65A -4
Proposal with AMCAL Multi- Housing, Inc.
April 19, 2016
Page 5
$3,469,000) for the City's total loan investment of $4,969,000. In addition, the project had eight
(8) Project Based Vouchers.
The proposed new project, located at 1440 East First Street, will provide 69 units of affordable
workforce housing (Exhibit 3). The residential units will be located within six buildings. The
rental units are 100% affordable to family households earning between 30% and 60% of the Area
Median Income. The unit mix will consist of six (6) four - bedroom units, twenty -eight (28) three -
bedroom units and thirty -five (35) two- bedroom units (one being a manager's unit). Eight (8) of
the units will be assisted by the Santa Ana Housing Authority's Project -Based Voucher Program.
On -site amenities will include a community room and amenity space including tot lots /play areas
for children; outdoor seating, BBQs, a flex play space and planters. The community room will be
incorporated into the development, providing a computer laboratory, kitchen, activity room for
resident activities, and office space for property management and social services staff. The
design of the units and the on -site amenities will reflect innovative standards that promote long-
term viability for working families.
AMCAL will engage the non - profit organization LifeSTEPS to provide free on -site social services
to project tenants. Services will be provided in the form of classes and workshops with the
subject matter tailored by a social service coordinator to the specific needs of the community.
Some example class topics may include: 1) Computer skills; 2) English as a Second Language
(ESL); 3) Exercise and Dance for All Ages and Abilities; and 4) Job Search Workshops.
The proposed unit mix and rent restrictions are as follows:
i ne manager's i wo- dearoom unit is not incmaea
The City of Santa Ana's funding source would be the in -lieu fee payment from the Heritage
Village OC, LLC that would be deposited into the Inclusionary Housing Fund that 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 approved by City Council prior to execution
and when the Inclusionary Housing Funds become available after receiving the in -lieu fee payment,
cash or cash equivalent from the Heritage Village OC, LLC Inclusionary Housing Agreement.
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
65A -5
30 %AMI
35% AM
40% AMI
45% AM]
50% AMI
60% AMI
Unit Size
No. Units
Proposed
No. Units
Proposed
No. Units
Proposed
Proposed
Proposed
Proposed
Total
Rent
Rent
Rent
No. Units
Rent
No. Units
Rent
No. Units
Rent
Two
3
$ 554
6
$ 659
7
$ 765
7
$ 870
7
$ 976
4
$ 1,187
34
Bedroom
Three
3
$ 615
1
$ 737
- --
—
--
--
- --
--
24
$ 1,346
28
Bedroom
Four
1
$ 687
—
—
-
__
—
—
--
_-
5
$ 1,502
6
Bedroom
Total
7
7
7
7
7
1 33
1 68
i ne manager's i wo- dearoom unit is not incmaea
The City of Santa Ana's funding source would be the in -lieu fee payment from the Heritage
Village OC, LLC that would be deposited into the Inclusionary Housing Fund that 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 approved by City Council prior to execution
and when the Inclusionary Housing Funds become available after receiving the in -lieu fee payment,
cash or cash equivalent from the Heritage Village OC, LLC Inclusionary Housing Agreement.
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
65A -5
Proposal with AMCAL Multi- Housing, Inc.
April 19, 2016
Page 6
housing created under the City's Housing Opportunity Ordinance or with City funding to the
extent allowed under state law).
FISCAL IMPACT
The final fiscal impact will not be known until such time that the Heritage Village OC, LLC
inclusionary housing fees are received.
Judson Brown
Housing Division Manager
Community Development Agency
Exhibits: 1. Dyer 18 Written Preference Request Letter
2. Conditional Loan Commitment Letter
3. 1440 East First Street Site Map
65A -6
October 6, 2015
Kelly Reenders, Executive Director
Community Development Agency
20 Civic Center Plaza
P.O. Box 1988
Santa Ana, CA 92702
Re: Heritage Village - In Lieu Fee Payment
Dear Ms. Reenders:
As you know, the Heritage project is in the process of obtaining entitlements and anticipated to
be go before the Planning Commission on October 12, 2015. As part of the entitlements, the
Heritage project is required to satisfy the City's inclusionary housing requirements pursuant to the
Housing Opportunity Ordinance (HOO), as recently amended and adopted by the City Council
on Tuesday, September 1, 2015. As part of the menu of options available under the HOO, we plan
on paying an in lieu fee to satisfy the City's inclusionary housing requirements. As stipulated in the
new HOO, the developer may provide input regarding what project the in lieu fees should be
applied towards. We are writing to request that the in lieu fee payment for the Heritage project
be applied towards the AMCAL Multi- Housing, Inc. (AMCAL) project located at 1440 East First
Street in Santa Ana ( "First Street Apartments ").
We request that the in lieu fee payment being made by the Heritage project be used to fund an
important project for Santa Ana, namely the First Street Apartments Project. It is important to note
that the First Street Apartments Project is a financially feasible transaction that will be built and
financed within a timeframe that compliments the Heritage project. Given the progress made
thus for on First Street Apartments, we see an opportunity to partner with AMCAL and fast track
the development of affordable workforce rental housing in Santa Ana.
AMCAL's successful track record is well known locally, including in Santa Ana. Vista del Rio,
recently completed by AMCAL, is a successful award - winning project located in Santa Ana that
represents the high level of quality and design that we want to see in the City. We have also meet
with AMCAL and provided design and other input on the First Street Apartments Project and are
very confident that it will be an attractive, well constructed project that will no doubt be an asset
to the community. The Heritage project's benefits to the City and the community are noteworthy
and include over 98,000 square feet of retail and office space, hundreds of new jobs and multi-
EXHIBIT 1
1945 PORT CreLren PLACE -NEWPORT BEACH - CA- 92660
65A -7
millions of dollars annually to the City's general fund, We recognize an additional benefit to The
Heritage is its ability to subsidize sufficient high-quality affordable housing in the surrounding
community, We are confident First Street Apartments, which is located about 3 miles from the
Heritage project, will help satisfy this importc.int need.
For the reasons set forth above, we strongly request that the City allocate the lieu fee payment
for the Herttoge project towards First Street Apartments.
It you have any questions, please feel free to contact me directly at 31MW4083.
Sincerely,
RY'. Ogul,-,,-,—
Heritage Village Project
194", P".7 p...... f"', (A W66C)
65A-8
Attachment A
April 20, 2016
AMCAL 1440 Santa Ana Fund, L.P.
AMCAL Multi- Housing, Inc.
2082 Michelson Drive, Suite 306
Irvine, CA 92612
Attention: Mario Turner
SUBJECT: 69 Unit Multi - Family Housing Project
1440 East First Street, Santa Ana, California
Dear Mr. Turner:
AMCAL 1440 Santa Ana Fund, L.P., a California limited partnership ( "Developer ")
applied for financial assistance in connection with the proposed development of a 69 unit
affordable housing complex to be located at 1440 East First Street, Santa Ana, California
( "Project "). The City has reviewed the Developer's request for assistance and at a City Council
meeting on April 19, 2016 the City Council authorized and approved providing up to a maximum
amount of $8.9 million of funds to the Project (the "City Assistance "), which City Assistance
shall be funded exclusively from inclusionary housing in -lieu fee payments made pursuant to the
City's Housing Opportunity Ordinance (Article XVIILI of Chapter 41 of the Santa Ana
Municipal Code) by the developer (the "Market Rate Developer ") of that certain mixed -use
development to be located at 2001 East Dyer Road, Santa Ana, California (the "In- Lieu Fee ").
The specific amount of funding assistance will be determined on or before May 18, 2016. 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 conditional, pre - commitment from the City of
Santa Ana for a loan of up to $([TO BE DETERMINED ON OR BEFORE MAY 18, 20161)
( "City Loan ") from funds received by the City from the In -Lieu Fee. The City intends that this
letter evidence the City's award of the City Assistance to the Developer for the Project subject to
the conditions described below.
The amount of the proposed Loan has been determined based upon the City's review of
the Developer's proposal 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 as of March 18,
2016 ( "Proforma "). The City Manager 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.
Exhibit 2
Error! No document variable supplied. 65A-9
AMCAL 1440 Santa Ana Fund, L.P.
April 20, 2016
Page 2
The Loan, should it be issued, will have the following teams:
$[TO BE DETERMINED BY MAY 18, 2016] principal amount, or as much
thereof as is disbursed for acquisition costs and hard and soft costs in constructing
the Project;
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 55th 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; and
Cost savings from the Project, if any, will be applied first to pay down the Loan,
subject to compliance with the TCAC Regulations.
The City's obligation to provide the Loan to the Project are subject to each of the following
conditions:
Receipt by the City of the In -Lieu Fee. On October 6, 2015 the City received a
letter indicating a Market Rate Developer's preference that the In -Lieu Fees be
applied towards the Project. The Developer agrees and acknowledges that while a
preference has been stated and the City has agreed to honor the preference, the
City has not yet received the In -Lieu Fee. The City shall notify the Developer if
and when it receives the In -Lieu Fee. Notwithstanding anything to the contrary
set forth herein, the City shall have no obligation to fund the Loan unless the In
Lieu Fee has been received by the City.
2. Review and approval of the documents evidencing the Loan by the City Council.
3. Compliance with and completion of environmental review of the Project pursuant
to the California Environmental Quality Act ( "CEQA ") and approval thereof.
68 of the 69 "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.
Error! No document variable supplied.
65A -10
AMCAL 1440 Santa Ana Fund, L.P.
April 20, 2016
Page 3
5. The Loan Agreement shall provide that each of the following conditions shall be
met prior to the disbursement of any portion of the 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 Proforma (or as
otherwise approved by the City),
C. The Developer shall have provided evidence to the City that the Developer
has obtained insurance policies and certificates or endorsements
acceptable to the City, as described in the Loan Agreement.
d. The Developer shall have provided construction security in favor of the
City, which may include a completion guarantee from AMCAL Multi -
Housing, Inc. 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.
6. The City's obligation to provide the Loan is and shall remain subject to all
covenants, conditions, and restrictions set forth in the 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.
If you have any questions or require additional information regarding this letter, please
Error! No doe a meat variable supplied. 65A-1 1
AMCAL 1440 Santa Ana Fund, L.P.
April 20, 2016
Page 4
contact
Sincerely,
City Manager
Error! Nu document vuri"W supplied.
65A -12
PROPOSED PROJECT LOCATION
1440 EAST 1 ST STREET
EXHIBIT 3
65A -13
65A -14