SUBJECT: APPROVAL OF BUSINESS TERMS FOR A PERMANENT
LOAN TO SIMPSON HOUSING SOLUTIONS, L.L.C., OR ITS DESIGNATED PARTNERSHIP, FOR
THE DEVELOPMENT OF THE ALMADEN SENIOR APARTMENTS
COUNCIL DISTRICT: 6
RECOMMENDATION
It is recommended that the City Council adopt a resolution approving business terms for a permanent loan of up to $3,757,000 to Simpson Housing Solutions, L.L.C, or its designated partnership, for the development of the Almaden Senior Apartments, a 66-unit senior housing development affordable to low- and very low-income households on a 1.3-acre site located on the west side of Almaden Road, approximately 100 feet southerly of Willow Glen Way.
BACKGROUND
On May 29, 2001, the City Council adopted a resolution to approve a fund reservation of up to $3,757,000 to Simpson Housing Solutions, L.L.C., or its designated partnership (“Developer”), for the Almaden Senior Apartments (“Project”).
In August 2001, the project was awarded an allocation of tax-exempt bonds. The Developer has secured construction and permanent financing commitments and is seeking approval of a City permanent loan of up to $3,757,000.
The
authorization to issue the bonds in an amount not to exceed $8,000,000, and
other recommendations related to the bonds will be completed under a separate
report for the City Council meeting on November 13, 2001. The purpose of this report is to establish
the business terms for the Housing Department’s permanent loan for the project.
Project costs are estimated to be $12,100,000. In addition to the funds available from bond proceeds, the developer has applied for an allocation of 4% tax credits under the California Tax Credit Allocation Committee’s (CTCAC) non-competitive funding application.
Staff is
recommending approval of business terms for a City permanent loan of up to
$3,757,000, which will be funded at construction completion when the tax-exempt
bonds convert from construction to permanent.
The City business terms will require that any surplus funding from
tax-credit equity, permanent loan financing and lease-up income will be applied
first to reduce deferred developer fee, if any, then to reduce the City’s
permanent loan commitment.
Refer to the
attached Fact Sheets for complete business terms for the City permanent loan.
PUBLIC OUTREACH
A neighborhood meeting was held on November 16, 2000 at Canoas Elementary School. Representatives from the Office of Council District 6 and staff from the Planning, Building and Code Enforcement Department and Public Works Department were among the attendees. The project sponsor and City Department staff described the proposed project and responded to questions and concerns.
COORDINATION
Preparation of this memorandum was coordinated with the Office of the City Attorney.
COST
IMPLICATIONS
The City’s permanent loan will be funded at construction completion out of the Housing Department's Fiscal Year 2001-2002 budget.
LESLYE CORSIGLIA
Acting Director of Housing
Attachments
Almaden Senior Apartments
Fact Sheet
Development Team
Developer: Simpson Housing Solutions, L.L.C.
Architect: The Steinberg Group
Contractor: TBD
Property Manager: AIMCO
Project Characteristics
Project Location: West side of Almaden Road, approximately 100 feet southerly of Willow Glen Way
Acreage: 1.3 acres
Council District: 6
Project Type: Senior Rental
Group Served: Low- and very low-income households
Number of Units: 66 (52 low-income, 13 very low-income, 1 unrestricted manager’s unit)
Bedroom Mix and
Monthly
Rent: 1
BR
LI (60% AMI) 52 @ $939
VLI (50% AMI) 13 @ $776
Unrestricted 1 Manager’s unit
Other Amenities: Elevators; furnished recreation building with TV room and community kitchen; laundry rooms and landscaped courtyard. Unit amenities include refrigerator, stove, dishwasher and air-conditioning.
Estimated Total Project Cost: $12,100,000
Estimated Cost Per Unit: $183,333
Anticipated City Subsidy
at Permanent Loan: up to $3,757,000
Anticipated City Subsidy
per Unit at Permanent Loan: $56,924
Anticipated Leverage Per Unit
for Permanent Loan: 2.2 to 1
Land Appraised Value: Appraisal in process. Appraisal that supports land purchase price of $3,000,000 is a condition of City financing.
Permanent Loan Terms and Conditions:
Loan Amount: Up to $3,757,000
Term: Up to 40 years
Interest Rate: 4% simple
Security: Subordinated Recorded Deed of Trust
Repayment: Residual Receipts: 70% City; 30% Borrower
Loan to Value: Less than 100%, unless otherwise approved by the City
Recourse: The loan shall be non-recourse.
Subordination: As allowed by State law.
Affordability Restrictions: 55-year Affordability Restrictions for the 66 units will be recorded on the Property at the time of closing of the City’s permanent loan, and may be subordinated as permitted by State law.
Conditions:
1. Standard conditions and documentation
requirements for the Housing Department apply.
2. Prior to close of Construction financing,
the following are required:
a.
Proforma
Budget acceptable to the City
b.
Appraisal
acceptable to the City that supports the land purchase price of approximately
$3,000,000.
c.
Phase I
(and Phase II, as necessary) evidencing environmental clearance of the site
acceptable to the City.
d.
Borrower
must maximize all available financing sources, including senior permanent loan,
tax credit equity and/or grants.
e.
Negotiation
of final permanent City subsidy amount, which is not to exceed $3,757,000.
f.
Any changes
to City loan terms and conditions requested by lenders or tax credit investors
are subject to the review and approval of the Housing Department.
g.
The City’s
Permanent Loan commitment shall be subject to the Term Sheet- City Loan
Commitment executed between Borrower and City.
3. The
Project will be allowed the following to be identified as permitted expenses
for purposes of calculating net cash flow:
a.
Partnership
Management Fee of $15,000 fixed for a period not to exceed 15 years.
b.
City issuer
fee for the bonds equal to one-quarter of a point (.25%) of the original
principal amount of the Bonds for the term of the bonds.
4. Any changes to
City loan terms and conditions requested by lenders or tax credit investors are
subject to the review and approval of the Housing Department.
Planning Issues
GP Designation: High Density Residential (25-50 DU/AC)
PD Rezoning Status: Approved
PD Permit Status Approved
Building Permits: Pending
Article XXXIV Status: Authority from Measure D (1994) is available
Estimated Project Development Timeline
November 13, 2001 Anticipated City Council Approval of Permanent Loan Business Terms
December 2001 Anticipated Issuance of Bonds and Loan Closing
December 2002 Anticipated Start of Construction
February 2003 Anticipated Completion of Construction