SR-6H (28)
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F \HOUSING\SHARE\WPFILES\DEVPROJS\NEWHOPE\NHSITS14 RPT
Council Meetmg Apnl 29, 1997 Santa MOnica, GonlH
API 29 1997
To Mayor and City Council
From City Staff
SubJect Authorization to Negotiate and Execute an Agreement with the U S
Department of Housing and Urban Development to Complete ProJect New
Hope Financing
INTRODUCTION
ThiS report recommends that City Council authorize the CIty Manager to negotiate and
execute a subordination agreement with the US Department of Housing and Urban
Development (HUD) to complete the financing for Project New Hope
BACKGROUND
In October 1993, Project New Hope received a HUD Section 811 fund reservation of $24
million for a proposed new construction, 25 Unit, rental housing proJect for disabled
persons The proposed proJect Will provide permanent housing for the very low-Income
phYSically disabled, with supportive services for persons with HIV/AIDS
On July 12, 1994 the City Councrl authonzed the City Manager to negotiate and enter Into
an option agreement for a long-term ground lease with Project New Hope at 1642 Ocean
Avenue, a City-owned site On March 15, 1995 Project New Hope entered Into an Option
to Lease Agreement with the CIty for the sIte
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APR 29197
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Since the signing of the Option to Lease Agreement, Project New Hope has fulfilled all of
the obligations per the terms of the option agreement,
. obtaining clear title to the property
. zOning and land use approvals, and
. securing all necessary financing
DISCUSSION
As a matter of POliCY, HUD prefers sponsors of 811 projects to own the land However,
In this Instance, the City chose to retain title HUD has agreed to accept the long-term
ground lease as security
Under Its Section 811 program, HUD requires language In the City Ground Lease and In
a subordmatlon agreement which give HUD the option to obtain fee title to the project and
the land In the event of a material default by Project New Hope A material default IS
unlikely, partIcularly for financIal reasons, since thIs IS a grant program Areas of potentIal
matenal default would Include gross mismanagement of the project, rentmg of apartments
to Ineligible households, and project abandonment or sale Without prior HUD approval
The City Ground Lease and the subordmatlon agreement between the City and HUD Will
provide for the City to cure any matenal default pnor to the commencement of foreclosure
proceedings by HUD
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FINANCIAL/BUDGETARY IMPACTS
The recommendations contained In this staff report have no budget or frnanclallmpacts
RECOMMENDA liONS
Staff recommends that the City Council authOrize the City Manager to negotiate and
execute a subordmatlon agreement With HUD and an amended City Ground Lease which
contain an option by HUD to obtain fee title to the land that Includes a condition that allows
the City to cure any material default by Project New Hope prior to the commencement of
foreclosure proceedings by HUD
Prepared by Jeff Mathieu, Director of Resource Management
Robert Moncrief, Housing Manager
Johanna Gullick Housing Coordinator
Mike Strader, Senior Development Analyst
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