SR-CC/RA-4
. . CC/Il.A-'-I
/loLf -00 l SEP 1 7 1985
C/ED:HSG:AS:CR:Jt Santa Monica, Cal1fornia
Redevelopment Agency Meet1ng 9/Hl/85
CIty CouncIl Meet1ng
TO: -Cha1rperson and Redevelopnlent Agency
Mayor and City Councll
FROM: CIty Staff
SUBJECT: Request for ConlIll1 tment of Funds froll' Ci ty-wIde
Hous1ng Acqulsltlon and Rehab1l1tat1on Program
for Purchase and Rehab1lltatlon of Cloverfleld
Gardens
INTRODUCTION
Thls report tranSntl ts a request for a COll,nll tn,ent of deferred loan
funds from the Cltywlde HousIng ACqUISltlon and Rehabllltat10n
Program submltted by CommunIty Corporation of Santa Monica (CCSM)
for a short-ternl loan for the purchase and rehabllltatIon of
CloverfIeld Gardens, pendIng converSlon of the property as a
llmlted equ1ty cooperatIve USIng TORCA loan funds. The report
reCOlllrnends approval of a fInal COntllil tment of program loan funds
1n the amount of $1, HHl, lHHJ and requests authorIzation to enable
the Execut1ve Director to release funds upon satlsfaction of all
program reqUIrements.
BACKGROUND
On December 13, 1983 the Red~velopn~nt Agency approved gUIdelInes
for the Cltywlde Houslng Acqulsltlon and Rehab1.11tation Program
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(CHARP) , WhICh rrlakes loans to non-prof 1 t hous lng developrrlent cor-
poratIons for the purchase and rehabIlItatIon of rental housIng.
On Apn 1 23, 1985, the Ci ty CouncIl approved, In concept, a Ten-
ant OwnershIp RIghts Charter Arrlendment (TORCA) Holtleownershlp As-
SIstance prograltl, WhIch makes loans for the purchase and
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rehabIlItatIon of lImIted equIty cooperatIves or condoml ni UltIS.
Over the past year the tenants at 1959 Cloverfleld Boulevard,
known as CloverfIeld Gardens, have been workIng wIth CommunIty
CorporatIon of Santa MonIca to organIze a cooperative corporatIon
and convert the bUIldIng to a lImIted equIty cooperatIve under
the terms of the Tenants OwnershIp RIghts Charter Amendment. CCSM
entered Into a nIne month escrow agreement to purchase the prop-
erty from the current owner In January, 1985. ThIS agreement re-
qUIres that CCSM or the cooperatIve purchase the property by Oc-
tober 1, 1985. The agreed-upon purchase prIce IS $2,2lHl,0IHJ, or
$35,484 per unIt. ThIS prIce IS conSIderably lower than the cur-
rent prIces of other TORCA-convertIng units. If CCSM IS not able
to close escrow by October 1st, the seller may refuse to sell the
buildIng for the same prIce, and may be able to collect up to
$10,000 from CCSM's deposi t.
CommunIty CorporatIon, on behalf of Clover fIeld Gardens Coopera-
tIve, receIved approval from the PlannIng CommIssion for thIS
converSIon on July 15, 1985. CCSM and CloverfIeld Gardens
CooperatIve then submItted gn applIcatIon for TORCA loan funds,
after dISCUSSIons with staff on the proposed guidelines for the
cooperatIve loan program. However, before the cooperatIve cor-
poratIon can sell shares and own the property, It must receive
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approval from the Department of Real Estate and ITlust o b ta I n
fInancIng from the NatIonal Consumer CooperatIve Bank. The Co-op
Bank wIll requIre that the property be brought up to code prIor
to making the loan.
CCSM ana Cloverf Ield Gardens have therefore requested that the
CIty revIew this loan applIcatIon as a CHARP loan, and make a
short-term constructIon loan of $1,100,000. Upon completion of
rehabIlitatIon, the CHARP loan wIll be "rolled over" Into a TORCA
loan, wIth the execution by the CooperatIve of the necessary loan
documents. In order to ensure that thIS occurs In a tImely
fashIon, the CIty WIll requIre that a f I rn, fInanCIng conln,l tnlent
froITl the perITlanent lender be obtaIned prIor to dIsbursIng the
constructIon loan funds.
The Tenant OwnershIp RIghts Charter Anlendnlent requIres that sub-
stanItIal prIorIty be gIven to lImIted eqUIty cooperatives In the
hon,eownershlp aSSIstance loan program. However, the process of
organIZIng and obtaInIng fInanCIng for a lInlI ted equity coopera-
tIve IS complex and tIme-consuming. By USIng other elIgIble hous-
Ing programs such as CHARP fOr short-term loans the CIty can pro-
VIde the addItIonal support that WIll be needed to facIlitate the
converSIon of lImIted eqUIty cooperatIves and fulfIll the obJec-
tIves of the charter amendn,ent.
ThIS report descrIbes the acqUISItIon and rehabIlItatIon of thIS
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sixty-two unIt rental property, and analyzes the borrower's pro-
posal relatIve to both the CHARP program elIgibllty crIteria, and
the TORCA Lin,I ted EgUI ty CooperatIve program gUIdelInes.
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DescrIptIon of the ProJect
The Cloverfield Gardens property has a total of SIxty-two unIts,
including thIrty-one one-bedroom unIts, twenty-nIne two-bedroon,
unIts, and two three-bedrooIt. unIts. The rehabIlItatIon work WIll
include-repalring the roof, repaIrIng and replaCIng the pluTIlbing
system, termIte funllga tIon, and correctIon of deferred main-
tenance items such as damaged doors and floorIng. The cost of
rehabIlItatIon IS estImated at $454,000, or $7,322 per unIt.
All of the tenants In thIS bUIldIng are low or moderate Income
under the CHARP defInItIons, WIth incomes below 120% of medIan.
Thirty-one percent of the tenants have 1 nCOTIle s In the very low
category (below 513% of Itledlan), thIrty-fIve percent have 1 ncon,es
in the low category (below 813% of TIled 1 an) , and thIrty-four per-
cent have Incomes In the moderate income category (below 120% of
ItledIan) .
ElIgIbilIty Under the CHARP Program GUIdelInes
The approved CHARP gUIdelInes contaIn a number of crIterIa for
proJect evaluatIon. The CloverfIeld Gardens proposal meets the
program standards as follows:
l. Low and Moderate Income BenefIt: The CHARP gUIde-
lInes reqUIre that at least eIghty-fIve percent of
the tenants have low or moderate Incon,es. Under re-
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development law, persons with InCOTIles below 120% of
median are considered to be moderate Income, and
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those w1th lncomes below 8@% of !lIed 1 an are con-
sldered as low income households. One hundred per-
cent of the tenants 10 the Clover held Gardens proJ-
ect have low or n,oderate 1ncomes.
CH1\:RP gU1del1nes require that projects are struc-
tured to create or ma1nta1n affordable rent levels.
Proposed after-rehab1lltat1on rent levels n.eet th1S
requ1rement.
2. Tenant partic1pation: N1nety-three percent of the
tenants have aff1rn,ed the1r deS1re to partlc1pate 1n
the program, Wh1Ch exceeds the CHARP requ1rement of
75%.
3. F1nanclal Feas1b11Ity: The CHARP gUldel1nes re-
qU1re that the prog ran, loan not exceed $15,00@ per
un1t, or 33% of the Total Development Cost, w1thout
a deternl1oat1on of spec1al benef1t to the ne1ghbor-
hood and the low and !l,oder a te 1 nco!lle tenants. The
requested loan amount of $1,100,@@0 represents 39%
of the total development cost, and a per un1t cost
of $17,742. Although th1S 1S somewhat h1gher than
the 11m1ts establ1shed 10 the CHARP gU1del1nes 1t 1S
considerably lower than the usual costs for TORCA
unlts. The loan w1ll be of spec1al benef1t to the
tenants and the ne1ghborhood because of the correc-
t10n of the bU1ld1ng's structural and deferred maln-
tenance problems. In add1t1on, Slnce the bU1ld1ng 1S
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beIng purchased for converSIon to a cooperatIve and
the CHARP loan IS only for a sIx-month constructIon
perIod, the proJect costs are not comparable to
other CHARP proJects and the cost gUIdelInes are not
accurate nleasures of the proJect feasibIlIty.
ELIgIbIlity Under the TORCA Program GUIdelines
The Cloverfleld Gardens loan request was also revIewed uSIng the
crIterIa establIshed In the TORCA LImIted EqUIty CooperatIve Loan
Program GUIdelInes as follows:
1. MaXllt.un, Loan An,ount: The gUIdelInes requIre that
the loan anLount be no greater than the nunLber of
unIts occupIed by elIgIble low and nloderate-Income
households multIplIed by $35,000, or the gap between
the maXImum affordable prIvate loan and the approved
total developnlent cost. The n,aXlmum loan for thIS
project based on the nun,ber of elIgIble unIts would
be $1,500,000; however, the gap finanCIng needed to
make the proJect feasIble IS only $l,l00,000.
2. PrIvate FInanCIng: The cooperatIve wIll obtaIn a
fIrm commItment from a prIvate lender for the maXl-
munl prIvate fInanCIng under the most advantageous
terms approved by the CIty, as requIred In the
gUIdelines.
3. Rehablli tation Requirements: The rehabl1 i tatlon
work to be performed during the construction loan
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perIod wIll bnng the bUIldIng up to the standards
establlshed In the gUldellnes. All ilIaJ or structural
and functIonal systems wlll be In good workIng con-
dItIon such that no addItIonal rna J or rehabIlItatIon
wlll be requIred for at least the fIrst fIve years.
4. Use of Other HousIng AssIstance Prograll's: The
borrower WIll use the SectIon 8 Houslng AssIstance
Payments progralll to provIde SubsIdIes to very low
Income members.
5. CompetItIve Selectlon CrIterIa: The Cloverfleld
Gardens proJect WIll SIgnIfIcantly Improve the hous-
Ing stock; SIXtY-SIX percent of the tenants are In
the low or 1l10derate 1 nconle categorIes at the tlllle of
converSIon, and addItIonal unlts wIll be occupIed by
low and moderate Income households as vacanCIes oc-
cur to brIng the nUIl,ber of low and Illoderate-lncorne
households up to seventy-fIve percent; nInety-two
percent of the tenants Intend to purchase shares;
and the proJect WIll assIst large fantllles.
TranSItIon Process from CHARP to TORCA Loan
Upon completIon of all CHARP progralll reqUIrements and SUbllllSSIon
of an acceptable CooperatIve Board TraInIng and tranSItIon plans,
ComlliUnIty CorporatIon shall execute a PromIssory Note and Deed of
Trust WIth a SIX n,onth tern. and the CIty Manager WIll authorIze
the dIsbursement of CHARP funds. Upon completlon of constructIon,
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the InteJ:Im loan by the pJ:Ivate lendeJ: shall be paId thJ:ough es-
crow by the permanent prIvate lender, and the Cloverfleld Gardens
CoopeJ:atlve sha 11 execute loan docuItlents and a Regulatory AgJ:ee-
!TIent for a TORCA loan. The CIty'S balance sheet shall reflect the
change frOll. the CHARP loan to a TORCA loan as of the close of
escrow. The terms of the loan of CHARP and General Fund monies to
the TORCA fund, InclUdIng the prOVISIon establIshed by the CIty
CounCIl on June l8, 1985 that repayn.ents be used for CHARP, WIll
be submItted for CIty CounCIl approval pJ:Ior to the close of es-
crow on the TORCA loan.
FINANCIAL / BUDGETARY IMPACT
A portIon of the approprIatIon authorIty to fund the requested
loan eXIsts In the CItYWIde HOUSIng AcqUISItIon and RehabIlIta-
tIon PJ:ogJ:am Account, WhICh IS funded froll. from the follOWIng
account nUlllber s:
$135,000 (18-720-264-129-947)
$365,0fJ0 (18-720-264-128-947)
$ 75,000 (16-720-264-000-942)
$ 54,750 (18-720-264-l28-942)
$ 20,250 (18-720-264-129-942)
$650,000 Total CHARP
The remaInIng $450,000 was appJ:opJ:lated In the FY 1985-86 budget
In the TORCA fund In Account Number 14-72fJ-264-000-950, for the
TORCA HOUSIng Loan Fund pJ:ogram. ThIS amount was fInanced by a
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A TT f\C H lV\fN l
CD
SANTA MONICA
~~j;;~!lIlill'\!bii.wtit~~'1'.. t:l1l!l!ll.I;~ ~ J(!.,
City Plannrng DIVISIon 1685 Main Street, POBox 2200
(213) 458-8341 Santa MOnica, CA 90407-2200
October 16, 1991 .
Mary Hale
2110 4th Street # 26
Santa Monica, CA 90405
Re: 2110 4th Street/TPC 183
Dear Ms. Hale:
The Planning and Zoning Division is in receipt of your letter
expressing reservations about the above-mentioned TORCA
application. A copy of this letter will be included as an
attachment to the staff report if and/or when this application
goes before the Planning Commission.
Article XX does not require that a person pay rent in order to be
a participating tenant. Section 2001 (i) states that a
participating tenant is any tenant "residing in the building at
the date of approval of the Tenant Participating Conversion."
Also, there is no rule stating that a tenant is disqualified if
he or she is a friend of the applicant, or if he or she does not
intend to stay for a long period of time (although they must
reside in the unit for at least six months prior to signing the
agreement or intent to purchase forms). If a tenant opts to
leave prior to approval by the Planning commission of the TORCA
application, that is his or her right1 the validity of fiis or her
signature is not affected by said action.
,
There are no financial require1nants for a tenant to sign an
intent to purchase form.
Also, this office will investigate the legitimacy of Mr. Kane's _
residency at your b~~lding. _:
A copy of your letter has been forwarded to Paul Desantis I
office. '.
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Please contact me at (213) 458-~341 if you have any questions.
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