SR-6-N (22)
CDD:HOUSING:BS:CE:DA:LINCSTAF/PC
Council Meeting: March 3, 1992
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Santa Monica, caliform 3 1992
TO: Mayor and City Council
FROM: city Staff
SUBJECT: Recommendation to Approve a Backup Construction Loan to
the Ashland Limited Partnership for the Development of 45
Units of Affordable Housing at 815 Ashland Avenue
(Lincoln/Ashland Project)
INTRODUCTION
This report presents recommendations regarding the commitment of a
backup construction loan for the development of 45 units of
affordable housing at 815 Ashland Avenue, known also as the
Lincoln/Ashland Project.
The report recommends that the City
Council authorize the city Manager to execute a preliminary
commitment letter to provide an additional backup construction loan
of no more than $1,835,100 contingent on the development team of
CP-Century West and Volunteers of America pursuing other previously
identified sources of construction financing.
BACKGROUND
The Lincoln/Ashland project is the development of 45 units of
affordable housing at the corner of Lincoln Boulevard and Ashland
Avenue. The project was approved by city council for funding on
December 12, 1989.
The Council authorized the commitment of a
construction and permanent loan of $2,700,000 which is within the
limits set by the Citywide Housing Trust Fund guidelines.
It is
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anticipated that the project will require a construction loan from
the City of the full $2,700,000 already approved. That loan will
be partially repaid by permanent lenders after completion of
construction at the end of 1993, thereby reducing the City's
permanent loan to $1,100,000.
The current development team of CP-Century West and Volunteers of
America have been pursuing all of the approvals, closing items and
additional financing sources necessary to allow the project to
start construction in the early fall of 1992.
Finance Packaqe
The city has been assisting the development team in applying for a
Rental Housing Construction Loan from the state of California, and
for a reservation of low-income housing tax credits from the
California Tax Credit Allocation Committee. In addition, the
development team has been diligently pursuing conventional sources
of funds for construction and permanent financing. The
conventional sources that the development team is currently
negotiating with include the Low Income Housing Fund and citibank.
The application for low income housing tax credits is a critical
piece of the project's financing, representing approximately 30% of
the total development costs. The deadline for submittal of this
application is March 13th. A condition of the reservation is the
ability to demonstrate a commitment of 50% of construction
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financing, evidenced by a commitment letter. Due to a recent
change in the tax credit allocation regulations, the project cannot
take advantage of anticipated state financing or private tax credit
equity for purposes of meeting the 50% requirement in the tax
credit application. Therefore, the development team is actively
pursuing conventional construction financing. Although the
conventional lenders are in the preliminary stages of underwriting
construction and permanent loans for this project, it is not
possible to provide a commitment letter within the time frame of
the tax credit application.
The development team is requesting that the city provide the
project with a commitment letter for back up construction
financing for the purposes of the tax credit application only.
This commitment will be valid only until the other construction
lenders provide a firm commitment. The total amount of the
additional construction financing necessary is $1,835,100. Upon
recei v ing the conventional construction loan commitment, the City I S
back-up construction loan commitment will be canceled. A
commitment from a conventional lender is expected within the next
90 days.
As stated in the Development Agreement between the city and the
development team, should the anticipated conventional loans, state
loan or private equity not be available, the development team will
be required to pursue other sources. I f no other sources of
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financing can be secured, the city has the ability to review the
project completely. It is not anticipated that the city will be
called upon to fund the backup construction loan.
FINANCIAL IBUDGETARY IMPACT
A Program loan from the Citywide Housing Trust Fund was approved
for this project on December 12, 1989 up to the amount of
$2,700,000. Of this amount, $2 million has already been expended.
This action would permit an additional commitment of up to
$1,835,100.
To implement this additional commitment, the Council should approve
an appropriation of $1,835,100 to be financed from housing
mitigation and inclusionary housing deferred revenues on hand.
RECOMMENDATIONS
It is recommended that the city council:
A) Authorize the city Manager to execute a preliminary commitment
letter to provide a backup construction loan contingent on the
development team of CP-Century West and Volunteers of America
pursuing other previously identified sources of construction
financing. This backup construction loan shall be for no more
than $1,835,000
B) Appropriate $1,835,100 to account number 01-720-264-25792-
8900-99235.
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Prepared by:
Barbara Stinchfield, Acting Director
Chuck Elsesser, Housing Program Manager
Denise Altay, Senior Development Analyst
Community Development Department
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