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grstaff.rpt
Santa Monica, California
council Meeting: November 26, 1991
To: Mayor and City council
From: city staff
Subject: Recommendation to Authorize Interim Financing for a
Thirty Unit New Construction Affordable Housing project
(Garcia Apartments)
INTRODUCTION
This report presents background information on the Garcia
Apartments (also known as the Greenwood Project) and recommends
that the City Council approve extension of a portion of a three
year interim loan, approved at the June 8 council meeting, for up
to fifteen years.
BACKGROUND
The Garcia Apartments Project is a 30-unit scattered site new
construction affordable rental housing project being developed by
Community Corporation of Santa Monica (CCSM) . When completed,
the project will provide a total of 10 one bedroom units, IO two
bedroom units, and IO three bedroom units on the following four
sites:
1747 15th street 9 Units
1828 17th street 7 units
1968 19th street 7 Units
1544 Berkeley 7 Units 6-K
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The project is being financed through a combination of
conventional loans, a loan from the state Rental Housing
Construction Program, private investor equity (attracted by the
syndication of federal low income housing tax credits) and a loan
from a City-administered developer agreement payment made to the
city in connection with the Colorado Place development. These
loans must be funded by December 4, 1991 or the federal and state
subsidies will be lost.
BRIDGE LOAN
A three year interim "bridge loan" for $537,531 was approved by
Council on June 8, 1991. Through the sale of housing tax credits
to a pool of private investors, the project is able to draw
approximately $1,300,000 in private equity. However, because the
private investors are scheduled to make their investments over
a three-year period, instead of all at once, the project needs a
loan to "bridge" the time between the start of project
construction, when all funds are needed, until the end of the
three-year investor pay-in period. The city's bridge loan
supplies those funds.
An additional three month $425,000 inter im loan was approved by
City Council for this project on October 8, 1991- The terms of
this loan required that it be repaid in full at the start of
construction. This request does not affect the terms of that loan
in any way.
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Originally, the construction financing required that 90% of the tax
credit shares be sold prior to financing of the construction loans,
in order to obtain sufficient funds to complete construction.
However, due to early delays in the marketing of the shares, the
syndication firm retained by CCSM, Progressive Asset Management
(PAM) will not be able to reach the 90% threshold by December 4,
when the construction loans must close. Therefore, CCSM has
restructured the financing for this project, through deferral and
potential foregoing of developer fees and consultant fees, so as to
provide all of the construction financing necessary to complete the
project with only 50% of the tax credits sold. This will meet
the construction loan closing deadline and allow for the continued
sale of the credits by PAM. PAM has informed staff that it has
already received broker commitments for 100% of the shares but will
not be able to complete the actual sales transactions until
approximately February, 1992.
The City's bridge loan will continue to be secured with the
investor payments, and will additionally be secured with a Trust
Deed on the properties. staff believes that the bridge loan will
be fully repaid by the investor payments within the three years
originally scheduled. However, in order to permit the closing of
the construction loans and the continued marketing of the shares,
and in order to fully secure the repayment of the City's loan,
staff is recommending that the loan agreement be modified so as to
provide that should any amount remain unpaid at the end of the
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three year investor pay in schedule, that amount would become due
and payable at the end of fifteen years, secured by a Trust Deed on
the property.
FINANCIAL/BUDGETARY IMPACT
These funds were previously scheduled to be repaid over a three
year period. If the loan agreement is extended, a portion of these
funds could remain outstanding for up to 15 years. The funds have
already been drawn and are being held in an interest bearing escrow
account.
RECOMMENDATION
Staff recommends approval of an extension of the $537,531 bridge
loan from three years to fifteen years, as described herein, and to
authorize the City Manager to execute all documents necessary to
evidence this action.
Prepared by: Peggy Curran, Director
Chuck Elsesser, Housing Program Manager
Denise Altay, Senior Development Analyst
Community Development Department
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