SR-901-009-03 (3)
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JAN 1 3 1987
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Redevelopment Agency Meeting: 1/13/87 Santa Monica, California
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TO:
Chairperson and Redevelopment Agency
FROM:
Redevelopment Agency Staff
SUBJECT:
Recommendation to Authorize the Execution of a Sales
Agreement for the Sale of Redevelopment Agency Owned
land at 2400 Fifth Street and 2207 sixth street to
Community Corporation of Santa Monica
INTRODUCTION
This report transmits information and recommendations concerning
the execution of a Sales Agreem~nt for the development of twelve
(12) units of affordable rental housing to be executed by and
between the Redevelopment Agency and Communi ty Corporation of
Santa Monica (CCSM). The report recommends that the Redevelop-
ment Agency hold a public hearing as required by California Re-
development Law concerning the sale of land, and adopt the at-
tached resolution approving the sale of land for the development
of affordable housing. In addition, the report recommends that
the Redevelopment Agency authorize the Executive Director to
finalize and execute the Sales Agreement with the terms discussed
herein and transfer the land to CCSM.
BACKGROUND
In April, 1983 the Redevelopment Agency approved a plan for the
completion of the Ocean Park Redevelopment Project that included
a requirement that the Agency construct fifty-five (55) units of
affordable housing for
low and moderate income
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persons within
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:;AN '1 3 1987
the Ocean Park area. On September 10, 1985 the Redevelopment
Agency established development criteria for the replacement hous-
ing and designated CCSM as the developer. At that time the Agen-
cy designated forty-three (43) of the units to be developed as a
limited equity cooperative, on the sites at Highland, Pier, Ash-
land, and Marine; and the remaining twelve (12) units to be de-
veloped as rental units, on the sites at Fifth and sixth streets.
The following discusses the Ocean Park 12 project status, design,
financing terms including the sales price of the land and the
Agency contribution, and the major terms of the Sales Agreement.
DISCUSSION
Project Status
CCSM has finalized the architectural work on the twelve (12)
units to be developed at 2400 Fifth Street and 2207 sixth Street,
entered into a construction contract with Salter Construction for
the development of these units, and received a financing commit-
ment from Wells Fargo Bank for construction and permanent
financing.
Project Design
Each site will contain six units with twelve parking spaces. The
unit mix includes four (4) one-bedroom units, four (4) two-
bedroom units, three (3) three-bedroom units, and one (1) four-
bedroom unit. The project architect is Koning, Eizenberg Archi-
tects. The project elevations have been provided for Agency
review.
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Financing Terms
CCSM has secured a financing commitment from Wells Fargo Bank for
a first trust deed, graduated payment mortgage with a thirty (30)
year term in the amount of $530,311. This is the maximum
mortgage for the development based upon the affordable rents re-
quired by the Sales Agreement.
Sales Price of Land
The cost of acquiring the two sites was $332,656. The sales
price of the land was established based upon the difference
between the total development costs of the project and the maxi-
mum affordable mortgage available to the proj ect. The total
development costs of the project are $1,327,008, and the maximum
affordable mortgage is $530,311. The difference between the to-
tal development cost and the maximum mortgage requires the con-
tribution of $796,697 to the project. Thus, in order to make
the provision of affordable rental housing feasible, the Agency
must sell the land at a price of one dollar ($1. 00) and con-
tribute $464,041 in cash to the project.
The Redevelopment Agency appropriated $3.5 million for the
development of the Ocean Park Fifty-Five units, or approximately
$63,636 per unit. This is within the budgeted amount for the
Ocean Park Project.
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Terms of the Sales Agreement
The Sales Agreement details the disposition and development re-
quirements of the land. The Sales Agreement contains the condi-
tions and covenants regarding the use of the land and the opera-
tion of the improvements by the developer as required in exchange
for the Agency's writedown of the land and contribution of funds
to the development of rental housing. The Agreement will include
subordination language which is necessary in order to obtain the
private lender financing to leverage Agency funds. The Agency
will have the option to cure any mortgage default by the
Developer in order to prevent foreclosure, however if foreclosure
does occur then the private lender would be released from the
covenants and conditions on the land. The covenants and condi-
tions and the subordination provisions in the Agreement are simi-
lar to those executed with private developers on Redevelopment
Agency projects such as Ocean Park Villas, and Barnard Park Vil-
las. The major terms of the Agreement are discussed below.
Rent Limits
The rent limits were determined based upon the criteria approved
by the Agency on September 10, 1985. CCSM will be required to
provide eight (8) units at rents affordable to low income house-
holds earning less than 80% of the median income, with six (6) of
these units affordable to very low income households with Section
8 certificates. The remaining four (4) units will be provided at
rents affordable to moderate income households earning between
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81% and 120% of the median income. The initial rent levels by
bedroom size are detailed in Attachment 1 to this report.
Occupancy Requirements
California Redevelopment Law requires that the units be afford-
able to households with incomes at or below 120% of the median.
The Agreement requires that occupancy be restricted to eight
households with low incomes and four households with moderate
incomes, adjusted for family size. The Agreement stipulates that
in addition to confirming that applicants are eligible when they
first move in, CCSM must obtain information from the tenants each
year to determine whether or not the household is eligible to
continue to reside in the unit. If upon such confirmation it is
determined that the income of a low income household has in-
creased 20% above the low income range then the household will be
required to pay the moderate income rent. Moderate income house-
holds whose incomes rise above the moderate income range will be
notified of such determination, and given ninety days to vacate
the unit. This procedure is consistent with the practice in
federal or state-assisted housing projects and is recommended to
ensure that the Agency's funds benefit low and moderate income
tenants over the life of the development.
Tenant Selection Policy
The tenant selection policy for the units sets forth preferences
in renting units. In accordance with California Redevelopment
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Law, persons displaced as a result of the Ocean Park Redevelop-
ment Project have first priority in the occupancy of units. Ad-
ditional preferences were established based on housing needs set
forth in the City's Housing Element, as follows:
1) Persons who are residents, or who are employed full-
time in Santa Monica,
2) Persons who are currently paying greater than thirty
percent (30%) of their income for rent; and
3) Persons who are currently residing in substandard
housing.
These preferences will be applied after the household has met the
occupancy requirements regarding income as detailed above.
Reversion of the Land
The term of the Agreement has been set at fifty (50) years from
the date of the receipt of the Certificate of Occupancy. At the
end of the term the Agency has right to repurchase the land and
improvements for $1.00. If the Agency chooses not to exercise
this right the Developer may either pay to the Agency; (1) the
fair market value of the land and improvements at it's highest
and best use, or (2) the value of the land and improvements on
the basis of the continued use as affordable rental housing, and
execute a new deed restriction including covenants on occupancy
and rent levels for a term of thirty (30) years. These options
allow the Agency to determine the ultimate disposition of the
property, and either allow for the continued ownership and opera-
tion by CCSM as affordable housing, or to recoup the Agency's
original investment.
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Agency Requirements for Sale
Prior to the sale of any property acquired with tax increment
funds the Agency must hold a public hearing and adopt a resolu-
tion authorizing the sale of the land to the developer. A notice
was published in the Evening Outlook, indicating that the Re-
development Agency will hold a public hearing on this item prior
to acting on the staff recommendation.
FINANCIAL/BUDGETARY IMPACTS
Funds for the Ocean Park Replacement Housing Project were ini-
tially appropriated in FY 1984-85 and have been reappropriated in
FY 1986-87 budget. The total Agency cash contribution to this
part of the project is $464,041. To date the Agency has expended
$90,683.42 for approved predevelopment costs for the Ocean Park
12. The actions recommended in this report will require the dis-
bursal of an additional $373,357.58. Funds are available in the
following account numbers:
18-720-263-128-905
18-720-263-129-905
18-720-264-128-905
TOTAL:
$162,856
$ 62,103
$148,398.58
$373,357.58
RECOMMENDATIONS
It is recommended that the Redevelopment Agency:
1. Open a public hearing and hear public comment on the sale of
land to Community Corporation of Santa Monica for the
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development of affordable rental housing, and close public
hearing.
2. Adopt the attached resolution authorizing the sale of land at
2400 Fifth street and 2207 sixth street to Community Corpora-
tion of Santa Monica for the development of affordable rental
housing.
3. Authorize the Executive Director to negotiate and execute the
Agreement for Sale of Land for Development of Housing which
shall include the provisions detailed in this report, and
disburse up to $373,357.58 in Agency funds appropriated for
the Ocean Park Replacement Housing Project.
Prepared by:
Candy Rupp, Development Analyst
Housing Division
Department of Community & Economic Development
Attachments:
1. Rent Schedule
2. Notice regarding Public Hearing
3. Resolution authorizing the sale of land
4. Agreement for Sale of Land for Development of Housing
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ATTACHMENT 1: INITIAL RENT SCHEDULE
# OF UNITS SIZE BY BD INITIAL RENT LOW/MOD
4 1 Bedroom $463* low income
2 2 Bedroom $574 low income
2 2 Bedroom $861 mod. income
1 3 Bedroom $655* low income
2 3 Bedroom $983 mod. income
1 4 Bedroom $740* low income
*Rent at or below the BUD Fair Market Rent for Section 8 Existing
Housing Payments Program
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