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Parking Authority
Redevelopment Agency: 6/24/86
Santa Monica, California
TO:
Chairperson and parking Authority Members
Chairperson and Redevelopment Agency Members
FROM:
city staff
SUBJECT:
Recommendation to Adopt Resolution Giving Notice of
Intent to Sell Air-Rights over Parking Lot Three at
1121-35 Third street Contingent on Receipt of Sec-
tion 202 Loan to Retirement Housing Foundation
(RHF)
INTRODUCTION
This report transmits information and recommendations concerning
the development of senior housing units over the surface parking
lot at 1121-35 Third street referred to as Parking Lot Three.
The report recommends that the Parking Authority adopt the at-
tached resolution authorizing the sale of the air-rights to Re-
tirement Housing Foundation (RHF) contingent on receipt of Sec-
tion 202 loan funding from HUD. In addition, the report recom-
mends that the Redevelopment Agency commit up to $90,000 from the
City-wide Housing Acquisition and Rehabilitation Program Account
for the payment of predevelopment costs associated with the
project.
BACKGROUND
The city Council directed staff in the 1985-86 departmental
workplans to evaluate~the alternatives for developing affordable
housing on the City-owned parking lots between Third and Fourth
Streets, north of Wilshire.
A preliminary analysis indicated
that the parking lot on Third street could be feasibly developed
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as senior housing, with a HUD Section 202 loan, while still main-
taining the public parking. In February 1986 a Request for
Qualifications for a development team with the experience and
capacity to obtain a Section 202 loan commitment was issued. On
May 13, 1986 the City Council approved the selection of the
development team led by the non-profit housing development cor-
poration of Retirement Housing Foundation (RHF). The RHF team
and city staff have completed the feasibility analysis of the
senior housing proj ect over Parking Lot Three. The following
outlines the basic features of the proposed project and the next
steps required to submit the 202 application to HOD, and contin-
gent upon receipt of funds, to design and develop the project.
DISCUSSION
Project Design and Financing
The proposed senior housing project will include seventy-two (72)
units, consisting of eighteen (18) studio units and fifty-four
(54) one-bedroom units, with thirty (30) parking spaces for the
exclusive use of the tenants. In addition, all of the eighty-
three (83) pUblic parking spaces currently on the existing park-
ing lot will be retained on site. The project would be con-
structed with the ground level as public parking, first level a
combination of pUblic and tenant parking, and housing on the four
floors above.
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The preliminary site plan, elevations, and typical unit plans
which will be submitted to HUD with the application for a 202
loan are provided for information purposes at this time. These
elevations illustrate the type of building that would meet HUD
guidelines. These elevations have been prepared for use with the
HUD application; however, the actual project design will be sub-
ject to review by the Architectural Review Board, interested
residents, and city staff.
The HOD 202 program guidelines do not permit HUD funds to be used
on items such as structured parking, building articulation, bal-
conies, or other design amenities. In order to utilize the HUO
funds and still develop an acceptable project for the community,
the costs of the ineligible items are normally covered by the
locality.
The Section 202 loan provides financing at 9.25% for forty years
for the development costs approved by HUO. It is anticipated
that the difference between the HUD approved costs and the actual
total development costs that would have to be provided by the
City will be apprOXimately $1,000,000 (see Exhibit 1). However,
BUD would include funds for payment to the locality for the use
of the air-rights in he loan. The project will be feasible if
these funds are used to cover the costs which exceed those costs
approved by HUD. Therefore, it is not anticipated at this time
that the City would have to provide funds in cash to the project,
but would have to commit the proceeds from the sale of the air-
rights to the project.
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HUD does not provide any of the section 202 loan funds until the
project is ready to begin construction. Therefore, the costs of
architectural and engineering services and related predevelopment
costs are typically paid for by the locality and reimbursed by
the developer upon the funding of the section 202 loan. The to-
tal cost is estimated at $90,000. Sufficient funds are avail-
able in the City-wide Housing Acquisition and Rehabilitation Pro-
gram (CHARP) Account for these costs. These funds will be paid
back to the CHARP account upon HUD funding of the Section 202
loan.
Next steps
The applications for loan funds under the section 202 Program are
due to HUD by July 18, 1986. In order to provide RHF with the
site control necessary for submittal of a Section 202 loan ap-
plication to HUD, the Parking Authority must adopt the attached
resolution. The resolution provides for the sale of the air-
rights for the development of senior housing units contingent on
(1) the receipt of a section 202 loan commitment, (2) execution
of a Development and Disposition Agreement (DDA) governing the
use and management of the project as affordable senior housing,
and (3) Subject to a pUblic hearing to be held prior to the ex-
ecution of the DDA.
Staff will be returning to the Parking Authority for authoriza-
tion to execute the Development and Disposition Agreement with
Retirement Housing Foundation after September 30, 1986, upon
receipt of a Section 202 loan commitment from HUD.
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In addition, the City Council has requested that staff analyze
the feasibility of acquiring the adjacent property at 1137 Third
and incorporating this property in the proposed senior housing
project. This property is currently a mUlti-family residential
property with ten (10) legal units and twenty-one (21) registered
rental units. Land costs in this area are very high, and the
seller would have to be willing to provide very reasonable sales
terms in order for the acquisition of the site and replacement of
the existing units to be financially feasible. During the next
several months city staff will explore the purchase of this prop-
erty. If reasonable terms could be accepted by the owner, the
inclusion of the site would be presented to the City council and
the HUD application amended.
Upon receipt of a Section 202 loan commitment and during the
normal planning and site review process, RHF will submit the
necessary applications to the Planning commission for a zone
change or variances to permit the development of this project,
and the proj ect would be reviewed by City staff , Architectural
Review Board, and Planning Commission according to standard City
practice.
FINANCIAL/BUDGETARY IMPACTS
As detailed in this report a total of $90,000 in city-wide Hous-
ing Acquisition and Rehabilitation Program funds would need to be
expended in FY 86-86 for the payment of predevelopment expenses
associated with the Section 202 project. Sufficient funds are
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available in the FY86-87 City-wide Housing Acquisition and
Rehabilitation Program Account Number 16-720-264-000-942.
RECOMMENDATIONS
It is recommended that the Parking Authority:
(1) Adopt the attached resolution which agrees to sell the
air-rights to RHF over the parking lot at 1121-35 Third
street for the development of senior housing, contingent
on the receipt of a Section 202 loan commitment.. and
execution of a Development and Disposition Agreement
with RHF.
It is recommended that the Redevelopment Agency:
(1) Authorize the expenditure of up to $90,000 in Redevelop-
ment Agency funds from the City-wide Housing Acquisition
and Rehabilitation Program Account number 16-720-264-
000-942 for payment of architectural and engineering
costs associated with the Section 202 project at 1121-37
Third Street.
Prepared by: Candy Rupp, Development Analyst
Ann Sewill, Housing Program Manager
Housing Division
Department of Community & Economic Development
Exhibits:
(1) Projected Cost Summary
(2) Parking Authority Resolution
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EXHIBIT 1:
PROJECTED COST SUMMARY SECTION 202 LOAN
Comparison of Develoment Cost and Maximum BUD 202
Loan
DEVELOPMENT COSTS NOT INCLUDED IN 202 LOAN:
Parking structure
Elevator two additional floors
One half of Exterior corridor
Curved stair Tower
Left Side Stairs, Extra Corners,
and area over 4 Corners
Off-site improvements alley and
sidewalk
Architectural Treatments
$699,840
10,000
88,020
3,200
18,000
50,000
47,600
Subtotal
$916,660
Architectural & Engineering fees
on above cost items @ 4.2%
38,500
Architectural fees for planning
and design approval process
12,144
TOTAL HUD INELIGIBLE COST:
$967,304
MAXIMUM HUD 202 LOAN:
Construction Costs @$51/sq.ft.
Construction contingency 3%
Financing Costs:
Construction Interest
Taxes
Insurance
Title and Recording
$2,676,990
82,754
223,264
5,000
25,000
12,000
Legal
Organizational
Audit
Consultant Fee
Management Fee
8,000
3,000
5,000
40,000
7,200
Land Cost*
1,049,492
TOTAL PROJECT COST & MAXI}~ MORTGAGE:
$4,137,700
*Calcu1ated as residual based on maximum mortgage allowed for 72
units based on HUD established rents
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