SR-407-003-22~_
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Santa Monica
City Council Report
City Council Meeting: April 25, 2006
Agenda Item: ~/
To: Mayor and City Council
Chairperson and Redevelopment Agency
From: Jeff Mathieu, Director, Resource Management Department
Subject: Housing Trust Fund Loan/Grant for Proposed Eight-Unit Affordable
Housing Development Located at 1944 20th Street
Recommended Action
It is recommended that:
1) The City Council and the Redevelopment Agency approve a housing trust
fund loan and grant to the Community Corporation of Santa Monica in an
amount not to exceed $3,010,789 for the acquisition and rehabilitation of an
eight-unit affordable housing development located at 1944 20th Street; and
2) Authorize the City Manager and Executive Director to negotiate and execute
all documents necessary to provide this funding.
Executive Summary
The Community Corporation of Santa Monica (CCSM) has applied for housing trust
fund financing in the amount of $3,010,789 to acquire and rehabilitate an existing eight-
unit apartment building located at 1944 20t" Street. Typically, such financing is
approved administratively pursuant to the Housing Trust Fund Guidelines (Guidelines)
adopted by the City Council and the Redevelopment Agency (Agency). However, due
to escalating real estate prices and construction costs, the amount of the proposed
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financing exceeds the existing per unit financing limits established in the Guidelines,
therefore, Council/Agency approval is required. The units will be affordable to very low
income and (ow income households (50% and 60% of area median income,
respectively) for a period of at least 55 years. Current maximum eligible incomes for
these thre~-bedroom units will range from approximately $33,000 to $40,000 and
current maximum rents will range from approximately $689 to $827.
Discussion
The City's current Housing Element and Consolidated Plan have both identified low
income, large family households in Santa Monica with special housing needs. The
acquisition of an existing apartment building containing units suitable for large families,
that will be restricted to very low income and low income households, will assist the City
in serving this special needs population.
The property is a two-story building with eight three-bedroom units that was built in 1975
and is located befinreen Virginia Avenue and Delaware Avenue. The property also
contains a laundry room and surFace parking in the rear of the site that includes twelve
parking spaces. The rehabilitation of the property involves exterior and interior
improvements. The exterior work includes a new roof, light fixtures, railings, and
windows, painting the building, and landscape improvements. The interior work
includes new gas and electric heaters, carpeting and vinyl flooring, stoves, and
plumbing and light fixtures, redesigning the bathrooms with new showers, painting the
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unit interiors and asbestos removal. The cost of these improvements is estimated at
approximately $700,000.
The purchase price of the property is $1,975,000. A City-commissioned appraisal of the
property was completed in February 2006 and estimated the as-is market value of the
property at $2,280,000. The total development cost of acquiring and rehabilitating the
property is estimated at $3,010,789 or $376,348 per unit. In addition to the purchase
price and estimated cost of the rehabilitation work, this total cost includes expenses for
environmental consultants, architects, a developer fee, permit fees, temporary
relocation, and contingency funds. The projected net income for the property is
insufficient to finance a bank loan, based upon the restricted rent levels for very low
income and low income households. Therefore, the City/Agency funding is the sole
source of financing.
Table 1 summarizes the sources and uses of the proposed financing. The acquisition
and rehabilitation budget is included in this report as Attachment A and provides details
of the acquisition and estimated rehabilitation costs.
Table 1
Totat Estimated Development Costs
Acquisition [with elosing costs] $ 1,982,900
Rehabilitation $ 689,695
Other Development Costs $ 338,194
TOTAL: $ 3,010,789
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Total Estimated Fundinq Sources
Redevelopment Housing Trust Fund - loan $ 2,554,820
Redevelopment Housing Trust Fund - grant $ 455,969
TOTAL: $ 3,010,789
The terms of the proposed financing are provided in Attachment B. These terms require
that the units are restricted as affordable housing for at least 55 years, with an option to
continue the restrictions for an additional 25 years in exchange for loan/grant
forgiveness. Loan payments are made from net income after paying all of the operating
expenses and funding the replacement reserve account. The source of the financing is
the Redevelopment Housing Trust Fund, which receives tax increment revenue from the
City's three redevelopment project areas. Most of the proposed financing will be in the
form of a forgivable loan, and the remaining portion will be in the form of a conditional
grant. The portion identified as a conditional grant must be structured as a grant
because these funds were generated from the sale of tax exempt bonds.
Environmental Analysis
The acquisition and proposed rehabilitation of the existing property at 1944 20t" Street is
categorically exempt from the California Environmental Quality Act (CEQA) pursuant to
Section 15301 of the CEQA guidelines regarding rehabilitation of existing facilities.
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Budqet/Financial Impact
The housing trust fund loan/grant amount to be awarded to Community Corporation of
Santa Monica is not to exceed $3,010,789. Funds are available in the following
accounts:
HOUSING TRUST FUND ACCOUNTS
H15068202.589000 $ 47,793
H 18068202.589000 $ 408,176
H 15004905.589000.17900 $ 907,481
H15004905.589000.18800 $ 124,200
H15004906.589000.16800 $ 170,435
H15004906.589000.16900 $ 192,365
H 15004906.589000.17900 $ 1,160,339
Prepared by:
Bob Moncrief, Housing Manager
Approved:
~
~~
hieu, Director, Resource
ment Department
Forwarded to Council:
~t Ewell
ager
ATTACHMENTS: A- Acquisition & Rehabilitation Budget
B- Loan & Grant Term Details
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ATTACHMENT A
DEVELOPMENT
PRO.ECT NAME 1944 20th Street
STREET ADDRESS 1944 20[h 5[reet
CfTY SarRa Monica
NAME OF SPONSOR Community Corpofa tion of Senta MOnica
. k af Units ~. 6
- Square Footage of BuilGing 9,592
TOTAL
RESIDENTIAL ONLY COST $/UNIT COMMENTS
ACQUIS?ION
Lantl 8 Building t,975,000 246,875 Actual
Closing Costs 7,900 988 4% of Lend & Buildin9
SUBTOTAL: ACOUlS?ION 1,981,900 247,883
NAROC0.SfS
Rehab-construc[ion 667 590 83,449 Es[imete .
Third-PartyAbetemen[Monitonng 11,200 1,400 Estimate
Termiteteriting 10,905 1.363 Estime~e
SUBTOTAL: HAROC0.STS 68i,W6 66,212
SOFTCOSTS
Environmental ConSWtaMs (Ph1, Lead, Asbe stos) 4 400 550 ActUel costs' Leatl 8 Psbestos=2600, Pha50 1=1800
Pre-developmentlnspedions 445 56 Termite
Archltec[ure 8 Engineenng 5,000 625 Es[imete
Constmction Menager - -
Depu[y Inspectorand Leb Tests
SUBTOTPL~TECHNICPL CONSULTANTS 9,845 1.231
Const~uc[ion LenOerFee - -
Construction InterestReserve - -
Permanent Lender Fees - - appreisal • ernim review i legal + pts
Rele Lock Fee
SUBTOTAL~. FINANCWG COSTS - -
DeveloperFee 76,000 9,500
Legal 1,500 168 Estimete ~ ~
Capitalized Reserve 3.249 406 1 month opereting
Local Pertni[s and Fees 7,200 900 Estimate $900 perunit
Wes[e Manegement Deposit 20 028 2,503 346 of Herd Costs
Marketing - -
Leese-Up - -
Appliences 2,800 325 Replece stoves es needed (allow for4~
Relocation & Tenan[ Expenses 64,000 8,000 20 nights ~$200/nigM ~$3 000 each move/beck+ storage
Atlministretive end Organizetional 1,500 188
Real Estate Taves - (Purchase Price x t2%)
Insurence 8,500 1,063 Es[ima[e
Esaow, Tdle and Recording - - Closing on perm loan
Appreisel - Clty
SUBTOTAL: MISC SOFT COSTS iB4,577 23,072
SU6MTAL: SOFTC0.4TS 7i/,414 24,303
Herd Cost CorRinqency 137 939 17,242 209fi of Herd Costs
SoftCoslContingency 5,833 729 3%SOftCOSts
SUBTOTAL: COVYflNGENCY ~ 147,T1P 17,977
TOTAL DEVELOPMENT COSTS 9,010,789 376,349
DEFERRFD C0.STS
Pertnanent Lender Fees - 100%paitl at commi[ment anE forwartl ra[e lock
Deferted Developer Fee (76,000) 100% of Developer Fee
Cepitelized Reserves (3,249) 1009fi of Cepilelized Reserves
SUB-TOTALOFDEfERREDCOSTS ~79,249) (9,906)
TOTALDEVELOP.BUOGETATCONSTRUCTION 2,931,540
Exduaes Dererred cosrs
JOTAL OEYELOP. B UDGET AT PERMANENT
~ Total City Loan Amount 3,010,789
To[elBenkLOenAmowt -
2006 64 03 19q4_20th_Street_reheh_pro_fortnaxis Developmant 04/07/2006
ATTACHMENT B
HOUSING TRUST FUND LOAN and GRANT TERMS
Loan Terms Grant Terms
Amount $2,554,820 $455,969
Equal to Federal Home Loan
Interest Rate Mortgage Corporation rate for 30- Not applicable
year fixed-rate loan
55-years; a 25-year extension is 55-years; a 25-year extension is
Term permitted if the Regulatory permitted if the Regulatory
Agreement is similarly extended Agreement is similarly extended
Security
Promissory Note, Deed of Trust, Conditional Grant Promissory
Note
Deed of Trust
and
and Regulatory Agreement ,
,
Regulatory Agreement
Eligible households will be very Eligible households will be very
Affordability low income and low income [50% low income and low income [50%
and 60% of inedian income] and 60% of inedian income]
Payments made annually from
"residual receipts" [net income Not applicable;
from operation of the property]; If
Repayment loan term and Regulatory 1/80t" of the grant amount is
Agreement are extended 25 years, forgiven on an annual basis if the
and the property is satisfactorily property is satisfactorily operated
operated for that period, any loan during the previous year.
balance is forgiven.
The loan may be prepaid in whole
or in part at any time without
Prepayment penalty, but all covenants will Not applicable
remain in effect for at least 55
years.
Resale of Not allowed without prior written Not allowed without prior written
approval of the Redevelopment approval of the Redevelopment
Property Agency during the term of the Agency during the term of the
Regulatory Agreement. Regulatory Agreement.
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