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SR-05131986C/ED:HD:CR:wp City Council Meeting Parking Authority: 5/13/86 ~% MAl' 13~ i!M Santa Monica, California TO: Mayor and City Council Chairperson and Parking Authority Members FROM: City Staff SUBJECT: Recommendation to Approve Selection of Development Team and Authorize City Manager to Negotiate and Execute Agreement INTRODUCTION This report transmits a recommendation to approve the selection of a development team to prepare an application to the U.S. De- partment of Housing and Urban Development (HUD) for a loan through the Section 202 elderly housing program to develop senior housing units over the parking lot at 1121-35 Third Street. The report also describes the process utilized to arrive at this selection, and the next steps required by the City Council to submit a loan application to HUD. It is also recommended that the City Council authorize the City Manager to negotiate and ex- ecute an Agreement with the non-profit developer for the prepa- ration of the HUD application. BACKGROUND In the 1985-86 departmental workplans the City Council directed staff to evaluate the alternatives for developing affordable housing on the City-owned parking lots between Third and Fourth Streets, north of Wilshire. In February 1986 staff conducted a preliminary feasibility analysis of developing affordable housing - 1 - ~% -a MAY ~ 3 i!!6 on the Third and Fourth Street lots. This analysis indicated that it could be feasible to develop seventy-five (75) units of housing for low income seniors utilizing the air rights over the Third Street portion of the surface parking lot, with a Section 202 loan from HUD. The following sections describe the 202 Pro- gram, and outlines the process and the criteria used in selecting a development team. DISCUSSION The Section 202 loans are direct loans from HUD to non-profit developers with an experienced team in housing the elderly or disabled. The loans are for a forty (40) year term, with a fixed interest rate at 9.75°x. In addition, HUD commits Section 8 rent subsidies for the term of the loan, thus ensuring that the units are affordable to low income seniors. The development team generally consists of a non-profit developer/manager, a housing consultant, and an architect. The non-profit developer is responsible for development and management of the senior housing project. The housing consultant prepares the HUD loan applica- tion, puts together the financing package, coordinates the team's activities, and acts as liaison to HUD staff. The architect per- forms all design functions, and is involved in construction supervision. Request for Qualifications Selection Criteria Subsequent to the preliminary feasibility analyses, staff pre- pared a Request for Statement of Qualifications (RFQ) soliciting development teams experienced with law income, senior housing, - 2 - and the HUD 202 application and development process. The RFQ outlined the project description, the qualifications to be sub- mitted, and the selection criteria to be utilized. As it was determined that a senior housing project would be feasible on the Third Street Parking Lot with a HUD 202 loan the selection criteria was based upon HUD's rating criteria for 202 applica- tions. These included: 1. Demonstrated ability and experience of all members of the development team in successfully obtaining and com- pleting HUD 202 projects. 2. Financial capacity of developer, including past finan- cial history and current outlook, developer's ability to commit financial resources to the project, and the scope of the project in relationship to the financial capacity of the developer. 3. Scope, extent and quality of developer's experience in managing housing for lower-income elderly persons or families. 4. Architect's proven ability to design a building concept which is modest and will be economical to construct and efficient to operate. 5. Demonstrated experience of developer in serving the area where the project is to be located, and ability to work with and be responsive to local neighborhood groups, low income tenants, and interested citizens. - 3 - The RFQ was issued on February 21, 1986, and sent directly to thirty (30) non-profit developers, architects, and housing con- sultants both local and national. A notice was also published in the Evening Outlook on February 25, 1986. Responses to the RFQ were due on March 21, 1986. Four teams submitted qualifications. The following briefly out- lines the experience of the teams who submitted, including the number of 202 projects, and the financial capacity of the non- profit. 1) Team members include Jewish Federation Council (JFC), non-profit developer, Howard Katz, housing consultant, Menorah Housing, management .agency, and Kamnitzer/Cotton, architect. JFC is based in Los Angeles and has received three (3) Section 202 loan commitments, two of these projects are currently under construction. JFC's finan- cial statements show a total of $7.8 million cash on hand. Howard Katz has received two (2) Section 202 fund- ing reservations, and Kaminitzer/Cotton also have two (2) 202 project awards. Menorah Housing currently manages 90 202 units. 2) Team members include United Community Housing Development Corporation, (UCHDC) non-profit developer, Noel Sweitzer, housing consultant, SK Management Company, management agency, and Berman, Bertoloni, Crawford, architect. UCHDC is based in Los Angeles and has received seven (7) 202 project commitments. The consultant Noel Sweitzer - 4 - has received four (4) 202 loan commitments from the Los Angeles Area Office. The architect has received three (3) project awards. In addition, the management agency of SK Management has 2,659 units under management cur- rently. The financial capacity of UCHDC as detailed in their financial statements indicates $225,000 cash on hand at this time. 3) Team members include National Church Residences (NCR), non-profit developer, Shelter Venture, housing consul- tant, and Peoples Housing, architect. NCR is based in Columbus, Ohio and has received a total of sixty-nine (69) 202 project awards nationally. NCR has a total of $2.2 million cash on hand. In addition NCR manages all the 202 units they own, and currently has 4,083 units under management. Shelter Ventures has received a total of twelve (12) loan commitments. Peoples Housing has received seven (7) 202 project awards. 4) Team members include Retirement Housing Foundation (RHF), non-profit developer, Phillips Consulting, housing con- sultant, and Joseph Woollett, architect. RHF is based in Los Angeles, and has received thirty-two (32) 202 project awards. Their financial statements show a total of $7.0 million cash on hand. RHF also manages the 202 units they own, and currently have 5,733 units under manage- ment. Phillips Consulting has received fifteen (15) 202 loan commitments from the HUD Los Angeles Area Office. - 5 - The architect, Joseph Woollett has been awarded four (4) 202 projects. Evaluation Process The evaluation process consisted of an extensive review of the qualifications submitted, reference follow-up, and interview of the top two teams. The submittals were reviewed by the Housing Division staff and ranked, based upon the selection criteria described in the RFQ. Two of the four teams ranked highest based on extensive experi- ence in receiving, developing, owning and managing Section 202 housing projects. Also, both proposers had the financial capaci- ty which is essential in obtaining a Section 202 funding commit- ment. These two teams were called in for an interview. The in- terview focused on organizational capacity and qualifications of staff to be assigned to the project, the number of projects cur- rently in the developer's pipeline, history in meeting HUD dead- lines, management model and procedures, local capacity, architec- tural experience, and familiarity with air-rights development. Developer Selection Based upon this extensive evaluation process the staff found the team of Retirement Housing Foundation, Phillips Consulting, and Joseph Woollett, AIA (RHF Team) to bey the most experienced and effective in the development of HUD Section 202 low income elder- ly housing. With the selection of the RHF team the chances of successfully obtaining a HUD Section 202 loan commitment are the - 6 - best available to the City. The following describes the qualifications of this team in comparison to the criteria es- tablished in the RFQ. Experience: Retirement Housing Foundation has thirty-two (32) Section 202 projects in various stages of development/ownership, Phillips Consulting has successfully been involved in fifteen (15) Section 202 project awards, and Joseph Woollett has received four (4) Section 202 projects since establishing his own firm. The members have good records of meetzng HUD imposed deadlines, which is extremely important given the predilection of HUD to recapture funds from projects which fail to meet project time- lines. In addition, all the members of the team have extensive experience with the HUD Los Angeles Area Office. Phillips Con- sulting received all of their 15 project approvals from the HUD Los Angeles Area Office, and have strong relationships with key members of the HUD staff. Financial Capacity: Retirement Housing Foundation's current fi- nancial statements shows approximately $7.0 million cash on hand. If necessary, RHF is able to contribute funds to the San- to Monica project for unexpected costs not covered by the Section 202 loan. Management: Retirement Housing Foundation which is based in Los Angeles, has 5,733 units under management in California. RHF establishes a governing board for each project they manage which includes RHF appointees and members of the community. The RHF - 7 - management model encourages the involvement of tenants in manage- ment and on-site social and recreational activities. Architect's Ability: Joseph Woollett, AIA has extensive experi- ence in designing housing for the elderly. Since he established his own firm he has provided architectural work on four Section 202 developments in Southern California. In addition, Mr. Wool- lett is familiar with the concerns of an Architectural Review Board, and is able to work directly with the community in meeting design concerns. Ability to Work with Local Groups: The final area of concern was local participation both in the design phase and in ownership and management. The architect has experience in working with com- munity groups throughout the design phase. Retirement Housing Foundation has indicated that it will seek to co-sponsor the project with a local service provider such as a church or com- munity service organization. The co-sponsor will make up part of the governing board of the project. Based upon these criteria staff recommends the selection of Re- tirement Housing Foundation, Phillips Consulting, and Joseph Woollett, AIA for the development of an application to HUD for loan funds under the Section 202 program. Next Steps City staff are currently working with the architect to determine the feasibility of the project concept and to prepare a prelimi- nary cost estimate. Although the 202 program will technically - 8 - make a one-hundred percent loan, there is a statutory cap on the loan amount per unit so that in most cases the loan does not cover all of the project development costs. Therefore, the pre- liminary feasibility analysis will also estimate the amount of the project costs which will not be included in the 202 project loan. This estimate will affect the determination of the sale price of the air-rights to RHF. Upon completion of this preliminary feasibility and cost analysis negotiations can commence on the Agreement between the City and the RHF team. The Agreement will include the following provisions: 1) Payment of pre-application costs of $7,500 for architec- tural services, and consulting and will be structured as a loan to be re-paid to the City upon award of a 202 loan; 2) The mechanism to be used for sale of the air-rights and the sale price of the air-rights for the 202 project; 3) The necessary site control documents containing a con- tingency relating to the award of a 202 loan, to be exe- cuted by the City Council to meet the requirement of the HUD 202 loan program; and 4) A determination of the maximum amount of City subsidy that will be available to the project. The approval of the development team selection at this time will allow staff and the RHF team sufficient time to negotiate the - 9 - Agreement. The "Notice of Fund Availability" from HUD has not as yet been issued, and the earliest anticipated date is June 30th. It is anticipated that this Agreement will be brought before the City Council for final review and appr6val at the second meeting in June. FINANCIAL/BUDGETARY IMPACT Funds for the costs incurred in preparing the Section 202 ap- plication are available in the City-wide Housing Acquisition and Rehabilitation Program, account number 16-720-264-000-942. The total contract cost for architectural and consulting services required to prepare the application are $7,500. RECOMMENDATIONS It is recommended that the City Council: 1. Approve the development team selection of Retirement Housing Foundation, Phillips Consulting, and Joseph Woollett, archi- tect as described in this report. 2. Authorize the City Manager to negotiate and execute an Agree- ment with Retirement Housing Foundation for the preparation of an application for a HUD Section 202 loan for the site at Third and Wilshire. It is recommended that the Parking Authority: Direct the Authority Attorney to ppepare the necessary Park- ing Authority Resolution, and notice of intent to sell the air-rights over Parking Lot Three to RHF contingent on - 10 - receipt of a funding commitment from HUD under the Section 202 program. Prepared by: Candy Rupp, Development Analyst Ann Sewill, Housing Program Manager Department of Community & Economic Development Attachment: 1. Request for Statement of Qualifications 2. RHF Team Application Summary - 11 - Reference Contract No. 4679 (CCS).