SR-05-12-2009-1PRedevelopment Agency Meeting: May 12, 2009
Agenda Item: ~~
To: Chairperson and Redevelopment Agency
From: Andy Agle, Director of Housing and Economic Development
Subject: Property Conveyance from Habitat for Humanity to Redevelopment
Agency and Cancellation of Loan Agreement
Recommended Action
Staff recommends that the Redevelopment Agency authorize the Executive Director to:
1. Negotiate and execute a Conveyance Agreement and all other legal documents
necessary to convey the property located at 2018 19t" Street from Habitat for
Humanity Los Angeles (Developer) to the Redevelopment Agency of the City of
Santa Monica (Agency); and
2. Cancel all contracts, loan agreements and financial obligations between the
Developer and the Agency that relate to this proposed affordable homeownership
development.
Executive Summary
In early 2008, Habitat for Humanity informed City staff that it would not complete the
affordable home ownership project located at 2018 19t" Street for which it received a
$575,000 acquisition and predevelopment loan in October 2002. Staff recommends
that the Agency authorize the Executive Director to negotiate and execute an
agreement wherein Habitat -for Humanity conveys the land to the Redevelopment
Agency in exchange for cancellation of the loan, its associated contracts and
obligations.
Background
In October 2002, the Redevelopment Agency of the City of Santa Monica funded a
$575,000 loan to Habitat for Humanity Los Angeles (Habitat) for acquisition and
predevelopment costs associated with a proposed affordable home ownership project at
2018 19t" Street. Habitat used $425,000 of the loan for acquisition of the site, with the
balance funding. a portion of the predevelopment expenses. Additionally, Habitat
provided $80,000 of its own funds for predevelopment expenses.
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Discussion
In early 2008, Habitat contacted the City regarding its inability to proceed with the
project, citing financial infeasibility, decreased fundraising capacity and the re-direction
of organizational resources to other Los Angeles projects. On April 17, 2008, the City
Manager informed the Council of the project's status and Habitat's intent to discontinue
the project.
The existing loan agreement provides that Habitat's failure to proceed in a timely
manner with the Agency-financed project would result in a default of the loan. Default
proceedings typically lead to a foreclosure process that includes a competitive public
auction and therefore do not guarantee that the property will be transferred to the
Agency. In a foreclosure process, the Agency would be first in line for any property
auction proceeds; however, there is no guarantee that the Agency would recover all of
its loan proceeds. Additionally, if the Agency desires'to take ownership of the property,
the Agency would have to compete with other buyers in a foreclosure process and risks
having to pay more for a site the Agency financed initially.
Staff considers the site to be a valuable resource worth maintaining as a future
affordable housing opportunity. The loan agreement does not provide a simple
mechanism for the property's ownership to be transferred to the Agency in the event of
default. In conjunction with the City Attorney's Office and Lawyer's Title Company, staff
has determined that a conveyance transaction assures that the property is transferred
to the Agency with relative ease at minor cost (escrow fees).
Considering the Developer's good faith effort to develop the property, its own
investment of time, staff and financial resources, its nonprofit status and the likelihood of
increased value of the property since its 2002 purchase (based upon sales of
comparable sites), staff recommends that the Conveyance Agreement provide
cancellation of the loan in exchange for conveyance of the site to the Agency.
Staff is evaluating several small sites to determine if a future scattered-site affordable
housing development could incorporate this property. Such a development may be
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several years away, considering the current uncertainty in the financing markets. If it is
determined that affordable housing is not feasible at the property, then staff will return to
the Redevelopment Agency with recommendations regarding the disposition of the
property. Staff believes the current value of the property is greater than the Agency's
original loan.
Financial Impacts & Budget Actions
One-time costs include title and escrow fees estimated at $4,000 to $5,000 and property
fencing estimated at $10,000. The funding for these expenses is available in account
H 18005008.589000.
Prepared by: Lisa Luboff, Senior Administrative Analyst
Approved:
Andy Agle, Director
Housing and Econ~a
Forwarded to Council:
i
P. ont Ewell
City Manager
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