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James Wong, Senior Project Manager December 11, 2017

City Council Restated Development & Loan Agreements with Heritage Housing Partners for Decker Court and Gill Court Housing Projects at 1661 and 1669 N. Fair Oaks Avenue. James Wong, Senior Project Manager December 11, 2017. Recommendation.

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James Wong, Senior Project Manager December 11, 2017

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  1. City CouncilRestated Development & Loan Agreementswith Heritage Housing Partnersfor Decker Court and Gill Court Housing Projectsat 1661 and 1669 N. Fair Oaks Avenue James Wong, Senior Project Manager December 11, 2017

  2. Recommendation • Appropriate $3.0M Housing funds to FY 2018 Housing Dept. operating budget for Decker/Gil Court projects $2,782,982 HOME and $225,000 Inclusionary) • Find that proposed projects qualify for “In-Fill Housing” Categorical Exemption under CEQA • Approve key business terms of the Restated Development and Loan Agreements with Heritage Housing Partners for the Decker Court project at 1661 N. Fair Oaks Ave, and the Gill Court project at 1669 N. Fair Oaks Ave

  3. Decker & Gill Court Project Sites 1669 N. Fair Oaks 1661 N. Fair Oaks

  4. Background • Aug. 2014: $1.1M City loan approved for 8-unit low income for-sale project at 1661 N. Fair Oaks • Oct. 2015: Additional $1.25M City loan approved for expanded15-unit project at 1661-1669 N. Fair Oaks (8 low income, 7 moderate) • Required $1.49M New Market Tax Credit equity from Bank of America in the 2016 funding cycle that did not become available, creating a significant funding gap • September 2016: HUD required the single-site project to be environmentally reviewed and developed as two separate projects.

  5. Background • June 2017: HHP submitted funding proposal to Housing Dept for $3.0M in additional City gap funding for a larger 16-unit project, all low income. • July-Aug 2017: Environmental reviews were completed and approved by HUD. • Funding gap filled with $2.78M federal HOME funds and $225,000 City Inclusionary funds • Total development costs: $9.56M • City subsidy: $335K per unit (Summit Grove: $193K direct City subsidy)

  6. Funding Considerations • Affordable homeownership projects lack other available public subsidy sources outside of City • The total HOME funding of $4.1M complies with HUD maximum subsidy limits • HUD imposes strict timelines for commitment and disbursement of HOME funds, and it is difficult to identify projects that are eligible for HOME funding Local Benefits: • Preservation of local landmark Decker House (w/ added costs of house moving & historic rehab) • Local hiring and local preference in buyer selection

  7. $3.0M Gap - Summary • ($1,486,480): Inability to acquire NMTC allocation • ($ 767,600): Increase in costs due to HUD-required separation of the project (added 1 unit) • ($ 480,000): HHP redeployed State Calhome funds to Summit Grove to meet deadline • ($ 273,900): Decrease in sales proceeds from conversion of moderate income units to low income affordability • ($3,007,980): Financing gap

  8. Key Terms of Restated Agreements • Additional $3.0M City loan funding for a total $5.36M • Restated DLA and Restated Loans for Decker/Gil • Restated Loans: promissory note secured by trust deed subordinate to conventional construction loan, 2-year repayment term, 3% simple interest forgiven if projects are completed successfully • Compliance w/ applicable City policies, including local hiring, Living/Min wage, local preference

  9. Key Terms of Restated Agreements • Upon project completion, HHP’s obligation on City loans repaid/recast as low income homebuyers loans • Loan underwriting per City’s Homeownership Opportunities Program (“HOP”) • Buyers: 5% down payment and completion of homebuyer education course. • HOP loans secured by subordinate trust deeds, bear 0% interest w/ payments deferred over a 45-year term • Recorded 45-year regulatory agmt: Owner occupancy, affordable resale to low income families w/ City right-of-first refusal to purchase.

  10. Homebuyer Purchase Financing (3-BR) $626,916 Contract Purchase Price financed with: $ 15,795 Down payment (5% Affordable Sale Price) $300,605 1st mortgage $ 94,502 City Inclusionary HOP loan (silent 2nd TD) $216,014 City HOME HOP loan (silent 3rd TD) The effective Affordable Sale Price is $316,400 (financed w/ 1st mortgage + down payment) on which homeowner pays affordable monthly housing cost of $2,156 (PITI, HOA, utilities)

  11. Project Schedule Project Schedule • Demolition & grading in February 2018 • Decker House relocation in March 2018 • Construction start in May 2018 • Project completion in July 2019 • Final unit sales by January 2020

  12. Decker House – Current location

  13. 15-unit Single-Site Project

  14. Gil/Decker Courts - Separate Sites

  15. Decker & Gill Court Projects

  16. Conceptual streetscape

  17. Conceptual streetscape

  18. Affordable Housing in Pasadena

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