Agenda Item
ASR
Control 19-001358 |
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MEETING
DATE: |
01/28/25 |
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legal entity taking action: |
Board
of Supervisors |
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board of supervisors district(s): |
5 |
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SUBMITTING Agency/Department: |
OC
Community Resources (Approved) |
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Department contact person(s): |
Dylan
Wright (714) 480-2788 |
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Julia
Bidwell (714) 480-2991 |
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Subject: Approve Estoppel and Partnership
Interest Transfer for Vintage Shores
ceo CONCUR |
County Counsel Review |
Clerk of the Board |
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Concur |
Approved
Agreement to Form |
Discussion |
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3
Votes Board Majority |
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Budgeted: N/A |
Current Year
Cost: N/A |
Annual Cost: N/A |
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Staffing Impact: |
No |
# of Positions: |
Sole Source: N/A |
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Current Fiscal Year Revenue: N/A
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Prior Board Action: 6/26/2001 #104, 2/6/2001 #9 & #92 |
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RECOMMENDED
ACTION(S):
1. |
Approve and
authorize the OC Community Resources Director or designee to execute an
Estoppel Certificate for the County of Orange’s existing HOME Regulatory
Agreement for Vintage Shores Senior Apartments. |
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2. |
Approve the
transfer in partnership interest from the current limited partner, SHS
Guaranteed I, L.P., to the new limited partner, USA San Clemente Limited 448,
Inc., a wholly owned subsidiary of USA Properties Fund, Inc. |
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SUMMARY:
Approval of the Estoppel
Certificate for the County of Orange’s HOME Regulatory Agreement and transfer
in partnership interest will allow USA Properties Fund, Inc. to continue
operation of the Vintage Shores Senior Apartments, an existing 122-unit senior
affordable housing development in the City of San Clemente.
BACKGROUND
INFORMATION:
On February 6, 2001, the Board of
Supervisors (Board) approved a HOME loan of $472,578 to USA Properties Funds,
Inc. (USA) for the development of Vintage Shores Senior Apartments (Vintage
Shores), a 122-unit affordable senior housing development in the City of San
Clemente. Vintage Shores consists of one and two-bedroom units, restricted to
50% and 60% of Area Median Income (AMI). The development is 100 percent occupied.
At that same meeting, the Board held a Public Hearing to consider adopting a
resolution for submission of application to the California Debt Limit
Allocation Committee for up to $9 million in Apartment Development Revenue
Bonds and issuance of the bond. On June 26, 2001, the Board adopted a
resolution approving new financing terms for Vintage Shores and issuance of the
$9 million in Apartment Development Revenue Bonds. The County of Orange’s
(County) HOME loan has been paid in full, but the County’s HOME Loan Regulatory
Agreement (Regulatory Agreement) continues to encumber the property.
The ownership entity, San Clemente Senior
Apartments, L.P. (Partnership), is a limited partnership consisting of USA San
Clemente, Inc. (Administrative General Partner) and Riverside Charitable
Corporation (Managing General Partner) as general partners and SHS Guaranteed
I, L.P. (Simpson Housing Solutions) as a limited partner. USA San Clemente,
Inc., a California corporation, is a wholly owned subsidiary of USA, the parent
company.
USA was founded in 1981 and headquartered
in Roseville, California. USA is a vertically integrated, full-service real
estate development, investment and management company. USA has $1 billion in
total assets through development and acquisition of more than 12,000 units of
family and senior apartments in 90 communities throughout California and
Nevada. USA has interest in a number of existing affordable housing
developments throughout Orange County and most recently, has one
County-assisted development under construction in the City of Orange, The Orion
Apartments, consisting of 166 units of affordable and supportive housing.
In 2019, USA refinanced Vintage
Shores to pay off its existing bond debt by securing a new loan with Union Bank
in an amount not to exceed $17.35 million. The Bond Regulatory Agreement was
terminated upon repayment and the transaction also allowed USA to pay off
existing soft debt (including the City of San Clemente’s $305,000 loan), return
capital to the limited partner, make a distribution to the general partners and
limited partners and make minor repairs to the well-maintained property.
Since the County’s Regulatory
Agreement remained on title, Union Bank initially required that the County of
Orange subordinate its Regulatory Agreement to the new Union Bank Deed of
Trust. However, the existing authorizations for this project did not allow for
future subordination to new financing and the County’s lending policy did not
allow the County to subordinate its Regulatory Agreement to conventional Deed
of Trusts. As such, OC Community Resources (OCCR) staff determined the
subordination request would require Board approval and the lead time to get on
the Board agenda would exceed the date for when the Union Bank loan was
scheduled to close.
Due to the time constraint, Union
Bank worked with USA to come up with an alternative solution: to close on the
new bank loan and record its Deed of Trust subordinate to the County’s
Regulatory Agreement provided that promptly following the closing of the
refinancing process, the County would either subordinate the Regulatory
Agreement or execute an Estoppel Certificate. The failure to obtain either the
subordination agreement or the Estoppel Certificate following closing would
constitute an event of default under the new bank loan. However, since the
closing of the refinancing process, Union Bank merged with U.S. Bank National
Association (U.S. Bank) and this request was not fulfilled.
U.S. Bank, as successor to the
merger with Union Bank, is now looking to satisfy the outstanding requirement
from Union Bank and is requesting the County execute an Estoppel Certificate to
address two matters in the Regulatory Agreement which were of concern:
1. |
To acknowledge the prohibitions on
transfers contained in the Regulatory Agreement were not intended to apply to
transfers resulting from a foreclosure, a deed in lieu of foreclosure or a
transfer following foreclosure or deed in lieu if USA were to default on the
loan. Without the acknowledgement, U.S. Bank would require the County’s
approval to foreclose its Deed of Trust (or accept a deed in lieu of
foreclosure) if USA were to default on its loan. |
2. |
To acknowledge that U.S. Bank will not
be liable for noncompliance with the Regulatory Agreement that may have
occurred prior to the foreclosure or deed in lieu of foreclosure of its Deed
of Trust (this is typically called a mortgagee protection clause). |
Approval of the Estoppel
Certificate (Attachment B) will help USA avoid defaulting on its bank loan and
allow for the continued operation of Vintage Shores. The County’s affordability
restrictions are protected and will remain in place for the outstanding years
under the County’s Regulatory Agreement.
The Partnership is requesting
County approval to transfer interests of its constituent partners in the
Partnership. USA San Clemente Limited 448, Inc., wholly owned and controlled by
USA, is proposing to acquire the existing limited partner’s interest in the
Partnership from SHS Guaranteed I, L.P.
The existing Managing General Partner and the Administrative General
Partner for the Partnership will remain the same. The current and proposed
organizational structures are shown in the charts below.
Organization Chart (Before): San Clemente Senior Apartments, L.P. |
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USA San Clemente, Inc. (Existing Administrative General
Partner) |
Riverside Charitable Corporation (Existing Managing General Partner) |
SHS Guaranteed I, L.P. (Existing Limited Partner) |
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Organization Chart (After) (As
Proposed): San Clemente Senior Apartments, L.P. |
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USA San Clemente, Inc. (Existing Administrative General
Partner) |
Riverside Charitable Corporation (Existing Managing General Partner) |
USA San Clemente Limited 448, Inc. (New Limited Partner) |
Approval of the partnership
interest transfer related to Vintage Shores will help maintain housing
affordability and stability for the 122 households residing at Vintage Shores.
The County loan has been paid off
and the project is being operated in compliance with all regulatory agreements.
Staff recommend approval of the Estoppel Certificate, as reviewed and approved
as to form by County Counsel, and the as it relates to the County’s Regulatory
Agreement.
Compliance
with CEQA: This
action is not a project within the meaning of the California Environmental
Quality Act (CEQA) Guidelines Section 15378 and is therefore not subject to
CEQA, since it does not have the potential for resulting in either a direct
physical change in the environment, or a reasonably foreseeable indirect
physical change in the environment. The approval of this agenda item does not
commit the County to a definite course of action in regard to a project since
it is for approval of an estoppel certificate related to the refinancing of the
property. This proposed activity is therefore not subject to CEQA. Any future
action connected to this approval that constitutes a project will be reviewed
for compliance with CEQA.
FINANCIAL
IMPACT:
N/A
STAFFING
IMPACT:
N/A
ATTACHMENT(S):
Attachment
A - California Code of Regulations Title 14 Section 15378
Attachment B - Estoppel Certificate