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Agenda Item
ASR
Control 24-000115 |
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MEETING
DATE: |
03/26/24 |
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legal entity taking action: |
Board
of Supervisors and Orange County Housing Authority |
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board of supervisors district(s): |
2 |
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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 Loan and Project-Based
Vouchers for the Orion Apartments
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ceo CONCUR |
County Counsel Review |
Clerk of the Board |
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Concur |
No
Legal Objection |
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: 2/28/2023 #32 |
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RECOMMENDED
ACTION(S):
Acting as the Board of Supervisors:
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1. |
Authorize the OC
Community Resources Director or designee to utilize up to $921,150 in
available funding as outlined in the Financial Impact Section for loan
financing to Orange 702, L.P., formed by USA Properties Fund Inc. and
Riverside Charitable Corporation, for the development of the Orion
Apartments, a 166-unit affordable and supportive housing development located
at 1800 East La Veta in the City of Orange, pursuant to the 2023 Supportive
Housing Notice of Funding Availability. |
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2. |
Approve the loan
commitment to Orange 702, L.P., formed by USA Properties Fund Inc. and
Riverside Charitable Corporation, in the amount not to exceed $921,150,
subject to contingencies outlined in this Agenda Staff Report. |
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3. |
Approve
subordination of the $921,150 loan at construction financing to a first trust
deed loan of approximately $29 million and second trust deed loan of
approximately $5 million, and at permanent financing to a first trust deed
loan of approximately $19,475,000, with the ability to increase 10 percent
due to an increase of construction costs, as set forth in this Agenda Staff
Report and authorize the OC Community Resources Director or designee to
subordinate to additional senior debt up to 100 percent of the cumulative
loan to value based on the as-built appraised market value, if necessary,
based on any future changes in the project financing. |
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4. |
Authorize the OC
Community Resources Director or designee to execute subordination agreements;
standard set of loan documents and restrictive covenants; and such additional
agreements, contracts, instructions, and instruments necessary or appropriate
for construction and permanent loan financing. |
Acting as the Board of Commissioners to the Orange County Housing
Authority:
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5. |
Approve the
selection of the Orion Apartments for the utilization of eight (8) Housing
Choice Project-Based Vouchers in
accordance with the policies and procedures identified in the Orange County
Housing Authority Administrative Plan and authorize the execution of related
documents, instruments and agreements. |
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6. |
Authorize the
Executive Director of the Orange County Housing Authority to execute any
document necessary related to the commitment of the U.S. Department of
Housing and Urban Development Housing Choice Project-Based Vouchers in
connection with the Orion Apartments, provided the commitment incorporates
the business and financial terms set forth in this Agenda Staff Report and is
approved as to form by County Counsel. |
SUMMARY:
Approval of the County construction
to permanent loan, commitment of eight (8) Housing Choice Project-Based
Vouchers and subordination of the County loan at permanent financing to senior
debt for the Orion Apartments will help facilitate long-term financing needs
for the Orion Apartments and support the production of supportive housing in
Orange County.
BACKGROUND
INFORMATION:
On February 28, 2023, the Board of
Supervisors (Board) approved the recommended changes in policy and process for
the 2023 Supportive Housing Notice of Funding Availability (2023 NOFA) and
authorized the OC Community Resources (OCCR) Director or designee to issue the
2023 NOFA making up to $67.1 million in funding and up to 210 Housing Choice
Project-Based Vouchers (PBVs) available for the development of extremely
low-income housing and return to the Board for funding commitments to
individual projects.
In November 2023, Orange 702, L.P.,
a limited partnership formed by USA Properties Fund Inc. and Riverside
Charitable Corporations (Developers) submitted a response to the 2023 NOFA with
a funding application requesting $921,150 and eight (8) PBVs for a 166-unit
affordable and supportive senior rental housing development, Orion Apartments
(Development). The Development will be located at 1800 East La Veta in the City
of Orange (City).
USA Properties Fund (USA), a
for-profit company established in 1981, is the lead developer and an
experienced housing developer, builder and manager of apartment homes in
California and other western states. USA’s portfolio includes conventional
apartments as well as affordable and senior housing options and currently has approximately
12,000 rental units. Their property management arm, USA Multifamily Management,
manages more than 90 apartment communities in California and Nevada. USA has
developed and partnered on the development of a number of affordable housing
projects in Orange County, including Vintage Aliso (Phase I) and Liberty Aliso
(Phase II), which were developed through a public-private partnership,
resulting in the creation of 402 units of new multifamily housing in the City
of Aliso Viejo that was completed in 2019. Most recently, USA partnered with
Jamboree Housing Corporation to develop Pelican Harbor (formerly known as
Huntington Beach Senior Housing), a 43-unit senior community with 33 units
restricted by the County of Orange (County) for seniors experiencing homelessness,
which is slated to complete construction in July 2024.
The Riverside Charitable
Corporation (RCC), the co-developer and a 501(c)(3) non-profit partner, was
founded in 1988 and provides partnership management and partners to provide
social services to various low-income housing tax credit entities in which it
has an ownership interest. The mission of RCC is to help those who cannot
afford the necessities of life. RCC has assisted in the development of over 128
communities to date, housed over 15,800 families and provided services to over
12,000 families.
The proposed Development will
provide 166 units of affordable and supportive housing, including 111
one-bedrooms and 55 two-bedroom rental units, including two managers’ units. Of
these units, eight (8) one-bedroom rental units will be restricted to Mental
Health Services Act (MHSA) eligible seniors experiencing homelessness with
rents set at 30 percent Area Median Income (AMI), to include five (5) units
restricted by the County through a 55-year regulatory agreement and three (3)
units restricted by the Orange County Housing Finance Trust (Trust). The eight
(8) one-bedroom units will be subsidized with Orange County Housing Authority
(OCHA) PBVs. The remaining 156 rental units will be restricted at 30 to 70
percent AMI by the California Tax Credit Allocation Committee (TCAC) and/or
other funding sources.
The proposed Development will
consist of two four-story buildings and one two-story building, both with
elevators, and surface parking on 3.85 gross acre parcel. Onsite amenities
include approximately 1,300 square foot club room with a hospitality kitchen, a
computer room, a fitness center, food storage lockers, laundry rooms, bike
stalls, and 17,900 square feet of outdoor courtyard space with several barbecue
grills, outdoor bench and picnic seating areas, a resident tended garden and a
fenced dog park.
Onsite property management services
will be provided by USA Multifamily Management. The Orange County Health Care
Agency will provide supportive services to eight (8) MHSA units with households
who meet the MHSA eligibility criteria, sourced through the Coordinated Entry
System. Life Skills Training and Educational Programs, Inc. (LifeSTEPS), a
non-profit corporation, will provide on-site supportive social services to all
residents at the Development. LifeSTEPS formed in 1996 and is one of the
largest providers of social and supportive services for residents of affordable
housing in California. LifeSTEPS currently provides service coordination to
over 19 properties in Orange County, encompassing over 2,100 units of senior
and multi-family housing. LifeSTEPS will leverage its relationships with local
non-profit and governmental agencies to access as many additional resources as
possible for all residents. All services are geared toward supporting residents
to maintain their housing and to learn, grow and thrive in the community.
Permanent
Financing and PBVs
The Developers are requesting a
construction to permanent loan financing under the 2023 NOFA in the amount of
$921,150 to be available to the project at construction and conditions placed
on the loan have been satisfied. The County loan will be subordinate to
financing as outlined in the financial summary below. OCCR is requesting
authorization to subordinate to additional senior debt up to 100 percent of the
cumulative loan-to-value based on the as-built appraised market value, if
necessary, based on any future changes in project financing. In determining the
maximum additional senior debt to which the County will subordinate its loan,
OCCR will calculate the senior debt plus the County loan and subtract that
total from the current (within last six months) as-built appraised market
value. If the current as-built appraised market value exceeds the cumulative
senior debt plus the County loan, the County may subordinate to additional
senior debt, if necessary, for the viability of the project.
The Developers have secured a $2.2
million loan commitment in Low- and Moderate-Income Housing Asset Funds
(LMIHAF) from the City. A unique feature of the financing for the Development
is a private ground lease with a publicly traded company by the name of
iStar/Safehold (NYSE: SAFE). This financing strategy helped to create an
additional subsidy of $7 million that enabled the project to obtain a bond
allocation from the State California Debt Limit Allocation Committee (CDLAC) in
2023. Additionally, RCC is investing $4 million in the Development.
The Developers are requesting eight
(8) PBVs to be available to the Development after construction is completed and
a Certificate of Occupancy is issued. The eight (8) PBVs will be guaranteed for
20 years, consistent with U.S. Department of Housing and Urban Development
(HUD) regulations and will provide rental subsidies to eight (8) of the
one-bedroom units restricted to 30 percent AMI by the County.
The Development received an
allocation of tax-exempt bonds in 2023 with a readiness deadline of February
2024; however, as development costs have significantly increased due to a
shortage of material, skilled labor/workforce, inflation, as well as the rise
of interest loan rates, the Developers needed to secure additional financing to
fill the funding gap. The Developers also had to request a three-month
extension from CDLAC to extend their readiness deadline from February 2024 to
May 2024 which was approved. The additional funding commitments from the City
and the Trust with the approval of the requested County loan and PBVs will
enable the Developers to close on the construction loan financing and meet the
readiness deadline. OCCR intends to close on the County’s loan at construction
loan closing and disburse funds during construction.
Below are the updated financial
summary highlights of the Construction and Permanent Financing phase of the
Development:
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Construction
Source of Funds |
Funding Amount |
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Tax Exempt Loan
(Bond Allocation) |
$29,000,000 |
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Bridge Loan |
$5,000,000 |
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County of Orange
(MHSA) |
$921,150 |
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City of Orange
Loan |
$2,200,000 |
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Riverside
Charitable Corporation Loan |
$4,000,000 |
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Orange County
Housing Finance Trust |
$503,502 |
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Safehold/iStar
Subsidy |
$7,000,000 |
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Tax Credit
Proceeds (4% BofA) |
$2,925,970 |
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Proceeds from
Construction NOI |
$51,646 |
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Deferred
Developer Fee |
$10,028,041 |
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Total
Sources of Funds |
$61,630,309 |
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Permanent
Source of Funds |
Funding Amount |
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Tax Exempt Loan
(Bond Allocation) |
$19,475,000 |
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County of Orange
(MHSA) |
$921,150 |
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City of Orange
Loan |
$2,200,000 |
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Riverside
Charitable Corporation Loan |
$4,000,000 |
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Orange County
Housing Finance Trust |
$503,502 |
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Safehold/iStar
Subsidy |
$7,000,000 |
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Tax Credit
Proceeds (4% BofA) |
$21,689,921 |
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Proceeds from
Construction NOI |
$2,225,197 |
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Deferred
Developer Fee |
$3,615,539 |
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Total
Sources of Funds |
$61,630,309 |
Note: Financing is subject to
change prior to construction and completion of Development. Underwriting
guidelines are per the 2023 NOFA.
Loan
Terms:
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Permanent Loan: |
Up to $921,150 |
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Interest Rate: |
3 percent simple |
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Security: |
Third Deed of
Trust at Construction Financing; Second Deed of
Trust at Permanent Financing |
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Term: |
55 years from
Qualified Project Period |
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Payments: |
Residual
Receipts per the 2023 NOFA (approximately 6.04%) |
The County will record rent and
occupancy restrictions on five (5) one-bedroom units for seniors experiencing
homelessness earning at or below 30 percent AMI for a period of 55 years via a
regulatory agreement, which will be subordinated to the California Municipal
Finance Authority (CMFA), pursuant to the 2023 NOFA policy which allows the
County to subordinate to a municipal financing authority issuing bond debt.
The specific rent and occupancy
restrictions may ultimately change based on the final financing structure of
the Development.
Funding of the County loan and
commitment of the PBVs are contingent upon the following:
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1. |
Completion and
approval of National Environmental Policy Act (NEPA). |
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2. |
Evidence of
commitment of all construction and permanent financing sources. |
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3. |
Receipt and
approval of final project development costs and revised final development
proforma and financing plan (including cash flow analysis) to reflect all
final funding approvals. |
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4. |
Completion and
approval of the Subsidy Layering Review. |
The Project Review Advisory Panel
reviewed staff recommendation to pass the project on underwriting at their
January 30, 2024, meeting and had no concerns.
The proposed Development will help
to address homelessness by providing supportive housing units as part of the
2,396 permanent supporting housing units identified in the Housing Funding
Strategy 2022 Update to address housing needs for individuals and households
experiencing homelessness. As such, these eight (8) supportive housing units
will contribute to the progress of this effort and provide much needed
supportive housing in the near future. Additionally, the eight (8) units of
supportive housing units will follow the best practices, guiding principles and
commitments of the Homeless Service System Pillars Report which was created by
the Commission to End Homelessness and accepted by the Board on October 18,
2022.
Compliance
with CEQA:
This action is not a project within the meaning of 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 County loan,
commitment of eight (8) PBVs, subordination of the County loan to senior debt
for the Development and to allow the County’s continued support of the
production of supportive housing in Orange County. 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.
Compliance
with NEPA:
Per 24 Code of Federal Regulations Part 58, an Environmental Assessment of the
project is being compiled and will be submitted to HUD for approval along with
the Request for Release of Funds upon completion.
FINANCIAL
IMPACT:
This loan commitment will only
affect the notes receivable balance sheet accounts of the fund. Per budgeting
practice, the loan is not built into the fiscal year appropriations budget
process. The County $921,150 loan will be funded after construction loan
closing in May 2024, (Fiscal Year 2023-24) with 100 percent Mental Health
Services Act (MHSA) in Fund 12A and/or Federal HOME Investment Partnerships
Program (HOME) Funds and/or HOME American Rescue Plan Act (HOME-ARP) Funds
and/or 15G Reserves in Fund 15G.
STAFFING
IMPACT:
N/A
REVIEWING
AGENCIES:
Health
Care Agency
CEO Office of Care Coordination
ATTACHMENT(S):
Attachment
A - California Code of Regulations Title 14 Section 15378
Attachment B - Code of Federal Regulations Title 24 Subtitle A Part 58