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Agenda Item
ASR
Control 25-000149 |
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MEETING
DATE: |
05/20/25 |
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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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Dr.
Veronica Kelley (714) 834-7024 |
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Subject: Approve Loan and Project-Based
Vouchers for Marks Way Orange 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: 2/27/2024 #35 |
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RECOMMENDED
ACTION(S):
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Acting as the
Board of Supervisors: |
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1. |
Authorize the OC
Community Resources Director or designee to utilize up to $2,107,600 for loan
financing in Mental Health Services Act funding, as outlined in the Financial
Impact Section to a limited partnership to be formed by National Community
Renaissance of California, for the development of Marks Way Orange Apartments
located at 164 S. Marks Way in the City of Orange, in accordance with the
2023 Supportive Housing Notice of Funding Availability First Amendment
guidelines and policy. |
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2. |
Approve the loan
commitment to a limited partnership to be formed by National Community
Renaissance of California in the amount not to exceed $2,107,600 in Mental
Health Services Act, as outlined in the Financial Impact Section, subject to
contingencies outlined in this Agenda Staff Report. |
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3. |
Approve
subordination of the up to $2,107,600 loan at construction financing to a
first construction loan of approximately $20,056,686 with the ability to
increase the subordination amount up to 10 percent due to an increase of
construction costs and at permanent financing to a first trust deed loan of
$5,463,604, 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 Board approved loan documents and restrictive covenants; and
such additional agreements, contracts, instructions and instruments necessary
or appropriate for loan financing. |
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5. |
Authorize the OC
Community Resources Director or designee to approve the Relocation Plan for
Marks Way Orange Apartments consistent with State and/or Federal relocation
laws. |
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6. |
Authorize the
Health Care Agency Director or designee to execute documents related to
services agreements that are necessary or appropriate for confirming the
commitment of ongoing services for the Mental Health Services Act funding. |
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7. |
Approve
the City of Orange’s request for waiver of matching funds pursuant to the
2023 Supportive Housing Notice of Funding Availability First Amendment. |
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Acting as the
Board of Commissioners to the Orange County Housing Authority: |
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8. |
Approve the
selection of Marks Way Orange Apartments for utilization of 25 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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9. |
Authorize the
Executive Director of the Orange County Housing Authority or designee to
execute agreements related to the commitment of the U.S. Department of
Housing and Urban Development Project-Based Vouchers in connection with Marks
Way Orange Apartments, provided the commitment incorporates the business and
financial terms and contingencies 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 25 Project-Based Vouchers, subordination of
the County loan at construction and permanent financing to senior debt and
waiver for Marks Way Orange Apartments subject to any contingencies will help
support the production of affordable and supportive housing in Orange County.
BACKGROUND
INFORMATION:
On February 27, 2024, the Board of
Supervisors (Board) approved the recommended changes in policy and process for
the 2023 Supportive Housing Notice of Funding Availability (2023 NOFA) First
Amendment and authorized the OC Community Resources (OCCR) Director or designee
to issue the 2023 NOFA First Amendment making up to $32.7 million in funding
and up to 218 Housing Choice, Mainstream and/or Veterans Affairs Supportive
Housing Project-Based Vouchers (PBVs) available for the development of
extremely low-income housing and return to the Board for funding commitments to
individual projects. Assisted units through the 2023 NOFA receive direct referrals
through the County of Orange’s (County) Coordinated Entry System.
National Community Renaissance of
California (Developer) responded to the 2023 NOFA First Amendment with a
funding application for a 50-unit affordable and permanent supportive rental
housing development. The Marks Way Orange Apartments (Development) will be
located at 164 S. Marks Way in the City of Orange (City). The 0.9-acre project
site is currently improved as a parking lot for the adjacent office building as
well as a multifamily property with five units. In accordance with applicable
relocation laws and regulations and proposed Relocation Plan, any eligible
tenants in the existing five units will be provided first right of refusal,
relocation assistance and/or benefits from the Developer.
The Developer, a nonprofit
corporation, has been in operations since 1992 and has participated in the
development of over 8,000 affordable homes throughout the nation. The Developer
serves as the owner, operator and service provider for many of its properties.
The proposed Development will
provide 50 units of affordable housing for seniors age 62 and older, including
49 one-bedroom units and one two-bedroom manager’s unit. Twenty-four of the 50
units will be restricted to senior households who are experiencing
homelessness, with incomes at 30 percent area median income (AMI) and meet the
Mental Health Services Act (MHSA) eligibility criteria. Eleven of these units
will be restricted by the County and the other 13 by the Orange County Housing
Finance Trust. One additional unit will be restricted at 30 percent AMI by the
California Tax Credit Allocation Committee (TCAC). Rent for the 25 units will
be subsidized by the 25 PBVs from the Orange County Housing Authority (OCHA).
The remaining 24 units will be
restricted at 40 to 80 percent AMI by the TCAC and/or other funding sources.
The Development will feature one
three-story building, 19 onsite parking spaces and on-site amenities that
include community room spaces, private case management offices, common outdoor
space courtyard inclusive of seating areas, multiple roof decks and
landscaping.
On-site property management
services and supportive services will be provided by the Developer’s in-house
property management agent, Hope Through Housing Foundation. Twenty-four units
will also receive supportive services from the OC Health Care Agency or through
County-contracted program for the MHSA eligible households.
The City is not able to provide
funding to meet the 2023 NOFA First Amendment match requirement of providing
financial support that equals or exceeds the amount of the assistance requested
from the County. The City has exhausted
all housing and housing-related funds and is requesting a waiver of the 2023
NOFA First Amendment required matching funds (Attachment A).
Under the NOFA policy, transfer of
a Regional Housing Needs Allocation (RHNA) is optional because the proposed
MHSA funding source is a regional source. Although optional, City staff
confirmed they would be open to engaging in sharing RHNA credit for 11
County-restricted units, subject to further City approvals.
OCCR is recommending approval of
waiver of match funds based on these units contributing to the County’s overall
Housing Funding Strategy 2022 Update goal of developing 2,396 units of
permanent supportive housing.
Construction
to Permanent Financing and PBVs
The Developer is requesting an
amount up to $2,107,600 in MHSA funds to be available to the project at
construction financing and during construction to permanent financing. The
County loans will be subordinate to financing as outlined in the financial
summary below. At construction financing, the County will close on its loan and
is requesting authorization to increase the subordination amount up to 10
percent if there is an increase in construction cost without requiring an
as-built appraisal. 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 loans, OCCR will calculate the senior
debt plus the County loans 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
loans, the County may subordinate to additional senior debt, if necessary, for
the viability of the project.
The Developer is also requesting 25
PBVs to be available to the Development after construction is completed and a
Certificate of Occupancy is issued. These 25 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 25 of the one-bedroom units
restricted to 30 percent AMI by the County and/or other funding sources.
Upon approval of the County loan
and PBVs request, the Developer intends to apply for tax credit financing in
July 2025.
Below are the updated financial
summary highlights of the Construction and Permanent Financing phase of the
Development:
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Construction
Sources of Funds |
Funding Amount |
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Construction Loan |
$20,056,686 |
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County of Orange (MHSA Loan) |
$2,107,600 |
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Orange County Housing Finance Trust |
$3,394,990 |
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Tax Credit Equity (GP/LP Equity) |
$6,980,862 |
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Deferred Expenses |
$1,695,363 |
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Total
Sources of Funds |
$34,235,501 |
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Construction
Uses of Funds |
Total Amount |
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Land Value |
$3,300,000 |
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Construction (hard costs) |
$19,148,438 |
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Relocation Expenses |
$700,000 |
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Architect, Engineer, Design |
$1,150,000 |
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Construction Interest & Fees |
$2,536,056 |
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Hard and Soft Cost Contingencies |
$982,969 |
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Legal Fees and Consulting Costs |
$145,000 |
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Permanent Financing Costs |
$64,637 |
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Reserves |
$505,726 |
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Developer Costs |
$2,800,000 |
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Other Costs |
$2,902,675 |
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Total
Uses of Funds |
$34,235,501 |
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Permanent
Sources of Funds |
Funding Amount |
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Conventional Permanent Loan |
$5,463,604 |
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County of Orange (MHSA Loan) |
$2,107,600 |
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Orange County Housing Finance Trust |
$3,394,990 |
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Tax Credit Equity (GP/LP Equity) |
$23,269,307 |
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Total
Sources of Funds |
$34,235,501 |
Note: Financing subject to change
prior to construction and completion of Development. Underwriting guidelines
are in accordance with 2023 NOFA First Amendment.
Loan
Terms:
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Permanent Loan: |
Up to $2,107,600
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Interest
Rate: |
3 percent
simple |
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Term: |
55 years from
Qualified Project Period |
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Security: |
Second Deed of
Trust at Construction and Permanent Financing |
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Payments: |
Residual
Receipts per the 2023 NOFA First Amendment |
The County will record rent and
occupancy restrictions on 11 one-bedroom units for senior individuals
experiencing homelessness earning at 30 percent AMI for a period of 55 years
via a regulatory agreement, which will not be subordinated to any conventional
deed of trust. The specific rent and occupancy restrictions may ultimately
change based on the final financing structure of the Development, but in no
circumstance shall restrictions be less than 30 percent AMI for the units
subsidized by the PBVs.
Commitment of the
County loans and PBVs are contingent upon the following:
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1. |
Completion and
approval of California Environmental Quality Act (CEQA), as applicable, and
satisfactory completion of an Environmental Review under the National
Environmental Policy Act (NEPA) with receipt of an approval of the request
for release of funds and certification from HUD under 24 CFR Part 58. |
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2. |
Evidence of
commitment of all construction and permanent financing sources, including tax
credit award. |
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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. |
OCCR staff provided a summary of
the Development's financing plan and funding request to the Project Review
Advisory Panel.
The supportive housing units in
this Development are 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 25
supportive housing units will contribute to the progress of this effort and
provide much needed supportive housing in the near future. Additionally, the 25
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 Address 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 (Attachment B) 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 loans, commitment of 25 PBVs, subordination of the County loans to
senior debt for the Development and waiver of City of Orange’s match funds 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 (Attachment C), 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:
The loan commitments will only
affect the notes receivable balance sheet accounts of the fund. Per budgeting
practice, the loan commitments are not built into the fiscal year
appropriations budget process. The $2,107,600 loan will funded be at construction
financing anticipated in April 2026. The loan will be funded with 100 percent
MHSA Housing Fund 12A.
STAFFING
IMPACT:
N/A
REVIEWING
AGENCIES:
OC
Health Care Agency
Office of Care Coordination
ATTACHMENT(S):
Attachment
A - City of Orange Request for Waiver of City Match Funds
Attachment B - California Code of Regulations Title 14 Section 15378
Attachment C - Code of Federal Regulations Title 24 Subtitle A Part 58