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Agenda Item
ASR
Control 24-000865 |
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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): |
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 Capitalized Operating
Subsidy Reserve Loan for WISEPlace PSH 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, 6/7/2022 #S28C |
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RECOMMENDED
ACTION(S):
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1. |
Authorize the OC Community Resources
Director or designee to utilize up to $2,682,400 for capitalized operating
subsidy reserve permanent loan financing in Mental Health Services Act
funding, as outlined in the Financial Impact Section, to North Broadway Housing
Partners LP, a limited partnership formed by Jamboree Housing Corporation,
for the development of WISEPlace PSH Apartments located at 1411 N. Broadway
in the City of Santa Ana, in accordance with the 2023 Supportive Housing
Notice of Funding Availability First Amendment guidelines and policy. |
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2. |
Approve the capitalized operating
subsidy reserve permanent loan commitment to North Broadway Housing Partners
LP, a limited partnership formed by Jamboree Housing Corporation, in the
amount not to exceed $2,682,400 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 $2,682,400
capitalized operating subsidy reserve loan at permanent financing to a first
trust deed loan of approximately $5,256,327 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 of
Supervisors approved loan documents and restrictive covenants; and such
additional agreements, contracts, instructions and instruments necessary or
appropriate for permanent loan financing. |
SUMMARY:
Approval
of the County capitalized operating subsidy reserve loan and subordination of
the County loan will help support the production of affordable and supportive
housing in Orange County.
BACKGROUND
INFORMATION:
On June 7, 2022, the Board of
Supervisors (Board) approved the use of American Rescue Plan Act State and
Local Fiscal Recovery Funds (ARPA-SLFRF), allocated to Second District as
discretionary funding (prior to redistricting) for a variety of programs,
including housing assistance funds that aid residents experiencing or at risk
of homelessness. Jamboree Housing Corporation (Developer) requested financial
assistance from Second District to develop new construction of a 48-unit
affordable and permanent supportive housing project, WISEPlace Permanent
Supportive Housing (PSH) Apartments, located at 1411 N. Broadway in the City of
Santa Ana (Development). Subsequently, Second District committed $1.5 million
in ARPA-SLFRF to the Development. The Development closed on its construction
financing and started construction in March 2023.
On February 27, 2024, the 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
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.
The 2023 NOFA First Amendment also
allows OCCR to implement a County Capitalized Operating Subsidy Reserve (COSR)
Program utilizing Mental Health Services Act (MHSA) funds to address
operational deficits attributable to restricted MHSA supportive housing units.
The COSR Program term will be for a minimum of 15 to a maximum of 20 years,
based on current assumptions of operating costs, which is approximately seven
percent of the total MHSA COSR funds that will be provided per year as an
operational deficit subsidy.
The Developer, a nonprofit
corporation, responded to the 2023 NOFA First Amendment with a gap funding
application for the Development. The proposed Development will provide 47
studio units of affordable and permanent supportive housing and one
unrestricted two-bedroom manager’s unit. The 47 studio units are restricted to
households whose income is at or below 30 percent of the Area Median Income
(AMI), 30 of which are rent and income restricted by the County. The Orange
County Housing Finance Trust (OCHFT) restricted 14 units of those 30 units to
also be required to meet the MHSA eligibility criteria. The remaining 17 units
will be restricted by the California Tax Credit Allocation Committee and/or
other funding sources.
The Developer has been operating in
Orange County for over 30 years and has a $3.2 billion asset portfolio
accommodating 27,000 residents in over 100 properties throughout Northern and
Southern California. To date, the Developer has been able to place 700
residents in Orange County who were experiencing homelessness into new housing.
The Developer is currently providing housing for more than 120 individuals with
a mental health diagnosis and/or experiencing homelessness in Orange County.
The Development was developed on
the existing WISEPlace property and construction was completed in January 2025.
Situated on a 0.6-acre site in the City of Santa Ana’s Midtown Specific Plan
Area, the Development is near amenities such as a grocery store, health clinic,
bus stop, parking and public library. The surrounding area is characterized by
a mix of commercial and residential uses, with new live/work townhomes across
Broadway.
On-site property management
services will be provided by Quality Management Group and supportive services
through WISEPlace, a nonprofit corporation. For the 14 MHSA units, they will
receive supportive services from the OC Health Care Agency through the County
or County contracted program for the MHSA eligible households.
COSR
Funding Request
The Developer is requesting
$2,682,400 in MHSA COSR funds at permanent financing to be available to the
project, which will be overlayed on top of the OCHFT’s 14 MHSA restricted units
and the County ’s ARPA-SLFRF units. The Development’s financial plan initially
underwrote the 14 MHSA units assuming that all tenants (experiencing chronic
homelessness) would have some income (e.g., Social Security Income). However,
based on more recent experiences and technical assistance, the Developer has
learned that the MHSA units and other units without PBVs should assume tenants
have $0 income. The 14 MHSA and other units have now been underwritten at $0
income resulting in a $3 million funding gap and the Developer is requesting
the County’s MHSA COSR provide operating subsidy on those units. The remaining
gap will be filled with tax credit equity.
The County MHSA COSR 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 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.
Below is the updated financial
summary of the Permanent Financing phase of the Development:
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Permanent Sources of Funds |
Funding Amount |
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Lienholders
in Order of Priority |
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City of Santa
Ana (Capital and COSR) |
$5,256,327 |
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County of Orange
– ARPA-SLFRF Loan |
$1,500,000 |
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County of Orange
– MHSA COSR Loan |
$2,682,400 |
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Orange County
Housing Finance Trust - MHSA Loan |
$2,480,030 |
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Federal Home
Loan Bank Affordable Housing Program |
$705,000 |
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Non-Lienholder
Funds |
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Tax Credit
Equity (9%) |
$20,089,816 |
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Deferred
Developer Fee |
$99,829 |
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Total
Sources of Funds |
$32,813,402 |
Note: Financing subject to change
prior to completion of Development. Underwriting guidelines are in accordance
with 2023 NOFA First Amendment.
Loan
Terms for County COSR:
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COSR: |
Up to $2,682,400 |
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Interest Rate: |
0 percent |
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Term: |
Maximum of 20
years |
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Security: |
Third Deed of
Trust |
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Payments: |
Deferred and
forgivable |
As mentioned, the County will
overlay the MHSA COSR funds on top of the OCHFT’s 14 restricted MHSA and the
County’s ARPA-SLFRF recorded regulatory agreement, which restricts rent and
occupancy for individuals experiencing homelessness earning at or below 30
percent AMI for a period of 55 years and does not subordinate to any
conventional deed of trust.
Funding of the
County loan is contingent upon the following:
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1. |
Evidence of
commitment of all permanent financing sources. |
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2. |
Complete all
required document submittals to the County for permanent loan conversion. |
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3. |
A commitment
from the Developer and City of Santa Ana (City) that the COSR provided by the
City will be drawn down first (prior to any draw requests to the County). |
The Project Review Advisory Panel
concurred with staff recommendation to move forward with the project at their
October 17, 2024, meeting.
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
supportive housing units will contribute to the progress of this effort and
provide much needed supportive housing. Additionally, these supportive housing
units will follow the best practices, guiding principles and commitments of the
Homeless Service System Pillars Report that 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 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 County's COSR loan and 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.
FINANCIAL
IMPACT:
The loan will be funded with 100
percent MHSA in Fund 12A.
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 $2,682,400 COSR loan will be funded at permanent financing
anticipated in August 2025.
STAFFING
IMPACT:
N/A
REVIEWING
AGENCIES:
OC
Health Care Agency
Office of Care Coordination
ATTACHMENT(S):
Attachment
A - California Code of Regulations Title 14 Section 15378