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Agenda Item
ASR
Control 23-000984 |
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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): |
4 |
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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 Lincoln Avenue 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:
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No |
#
of Positions: |
Sole
Source: N/A |
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Current Fiscal Year Revenue: N/A
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Prior Board Action: 10/18/2022 #15, 11/16/2021 #22,
11/5/2019 #S19E |
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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 $1,384,230 in
available funding as outlined in the Financial Impact Section, for loan
financing to a limited partnership to be formed by C&C Development Co.,
LLC and Riverside Charitable Corporation, for the development of Lincoln
Avenue Apartments, located at 7101 Lincoln Avenue in the City of Buena Park,
pursuant to the 2023 Supportive Housing Notice of Funding Availability. |
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2. |
Approve the loan
commitment to a limited partnership to be formed by C&C Development Co.,
LLC and Riverside Charitable Corporation, as general partners, in the amount
not to exceed $1,384,230, subject to contingencies outlined in this Agenda
Staff Report. |
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3. |
Approve
subordination of the combined $1,759,040 Special Needs Housing Program/Mental
Health Services Act (current request of $184,230 and previously committed
$1,574,810) at construction financing to a first trust deed loan of
approximately $21 million; and up to $1,200,000 (current request) and
combined $1,759,040 in Special Needs Housing Program/Mental Health Services
Act Funds at permanent financing to a first trust deed loan of approximately
$8,596,420, 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;
a 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 Lincoln Avenue Apartments for the utilization of 13 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 Lincoln Avenue 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 and permanent loans, commitment of 13 Housing Choice
Project-Based Vouchers and subordination of the County loans at construction
and permanent financing to senior debt for Lincoln Avenue Apartments will help
facilitate long-term financing needs for Lincoln Avenue Apartments and support
the production of affordable and supportive housing in Orange County.
BACKGROUND
INFORMATION:
On November 5,
2019, the Board of Supervisors (Board) approved Lincoln Avenue Apartments
located at 7101 Lincoln Avenue in the City of Buena Park (Development) for
Special Needs Housing Program (SNHP) funding for 10 Mental Health Services Act
(MHSA) units and authorized the Orange County Health Care Agency (HCA) Director
or designee to execute the Local Government Certification and Regulated Unit
Occupancy Restrictions form.
On November 16,
2021, the Board approved the transfer of up to $13,038,389 in anticipated and
returned SNHP MHSA funding from the State of California Housing Finance Agency
(CalHFA) to OC Community Resources (OCCR) and authorized recommitment of the
returned funds to the previously awarded developments, which included a
$1,574,810 capital and $1,342,870 Capitalized Operating Subsidy Reserve (COSR)
SNHP commitment to the Development.
C&C
Development Co., LLC (C&C Development), currently has an executed
Affordable Housing Disposition and Development Agreement with the City of Buena
Park (City) for site control of the property. C&C Development is proposing
to acquire the site from the City and demolish the existing commercial building
and associated parking lot. The site was previously occupied by a
month-to-month tenant who was made aware of the proposed Development. The City
has informed the County that the tenant does not qualify for relocation
benefits. Internal review of the documents provided by the City and C&C
Development, confirms the County’s determination that the tenant occupying the
site likely does not qualify for state or federal relocation benefits. As a
condition to accepting these funds, C&C Development has agreed to assume
the liability and indemnify the County on any claims and suits arising from the
failure to provide relocation benefits as required under State and Federal
relocation law.
The proposed
Development will provide 55 units of affordable and supportive housing,
including 54 rental units to households earning between 30 and 70 percent of
the Area Median Income (AMI) and one unit for the property manager. The
Development will consist of 14 one-bedroom units, 23 two-bedroom units and 18
three-bedroom units. Thirteen (13) one-bedroom rental units will be restricted
to MHSA eligible individuals experiencing homelessness with rents set at 30
percent AMI and subsidized with Orange County Housing Authority (OCHA) Housing
Choice Project-Based Vouchers (PBVs). It should also be noted that the 13
restricted units for MHSA eligible tenants include two (2) units restricted by
the Orange County Housing Finance Trust (OCHFT), 10 restricted through the SNHP
that is now administered by the County, as well as one (1) additional MHSA unit
being requested under this application.
Onsite
amenities include a leasing office for professional on-site management, a
community room, a computer room, a tot lot, a barbeque pavilion, interconnected
pedestrian walkways and green open spaces for the tenants to enjoy.
C&C
Development is a full-service Real Estate Development Company with more than 35
years of experience with a primary focus on building affordable housing to
assist cities in meeting their production goals. The property will ultimately
be owned and managed by a to-be-formed Limited Partnership owned by C&C
Development and their non-profit, Riverside Charitable Corporation
(collectively referred to as Developers). These partners combined have many
years of experience in providing affordable housing for low-income individuals.
The
Riverside Charitable Corporation (RCC), a non-profit member, was founded in
1988 and is an approved 501(c)(3). RCC will serve as the managing general
partner for the proposed Development. RCC 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.
C&C
Construction Services is a wholly owned subsidiary of C&C Development and
is a licensed contractor with a full construction staff. By using its own
licensed contractor to build the Development, construction costs can be kept to
a minimum (as much as possible in the current market) and quality of the
product is ensured through direct oversight over the entire construction
process. Advanced Property Services is another wholly owned subsidiary of
C&C Development and will handle the property management for the Lincoln
Avenue Apartments.
Onsite property
management services will be provided by Life Skills Training and Educational
Programs, Inc. (LifeSTEPS), a non-profit corporation. Thirteen (13) units will
also receive supportive services from the HCA for the MHSA eligible tenants.
Permanent Financing and PBVs
The Developers are
requesting $184,230 in MHSA funds at construction closing to permanent
financing and $1.2 million in 15G Reserves, or other County funding source, at
permanent financing, totaling $1,384,230, to be available to the Development.
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 City also
provided local funding in the amount of $3.85 million for acquisition and $1
million for the development of the project. The Development was also recently
awarded an $8 million grant from CalOptima Health. This funding source is
subject to prevailing wage, which significantly increased the construction
budget and overall total development cost. The Developers are also requesting
13 PBVs, which also requires the payment of prevailing wage (the Davis Bacon
Act [49 Stat. 1011]). These 13 PBVs will be guaranteed for an initial 20 years
and can be renewed, consistent with U.S. Department of Housing and Urban
Development (HUD) regulations and will provide rental subsidies to 13 of the
one-bedroom units restricted to 30 percent AMI by County and/or other funding
sources. The Developers are requesting the PBVs to be available to the
Development after construction is completed and a Certificate of Occupancy is
issued.
With the request
of 13 PBVs, the Developers are relinquishing the SNHP COSR commitment. The
Development is eligible for SNHP COSR; however, the 13 PBVs are more beneficial
long-term to both the MHSA tenants and Development by providing a rental
subsidy to offset the portion of rent that is not covered by the tenant.
Upon approval of
the County loan and PBVs request, the Developers intend on applying for 4
percent tax credits in Spring 2024.
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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Construction
Loan |
$21,000,000 |
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County of Orange
(Previously committed SNHP/MHSA) |
$1,574,810 |
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County of Orange
(MHSA) (current request) |
$184,230 |
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City of Buena
Park Land Loan |
$3,850,000 |
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City of Buena
Park Development Loan |
$1,000,000 |
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CalOptima Health
Grant/MGP Loan |
$8,000,000 |
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Deferred
Developer Fee |
$4,049,143 |
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Tax Credit
Equity (GP/LP Equity) |
$696,644 |
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Other Costs
Deferred Until Completion |
$308,540 |
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Total Sources of Funds |
$40,663,367 |
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Permanent Sources of Funds |
Funding Amount |
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Conventional
Permanent Loan |
$8,596,420 |
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County of Orange
(Previously committed SNHP/MHSA) |
$1,574,810 |
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County of Orange
(MHSA) (current request) |
$184,230 |
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County of Orange
(15G Reserves/other) (current request) |
$1,200,000 |
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City of Buena
Park Land Loan |
$3,850,000 |
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City of Buena
Park Development Loan |
$1,000,000 |
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County of Orange
Housing Finance Trust (MHSA) |
$1,154,290 |
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Tax Credit
Equity (GP/LP Equity) |
$12,554,474 |
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CalOptima Health
Grant/MGP Loan |
$8,000,000 |
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Deferred
Developer Fee |
$2,549,143 |
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Total Sources of Funds |
$40,663,367 |
Note: Financing
subject to change prior to construction and completion of Development.
Underwriting guidelines are per 2023 Supportive Housing Notice of Funding
Availability (2023 NOFA).
County Loan Terms:
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Construction and
Permanent Loan: |
Up to $1,384,230 |
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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
and Third Deeds of Trust |
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Payments: |
Residual
Receipts per the 2023 NOFA |
The County will
record rent and occupancy restrictions on 13 one-bedroom units for individuals
experiencing homelessness earning at or below 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.
Funding
of the County loan and commitment of the PBVs are contingent upon the
following:
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1. |
Evidence of commitment
of all construction and permanent financing sources, including tax credit
award. |
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2. |
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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3. |
Formation of the
Limited Partnership. |
The Project Review
Advisory Panel reviewed staff recommendation to pass project on underwriting at
their October 26, 2023, 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 13 supportive housing units will contribute to the progress of this
effort and provide much needed supportive housing in the near future.
Additionally, the 13 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 a County loan,
commitment of 13 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 was completed and the Authority to Use Grant Funds was issued by HUD
for the PBVs on December 21, 2023.
FINANCIAL IMPACT:
This loan
commitment will only affect the notes receivable balance sheet accounts of the
fund. Per budgeting practice, the loan commitment is not built into the fiscal
year appropriations budget process. The $184,230 loan will be funded at
construction loan closing anticipated in December 2024 (FY 2024-25) and $1.2
million at permanent financing (totaling $1,384,230). The total loan up to
$1,384,230 will be funded with 100 percent Federal HOME Investment Partnerships
Program (HOME) Funds, HOME American Rescue Plan (HOME-ARP) Funds or 15G
Reserves Fund and/or Mental Health Services Act (MHSA) in Fund 12A.
STAFFING IMPACT:
N/A
REVIEWING
AGENCIES:
Health Care Agency
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