HomeMy WebLinkAboutCC Reso No 2016-118 CC Reso Moderate Income Housing Asset FundRESOLUTION NO. 2016 -118
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE,
CALIFORNIA, AUTHORIZING EXECUTION OF A COMMITMENT LETTER TO
PROVIDE FINANCIAL ASSISTANCE FROM FUND 106 AND, IN ITS CAPACITY AS
SUCCESSOR TO THE HOUSING FUNCTIONS OF THE FORMER
REDEVELOPMENT AGENCY OF THE CITY OF LAKE ELSINORE, FROM THE
CITY'S LOW AND MODERATE INCOME HOUSING ASSET FUND TO LAKE
ELSINORE CCR LLC FOR AN AFFORDABLE HOUSING PROJECT
Whereas, the Redevelopment Agency of the City of Lake Elsinore (Agency) was a public body,
corporate and politic, organized, existing and exercising governmental functions and powers
under the California Community Redevelopment Law (California Health & Safety Code Section
33000, et seq.) (CRL); and,
Whereas, the Agency had established a Low and Moderate Income Housing Fund (Housing
Fund) pursuant to CRL Section 33334.2, et seq., for the purpose of increasing, improving and
preserving the community's supply of housing available to low and moderate income
households at an affordable housing cost; and,
Whereas, in accordance with AB X 126 and AB X 127 (as amended to date, the "Dissolution
Law "), the Agency was dissolved on January 31, 2012, and the City became the successor to
the housing assets and functions of the former Agency in accordance with Health and Safety
Code ( "HSC ") Section 34176; and,
Whereas, in its capacity as housing successor, the City holds the Housing Fund monies in the
Low and Moderate Income Housing Asset Fund ( LMIHAF); and,
Whereas, the City also possesses funds from the City's Affordable Housing Fund (Fund 106)
that are unrelated to the Housing Fund monies formerly held by the Agency; and,
Whereas, Section 34176.1 of the HSC requires certain expenditures from the LMIHAF to be for
the development of housing affordable to low and very low income households; and,
Whereas, concurrently herewith, the City is approving a Disposition, Development and Loan
Agreement (DDLA) with Lake Elsinore CCR LLC, (Developer), which provides for the disposition
of approximately 5.3 acres of real property in the vicinity of Mission Trail owned by the City for
the development of 81 two- and three- bedroom units, 80 of which will be restricted for
occupancy by and available at affordable rent to low and very low income households (Project);
and,
Whereas, in addition to the financing provided in the DDLA, the Developer has requested a
commitment of additional Fund 106 monies and a loan of LMIHAF monies to provide
construction and permanent financing for the Project, in addition to tax credit and other financing
to be obtained by the Developer from third parties; and,
Whereas, no other reasonable means of private or commercial financing of the Project are
available to the Developer other than the financial assistance sought through the City.
CC Reso No. 2016 - 118
Page 2 of 3
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE DOES
HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS:
Section 1. The foregoing recitals are true and correct and are incorporated as substantive
findings of the Agency by this reference.
Section 2. The City Council (Council) hereby approves the Commitment Letter attached
hereto and authorizes the City Manager to execute such Commitment Letter substantially in the
form attached hereto providing financial assistance from the LMIHAF in an amount not to
exceed $7,520,000 and from Fund 106 in the amount of $695,250 to the Developer, to be used
for construction and permanent financing of an affordable housing project as set forth therein.
The City Manager is hereby authorized to modify the Commitment Letter, subject to the City
Attorney's review and approval, provided such modifications do not materially alter the business
terms set forth in the Commitment Letter. Copies of the Commitment Letter when executed
shall be placed on file in the office of the City Clerk.
Section 3. The LMIHAF and Fund 106 assistance as provided therein shall be contingent on
and subject to compliance by Developer with all conditions set forth in the Commitment Letter
and all applicable laws in connection with application of project entitlements, construction and
operation.
Section 4. The Council hereby finds and determines that the City's commitment of LMIHAF
and Fund 106 monies to the Developer for the Project is not an "approval" of a project within the
meaning of the CEQA Guidelines section 15352 and that all necessary land use entitlements
must be obtained in accordance with the City's land use regulatory process prior to conveyance
of the property and commencement of any development thereon.
Section 5. The City Manager is hereby authorized to execute on behalf of the City such further
documents and take such further actions as may be necessary or appropriate to carry out the
City's obligations pursuant to the Commitment Letter.
Section 6. The Council hereby appropriates funds in the amounts and from the City
accounts as described in the Commitment Letter to fund the City Loans as defined in the
Commitment Letter.
Section 7. The City Clerk shall certify to the adoption of this Resolution,
Section 8. This Resolution shall take immediate effect upon adoption.
Passed and Adopted this 11th day of October, 2016.
Bria Tisdale, Mayor
CC Reso No. 2016 - 118
Page 3 of 3
ATTEST:
Lena- run, CMC
Deputy City Clerk
STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss.
CITY OF LAKE ELSINORE )
I, Diana Giron, Deputy City Clerk of the City of Lake Elsinore, California, do hereby certify that
Resolution No. 2016 -118 was adopted by the City Council of the City of Lake Elsinore,
California, at the Regular meeting of October 11, 2016, and that the same was adopted by the
following vote:
AYES: Council Members Hickman, Johnson, and Manos; Mayor Pro Tern Magee and
Mayor Tisdale
NOES: None
ABSENT: None
ABSTAIN: None
Dian Qn, CMC
Deputy City Clerk
C:..1 f 01: >.
LAI-E LSI NOIRE
October 18, 2016
Mr. Todd R. Cottle
Lake Elsinore CCR LLC
c/o C & C Development Co., I,LC
14211 Yorba Street, Suite 200
Tustin, CA 92780
Re: Loan Commitment For Rental I lousing Project -- Mission Trail Affordable
Housin
Dear Mr. Cottle:
The City of Lake Elsinore (City) has approved a construction and permanent loan in
an amount not to exceed $8,215,250 (Loan) to Lake Elsinore CCR LLC or its
permitted assignee, a limited partnership in which Lake Elsinore CCR LLC or its
affiliate acts as the co- general partner, Orange Housing Development Corporation or
its affiliate acts as managing general partner, and with such tax credit limited partners
as may invest in the Project (Developer), for the above - referenced project. Seven
Million Five flundred Thousand Dollars ($7,520,000) of the Loan will be funded
from the City's "SARDA Housing Fund," which consists of Low and Moderate
Income Housing Asset Fund monies, and $695,250 of the Loan will be funded from
the City's "Affordable Housing Fund." Proceeds of the Loan are to be used to
acquire property and construct an approximately eighty -one (81) unit apartment
building (Project) located on Mission Trail in the City (Property).
Disbursement of the proceeds of the Loan and consummation of the transactions
contemplated hereby are conditioned upon the negotiation and execution of one or
more loan agreements and related documents on terms and conditions acceptable to
City.
1. TERMS OF THE LOAN. Principal terms of the Loan will include, but not
be limited to, the following:
a. The maximum principal amount of the Loan shall be $8,215,250. The
outstanding principal balance of the Loan shall bear interest at one -half
percent (0.5 %) per annum simple interest. The Loan shall be due and
payable in 55 years from the completion of construction of the Project.
Payments of principal and interest shall be paid from residual receipts,
with 50% of residual receipts to be disbursed to City and any other
95'1.674.3124 subordinate lenders, pro rata based on the amount of each subordinate
130 `. N!A114 ` 11"'' lender's loan, in payment thereof. Residual receipts shall mean the
lAK': 11siNOil , ` 92,`53' effective gross rental income from the improvements, less actual,
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Lake Elsinore CCR LLC
Page 2
reasonable and customary costs, fees and expenses of operation
directly attributable to the improvements, including, but not limited, to
the following: maintenance; alterations; taxes; landscaping; common
utilities; premiums for property damage and liability insurance; any
annual license or certificate of occupancy fees required for operation
of the Project; security services; advertising and marketing; debt
service on subordinate loan(s) not payable out of residual receipts or as
otherwise approved by the City Manager; debt service on superior
loans providing construction or permanent funding to the Project
approved as part of the loan closing process and loans refinancing such
debt with no "cash out" to the Developer; a property management fee;
a general partner management fee; an asset management fee, deposits
into a replacement reserve; deposits into an operating reserve; resident
service costs; payment of any Deferred Developer Fee; payment of
principal or interest on any indebtedness of Developer to any affiliate
of Developer or partner of Developer to repay completion and
operating deficit loans relating to the Project (provided that such loans
and repayment are permitted by the agreements and programs
governing debt and equity invested in the Project); partner loans from
the partners of the Borrower (provided that such loans and repayment
are permitted by the agreements and programs governing debt and
equity invested in the Project); tax credit adjusters as set forth in the
Developer's partnership agreement; payments of deductibles in
connection with casualty insurance claims not paid from reserves; the
amount of uninsured losses actually replaced, repaired or restored, and
not paid from reserves; and other ordinary and reasonable operating
expenses not listed above. All fees and costs (including, without
limitation, general partner management fees, developer fees and
deferred developer fee) are to be as outlined in the financial pro forma
provided by the Developer to the City dated as of September 12, 2016.
Any revisions to such fees and costs shall be reasonably approved by
the City Manager as part of the loan closing process.
b. The Loan shall be evidenced by one or more Promissory Note(s) and
shall be secured by one or more Deed(s) of Trust in a form acceptable
to City. The Deed of Trust shall be recorded against the Property in a
lien position subordinate to the commercial construction lenders to the
Project and any permanent financing provided by a commercial lender
and approved as part of the loan closing process provided that the City
receives customary subordinate lender protections. In addition, one or
more City regulatory agreements restricting occupancy of no more
than 49% of the Project apartment units to persons of very Iow and
low income (as determined in accordance with California Health &
Safety Code Sections 50105 and 50079.5, respectively) at an
Lake Elsinore CCR LLC
Page 3
affordable rent (as determined in accordance with California Health &
Safety Code Section 50053(b)) for the longest feasible time, but no
less than 55 years from the date of initial occupancy, will be recorded
prior to the disbursement of the City funds. Twenty -one (21) units
shall be restricted to occupancy by very low income households at an
affordable rent, and nineteen (19) shall be restricted to occupancy by
low income households at an affordable rent. In the event the land use
approvals require a change to the allocation of units restricted to
occupancy by low and very low income households, Developer and
City agree to negotiate appropriate allocations between low and very
low income households in good faith, which such revised unit
restrictions shall be approved by the City Council and acceptable to
other lenders and the investor to the Project.
c, City shall be furnished with evidence that the Project has received all
required approvals from all applicable governmental bodies and
agencies. Such approvals shall include, but not be limited to, ready to
issue building permit letters.
d. "All risk" (special perils) property insurance, including coverage
during the course of construction and, if the property is in a flood zone
designated for mandatory flood insurance, coverage for the peril of
flood, shall be fumished in an amount sufficient to rebuild or replace
the improvements at replacement cost new. A policy shall be issued by
an insurance company acceptable to City and shall name City as a loss
payee. Developer shall furnish or cause to be furnished to City, and
Developer shall ensure that the Project contractor furnishes or causes
to be furnished to City, general liability insurance policies equivalent
in coverage scope to an ISO CG 00 01 10 93 form in an amount of at
least $5,000,000 per occurrence. Each policy shall name City and its
respective boards, commissions, officials, employees, and agents as
additional insureds on an endorsement equivalent in coverage scope to
an ISO 20 10 11 85 that includes coverage for both ongoing and
completed operations, provided the endorsement is commercially
available from the Developer's insurance underwriter. All insurance
shall be subject to such other conditions as may be required by the
City Risk Manager.
e, Developer shall obtain surety regarding the payment of the loan and
completion of construction as is reasonably .approved by City,
construction lender and investor in such amount as is reasonably
required by construction lender and investor. The City shall be a
named insured on such surety.
Lake Elsinore CCR LLC
Page 4
f. The Loans shall be non - recourse.
g. City shall be provided with one or more ALTA Policies of Lender's
Title Insurance in the amount of the Loan secured by the Property
showing fee title vested in Developer and including such endorsements
as reasonably requested by City.
h. Developer shall provide evidence, satisfactory to City, of its
compliance with all applicable and reasonable City requirements.
i. Construction of the Project (as evidenced by the issuance of Notice to
Proceed) shall commence within the time frame which satisfies the
requirements of all programs providing funding for the Project. Should
construction not commence by such date, City shall have the right to
terminate the City Loan Agreement and /or the commitment for the
Loan described herein unless delay is due to City's delays.
j. City shall reasonably approve the tax credit investor and the terms of
its investment in the Project. Any additional funds generated by
Developer through enhanced tax credit equity rates will reduce the
amount of the Loan, but only to the extent that such additional funds
result in net savings to the Project and only after reduction of any
deferred developer fee to an amount not less than $250,000.
k. Construction must be completed and a Certificate of Occupancy issued
within twenty -four (24) months from the start of construction or such
other date as may be approved in writing by CDLAC, City and any
other provider of funding for the project, subject to any permitted
extension provided by the senior construction lender and the investor.
1. Loan proceeds will be disbursed in accordance with a disbursement
schedule to be finalized before Loan closing.
m. The type of units constructed and their restrictions, and the amount and
terms of other financing, shall not differ substantially from those
approved by City as of the date hereof
n. Developer shall pay an annual monitoring fee to City of $60 per
restricted unit per annum, as such amount may be increased by 3.0%
per annum.
o. A portion of the Loan shall be used to repay in full any
predevelopment loan made by the City to the Developer in connection
with the Project.
Lake Elsinore CCR LLC
Page 5
2. CONDITIONS PRECEDENT TO DISBURSEMENT OF THE LOAN:
a. The Loan commitment described herein is expressly conditioned upon
Developer's demonstration, to the satisfaction of City, of receipt of
such financing as is necessary and sufficient to construct and operate
the Project in a financially feasible manner, including, without
limitation, binding legal agreements for (i) construction financing; (ii)
Developer application for and receipt of an allocation of Tax Exempt
Bonds from the California Debt Limit Allocation Committee
( CDLAC) and of Low Income Tax Credits from the California Tax
Credit Allocation Committee (TCAC), and purchase thereof by a
qualified investor(s); and (iii) any additional permanent financing
and/or operating subsidies in an aggregate amount sufficient to repay
the construction financing and operate the project in a manner that
results in sufficient cash flow to pay for customary maintenance and
operation of the project, including all required debt payments.
b. Funding of the Loan is conditioned upon submission of draw requests
accompanied by satisfactory evidence of incurrence of approved
construction and related costs of rehabilitation of the units.
c. Funding of the Loan and other construction financing shall occur by
the outside closing date imposed by CDLAC for the tax- exempt bonds
that will finance the senior construction loan for the Project, or this
Commitment or the Loan agreement (if any) shall be automatically
terminated and of no further force and effect, except if the City causes
such delay, in which case this Commitment or the City Loan
agreement (if any) remains in place and the Developer will reapply to
CDLAC for tax - exempt bond allocation for the Project. If CDLAC
approval is not obtained within eighteen months of the date of such re-
application, the Loan Agreement shall automatically terminate and be
of no further force and effect.
d. This commitment and any loan agreement(s) to be entered into are
expressly conditioned upon compliance with CEQA and all other
applicable laws.
e. The Loan commitment described herein is expressly conditioned upon
approval of the final loan agreement(s) and all necessary attachments
thereto (including, but not limited to, promissory note(s), deed(s) of
trust, and regulatory agreement) by the City Manager, and the
preparation, execution and delivery of such documentation in form and
Lake Elsinore CCR LLC
Page 6
substance satisfactory to the City Manager and City Attorney
incorporating substantially the terms and conditions outlined or
referred to above plus the customary terms and conditions of a City
loan of this type.
f. This commitment and any loan agreement to be entered into is
expressly conditioned upon the execution by Developer's construction
lender(s) of a subordination agreement and /or an intercreditor
agreement, with such agreement(s) in such form as is acceptable to the
City Manager and City Attorney, pursuant to which City subordinates
the lien(s) of its Deed(s) of Trust and regulatory agreement(s) to the
lien(s) of the deed(s) of trust securing the construction lender's loan.
g. The Loan commitment described herein is expressly conditioned upon
the Developer agreeing to additional covenants relating to property
maintenance and funding and expenditure from reserve accounts to be
set forth in a Loan agreement executed by the Developer and City.
3. DUE ORGANIZATION: Developer warrants that it is, and at closing of the
loan it or its approved assignee will be, duly organized and authorized to enter
into any documents evidencing and securing the Loan and that evidence in the
form of corporate resolutions and the like, reasonably acceptable to City, will
be provided. Developer shall furnish such additional evidences, assurances,
certifications, acknowledgments, instruments, documents or other items as
City may request to evidence Developer's authority to enter into any
documents evidencing and securing the Loan.
4. ACCURACY OF INFORMATION: City is relying on the information in
the documents furnished to it by Developer in making this Loan commitment,
including, without limitation, those documents describing the Project and the
proposed financing therefore. Developer represents and warrants to City that
all information heretofore provided by it is accurate in all material respects
and agrees and acknowledges that the commitment described herein is solely
for the Project as described in those documents.
5. APPLICABLE LAW: This Commitment Letter is made pursuant to, and
shall be construed and governed by the laws of California and the United
States.
6. NO OTHER AGREEMENTS: This Commitment Letter supersedes and
cancels all other discussions, representations and agreements, which may exist
between Developer and City regarding the Loan. This Commitment Letter is
not assignable by Developer except in accordance with the terms set forth
herein and upon the prior written consent of City and any such attempted
Lake Elsinore CCR LLC
Page 7
assignment is void. At the closing of the Loan, this Commitment Letter will
merge into and be superseded by the documents evidencing and securing the
Loan.
7. TIME OF ESSENCE: Time is of the essence of each and every obligation
set forth in this Commitment Letter.
The Acceptance below must be executed and delivered to City no later than October
31, 2016. If the execution of the Loan agreement (which shall not include funding of
the Loan) does not occur by the earlier of either (a) the outside closing date imposed
by the California Debt Limit Allocation Committee for the issuance of the tax - exempt
bonds that will finance the senior construction loan for the Project, or (b) December
31, 2019, this Commitment Letter and the Loan commitment described herein shall
be automatically terminated and of no further force and effect.
Sincerely,
City of Lake Elsinore
By' -
Grant es, City Manager
ACCEPTANCE:
Each individual signing on behalf of Developer acknowledges that he or she has read
and understood all of the terms and conditions of this Commitment Letter, and
accepts all of them as written above.
Lake Elsinore CCR LLC,
a California limited liability company
Todd R. Cottle, Managing Member