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HomeMy WebLinkAbout2006 CON CDC Willow Partners - 2nd Amendment Term SheetChairman Nick Inzunza Members Ron Morrison Louie Natividad Frank Parra Rosalie Zarate Executive Director Chris Zapata Preserving History... Shaping the Future Community Development Commission of National City October 2, 2006 Davis Slajchert, Willow Partners, LLC. 310 N. Westlake Boulevard, Ste. 210 Westlake Village, CA 91362 Re: Second Amendment to Term Sheet for CDC Loan Dear Mr. Slajchert: I am pleased to offer the revised loan amount as described in this Second Amendment to the Term Sheet dated June 15, 2005, for the Plaza City Apartments project, which is proposed at 1535 East Plaza Boulevard in National City, CA. Pursuant to the approval of the National City Community Development Commission Board, the Term Sheet shall herein be amended as follows: CDC Loan Principal Amount: CDC will make a loan to the Borrower in the amount of $3,422,000 (the "CDC Loan"). Provided, however, that Borrower shall apply for and use Borrower's best efforts to obtain a conditional grant or loan which may be awarded by the Federal Home Loan Bank Affordable Housing Program for the Project (the "ARP Loan"), the terms and conditions of which shall be acceptable to the Executive Director of the CDC or designee. Except as modified by this Amendment, the terms and conditions of the Term Sheet dated June 15, 2005 remain unchanged and in full force and effect. Sincerel CsZa Executi -. i irector 1 of 2 ACCEPTANCE / Accepted this sr day of October 2006, at Z(% k e l/ t, California. By executing below, the undersigned warrants that he/she has full . complete authority and power to execute this Second Amendment on behalf of Willow Partners, LLC, a California Limited Liability Company. Borrower: Willow Partners, LLC, a California Limited Liability Company By: Print N Its: Member avis 2 of 2 RESOLUTION NO. 2006 — 202 RESOLUTION OF THE COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF NATIONAL CITY AUTHORIZING THE CHAIRMAN TO EXECUTE A SECOND AMENDMENT TO THE TERM SHEET THAT WAS ENTERED INTO BETWEEN WILLOW PARTNERS, LLC AND THE COMMUNITY DEVELOPMENT COMMISSION OF NATIONAL CITY, AND APPROPRIATING $722,000 FROM THE PROJECT AREA HOUSING FUND FOR THE PLAZA APARTMENT PROJECT LOCATED AT 1535 EAST PLAZA BOULEVARD WHEREAS, on June 15, 2005, a Term Sheet for a CDC Loan was entered into between Willow Partners, LLC, and the CDC for development of the 80-unit Plaza Apartment senior housing project at 1535 East Plaza Boulevard; and WHEREAS, pursuant to the Term Sheet, the CDC shall provide a long term low interest loan of $2,700,000 to assist Willow in developing the project; and WHEREAS, on October 25, 2005, an Amended Term Sheet was approved, which provided an initial payment of $1,000,000 to Willow to assist them in the acquisition of the subject property; and WHEREAS, due to an increase in construction and finance costs in the market place, the CDC has been requested to increase the loan amount for the project by $722,000 for a total of $3,422,000; and WHEREAS, funding for the additional loan amount is available in the Redevelopment Project Area Housing Fund. NOW, THEREFORE, BE IT RESOLVED, that the Community Development Commission of the City of National City hereby authorizes the Chairman to execute a Second Amendment to the Term Sheet between Willow Partners, LLC, and the CDC for development of the 80-unit Plaza Apartment senior housing project at 1535 East Plaza Boulevard, pursuant to which the loan amount for the project from the CDC shall increase by $722,000 for a total of $3,422,000. BE IT FURTHER RESOLVED that the additional loan amount is appropriated from the Redevelopment Project Area Housing Fund. ATTF�$T: PASSED and ADOPTED this 19th day of September, 2006. Nick Inzun k',Chairman APPROVED AS TO FORM: ris Za, Secretary George H. Eiser, III Legal Counsel Passed and adopted by the Community Development Commission of National City, California, on September 19, 2006, by the following vote, to -wit: Ayes: Councilmembers Morrison, Natividad, Parra, Zarate. Nays: None. Absent: None. Inzunza. Abstain: None. AUTHENTICATED BY: NICK INZUNZA Chairman Corry n) nity Development Commission 1' Secretary Com ty Development Commission By: Deputy I HEREBY CERTIFY that the above and foregoing is a full, true and correct copy of RESOLUTION NO. 2006-202 of the Community Development Commission of the City of National City, California, passed and adopted on September 19, 2006. Secretary Community Development Commission By: Deputy City of National City, California COMMUNITY DEVELOPMENT COMMISSION AGENDA STATEMENT MEETING DATE September 19, 2006 AGENDA ITEM NO. 20 ITEM TITLE Resolution approving a Second Amendment to the Term Sheet that was entered into between Willow Partners, LLC and the Community Development Commission (CDC) of National City, and appropriating $722,000 from the Project Area Housing Fund for the Plaza Apartment Project located at 1535 East Plaza Boulevard in National City_ CA PREPARED BY Xavier Del Valle Senior Project Manager DEPARTMENT Community Development Commission EXPLANATION On June 15, 2005, a Term Sheet for CDC Loan was entered into between the Willow Partners, LLC, and CDC for the development of an 80-unit senior housing project at 1535 East Plaza Boulevard. Under the original Term Sheet, the CDC provides a long term low interest loan of $2,700,000 to Willow to assist them in developing the affordable housing senior project. In June 2006, the Project was awarded low income tax credits, and thereafter Willow formally requested that the CDC provide an additional loan of $1,000,000 for the project. Willow asserted that since the project was approved nearly a year ago, there has been a significant increase in construction and finance costs in the market place. KMA, the CDC's on -call consultant, reviewed Willow's updated pro forma, and determined that the assistance should not exceed $722,000. Environmental Review On June 6, 2005, Conditional Use Permit (CUP) 2005-08 was approved by the Planning Commission for the proposed 80-unit senior housing complex. The project was Categorically Exempt under Class Section 15302 of CEQA. Financial Statement Under the terms of the Amended Term Sheet, the CDC shall provide a long term low interest loan of $2,700,000 to Willow for the project. If the additional subsidy is approved, the loan shall increase by $722,000 for a total of $3,422,000. The additional $722,000 would be appropriated from the Project Area Housing Fund to implement the project. Of note, the CDC has provided an initial payment of $1,000,000 to assist Willow in acquisition of the subject property. l STAFF RECOMMENDATION Approve a Second Amendment to the Term Sheet that was entered into between Willow and the CDC, and appropriate $722,000 from the Project Area Housing Fund to implement the Plaza Apartment Project located at 1535 East Plaza Boulevard in National City, CA J IATTACHMENTS 1. Background Report 2. Resolution 3. 2nd Amendment to Term Sheet for CDC Loan Resolution No. aoob -a 2 ca;& - I1p A-200 (9/80) RESOLUTION NO. 2006 — RESOLUTION OF THE COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF NATIONAL CITY AUTHORIZING THE CHAIRMAN TO EXECUTE A SECOND AMENDMENT TO THE TERM SHEET THAT WAS ENTERED INTO BETWEEN WILLOW PARTNERS, LLC AND THE COMMUNITY DEVELOPMENT COMMISSION OF NATIONAL CITY, AND APPROPRIATING $722,000 FROM THE PROJECT AREA HOUSING FUND FOR THE PLAZA APARTMENT PROJECT LOCATED AT 1535 EAST PLAZA BOULEVARD WHEREAS, on June 15, 2005, a Term Sheet for a CDC Loan was entered into between Willow Partners, LLC, and the CDC for development of the 80-unit Plaza Apartment senior housing project at 1535 East Plaza Boulevard; and WHEREAS, pursuant to the Term Sheet, the CDC shall provide a long term low interest loan of $2,700,000 to assist Willow in developing the project; and WHEREAS, on October 25, 2005, an Amended Term Sheet was approved, which provided an initial payment of $1,000,000 to Willow to assist them in the acquisition of the subject property; and WHEREAS, due to an increase in construction and finance costs in the market place, the CDC has been requested to increase the loan amount for the project by $722,000 for a total of $3,422,000; and WHEREAS, funding for the additional loan amount is available in the Redevelopment Project Area Housing Fund. NOW, THEREFORE, BE IT RESOLVED, that the Community Development Commission of the City of National City hereby authorizes the Chairman to execute a Second Amendment to the Term Sheet between Willow Partners, LLC, and the CDC for development of the 80-unit Plaza Apartment senior housing project at 1535 East Plaza Boulevard, pursuant to which the loan amount for the project from the CDC shall increase by $722,000 for a total of $3,422,000. BE IT FURTHER RESOLVED that the additional loan amount is appropriated from the Redevelopment Project Area Housing Fund. PASSED and ADOPTED this 19th day of September, 2006. ATTEST: Chris Zapata, Secretary Nick Inzunza,Chairman APPROVED AS TO FORM: George H. Eiser, III Legal Counsel ATTACHMENT BACKGROUND REPORT On June 15, 2005, a Term Sheet for a CDC Loanwas entered into between the Willow Partners, LLC, and the CDC for development of an 80-unit senior housing project on a 1.68-acre parcel located at 1535 East Plaza Boulevard. The proposed tax credit project would consist of 64 one - bed room units, 16 two -bed room units, and 80 parking spaces. The units would be rent restricted for a minimum of 55-years, and would be made available for seniors (55-years or older) at income levels that range from 30% to 60% of the Area Median Income. Under the terms of the original Term Sheet, the CDC would provide a long term low interest loan of $2,700,000 to Willow to assist them in developing the project. In order for Willow to secure the CDC loan, Willow would need to obtain all the necessary funding, building permits, regulatory approvals, and have satisfied all conditions of the Term Sheet. The CDC Loan would be secured by a deed of trust made by the borrower in favor of the CDC. In July 2005, Willow submitted a Tax Credit Application, which received a perfect score and was initially approved as a recipient of the competitive 9% low income tax credits. In September 2005, Willow and the CDC were notified that the Tax Credit Committee bypassed the project, and awarded the tax credits to another County project. Soon after, Willow and the CDC attended a Tax Credit Committee meeting in Sacramento to lobby for the project and tax credits. The visit proved unsuccessful. The following provides a time line of the ensuing course of events. • On October 25, 2005, an Amended Term Sheet was approved, which provided an initial payment of $1,000,000 to Willow to assist them in the acquisition of the subject property. • On November 5, 2005, the subject property was acquired with a combination of City loan, developer equity, and a loan from Sun America, the tax credit investor. • In February 2006, demolition of the former Ha Penny Motel was completed. • In March 2006, Willow resubmitted a Tax Credit Application to the State Tax Credit Committee. • In June 2006, Willow formally requests that the CDC provide an additional loan of $1,000,000 for the project. Willow asserted that since the project was approved nearly a year ago, there has been a significant increase in construction and finance costs in the market place. KMA, the CDC's on -call consultant, reviewed Willow's updated pro forma, and determined that the assistance should not exceed $722,000. Willow's request was reduced to $800,000, which is $78,000 more than staffs recommendation. The variation is primarily due to a difference in opinion regarding the financing costs associated with developing the project. • In June 2006, Willow and the CDC were notified that the project was awarded the tax credits, which amounts to $11,358,330. Under the terms of the Second Amendment to the Term Sheet, the CDC loan would increase by $722,000 for a total of $3,422,000. The additional $722,000 would be appropriated from the Project Area Housing Fund for the project. Of note, the CDC has provided an initial payment of $1,000,000 to assist Willow in acquisition of the subject property. The Time of Funding shall not change from the Amended Term Sheet that was entered into on October 25, 2005. As set forth in the Term Sheet, the remaining loan proceeds for the project shall be dispersed as follows: • 33% of the CDC Loan principal amount upon receipt of all building permits necessary to complete the project; • An additional 33% of the CDC Loan principal amount upon completion of 50% of the construction of the project, as certified by the project architect; and • The remaining 33% of the CDC Loan principal amount upon completion of construction of the project, as evidenced by a final certificate of occupancy. In order to secure the tax credits, Willow shall need to provide to the Tax Credit Committee by November 20, 2006, evidence of issuance of building permits along with evidence of the payment of all lender fees, and recorded deeds of trust for all construction financing and notice to proceed delivered to general contractor. Willow is working diligently in making sure that they address all the above mentioned submittal requirements. If approved, construction is slated for completion by March 2008. The benefits of the senior housing project are as follows: • The project shall provide 80 senior housing units that will be made affordable for a minimum of 55 years, and made affordable to seniors (55 years or older) at income levels that range from 30% to 60% of the Area Median Income; • The project removes the former Ha Penny Motel, an "eyesore" that received an unusually high number of calls for police service; • The project addresses the larger community need for providing additional affordable senior rental housing; • The project contributes to the redevelopment project area obligation for providing affordable housing in the community; and • The project provides an architecturally attractive building that adds stability to the area, and provides an increased customer base that would patronize area businesses. September 19, 2006 Davis Slajchert, Willow Partners, LLC. 310 N. Westlake Boulevard, Ste 210 Westlake Village, CA 91362 Re: Second Amendment to Term Sheet for CDC Loan Dear Mr. Slajchert: I am pleased to offer the revised loan amount as described in this Second Amendment to the Term Sheet for the Plaza City Apartments project, which is proposed at 1535 East Plaza Boulevard in National City, CA. Subject to the approval of the National City Community Development Commission Board, the Term Sheet shall herein be amended as follows: CDC Loan Principal Amount: CDC will make a loan to the Borrower in the amount of $3,422,000 (the "CDC Loan"). Provided, however, that Borrower shall apply for and use Borrower's best efforts to obtain a conditional grant or loan which may be awarded by the Federal Home Loan Bank Affordable Housing Program for the Project (the "AHP Loan"), the terms and conditions of which shall be acceptable to the Executive Director of the CDC or designee. Except as modified by this Amendment, the terms and conditions of the Agreement remain unchanged and in full force and effect. In the event of a conflict in the terms and conditions of the Agreement and this Addendum, the terms and conditions of this Addendum shall control. All references to the Agreement in any document shall be deemed to mean the Agreement as herein modified. Notwithstanding anything contained herein to the contrary, this Second Amendment shall not be binding upon the CDC, unless and until the transaction proposed herein is duly approved by the CDC Board. If your organization desires to pursue the transaction described herein, please sign the acceptance below and return a signed copy to my office. Sincerely, Chris Zapata Executive Director Willow Partners, L.P. Page 2 ACCEPTANCE Accepted this day of September 2006, at , California. By executing below, the undersigned warrants that he/she has full and complete authority and power to execute this Second Amendment on behalf of Willow Partners, LLC, a California Limited Liability Company. Borrower: Willow Partners, LLC, a California Limited Liability Company By: Print Name: G. Davis Slajchert Its: Member City of National City Office of the City Clerk 1243 National City Boulevard, National City, CA 91950-4397 Michael R. Della, CMC - City Clerk (619) 336-4228 Fax: (619) 336-4229 October 3, 2006 Mr. Davis Slajchert Willow Partners, LLC 310 N. Westlake Boulevard, Suite 210 Westlake Village, CA 91362 Project: National City — Second Amendment to Term Sheet for CDC Loan Resolution 2006-202 Dear Mr.Slajchert: On September 19th, 2006, the Community Development Commission of National City passed and adopted Resolution No. 2006 - 202, amending the loan Term Sheet dated June 15, 2005. We are pleased to enclose one certified copy of the Resolution for your records. Should you have any questions, please contact Mr. Chris Zapata, Executive Director, Community Development Commission at (619) 336-4240. Sincerely, Michael R. Da City Clerk MRD Enclosure cc: CDC File No. 406-2-9 ® Recycled Paper