Loading...
HomeMy WebLinkAbout09/27/1994, C-2 - HOUSING AUTHORITY LEASE ASSIGNMENT REQUEST lull^I��III�IIIIIII�I�I��I� � MEETING DATE: II pi�uil city o san _ais o��spo 9/27/94 COUNCIL AGENDA DEPORT TEM NUMBER: FROM: Ken Hampian, Assistant City Administrative Officer Prepared By: Deb Hossli, Assistant to the City Administrative Officer SUBJECT: Housing Authority Lease Assignment Request i CAO RECOMMENDATION: Approve and authorize the Mayor to execute an assignment of Agreement A-24-91-CC for City owned property located on Orcutt Road from the San Luis Obispo Non-Profit Housing Corporation to Laurel Creek Apartments, a California Limited Partnership. DISCUSSION: In mid-1991, the City executed a long term lease with the Housing Authority to construct and operate a low income housing project (for seniors and the disabled) on City owned property located on Orcutt Road (see attachment 1 for site map). As set out in the lease, the Housing Authority agreed to construct a minimum of 18 low income rental units on the site. The City, in turn, agreed to provide the property for $1 per year (see attachment 2 for original lease). The Housing Authority completed the housing project in May of this year. Now named Marvin's Gardens (and assigned the street addresses 1090 and 1092 Orcutt Road and 1105 Laurel Lane), the completed development contains twenty-four low income apartment units for elderly and disabled Housing Authority clients. The apartments are fully occupied and managed by the Housing Authority. The Housing Authority is now in the process of finalizing the financing arrangements for the project. As part of this process, the Housing Authority has requested the City to reassign the lease for the property to a limited partnership (the Laurel Creek Apartments, a California Limited Partnership - see attachment 3 for letter from Housing Authority). I As the Council will recall, the City first reassigned the lease for this property in December of 1992. At that time, the Housing Authority requested to reassign their interest in the lease to the San Luis Obispo Non-Profit Housing Corporation. This was done so that the Housing Authority (via the Non-Profit Housing Corporation) could pursue a tax credit program to finance the project. By using the tax credit program, the Housing Authority (via the Non-Profit Housing Corporation) was able to generate nearly $1.2 million toward the project's total cost of $1.95 million (the $750,000 balance will be financed with a 15 year mortgage). Reassigning the lease from the Non-Profit Housing Corporation to Laurel Creek Apartments, a California Limited Partnership, is now necessary so that the Housing Authority (via the Non-Profit Housing Corporation) can collect the $1.2 million dollars and secure the mortgage. In short, this arrangement allows the Housing Authority (via the Non-Profit Housing Corporation) to maintain control of the housing project while still taking advantage of the most favorable financing mechanisms available. �IiN����►►IVlllllllllli° IIIIIII city o� san Luis osispo COUNCIL AGENDA REPORT Page 2 Staff has reviewed the Housing Authority's request to assign the lease to the Laurel Creek Apartments, a California Limited Partnership and ConCludcd that the Limited Partnership is capable of fulfilling the terns and conditions of the Icasc agreement. As SLICII, staff recommends approval of the assignment. ATTACHMENTS: Lease Agreement I - Site Map 2 - Original Agreement 3 - Letter from Housing Authority I I i I I L housing ASSIGNMENT OF AGREEMENT A-24-91-CC BETWEEN THE CITY OF SAN LUIS OBISPO AND THE SAN LUIS OBISPO NON-PROFIT HOUSING CORPORATION, FOR CITY-OWNED PROPERTY AT 1090 AND 1092 ORCUTT ROAD AND 1105 LAUREL LANE FROM THE SAN LUIS OBISPO NON-PROFIT HOUSING CORPORATION TO LAUREL CREEK APARTMENTS, A CALIFORNIA LIMITED PARTNERSHIP Whereas, in April of 1991 the City Council deemed City owned property located at 1090 Orcutt Road as surplus to City needs, and Whereas, the City Council subsequently leased (Agreement A-24- 91-CC, hereafter referred to as the Original Lease Agreement) the 1090 Orcutt Road property to the Housing Authority of the City of San Luis Obispo for a fifty-five year period to develop an elderly and disabled housing project; and Whereas, the Housing Authority of the City of San Luis Obispo subsequently requested that the lease be assigned to the San Luis Obispo Non-Profit Housing Corporation, which was created in 1990 for the purposes of securing advantageous financing for public housing projects; and Whereas, San Luis Obispo Non-Profit Housing Corporation became the general partner in a California Limited Partnership known as Laurel Creek Apartments which subsequently secured tax credits, built and occupied a development on the site commonly known as Marvin's Gardens with street addresses now designated as 1090 and 1092 Orcutt Road, and 1105 Laurel Lane; and Whereas, the San Luis Obispo Non-Profit Housing Corporation is requesting that the lease be re-assigned to Laurel Creek Apartments, a California Limited Partnership; and Whereas, the Original Lease Agreement between the City and the Housing Authority of the City of San Luis Obispo requires written approval from the City Council for any lease assignments to insure that the successor is capable of fulfilling the terms and conditions of the Original Lease Agreement; and Whereas, the City has reviewed the performance of Laurel Creek Apartments limited partnership and concluded that the partnership is capable of fulfilling the terms and conditions of the Original Lease Agreement between the City and Housing Authority of the City of San Luis Obispo. Now, therefore, in consideration of the mutual covenants, conditions, promises, and agreements herein, the City and the San Luis Obispo Non-Profit Housing Corporation hereby agree to the following: 1. The City hereby consents to the assignment of the Original Lease Agreement with the Housing Authority of the City of San Luis Obispo for City owned property at 1090 and 1092 Orcutt Road and 1105 Laurel Lane to Laurel Creek Apartments, a California Limited Partnership for purposes of financing, managing and owning an elderly and disabled housing project. 2 . The Laurel Creek Apartments, A California Limited Partnership, hereby assumes and agrees to fulfill all terms and conditions in the Original Lease Agreement between the City and the Housing Authority of the City of San Luis Obispo, and the same shall remain in full force and effect. The Laurel Creek Apartments, a California Limited Partnership further represents and warrants that it is an eligible sponsor to carry out this project. In witness whereof this agreement has been executed by: APPROVED: City of San Luis Obispo By: Mayor Peg Pinard Laurel Creek Apartments, a California Limited Partnership By: Donald Grant, Managing General Partner ATTEST: Diane Gladwell, City Clerk APPROVED AS TO FORM: J f rg se Ci�f Attorney The San Luis Obispo Non-Profit Housing Authority Corporation hereby consents to this assignment. By: Donald Grant, President Date I:orcutt.agr ' I A .J V =Ir, QP Tk ! ,moo \\� ti-� � ?�e..� ' :V �$•'jam 1 Z a0 �a ado �D e a.P ' r.0 2 +v / J c b / I 1 c �� IN .�. SRC UTr � = � rJC CQ Np- 34 or —47 Sal L Ellis OUIS130 Vacant Department of Community Development Laurel & CrCutt M Palm S116611POat O!IICa 6c: 321, San Lula ODlapo, CA GUCe Public WCrks ACREEITNT A-24-91-CC CITY OF SAN LUIS OBISPO Lease-Agreement with the Housing Authority for Property Located at 1090 Orcutt Road in San Luis Obispo, California This agreement is made and entered into this 29tii day of April , 1991, by and between the Housing Authority of the City of San Luis Obispo, a public corporation, hereinafter referred to as "Housing Authority" and the City of San Luis Obispo, a charter municipal corporation, hereinafter referred to as "City" . WITNESSETH: WHEREAS, the City Council has conceptually agreed to surplus City-owned property located at 1090 Orcutt Road in San Luis Obispo; WHEREAS, the City Council .has conceptually agreed to enter into a long term lease with the Housing Authority for the construction and operation of an elderly and low income housing project on the 1090 Orcutt Road property; WHEREAS, use of the 1090 Orcutt Roadproperty for a low income housing project is consistent with goals set-out in the City ' s Housing Element and Property Management Manual; WHEREAS, it has been determined that use of the 1090 Orcutt Road property for elderly and handicapped low income housing conforms with the City's General Plan; NOW, THEREFORE, IT IS AGREED, by and between the parties hereto as follows: I. City agrees: A. To lease property located at 1090 Orcutt Road, San Luis Obispo, California as described in Exhibit "A" (Assessor ' s Parcel Number: 004-961-047) to the Housing Authority for a period of fifty-five years commencing upon the execution of this agreement at a cost of $1 per year payable on July 1 of each year. B. To negotiate in good faith toward a mutually acceptable extension to this agreement with the Housing Authority at the end of the fifty-five year term. The sole purpose of an extension under this agreement shall be to provide for the continuation of affordable housing to lower income families. II. Housing Authority agrees: A. To secure permanent financing for the construction and operation of a minimum of eighteen elderly and handicapped low income housing units on the 1090 Orcutt ATTACHMENT 2 A-24-91-cc Road site. Fee title to the property shall not be subrogated in any way to any such financing. B. To develop the project in accordance with the development review policies and regulations of the City of San Luis Obispo. C. To adhere to the easements for City utilities as outlined in Exhibit "B" . D. To complete the development of the project within two years of securing a building permit from the City of San Luis Obispo. If a building permit .is not obtained within five years following the execution of this lease agreement, this agreement shall be considered void.. E. To operate the project during the initial term as a low income housing project. All housing units will be rented to households with incomes at or below 80$ of the County's median income level (adjusted for household size) as established by the Federal Department of Housing and Urban Development (HUD) or its successor agency. Reports verifying low income household occupancy of the project wi11 be provided to the City by January 31 of each year throughout the term of this agreement. F. To obey all laws, rules, and regulations, whether municipal, State or Federal, applicable to the operation of the project as a low income housing project. G. To maintain insurance coverage throughout the term of the lease as described in Exhibit "C" . III. General: A. Transfer of the Development Express prior written approval of the City Council is required for the sale, transfer, assignment or conveyance of the project by the Housing Authority. Such approval shall not be unreasonably withheld, provided that the following terms are incorporated into any transfer agreement: 1. The Housing Authority successor in interest agrees to assume the obligations relating to this agreement for the duration of the agreement. 2. The Housing Authority successor in interest is an eligible sponsor and demonstrates to the satisfaction of . the City that it can successfully own and operate a low income housing project. B. Expiration of Acrreement Upon expiration of this agreement or any extension, the 1090 Orcutt Road site and all improveme•.ts made to the site will become the sole ,'-.2-7 property of the City. The City has no legal obligation for reimbursement or compensation of any. .:kind to the Housing Authority. At City ' s sole option and request, Housing Authority shall execute a quit claim deed to City conveying any and all right, title and interest in the property to City upon expiration. C. Violation of Agreement In the event that the Housing Authority violates any of the terms of this agreement, the City will give written notice to the Housing Authority by registered or certified mail . If such violation is not corrected to the satisfaction of the City within thirty days after the date of such notice is mailed (or within a time period the City, at its sole discretion, may permit) the City may without further prior notice, declare in writing a default under the agreement. Under any such declaration of default, the City may apply to any court, State or Federal, for specific performance of this agreement; for an injunction against any violation of this agreement by the Housing Authority, requiring repayment of excess rentals to tenants; requesting judicial appointment of a receiver to take over and operate the property in accordance with the terms of this agreement; or for such other relief as the City deems appropriate, it being agreed by the Housing Authority that the injury to the . City arising from a default under any terms of the agreement would be irreparable and that it would be extremely difficult to ascertain the amount if compensation to the City which would be adequate relief in light of the purpose of the project. D. Amendment. This agreement shall not be modified or amended except in writing. No such amendment shall be effective without prior approval of the city and Housing Authority. E. Partial Invaliditv If any provisions of this agreement are deemed invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not be affected or impaired. F. Bindings on Successors This agreement shall bind the respective parties hereto, their legal representatives, executors, administrators, successors or assigns . The Housing Authority may not assign this agreement or any of its obligations hereunder voluntarily or by operation of law, without prior approval of the City. G. Governing Law. This agreement shall be construed in accordance with, and governed by, the laws of the State of California, unless otherwise governed by Federal Law. 6-7,Z-r H. Hold Harmless. Neither the City nor any officer, agent or employee thereof shall be responsible for any damage or liability occurring by reason of any act or omission of the Housing Authority or its employees, agents, associates, contractors, sub-contractors, materialmen, laborers or any other persons, firms, or corporations furnishing or supplying work, service, materialsor supplies in connection with the Housing Authority ' s performance of this agreement.. The Housing Authority agrees to fully indemnify, defend and hold the City harmless from any liability imposed, including attorney ' s fees and costs, for any injury to person or property occurring 'by reason of any act or omission of the Housing Authority arising out of this agreement. I. Attorneys Fees. In the event of any controversy, claim or dispute between the parties arising out of or relating to this agreement or breach thereof., the prevailing party shall be entitled to recover from the losing party reasonable expenses, attorneys fees and costs. J. Recordation. This agreement shall be acknowledged by each of the parties and recorded in the oficial records of the County of San Luis Obispo. This agreement shall terminate on April 29, 2046, fifty-five years following the execution of this agreement, unless further extended by written mutual agreement of the parties. IN WITNESS WHEREOF this agreement has been executed by: THE HOUSING AUTHORITY OF SAN LUIS OBISPO By: ., APPROV CITY OF SAN LUISBISPO By: ATTEST: MAYOR RON DUNIN . CITY r,"LERK PAM V GE APPROVED AS TO FORM: 5 I AT RNE ` JEF JORGENSEN dh\HA-AGRE ��` DESCRIPTION THAT PORTION OF LOT 3 IN SECTION 1 OF TOWNSHIP 31 SOUTH, RANGE 12 EAST, MOUNT DIABLO MERIDIAN, IN THE CITY OF SAN LUIS OBISPO, COUNTYOF SAN LUIS OBISPO, STATE OF CALIFORNIA, ACCORDING TO THE OFFICIAL PLAT OF SAID LAND FILED IN THE DISTRICT LAND OFFICE DECEMBER 13 , 1275 DESCRIBED AS FOLLOWS : BEGINNING AT THE INTERSECTION OF THE CENTER LINE OF ORCUTT ROAD, 40 FEET WIDE, WITH THE CENTER LINE OF LAUREL LANE, 40 FEET WIDE; THENCE ALONG THE CENTERLINE OF SAID LAUREL LANE, NORTH 300 .40 ' EAST, 303 . 74 FEET; THENCE SOUTH 590 20 ' EAST 38 . 00 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING SOUTH 590 20 ' EAST 100 . 00 FEET; THENCE SOUTH 300 40 ' WEST 39 . 89 FEET, TO THE NORTHERLY LINE OF THE LAND DESCRIBED IN THE DEED TO HENRY A. BERNARD, ET UX . , RECORDED MAY 22, 1953 IN BOOK 711, PAGE 62 OF OFFICIAL RECORDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY; THENCE ALONG SAID NORTHERLY LINE, SOUTH 820 17 ' EAST 182 . 52 FEET TO THE NORTHEASTERLY CORNER OF SAID LAND OF BERNARD; THENCE ALONG THE EASTERLY LINE OF SAID LAND OF BERNARD AS FOLLOWS : FROM A TANGENT LINE BEARING SOUTH 190 56 ' WEST, SOUTHERLY ALONG A CURVE CONCAVE EASTERLY HAVING A RADIUS OF 175 FEET, THROUGH A CENTRAL ANGLE OF 200 181 , AN ARC DISTANCE OF 62 FEET; TANGENT TO SAID CURVE, SOUTH 00 22 ' EAST 28 . 40 FEET AND SOUTHWESTERLY ALONG A TANGENT CURVE, CONCAVE NORTHWESTERLY HAVING A RADIUS OF 20 FEET, THROUGH A CENTRAL ANGLE OF 900, AN ARC DISTANCE OF 31 . 42 FEET TO THE NORTHERLY LINE OF ORCUTT ROAD, 40 FEET WIDE; THENCE ALONG SAID ORCUTT ROAD, NORTH 890 38 ' EAST 90 FEET TO THE WESTERLY TERMINUS OF THE COURSE RECITED AS HAVING A BEARING AND LENGTH OF SOUTH 890 38 ' WEST, 197 . 00 FEET IN THE DEED TO CHARLES E. FREEMAN AND WIFE, RECORDED MAY 11 1957, AS INSTRUMENT NO . 6777, IN BOOK 8901 PAGE 85 OF OFFICIAL RECORDS, IN THE OFFICE OF THE SAID COUNTY RECORDER; THENCE ALONG THE WESTERLY BOUNDARY OF THE LAND DESCRIBED IN SAID DEED TO FREEMAN AS FOLLOWS : NORTHWESTERLY ALONG A CURVE CONCAVE NORTHEASTERLY HAVING A RADIUS OF 20 FEET, THROUGH A CENTRAL ANGLE OF 900, AN ARC DISTANCE OF 31 . 42 FEET; TANGENT TO SAID CURVE NORTH 00 22 ' WEST 28 . 40 FEET, AND NORTHEASTERLY ALONG A TANGENT CURVE CONCAVE SOUTHEASTERLY HAVING A RADIUS OF 175 FEET THROUGH A CENTRAL ANGLE OF 31°, AN ARC DISTANCE OF 67 . 63 FEET; THENCE NORTHEASTERLY IN A DIRECT LINE TO THE MOST SOUTHERLY CORNER OF LOT 7 IN BLOCK A OF TRACT NO. 208, AS SHOWN ON MAP RECORDED IN BOOK 6, PAGE 49 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY; THENCE ALONG THE SOUTHWESTERLY LINE OF SAID BLOCK A. NORTH 590 '?0l WEST 312 . 70 FEET TO THE MOST WESTERLY CORNER OF LOT 43 IN SAID BLOCK A; THENCE SOUTH 300 40 ' WEST 90 . 69 FEET TO THE TRUE POINT OF BEGINNING . EXHIBIT "A" RECEIVED SEP 6 1994 CITY OF SAN LUIS 081SP0 COMMUNITY OEVELOPv' September 2, 1994 Nom. John Dunn Chief Administrative Officer City of San Luis Obispo P.O. Box 8100 San Luis Obispo, CA 93406-8100 Dear John: We have one retraining item to be resolved relative to Marvin's Gardens Apartments as constructed on the City owned parcel of land at 1090 Orcutt Road. 'I':lat is the placement of the mortgage on the property. -iortgaging of assisted rental housing is always somewhat of a problem, with a variety of concerns responsible for the difficulty. The problem has been ::dgnified in this instance by the fact that the development is built on leased :.dnd and the financial markets prefer fee ownership. Phus Carol Hatley, our Director of Finance, and I have worked diligently for the past several months working to achieve the best terms and with as little exposure as possible to the Housing Authority, the Non-Profit and the City of San Luis Obispo. We have crane to an arrangement with First Bank of San Luis Obispo that involves 15-year mortgage, 20 year amortization, at an interest rate of 8.5% with that rate fixed for the first 10 years of the mortgage. We consider this a breakthrough arrangement in that this is the first time that a local banking establishment will have provided mortgage financing on one of our developments. Previously we have had to rely on specialized consortiums with offices in San Francisco and Los Angeles with high placement and legal fees. However, this mortgage cannot be put into place until the lease on the land with ,-Ile San Luis Obispo Non-Profit Housing Corporation is assigned by the City to laurel Creek Apartments, a California Limited Partnership. Please permit me to remind you of the history and the reason for the assignment: (n April 29, 1991 via Resolution No. 6966 (1991 Series) the City Council agreed =� adopt a lease agreement with the Housing Authority for city-owned property located at 1090 Orcutt Road. That agreement (Agreement A-24-91-CC) was necessary }.c provide for the "construction and operation of elderly and handicapped housing" ATTA r,H1MENT Section III of the lease itself reads as follows: A. Transfer of the Development. Express prior written approval of the City Council is required for the sale, transfer, assignment, or conveyance of the project by the Housing Authority. Such approval shall not be unreasonably withheld, provided that the following terms are incorporated' into any transfer agreement. 1. The Housing Authority successor in interest agrees to assume the obligations relating to this agreement for the duration of the agreement. 2. The Housing Authority successor in interest is an eligible sponsor and demonstrates to the satisfaction of the City that it can successfully own and operate a low income housing project. At the time of the lease we made it clear to the City that while the Housing Authority would be the lessee the City would be asked at some point to transfer the lease to San Luis Obispo Non-Profit Housing Corporation. That point would be when we were certain as to how the land would be developed. There are a variety of legal and business reasons to use a Non-Profit as a developer instead of a public agency. Those reasons are magnified when one selects the tax credit program, as established under the Internal Revenue Service Act of 1986, as your major financing mechanism. A non-profit can be the general partner in a limited partnership arrangement, a public agency cannot. Thus in December 1992 the Housing Authority went before the City Council and, in keeping with the provisions of Section III-A of the lease, asked that the lease be assigned to the San Luis Obispo Non-Profit Housing Corporation. That was accomplished through the consent agenda. As per the completed product the Non-Profit Housing Corporation designed, built and occupied the 24 units of assisted housing with elderly, disabled and handicapped tenants as per the conditions of the initial lease. The Non-Profit formed a partnership, Laurel Creek Apartments (a California Limited Partnership) chiefly for the purpose of syndicating the available tax credits to limited partners. That has been done and some $1,190,814 in cash proceeds have been earned by selling the tax credits. That leaves the remaining $750,000 needed to pay for the developments additional costs, currently funded by a construction loan, to be reimbursed via the proposed mortgage with First Bank. Thus the need for City Council approval to assign the lease from San Luis Obispo Pion-Profit Housing Corporation to Laurel Creek Apartments, a California Limited Partnership. San Luis Obispo Non-Profit Housing Corporation is the general (controlling) partner in the limited partnership. The limited partners are simply investors who are seeking the tax credits made available to them by the Federal government for their investment in low-income housing. The assignment of the lease by the City and the ultimate mortgage with First Bank is a key component of our receiving all negotiated syndication proceeds. To date we have actually received just $600,000 of the $1,190,814 which will eventually came to us, thus we would like to see assignment at the earliest cossible date. L -i z- Hence we are asking the City Council to approve a replication of the Agreement of December 1992, with the assignment of the lease simply going to Laurel Creek Apartments, a California Limited Partnership. Items IIIA-1 and 2 of the original lease agreement require that the Housing Authority's successor in interest agrees to assume the obligations of the agreement and that it be an eligible sponsor that can successfully own and operate a low income housing project. Those conditions are addressed as follows: --Laurel Creek Apartments, a California Limited Partnership, is indeed a partnership established solely for the construction and operation of these 24 apartments; and the Housing Authority of the City of San Luis Obispo has been chosen as the management agent for the apartments. I realize the City process calls for a staff report, etc. which given your offices busy schedule may take some time to prepare and thus delay the date for establishing a time for City Council action. For that reason I have made this letter to you as comprehensive as possible and have attached Council Agenda Reports of April 29, 1991 and December 1, 1992, both prepared by Deb Hossli, in the hopes that by assisting you we can expedite the scheduling of this item for City Council action. Both of those Council Agenda Reports proved to be `ncredibly accurate as to the ultimate development scenario. In adopting the amendment there is a minor technical problem. City Council action to date has referred to the site as 1090 Orcutt Road, in developing the units the Post Office and the City has assigned the street addresses for the developments three buildings as 1090 and 1092 Orcutt Road and 1105 Laurel Lane. Thus any subsequent action should probably reflect those addresses. In fact in the enclosed draft agreement I speak to three separate addresses. However, if there is a problem with my solution, I am sure we can easily work out that detail with the City Attorney and First Bank. Sincerely, George J. Moylan for San Luis Obispo Non-Profit Housing Corporation Enclosures --City Council Agenda Reports of December 1, 1992 and April 29, 1991 --Proposed Draft of Assignment of Agreement cc: City Attorney