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HA - Approval of an Amended and Restated Disposition, Development and Loan Agreement between the Culver City Housing Authority and Habitat for Humanity of Greater Los Angeles for the Development of Affordable and Workforce Ownership Housing on the Housing Authority-Owned Site Located at 4044-4068 Globe Avenue.
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Contact Person/Dept: Tevis Barnes/CDD
Sol Blumenfeld/CDD
Phone Number: (310) 253-5782/ (310) 253-5700
Fiscal Impact: Yes [X] No [] General Fund: Yes [] No [X]
Public Hearing: [] Action Item: [] Attachments: Yes [X] No []
Commission Action Required: Yes [] No [X] Date:
Commission Name:
Public Notification: Notice by US Postal Service to all property owners/occupants and businesses within a 500 foot radius of the site (approximately 490 recipients) (12/01/2015); (Email) Meetings and Agendas - Housing Authority Board (12/10/15); and by e-mail to the Master Notification List (12/01/2015); Habitat for Humanity of Greater Los Angeles (12/01/2015).
Department Approval: Sol Blumenfeld, Director of Community Development
(12/09/15)
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RECOMMENDATION:
Staff recommends the Culver City Housing Authority Board (Board) approve an amended and restated Disposition, Development and Loan Agreement (AR-DDA) for the sale of Culver City Housing Authority-owned property located at 4044-4068 Globe Avenue, Culver City, California (Site) to Habitat for Humanity of Greater Los Angeles (HFHGLA or Developer) for the creation of 10 units of affordable and workforce ownership housing units.
BACKGROUND:
In June 2005, the former Culver City Redevelopment Agency (Former CCRA) purchased seven surplus properties on Globe Avenue (Site) from the California Department of Transportation (Caltrans) for $3.1 million with Housing Set Aside Funds for the purposes of creating affordable housing. The Site is comprised of seven lots totaling 32,361 square feet and is zoned R-2 which allows the development of up to two residential dwelling units per lot. Pre-development studies commenced in 2007, and the Site was made ready for development.
On June 13, 2011 the Board selected HFHGLA as the affordable housing developer and on December 5, 2011, approved a Disposition, Development and Loan Agreement (DDA) for the construction of 10 affordable ownership housing units with Former CCRA financial assistance including mortgage assistance funds.
Subsequently, the State dissolved all redevelopment agencies with the intent of assigning all Former CCRA assets to the taxing entities including proceeds from the Housing Set Aside Funds. The Successor Agency to the Culver City Redevelopment Agency eventually retained the Site but not the mortgage assistance funds that were proposed as part of the project.
DISCUSSION:
In response to the loss of former CCRA mortgage assistance funding, the project was revised to include two workforce housing units. The AR-DDA was prepared to address the new project components in order to make the project financially feasible.
As contemplated in the AR-DDA, the proposed project consists of four low-income, four moderate-income, and two workforce housing units. Based on the California Health and Safety Code, for 2015 a low-income household is defined as 50%-80% of Area Median Income (or up to $68,300 for a household of 4 persons). A moderate income-household is defined as 81%-120% of Area Median Income (or up to $77,750 for a household of 4 persons). The two workforce housing units will serve households up to 192% of Area Median Income (or up to $124,400 per year for a household of 4 persons). The level of 192% was determined to be the most optimal based on the types of jobs in Culver City and the incomes they provide, the lack of affordability to purchase an average priced home in Culver City for middle and upper middle income workers, and the State standard of 35% of income to determine housing cost affordability.
To make the homes affordable, the four low-income townhomes are priced at $129,700, the four moderate-income townhomes are priced at $280,000, and the two workforce housing units are priced at $550,000. The affordable sales prices are based on the calculation methodology imposed by California Health and Safety Code Section 50052.5 These calculations allocate 30% of the low-income households’ income to housing related expenses, while the allocation is set at 35% for the moderate income and workforce units households.
The low-income buyer will purchase the property with the assistance of the Developer’s banking partners, the Developer’s subordinate financing, and the Workforce Initiative Subsidy for Homeownership (WISH) program. The moderate-income and workforce buyers will purchase the home using a market-rate interest loan. The Developer will maximize their lending resources to assist the moderate-income and workforce buyers, if needed. All homebuyers will be required to provide 500 hours of “sweat-equity” toward the purchase of their home (250 hours for single-headed households).
All units will carry a 45-year affordability covenant per California Health and Safety Code Section 33334.3 (f) (1) (B). The Developer will have a Right of First Refusal to reacquire the home and resell the property to low and moderate-income buyers. In addition, a local preference will be given to prospective buyers who live and/or work in Culver City. Employment will be verified through credit checks, paycheck stubs, and direct verification from the employer. Residency will be determined through rental/leasing agreements, credit checks, and utility bills. For those households living in overcrowded or substandard situations, home visits will be conducted.
The townhomes will be built to Cal Green residential standards to ensure sustainable design.
Amended and Restated Disposition, Development and Loan Agreement (AR-DDA)
The purpose of the AR-DDA is to provide affordable housing opportunities in Culver City for low-income homebuyers and moderate-income homebuyers by providing for the sale of the Site to the Developer, the making of the Authority Loan to the Developer, the construction of the affordable units by the Developer, and their sale to low-income or moderate-income homebuyers so that their total housing cost does not exceed an affordable housing cost. The AR-DDA also provides for the construction of the workforce units by the developer and their sale to workforce-homebuyers. The AR-DDA includes the following provisions:
Monthly Status Reports: The Developer shall provide monthly status reports to the City Manager or designee in a format reasonably requested by the City Manager or designee. These reports, at a minimum, shall include progress associated with achieving the Schedule of Performance, identification of the issues and concerns raised by community residents, organizations, businesses and property owners, and the Developer’s progress in resolving those issues and concerns, and the Developer’s efforts to secure qualified buyers for the Project.
Developer’s Investigation of Property: The Developer shall have the opportunity to investigate the condition of the Site during the due diligence period. The Developer may elect, but shall not be required, to proceed with the closing prior to the expiration of the due diligence period. The Developer represents that except for the representations, warranties and covenants of the Culver City Housing Authority (Authority) contained in the AR-DDA, it has relied and shall rely solely upon its own expertise and that of the Developer’s consultants in purchasing the Site and the Developer’s own knowledge of the Site based on its investigation and inspections of the Site. The Developer has conducted, or by the closing will conduct, such inspections and investigation of the Site as the Developer deemed or shall deem necessary, including, but not limited to, the physical and environmental conditions of the Site and shall rely upon same. The Developer acknowledges that the acquisition price reflects the “as is” nature of this sale and any faults, liabilities, defects or other adverse matters that may be associated with the Site.
Review of Title: Not later than 30 days after the effective date, the Authority shall cause the title company to deliver to the Developer a standard preliminary title report with respect to the Site.
Construction Drawings and Related Documents: Developer shall prepare and submit construction drawings and related documents for the development of the Project to the Authority for review (including, but not limited to, architectural review) and written approval at the times established in the Schedule of Performance. The construction drawings and related documents shall be submitted in two stages: preliminary and final drawings, plans and specifications. Final drawings, plans and specifications are hereby defined as those in sufficient detail to obtain a building permit.
City’s Planning Process (Local, State and Federal Laws): The Developer shall carry out the construction of the improvements in conformity with all laws, including all applicable Federal and State labor standards. The Developer shall be responsible for obtaining all permits and land use approval required by the Authority and/or City for the construction of the improvements, ensuring that the use of the Site for the purposes described in the AR-DDA complies with the zoning and other City land use regulations (including any applicable exemptions and/or exceptions) applicable to the Site at the time of the closing.
Cost of Construction: The cost of developing the Project and constructing all improvements thereon shall be the responsibility of the Developer. The development costs are set forth in the project budget, which shall be subject to change from time to time. The Authority shall exercise commercially reasonable efforts to cause the City to waive City permit fees for the Project in the amount of approximately $200,000.
Maintenance of Property: Until such time as all the units are sold to purchasers, the Developer covenants and agrees that the Developer and/or the homeowner’s association, for so long as the Developer is a member of such association, shall maintain the interior and exterior of the improvements and the landscaping of the Project in a manner consistent with community standards which will uphold the value of the site, in accordance with the AR-DDA, the Authority grant deed, and the Culver City Municipal Code.
FISCAL ANALYSIS:
The Agency expended $3.1 million to purchase the Site from Caltrans in 2005. The land will be “gifted” as a deferred loan to the Developer.
The Authority would carry the land value with a promissory note and deed of trust from the Developer. When the Developer completes construction and sells the units to the homebuyers, the Authority land loan will be converted into silent second mortgages on the units. These second mortgages would be forgiven at the end of the homebuyers’ loan terms. The workforce units will not be encumbered by a silent second because they are priced at or near market value. A total of $338,800 of the Authority Loan will be forgiven upon the sale of the workforce units.
Based on the Developer’s estimates, the total development costs for the 10 units is $3.5 million, which equals approximately $350,000 per unit. Based on an analysis conducted by the Authority’s financial consultant, Keyser Marston and Associates (KMA), the projected construction costs are approximately $3.6 million (an approximate difference of $100,000). In addition, based on KMA analysis, the Project has an unfunded construction financial gap of $143,700. The Developer is seeking a contribution of the land and forgiveness of City fees in the amount of approximately $200,000. This translates to a total Authority/City contribution of $3.3 million.
Structuring the “gift” of the land as a deferred loan also helps to address the issue of the property tax burden of the ultimate Project homeowner. The County Assessor determines property tax on the value of the home which is determined through comparables in the area. The Globe homeowner will purchase the home below market, but will be taxed based on comparables. If the home carries a government affordability restriction, the property tax is adjusted based on the actual purchase price which will help maintain affordability.
The Developer has agreed to raise funding necessary to address the unfunded financial gap and has received financial commitments in the amount of $462,000 for the Project which has been included in the KMA financial analysis.1
The estimated construction costs for the Project are as follows:
Direct Costs
Off-Site Improvements $ 150,000
On-Site Improvements $ 480,000
Building Costs $1,349,000
Contractors’ Fees/General Requirements $ 287,000
Contingency Allowance $ 227,000
Total Direct Costs $2,493,000
Indirect Costs
Architecture, Engineering and Consulting $ 199,000
Public Permits & Fees $ 200,000
Taxes, Insurance, Legal and Accounting $ 100,000
Developer Fee $ 453,000
Contingency Allowance $ 48,000
Total Indirect Costs $1,000,000
Financing/Closing Costs
Interest and Loan Origination Fees $ 80,000
Closing Costs/Commissions $ 60,000
Total Financing /Closing Costs $ 140,000
Total Construction Costs $3,633,000
$ 363,000 per unit
RECOMMENDED MOTION(S):
That the Housing Authority Board:
1. Approve an Amended and Restated Disposition, Development and Loan Agreement for the sale of 4044-4068 Globe Avenue to Habitat for Humanity of Greater Los Angeles for the development of 10 affordable and workforce ownership housing units; and,
2. Authorize Authority Special Counsel to review/prepare the necessary documents; and,
3. Authorize the Executive Director to execute such documents on behalf of the Authority.
NOTES:_____________________________________________________
1. The commitment funds are as follows:
§ $150,000 from the Presbytery of the Pacific
§ $150,000 from Westside Methodists Churches
§ $150,000 from Mosaic Church of Hollywood
§ $12,000 in commitments from Westside Lutheran Churches
In addition to the faith based partners listed above, the Developer is working with the Culver City Chamber of Commerce and reaching out to many corporate partners in and around Culver City, including Sony, which have expressed interest in supporting this development. The Project will also draw funding from the following additional sources:
§ The sales revenue generated by the workforce homes;
§ HFHGLA will Re-Invest $90,500 of their Developer Fee into the Project;
§ The City will waive $200,000 in permits and fee costs; and
§ WISH Funds equal to $15,000 per low income unit.
HFHGLA Re-invest funds are awarded from Habitat for Humanity International from cash donations. The WISH Program provides down payment assistance or closing cost in the amount of $15,000 per low-income household. In addition, the Developer will also reach out to local businesses/agencies to secure donation of building materials, furnishings/appliances and volunteer builders.