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HomeMy WebLinkAbout4.15 Arroyo Vista Add'l FundsG~~~ OF Dp~~ /// ~ 1\1 1`~~~~1 ~ `~'1LIt'OR~~~/ STAFFREPORT CITY CLERK DUBLIN CITY COUNCIL File # ^[~]~~-~~ DATE: June 22, 2010 TO: Honorable Mayor and City Councilmembers FROM: Joni Pattillo, City Manager SUBJE : Request from Eden Housing for Additional Funding for the Affordable Family and Senior Housing Rental Housing Components of the Arroyo Vista Redevelopment Project Prepared By: Joni Pattillo, City Manager, Jeri Ram, Community Development Director, Paul Rankin, Administrative Services Director and Sue Bloch, City Attorney's Office EXECUTIVE SUMMARY: The City Council will review and take action on proposed loan terms for additional financing for the redevelopment of the Arroyo Vista Project including the Affordable Family Rental and Senior Housing Components. FINANCIAL IMPACT: The City previously approved a loan to Eden Housing in the amount of $1.5 million loan for predevelopment/construction costs for the Affordable Family Rental Housing component of the Arroyo Vista project which would be replaced by the new financing structure. No change is made to the City grant in the amount of $1.5 million for tenant relocation costs. This new loan structure would (i) replace the previous loan commitment with a total of $7.6 million structured as two loans (a maximum of $5.3 million for the Family Rental Project and a maximum of $2.3 million for the Senior Housing component of the project). The City will also provide Alameda County Housing Authority with up to $3 million for their participation in the project financing. A Budget Change for Fiscal Year 2010-2011 and additional appropriation is required. RECOMMENDATION: It is recommended that the City Council authorize the City Manager to execute on behalf of the City documents providing financing for the Arroyo Vista Redevelopment Project, provided that the terms and conditions are materially consistent with the terms in this Staff Report and subject to review of all legal forms by the City Attorney. It is further recommended that the City Council approve the Budget Change providing an appropriation of funds and authorize the release of funds based on the final loan documents and grant funding agreement. ~ ~~ ~ Vp~ ~- ~~?/ ubmitted By Reviewed By Reviewe By Community Development Dir. Administrative Services Dir. Assistant City Manager Page 1 of 5 ITEM NO. .~ ~~ DESCRIPTION: Arroyo Vista is a public housing development on approximately 22.9 acres of land located at 6700 Dougherty Road in the City of Dublin and owned by the Dublin Housing Authority (DHA). On July 25, 2007, the City of Dublin, the Dublin Housing Authority (DHA), the Alameda County Housing Authority (HACA), Eden Housing and Citation Homes entered into a Disposition and Development Agreement (DDA) for the purpose of creating a new 378 mixed income development on the site consisting of 50 rental units for seniors, 130 rental units for families, 141 attached for sale units and 57 detached for sale units. The project also includes a community building, daycare facility and related site improvements. In October of that same year the parties were sued by four Arroyo Vista tenants, represented by the Public Interest Law Project and Bay Area Legal Aid, to set aside the DDA. On May 22, 2009, the Department of Housing and Urban Development (HUD) approved the Dublin Housing Authority's Disposition Application and the plaintiffs' counsel proposed negotiations to settle the lawsuit. Negotiations were conducted over several months and approved by all parties to the DDA and ultimately HUD. On December 17, 2009, the settlement was approved by the court and the case was dismissed. In January, 2010, the DDA was amended ("First Amendment") by the City of Dublin and the other parties to the Agreement to comply with HUD approval conditions, including affordability provisions and restrictions on the use of the land sale proceeds. An important item to note is that one of HUD's approval conditions is that a restriction will be recorded against the property stipulating that the property would revert to the Dublin Housing Authority, or its successor in interest, if Eden fails to develop, operate and maintain the property in accordance with HUD's conditions (referred to as a"reverter clause"). As noted above, the original DDA was negotiated in 2007. The financial assumptions that the non-profit Eden Housing and the market rate home builder, Citation, used in entering into the DDA are significantly different from today's market reality. The delay in the development of the property was due to the lawsuit. The developers were not at fault in delaying the project. While the project was in litigation, the development team continued to move forward to the extent possible (within the bounds of the lawsuit), on predevelopment approvals such as planning entitlements and the Disposition Application to HUD. The development team now has all the entitlements necessary to move forward towards construction. Before this can occur, however, Eden must secure financing to build the first phase of the project. Status of Previous Loan And Grant Commitments The DDA and First Amendment to the DDA provide for the City to participate in the funding of the project by providing a loan in the amount of $1.5 million. At the present time the City has funded $325,000 of this loan commitment. The proceeds were used for pre-development costs and the loan is due in December 2010. Given the updated financing needs it is proposed that the new loan will be used to repay the $325,000 that has been funded to date and the previous loan commitment is replaced in its entirety with the new terms. As part of the redevelopment of the project it was necessary to relocate current tenants which results in certain relocation costs. It was estimated that the total required may be $3.1 million. These costs have been incurred as tenants relocate and in some cases are being paid over up to forty-eight months. The funding of the estimated relocation costs is provided from three sources: 1) Dublin Housing Authority has expended $600,000; 2) Up to $1 million from the Page 2 of 5 proceeds of the land sale from Citation; and 3) A grant from the City for tenant relocation expenses in an amount not to exceed $1.5 million. The revised proposal does not make any changes to the maximum City grant. Because the timing of the payments by Citation lag behind when funds for relocation costs are needed, the City has advanced payments which are reimbursed by the Housing Authority. If the full $1 million provided by Citation is not needed for relocation costs any remainder becomes part of the loan amount the Housing Authority will provide Eden Housing. Revised Proposal For Citv Participation In Financinq Proiect Costs As noted above, the negotiation for the DDA occurred during a very different economic climate. Eden has completed a new financial analysis examining the cost of construction along with various scenarios for a phased construction with 9% low-income housing tax credits. Based on that analysis, Eden has made an additional funding request (Attachment 1) to the City. It is proposed that the financing will be structured as finro loans. As mentioned above, up to $325,000 will be used to retire the previous funding provided by the City. The following summarizes how the total amount to be loaned is allocated between the two project components. The financing terms are described in more detail in Attachment 2 and Attachment 3. The maximum amount that may be loaned is $7.6 million. PROPOSED CITY FINANCING Of TWO LOANS TO EDEN HOUSING Affordable Senior Rental Housin Pro'ect Affordable Family Rental Housin Pro'ect Pro'ect Descri tion 50 units 130 units Maximum Loan $ 2.3 Million $ 5.3 Million Limitation On Funds Available For Pre-Develo ment Costs Subject To City Manager A roval $ 2.5 Million The basic terms of the two loans are the same. The following summarizes the key terms applicable to the loans. SUMMARY OF KEY TERMS PROPOSED FOR THE LOANS LOAN PROVISION PROPOSAL Interest Rate Between 0% and 3% Sim le Interest Be ins At ro'ect com letion and occu anc Source of Funds Cit Affordable Housin Funds includin Reserves Loan Term 55 Years Interest Rate Between 0% and 3% Re a ment Sources Onl from residual recei ts from o eration of the ro~ect Limitation On Repayment Sources Eden may retain 40% of residual receipts and the Lender Share shall be 60%. Repayments from the 60% Lender Share shall be distributed on pro-rata basis between City of Dublin and Dublin Housing Authority, based on loans provided. Dublin Housing Authority has agreed to defer its share until the Cit is full re aid. Page 3 of 5 City staff and Eden Housing have negotiated a set of terms for the proposed funding request (Attachments 2 and 3). These terms will be incorporated into loan documents prepared by the City Attorney. It is recommended that the City Council authorize the City Manager, on behalf of the City, to execute loan documents that are in substantial conformance with the term sheets and to, if necessary, execute an amendment to the DDA to incorporate the terms of the loans. Because the City of Dublin has Affordable Housing Reserves this level of loan commitments can be made. This is expected to fill the financing gap for construction of the two project components. These City-funded loans will also help Eden Housing compete more favorably in their application for the 9% tax credits. As noted earlier in the report, should Eden Housing not be able to secure financing to construct the project, the property would revert back to the Dublin Housing Authority (or its successor) and the entire process would need to be restarted. Therefore, it is in the City's interest to increase its financial participation in the project. Eden has indicated that they plan to apply for 9% tax credits in July of this year. Proposed Contribution To Alameda Countv Housinq Authoritv In addition, to the Eden Loans there is a proposed commitment to the Alameda County Housing Authority based on their participation in the project. At the time the DDA was approved in July 2007, the terms of the development were envisioned as providing $12 million from the land safe which would be allocated as follows: $8 million was assigned to the project as a"soft second" mortgage. (A soft second mortgage is one that is paid only after all hard money mortgages are paid to the banks and all expenses are paid and comes solely from cash flow.) $3 million of the land sales proceeds was allotted to the Alameda County Housing Authority. This provision recognized the Alameda County Housing Authority support in the processing, on behalf of the Dublin Housing Authority (DHA). This included obtaining necessary HUD approvals and the conveyance of the property. $1 million towards the tenant relocation costs. During the HUD process to approve Dublin Housing Authority's disposition application, HUD issued new guidance regarding the use of land sale proceeds in public housing dispositions. The guidance included intended uses of sales proceeds and a requirement that some form of affordable housing assistance, either Section 8 vouchers or public housing, be included in redeveloped public housing projects. In order to meet these requirements Dublin Housing Authority amended its application to conform with the new guidance, including the assignment of a minimum of $11 million of sales proceeds to soft second mortgages. The minimum would be increased if the full $1 million in refocation costs was not required. Further, the Alameda County Housing Authority committed to the provision of 81 Section 8 project based vouchers as well as vouchers for resident relocation. When the DDA was amended to reflect the HUD approval and the settlement of the lawsuit it provided for the use of the $11 million in conformance with the HUD approval. It is proposed that the City fund from Affordable Housing Funds a$3 million payment to the Alameda County Housing Authority. This matches the original amount anticipated from the transaction as devised in 2007 and recognizes the participation by the Authority in financing the project. Page 4 of 5 Additional Appropriation / Budqet Chanqe Repuired For Fiscal Year 2010-2011 Due to the timing of the negotiation of the financing required the amounts were unknown as the Fiscal Year 2010-2011 Budget was being prepared. Currently there is an appropriation of $1,175,000 in the Fiscal Year Budget which will expire June 30, 2010. It is expected that Eden will require a loan draw in the coming weeks, however it does not appear certain that the documents will be completed and the loan funded by June 30th. Therefore, Attachment 4 contains a Fiscal Year 2010-2011 Budget Change and Appropriation that will account for the entire financing in Fiscal Year 2010-2011. NOTICING REQUIREMENTS/PUBLIC OUTREACH: Copies To: Linda Mandolini, Executive Director Eden Housing Chris Gouig, Executive Director Dublin Housing Authority ATTACHMENTS: 1. Letter from Eden 2. Term Sheet - Family Housing 3. Term Sheet - Senior Housing 4. Budget Change Page 5 of 5 la~ M ~ ~ ~ ~~ ~~~~ HflUSIPIG zas~~ 6ra~d s¢~Q~r Haywarcl, GA 9AS~i s~~.ssz:~~~o ano~e 510.5~2:&S23 Fax May 18, 2010 www.e dea~hausing.urg Ms. Joni Pattillo City Manager City of Dublin 100 Civic Plaza Dublin, CA 94568 RE: Arroyo Vista Development Family Housing - Additional Funding Needs Dear Joni Per our recent discussions with you about the additional funding needs for the Arroyo Vista affordable housing project, we are writing to request that the CiTy provide a total of $5,300,000 in funding for the Family component of the project. We also request that $2,500,000 of this commitment be made available during predevelopment, including the existing $325,000 predevelopment loan. The $5,300,000 includes the $1,500,000 that the City has already committed to provide in the Disposition and Development Agreement and First Amendment to the DDA. The net additional amount that Eden is requesting is $3,800,000 to fill a funding gap that has resulted from the delays relating to the tenant law suit. We are exploring ways to reduce this gap, but believe that the time constraints for the tax credit application for the family project necessitate a commitment of this amount of funding. Should any savings be realized, the funding could be dedicated to solving the gap in the second phase senior housing project. The attached chart details potential savings and the options for proceeding with the project. The economic climate and financial situation of the project have changed significantly since Eden prepared the financial proformas for the DDA in 2007. The tenants' lawsuit resulted in a two-year delay that coincided with the economic crisis and a dramatic decline in the tax credit equity market, which has had a significant impact on the project. Additionally, current limitations on 9% tax credit availability in the very competitive East and North Bay Region impact the amount of tax credits and related equity that we can request for the project. There are, however, some areas where sources of funds have increased, but not enough to eliminate the gap. All of these impacts are described in more detail on the next pages. Because of these significant impacts, we have analyzed a number of alternative scenarios to try to reduce the funding gap for the project. The two best overall alternatives for the Family Housing each result in approximately the same funding gap. They are: l. Continue to pursue the entire 130 unit Family Housing project as a single phase 9% tax credit project. 2. Build the Family Housing in two phases, both as 9% t~ credit projects: Phase 1- 88 units with Community Building and Child Care Center Phase 2 - 42 units ~_~~-rz~ Eden Housin~ does not discrtminate based ttn rac2, cc4or. reli~ia~, sex. har,dicap. `ar*~lliai sEatus, nat'sor:ai orEgin, or any otF~er ~ ~ ~rb:trary ~as:s. Tt)~J7TY 2.8SJL.7~5:2922 ~ ~ ~ ~ ~~ ATTACHMENT 1 ~ Q-~~ ~ ~ Proceeding with the entire 130 units at once requires that the construction pricing savings be realized. In the event that this is not the case, we believe that phasing the project is a viable alternative because it will allow us to secure additional tax credit equity. After the Family ' project secures tax credits we would then proceed with Phase 3, the senior project. Analysis of Changes and Potential Savings: The delays have resulted in changes that have impacted project costs and sources of funds for the family phase of the development, as follows: A. Funding Sources: 1. 9% Tax Credit Equity and Yield Changes As noted earlier, due to the two-year lawsuit delay in the project, the economic downturn has resulted in a decrease in tax credit equity. Our original DDA proformas projected 9% tax credit equity at $.95 per dollar. Current 9% tax credit equity yields are approximately $.74 per dollar. That change has resulted in a potential loss of over $4,800,000 in funding on the single phase project. The current amount of 9% tax credits that is available in the East & North Bay region which includes Alameda County is lower than it has been in the past several years, and a project may not apply for more than 125% of the available credits, regardless of the amount of credits the project is eligible for. Because of the size of the Family project in conjunction with the limited amount of tax credits available, we cannot apply for all the tax credits that the single phase project could support. That limitation results in a loss of approximately $4,100,000 in tax credit equity when the project is carried out as a single phase. The two-phase projects are smaller and even though they are slightly less efficient on the construction side, they do not have to farego as many tax credits because each phase individually doesn't exceed the 125% tax credit cap. Unfortunately, the new tiebreaker in place does create limitations on the credits that we can request. Due to the competitiveness of the 9% tax credit application process, a high "tiebreaker" score is required to be awarded 9% tax credit funding (the tiebreaker is projected to be at least 95% in the most recent round for this region). The current tiebreaker methodology is heavily weighted toward reducing the amount of the tax credits requested as much as possible and securing significant public funds. The extremely limited amount of tax credits available in the region and resulting oversubscription (over 9:1 in the first round of 2010) mean that the single phase project, which has a higher gap, has a very high tiebreaker score (nearly 108%), and would be extremely competitive. The 2 phase project also scores well (over 100% for each phase). 2. Section 8 Changes The DDA proformas estimated that the project would have one permanent loan, a first mortgage of approximately $5,000,000. Because of the addition of Project Based Section 8 Vouchers, the current proformas have approximately $8,000,000 in first and second ~~,~ 11 mortgages. This results in an addition of $2,650,000 in funding sources. The two- phase project has a similar addition. 3. Rea[location of City and increase in Dublin Housing Authority Funding Because of overall project need, we reallocated $360,000 in City and DHA funds from the Senior project to the Family project (initially they were split according to unit count), and the amount of DHA funding to the project increased by $3,000,000 per the First Amendment to the DDA. 4. Federal Home Loan Bank AHP We applied for and received $1,290,000 in AHP funds for the family project in Round 2, 2009. At that time, we were able to get $290,000 more than originally estimated. We were fortunate to apply at that time because in 2010 the FLHB changed the maximum per project amount back to $1,000,000. We would allocate the AHP funds by number of units to each phase. S. Interest Rate Changes Projected interest rate reductions result in approximately $300,000 of added funding for both the single phase and two phase projects. B. Uses of Funds Uses of funds have increased for permits and fees and off-site, demolition and environmental costs. But there have been decreases in the cost of construction and architecture and engineering fees. The net increase in project costs is approximately $4,700,000. C. Potential Savings We also have analyzed additional potential savings. 1. Deferred Developer Fee Eden Housing will defer additional developer fee of $500,000 in all options, adding sources of $500,000 per option. 2. Additional Tax Credit Equity Eden's economic consultant believes that this project can attract additional equity, resulting in an additional source of approximately $900,000 -$1,100,000. 3. Construction Pricing Escalation Contingency Eden is working with a general contractor to refine the construction budget. We are currently carrying a pricing contingency of $1,400,000. Once the plans are developed, we may be able to save at least a portion of the contingency amount. ~~~ < < 4. Reduced Construction Loan Interest Eden's lenders indicate that construction loan pricing has improved and that the construction loan interest rate could be 2% lower than estimated. This would save over ~500,000 for the 1 phase project and over $300,000 for the 2 phase project. 5. Permits & Fees: Potential Additional Credits Eden and Citation are working with Zone 7 and the Dublin Unified School District to obtain additional credits against impact fees for the existing units that will be replaced. This could be worth up to $1,100,000 in the single phase project, or $232,000 in the two phase project. Any or all of the savings would be shared with the City of Dublin and reduce the amount the City would have to put forth to achieve the first phase. We greatly appreciate the continued support of the City of Dublin and welcome any questions or comments on the current financing projections. We look forward to finally moving this project towards a construction start next year. Sincerely, ~ ,~ /~.*~c~. t=,..:, Linda Mandolini Executive Director Cc: Christine Gouig, Director, Dublin Housing Authority EDEN HOUSING, INC. PROPOSED LOAN TERMS ~~' ~~~ June 7, 2010 LOAN TERM SHEET AFFORDABLE FAMILY RENTAL HOUSING - ARROYO VISTA SITE THE CITY OF DUBLIN 1. BORROWER: The Borrower shall be Eden Housing, Inc., an Affiliate of Eden Housing, Inc., or a limited partnership the general partner of which shall be an Affiliate of Eden Housing, Inc. The initial Borrower may assign the Loan to an Affiliate of Eden Housing, Inc., or a limited partnership the general partner of which shall be an Affiliate of Eden Housing, Inc to meet Project financing requirements and/or the Borrower's limited partnership agreement. All capitalized terms not defined herein shall have the meanings set forth in the Disposition and Development Agreement for the Redevelopment of Arroyo Vista, among the Housing Authority of the City of Dublin, the City of Dublin, the Housing Authority of the County of Alameda, Eden Housing, Inc. and Citation Homes Central dated July 25, 2007, as amended (the "DDA"). 2. PROPERTY; PROJECT(S): The Loan shall be made in connection with the development of the Affordable Family Rental Housing to be constructed on a portion of the Arroyo Vista site on Dougherty Road in Dublin. The approximately 130-unit family development shall be developed as one project or as two separately financed projects constructed in two phases if necessary to make the project or projects more competitive for Low-Income Housing Tax Credits and/or other financing sources. The number of family units, unit size and mix, affordability and project amenities shall not be inconsistent with the provisions of the DDA. As used in this Loan Term Sheet, "Project" shall mean each separate project if the Affordable Family Rental Housing is developed and constructed as two separate projects. 3. LOAN AMOUNT: To assist in financing the development of the Project, the City of Dublin ("Lender") agrees to loan funds in an aggregate amount not to exceed Five Million Three Hundred Thousand Dollars ($5,300,000) ("Maximum Loan Amount"). If the Affordable Family Rental Housing is developed as two separate Projects as set forth in #2 above, the Maximum Loan Amount shall be divided into two separate loans, and each loan shall be in the amount necessary to make the Projects financially feasible, provided that the aggregate amount of the finro loans shall not exceed $5,300,000. Each Loan shall have the terms set forth in this Loan Term Sheet. As used in this Loan Term Sheet, "Loan" shall be each loan. The City previously agreed to provide a loan in an amount up to $1,500,000 for Project construction and predevelopment costs (the "Prior Loan"). The Maximum Loan Amount is inclusive of that commitment. As of the date of this Term Sheet, a total of $325,000 of the proceeds of the Prior Loan have been disbursed for predevelopment expenses pursuant to a_ promissory note executed by Eden Housing, Inc. that matures in December 2010 (the "Existing Note"). The City agrees to extend the maturity date of the Existing Note, and further agrees that the outstanding balance payable under the Existing Note may be repaid with the proceeds of the new Loan. ATTACHMENT 2 1433836.5 1 EDEN HOUSING, INC. PROPOSED LOAN TERMS ~~ ~~w l~ June 7, 2010 LOAN TERM SHEET AFFORDABLE FAMILY RENTAL HOUSING - ARROYO VISTA SITE THE CITY OF DUBLIN 4. COST SAVINGS. Within ten (10) business days after Borrower's receipt of its limited partner(s)' capital contribution following the issuance of the IRS Form 8609 for the Project, Borrower shall pay to the Lender as a reduction of the outstanding principal balance of the Loan, a one-time payment in the amount of Excess Proceeds. "Excess Proceeds" shall mean the sum of all sources of permanent financing for the Project (including equity and mortgage debt) less the sum of actual uses as shown on the final cost certificate for the Project. The loan documents may provide that deferred developer fees and reserves may be funded with a portion of the Excess Proceeds. 5. INTEREST RATE: The outstanding principal balance of the Loan shall bear no interest (0%) until the earlier of :(i) the date that the Project's- construction loan is either converted to a permanent loan or repaid in full, or (ii) finrelve (12) months following the date of issuance of the final certificate of occupancy or equivalent for the Project; thereafter, the outstanding principal balance of the Loan shall bear interest at a simple rate not to exceed three percent (3%) per year, with the City Manager or his/her authorized designee authorized to set the rate. Unless Borrower can demonstrate to the reasonable satisfaction of Lender that the Project would otherwise be infeasible, the interest rate shall be not less than finro percent (2%) annual simple interest. 6. MATURITY DATE: The Loan shall mature fifty-five (55) years from the date the Certificate of Occupancy or its equivalent is issued by the City of Dublin. 7. USES OF LOAN PROCEEDS: The Loan proceeds shall be used to finance a portion of the predevelopment, development and construction costs of the Affordable Rental Family Housing. Not more than $2,500,000 of the Loan proceeds may be disbursed prior to construction loan closing. This sum includes the previously disbursed $325,000. The Loan documents will specify the types of expenses that may be funded with Loan proceeds as predevelopment expenses prior to conveyance of the Property. 8. REPAYMENT LIMITED TO RESIDUAL RECEIPTS: Annual installments to repay the Loan shall be limited to Residual Receipts generated by the Project. Residual Receipts will be divided as follows: 40% as the Borrower's Share and 60% as the Lenders' Share. The Lenders' Share will be used to repay the Loan and the loan or loans from the Housing Authority of the City of Dublin on a prorata basis based on the respective loan amounts, or such other basis as the subordinate lenders may agree. If there are other subordinate loans or an MHP loan, such other loans shall be repaid on a prorata basis from the Lenders' 60% share of the Residual Receipts. The definition of Residual Receipts shall include the payment of the following fees, among others, as part of the annual operating expenses to be deducted from the Project's gross revenue: any previously unpaid portion of the developer fee (without interest) provided that the cumulative amount of such fee does not exceed the maximum allowable by the California Tax Credit Allocation Committee; an investor asset management fee in the amount of $10,000 per year plus accruals and unpaid amounts from previous years and a$25,000 1433836.5 2 EDEN HOUSING, INC. PROPOSED LOAN TERMS ~`°''~ ~~ June 7, 2010 LOAN TERM SHEET AFFORDABLE FAMILY RENTAL HOUSING - ARROYO VISTA SITE THE CITY OF DUBLIN annual partnership management fee plus accruals and unpaid amounts from previous years, both of which shall increase by 3% per year. The asset management fee and the partnership management fee shall be deducted from the Project's gross revenue in calculating residual receipts only during the first fifteen (15) years following issuance of a final certificate of occupancy for the Project unless the City in its sole discretion consents to a request by Borrower to extend such time period. 9. SECURITY: The Loan shall be secured by an Assignment of Agreements, Plans and Specifications and by a Deed of Trust naming the Lender as the beneficiary which shall be recorded against the Project site at such time that the Project site is conveyed to the Borrower. . 10. NONRECOURSE: Repayment of principal and interest shall be nonrecourse to the Borrower and its partners; recourse shall be limited to the property and any other security (such as the plans, specifications and other Project-related documents) provided by Borrower or Borrower's affiliates pursuant to the Prior Loan and/or the Loan. The loan documents shall include standard nonrecourse provisions and carveouts. 11. SUBORDINATION: Lender agrees to subordinate its Deed of Trust and Regulatory Agreement to construction and permanent deeds of trust and senior loan regulatory agreements, pursuant to subordination agreements that provide Lender with reasonable notice and cure rights, subject to HUD requirements imposed as conditions to HUD's approval of the disposition of the improvements and land known as Arroyo Vista, CA 142000001. Use and other restrictions imposed by HUD whether in a recorded Use Agreement and/or the grant deed with a right of reverter or the power of termination shall not be subordinated unless specifically allowed and approved by HUD. 12. LOAN AND LENDER FEES: None. All Lender loan fees and costs, including attorney fees shall be paid by Lender. Borrower shall pay all escrow, title, recording and other standard closing costs, including the cost of Lender's policy of title insurance. 13.OTHER LOAN TERMS; MODIFICATION OF TERMS: The City Manager or his/her authorized designee shall have the authority to add to and/or modify any of the above Loan terms without additional approval from the City Council; provided, however, that the City Manager or his/her authorized designee shall not have the authority to increase the aggregate loan amount. 1433836.5 3 ~~ ~ 1 EDEN HOUSING, INC. PROPOSED LOAN TERMS June 3, 2010 LOAN TERM SHEET AFFORDABLE SENIOR RENTAL HOUSING - ARROYO VISTA SITE THE CITY OF DUBLIN BORROWER: The Borrower shall be Eden Housing, Inc., an Affiliate of Eden Housing, Inc., or a limited partnership the general partner of which shall be an Affiliate of Eden Housing, Inc. The initial Borrower may assign the Loan to an Affiliate of Eden Housing, Inc., or a limited partnership the general partner of which shall be an Affiliate of Eden Housing, Inc to meet Project financing requirements and/or the Borrower's limited partnership agreement. All capitalized terms not defined herein shall have the meanings set forth in the Disposition and Development Agreement for the Redevelopment of Arroyo Vista, among the Housing Authority of the City of Dublin, the City of Dublin, the Housing Authority of the County of Alameda, Eden Housing, Inc. and Citation Homes Central dated July 25, 2007, as amended (the "DDA"). 2. PROPERTY; PROJECT: The Loan shall be made in connection with the development of the Affordable Senior Rentaf Housing to be constructed on a portion of the Arroyo Vista site on Dougherty Road in Dublin. The number of senior units, affordability and project amenities shall not be inconsistent with the provisions of the DDA. 3. LOAN AMOUNT: To assist in financing the development of the Project, the City of Dublin ("Lender") agrees to loan funds in an aggregate amount not to exceed Two Mil~ion Three Hundred Thousand Dollars ($2,300,000) ("Maximum Loan AmounY'). The Loan shall have the terms set forth in this Loan Term Sheet. 4. COST SAVINGS. Within ten (10) business days after Borrower's receipt of its limited partner(s)' capital contribution following the issuance of the IRS Form 8609 for the Project, Borrower shall pay to the Lender as a reduction of the outstanding principal balance of the Loan, a one-time payment in the amount of Excess Proceeds. "Excess Proceeds" shall mean the sum of all sources of permanent financing for the Project (including equity and mortgage debt) less the sum of actual uses as shown on the final cost certificate for the Project. The loan documents may provide that deferred developer fees and reserves may be funded with a portion of the Excess Proceeds. 5. INTEREST RATE: The outstanding principal balance of the Loan shalf bear no interest (0%) until the earlier of :(i) the date that the Project's construction loan is either converted to a permanent loan or repaid in full, or (ii) twelve (12) months following the date of issuance of the final certificate of occupancy or equivalent for the Project; thereafter, the outstanding principal batance of the Loan shall bear interest at a simple rate not to exceed three percent (3%) per year, with the City Manager or his/her authorized designee authorized to set the rate. Unless Borrower can demonstrate to the reasonable satisfaction of Lender that the Project woutd otherwise be infeasible, the interest rate shall be not less than two percent (2%) annual simple interest. ATTACHMENT 3 EDEN HOUSING, INC. PROPOSED LOAN TERMS ~~~ (( . June 3, 2010 LOAN TERM SHEET AFFORDABLE SENIOR RENTAL HOUSING - ARROYO VISTA SITE THE CITY OF DUBLIN 6. MATURITY DATE: The Loan shall mature fifty-five (55) years from the date the Certificate of Occupancy or its equivalent is issued by the City of Dublin. 7. USES OF LOAN PROCEEDS: The Loan proceeds shall be used to finance a portion of the predevelopment, development, and construction costs of the Affordable Senior Rental Housing. The Loan documents will specify the amount of the Loan proceeds and the types of expenses that may be funded with Loan proceeds as predevelopment expenses prior to conveyance of the Property. 8. REPAYMENT LIMITED TO RESIDUAL RECEIPTS: Annual installments to repay the Loan shall be limited to Residual Receipts generated by the Project. Residual Receipts will be divided as folfows: 40% as the Borrower's Share and 60% as the Lenders' Share. The Lenders' Share will be used to repay the Loan and the loan from the Housing Authority of the City of Dublin on a prorata basis based on the respective loan amounts, or such other basis as the subordinate lenders may agree. If there are other subordinate loans or an MHP loan, such other loans shall be repaid on a prorata basis from the Lenders' 60% share of the Residual Receipts. The definition of Residual Receipts shall include the payment of the following fees, among others, as part of the annual operating expenses to be deducted from the Project's gross revenue: any previously unpaid portion of the developer fee (without interest) provided that the cumulative amount of such fee does not exceed the maximum allowable by the California Tax Credit Allocation Committee; an investor asset management fee in the amount of $10,000 per year plus accruals and unpaid amounts from previous years and a$25,000 annual partnership management fee plus accruals and unpaid amounts from previous years, both of which shalt increase by 3% per year. The asset management fee and the partnership management fee shall be deducted from the Project's gross revenue in calculating residual receipts only during the first fifteen (15) years following issuance of a final certificate of occupancy for the Project, unless the City in its sole discretion consents to a request by Borrower to extend such time period. 9. SECURITY: The Loan shall be secured by an Assignment of Agreements, Plans and Specifications and by a Deed of Trust naming the Lender as the beneficiary which shall be recorded against the Project site at such time that the Project site is conveyed to the Borrower. 10. NONRECOURSE: Repayment of principal and interest shall be nonrecourse to the Borrower and its partners; recourse shall be limited to the property and any other security (such as the plans, specifications and other Project-related documents) provided by Borrower or Borrower's affiliates pursuant to the Prior Loan and/or the Loan. The loan documents shall include standard nonrecourse provisions and carveouts. 2 EDEN HOUSING, INC. PROPOSED LOAN TERMS ~~ ~ I I June 3, 2010 LOAN TERM SHEET AFFORDABLE SENIOR RENTAL HOUSING - ARROYO VISTA SITE THE CITY OF DUBLIN 11. SUBORDINATION: Lender agrees to subordinate its Deed of Trust and Regulatory Agreement to construction and permanent deeds of trust and senior loan regulatory agreements, pursuant to subordination agreements that provide Lender with reasonable notice and cure rights„ subject to HUD requirements imposed as conditions to HUD's approval of the disposition of the improvements and land known as Arroyo Vista, CA 142000001. Use and other restrictions imposed by HUD whether in a recorded Use Agreement and/or the grant deed with a right of reverter or the power of termination shall not be subordinated unless specifically allowed and approved by HUD. 12. LOAN AND LENDER FEES: None. All Lender loan fees and costs, including attorney fees shall be paid by Lender. Borrower shall pay all escrow, title, recording and other standard closing costs, including the cost of Lender's policy of title insurance. 13.OTHER LOAN TERMS; MODIFICATION OF TERMS: The City Manager or his/her authorized designee shall have the authority to add to and/or modify any of the above Loan terms without additional approval from the City Council; provided, however, that the City Manager or his/her authorized designee shall not have the authority to increase the Loan amount. 14581613 3 CITY OF DUBLIN BUDGET CHANGE FORM FY 2010 / 2011 CHANGE FORM # New Appropriations (Ciry Council Approval Required): X From Unappropriated Reserves (*) * Affordable Housing Reserves C~ From New Revenues ~ H ,.~n". ~ ~'. ~,~ Budget Transfers: __ From Budgeted Contingent Reserve (1001.1901.81101) Within Same Department Activity _,_ Between Departments (City Council Approval Required) n*tio,. . . ,.. , , ~,_ _ _ ~. :.. ~ ~ ~~ - .., ~._. ....~. ... .:.. _ :,.._.. ~ .~. ~ . ~ ,. .. ~ i~1~4t1~~~ ~ _. ~. :~.~ Name: EXPENSE - Affordable Housing Fund - Housing Project Development Loan [Affordable Rental $ 5,300,000 Family Housing Project] Account #: 2901 .5701. 66102 Name: EXPENSE - Affordable Housing Fund - Housing Project Development Loan [Affordable Rental $ 2,300,000 Sr. Housing Project] Account #: 2901 .5701. 66102 Name: EXPENSE - Affordable Housing Fund - Grant to Alameda County Housing Authority - Contract Services $ 3,000,000 Account #: 2901. 5701. 64001 RFncnni G/l~ QI 111l~CT /~LJAw~r+r r~~T'... -r~ • -- -- - ~ - . -. - ~ ~ ~~ ~~~.~~ "~ ~ ~ ~ . ~ ~ ~„ ouuye~ ~nange is ror risca~ Year 2010/2011 based on changes negotiated to the City participation in Financing the Redevelopment of the Arroyo Vista Project. As explained in the Staff Report presented June 22, 2010 the City participation has been restructured to include two loans and a grant to Alameda County Housing Authority. The funding will come from Affordable Housing Reserves. Fin Mgr/ASD: ~~ Date: 6 `~/!c'~ Date: Date: Date: G:IBvdge~Chmrgesl3_1010III2_6_22_!0_Arro}roVistaLomis.doc ATTACHMENT # 4