DATE: November 7, 2023
TO: Paul Buddenhagen, City Manager
FROM: Chadrick Smalley, Community Development Director
SUBJECT: Resolution Of The City Council Of The City Of Emeryville Authorizing The City Manager To Execute All Documents Necessary To Effectuate The Sale Of A Below Market Rate Unit Located At 1500 Park Avenue #314 For $355,900; Amending The Fiscal Year 2023-2024 Operating Budget To Increase Revenues To, And Expenditures From, The Measure C Affordable Housing Bond (Fund No. 284) By The Net Proceeds Collected Upon The Close Of The Sale Of The Property; And Appropriating The Net Proceeds Collected To The Fiscal Year 2023-2024 Operating Budget For The Below Market Rate Acquisition Program
RECOMMENDATION
Staff recommends that the City Council adopt the above-entitled resolution authorizing the City Manager to execute all documents necessary to effectuate the sale of a Below Market Rate (“BMR”) unit located at 1500 Park Avenue #314 (the “Property”) for $355,900; amending the Fiscal Year 2023-2024 operating budget to reflect the increased revenue to, and expenditures from, the Measure C Affordable Housing Bond Fund (Fund No 284); and appropriating the net proceeds to the Fiscal Year 2023-2024 Operating Budget for the BMR Acquisition Program.
BACKGROUND
Peter Christ (“Owner”) purchased the Property, a one-bedroom unit, on May 16, 2000 for $187,000 as a moderate-income homebuyer. To ensure long-term affordability of the Property, the City required that a Resale Restriction and Right of First Refusal (“Agreement”) be recorded against the Property. The Agreement will expire on May 16, 2025, and annually the Owner must confirm that they still reside in the Property as their principal place of residency.
On May 30, 2023, the City received notification from the Owner of their intent to the sell the Property. Pursuant to the terms of the Agreement, the City had 60 days to exercise its right to purchase the Property or assign its right to purchase to an income eligible buyer. On October 3, 2023, the City Council adopted Resolution No. 23-47 authorizing the City Manager to purchase the Property for $355,900, to ensure that the City retained the Property in its BMR portfolio.
DISCUSSION
Maximum Resale Price
The Agreement specifies that the resale price of the Property must be fixed at the lower amount derived from following two methods:
Fair market appraised value, if there is a substantial chance that the fair market appraised value is less than method # 2.
Acquisition price plus the cost of living increase as measured by the Consumer Price Index plus the depreciated value of capital improvements made by the Owner minus the cost of any deferred maintenance remaining at close of escrow.
The City is purchasing the Property for $355,900. The City does not anticipate making any capital improvements nor will there be any deferred maintenance items at close of escrow, therefore method #2 calculates to a maximum resale price of $355,900. A comparable one-bedroom unit at Emery Warehouse Lofts was sold in July 2023 for $620,000, therefore staff has determined that there is not a substantial chance that the fair market appraised value of the Property is less than the amount calculated via method #2 and will not order an appraisal of the Property. Thus, staff has determined that the maximum resale price for the Property is $355,900.
Pursuant to the Agreement, the unit may only be sold to an eligible purchaser, defined as a moderate-income household earning no more than 120% of the Area Median Income (AMI).
Resale and Lottery Process
Upon the acquisition of the Property, the City will engage with a licensed Realtor and Hello Housing, the City’s BMR Homebuyer Consultant, to coordinate the marketing and a lottery process to identify a moderate income-eligible buyer to purchase the Property. The Property will be listed on Multiple Listing Service (“MLS”) for approximately three weeks, with notification also going out to those registered through the City’s Housing Notification System. Prospective buyers will be allowed to view the property virtually and through scheduled open houses. During this window, the Realtor will respond to all inquiries about the unit and will collect all purchase contract offers on the Property.
Upon the end of the marketing period, the Realtor will forward all offers received to Hello Housing. Hello Housing will contact those who submitted offers to communicate what the next steps are, including the submission of a complete BMR Program Application. Prospective buyers will have two weeks to submit the complete BMR Program Application in order to be included in the lottery. Hello Housing will host the lottery and then work with the prospective buyers in rank order to complete the underwriting process. Hello Housing will continue to work through the prospective buyers in rank order until a prospective buyer meets the underwriting requirements. The City will then execute the sales agreement with the selected buyer and request that the buyer submit earnest money into escrow in preparation for closing. It is estimated that, from the start of the marketing period until close of escrow, the entire process will take at least three months. The following flow chart depicts the estimated timeline, roles and responsibilities of each party in the marketing, lottery, and sales process.
FISCAL IMPACT
In addition to authorizing the purchase of the Property, on October 3, 2023, the City Council authorized the expenditure of $13,600 for holding costs from the Measure C Affordable Housing Bond Fund (Fund 284) for this transaction. All seller-related real estate transactions costs (i.e. seller and buyer real estate commission, title search, title fee, recording fees, taxes, etc.) will be withheld from the proceeds of the sale. Upon the closing of escrow, the City will receive the net proceeds of the sale from the Title Company. This revenue is proposed to be receipted in the Measure C Affordable Housing Bond Fund (284) as “program income”, and the attached resolution provides for the amendment of the Fiscal Year 2023-2024 budget to recognize this revenue and expenditures administered by the City. The net proceeds are proposed to be appropriated to the BMR Acquisition Program for future use.
Staff Communication with the Public
Staff has been in communication with Hello Housing and two real estate agents regarding the resale process of the Property.
CONFLICT OF INTEREST
None.
Conclusion
Staff recommends that the City Council approve the attached resolution authorizing the City Manager to execute all documents necessary to sell 1500 Park Avenue #314 for $355,900; amending the Fiscal Year 2023-2024 budget to reflect the increased revenue to, and expenditures from, the Affordable Housing Fund (Fund 299); and appropriating the net proceeds to the BMR Acquisition Program.
PREPARED BY: Charles Harris, Community & Economic Development Coordinator II REVIEWED BY: Chadrick Smalley, Community Development Director Approved and Forwarded to the
City Council of the City of Emeryville
Paul Buddenhagen, City Manager
Attachments
Draft Resolution
BMR Resale; 1500 Park Avenue #314
City Council Meeting | November 7, 2023
City of Emeryville
CALIFORNIA
MEMORANDUM