CITY COUNCIL STAFF REPORT
Meeting Date: March 21, 2022
TO: THE HONORABLE MAYOR AND CITY COUNCILMEMBERS
SUBJECT: ADOPT RESOLUTION NO. ___-22 APPROVING AN AMENDED AND
RESTATED PREDEVELOPMENT LOAN AGREEMENT WITH
SATELLITE AFFORDABLE HOUSING ASSOCIATES TO
CONTRIBUTE $736,000 TOWARD SENIOR AFFORDABLE HOUSING
DEVELOPMENT AT 490 GOLF CLUB ROAD
SYNOPSIS
Satellite Affordable Housing Associates (“SAHA”), a non-profit affordable housing developer, is partnering with Choice in Aging (“CiA”), a non-profit corporation, to develop 82 units of affordable senior rental housing (“Housing Project”) on CiA’s property at 490 Golf Club Road.
The Housing Project will be on a mixed-use campus that provides wrap-around support services to seniors.
In November 2016, the City executed a $236,000 loan agreement to assist CiA (formerly Rehabilitation Services of Northern California or “RSNC”) with predevelopment costs associated with the Housing Project. CiA has since partnered with SAHA to manage the Housing Project’s development. In February 2020, the City Council made a preliminary commitment to provide an additional $500,000 loan for predevelopment costs toward the Housing Project.
The City has prepared an Amended and Restated Predevelopment Loan Agreement (“Amended Loan Agreement”) and related documents necessary to implement the $500,000 predevelopment loan and to transfer the original $236,000 loan from RSNC to SAHA, for a total predevelopment loan amount of $736,000.
DISCUSSION
Choice in Aging Campus
CiA and SAHA are partnering to develop the Aging in Place Campus (“Campus”) on a four-acre site at 490 Golf Course Road. The Campus will contain:
Housing Project: An affordable senior housing development with 82 rental units. The City will require that not less than 30 units be affordable to extremely low-income households earning up to 30 percent of the Contra Costa County Area Median Income (“AMI”). SAHA anticipates that the remaining units, aside from one manager unit, will be affordable to lowincome residents earning up to 80 percent AMI. Other public agencies financing the development will restrict the remaining units.
CiA and CiL facilities, adult and child day care facilities (CiL – Choice in Learning, is a child day care facility that is operated by CiA, located within the campus). Future Development that could contain medical offices and an assisted living facility.
City Commitment to Assist Affordable Housing
On November 14, 2016, the City executed a $236,000 loan agreement to assist CiA (under its former name RSNC) with predevelopment costs associated with the Housing Project. CiA has since partnered with SAHA to manage the Housing Project’s development.
On February 3, 2020, the City Council approved a preliminary commitment of $2,236,000 to SAHA from Low and Moderate Income Housing Asset Funds (“Housing Asset Funds”), broken out as follows:
a. The assignment and assumption of the $236,000 predevelopment loan agreement for funds previously disbursed to CiA;
b. $250,000 in predevelopment funds to be disbursed after SAHA has obtained approvals for a general plan amendment, planned unit development (rezoning), development plan, and environmental review required for the proposed development; c. $250,000 in predevelopment funds disbursed after SAHA has obtained approvals for a use permit, subdivision or parcel map and architectural review permit as required for the proposed development; and
d. $1,500,000 in construction funds disbursed after SAHA has secured all financing required to move forward with project construction.
City staff and consultants analyzed the proposed Housing Project before a commitment was made in February 2020. It was determined that the City’s commitment was a reasonable amount considering total development costs, affordability levels, and other factors.
The City has prepared an Amended Loan Agreement for a $736,000 predevelopment loan to fulfill its commitment under items a through c above. SAHA has obtained approvals under item b and the approvals listed under item c are pending. Loan funds will be dispersed as the above milestones are met pursuant to the terms of the Amended Loan Agreement.
Funding of the $1,500,000 construction loan under item d is subject to the City’s receipt of $1,000,000 in Housing Asset Fund deposits through the Pleasant Hill Successor Agency’s Recognized Obligation Payment Schedule (“ROPS”). City staff anticipates receiving this funding by June 2022, subject to California Department of Finance approval of the ROPS. A second $1,500,000 loan agreement will be drafted and presented to City Council on a later date.
Amended Loan Agreement Terms
The $736,000 Amended Loan Agreement has a 55-year term and accrues simple interest at three percent per year. The loan will be repaid annually from residual receipts, or revenues net of certain operating costs and debt as defined in the Amended Loan Agreement. The loan proceeds may be used to reimburse actual third-party predevelopment costs incurred by SAHA, such as architectural fees, engineering fees, environmental studies, and entitlements.
CiA and SAHA entered into an Amended and Restated Memorandum of Understanding dated July 30, 2020 (“MOU”) that gives SAHA lead responsibility for development and financing of the Housing Project, as well as limited responsibility for the Commercial Project. The Amended Loan Agreement is therefore with SAHA and not CiA.
CiA and SAHA are in the process of subdividing CiA’s lot into three parcels. One of the three parcels will be ground leased to SAHA for the Housing Project (“Housing Site”), and SAHA currently has an option to ground lease the Housing Site from CiA once that separate parcel is created. The Amended Loan Agreement is secured by the following: First, SAHA is making an assignment to the City of all agreements, plans and specifications and approvals that SAHA enters into or obtains in furtherance of the Project, and second, SAHA is assigning its interest in the MOU and Option to Ground Lease with CiA to the City. In the event of a default by SAHA prior to the establishment of the separate Housing Site as a legal parcel, the City has the ability to step into the position of SAHA, and select a new developer to complete the project. Further, once the Housing Site is established as a separate legal parcel and the ground lease is recorded, the Amended Loan Agreement will be secured additionally by a leasehold deed of trust against the Housing Site. If SAHA defaults under the terms of the Amended Loan Agreement, the City will have the right to take over the ground lease and select a new developer to complete the Housing Project.
The Amended Loan Agreement includes an Amended and Restated Affordable Housing Regulatory Agreement (“Regulatory Agreement”) that restricts 30 units to be rented to extremely low-income households for 55-years.
Approval of the Amended Loan Agreement does not constitute approval of the proposed Property development, will which undergo the regular design review process.
FISCAL IMPACT
The Loan Agreement will approve a $500,000 expenditure from the City’s Housing Asset Fund, which is restricted for use on affordable housing activities pursuant to the California Health and Safety Code. The $236,000 loan that will be assigned from CiA to SAHA was previously expended. The Housing Asset Fund balance has approximately $1.7 million dollars available that is not committed to other projects.
PUBLIC CONTACT
Public contact was made through posting of the City Council agenda on the City’s official notice bulletin board, at the Pleasant Hill Senior Center and at the Pleasant Hill Police Department. The agenda and staff report are posted on the City’s web page.
RECOMMENDED CITY COUNCIL ACTION
Adopt the proposed resolution approving the Amended Loan Agreement.
ALTERNATIVES TO RECOMMENDED ACTION
1. Do not approve the resolution
2. Provide direction to staff.
ATTACHMENT(S):
1. Proposed Resolution
Exhibit A - Amended and Restated Predevelopment Loan Agreement Prepared by: Troy Fujimoto, City Planner
Reviewed by: Ethan Bindernagel, Public Works and Community Development Director/Assistant City Manager
Approved by: June Catalano, City Manager