NVF:HAH:CEG
12/1/2022
T-28560.004 / 1980550_21980550_2 1
Council Agenda: 12/13/2022
Item No.:8.3(a)
DRAFT – Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
RESOLUTION NO. ______________
A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN
JOSE (A) APPROVING A CONSTRUCTION AND
PERMANENT LOAN COMMITMENT OF $13,000,000 TO
SECOND STREET STUDIOS, LP, A CALIFORNIA LIMITED
PARTNERSHIP AND AFFILIATE OF FIRST COMMUNITY
HOUSING, FOR THE SECOND STREET STUDIOS
DEVELOPMENT LOCAT ED AT 1144 SOUTH SECOND
STREET; (B) AUTHORIZING THE DIRECTOR OF
HOUSING OR THE DIRECTOR OF HOUSING’S DESIGNEE
TO NEGOTIATE WITH SECOND STREET STUDIOS, LP
FOR THE REFINANCE AND PAYOFF OF THE
OUTSTANDING $12,000,000 SENIOR SILI CON VALLEY
BANK LOAN TO THE DEVELOPMENT AND FOR THE
FUNDING OF AN ADDITIONAL $1,000,000 TO PAY FOR
OTHER OPERATING EXPENSES OF THE
DEVELOPMENT; AND (C) AUTHORIZING THE DIRECTOR
OF HOUSING OR THE DIRECTO R OF HOUSING’S
DESIGNEE TO NEGOTIATE AND EXECUTE EITHER AN
AMENDMENT TO THE EXISTING LOAN DOCUMENTS
FOR A LOAN INCREASE OR A NEW LOAN COMMITMENT
FOR CONSTRUCTION AND PERMANENT FINANCING IN
THE AMOUNT OF $13,000,000 FROM THE LOW AND
MODERATE INCOME HOUSING ASSET FUND,
INCLUDING ANY RELATED DOCUMENTS,
AMENDMENTS OR MODIFICATIONS THERETO
WHEREAS, the Second Street Studios project, a 135 unit one hundred percent (100%) permanent supportive housing development located at 1144 South Second Street, (“Development”) was completed and fully leased in August 2019; and
WHEREAS, the City currently has a construction and permanent loan in the amount of $20,158,673 to Second Street Studios, LP (“Developer”) with a 4% simple interest per annum for a term of 55 years repaid from residual receipts; and
NVF:HAH:CEG
12/1/2022
T-28560.004 / 1980550_21980550_2 2
Council Agenda: 12/13/2022
Item No.:8.3(a)
DRAFT – Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
WHEREAS, in June of 2022 staff learned from Developer and the Bank that the Development’s financial position and financial stresses were impacting the Development’s ability to pay its monthly senior loan repayment; and
WHEREAS, over the past year operating expenses have exceeded the rents collected and project sponsor First Community Housing (“FCH”) was forced to lend the Development funds to pay property managers, contractors and service providers; and
WHEREAS, the Housing Department has determined that there is a need to increase cash flow in order to stabilize operations, pay for the unanticipated operating expenses and eliminate short-term unpaid financial obligations as described in the memorandum from the Housing and Budget Departments dated November 21, 2022 (“Memorandum”); and
WHEREAS, staff recommends additional City funding to the Development in order to pay off the Bank Loan to the Development by the Developer’s refinancing and to payoff of the outstanding $12,000,000 senior Silicon Valley Bank Loan and an additional $1,000,000 in funding for Development operations; and
WHEREAS, the restructure of the senior loan debt will eliminate the Bank’s monthly payment of $84,579 and allow the property to become qualified for and receive the final Equity Pay-in Amount and the redirected funds could go to the Development to pay current liabilities and then to repayment of the City’s loans, and
WHEREAS, this would also allow the Developer, over a period of time, to fully fund the Operating and Social Services Reserves.
NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF SAN JOSE THAT:
NVF:HAH:CEG
12/1/2022
T-28560.004 / 1980550_21980550_2 3
Council Agenda: 12/13/2022
Item No.:8.3(a)
DRAFT – Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
The City Council hereby:
A. Approves a Construction and Permanent loan commitment of $13,000,000 to Second Street Studios, LP for the Second Street Studios Development located at 1144 South Second Street.
B. Authorizes the Director of Housing or the Director of Housing’s designee to negotiate with Second Street Studios, LP for the refinance and payoff of the outstanding $12,000,000 senior loan made by Silicon Valley Bank to the Development and for the funding of an additional $1,000,000 to pay for other operating expenses of the Development.
C. Authorizes the Director of Housing or the Director of Housing’s designee to negotiate and execute either the amendment of the existing loan documents to reflect a $13,000,000 increase to the existing City of San José construction and permanent financing commitment for the Development or a new set of loan documents evidencing a new construction and permanent loan commitment in the amount of $13,000.000, including any documents, amendments or modifications thereto.
NVF:HAH:CEG
12/1/2022
T-28560.004 / 1980550_21980550_2 4
Council Agenda: 12/13/2022
Item No.:8.3(a)
DRAFT – Contact the Office of the City Clerk at (408) 535-1260 or [email protected] for final document.
ADOPTED this _____ day of ___________, 2022, by the following vote:
AYES:
NOES:
ABSENT:
DISQUALIFIED:
SAM LICCARDO
Mayor
ATTEST:
TONI J. TABER, CMC
City Clerk