TO: HONORABLE MAYOR AND FROM: Rosalynn Hughey
CITY COUNCIL Rick Bruneau
SUBJECT: SEE BELOW DATE: September 29, 2023
Approved Date
10/2/23
COUNCIL DISTRICT: 6
SUPPLEMENTAL
SUBJECT: APPROVAL OF THE ISSUANCE OF TAX-EXEMPT MULTIFAMILY
HOUSING REVENUE BONDS AND THE LOAN OF THE PROCEEDS
THEREOF FOR THE FINANCING OF THE PARKMOOR COMMUNITY
APARTMENTS AND APPROVING RELATED DOCUMENTS
REASON FOR SUPPLEMENTAL
This supplemental memorandum provides disclosure of items that have surfaced since the submittal of the original memorandum, including a disclosure of variance from the Underwriting Guidelines and Standard Procedures. Additionally, this supplemental memorandum provides an update regarding the commitments for Rounds 1 and 2 of the 2021 Notice of Funding Availability (NOFA).
BACKGROUND
Abode Housing Development is proposing to develop, own, and manage a new mixed-use 81- unit affordable housing development on a 1.62-acre site located at 1510-1540 Parkmoor Ave.
After construction of the development is complete, estimated in May 2024, financing will convert from construction financing to permanent financing. Abode Housing Development is working with Fannie Mae as the senior permanent financing lender. During the process of underwriting, the City’s loan and the senior financing terms are being agreed to that deviate from the City’s Underwriting Guidelines
1. Fannie Mae is a quasi-governmental lender and as such may require more restrictions on the City’s funding related documents than a traditional
1 City of San Jose Multifamily Underwriting and Compliance Manual:
https://www.sanjoseca.gov/home/showpublisheddocument/40681/637527183320870000 COUNCIL AGENDA: 10/3/23
FILE: 23-1328
ITEM: 8.2
HONORABLE MAYOR AND CITY COUNCIL
September 29, 2023
Subject: Approval of the Issuance of Tax-Exempt Multifamily Housing Revenue Bonds and the Loan of the Proceeds Thereof for the Financing of the Parkmoor Community Apartments and Approving Related Documents
commercial lender. Fannie Mae has previously accepted a standstill agreement in lieu of subordination on refinances with the City and also on the City’s leasehold affordability restriction for this deal. However, Fannie Mae did not agree that those previously negotiated agreements applied to the Bond Regulatory Agreement on a new construction deal and are requiring a rider to the Bond Regulatory Agreement. In effect, the rider will subordinate the City’s Bond Regulatory Agreement to the Fannie Mae deed of trust.
ANALYSIS
City staff are actively working with Abode Housing Development to finalize the bond documents related to the Parkmoor Affordable Housing Development. During this process, the City learned that the permanent lender, Fannie Mae, requires a rider agreement to the Bond Regulatory Agreement which subordinates the agreement to the senior lender deed of trust.
Variance from the Underwriting Guidelines and Standard Procedures
Fannie Mae requires a rider agreement to the Bond Regulatory Agreement that deviates from the City’s Underwriting Guidelines and Standard Procedures. The rider agreement requires the Bond Regulatory Agreement be subordinate to the senior lender’s deed of trust. Fannie Mae has agreed this will not affect the City’s rights to prepay the outstanding bond fees at redemption. The City will also retain its rights to receive a no adverse effect opinion, and to require assignment and assumption upon transfer by the borrower. Therefore, City staff will proceed to negotiate and execute a rider to the Bond Regulatory Agreement with Fannie Mae.
Rounds 1 and 2 of the 2021 NOFA
City staff have updated the 2021 NOFA pipeline report to include the 11 NOFA-awarded developments in the Attachment. These eleven developments will offer 1,211 homes, comprising 535 two- and three-bedroom units, to approximately 2,000 people within the next two to three years.
COORDINATION
This memorandum was coordinated with the City Attorney’s Office and the City Manager’s Budget Office.
/s/ /s/
RICK BRUNEAU ROSALYNN HUGHEY
Director of Finance Deputy City Manager and
Acting Housing Director
HONORABLE MAYOR AND CITY COUNCIL
September 29, 2023
Subject: Approval of the Issuance of Tax-Exempt Multifamily Housing Revenue Bonds and the Loan of the Proceeds Thereof for the Financing of the Parkmoor Community Apartments and Approving Related Documents
The principal author of this memorandum is Shelsy Bass, Senior Development Officer. For questions, please contact Qianyu Sun, Deputy Director of Finance – Debt & Treasury Management, at [email protected]
or Ragan Henninger, Deputy Director, Housing
Department, at [email protected].
ATTACHMENT: Updated 2021 NOFA Pipeline Report
1 ATTACHMENT– Updated 2021 NOFA Pipeline Report
June 2021 Round 1 Original NOFA $75,000,000
Total NOFA Applicant Request $20,000,000
Dec 2021 Round 2 Original NOFA $150,000,000
Total NOFA Applicant Request $237,376,951
Original Total Dec 2021 NOFA Award $145,101,951
YTD Original NOFA requests $82,300,885
YTD Council Approved NOFA requests $110,802,826
YTD Council Approved NOFA Increase Total $28,501,941
% Increase 35%
2