Community Development Agency
santa-ana.org/community-development
Item # 16
City of Santa Ana
20 Civic Center Plaza, Santa Ana, CA 92701
Staff Report
January 16, 2024
TOPIC: First Amendment to Density Bonus Housing Agreement for Legacy Square
AGENDA TITLE
First Amendment to the Density Bonus Housing Agreement for Legacy Square
RECOMMENDED ACTION
Approve a First Amendment to the Density Bonus Housing Agreement with National Community Renaissance of California and Legacy Square, L.P. for the permanent loan conversion of Legacy Square (Agreement No. A-2024-XXX).
GOVERNMENT CODE §84308 APPLIES: Yes
DISCUSSION
On February 5, 2019, the City Council authorized the City Manager to execute a Density Bonus Housing Agreement with National Community Renaissance of California (“National CORE”) for the development of a 93-unit affordable housing development at 609 N. Spurgeon Street (“Legacy Square”) (Agreement No. A-2019-028). Legacy Square was completed on April 29, 2023 and without the density bonuses, National CORE would only have been permitted to build 51 units of affordable housing.
The First Amendment to the Density Bonus Housing Agreement is required for the permanent loan conversion for National CORE and Legacy Square, L.P. A permanent loan conversion for a multifamily affordable housing project refers to the transition from a construction loan financing to a long-term, permanent mortgage loan once the construction of the project is complete. The permanent loan will have terms and interest rates appropriate for the long-term nature of the financing. However, the terms can vary based on the agreement between the developer and one or more lenders. The conversion from construction financing to permanent financing allows the project to transition from the development phase to stable, long-term operations while meeting the affordability goals set for the housing units. The specific details of the permanent loan conversion process can vary depending on the project, financing arrangements, and regulatory requirements.
First Amendment to Density Bonus Housing Agreement for Legacy Square January 16, 2024
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Relative to the permanent loan conversion for Legacy Square, the State of California Department of Housing and Community Development (HCD) is one of the senior lenders on this project and has requested the City to amend our local Density Bonus Housing Agreement in order for HCD to approve their permanent loan. Specifically, this First Amendment to the Density Bonus Housing Agreement is required because the recordation of the original Density Bonus Housing Agreement on the fee interest triggers an obligation for HCD to record its regulatory agreement against the fee interest. At the time of recording of the Density Bonus Housing Agreement on March 25, 2019, following City Council approval, there was no ground lease, but the affordable housing owner now has a long-term ground lease with the Santa Ana United Methodist Church that they entered into on June 12, 2020, over one year later. Since there was no ground lease when recorded, the Density Bonus Housing Agreement was recorded against the ground lessor’s fee interest and not the leasehold interest held by the affordable housing owner.
Following approval of this action by the City Council, the First Amendment to the Density Bonus Housing Agreement will be recorded against the leasehold interest by modifying the leasehold description in the original Density Bonus Housing Agreement and satisfy the request of HCD (Exhibit 1). After this First Amendment is approved, HCD can record their regulatory agreement against the leasehold interest and approve their permanent loan. However, if this First Amendment is not approved, National CORE will not be able to close on its permanent loan conversion and the project will be in default under its construction loan financing documents.
FISCAL IMPACT
There is no fiscal impact associated with this action.
EXHIBIT(S)
1. First Amendment to Density Bonus Housing Agreement for Legacy Square Submitted By: Michael L. Garcia, Executive Director of Community Development Approved By: Tom Hatch, Interim City Manager