CITY OF SANTA CLARA TERM SHEET (DRAFT)
1601 CIVIC CENTER DRIVE FAMILY APARTMENTS
CONSTRUCTION AND PERMANENT LOAN
Date:
Property Description: Civic Center Drive Family Apartments is a proposed brand-new construction development, 5-stories high consisting of 108 residential rental units to be available to twenty-seven (27) homeless individuals and families with special needs earning up to 30% of Area Median Income (“AMI”), twenty-six (26) households earning up to 30% of AMI, 53 households earning up to 50% of AMI and two (2) unrestricted managers’ units (collectively, the “Project” or “Improvements”) located at 1601 Civic Center Drive in Santa Clara identified as Assessor’s Parcel Number 224-49-006 (the “Property”). The Property is owned by Civic Center, L.P., a California limited partnership, an affiliate of Charities Housing Development Corporation of Santa Clara County. The project includes a total of 82 on-site parking space.
Borrower: Civic Center, L.P., a California limited partnership.
Sponsor/Developer: Charities Housing Development Corporation of Santa Clara County.
Guarantor: Charities Housing Development Corporation of Santa Clara County.
Amount of City Loan: Up to Four Million, Nine Hundred Forty-Four Thousand, Five Hundred Dollars ($4,944,500).
Loan Funding Source: City Affordable Housing CIP Fund
Purpose of Loan: Construction and Permanent financing.
Loan Term: Three (3) years during Construction Phase; Fifty-five (55) years from Conversion date to Permanent Phase (“Maturity Date”).
Interest Rate: 3% simple, fixed throughout the Loan Term. Interest shall accrue on the outstanding principal Loan balance beginning on the disbursement date.
Loan Payments: Payments shall be made from share of Residual Receipts and shall be due beginning on the year following the Conversion Date, 120 days from Borrower’s end of fiscal year and every year thereafter. The share shall be City’s pro-rata share of the total original outstanding principal amount due under the soft loans. Principal and interest are due in full upon the Maturity Date.
Property Ownership: The Property which is currently owned by the Borrower will be sold to the County of Santa Clara and leased back to the Borrower. The ground lease will be subject to City review and approval.
Loan Security and Documentation: The Loan shall be secured by a Deed of Trust on the Property and the Improvements. In addition to the Deed of Trust, the Loan shall be evidenced by a Loan Agreement, Affordable Housing Agreement, Promissory Note, Hazardous Materials Agreement, Security Agreement, Assignment of Construction Contract and Contractor’s Consent to the Assignment, Assignment of Architect’s Agreement, Plans and Specifications and Architect’s Consent to the Assignment, Payment Guaranty, and any other documents that the City may require in connection with the Loan. The City Deed of Trust may be junior to a senior deed of trust, subject to a subordination agreement in a form and content acceptable to the City. The City’s Affordable Housing Agreement shall be recorded against the Property and shall not be subordinate to any senior lien or financing.
Affordability Restriction: The City’s Affordability Restriction (“Affordable Housing Agreement”) shall restrict twenty-seven (27) units rented to homeless households and families with special needs with income levels at or below 30% of AMI, twenty-six (26) units rented to households with income levels at or below 30% of AMI, fifty-three (53) units rented to households with income levels at or below 50% AMI and two (2) unrestricted manager’s units. The Affordable Housing Agreement will terminate fifty-five (55) years from the date the Project receives its first certificate of occupancy.
Developer Fee: Pursuant to the California Code of Regulations Section 10327(c)(2)(B) (TCAC regulations) on developer fees, the maximum developer fee shall be 15% of the Project’s unadjusted eligible basis, with the maximum cash portion of the development fee equal to or less than $2,500,000 plus $10,000 per unit for each Tax Credit unit in excess of 100 units (the “Developer Fee”). Any portion of the Developer Fee in excess of $2,500,000 plus $10,000 per unit for each Tax Credit unit in excess of 100 shall be deferred, repayable out of the Borrower’s share of the residual receipts of the Project, with a maximum pay-off period of 15 years from the closing of the Permanent Loan (“Deferred Developer Fee”). No interest is allowed on the Deferred Developer Fee.
Project Pro Forma: Borrower shall submit to City a pro forma budget reflecting Borrower’s projections of the construction and permanent budget, sources and uses of funds and income and operating expense cash flow for the Project. Borrower will sign a legible final version prior to closing of the Loan as an exhibit to the Loan Agreement.
Organization Agreements: Borrower shall submit to City a certified copy of certificate of limited partnership, partnership agreement, certificate of LLC/articles of organization, operating agreement, articles of incorporation, bylaws, borrowing resolutions and incumbency certificate with all exhibits and amendments thereto and related filings or recorded documents, a current good status certificate and such related documentation as City may request.
Property Management Agreement: The management agreement between the Borrower and a property management company, ancillary management documents, and management plan providing for the management or operation of the Project or Improvements shall be subject to City’s approval prior to execution and shall be received as a condition to Conversion to Permanent Loan. Prior to the issuance of the Certificate of Occupancy, the Borrower shall prepare and submit to the City for review and approval a program (the “Maintenance Program”) for the exterior and interior maintenance of the Property and the Improvements. The Maintenance Program may be included within its Management Plan.
Other Financing Requirements: As a condition to closing of the Construction Loan Borrower shall procure and deliver to City evidence satisfactory to City that Borrower has obtained all the necessary construction and permanent financing. Construction and permanent financing may include tax-exempt bond financed construction and permanent loans, low-income housing tax credit investment, loans from the County of Santa Clara, loans from the State of California and other financing available for the Project.
Plans and Specifications: Final plans and specifications for the Improvements shall be subject to City's approval prior to close of the Construction Loan. City's review and approval may include without limitation review of the following items: architectural plans and details, exterior elevations, interior finish schedule, structural plans and details, plumbing plans, HVAC plans, electrical plans, contractor's cost breakdown, grading plans, drainage, sewer, water, street, electrical and gas plans, plot plans, offsite, and landscaping plans. There shall be no change in the plans and specifications that are approved by City nor any material deviation in construction of the Improvements without City's prior written consent.
Prevailing Wage Requirements: Borrower will comply with labor and wage requirements if such are required by any of the financing in the Project.
Construction Contract: The construction contract ("Contract") and the general contractor ("Contractor"), to be retained by Borrower to construct the Improvements, shall all be subject to City's approval.
Construction Completion Bond: Performance and payment bonds for the construction contract naming the City as co-oblige may be required for the general contractor, acceptable to the City. Any surety for purposes of bonding, including, but not limited to, performance or completion bonds, must be a corporation duly authorized and admitted to transact business and issue surety bonds in the State of California. City may approve, at the request of the Borrower, bonding of the major subcontractors in lieu of bonding of the general contractor.
Start of Construction: Start of construction, as evidenced by a notice to proceed, shall occur within 30 days of the financing closing event followed by continuing construction progress. The construction work is expected to be completed pursuant to the attached Exhibit A from the closing date of the construction financing.
Construction Consultant: The City will engage a construction consultant (“Construction Inspector”) for the purposes of reviewing construction documents, monitoring construction draws, reporting on construction progress and inspecting Improvements. The cost of the Construction Inspector shall be invoiced to and paid by the Project. The City shall approve all construction draws.
Disbursement: City’s written approval is required for all disbursements during Construction Phase, no matter the source of funds. City shall require that Borrower provide documentation supporting the request for each disbursement of construction sources.
Project Cost Savings: Estimated project cost savings shall be calculated before the permanent loan closing based on a third-party development cost audit. Cost savings shall arise when all construction sources - including final senior loan amounts, final equity pay-ins, net operating income less operating expenses (during construction, lease-up and stabilization), and refunds from development deposits - are more than total hard and soft construction costs, including the payment of allowable Developer Fee. All Project Cost Savings, if any, at the issuance of 8609 shall be used to reduce the amount of the City Loan. If required, the City may share project cost savings with other lenders on a pro-rata basis.
Due Diligence: As a condition to closing of the Construction Loan Borrower shall provide all reports, studies, approvals, plans, drawings and other due diligence documents, in form and content acceptable to City, as reasonably requested by the City, including without limitation, an appraisal, a Phase I report, an ALTA survey, and preliminary title reports for the Site.
Public Liability, Hazard & Property Damage Insurance: As a condition to closing of the Construction Loan Borrower shall procure and maintain public liability, hazard, course of construction/builder’s risk and property damage insurance, and other insurance as required by the City. Borrower shall also procure and maintain workers' compensation and all other insurance required under applicable law, which insurance shall be in a form and amount approved by the City.
Title Insurance: As a condition to closing of the Construction Loan Borrower shall procure and deliver to the City an ALTA Extended Policy of Title Insurance, together with such endorsements as City may require, in an amount equal to the principal amount of the City Loan, insuring that City Deed of Trust constitutes a second lien or charge upon the Project subject only to such items as shall have been approved by City. There shall be no exceptions permitted for mechanics’ liens. Such policy shall be issued by a title insurer approved by the City.
Hazardous Materials: Borrower shall represent and warrant, and provide evidence satisfactory to City, that hazardous materials are not being, and will not be stored or used on the Project or Improvements, and that the Project and Improvements are in compliance with all environmental laws, ordinances, and regulations. Borrower shall be solely responsible for any loss, cost, expense, or liability in connection with hazardous materials.
Financial Information: During the term of the Permanent Loan, Borrower shall deliver to City within 120 days of the end of each fiscal year, Borrower’s audited income and expense statement, balance sheet, and statement of all changes in financial position signed by authorized officers of the Borrower. In some circumstances, Borrower may request up to 60 additional days for submitting the above documents if unforeseen challenges arise. Prior to close of the Construction and Permanent Loans and during the term thereof, Borrower promptly shall deliver to City such additional financial information as may be requested by City. City reserves the right to review and approve financial statements and other credit information and references prior to closing. Borrower will submit annual operating and capital budgets to City to demonstrate the ongoing viability of the Project Annual Budget and Quarterly Report: Borrower shall submit on or before the first day of each fiscal year after Completion of construction for the entire Loan Term and Affordable Housing Agreement Term, an estimated annual budget for management of the Property (the “Annual Project Budget”) in accordance with the Management Plan. Borrower shall also submit on a quarterly basis a quarterly report for the management of the Property (the “Quarterly Report”) in a form that is reasonably acceptable to the City. The Quarterly Report shall include a profit and loss statement, budget to date figures, and occupancy report. The City, in its sole discretion may waive the requirement of the Quarterly Report for one or more quarterly reporting periods.
Reserves: Consistent with any senior lender or investor limited partner review and approval requirements, withdrawals from Operating Reserves, Social Services Reserves, Replacement Reserves, or any type of reserves are subject to the prior written consent of the City.
Lease Requirements: Prior to rental of any of the affordable units, Borrower shall submit a standard lease form to the City for the City’s approval, which approval shall not unreasonably be withheld, conditioned, or delayed. The standard lease agreement shall not be amended in any material respects (except as required by applicable laws) without prior written City approval. Borrower shall enter a lease in the form approved by the City, and containing those provisions required by the City Regulatory Agreement, with each Qualified Tenant of an Affordable Unit. Borrower shall comply with City’s Local Preference Policy.
Unit Monitoring Fees: On or before July 1 of each year, commencing on the July 1 following Conversion until the expiration of the Affordable Housing Agreement, Borrower covenants and agrees to pay to the City the monitoring fee for the immediately preceding calendar year or portion thereof, prorated for the number of months in the partial year. The current monitoring fee per unit is $127. The monitoring fee is updated annually in the City’s Municipal Fee Schedule.
City Cost Recovery Fee: As defined in the City’s current fees and charges approved for the 2023-2024 fiscal year, Borrower agrees to pay the City the sum of $58,686 due at closing of the City Loan for Multi- Family Loan Origination fee. Borrower agrees to also pay City’s costs including attorney’s fees which shall also be due at closing of the City Loan.
Compliance: Prior to closing, the Borrower must be in compliance on all of its projects with the City including, but not limited to, rent and income compliance and document submissions.
Conversion: The Borrower will notify the City 90 days prior to the expected date of recording of the Notice of Completion for the construction and will work cooperatively with the City to convene conversion calls starting no less than 75 days from the target conversion date.
Conflict: This Term Sheet is not intended to set all of the terms, conditions and documents required by the City for this transaction, which shall include customary provisions and documents to be approved by City (including, but not limited to, all such documents mentioned in this Term Sheet and all City documents evidencing, securing or related to City documents related to this Project, shall in all respects be satisfactory to City (collectively, “City Documents”). If a conflict arises between terms herein and terms in the City documents, the City documents shall prevail.
City Approval: The terms set forth herein are subject to approval by the City Council.
Expiration: Please execute and return a copy of this Term Sheet to the City no later than September XX, 2023.
EXHIBIT A attached
Accepted by:
Civic Center, L.P., a California limited partnership
By: Civic Center Charities LLC, a California limited liability company, its general partner
By: Charities Housing Development Corporation of Santa Clara County, a California nonprofit public benefit corporation,
its sole member/manager
By:
Mark J. Mikl
Executive Director
Attachment: Exhibit A – Project Milestone
Project Milestone Schedule:
Milestone
Date of Completion
1. Site Control
January 2020
2. Community Engagement (continuous and ongoing)
May 2020
3. Land Use Approval
November 2022
4. Submit 4% Tax Credit Application
September 2024
5. Begin Construction
June 2025
6. Start of Lease‐Up Activities
November 2026
7. Complete Construction
April 2027
8. 100% Occupancy
October 2027
9. Permanent Loan Conversion
February 2028
1500 Warburton Avenue ● Santa Clara, CA 95050 ● Phone: 408-615-2210 ● Fax: 408-241-6771 ● www.SantaClaraCA.gov Term Sheet -City of Santa Clara
Civic Center Drive Family Apartments
July __, 2023
Housing and Community Development Housing and Community Development Housing and Community Development
Housing and Community Development