1318 4th Street
Disposition and Development Agreement and Ground Lease Deal Terms Item 11-A
October 8, 2024
Item 11-A
October 8, 2024
2 Brief Background
• 122-apartment, affordable and permanent supportive housing development (Development).
• Located at 1318 4th Street, Santa Monica.
• Identified for affordable housing development in the City’s 6th Cycle Housing Element for 2021-2029.
• Request for Proposal in 2019
• Development Team led by EAH Selected in 2022
• Council provided direction on May 10, 2024, and selected the design concept for the Development
Item 11-A
October 8, 2024
Item 11-A
October 8, 2024
3 The Development – 1318 4th Street
Development Highlights:
• LEED Gold, all electric.
• 70 Affordable Housing Apartments
• 50 fully-furnished Permanent Supportive Housing (PSH) apartments • On-site services for the PSH residents
• Wrap-around supportive services for PSH tenants
• Ground floor commercial use (approximately 19,000 square feet) • Proposed as a neighborhood-serving grocery store
• Tenant and commercial subterranean parking
• 60 for residential
• 58 for commercial
• Incomes ranging from 30% to 60% of the Area Median Income (AMI) • 50% of these are 2 and 3-bedroom apartments
Item 11-A
October 8, 2024
Item 11-A
October 8, 2024
4 Key Deal Terms – Negotiated Revenue on Residential
• The City’s Housing Trust Fund receives 50% share of net cash flow (residual receipts) from the residential portion of the Development. • In affordable housing developments, residual receipts are the annual payments on the City Loan after all debt service and operational expenses are paid .
• Industry Standard is 50% goes towards the public lenders and the remaining 50% goes towards the development partnership.
Item 11-A
October 8, 2024
Item 11-A
October 8, 2024
5 Key Deal Terms – Negotiated Revenue on Commercial
• The City has negotiated an annual Ground Rent for the Commercial Space.
• The annual payment amount will be calculated as 6% of the commercial gross building area appraised value as of the closing date
• The annual commercial ground rent amount shall increase between 2% and 4%.
Item 11-A
October 8, 2024
Item 11-A
October 8, 2024
6 Key Deal Terms – Ground Leases
• Residential Ground Lease
• Ground lease will be for a term of 99 years
• Annual payment of $1 per year plus residual rent in the amount of the City’s Percentage of residential residual receipts (50% of cash flow) • Commercial Ground Lease
• The City’s Housing Trust Fund will receive 100% of commercial residual receipts until the annual payment equates to the annual commercial ground rent.
• After the City receives the annual ground rent amount, the City and Developer will share the commercial residual receipts at a 50/50 split.
Item 11-A
October 8, 2024
Item 11-A
October 8, 2024
7 Key Deal Terms – Site Security
• The City shall approve the Security Plan
• EAH has provided a proposed Security Plan which includes at a minimum one year of evening and weekend security for the first year of operation. • The City can request a meet and confer after the first year to assess the Development’s security needs.
Item 11-A
October 8, 2024
Item 11-A
October 8, 2024
8 Key Deal Terms – Tenant Selection
• Must utilize a City-administered waitlist
• City’s Below Market Housing (BMH) waitlist to fill general affordable apartments, • Santa Monica Housing Authority’s waitlist to fill the Permanent Supportive Housing apartments, which would utilize a coordinated entry system with priority for SMPP applicants.
• Subject to federal and state fair housing laws and the regulatory requirements of any Development funders
Item 11-A
October 8, 2024
Item 11-A
October 8, 2024
9 Construction Permanent
Tax Exempt Construction Loan $63,531,007 Permanent Loan $7,100,000 Taxable Construction Loan $22,430,767 Commercial Loan $1,549,000 Costs Deferred Until Construction $3,168,268 Affordable Housing Sustainable Communities (AHSC/State)
$30,938,381
Infill Infrastructure Grant (IIG/State) $7,500,000 Infill Infrastructure Grant (IIG/State) $7,500,000 City of Santa Monica / Federal Allocation
Award for 1318 4th Street
$2,000,000 City of Santa Monica / Federal Allocation
Award for 1318 4th Street
$2,000,000
City Housing Trust Fund Loan Request $4,271,981 City Housing Trust Fund Loan Request $4,271,981 Deferred Fee $14,428,050 Deferred Fee $14,428,050
Equity $5,504,851 Equity $55,047,512
Total $122,834,924 Total $122,834,924
Development Financing - Sources
Item 11-A
October 8, 2024
Item 11-A
October 8, 2024
10 Next Steps
Timeline
• February 2025: Enter into the DDA to give site control needed for potential funding applications
• March 2025 (approximately): Architectural Review Board Approval • March 2025 – Affordable Housing and Sustainable Communities (AHSC) application • July 2025 – SuperNOFA (Infill Infrastructure Grant Program) application • August 2025 – Coastal Commission
• August 2025 – AHSC award
• December 2025 – IIG award
• April 2026 – California Tax Credit Allocation Committee/California Debt Limit Allocation Committee (CTCAC/CDLAC application
• August 2026 – CTCAC/CDLAC award
• February 2027 – Start Construction
• February 2029 – Complete Construction
Item 11-A
October 8, 2024
Item 11-A
October 8, 2024
11 Recommendation
Staff recommends City Council to:
• Adopt a finding that the actions to approve the Ground Lease and DDA for the Project (as described in the staff recommendation, below) are exempt from CEQA pursuant to CEQA Guideline section 15182 and a finding that the Project has been previously analyzed in the Downtown Community Plan Environmental Impact Report (SCH# 2013091056) and the 6th Cycle Housing Element Environmental Impact Report (SCH# 2020100575).
• Authorize the City Manager to negotiate and execute a Ground Lease and a Disposition and Development Agreement
• Authorize for the City Manager to award a grant in an amount not to exceed $2 million to be used for predevelopment costs for the Development. • Authorize for the City Manager to make a Housing Trust Fund loan not to exceed the Housing Trust Fund guidelines amount.
Item 11-A
October 8, 2024
Item 11-A
October 8, 2024