1211-1217 FOURTEENTH STREET AFFORDABLE RENTAL HOUSING
Topic/Item Disposition and Development (DDA) Deal Points Parties Lessor: City of Santa Monica (“City”);
Lessee: Hollywood Community Housing Corporation, (“Developer”) or a limited partnership controlled by the Developer; Collectively: (“Parties”);
Disposition and Development Agreement (“DDA”) and Ground Lease Agreement (“Agreement”) Development Site The development site is a total of approximately 25,000 square feet and is comprised of:
• 15,000 square feet, between Arizona Avenue and Wilshire Boulevard, located at 1211-1217 Fourteenth Street in Santa Monica, CA 90404 (“City Site”); and
• 10,018 square feet, between Arizona Avenue and Wilshire Boulevard, located at 1402 Wilshire Boulevard in Santa Monica, CA 90403 (“1402 Wilshire Boulevard”)
The proposed development will be 82 units total, with 80 affordable rental apartments with 40 apartments reserved for 30% AMI households and 40 apartments reserved for 60% AMI households, plus 2 manager apartments without income restrictions. 40 of the apartments will be reserved as permanent supportive housing (PSH) with Project-Based Section 8 from the City’s Housing Authority. All apartments, with the exception of the 2 manager apartments, will be reserved for seniors where the head of household must be aged 55 years and older. Government funding regulations and requirements may change, thus necessitating adjustments to the unit mix and AMI levels to maintain competitiveness for said funding. City staff shall reasonably approve changes to the unit mix and/or AMI levels to ensure competitiveness for government funding sources. All units except the two manager apartments shall be reserved for households with an average household income of 60% AMI or less.
The current proposed unit mix shall be as follows: 80 one-bedrooms and 2 two-bedroom property management units.
The building will have the following amenities: Community room with kitchenette; bike room; community laundry rooms; planted roof terraces; on-site supportive services offices and conference room; on-site offices for management staff; staff breakout room and kitchenette; large package room. Utilization of the bike storage facility will be provided at no additional cost to the residents. PSH apartments will be furnished and include: (1) full-size bed with frame, (1) Dresser, (1) Dining table with (2) chairs, (1) Sofa, (1) Coffee table, (1) Lamp
There will be at-grade parking with 42 vehicle spaces which will be for the sole use of the residents, on-site staff, and visiting service providers. The number of parking spaces could change due to design and building code requirements. City Manager is authorized to approve up to 10% change in the amount of parking spaces due to site constraints. Parking will be provided at no additional cost to residents.
The development includes approximately 3,657 square feet of ground floor space for ancillary use for property management, resident services and resident common areas. The affordable housing, vehicle parking and ground floor uses, are herein referred to as the “Development.”
Good Faith
Negotiation
In case of any dispute arising from this Agreement, including any question regarding its interpretation, validity, or termination, Parties will use best efforts to resolve the dispute by good faith negotiation.
Property Acquisition Developer is conducting due diligence and plans to acquire 1402 Wilshire Boulevard. Developer will deed 1402 Wilshire Boulevard to the City concurrently with execution of the ground lease for the City Site and 1402 Wilshire Boulevard, with condition of title approved by City. Developer shall clear all liens on 1402 Wilshire Boulevard prior to the deed transfer to the City.
Local Entitlements The Parties understand and agree that the Developer is eligible to apply for a local streamlined ministerial approval process and is exempt from California Environmental Quality Act (“CEQA”). The residential and ancillary uses are permitted by right. 1402 Wilshire Boulevard and the City Site will be subject to a lot tie agreement.
Ground Lease Term The City will provide a ground lease term of 55 years plus two options of 22 years each, the options may be elected by the Developer and City after mutual agreement subject to tax credit financing requirements, provided that Developer is not in default under the terms of the ground lease. The term of the ground lease will commence upon concurrent closing of escrow for financing the development, as more fully specified in the DDA. The Ground Lease Agreement and Regulatory Agreement shall include cross-default provisions.
Ground Lease
Rent
Annual rent for 55 years is $1 for the development site plus City’s pro rata share of residual receipts based on the amount of public funding provided by each public lender with the City’s contribution being calculated based on the fair market leasehold value of the City Site at construction loan closing (“FMV”). FMV of the City Site will be determined by an appraisal mutually agreed upon by the City and Developer in accordance with TCAC requirements. At Year 56, assuming extension of the lease is exercised, rent will be equivalent to City’s share of residual receipts. Notwithstanding anything to the contrary contained herein, the aggregate rent plus any payments actually paid to the City during the term of the ground lease shall not exceed the FMV of the City Site.
City Housing Trust
Funds Loan
If a funding gap should occur, City staff may approve HTF loans that comply with the underwriting criteria and loan limits within the City’s HTF Guidelines. Any request outside of these limits will be brought before City Council for approval. ****************************************************************************************** Developer/City to execute Acquisition Loan for 1402 Wilshire Boulevard in the amount of $6,000,000 (concurrent escrow for purchase and funding the Acquisition Loan), which shall be secured by a deed of trust in favor of the City. A City Deed of Trust/Regulatory Agreement/option agreement shall be recorded at funding of the acquisition loan. In the event of termination of the DDA due to inability to close the financing gap, City shall exercise a purchase option at the amount of the acquisition loan or allow for sale of the property at fair market value with the Regulatory Agreement to be released and repayment of the City’s loan from the proceeds of sale. At construction closing, Developer to convey property to City and City to ground lease back to Developer for partial repayment of City acquisition loan in the approximate amount of $3,500,000 from construction financing, subject to approval of the City Manager of the final amount. Simultaneously with the paydown of the City acquisition loan, the loan term shall be extended to 57 years from construction closing.
Repayment of the remaining balance of the City loan shall be paid from the City’s prorata share of 50% of residual receipts after payment in full of the Developer Fee, assuming both Parties agree to the Developer Fee. The loan term shall be 55 years from construction closing unless there is an early termination without construction closing.
City Regulatory
Agreement
The initial term of the City Regulatory Agreement will be 55 years from the date of the Certificate of Occupancy, to be extended concurrently with each option to extend the Ground Lease Term. There shall be no subordination of City Regulatory Agreement to other financing sources during the lease period and any extension thereto. The Regulatory Agreement shall reference the following:
1. Supportive Services Plan
2. List of Furnishings for PSH apartments
3. PSH Housing Retention Plans used by Developer
4. Form of Tenant Lease
5. House Rules
6. Security Plan
7. List of Amenities
8. Tenant Selection Plan
9. Property Management Plan
Predevelopment
Expenses
All predevelopment expenses will be paid by Developer.
Commercial rental
income
Any rent revenue collected by HCHC from the commercial tenant at 1402 Wilshire Boulevard after HCHC acquisition will be used to pay expenses associated with the commercial use and holding costs if the property is vacant. If rent revenue exceeds such expenses, rent revenue will be used to pay predevelopment expenses for the Development. If expenses exceed rent revenue, the net deficit would be treated as a project expense.
Non-City Development
Funding
Developer is required to obtain outside financing necessary to fully fund the Development, which includes a permanent bank loan, a construction loan, State and/or Federal tax credit equity, a loan from the California Department of Housing and Community Development Multifamily Housing Program, and any other funding the Developer deems necessary to achieve project feasibility.
The City will have approval rights to any loan documents or grant agreements with non-City development funders.
Developer Fee Developer to receive a maximum developer fee for the Development. The fee, including any deferred developer fee, will be subject to either the fee limit in the Santa Monica Housing Trust Fund Guidelines at the time of closing or a negotiated fee based on third-party review, up to the maximum allowable developer fee per CA LIHTC regulations at time of closing.
General Partner Asset
Management Fee
Developer’s maximum yearly general partner asset management fee will be capped as follows: $25,000, inflated annually at 3.5%.
Limited Partner Asset
Management Fee
Developer’s maximum yearly investor asset management fee will be capped as follows: $10,000, inflated annually at 3.5%.
Construction Bids The Developer will comply with City requirements regarding prevailing wage. Developer will provide the City with a list of subcontractors and conduct prevailing wage compliance review. Developer agrees to require a General Contractor to obtain most competitive pricing, terms and conditions, consisting of at least three subcontractors bids from the major trades.
Permanent Debt and
Tax Credit Equity
Developer agrees to hold a solicitation process for lenders and investors to obtain most competitive pricing, terms and conditions.
Financing Plan
Modifications
As changes are made during the predevelopment phase and prior to Development Closing, Developer shall submit to City for review updated versions of the Financing Plan reflecting any and all changes from prior versions submitted to the City.
City and Developer shall jointly approve changes to the Financing Plan through construction loan closing. Developer and
City will meet and confer if costs increase to create a funding gap. If the funding gap cannot be closed within 24 months from execution of the DDA, the City will have the right to terminate the Agreement or provide an extension to be negotiated. City can terminate the Agreement for cause if Developer is in default of the DDA (subject to all applicable notice and cure provisions of the DDA).
Assignment of
Contracts and Plans
The City shall require the Developer to assign land use entitlements, plans, and contracts. This assignment shall survive termination of the DDA; provided however, in the event the City elects to terminate the DDA as a result of a funding gap and Developer is not otherwise in default or owe the City any Housing Trust Fund loan, at the City’s request, the Developer shall assign, on an as is basis without any representation or warranty, all of its right, title and interest in any land use entitlements, plans, and contracts developed in connection with the Project (the “Work Product”) upon the City’s agreement to reimburse the Developer for the demonstrated third party out of pocket expenses incurred by Developer and its affiliates in connection with the Work Product.
City Approval Rights City shall have approval rights, which shall not be unreasonably withheld or delayed, over the following:
a. Key members of the development team, including the General Contractor b. Property Management team, Property Management Plan, Lease, Tenant Selection Plan, House Rules, Housing Retention Process, Security Plan
c. Service Provider Team and Services Plan
d. Key documents, including but not limited to the Limited Partnership Agreement and Construction Contract e. The Development’s development budget and annual operating budget f. Withdrawals from the operating and replacement reserves, consistent with the requirements of the lender/investor. g. Transfer or sale of leasehold interest, and refinancing, consistent with the requirements of the lender/investor h. Transfer of general partner, or managing general partner interest and all associated transfer documents i. Partnership and financing documents
Transfer or
Assignment
Developer agrees to City approval rights over General Partner transfer or assignment that are industry standard for tax credit financed developments.
Project-Based
Vouchers
The Santa Monica Housing Authority will provide 40 Project-Based Housing Choice Vouchers for the PSH apartments.
Supportive Services
Funding
The Los Angeles County Department of Health Services will fund supportive services for the 40 PSH apartments estimated at $936,000 per year.
Tenant Selection Subject to federal and state fair housing laws, the Development must utilize a City-administered waitlist – the City’s Below Market Housing waitlist to fill affordable apartments, and the Santa Monica Housing Authority’s waitlist to fill the PSH apartments, which utilizes a coordinated entry system with priority for Santa Monica Program Participant applicants.
Security The City shall approve the Security Plan as part of the Regulatory Agreement. Developer is required to provide security in accordance with the Security Plan. If the City believes that the Security Plan is insufficient, the City can request a meet and confer with the Developer to reassess the Security Plan. The Security Plan shall include at a minimum:
• Methods for securing 1402 Wilshire Boulevard prior to construction • Security staff during construction
• A resident Property Manager will be on duty Monday through Friday from 8:00 a.m. to 5:00 p.m. beginning with move-ins. At the City Site/1402 Wilshire Boulevard site, a second resident Assistant Property Manager will be on duty from 2:00 p.m. to 10:00 p.m. Monday through Friday, with the shift adjustable as needed. At all times when not on duty, the Property Manager or Assistant Property Manager will be on-call and available by phone for afterhours emergencies. • HCHC will provide security for the first year of operations at the City Site/1402 Wilshire Boulevard site during night and weekend hours when a resident property manager is not on duty, with continuation after the first year subject to reassessment with City staff.
• Controlled access points
• Perimeter security fencing
• Key fob access and automatic locking
• Alarm system
• Security cameras with an on-site monitoring system at the property management office Transportation
Demand Management
Developer and City shall explore the feasibility of measures to reduce personal vehicle usage by tenants of the Development, such as transit passes and shared mobility programs (such as car share, ride share and/or bicycle share).
Building sustainability • Developments will meet Santa Monica Energy Performance Requirements as defined by the Energy Performance Approach Reach Code.
• Developments will meet Santa Monica's Electric Vehicle Charger Reach Code and provide secure bicycle parking onsite to encourage alternate mobility options
• Developments will be solar-ready, with infrastructure in place to serve photovoltaic arrays when funding is available. • Developments will utilize drought-tolerant planting.
• Natural ventilation - while each unit will be equipped with air conditioning, units are planned with operable windows to maximize natural ventilation and reduce A/C demand
• Site orientation and self-shading - windows are placed to maximize natural daylight within units and windows facing south and west are self-shaded with architectural elements to reduce heat gain • Planted roof areas and podiums to mitigate urban heat island effect • Shaded, open-air common areas
DDA Upon approval of the Term Sheet by the City Council, Developer and City staff will negotiate a DDA containing all terms and conditions of the transaction for approval by the City Council. The City Council reserves the right to reject the recommended DDA.
The DDA will include, at a minimum:
1. Legal Description
2. Site Map
3. Scope of Development
4. Schedule of Development
5. Development Budget
6. Pro Forma Sources and Uses (Financing Plan)
7. Form of Regulatory Agreement
8. Form of Ground Lease
9. Memo of Ground Lease
10. Form of Assignment of Contracts and Plans
11. Assignment of Agreements