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Home My WebLink AboutR10-Redevelopment Agency - c: (" ., (: 1""'. ......... DEVELOPIIE.r DEPARrIlE.r OF TIIB CITY OF SAB' Il1i:VIU VDllIO IIEIIORAlIDllII ,-... - ------------------------------------------------------------------------------- TO: Honorable Chairman and Members Of The Community Development Commission FROM: ICENnTH J. HEMlERSON Executive Director SUBJECT: PAH PLACE BOllES - OCTOBER 5, 1992 COIKllO:rY DEVBLOPIIDT COIMISSION AGDDA lUll 110 DATE: October 2, 1992 COPIES: Administrator-EDA; Director of Planning and Building Services; Housing Division Manager; File ------------------------------------------------------------------------------- On the Commission's agenda for October 5, 1992 is Agenda Item #10 relating to the above referenced subject. The staff report included in the agenda packet contains two recommendations to the Commission, one submitted by the Housing Committee recommending approval and a second recommendation submitted by staff recommending denial. On October 1, 1992, staff and the Mayor met with the developer and came to full agreement on various issues affecting the project. This agreement has resulted in a new recommendation for approval by staff which will be set forth in detail later on in this report. Essentially, staff concerns involved overall marketability, certain design issues, developer profit and the number of one-bedroom units among others. A key concern was that, as proposed by the developer the Agency's loan guarantee would go into effect prior to the acquisition of construction financing. Based upon the staff's concerns, it was felt the distinct possibility existed that the Agency's guarantee would be called upon because the developer was unable to secure construction finanCing. Based upon the meeting with the developer noted earlier, these concerns have been successfully resolved and revised deal points agreed to as set forth below (the new deal points are underscored): The Drofect now consists of three-h,milred. ninetv-four condomini_ units to be built in seven Dhases of fiftv (SO) units each ....il one (ll Dhase of fortv-four (44) units (a total of eiRht Dhases). There will be two-bnndred. ten (210) two bedroom units with t:h..ee seDarate floor Dl...... for the two bedroom units ....il eiRhtv-four (84) one bedroom units. The Agency will gusrantee a loan of $3,443,000, which includes $2.9 million in principal and an interest reserve of $264,000 for two (2) years ($528,000). ------------------------------------------------------------------------------- IOH:lag:l044E Coaaission lIeetin& Agenda lIeetin& Date: 10/5/1992 Agenda Item No. 10 c: c: ,.- ,...., '-' - --' DBVELOPIIKBr DEPAoun6n.r IIBMOIWIDUM Park Place Homes October 2, 1992 Page llullber -2- ------------------------------------------------------------------------------- Agency will receive twenty-five percent (25X) of project as a limited partner. The $3,443,000 will accrue interest, for the Agency's purposes, at 9X with said interest to accrue to the back of the note. Sunset Group to pay 1.5X loan origination fee to Agency at the time appropriate documents are to be executed. The Aaencv will take over the second deed of trust held bv Co_erce BaDlt .nd allow the develoner to DaV off various consultants (ArChitects. market consultant. -.ineersl. These costs are estimated ~o :: *500.000 - *600.000. The Aaencv will have a second deed 0_ t_st on the nronertv. The Aaencv's loan auarantee will be reduced bv the 8m01Dlt ext)....ded to take over 1:1... C--'!!rce B-1. deed of trust _d to DaV off various consultants. The develoner will be reouired to secure construction ffn"ncina nrior to the hMley t!]ttPftdift. fts loan auarantee. After the develoner has acouired construction ffn.ncina. the first (BOD) and second (Aaencv) trust deeds will be Daid off. The isOO.00O-i600.000 I:h.t will be naid back to the Aaencv will be returned to the Aaenc';'s loan ln1&rantee aRreement with the Snnllet Grouo. The loan would be subordinate to construction and permanent loans as the project is phased. Sunset Group to pay one-half of all development fees up front, with the remaining cost of fees to be paid at the time of sale of individual units (there will be deed restriction ensuring this occurs). The fees will be paid upon sale of individual 1Dlits or the passage of three years, whiChever is first. The Agency's guarantee will go into effect at the time the Sunset Group obtains all appropriate entitlements. The project will not utilize any bond proceeds. ------------------------------------------------------- KJH:lag:l044E C~ission lIeetiD& Agenda lIeetiD& Date: 10/5/1992 Agenda It_ .0. 10 - <: ('. ,,,,' Co' - r ......., DBVELOPMDr DBPARnumr IIBNOUlUltDI Park Place Hoaea October 2, 1992 Pqe x.ber -3- """""'. ...." ------------------------------------------------------------------------------- As is noted in the staff report contained in your agenda packet, the project as originally proposed was close to meeting all development code requirements. Based upon the revised business terms, some design changes are necessary. Staff and the developer and the developer's architect have discussed these issues and it is believed all outstanding issues can be succeSSfully resolved in the immediate future. Based upon the foregoing, staff recommends adoption of the form motion set forth below: That the Community Development Commission approve the Sunset Group request for financial assistance relative to the Park Place Homes residential project, subject to the revised deal points as delineated in this memorandum. ~RSOB' Eucutive Developaent Depar~t ::IS Administrator Director ------------------------------------------------------------------------------- KJH:lag:1044E C~i88ion lIeeting Agenda lIeeting Date: 10/5/1992 Agenda Ite. Bo. 10 -- ,.. ,.... .(: .. J ,0 - j' (, - ,....... DQ.LOPII..r D.PA.r~.r OF rmr crn OF SAIl BBRIWIDIIIO IIBOtJEsr POR COJR[SSIO./COOlICIL ACTIO. From: ICElmBTII J. BBRDERSOR Executive Director Subject: PAH PLACE BOllES Date: September 30, 1992 SvooDsis of Previous C~f.sionlCftun~il/r.~tttee ActionCsl: On September 15, 1992, the Housina Committee considered new information submitted by Plannina and Buildina Services Department and Development Department staff regardina the Park Place Homes Project and recommended approval to the Community Development Commission by a vote of 2 to 1. Recom.Pn~ed IIOtionCsl: CC~ttv DeveloDBPnt C~fssionl (R0U8fft. C~itt@e Re~~~d.tiOD) IllrIO. A: That the Community Development Commission approve the Sunset Group request for financial assistance relative to the Park Place Home residential projects. - OR - (Staff .ec~~d.tion> 1IOrI0. B: That the Community Development Commission deny the request for financial assistance submitted by the Sunset Group relative to the Park Place Homes residential project. 15 ~~ becutive Direct r Administrator Contact Person(s): Kenneth HPndersonlDavid R. Edaar Phone: 5081 Project Area(s): RIA Ward(s): Three (3) Supportina Data Attached: Staff ReDort FUNDING REQUIREMENTS: Amount: *3.4 Million Source: Loan Guarantee Budget Authority: COIIIIIli..ionlCftun~il .otes: XJH:DRE:paw:OllOc COIMISSIO. IIDrIlIG AGDDA lleetiD& Date: 10/05/1992 II) -- ('''' ,(j/1" c: I " ",'''-, -. ~ ~ DBVBLOPKB.r DBPARrKB.r OF rBB CrrY OF SAB' BD1URDIlIO SrA!'F IIBPORr pillr PLlCR 110IIII:8 B.,..1r..nnnd At its meetina on September 15, 1992 the Housina Committee continued its onaoina discussion of the Park Place Homes project. Al Boughey, Director of Plannina and BUildina Servicea completed his analysis of the site plan and other materials resubmitted by the developer and determined that the project appeared close to approvable as submitted. By way of back&roUDd the Commission should be aware that this project involves the development of a three-hundred, ninety-four (394) unit condominium project consistina of 276 one bedroom units and 118 two bedroom units. The units are proposed to sell at $69,000 for the one bedroom units and $79,000 and $89,000 for the two'bedroom units. The Community Development Commission should also be aware of the followina deal points currently under consideration. These deal points are set forth below: The project has evolved from a rental project to one of homeownership. Approximately 394 condominiums will be developed for sale to eligible homebuyers. The Agency will guarantee s loan of $3,443,000, which includes $2.9 million in principal and an interest reserve of $264,000 for two (2) years ($528,000). Agency will receive twentY-five percent (25X) of project as a limited partner. The $3,443,000 will accrue interest, for the Agency's purposes, at 9X, with said interest to accrue to the back of the note. Sunset Group to pay 1.5X 10m origination fee to Agency at the time appropriate documents are to be executed. The loan would be subordinate to construction and permanent loans aa project is phased. Sunset Group to pay one-half of all development fees up front, with the remainina cost of fees to be paid at the time of sale of individual units (there will be deed restriction ensurina this occurs). KJH:DRE:paw:OllOc COIIIISSIO. IIIBrIlIG A_, Keet1n& Date: 10/05/1992 Agenda It_ ~er: /0 - (". .",.. <: (~ - C DBVELOPIIDr DBPAhImn-.a: S'UPI' DPOIlt' PAD: PLlCB APD.uma.lS SepteBber 30. 1992 Paae lI1aber -2- ...--, - The fees will be paid upon sale of individual units or the passage of three years. Whichever is first. The Agency's guarantee will go into effect at the time the Sunset Group obtains all appropriate entitlements. The project will not utilize any bond proceeds. In order to meet the open space requirements necessary for project approval. the developer was required to reduce the number of units from Four-Hundred Thirty (430) to Three-Hundred. lUnety-Four (394). In so dOing, however, the developer has chosen to delete the three bedroom units previously included in this development. What remains in the most recent developer submittal are Two Hundred Seventy-Six (276) two bedroom units &Del One Hundred-Bighteen (118) one bedroom units. In staff's professionsl opinion, a project consisting of these unit compositions raises significant issues relative to overall marketability. In addition, the project's "stacked-flat" design also poses serious questions regarding saleability, given today's real estate market &Del the traditional San Bernardino condominium market. The Agency has proposed a $3.4 million loan gusrantee Which will only be repaid upon successful receipt of construction financing, on s phased basis. If, because of project design and market feasibility considerations the developer is unable to secure the necessary construction financing, then the Agency's loan guarantee might be called upon, defeating any advantage that would accrue to the Agency as a result of the loan guarantee financing structure. In addition, if the developer is'unable to secure any construction financing whatsoever, the Agency will in effect become owner of this project. If any phase of the project does not sell quickly enoUih, with interest accruing on the construction loan, the developer could elect to rent all or some of the unaold units. If this scenario were to evolve, the Agency would have a project that included the undesirable mixture of both rental and owner occupied units. Given recent state budget cuts and their impact on the Agency, as well as and the serious questions Which staff has raised concerning the marketability and economic viability of this project, the agency's proposed loan guarantee must be given serious reconsideration. XJH:DRB:paw:OIIOc COMIIISSIOlI IIDrUl: AGEIDA Meetina Date: 10/05/1992 to Ageu4a It. lI1aber: - ('~. .... (: c: - C DBVBLOPIIIlIr DBPliUIAII.L STAn' UPORr PAD: PL&CI APAa.uu...LS SepteBber 30, 1992 Paae w-ber -3- '-.. ..... As current17 proposed, the Developer will be in a position to realize Bi8l1ificant profit 117 taltina down the land through the Agenc7's loan guarantee. The Agenc7's guarantee is not current17 dependent on the Developer havina previouS17 obtained a commitment for construction financina. The proposed financina allocates approzimate17 $2.1 million to pa7ina of the first and second trust deeds and capitalizina interest for two 7eara. This leaves approzimatel7 $1.3 million goina to the developer. As a result, the developer stands to make a considerable profit whether or not construction financina is obtained and the project proceeds. On September 15, 1992, the Housina Committee considered new information submitted b7 Plannina and Buildina Services Department and Development Department staff regardina the Park Place Homes Project and recommended approval to the Communit7 Development Commission 117 a vote of 2 to 1 (Mauds187) . Ree~...".tiOD Based on the foregoina, staff recommends adoption of form motion "B". ............LA J. 0_, I%ecutive Director Deve1o~t Depar ent KJH:DRE:paw:01IOc COIIIISSIOII IIIBrIJIG AGDIlA. Keeting Date: 10/05/1992 Aaenda It. _ber: ---111-