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Home My WebLink AboutR34- Economic Development CITY OF SAN BERNARDINO ECONOMIC DEVELOPMENT AGENQRIG1NAL FROM: Emil A. Marzullo Interim Executive Director SUBJECT: Meadowbrook Park Homes, Inc. - Request to Forgive Sales Price of $30,000 per parcel on three Agency Owned parcels pursuant to the terms of the 2005 Meadowbrook Single-Family Residential Development Agreement and its subsequent Amendment Nos. 1, 2 and 3 (IVDA Redevelopment Project Area) DATE: May 26, 2009 -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Svnopsis of Previous Commission/Council/Committee Action(s): On May 21,2009, Redevelopment Committee Members Johnson, Baxter and Brinker unanimously voted to recommend that the Mayor and Common Council and/or the Community Development Commission consider this action for approval. -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Recommended Motion(s): (Communitv Development Commission) Resolution of the Community Development Commission of the City of San Bernardino approving the forgiveness of $30,000 per parcel sales price on three Agency-Owned parcels pursuant to the terms of the 2005 Meadowbrook Single Family Residential Development Agreement and its subsequent Amendment Nos. 1,2 and 3 with Meadowbrook Park Homes, Inc. (IVDA Redevelopment Project Area) -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Contact Person(s): Musibau Arogundade Phone: (909) 663-1044 Project Area(s): IVDA Ward(s): Supporting Data Attached: [(I Staff Report 0' Resolution(s) 0' Agreement(s)/Contract(s) 0' Map(s) 0 Letter(s) Funding Requirements: Amount: $ -0- Source: N/A Budget Authority: N/A Signature: ~ ---- ( (' Fiscal Review: ~. . -~., Russ eJesus-) Interim Administrative Services Director Emil A. Marzullo, Interim Executive Director ____________m.____;__________n___n;_____________n____________________mmdn______m_________________d_.n__m_m___-------Z-r-----.--n-.------dn-----------d-m------------_m________mmm___ Commission/CouncIl Notes: 1 I ~OCJ 1- ---------------------------------------------------------------------------------------------------~-----------~------------------------------------------------------------------------.---------.------- P:\Agcndas\Comm Dcv Commission\CDC 2009\06-0 lw09 Meadowbrook Park Homes w Parcel Loan Forgiveness SR.doc COMMISSION MEETING AGENDA Meeting Date: 06/0112009 Agenda Item Number: ~ ECONOMIC DEVELOPMENT AGENCY ST AFF REPORT MEADOWBROOK PARK HOMES, INC. - REQUEST TO FORGIVE SALES PRICE OF $30,000 PER PARCEL ON THREE AGENCY OWNED PARCELS PURSUANT TO THE TERMS OF THE 2005 MEADOWBROOK SINGLE-FAMILY RESIDENTIAL DEVELOPMENT AGREEMENT AND ITS SUBSEQUENT AMENDMENT NOS. 1, 2 AND 3 (IVDA REDEVELOPMENT PROJECT AREA) BACKGROUND: The Community Development Commission of the City of San Bernardino (the "Commission") approved the Meadowbrook Single-Family Residential Grant Development Agreement (the "2003 Agreement") with ANR Industries, Inc. ("ANR"), in February 2003. The 2003 Agreement focused on the development of 23 new single-family homes. These New Homes were constructed within the area bounded by 2nd Street on the north and Rialto Avenue on the south, Sierra Way on the west and Allen Street on the east ("Phase I"). The Agency provided ANR with a grant of the Agency's Low and Moderate Income Housing Funds ("Housing Fund") in the amount of $500,000 to ensure that 10 of the 23 New Homes in Phase I were made available at affordable prices to income-eligible homebuyers. The remaining 13 New Homes were sold at market rate prices without affordability and occupancy covenants. Phase I was successful and established a firm foundation for further neighborhood restoration efforts in the Meadowbrook Neighborhood. Subsequently, the Commission authorized both the Agency and the San Bernardino City Housing Authority (the "Authority"), to enter into a Cooperation Agreement and acquire 8 additional parcels of land in the Meadowbrook Neighborhood as part of "Phase IA" to continue the Meadowbrook revitalization efforts as per the approved 2005 Meadowbrook Single-Family Residential Development Agreement ("2005 Agreement") dated January 1 0, 2005, with Meadowbrook Park Homes, Inc. (the "Developer"), a housing development entity, related to ANR. Phase IA area boundary extends the existing "Phase 1" boundary to Waterman A venue on the east from Allen Street. The 1 0 additional parcels acquired later are referred to as the "Agency Lots." The Agency Lots acquired for Phase IA were either vacant parcels or occupied with dilapidated and substandard 4-plexes. All 10 lots have been developed with New Homes and sold to homeowners. On February 6, 2006, the Commission further approved Amendment No. 1 to the 2005 Agreement to: (i) provide downpayment assistance to qualified homebuyers of completed New Homes; (ii) make other modifications to the 2005 Agreement in relation to the mechanics for the distribution of the "New Home Profit", for the purpose of funding either in whole or in part the additional Agency downpayment assistance; and (iii) add 1 Agency parcel of land as a Type C Agency Lot as defined in the 2005 Agreement. On December 18, 2006, the Commission approved Amendment No.2 to the 2005 Agreement to: (i) transfer 4 lots under the 2005 Agreement and its Amendment No. 1 to the Developer; (ii) extend the Schedule of Performance from December 31, 2006, to December 31, 2007, to allow the Developer additional time to build and sell the 4 new single-family homes; and (iii) allocate additional downpayment assistance in an amount not to exceed $62,000 per buyer for a total amount not to exceed $248,000. On September 17, 2007, the Commission approved Amendment No.3 to the 2005 Agreement to: (i) transfer the Agency Parcel to the Developer and to (ii) extend the Schedule of Performance from December 31, 2007, to December 31, 2008, to allow the Developer additional time to build and sell the New Home. The last three Agency parcels located at 163 and 171 North Allen Street and 167 East 2nd Street were developed with single- family homes and are in escrow pending closing. P:\Agendas\Comm Dev Commission\CDC 2009\06-01-09 Meadowbrook Park Homes - Parcel Loan Forgiveness SRdoc COMMISSION MEETING AGENDA Meeting Date: 06/01/2009 Agenda Item Number: --1l,~ Economic Development Agency Staff Report Meadowbrook Park Homes - Parcel Loan Forgiveness Page 2 CURRENT ISSUE: The Developer obtained a construction loan with PFF Bank & Trust ("PFF") in October 2007 in the amount of $750,000 to construct all three of these homes. The loan matured on December 1, 2008. The Developer completed the homes quickly in mid-March 2008 with a projected sales price of $397,000. By then, however, the downturn in the housing market had taken a significant toll and foreclosures were abundant. In May 2008, the median home price in the 92408 zip code had fallen by $100,000 to $215,000. This represents a 32% decrease in 1 year. The median price fell to $200,000 by October 2008, according to the most recent data supplied by Dataquick. Because of the rapidly declining prices, the Developer struggled in selling the homes during the spring and summer months of 2008, by decreasing prices multiple times. At the beginning of October, PFF had the units appraised and the appraisal report valued the home at a price ranging from $220,000 to $230,000. Based on this and with concurrence from PFF, the Developer lowered the prices of the homes to $190,000. Since then, the Developer has sold the 2 homes at 163 and 171 Allen Street and the home at 167 2nd Street is still available. The two homes that were sold were both sold to moderate-income buyers using the Agency's MAP program. Since the sales price of $190,000 is less than the par value of the construction loan ($250,000/unit), PFF will be taking all net settlement proceeds without any funds remaining to payoff the Agency's promissory note. Given the significant decline in the housing market and the fact that the Developer will not be receiving any funds from these sales, the Developer is requesting the Agency to waive the purchase price due and payable to the Agency by submitting a zero demand to escrow and forgive the $30,000 note in exchange for receiving a 45-year Covenant, Conditions and Restrictions (CC&R) on each of the three units. ENVIRONMENTAL IMP ACT: The requested action is categorically exempt under the California Environmental Quality Act ("CEQA"), Class 6, Section 15306 because the requested action will not result in the disturbance to any environmental resources. FISCAL IMPACT: The Agency's waiver of $30,000 in land value per parcel for three parcels will result in $90,000 in revenue being forgiven, however, three income eligible households will receive the benefit of becoming homeowners and the Agency will receive a 45-year CC& R on each property towards meeting its affordable housing requirements under the Inland Valley Development Agency ("IVDA") Redevelopment Project Area and the California Community Redevelopment Law, Section 33334.2 and 33334.3. RECOMMENDA TION: That the Commu ity Development Commission adopt the attached Resolution. o nterim Executive Director P:\Agcndas\Conml Dcv Commission\CDC 2009\06-01-09 Meadowbrook Park Homes - Parcel Loan Forgiveness SR.doc COMMISSION MEETING AGENDA Meeting Date: 06/0112009 Agenda Item Number: (t~4 -- ~I 'T"~"""'" -*, . Meadowbrook Park Homes, Inc SA-119986 As of 5/12/20096:48:09 PM Pagel' r- ..- j Burrow Escrow Services, Inc. III IIUlm~ I i BURROW 1551 N. Tustin Ave. Suite 500 Santa Ana CA 92705 I I ESCROW SERVICES Phone: (714) 558-9212 l Fax: (714) 547-2516 SA-119986-DM i ! Escrow Officer: I:>elaine M Marks .. _.- _. ! Seller's Final Settlement Statement Property: 167 East 2nd Street San Bernardino, CA 92410 Closed Date: 4/22/2009 SeDer: Meadowbrook Park Homes, Inc. Escrow Number: SA-119986-DM Debits Credits Purchase Price Contract Sales Price New Loan Loan Origination Fee % to PACIFIC FINANCIAL Administration Fee to FLAGSTAR BANK, FSB . Payoff Principal to.PFF BANK & TRUST Statement Fee to PFF BANK & TRUST Reconveyance Fee to PFP BANK. & TRUST Recording Fee to PFF BANK &. TRUST Sales Commission Listing Commission to ALLEGIANT GROUP PROPERTIES Prorations County Taxes (Paid) 2426.3 I 00/6 mos for 04/22/09 thru 07/01/09 Tax Proration Offset Escrow Fees Escrow Fee (Buyer $565.00) Escrow Fee Deeds Prepare Grant Deed Electronic Doc Download (Buyer) Wire Fee Messenger Fee (Buyer) Recording Fees Deed of Trust (Recording) (Buyer) Grant Deed (Recording) (Buyer) Documentary Transfer Tax - County Title Charges Owner's Coverage to FIRST AMERICAN TITLE COMPANY Wire Fee Sub-Escrow Fee A.ddi.tional Settlement Fe.ell Hazard Insurance (Buyer) to PENDING INFO Nortary Fee (Buyer) to Safe Signings Microwave Bill to R&B Wholesale Flooring Bill to Carpet Discount Warehouse Appliances Bill to R&B Wholesale Distnbutors lBlal!mce Due $190,000.00 $513.75 $650.00 $182,726.28 $30.00 $45.00 $15.00 $950.00 $930.09 $139.47 $565.00 $350.00 $75.00 $43.75 $25.00 $25.99 $48.00 $16.00 $209.00 $250.00 $15.00 $125.00 $323.04 $175.00 $249.61 $2,624.00 $741.20 $0.00 Tl!}t@~s: $19099311.109 $190,930.09 8=\~'G ~~[r.0 C\1C~~c;m.2n~ C,r5'? ~[1~.c'mo Tmi tI>~~~~G(Vi" 1 2 3 4 5 6 7 8 /;~ 17~ r~l( ;.. [f 1\' Lj} . l~'; t\ Ii:;~n-'-'~-'" ~ \ '\ ....... \ \ j j l' ( '<::::../ '<::>" d L RESOLUTION NO. RESOLUTION OF THE COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF SAN BERNARDINO APPROVING THE FORGIVENESS OF $30,000 PER PARCEL SALES PRICE ON THREE AGENCY-OWNED PARCELS PURSUANT TO THE TERMS OF THE 2005 MEADOWBROOK SINGLE F AMIL Y RESIDENTIAL DEVELOPMENT AGREEMENT AND ITS SUBSEQUENT AMENDMENT NOS. 1, 2 AND 3 WITH MEADOWBROOK P ARK HOMES, INC. (IVDA REDEVELOPMENT PROJECT AREA) WHEREAS, the Redevelopment Agency of the City of San Bernardino ("Agency") is a 10 9 public body, corporate and politic; and WHEREAS, on January 10,2005, the Community Development Commission of the City of 11 San Bernardino ("Commission") and the Mayor and Common Council of the City of San 12 Bernardino ("Council") approved and authorized the execution of the 2005 Meadowbrook Single 13 Family Residential Development Agreement ("2005 Agreement") between the Agency and 14 Meadowbrook Park Homes, Inc. (the "Developer"), to acquire ten (10) Agency Lots and to develop 15 and sell new single-family homes to income eligible homebuyers to the extent required by the 2005 16 Agreement; and 17 WHEREAS, on February 6, 2006, the Commission and the Council approved and 19 18 authorized the execution of Amendment No.1 to the 2005 Agreement; and WHEREAS, on January 22, 2007, the Commission and Council approved and authorized 21 20 the execution of Amendment No.2 to the 2005 Agreement; and WHEREAS, on November 17,2007, the Commission and Council approved and authorized 22 the execution of Amendment No.3 to the 2005 Agreement, and Amendment Nos. 1, 2, 3 and the 23 2005 Agreement are collectively referred to herein as the "2005 Agreement"; and WHEREAS, under the terms of the 2005 Agreement, three (3) remaining Agency parcels 25 located at 163 and 171 North Allen Street and 167 2nd Street were developed with single-family 24 26 homes by the Developer with a construction loan of $750,000 from Pomona First Federal Bank and 27 Trust ("PFF") ; and 28 1 P:\A,gendas\Resolutions'Resolutions\2009'06-0 1-09 Meado~trook Parks Home - Loan Forgiveness CDC Reso doc 1 WHEREAS, the Developer initially estimated the sales price of each single family home to 2 be $397,000, as an amount sufficient to pay-off the construction loans, Agency parcel purchase 3 price and to realize some dollar amount of profits to the Developer; and 4 WHEREAS, the current economic downturn has made it unfeasible to sell the homes at the 5 initially estimated $397,000 sales price and the Developer has reached an agreement with PFF to 6 sell each home at a sales price of $190,000 and together with a forgiveness of the remaining 7 outstanding construction loan balance; and 8 WHEREAS, the Agency's parcel purchase price of $30,000 each is subordinate to the 9 construction loan, and after the sale at the current real estate market prices there will be no funds 10 remaining after the construction loans are paid-off to repay the Agency loans; and 11 WHEREAS, the Agency's 45-year Covenant, Conditions and Restrictions (CC&R) will be 12 recorded on each parcel to enable the Agency to receive credit towards affordable housing 13 production in compliance with the Community Redevelopment Law Section 33334.2 and 33334.3 14 and the other requirements of the Inland Valley Development Agency ("IVDA") Redevelopment 15 Project Area wherein the three (3) Agency parcels are located; and 16 WHEREAS, the requested action is exempt under the California Environmental Quality Act 17 ("CEQA"), Class 6, Section 15306 because the requested action will not result in the disturbance to 18 any environmental resources. 19 NOW, THEREFORE, THE COMMUNITY DEVELOPMENT COMMISSION OF THE 20 CITY OF SAN BERNARDINO DOES HEREBY RESOLVE, DETERMINE AND ORDER AS 21 FOLLOWS: 22 Section 1. The Commission hereby approves the forgiveness of the sales pnce 0 23 $30,000 per parcel on the three Agency-owned parcels pursuant to the terms of the 2005 Agreement 24 with Meadowbrook Park Homes, Inc. 25 26 / / / 27 / / / Section 2. This Resolution shall take effect upon its adoption and execution. 28 / / / , 2 I P:lAgendas\Resolutions\!l.esolul~ns\2009\06-01-09 Meadowbrook Parks Home - Loan Forgiveness CDC Roso.doc 1 2 RESOLUTION OF THE COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF SAN BERNARDINO APPROVING THE FORGIVENESS OF $30,000 PER PARCEL SALES PRICE ON THREE AGENCY-OWNED PARCELS PURSUANT TO THE TERMS OF THE 2005 MEADOWBROOK SINGLE FAMILY RESIDENTIAL DEVELOPMENT AGREEMENT AND ITS SUBSEQUENT AMENDMENT NOS. 1, 2 AND 3 WITH MEADOWBROOK PARK HOMES, INC. (IVDA REDEVELOPMENT PROJECT AREA) 3 4 5 6 7 I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the Community meeting 8 Development Commission of the City of San Bernardino at a ,2009, by the following vote to wit: Nays Abstain Absent Secretary day of ,2009. Patrick J. Morris, Chairperson Community Development Commission of the City of San Bernardino 3 II P IAgendas\ResolutlonsResolutlOns\2009\06-01-09 Meadowbrook Parks Home - Loan Forgiveness CDC Reso doc