To: Honorable Mayor and Members of City Council
From: Vincent Smith, Community Development Director
Prepared By: Lark Ferrell, Housing Manager
TITLE:
Title
Heritage House and Valle Verde Project Loan Terms and Conditions
LABEL
RECOMMENDED ACTION:
Recommendation
Adopt a resolution amending R2020-025 to (1) extend the deadline for commencement of construction to March 1, 2024; and (2) authorize Heritage House Partners LP to use the City loan for development of both the Heritage House Apartments and the Valle Verde Apartments, and determining that the potential environmental effects of the actions authorized by this resolution were adequately analyzed by a previous CEQA action.
Body
DISCUSSION:
Heritage House Partners LP (the “Developer”) has proposed to develop the Heritage House Apartments, a 66-unit affordable rental project by rehabilitating the abandoned Sunrise Assisted Living Facility located at 3700 Valle Verde Drive and to construct the Valle Verde Apartments, 24 new affordable apartments, located at 3710 Valle Verde Drive as the Valle Verde and Heritage House Continuum of Housing Project (the “Project”). Originally the Developer envisioned developing the Heritage House Apartments and Valle Verde Apartments in two separate phases.
Heritage House Apartments would include 58 studios and eight one-bedroom units. There would be one unrestricted manager’s unit and 65 units affordable to very-low income households. Valle Verde Apartments would include one, two and three bedroom units for very-low and low-income families. The combined Project would set aside 39 units for households employed in the agricultural industry and 44 units for homeless persons. Supportive services would be provided to residents of the Heritage House Apartments by Abode Services.
On February 18, 2020, the City Council adopted Resolution R2020-025 authorizing the City Manager to execute and negotiate loan documents with the Developer for the Heritage House Apartments in an amount of up to $2.2 million from the City’s Affordable Housing Impact Fee Fund. At the time, the Developer intended to complete Heritage House Apartments as the initial phase of a two-phase development of the Project. Since that time, however, financing opportunities have become available due to the 2020 Napa County wildfires, including 9% Disaster Recovery tax credits, , that make it more efficient for the Developer to develop the Project in a single phase. Therefore, the Developer has requested permission from the City to use the City’s loan for the entire Project, rather than restricting its use solely to Heritage House Apartments.
Additionally, Resolution R2020-025 included a condition requiring the Developer to commence construction by February 18, 2022. Due to the timing for closing on the multiple layers of financing required for the Project, the Developer now anticipates starting construction in April 2022. Therefore, the Developer has requested the City to extend the deadline for starting construction. Although construction is expected to begin within two months, staff recommends extending the deadline for the start of construction for two years in order to provide a buffer in the event of unforeseen circumstances.
The City’s loan would be leveraged with a number of other funding sources including the County of Napa Housing funds, the County of Napa Whole Person Care funds, State No Place Like Home Program funds, State Joe Serna Farmworker Housing Program, Gasser Foundation, Partnership Health Plan of California, Providence/Queen of the Valley funds, Community Development Block Grant Disaster Recovery funds, and tax credit equity. The Project would also include 38 Section 8 project-based vouchers. The Developer anticipates the Project being fully complete by June 2023 and fully occupied by September 2023.
There would be no change in the City loan amount, interest rate, or repayment terms. It would still be a $2.2 million loan with a 55-year term at 3% interest rate. It would now be repayable from residual receipts from the combined Project. The loan would be secured by a Deed of Trust and a Regulatory Agreement recorded against the entire Project, which would increase the loan’s security. Other than allowing the loan funds to also be used for the Valle Verde Apartments and extending the deadline to start construction, all other terms and conditions of the loan would remain unchanged.
Staff is currently in the process of negotiating the loan documents with the Developer and anticipates that the loan will close by April.
FINANCIAL IMPACTS:
There is no financial impact by this action as the loan has already been budgeted for in the Affordable Housing Impact Fee fund.
CEQA:
Staff recommends that the City Council determine that the potential environmental effects of the Project were adequately examined in the environmental impact report prepared for the Heritage House Valle Verde Project (File No. PL17-0114) that was certified by the City Council on February 4, 2020, which included necessary findings and statements of overriding considerations, and mitigation, monitoring and reporting program for the Project.
DOCUMENTS ATTACHED:
ATCH 1 - Resolution
NOTIFICATION:
Burbank Housing Development Corporation, Abode Services, and the Project’s various other funders were notified of this agenda item.