Loading...
HomeMy WebLinkAboutAG RPTS 2000 0405 RDA REGMOORPARK REDEVELOPMENT AGENDA REPORT ITEM "i_A_- CTTV OF MOORPARK, CALIFOIUNTA edevelopment Agency Meeting of r 7 G '-V e, re s _M ele ACTION: `fr « Y e c kf; a Mrn rK red n J AGE BY: To: Honorable Agency Board of Directors From: Nancy Burns, Senior Management Analyst Date: March 23, 2000 (Agency Meeting of April 5, 2000) Subject: CONSIDER REPORT ON THE DISPOSITION AND DEVELOPMENT AGREEMENT (DDA) WITH CABRILLO ECONOMIC DEVELOPMENT CORPORATION (CEDC) BACKGROUND At its March 1, 2000, regular meeting, the Moorpark Redevelopment Agency considered a report presented by the Assistant Executive Director of the Agency on the status of the project to construct fifty -nine (59) single family detached residential units, fifteen (15) of which are to be affordable to low and very low income households. This report outlined specific actions which were to be performed by the dates identified in the DDA's Schedule of Performance (amended February 17, 1999), and which remained uncompleted. Outstanding issues enumerated include the question of subordination of the DDA to the construction loan; proof of financing for the complete project; provision of executed construction contracts for the project; corrections to the Promissory Note; changes to the number of units planned for each phase; corrections for approval of plans; additional right -of -way for access to site; changes to escrow instructions, title insurance, subordination agreement and promissory note; and deed restrictions for individual parcels (since reviewed by staff). The DDA provides for the imposition of penalties for not meeting the requirements of the Schedule of Performance. Staff was directed to return at the April 5, 2000, Agency meeting with an update on the progress in meeting key requirements of the DDA. 000001 Honorable Agency Board of Directors Date 03/30/00 Page 2 DISCUSSION Following the departure of the Agency's Assistant Executive Director, staff met March 14 and 21, 2000, with representatives of Cabrillo Economic Development Corporation (CEDC) to discuss identified concerns. The following remain unresolved: 1. Confirmation of construction financing and terms thereof. CEDC has advised that its lender has approved a $4,000,000 construction loan for Phase I construction (26 homes), grading of entire project and certain infrastructure improvements for subsequent phases. As a result of the Agency's expressed concern, CEDC advises that the lender, Wells Fargo Bank, is now not going to require subordination of the resale restrictions contained in the DDA. The lender is developing alternative language to be included in its loan documents which will be consistent with the DDA, requiring the Deed of Trust for the Agency's land loan to be subordinated to the construction loan. The full property would then be encumbered, with assurance of financing for Phase I only. The Agency will need to review construction loan documents to determine if the terms and conditions of this financing are acceptable and to ensure that the Agency's interest in this project is not compromised. 2. Provision for Agency to cure non - performance or other default, if necessary. To protect the Agency's interest in this project, language would need to be included in any subordination agreement, if one is to be developed and executed, that would enable the Agency to cure any default on the part of the Developer. 3. Revisions to number of units to be constructed in each phase. The DDA calls for no more than 20 units to be constructed in each of 3 phases, with 5 affordable units to be constructed in each of the phases. CEDC proposes to construct 26 units in Phase I, 5 of which are affordable to low income, 2 of which are affordable to very low income households; 14 units in Phase 2, with 2 units affordable to low income and 1 unit affordable to very low income; and 19 units in Phase 3, including 4 units for low income and 1 unit for very low income households. Honorable Agency Board of Directors Date 03/30/00 Page 3 4. Selection criteria for affordable units. Staff has expressed concerns to CEDC representatives regarding the selection method to be used to determine which eligible, qualified applicants will be given the opportunity to purchase the affordable units. Staff's preference is that a lottery system be established for all eligible applicants. While not required in the DDA, this assures equal chance for potentially eligible qualified households and assures impartiality. 5. Length of deed restrictions. Due to delays in the project, some units sold near project completion would have fewer than 30 years of deed restrictions if these restrictions expire on all units in 2032. Requiring at least 30 years of restrictions on all affordable units would address this issue. 6. Loan documents. CEDC has provided proposed documents, including promissory note and escrow instructions for the entire project and promissory note, resale restriction agreement, and deed of trust for the sale of the affordable units. These documents are being reviewed by staff, and should be subject to final language approval of the Executive Director of the Agency and Agency Counsel, to ensure that Agency interest is protected in the event of non - performance by the Developer and /or foreclosure on affordable units. 7. Schedule changes. The original Schedule of Performance required the Final Tract Map to be recorded in December 1999, at which time interest on the site purchase price was to begin accruing. The Amended Schedule of Performance, amended February 17, 1999, specified these events to occur in March 2000. The Agency should continue to begin accruing interest as of April 1, 2000, even with an amended Schedule. STAFF RECOHMNDATION Amend Disposition and Development Agreement (DDA) to reflect requested changes in the project schedule and identified concerns, including the following: 1. Require lottery drawing for selection of low and very low income buyers. 00000e- Honorable Agency Board of Directors Date 03/30/00 Page 4 2. Require all affordable units to be restricted to low or very low income households for thirty (30) years or until the year 2032, whichever is later. 3. Require final language of the following to be subject to approval by Executive Director and Agency Counsel, in order to protect the Agency's interest in the site and in this project: A. Construction loan documents (Item #1 in this report); B. Any and all subordination agreements that may be developed for this project (item #2 in this report); C. All loan documents and associated documents as itemized below for the purchase of the property by CEDC: Escrow instructions Title insurance policy Promissory note D.All loan documents as itemized below for the purchase of the affordable units by eligible low income buyers: Promissory note Deed of trust Resale restriction agreement 4. As part of the amended DDA, require interest accrual to be effective April 1, 2000, on the purchase price of the site. Attachment: Letter from CEDC 000004 CCabrilloEDC Economic Development Corporation 1 1011 Azahar St., Saticoy, CA 93004 (805) 659 -3791 Fax(805)659-3195 Email: cabrillo @vcvista.net BOARD OF DIRI<CT PRESIDENT DAVID J. SABEDRA March 23, 2000 American Commercial Bank VICE PRESIDENT MARLASANDALL Dear Chairperson Hunter Community Representative Apricot Ranch Simi Valley This is to report on progress on the development of the SECOND VICE PRESIDENT Chairperson Patrick Hunter MICHAEL McGUIRE Honorable Agency Board of Directors Affinity Bank Ventura Moorpark Redevelopment Agency TREASURER 799 Moorpark Avenue KENNETH R. MERIDETH, CPA Moorpark, CA 93021 Soares, Sandell, Phase 1 of the development, including major site Bernacchl & Petrovich improvements and the first 26 homes, has been approved by SECRETARY SISTER CARMEN RODRIGUEZ Dear Chairperson Hunter St. John's Community Outreach Oxnard This is to report on progress on the development of the EDWARD M. CASTILLO Planning Commission Mountain View Homes pursuant to our Disposition and City of Oxnard Development Agreement with the Moorpark Redevelopment RENE CORADO Community Representative Agency. Casa Velasquez Camarillo We are pleased to report that the construction loan for RICHARD FRANCIS Attorney Phase 1 of the development, including major site ERNIE MORALES improvements and the first 26 homes, has been approved by Community Representative Santa Barba our construction lender, Wells Fargo Bank. The Final Map and Engineering and Building plans are near to finalJESSICAMURRAY approval and we anticipate starting construction soon. We Montgomery Oaks Inc., OjaiMontgomery anticipate being able to close escrow with the Agency, DEAN A.PALIUS People Helping People record the final map for Phase 1, and record the Santa Babaal1ey construction loan for Phase 1 by the end of April 2000, ADVISORY BOARD but no later than the end of May 2000. RONL.HERTEL Hertel Constructors Following is a response to John Nowak's report of February 22, 2000. Items in italics are from the Nowak letter, BARBARAJOURNET community followed by our response. Oxnard Oxnard BARBARA MAORI -ORTIZ Channel Counties 1 CEDC ' s lender has wanted to subordinate the DDA to Legal Services Association the loan, meaning that if there were a foreclosure, the RICHARD McNISH requirement for affordable units through the year 2032 Strathmore Homes would be void. They were told this was completely ALZAPANTA unacceptable to the Agency Atlantic Richfield . Staff has been told this is Company no longer an issue but has not seen any written indication of such from the lender. RODNEY E. FERNANDEZ Wells Fargo has now approved the $4,000,000 loan for major site improvements and the first 26 homes, and is preparing loan documents including a subordination agreement. They are also concerned that some items in the project approvals may conflict with what is allowed under the DDA and are having outside legal counsel review this. The subordination agreement previously provided was an N C L R dN A United Way Agency NeighborWorks- ,. Moorpark Redevelopment Agency March 23, 2000 Page 2 example, not one proposed for this loan. I have provided staff with a copy of a subordination agreement used with a Wells Fargo Bank construction loan on a CEDC project involving the Oxnard Redevelopment Agency. Although a construction lender would typically expect that resale restrictions would be subordinated to the construction loan on a project of this type, the loan has been approved without that requirement, but only requiring that the Agency's land loan be subordinated, as provided in the DDA. This subordination has always been a key element of the CEDC proposal, and is essential to its feasibility. The subordination agreement will provide for the Agency to have the opportunity to cure a default, as we have discussed with staff. The CEDC may have access to other sources that would finance the acquisition of the site; this avenue would require additional time and success could not be guaranteed. 2. Proof of financing on the project was to have been submitted in September 1999. As of the date of this report preparation, no proof has been submitted. Financial projections prepared by CEDC showing how funding for the project will be covered were provided on February23. The construction loan of $4,000,000 for major site improvements and the first 26 homes has been approved and loan documents are being prepared. Bank officer Gary Steffens and others had been in contact with John Nowak and advised him of the bank's process and progress. In addition to the Wells Fargo construction loan and Agency land loan, additional funding for Phase 1 includes a predevelopment loan of $150,000 from the Enterprise Foundation (funded and not secured by this site), a predevelopment grant of $50,000 from the National Reinvestment Corporation (funded and not secured by real estate), and funding of $220,000 from the Ventura County HOME program (committed, proposed to be secured behind the Agency loan). Under the CEDC's most recent financial pro forma, the CEDC will provide additional unsecured financing of $181,815, and will defer its project management fees and construction profit until sale of the Phase 1 homes. Additionally, the Wells Fargo Bank Foundation has made a $50,000 grant to the CEDC; this grant will be kept as a project reserve until mutually agreed with the Bank. The CEDC anticipates that 90% of the Agency's payment of half the cost of "A" Street and related improvements will also be available for repayment 00000c; Moorpark Redevelopment Agency March 23, 2000 Page 3 of the Phase 1 construction loan. The construction loan for Phase 1 is the most tight financially, because many project costs are front loaded, and the Agency is well protected during this phase. This financing is summarized on an attachment. Because the construction lender is requiring that 7 of the 19 market rate home buyers and 6 of the 7 affordable home buyers have made reservations and been prequalified before closing the construction loan for Phase 1, marketing for Mountain View Homes has begun. The DDA does not address any specific requirements for marketing the homes. In conversations with prospective buyers of the affordable homes, the CEDC has represented from the beginning that applications would be processed on a first come first served basis and that priority would be given to Moorpark residents. Many people have expressed interest in the Mountain View Homes and been advised of the marketing process. Although not all of them will pursue this opportunity, we will not be able to meet all of the demand and some will be disappointed. 3. CEDC indicated on February 18 for the first time that they do not have funding for the complete project, only for phase one, yet CEDC wants all of the land to be deeded to them at once. They are planning to obtain financing in phases to match the construction. This gives the Agency no assurance that monies would be available for the second or third phase of the project. The CEDC has always proposed that the project be developed in phases, as required by our construction lender. In addition, as part of Phase 1, the soil importation, grading, retaining walls, south and west boundary walls, A" Street including storm drain, sewer and water lines, and some other site improvements will be constructed for the entire project. Upon completion of sales for Phase 1, the Phase 1 construction loan will be repaid and at least 300,000 in improvements will have been made that benefit Phases 2 and 3. We have provided conservative projections showing that financing will be available for subsequent phases. This could be a subject of discussion with the construction lender. 4. The Agency has not received any copies of executed construction contract documents for the project, which were due October 1999. CEDC now indicates that they will serve as general contractor and sub out all of the work. 00000`0 Moorpark Redevelopment Agency March 23, 2000 Page 4 Contracts with the subs have not been presented for the Agency's review for compliance with the DDA requirements. The CEDC has always intended to serve as the general contractor. We have final prices on most but not all major subcontracts; the most accurate prices are achieved with close to final plans, and we are at that stage. 5. The Promissory Note was provided in November (due in October 19099). Required corrections were submitted by staff to CEDC on December 8. No corrected document has been returned for staff review. The CEDC attorney will make the necessary corrections. 6. Per the DDA the final map is to be recorded in March 2000. Staff has not received for review a copy of the language for restrictions to be placed on each parcel when the map is filed. All parcels are to have a restriction prohibiting close of escrow until the Agency has affirmed all fees have been paid. The affordable units are to contain an additional deed restriction binding the units for purchase or lease to qualified households until the year 2032. Other deed restriction language is also required by the DDA. A draft of a proposed Resale Restrictions Agreement was provided on February 23 but not reviewed at the time of preparation of this report. The CEDC has asked its attorney to prepare the additional language. The proposed resale restrictions were provided last year. Before closing the construction loan, the Bank will require that the resale restrictions for the development be approved by the mortgage lender for the affordable homes, Washington Mutual Bank. Washington Mutual has approved the proposed resale restrictions. In discussions with staff, revisions were suggested which we have asked our attorney to make. These include a provision for at least 30 year affordability (30 years or to December 31, 2032, whichever is longer). 7. CEDC indicated on February 18 that the number of units to be constructed in each phase has changed from that indicated during preparation of the DDA. No written description of the change has been provided to the Agency. 000008 Moorpark Redevelopment Agency March 23, 2000 Page 5 The phases were identified in material provided 2/19/00 to Agency staff as follows: Phase 1: 26 homes (5 low income, 2 very low income) Phase 2: 14 homes (2 low income, 1 very low income) Phase 3: 19 homes (4 low income, 1 very low income) We will be building out sooner than required by the DDA; the number of affordable homes is dispersed throughout the development. 8. All building and other plans were to have been completed in October 1999. They are still in plan check for corrections. Final approvals are anticipated in a few weeks. This is correct. 9. No progress report has been provided on addressing the additional right -of -way required for the street to be constructed from Poindexter Avenue into the project and park. The additional right -of -way is required before the 49th certificate of occupancy. The right -of -way primarily affects the sidewalk and landscaping on the east side of A" street. We have been in discussions with the property owner, although not able to contact her recently. Our construction lender has indicated that they will require that this condition be met before closing the construction loan for Phase 3. Staff has not provided any information Co escrow due to problems with the language in the escrow instructions, title insurance, subordination agreement and promissory note. No revised documents have been provided to the Agency since the letter indicating the problems was mailed on December 8. If necessary, the CEDC will ask its attorney to prepare the escrow instruction as required by the Agency. Pursuant to the DDA Schedule of Performance, escrow is to close in April 2000 and construction to begin that month. Absent receipt of the documents with corrected language for staff's review, no action on the escrow will take place. This will impact the ability for construction to 000000 Moorpark Redevelopment Agency March 23, 2000 Page 6 begin on schedule. Also, CEDC has indicated it wants to import soil to the site at this time. The DDA allows the importation under certain conditions. Until not only those conditions are met, but also all other requirements of the DDA are brought to a current schedule, it is proposed no approval be granted. The CEDC does not have a specific proposal for soil importation at this time. Importation of approved soil would be advantageous to the Agency. The DDA provides for penalties to be assessed if the Schedule of Performance is not adhered to and delays not cured within a specified time. Currently a number of items are up to four (4) months late. The DDA with CEDC will need continued monitoring to assure all conditions of the DDA are met and the Agency's interests are protected before any permits are issued. The CEDC is very close to starting construction, and we do not feel that penalties are appropriate. Penalties would adversely impact the ability to move forward. In closing, the CEDC is close to start of construction. The many complexities of this development have created some slippage in meeting timelines; however, the CEDC believes that we are in substantial compliance with the DDA. We will be at the April 5, 2000 Agency /City Council meeting to respond to questions and provide additional information. Sincerely, Karen Flock Acting Executive Director 000010 Mountain View Homes Summary of Financing Date: 3/23/00 Phase 1 Construction Period Sources Wells Fargo Bank Construction Loan Moorpark Redevelopment Agency Land Loan Ventura County HOME Enterprise Foundation National Reinvestment Corporation CEDC Deferred to Sales Total Construction Period Sources Construction Period Uses Phase 2 Construction Period Sources Wells Fargo Bank Construction Loan Moorpark Redevelopment Agency Land Loan Deferred to Sales Total Construction Period Sources Construction Period Uses Phase 3 Construction Period Sources Wells Fargo Bank Construction Loan Moorpark Redevelopment Agency Land Loan Deferred to Sales Total Construction Period Sources Construction Period Uses Amount ajajo 4,000,000 Committed; Foundation made $50,000 grant 1,475,000 Committed 220,000 Committed 150,000 Funded 50,000 Funded 181,815 Committed 631,653 Committed 6,708,468 6,708,468 Amount Status 1,970,325 Applied For 838,068 Committed 376,924 Committed 3,1 85,317 3,185,317 Amount Status 2,538,242 Applied For 536,363 Committed 943,540 Committed 4,018,145 4,018,145 000011