HomeMy WebLinkAboutStaff Report 4.G 06/15/2015Agenda Item #4.G
DATE: June 15, 2015 J •-
TO: Honorable Mayor and Members of the City Council through City Manager
FROM: Sue Castellucci, Housing Coordinator 6W C
SUBJECT: Resolution Approving an Assignment Agreement from the Park Lane Apartments
Corporation in connection with the Acquisition, and Rehabilitation of Park Lane
Apartments.
RECOMMENDATION
It is recommended that the City Council adopt the attached Resolution Approving an Assignment
Agreement from the Park lane Apartments Corporation in Connection with the Acquisition and
Rehabilitation of Park Lane Apartments and Authorizing the City Manager to Execute all
Documents Necessary to Implement the Agreement.
BACKGROUND
The Park Lane Apartments project is an acquisition/rehabilitation of an existing affordable
housing apartment complex. The project is an existing 90 -unit, two -story garden style building
built in 1973. The project's 90 units will be restricted to residents with household incomes no
greater than 50% of the Area Median Income with the exception of one manager's unit. The
project will include substantial rehabilitation to address replacement of major building systems,
will increase energy and water efficiency, and will include a 20 year renewal of the Housing
Assistance Payment (HAP) contract. The developer is Burbank Housing Development
Corporation. Currently, the Park Lane Apartments Corporation owns the property and Burbank
Housing manages the property.
The development and support of low- income work -force housing is one of the priorities of the
City's 2015 -2023 Housing Element, and 2015 -2020 Consolidated Plan.
DISCUSSION
The Park Lane Apartments Corporation wishes to sell the project to a limited partnership in
which an affiliate of Burbank Housing Development Corporation is the general partner for a
purchase price equal to $13,426,468. Through the sale of the property, a City /PCDC loan with a
current outstanding balance of approximately $143,000 will be paid off. This money will stay
with the Housing Successor Agency, and can be spent on housing and homeless programs. In
connection with the sale, the new partnership will execute a seller take -back promissory note in
favor of the Corporation in the amount of approximately $8,068,600 (the "Seller Note "), and will
pay cash proceeds of approximately $996,000 to the Park Lane Corporation. Rights to receive
repayment of the Seller Note and rights under the deed of trust securing payment of the Seller
Note will be assigned to the City, and approximately $800,000 in cash proceeds will be paid to
the City and used to fund a City loan to assist in the rehabilitation of the Madrone Village
Apartments (as described in a separate staff report). The financial projections and figures will
be refined and finalized prior to the closing date.
The Board of Directors of the Park Lane Apartments Corporation, a California nonprofit public
benefit corporation that currently owns the Project, passed a resolution on May 13, 2015
approving an assignment to the City of Petaluma of the Corporation's rights, title and interest in
the Seller Note receivable, the deed of trust securing payment of the Seller Note, and cash
proceeds from the sale of the property for the City's use in supporting affordable housing for
low income households within the City.
FINANCIAL IMPACTS
By accepting the assignment of the Seller Note receivable and the cash proceeds, the City of
Petaluma's Housing program will greatly benefit. The cash proceeds will help another of
Petaluma's affordable housing properties, Madrone Village, get a much needed major
rehabilitation for that property. The stream of income from the note receivable will produce
approximately $100,000 of income in future years as the net income of Park Lane grows. These
funds can be used for affordable housing and programs for the low income community of
Petaluma.
ATTACHMENTS
1. Resolution
2. Assignment Agreement
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ATTACHMENT #1
RESOLUTION NO.
RESOLUTION APPROVING EXECUTION OF AN ASSIGNMENT AGREEMENT
WITH PARK LANE APARTMENTS CORPORATION IN CONNECTION WITH THE
ACQUISITION AND REHABILITATION OF PARK LANE APARTMENTS AND
AUTHORIZING THE CITY MANAGER TO EXECUTE ALL DOCUMENTS
NECESSARY TO IMPLEMENT THE AGREEMENT
WHEREAS, the Petaluma Community Development Commission previously provided
financing to Park Lane Apartments Corporation, a California nonprofit public benefit corporation
( "Owner ") to assist in the development of Park Lane Apartments, an affordable housing project
consisting of 90 units of multifamily housing (the "Project ") managed by an affiliate of Burbank
Housing Development Corporation ( "Burbank "); and
WHEREAS, to facilitate the refinancing and rehabilitation of the Project, the Owner
intends to sell the Project to Park Lane L. P., a California limited partnership ( "Developer ") in
which Burbank or an affiliate of Burbank will serve as the general partner; and
WHEREAS, in connection with the sale and refinancing of the Project, the Developer
will execute a promissory note payable to the Owner in the amount of approximately $8,068,600
(the "Seller Note ") secured by a deed of trust, and will pay cash to the Owner in the approximate
amount of $996,000; and
WHEREAS, in connection with the refinancing and rehabilitation of the Project, the term
of affordability will be extended for a term of 55 years commencing upon completion of the
rehabilitation; and
WHEREAS, the Owner and Burbank propose to (i) assign to the City the right to receive
payment under the Seller Note and the deed of trust securing repayment of the Seller Note, and
(ii) provide to the City approximately $800,000 of the cash proceeds from the sale of the Project,
provided that the City agrees to use the cash proceeds to support affordable housing in the City
of Petaluma; and
WHEREAS, a proposed form of an Assignment Agreement (the "Assignment
Agreement ") has been provided to the City Council; and
WHEREAS, in connection with the rehabilitation of the Project, conventional lenders
will provide construction and permanent financing, and may require the subordination of the
deed of trust securing the Seller Note.
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NOW THEREFORE BE IT RESOLVED that the City Council of the City of Petaluma
hereby:
1. Finds that the transactions described in this Resolution will facilitate the improvement of
the City's stock of affordable housing and will result in an increase in the term of affordability
of the Project.
2. Approves the Assignment Agreement, and authorizes the City Manager or his designee to
execute and deliver the Assignment Agreement substantially in the form provided for City
Council review, with such modifications as may be approved by the City Manager in
consultation with the City Attorney, provided that such modifications are consistent with the
intent of this Resolution and do not substantially increase the obligations or impair the rights of
the City.
3. Agrees to subordinate the deed of trust executed to secure the Seller Note to the deeds of
trust and the regulatory agreements to be executed by Developer for the benefit of the Project
construction and permanent lenders, provided that the City is provided reasonable protections
including reasonable notice and cure rights in the event of a default under the senior documents.
4. Authorizes and directs the City Manager and his designees to execute all documents and
to take all actions reasonably necessary to implement this Resolution and the transactions
described herein.
PASSED AND ADOPTED AT A REGULAR MEETING OF THE CITY COUNCIL OF
THE CITY OF PETALUMA ON , 2015 BY THE FOLLOWING
VOTE:
AYES:
NOES:
ABSTAIN:
ABSENT:
ATTEST:
City Clerk
ATTACHMENT #2
When recorded mail to:
Park Lane Apartments Corporation
790 Sonoma Avenue
Santa Rosa, California 95404
ASSIGNMENT OF SALES PROCEEDS AND DEED OF TRUST
This Assignment of Sales Proceeds and Deed of Trust (the "Assignment ") is effective as
of , 2015, by Park Lane Apartments Corporation, a California nonprofit public
benefit corporation (the "Assignor ") to the City of Petaluma, a municipal corporation (the
"Assignee "), with reference to the following facts:
A. In connection with the sale of the Park Lane Apartments low income housing project
located at 109 Magnolia Avenue, Petaluma, California, as more particularly described in the
attached Exhibit A. (the "Project ") to[ , a California limited partnership (the
"Partnership "), Assignor is the holder of cash proceeds in the amount of $ (the "Cash
Proceeds ") and a seller take -back promissory note from the Partnership dated
2015], in the original principal amount of
Dollars ($[ ) (the "Note "). The Note is secured by a deed of trust dated
2015 that was recorded against the Project in the Official Records of Sonoma
County as Instrument No.
(the "Deed of Trust "). The Cash Proceeds
and the Note shall be referred to together as the "Sales Proceeds."
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B. In furtherance of its charitable purpose providing housing for low income persons in
Sonoma County, California, Assignor desires to assign its rights, title and interest in the Sales
Proceeds and the Deed of Trust to Assignee.
C. Assignee has agreed that the Sales Proceeds shall be used by Assignee solely to support
low income housing within the City of Petaluma in a manner that is in furtherance of Assignor's
charitable purposes.
NOW, THEREFORE, in consideration of the foregoing, of the mutual promises of the
parties hereto and for other good and valuable consideration the receipt and sufficiency of which
are hereby acknowledged, the parties mutually agree as follows:
1. Assignment by Assignor. Assignor hereby assigns all of its rights, title and interest in the
Sales Proceeds and Deed of Trust to Assignee and Assignee hereby accepts the assignment of the
Assignor's rights, title and interest in the Sale Proceeds and the Deed of Trust.
2. Use of Sales Proceeds. Assignee hereby agrees that all Sale Proceeds, including all
payments of principal and interest paid under the Note, shall be used solely to support affordable
housing in the City of Petaluma, California. Assignor shall have the right to enforce this
provision using all available legal or equitable remedies after the recordation of this Assignment.
3. Payment of Obligations. Assignor hereby directs the Partnership to make payments
under the Note directly to Assignee at the following address: City of Petaluma, P. O. Box 61,
Petaluma, California 94953.
Delivery of Note. Concurrently with the execution and delivery of this Assignment to the
Assignee, the Assignor shall deliver the original Note to the Assignee.
4. Representations. Assignor hereby represents and warrants that it has not previously
assigned, pledged, hypothecated or otherwise transferred any of its rights to or under the Sale
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Proceeds and the Deed of Trust, and Assignor has the full power and authority to assign its
rights, title and interest in the Sale Proceeds and the Deed of Trust to Assignee.
Effective Date. The assignment set forth above shall be effective as of the date first
written above.
VA
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment as of
the date first written above.
ASSIGNOR:
Park Lane Apartments Corporation,
a California nonprofit public benefit corporation,
By:
Name:
Title:
ASSIGNEE:
City of Petaluma,
a municipal corporation
By:
Name:
Title:
[ALL SIGNATURES MUST BE NOTARIZED]
The undersigned acknowledges the assignment of the Note and agrees to make all payments thereunder to the
Assignee at the address indicated in this Assignment or at such other address as the Assignee may provide in
writing to the undersigned.
I 1, L.P.
a California limited partnership
By: [ I LLC,
a California limited liability company,
a general partner
By: Burbank Housing Development Corporation,
a California nonprofit public benefit corporation,
its sole member /manager
IM
Name:
Its:
0
EXHIBIT A
LEGAL DESCRIPTION
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