HomeMy WebLinkAbout11/2/2005 - STAFF REPORTS (10) �l
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Bentall
September 21, 2005 = Residential
a Bentall Capital affiliate
Dale E. Cook,Jr. 8105Irvine Center Drive
Lawrence Wedekind Suite830
City of Palm Springs Irvine,CA 92618
3200 E. Tahquitz Canyon Way r 949 753 0555
Palm Springs, CA 92263
F 949 7537590
Dear Mr. Cook and Mr. Wedekind, www bentall.corn
Thank you for taking the time to meet with us regarding the preservation of Palm Springs
Senior Apartments.
Palm Springs Senior Apartments is located at 3200 E. Baristo Road and consists of 116
units of Senior/Disabled housing. The property, originally constructed in 1980,benefits
from a long-term Section 8 Housing Assistance Payment contract. This contract allows
the property to serve the needs of residents whose incomes are typically at or below 30%
of the area's median income(AMI). As you know,supporting housing for households
whose incomes fall below 30%of AMI is the toughest housing challenge for any
municipality. As such,the preservation and extension of this type of housing deserves
special consideration.
Our intention is to acquire the property utilizing tax exempt bonds (issued by the
California Housing Finance Agency) and federal tax credits. We will extend
affordability for 55 years and invest approximately$2.3 million in physical renovations.
Furthermore, our non-profit partner will help to expand resident senior services.
Based on our discussions, you have indicated that there have been some issues relating to
the project's occupancy consisting of both elderly and/or disabled residents whereby the
younger disabled residents have been causing concern for the older senior population.
We have discussed this issue with the current and proposed lender, CalHFA,who is
sympathetic to the problem and would support us in navigating the Fair Housing issues
with HUD. We believe that a preference for 100%elderly occupancy is achievable over
time with the gradual attrition of the existing younger disabled tenant base.
The project is subject to a ground lease. The City of Palm Springs is the lessor. The lease
was originated in 1979 for a period of forty-five years. In order for Ca1HFA to issue 30
year tax exempt bonds, they will require the existing land lease with the city of Palm
Springs to extend beyond the term of their proposed amortization. Furthermore, for tax
credit investor purposes, the term of the ground lease has to be sufficient to indicate
ownership of the property because tax credits are not available to lessees.
To facilitate the preservation and recapitalization of Patin Springs Senior Apartments
we respectfully request the following:
1) Approval of the assumption of the existing ground lease by our tax credit limited
partnership; and
2) An extension of the existing ground lease to provide for 55 years in total term.
Please note that the ground lease is subject to a minimum rent of$59,796 per year. It
also contains a percentage rent clause which provides the city with 6.75%participation in
gross revenues above$1,174,173 million. This feature allows the city's compensation to
grow over time along with rents and property values.
Please also bear in mind that we have structured this transaction to assume the extension
of the existing ground lease. Assuming that the lease costs to the project would rise over
time along with rents and value. We have not approached the city for any type of residual
receipt financing,but rather have counted on its support of the project via the assumption
and extension of the ground lease,
Time is of the essence. We need to submit for bonds on October 21, in advance of our
November 9`h CaIHFA board meeting. Ca1HFA will require resolution of the assumption
and term issues prior to their commitment to provide the necessary financing.
Palm Springs Senior is a valuable asset to the City of Palm Springs. We are confident that
with your support and the support of CalHFA we can preserve and add to the useful life
of the asset while improving the quality of life for its residents.
Please call me if you have any questions.
Sincerely,
Ken I Diner
President
HFA California Housing Finance Agency
`�- RO Box 4034 . Sacramento• CA• 95812-4034 .(916)322-3991 www calhfa.ca gov
September 22, 2005
Mr. Ken J. Reiner, President
Bentall Residential
8105 Irvine Center Drive, Suite 830
Irvine, California 92618
RP: Letter of Interest
Palm Springs Senior Villa Apartments
Palm Springs, California
116 unit acquisitiontrehabilitation loan and permanent loan
Dear Mr. Reiner:
The following is the summary under which we are considering an application for
construction and permanent financing of the above referenced property. This
letter is not intended to constitute a commitment or offer to lend on the part of
California Housing Finance Agency ("Lender"), but only to summarize for
discussion purposes the loan terms that we are considering at this time.
As the Lender, CaIHFA has no objections in your efforts to extendlassume the
Ground Lease with City of Palm Springs. Time is of the essence regarding the
remaining terrn of the Ground Lease. Given our experience with Bentall
Residential on affordable senior/family facilities with CaIHFA (8 projects
representing approximately 2,400 units), we are proposing the following loan
terms for Palm Springs Senior Villa:
$2,735,000 (estimate) acquisitionfrehab loan at 5.29%for up to 2 years
$4,520,000 (estimate) permanent loan at 5A 0%for 20 years
$3,150,000 (estimate) permanent loan at 5.40%for 30 years
Based on receipt and review of your formal application, we could process and
present the project to the CaiHFA Board for Final Commitment. The above terms
are based on the preliminary information we have received from you. We
anticipate further discussions with you and obtaining information before
proceeding with a loan commitment. While this letter may form the basis for a
discussion of credit accommodation, all formal and binding loan offers must be in
the form of a written commitment.
If you have any questions, you can contact me directly at (916) 324-5698.
SincereWa4--1-Y
�J�.lames-r
Project Officer, Multifamily Programs
PALM SPRINGS AIRPORT COMMISSION
MINUTES OF REGULAR MEETING
WEDNESDAY AIRPORT CONFERENCE ROOM
October 5, 2005 8:00 A.M.
III. ASSIGNMENT AND EXTENSION OF PALM SPRINGS SENIOR CENTER LEASE
Assistant Director of Aviation-Operations & Planning provided background information as
outlined in the staff report dated October 5, 2005, however part of Item No. 2 is no longer
applicable because the FAA has no say in the use of the property as long as it remains a
state, county or city project.
MOTION: That the Airport Commission recommend City Council approve; 1. a Estoppel
and Consent to Transfer of Ownership Interests of Lessee Regarding Lease No. 1529
between the City of Palm Springs ("City'), and Bentall Residential ("Assignee') subject to
review and approval by the City Attorney; 2. That the Airport Commission further recommend
to City Council a 36-year extension of the lease term subject to authorization of the Federal
Aviation Administration (i-eview and approval predicated dpOn a current appraisal and
acceptable'ease terms and conditiot*; 3. That the Airport Commission further recommend
to City Council to commission an appraisal for the subject property.
It was moved by Sherman, seconded by Perry to approve as recommended and presented
by staff, but to eliminate part of Item No. 2, which referenced authorization of the Federal
Aviation Administration (review and approval predicated upon a current appraisal and
acceptable lease terms and conditions).
AYES: Ahlstrom, Betancur, Bizzell, Callahan, Doria, Duncan, Johnson, Kessler,
Sherman, Spicer, Villarreal and Elsner
NOES:
ABSTAINED:
ABSENT: Albert and Packer
Page 3 of 6
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{Cq<�FORN�P. Council Staff Report
DATE: November 2, 2005 CONSENT CALENDAR
SUBJECT: PALM SPRINGS SENIOR CITIZEN COMPLEX
LEASE AMENDMENT NO. 3
TO: David H. Ready, City Manager
BY: Department of Community & Economic Development
SUMMARY
Approval of the proposed Amendment No. 3 to Lease Agreement No. 1529 between the City
of Palm Springs ("Lessor")and the Palm Springs Senior Affordable, L.P., a California Limited
Partnership, ("Lessee"), would allow an assumption by the Buyer and a 36-year extension to
facilitate $2.3 million in physical renovations and extending the affordability for fifty-five (55)
years.
RECOMMENDATION:
Approve Minute Order No. , "AUTHORIZING THE CITY MANAGER TO EXECUTE
LEASE AGREEMENT AMENDMENT NO. 3 TO THE LEASE AGREEMENT NO. 1529
BETWEEN THE CITY OF PALM SPRINGS ("LESSOR") AND PALM SPRINGS SENIOR
AFFORDABLE, L.P., A CALIFORNIA LIMITED PARTNERSHIP, IN A FORM ACCEPTABLE
TO THE CITY ATTORNEY."
STAFF ANALYSIS:
On June 4, 1980, the City entered into Lease Agreement No. 1529 ("Agreement")with the G
& IK Management Co. dba Palm Springs Senior Citizen Complex, ("Lessee")for the lease of
land underlying the Palm Springs Senior Citizen Complex and related improvements. This
affordable apartment project was financed by the California Housing Finance Agency
("CaIHFA") and was thereafter operated for low and moderate income elderly residents.
Subsequently, the City and Lessee entered into Amendment No. 1 to the Agreement on
August 17, 1983, which modified the rental formula provided in Article V; and, Amendment
No. 2 to the Agreement on January 17, 2001 which clarified a minimum annual rental
payment guarantee as a yearly base plus a percentage rent calculated on the difference
between the previous year's total gross receipts over a specified base amount.
On September 22, 2005, Bentall Residential forwarded a formal request to the City of
consideration of their intent to recapitalize the project and preserve its affordability by utilizing Item No. 2 . 1C
.
City Council Staff Report
November 2, 2005- Page 2 of 2
Palm Springs Senior Citizen Complex Lease Agreement No. 3
thirty(30)year tax-exempt housing bonds issued by CalHFA and federal Low Income Housing
Tax Credits. In order for CaIHFA to issue bonds, however, they require the following:
1. Assumption of the existing land lease by the tax credit limited partnership, Palm
Springs Senior Affordable, L.P. in accordance with Article X of the Agreement; and
2. Extension of the existing land lease to provide for fifty-five (55)years in total term to
secure the 30 year amortization, as well as fifty-five (55) affordability restrictions.
Staff moved quickly on the request to help the developer meet the tax credit and tax-exempt
bond financing submission deadlines for California Debt Limit Allocation Committee(CDLAC)
meeting of October 21, 2005 and CaIHFA's November 9, 2005 deadline, which required the
item being agendized for the Airport Commission Meeting of October 5, 2005.
Tile Airport Commission unanimously approved and recommended to the City Council the
following approvals:
• The Transfer of Ownership Interest of Lessee in accordance with the Lease
Agreement's Article X which allows for automatic replacement of the Lessee should
CaIFHA replace the borrower(Lessee) pursuant to the terms of the CalFHA'S Loan
Agreement; and
• The extension of the current Lease (October 1, 1979, 19 years remaining) with an
additional 36 years until October 1, 2060 for the acquisition to be a viable option.
The City learned during June's Senior Forum that the current operator accepts HUD Project-
Based Section 8 Housing Assistance Payment contracts,which includes other special needs
populations (i.e., disabled—physical and mental, etc.)that are not elderly. Bentall Residential
had been made aware of this issue and has been negotiating with the current owner and HUD
to purchase and rehabilitate this 116-unit development, safeguard the elderly restriction and
gradually return, through attrition, the tenant base back to the preferred 100% senior
occupancy as cited in the original Lease Agreement Recitals. They will also commit $2.3
million from the bond proceeds in physical renovations.
In addition, the property had been under the jurisdiction of the Airport until 1982 when it was
completely released from the FAA recapture clause. This property is now subject only to
recapture by the City should the property no longer be used for city, county or state offices or
the housing project. The FAA waiver is only applicable to a ground lease and not to a
conversion to fee ownership.
Staff has also verified with the respective City Departments (i.e., Building, Fire, Police and
Risk)that this property is in compliance and is being maintained in a good health and safety
manner reflecting capacity to operate this property.
Therefore, the developer and CalFHA requests and Staff recommends that the City Council
approves this Lease Amendment, subject to a the final form approved by the City Attorney,
allowing the Assumption and 36-year extension which extends the affordability for fifty-five
(55) years.
City Council Staff Report
November 2, 2005- Page 3 of 3
Palm Springs Senior Citizen Complex Lease Agreement No. 3
FISCAL IMPACT: Finance Director Review:
There is no fiscal impact to the City and issuance of the Mortgage Revenue Bonds does not
obligate the City financially in any way, nor does it affect the City's bonding capacity for City-
funded projects. The bonds would be repaid through the rents received from the project.
J HN S. Mmity'&
DALE E. COd JR.,
DIe�fdf Co Economic Development Community Development Administrator
THOMAS J. WI N,
Assistant City Man ger— Development Services
=,may„•_...��..o'.--`® M^--E n"'"'d""®/''
DAVID H. READY,
City Manager
ATTACHMENTS:
1. Property Location
2. Bentall September 21, 2005 Letter
3. CaIHFA September 22, 2005 Letter
4. Airport Commission October 5, 2005 Minute Excerpts
5. Lease Agreement Amendment No. 3
6. Minute Order No.
DaleC\Housing\PS_Senior_Apts_CC_StaffReport_LndLseAgrmntAdnt NovOS
AMENDMENT # 3 TO LEASE AGREEMENT # 1529 WITH PALM SPRINGS SENIOR
CITIZEN COMPLEX FOR LEASE AGREEMENT OF APN# 502-210-022, 3200 East Baristo
Road, Palm Springs, CA 92262 .
THIS THIRD AMENDMENT TO THE LEASE AGREEMENT (# 1529 herein Agreement), is
made and entered into this _day of November , 2005, by and between the City of Palm
Springs (herein City), a municipal corporation, and Palm Springs Senior Affordable , L.P. a
California Limited Partnership, (herein "Lessee") , and amends that certain Lease Agreement
dated June 4, 1980, as amended, between the prior parties, as follows:
'I. ARTICLE I —TERM shall be amended to include the following:
The term of this Agreement shall be extended for a period of an additional thirty-
six (36) years to October 1, 2060.
2. ARTICLE X—ASSIGNMENT shall be amended to include the following:
The City approves the assignment and consents to California Housing Finance
Agency ("CHFA" or "CalFHA") replacement of the original Borrower with the new
Lessee.
2. ARTICLE XVI — GENERAL PROVISIONS shall be revise the Notices to the
respective parties follows:
City - City of Palm Springs
Attn: City Clerk
P.O. Box 2743
Palm Springs, CA 92263-2743
With copy to: City of Palm Springs
Attn: City Attorney
P.O. Box 2743
Palm Springs, CA 92263-2743
Lessee - Palm Springs Senior Affordable, L.P.
Attn: Ken J. Reiner
8105 Irvine Center Drive, Suite 830
Irvine, CA 92618-3051
CalFHA- California Housing Finance Agency
Attn: Senior Vice President
P.O. Box 4034
Sacramento, CA 95812-4034
4. The City Manager is authorized to execute a formal amendment to this Agreement
as required in accordance with Minute Order and that Resolution 13401,
dated June 4, 1980, approving the Lease.
5. Full Force and Effect. Except as expressly amended herein, all terms of the
Agreement, including Amendments No. 1 and 2 shall remain unchanged and in full
force and effect.
SIGNATURES ON NEXT PAGE
LEASE AGREEMENT# 1529
AMENDMENT# 3
Page 2 of 2 Pages
IN WITNESS WHEREOF, the parties have executed and entered into this Amendment as of the
state stated below.
ATTEST: CITY OF PALM SPRINGS,
a municipal corporation
By:
City Clerk City Manager
DATED this day of November , 2005.
APPROVED AS TO FORM:
By:
City Attorney
LESSEE,
a California Limited Partnership:
Palm Springs Senior Affordable , L.P.
By:
Name: Ken J. Reiner
Title: President
ADDRESS: 8105 Irvine Center Drive, Suite 830
Irvine, CA 92618-3051
[END OF SIGNATURES]
DaleC\Housing\PS_Senior_Apts_LeaseAmdmt3.0ct05
MINUTE ORDER NO.
AUTHORIZING THE CITY MANAGER TO EXECUTE
AGREEMENT AMENDMENT NO. 3 TO THE LEASE
AGREEMENT NO. 1529 BETWEEN THE CITY OF
PALM SPRINGS ("LESSOR") AND THE PALM
SPRINGS SENIOR AFFORDABLE, L.P., A
CALIFORNIA LIMITED PARTNERSHIP, IN A FORM
ACCEPTABLE TO THE CITY ATTORNEY.
I, James Thompson, City Clerk of the City of Palm Springs, hereby certify that
this Minute Order authorizing approval of Amendment No. 3 to the Lease
Agreement No. 1529 between the City of Palm Springs ("Lessor") and the Palm
Springs Senior Affordable, L.P., was adopted by the City Council of the City of
Palm Springs, California, in a meeting thereof held on the day of
November, 2005.
James Thompson, City Clerk
DaleC\Housing)PS_Sen ior_Arts_CC_Min uteOrder_Ln d LseAg rm tAd mt.Nov05