HomeMy WebLinkAbout10/6/2004 - STAFF REPORTS (12) DATE: OCTOBER 6, 2004
TO: CITY COUNCIL
FROM: DIRECTOR OF COMMUNITY & ECONOMIC DEVELOPMENT
FINAL APPROVAL OF MULTIFAMILY MORTGAGE REVENUE BOND FINANCING ISSUE
BY THE CITY OF PALM SPRINGS (CONDUIT FINANCING)ON BEHALF OF SANTIAGO
SUNRISE VILLAGE MOBILE HOME PARK CORPORATION,A CALIFORNIA NON-PROFIT
CORPORATION ("SSVMHPC"), FORA PROPERTY AT 1500 EAST SAN RAFAEL ROAD,
KNOWN AS SUNRISE VILLAGE MOBILE HOME PARK, TO FACILITATE GNMA-
INSURED BOND FINANCING IN THE AMOUNT OF $3,770,000, FOR THE PURCHASE
AND REHABILITATION OF THE PARK
RECOMMENDATION:
It is recommended that the City Council approve the final form of the documents
related to a multifamily mortgage revenue bond issue in the amount of$3,770,000,
on the part of Santiago Sunrise Village Mobile Home Park Corporation, a California
non-profit("SSVMHPC"), a Santa Ana non-profit,for the purchase and rehabilitation
of the Sunrise Village Mobile Home, a 176-space park located at 1500 East San
Rafael Road in Palm Springs.
SUMMARY:
The Community Redevelopment Agency approved a DDA with Santiago Sunrise
Village Mobile Home Park Corporation, a California non-profit ("SSVMHPC"), and
Santiago Sunrise Village, a California Limited Partnership, to allow SSVMHPC to
acquire the Sunrise Village Mobile Home Park, including the Agency-owned
underlying fee interest in the site, on November 19, 2003. This is a project the
Agency had worked on for three years. The non-profit corporation is acquiring the
park to upgrade it, including adding a clubhouse. In return for the value of the land
and as part of the covenants to the bond issue,the non-profit agrees to preserve the
long-term affordability of a portion of the spaces. This action approves a GNMA-
secured multifamily mortgage revenue bond issue in the amount of$3,800,000 on
behalf of the Borrower. The City Council conducted the required TEFRA public
hearing on November 19, 2003 concurrently with the approval of the Agency
Disposition and Development Agreement. The bonds are issued Bonds pursuant to
Sections 52030 and 52075 of the Health & Safety Code of the State of California.
The City Council approved the bond issue in an amount not to exceed $3,800,000
on May 19,2004(Resolution 20943). Since a number of months have gone by since
the approval, Bond Counsel has recommended re-approving the agreements in final
form. The anticipated bond closing date is October 11, 2004. The entire May 19
staff report is included for information purposes but no changes in the deal have
been made since then.
BACKGROUND:
The City of Palm Springs, California (the"City'),acquired approximately 100 acres of
land over a period from the 1960's through the 1980's in the area commonly referred
to then as North Palm Springs (it is now the geographic center of the city). The
purpose of this land acquisition was intended to provide low income housing, in part
to relocate low-income residents of several mobile home parks that were demolished
in the 1970's and 1980's. It was the expectation of the City when it acquired the
acreage that the property be developed within a few years into affordable lower
income housing projects.
The City responded to a need in the community to provide affordable housing on a
portion of this parcel and sought to develop a mobile home park on up to 40 acres.
In 1982, the City executed a lease with Fredricks Development Corporation for 60
acres to develop affordable housing. The Sunrise Village Mobile Home Park
("Sunrise Village") was opened with the first residents taking occupancy shortly
thereafter. Fredericks developed approximately 2/3 of the first twenty acre phase of
the 40 acre park, as well as Sunrise Norte to the west. Sunrise Norte is a
development of deed-restricted single family homes on which the Council recently
amended the leases to allow residents to purchase their lots and remove the resale
restrictions. In 1987,the ground lease with Fredricks on the mobile home park was
terminated and a new lease with Santiago Sunrise Village, a California Limited
Partnership ("Santiago') was entered into for the 40 acre parcel. Santiago
completed the build-out of the final 1/3 of the first 20 acre phase but never
commenced construction on the second (19.17+ acre) phase. This second 19.17
acre parcel was intended for future expansion of the original 176 spaces but was
never developed. Fredericks also quit-claimed their remaining interest in the
property in December 1991, including the land that is now Coyote Run Apartments.
In 1995, the City sold the entire 40 acre mobile home park parcel to the Community
Redevelopment Agency of the City of Palm Springs (the "Agency")for a purchase
price of$1,510,000 based upon a fair market value appraisal conducted at that time.
The Agency acquired title to the 40 acre parcel, subject to the ground lease with
Santiago. The Agency in 2000 received an offer from Burnett Development to
purchase the remaining unused 19.17 acre mobile home park remainder parcel, as
well as a 22.21 acre City-owned parcel located immediately to the north of it,for the
purpose of constructing single family, market rate homes. The Agency sold those
parcels to Burnett for fair market value, which at the time was appraised for
$1,080,000 for the 41.39 acres. The DDA with Burnett was approved by the Agency
on December 18, 2002 and the sale closed in May, 2003; the land has since been
transferred to the ultimate builder, K. Hovnanian Companies of California,which will
construct 400 market rate, active adult single family homes called Four Seasons on
the 41.39 acres and an additional site on the east side of Sunrise Way. In order to
facilitate the DDA with Burnett, Santiago Sunrise Village, LP was asked to amend its
lease with the Agency to relinquish its rights to the 19.17 acres; the partnership
cooperated because of the ongoing negotiations with the Agency and City over the
DDA and this bond issue.
Today there is a mix of housing types in the neighborhood, including affordable
multi-family housing, deed-restricted single-family housing, the mobile home park,
and market rate single family homes and condominiums. The general neighborhood
has, in the recent past, expressed concern about the City's intent to "over-
concentrate" low-income housing in that area, which led to a re-examination of the
objectives of the entire 100-acre site. With the sale of the 41.39 acres to Burnett
(and then to K. Hovnanian) to construct hundreds of market rate homes, plus a
proposed development to the west of 1,200 market rate homes (PS Village), the
demographic balance of that area has shifted to the point where preserving
affordable housing stock is increasingly important to the City and Agency, as more
land is used for market rate housing and less available for affordable.
In July, 2001, staff brought to the City Council and Agency a resolution allowing the
California Mobile Home Park Corporation to undertake mobile home park conversion
activities in Palm Springs; and,that the Agency approve a resolution requesting the
CMHPC to acquire the Sunrise Village Mobile Home Park and to terminate the
leasehold interest in the Park and the Undeveloped Parcel. SSVMHPC is a
subsidiary non-profit of CMHPC.
Today the status of the original 100 acres comprising the original City acquisition of
land for affordable housing purposes is as follows:
20 acres Sunrise Village mobile home park,to be sold to a non-profit in
order to upgrade the park and preserve ongoing affordability
41.39 acres Combined with 60+acres on the east side of Sunrise Way to
become a 400-home market rate active adult community, Four Seasons of
Palm Springs, built by K. Hovnanian Companies
7.5 acres Expansion site for Coyote Run Apartments(Coyote Run 2);68
apartments financed by HOME funds, state Multifamily Housing Program
Funds, and Agency funds, to commence construction in 2004
30 acres (i)Coyote Run Low-Income Multi-Family Project financed with
low income housing tax credits,and (ii)Sunrise Norte, 53 single family home
subdivision built in the 1980's and which have City land leases and resale
price restrictions
1.2 acres Small neighborhood park site
The Agency received $615,000 from the sale of the 19.17 undeveloped acres at
Sunrise Village to Burnett Development. The remaining value underlying the mobile
home park was $392,000, based on the appraisal of the park commissioned by the
Agency. That amount will go to the non-profit as part of the DDA(in land, not cash)
and is secured by a Regulatory Agreement and a performance-based Deed of Trust
to ensure continued compliance with the terms of the DDA (affordability and
maintenance).
The Agency and City Council approved the DDA with SSVMHPC and Santiago
Sunrise Village, LP to facilitate the sale of the park to the non-profit on November 19,
2003. In addition,at the same meeting the City Council conducted a TEFRA hearing
on HUD-insured tax-exempt bond issue not to exceed $5,000,000 and approved the
TEFRA resolution. That hearing was noticed to comply with the public notice
requirements of Section 147(f)of the Internal Revenue Code of 1986, as amended
and applicable provisions of California law. Staff and the non-profit then began
working on finalizing the bond issue, which is now before Council.
All of these actions — the DDA and the bond issue -- were anticipated in the prior
action by the Agency and Council in July, 2001 and confirmed again when the
Agency approved the lease amendment with Santiago Sunrise Village, LP(the seller
of the park) in December, 2002 to release the 19.17 acres for sale to Burnett
Corporation. All of the outstanding issues related to the Deed of Trust and
Supplemental Regulatory Agreement, and HUD's approval of the same, were
resolved as part of the DDA negotiation.
The Park
Sunrise Village Mobile Home Park is an existing mobile home park located at 1500
East San Rafael Road, near Sunrise Way. Built in 1982, the gated community
Project encompasses 871,200 square feet or approximately 20 acres and includes
176 residential pads, 2 of which are for employee living units. Of the 176 spaces,
138 are single-wide and 29 are double-wide. The Project's common areas include a
swimming pool, a tot lot/playground, a picnic/barbeque area, 2 laundry rooms, 2
trash areas, and a leasing office. Additionally, the Project includes 250 parking
spaces, consisting of 171 carport spaces and 79 open spaces.
As of January 29, 2004, the Project was approximately 95% occupied. The mobile
home spaces are leased at$300 per month to the individual homeowners,generally
on a month-to-month basis. The ratio of families to seniors in the Project is
approximately 50%-50%. All off-site utilities are available. Sewer,trash,water,gas
and electricity are billed individually to the resident.
The Project is located in primarily a residential neighborhood with other land uses
including limited commercial and light industrial developments along Indian Canyon
Drive and San Rafael Road. Significant neighborhood developments include Palm
Springs Country Club to the east and several adjacent residential communities
including the Four Seasons project,Vintage Palms, Sunrise Norte,and the proposed
PS Village. With the general improvement of the neighborhood,the City and Agency
have sought ways to improve the accountability of the park's management as well as
the general appearance of the park as it relates to its neighbors. The clubhouse and
the perimeter improvements are some of the priority improvements identified in the
needs assessment.
An appraisal of the market value of the Project was completed as of January 9,2004
by John P. Neet, MAI of Temecula, California ("Appraiser"). It is the conclusion of
the Appraiser that the fair market value of the Project, when owned by a non-profit
entity, as of January 9, 2004 was $4,200,000 in an "as is" condition.
The Borrower
Santiago Sunrise Village Mobile Home Park Corporation, a California non-profit
�i
("SSVMHPC"),the Borrower, is a California nonprofit corporation,wholly controlled
by the California Mobilehome Park Corporation (the "Parent"). The Parent was
originally organized by the Redevelopment Agency of the City of San Bernardino on
May 2, 1996 as a California nonprofit corporation. The original purpose of the Parent
was to assume ownership of certain mobilehome projects located in the City of San
Bernardino, California. Ownership of such projects was fully assigned to the Parent
in 1998 and new management was retained in June 1999. Since that time, the
Parent has assumed full responsibility for the ownership and operation of such
projects and has elected new board members.
Financing of the Purchase
The City as the Issuer will loan the proceeds derived from the sale of the Bonds to
SSVMHP (the"Borrower")pursuant to the terms of the Financing in order to fund the
acquisition and rehabilitation by the Borrower of the Park,to make deposits to certain
reserve funds established pursuant to the Indenture, and to pay certain costs in
connection with the issuance of the Bonds. The Bonds are being issued under
Sections 52030 and 52075 of the Health & Safety Code of the State of California
(the "Act") and are backed by the Government National Mortgage Association
("GNMA"). In addition to the indebtedness of the Bonds, the Borrower will, at
closing, issue a subordinated debt obligation to the seller of the Project in the
amount of$750,000. Payments on such subordinated debt obligation will be based
upon the available cash flow from the Project after all senior obligations have been
satisfied, including payments on the Bonds.
Union Bank of California is the bond trustee. Subsequent to the Trustee's
acquisition of the GNMA Security, the Bonds are to be secured primarily by a fully
modified mortgage-backed security in the aggregate principal amount of$3,800,000
(the "GNMA Security") to be issued by Red Mortgage Capital, Inc., an Ohio
corporation (the "Lender"), guaranteed as to principal and interest by the
Government National Mortgage Association ("GNMA")and backed by the Mortgage
Loan from the Lender to the Borrower as evidenced by the Mortgage Note. In the
event the GNMA Security is not delivered to the Trustee on or prior to September 30,
2004 (unless extended pursuant to the Indenture), the Bonds will be subject to
redemption on or before October 15, 2004, at specified redemption prices, plus
accrued interest.
THE GNMA MORTGAGE-BACKED SECURITIES PROGRAM
Previous staff reports have referred to HUD insurance on the bonds. The
Government National Mortgage Association ("GNMA") is a non-stock corporate
instrumentality of the United States within the Department of Housing and Urban
Development ("HUD)")with its principal office in Washington, D.C.
The GNMA Securitywill be a"fully modified pass-through"mortgage-backed security
issued and serviced by the Lender.The total face amount of the GNMA Security will
be in approximately the same principal balance as the Mortgage Note, subject to a
rounding convention. The Lender will be required to pass through to the Trustee or
its nominee,as the holder of the GNMA Security, by the 15th day of each month,the
monthly scheduled installments of principal and interest on the Mortgage Note(less
the GNMA guarantee fee and the Lender's servicing fee),whether or not the Lender
receives such payment from the Borrower, plus any unscheduled prepayments of
principal of the Mortgage Note received bythe Lender. GNMA guarantees the timely
payment of the principal of and interest on the GNMA Security.
GNMA is authorized by Section 306(g) of Title III of the National Housing Act, as
amended (the "National Housing Act"), to guarantee the timely payment of the
principal of,and interest on, securities which are based on and backed by mortgage
pools consisting of a single mortgage insured by the Federal Housing Administration
("FHA") pursuant to Section 207 of the National Housing Act. Section 306(g)of the
National Housing Act further provides that "[T]he full faith and credit of the United
States is pledged to the payment of all amounts which may be required to be paid
under any guaranty under this subsection."An opinion, dated March 12, 1969,of the
then Assistant Attorney General of the United States, states that such guaranties
under Section 306(g) of mortgage-backed securities of the type being delivered to
the Trustee on behalf of the City are authorized to be made by GNMA and "would
constitute general obligations of the United States backed by its full faith and credit."
Pursuant to such authority, GNMA, upon delivery of a GNMA Security to the Lender
in accordance with the related GNMA Guaranty Agreement,will have guaranteed the
timely payment of the principal of and interest on such GNMA Security.
Red Mortgage Capital, Inc. (the "Lender") an Ohio corporation, is a mortgage
banking firm specializing in FHA-insured construction and permanent mortgage
loans, Fannie Mae forward commitment and permanent mortgage loans, and both
Fannie Mae and FHA bond credit enhancements for multifamily and seniors housing
projects across the United States. The Lender is also approved by GNMA to issue
modified pass-through securities.
The Lender is responsible for servicing and otherwise administering the Mortgage in
accordance with generally accepted practices of the mortgage banking industry and
the GNMA I Guide. The Loan Servicer is one of the most active FHA mortgagees
and GNMA issuers for HUD insured project loans and one of the top Fannie Mae
DUS lenders (by annual volume) in the country.
Deal Structure
In order to prevent problems in tax-exempt issues that may threaten the tax-exempt
status of the issue or otherwise cause problems to the City, it is the City's policy to
use its own Bond Counsel and Financial Advisor on all bond deals, even conduit
issues. The City of Palm Springs is the issuer of the bonds, and will use the bond
proceeds to make a loan to the Borrower to carry out the deal. The Borrower will
repay the bonds from the net income from the park. The other parties in the
transaction are as follows:
ISSUER
CITY OF PALM SPRINGS
3200 E. Tahquitz Canyon Way
Palm Springs, CA 92263
John Raymond, Director of Community& Economic Development
T (760) 323-8228
F (760) 322-8325
johnr@ci.palm-springs.ca.us
Tom Kanarr, City Treasurer and Director of Finance
T (760) 323-8229
F (760) 322-8325
tomk@ci.paim-springs.ca.us
BOND COUNSEL
ALESHIRE &WYNDER ATTORNEYS AT LAW
18881 Von Karmen Avenue, Suite 400
Irvine, CA 92612
Urban Schreiner
T (949) 223-1170 Ext 216
F (949) 223-1180
uschreiner@awattorneys.com
DISCLOSURE COUNSEL
MESSERLI & KRAMER
150 S. 5T" Street, #1800
Minneapolis, MN 55402
John Larson
T (612) 672-3600
F (612) 672-3777
jlarson@mandklaw.com
UNDERWRITER
KINSELL, NEWCOMB & DE DIOS, INC.
462 Stevens Ave., Suite 308
Solana Beach, CA 92075
Todd Smith, Vice President
T (858) 793-5900
F (858) 793-8340
tsmith@kndinc.com
Pamela D. Newcomb
T (858) 793-5900
F (858) 793-8340
pnewcomb@kndinc.com
UNDERWRITERS COUNSEL
EICHNER& NORRIS, PLLC
The Jefferson Building
1225 191h Street, NW, 71h Floor
Washington, DC 20036
Kent Nuemann
T (202) 973-0107
F (202) 296-6990
knuemann@enbonds.com
FHA MORTGAGE LENDER
RED MORTGAGE CAPITAL
33475 Cockleshell Drive
Monarch Beach, CA 92629
Rick Andrews
T (949)489-9465
F (949)471-0125
rrandrews@redcapitalgroup.com
DUS COUNSEL
KROOTH &ALTMAN, LLP
1850 M Street, NW
Washington, DC
Joseph Knoll
T (202) 293-8200
F (202) 775-5872
EJKnoll@krooth.com
BORROWER'S FINANCIAL ADVISOR
CONNOLLY CAPITAL GROUP
3306 Bunmann Rd
Encinitas, CA 92024
Rhonda Connolly
T (858) 756-7488
F (858) 756-1059
RMCONNOLLY@aol.com
ISSUER'S FINANCIAL ADVISOR
Harrell & Company Advisors, LLC
The City Tower, 333 City Blvd. West, Suite 1430
Orange, CA 92868
Suzanne Q. Harrell
T (714) 939-1464
F (714) 939-1462
s.Harrell@harrelico.com
501(C) (3) BORROWER
Santiago Sunrise Village Mobile Home Park Corporation, a California non-profit
PO Box 11927
Santa Ana, CA 92711
Richard Simonian
T (714) 744-4993
F (714) 744-3955
richardsimonian@msn.com
501(C)(3) CORPORATE COUNSEL
THE LAW OFFICES OF MARLA MERHAB ROBINSON
1551 North Tustin Avenue, Suite 910
Santa Ana, CA 92705
Marla Robinson
T (714) 972-2333
F (714) 972-2296
marlarobinson@mmrlaw.cncdsl.com
501(C)(3) SPECIAL COUNSEL
STINSON MORRISON HECKET LLP
1299 Farnam Street, 15th Floor
Omaha, NE 6810285253
Wayne B. Henry
T (402) 930-1742
F (402) 930-1701
whenry@stinsonmoheck.com
TRUSTEE
UNION BANK OF CALIFORNIA
120 S San Pedro Street, Suite 400
Los Angeles, CA 90012
Alison Braunstein
T (213) 972-5674
F (213) 972-5694
alison.braunstein@uboc.com
TRUSTEE'S COUNSEL
UNION BANK OF CALIFORNIA
445 S. Figueroa Street, Suite 1203
Los Angeles, CA 90071
Janis Penton
T (213) 236-5454
F (213) 236-7575
janis.penton@uboc.com
The project is truly of benefit to the residents of the park, who now have a funding
source for necessary improvements without special rent increases. These project
objectives could not be accomplished without the use of tax-exempt financing by a
non-profit,as the lower interest cost and property tax waivers help to create the cash
flow necessary to fund ongoing replacement of needed items. In addition, the
GNMA guaranty allows for a cost-competitive interest rate on the bonds; because of
the quality of the park the bond issue would not have been able to obtain bond
insurance which would have lead to a lower rate and provided additional security for
the City.
ohnbi . Ra mod Thomas M. Kanarr
ir ctor of Cor4munity& Economic Director of Finance & City Treasurer
Development
Approved by:� '�
City Manage
ATTACHMENTS.
City Resolution Approving Issuance of Bonds
ON FILE IN CITY CLERK'S OFFICE:
Series B Bonds Tax Regulatory Agreement
RDA (Sunrise Village) Subordinate Tax Regulatory Agreement
RDA (Sunrise Village) Subordinate Tax Regulatory Agreement
Palm Springs RDA Sunrise Village Financing Agreement
Palm Springs (Sunrise Village) Financing Agreement
Palm Springs (Sunrise Village) Bond form (Exhibit A-1)for Series 2004-A and
Exhibit A-2 for Series 2004-B
Palm Springs (Sunrise Village) Bond form for Series 2004-C
Palm Springs (Sunrise Village)Trust Indenture (Series C)
Palm Springs (Sunrise Village) TRUST INDENTURE
RESOLUTION NO.
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM
SPRINGS APPROVING THE ISSUANCE OF MULTIFAMILY
MORTGAGE REVENUE BONDS FOR THE SUNRISE VILLAGE
MOBILE HOME PARK IN THE PRINCIPAL AMOUNT OF NOT
TO EXCEED $3,800,000
WHEREAS, the Santiago Sunrise Village Mobile Home Park Corporation. a California non-profit
501 (c)(3) corporation (the "Corporation") has requested that the City of Palm Springs (the
"City") issue multifamily revenue bonds in an aggregate principal amounts of not to exceed
$3,800,000 (the 'Bonds"), for the purpose of acquiring and rehabilitating the Sunrise Village
Mobilehome Park (the `Project'); and
WHEREAS, the City Council is the elected legislative body of the City of Palm Springs (the
"City'); and
WHEREAS, the Corporation has requested that the City Council approve the financing of the
Project and the issuance of the Bonds in order to satisfy the public approval requirements of
Section 147(f) of the Internal Revenue Code; and
WHEREAS, the City Clerk has caused the publication of a notice of public hearing which was
held on November 19, 2003 in accordance with the requirements of the aforementioned law;
and
WHEREAS, the City Council now desires to approve the financing of the Project and the
issuance of the Bonds;
NOW, THEREFORE, the City Council of the City of Palm Springs hereby finds and resolves as
follows:
SECTION 1. Recitals: The Recitals contained herein are true and correct and are
incorporated herein by this reference.
SECTION 2. Determination: The City Council hereby approves the financing described
above and finds and determines that said financing will result in
significant public benefits to the City and its residents.
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10031065/30902,02
SECTION 3. Official Action. The officers of the City are hereby authorized and
directed, jointly and severally, to do any and all things and to execute and
deliver any and all documents which they deem necessary or advisable in
order to carry out, give effect to and comply with the terms and intent of
this Resolution and the financing transaction approved hereby.
ADOPTED this_day of , 2004.
AYES:
NOES:
ABSENT:
ATTEST: THE CITY OF PALM SPRINGS, CALIFORNIA
By:
City Clerk Mayor
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1003/065/30802.02